Swathes of brokers will be unable to describe themselves as ‘independent’ from next month as major networks look to stop their intermediaries from advising on second charge loans.
Research by Money Marketing sister-title Mortgage Strategy shows just three major networks will allow their brokers to advise on second charge loans and thereby maintain their independent status.
As part of the MCD, which comes into effect on 21 March, the second charge market will become regulated.
The rules state that where a client wishes to increase borrowing, they must be made aware that a second charge loan could be more appropriate than a remortgage or further advance.
Brokers do not need to advise on second charge loans, but if they choose not to then they cannot call themselves ‘independent’ verbally, in their firm name or in any promotional material.
Earlier this week, Mortgage Strategy revealed that Sesame members must refer second charge business to its master brokers. However, it said it is considering an alternative solution for firms with ‘independent’ in their names.
Sesame Bankhall Group sales director Mark Graves says: “We are also working closely with a small number of firms with independence in their business name to look at all available solutions. Over the coming months we will be carefully monitoring market developments to assess the impact of the MCD and consider our options going forward. We will ensure that our approach continues to evolve in line with the needs of our members and their customers.”
Tenet Lime says it is giving members a choice of whether to advise on seconds or not.
Managing director Gemma Harle says: “We allow firms to make their own decision and are equally happy to accommodate both independent and restricted propositions; providing clear guidance on support on all options.”
Personal Touch Financial Services will allow its brokers to advise on second charge loans.
PTFS sales and marketing David Carrington says: “The reason for doing this is if you are a customer you don’t want to be passed from one person to the next.”
A note from Intrinsic to its members shows its restricted advisers will refer cases to one of its master broker partners. Independent advisers can remain independent and give advice although they must research products, obtain a KFI or ESIS and package cases using a master broker.
Openwork members will not be allowed to advise on second charge loans and must pass them onto the network’s exclusive partner, Enterprise Finance.
Openwork mortgage and protection proposition director Paul Shearman says: “We only have a couple of firms that describe themselves as ‘independent’ and therefore the impact of the changes on the network are very limited.”
Stonebridge, like Sesame, insists its brokers must refer the case to its panel of master brokers.
Pink and First Complete, part of the LSL Group, will insist that their brokers pass second charge cases onto their panel of master brokers.
LSL director of mortgage services David Copland says: “Our view is, with feedback from the brokers, is that they don’t advise for second charges and there is not much appetite out there to advise on second charges.”