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Second-charge boom could lift market

A boom in the second-charge lending market could offset falling margins across the mortgage sector, says Brentchase Financial Services mortgage expert Mike Fitzgerald.

His claim comes after Kensington said expansion in its secured loan business made up for falling first-charge margins in the first half of the year.

The lender said it was hit by a dramatic increase in bad debts that saw its loan impairment charge increase to 24.5m for the first half of the year compared with 11.3m for the first six months of 2005.

HBOS has pledged to shake up the secured loan market later this year with its new range of loans.

Fitzgerald says: “Second- charge lending is quick and it can work for the customer. It is wise for lenders to think about it.”

Brokers claim that any slowdown in the housing mar- ket due to home information packs could worsen the problem.

Fitzgerald says: “Hips might cause a problem because you can have bad debts as long as there is new business coming in but if there was a downturn then that could cause a problem. If other lenders experience high impairment charges, then it will cause a problem for the entire food chain.”

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By Rob Burnett, Neptune European Opportunities Fund

In recent months, investors have become more pessimistic about both the European and the US economic outlook and yet stockmarkets have pushed on to new highs. Some would argue that this is a worrying divergence. We would take the opposite view. This appears to be classic bull market behaviour. A wall of worry has been rebuilt, and stockmarket resilience should be taken as a sign of strength. The market is discounting an improving economic outlook ahead, particularly in the south of Europe.

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