2014 is being billed as a huge year for the secured loans sector but are brokers and networks prepared? Steve Walker managing director of Promise Solutions looks ahead at what is set to be an interesting 12 months.
Ask any broker what they’re expecting from 2014, and they will say ‘change’. The mortgage market is set for its biggest overhaul in years with the roll out of the Mortgage Market Review and the secured loans sector is finally being brought under the Financial Conduct Authority’s remit as the Office of Fair Trading hands over regulation of the sector in April.
The change in regulation for secured lending is adding to the buzz which is already circling the sector.
2013 was a good year for secured loans – although I think some people are getting a little over excited when it comes to figures. Yes, we saw an increase in lending but this was, in my opinion, as a result of bigger loans being written rather than more loans. We witnessed a 49% increase in our average loan during the first half of the year, but the increase in units was nowhere near as marked. The likes of Nemo, Shawbrook and Blemain relaxed their criteria and increased their LTVs and as a result the size of the loans being written has simply increased with the trend set to continue following the recent products launched by Precise and Prestige.
These figures however have caused much excitement in the sector and more people are suddenly taking notice of secured lending which can only be a good thing.
Last year saw a number of new lenders come to market and with the buzz around secured lending intensifying at least another four are rumoured to come to the fold in 2014. The sector is going to get much more competitive.
The current spotlight on the industry gives businesses the push they need to get their houses in order. Whether the change in regulation will have an immediate impact or we will see any marked increase in business volumes, brokers and networks would do well to spend the next few months preparing for them.
At present very few businesses are embracing technology in the way they should be. It is impossible to act compliantly and treat a customer fairly without the use of technology. The sourcing and compliance systems in place at the moment are not as good as they need to be in an FCA environment. In fact, for many firms, they are not good enough for an OFT environment.
Networks need to embrace secured loans further. Advising brokers to simply refer secured loan customers elsewhere with no follow up on what deal the client was offered or whether it was the best option cannot result in good customer outcomes. Under FCA regulation these processes are bound to come under the microscope and in my experience only one or two networks are ahead of the game.
Brokers must stop resisting change. They can no longer carry on doing business in the way they always have when the world around them is changing. There is something of an “it’ll be alright on the night” attitude in the sector that has to change.
2014 has the potential to be a fantastic year for second charge lending but to reach that potential whilst still treating customers fairly the industry needs to step up a gear.
