Second Charge Market Watch – Regulatory Shifts & Strategic Responses. From March 21st, the Mortgage Credit Directive (MCD) introduces a transformative shift in the second-charge mortgage market, aligning its regulation with that of first-charge mortgages. Borrowers seeking refinancing will now be presented with both conventional remortgage options and the increasingly viable second charge loan alternative. This opens up a distinctive and evolving lending landscape, one that many even experienced advisers may not fully understand.
For a structured understanding of second-charge, explore our Second-charge guide.
Second Charge Mortgages: A Shifting Landscape
The second charge sector continues to gain traction as affordability pressures and stricter underwriting criteria make secured loans more appealing for certain client profiles. However, this route introduces added complexity, particularly in distribution and lender engagement.
Master brokers, specialist intermediaries who facilitate second-charge lending between advisers and lenders, play a pivotal role in navigating this landscape. But obtaining lender consent from existing mortgage providers adds an extra layer of processing and risk assessment. Lender appetites vary, with some more flexible than others, especially for complex homeowner loan cases. If you advise on such deals, our Specialist Mortgage Network offers bespoke support.
As the second-charge proposition strengthens, mortgage firms must adapt their advice models to incorporate it as a mainstream solution, especially when clients seek capital without wanting to lose their existing low-rate first-charge deals.
How the Industry Is Responding
Our panel of first charge mortgage experts shared how they’re adjusting internal operations to integrate second charge lending into their offerings:
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Liz Syms, Director at Connect for Intermediaries, explains her firm’s strategic move to become a master broker, embedding second-charge distribution directly into its network support model for advisers. Learn more about the structure via our Mortgage Network for Advisers.
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Simon Collins, Product Technical Manager at John Charcol, describes how a recent acquisition has enabled the firm to manage second-charge loans internally. This internalisation provides more control and speed when servicing client needs.
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Dominik Lipnicki, Director at Your Mortgage Decisions, notes that while second-charge volumes remain low for some firms, they still recognise the value. His firm currently outsources second charge cases to maintain efficiency while keeping its core focus on first charge.
What This Means for Advisers
The message is clear: whether your volume is high or low, second charge opportunities demand attention. Advisers must:
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Understand how Consumer Duty standards apply to second charge advice
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Compare second charge versus remortgage scenarios when presenting client options
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Partner with networks and master brokers equipped to streamline this process
For firms needing flexible options or FCA-authorised support, our Adviser Mortgage Network for the Newly Qualified provides an onboarding structure to explore second-charge opportunities safely.
Connect’s Approach to the Second Charge Market
By Liz Syms, CEO – Connect for Intermediaries
Our journey into the second-charge mortgage space began when Castle Trust launched its innovative buy-to-let equity second-charge product. The proposition quickly gained traction with our clients and broker network. Yet, we also saw demand emerging for more traditional secured loan solutions alongside these new offerings.
In response, and with one eye on forthcoming regulatory changes, we strategically partnered with three leading master-broker agencies representing major second-charge providers. These partnerships enable advisers to access and advise on lenders’ second charge products, operating under various agency agreements. Some are standard contracts, while others, such as Castle Trust, require additional training and accreditation.
Our relationship with Castle Trust mirrors how we support advisers with first-charge lenders: Castle Trust handles paperwork and valuations, while our team coordinates adviser access, compliance, and lender communications. As master brokers for other providers, we also manage application processing and valuation logistics on their behalf.
Second-charge lending involves unique operational processes compared to mainstream mortgages. Tasks such as issuing regulated credit agreements and conducting credit and Land Registry checks require specific knowledge and systems. These complexities often lead advisers to collaborate with specialist distributors like Connect, ensuring a smooth and compliant experience.
From the outset, we deliberately focused on just three core agencies. This strategy enabled us to gain a deep understanding of each provider’s operational structure before scaling our adviser support. As the market evolved under the Mortgage Credit Directive (MCD), we adopted a measured “wait and see” approach, evaluating lender propositions post-MCD to ensure adviser suitability and regulatory alignment.
Today, many second charge lenders are exploring different agency models for brokers. Some propose master-broker-only solutions, in which the entire case is processed externally. Others offer more flexible agency frameworks, allowing advisers to manage their own cases with light-touch support.
At Connect, we continue to monitor the evolution of the second-charge market and are excited about the broader range of solutions emerging. Our goal remains clear: to empower advisers with flexible, compliant access to this growing segment of the secured lending market.
Simon Collins Product Technical Manager | John Charcol
At John Charcol, we’ve seen a steady rise in second charge mortgage enquiries, many of which mirror the nature of first charge requests. Our advisers follow a rigorous advice process, starting with a full fact-find and an initial assessment to determine whether a further advance from the existing lender is feasible. From there, we compare the potential benefits of a full remortgage with the flexibility and value of a second-charge loan.
If a second charge is determined to be the most suitable option for the client’s circumstances, we historically referred cases to a carefully selected third-party provider. That relationship, built over many years, helped ensure a seamless client experience and safeguarded adviser-client trust throughout the process.
Now, with our acquisition of Simply Finance, we’re able to bring second charge mortgage solutions in-house. While our commitment to robust advice standards remains unchanged, this acquisition enhances our ability to manage second-charge cases directly without compromising quality or regulatory oversight. Our consultants will continue to recommend second-charge loans only when they are clearly in the client’s best interest.
Although the Mortgage Credit Directive (MCD) and regulatory shifts around secured homeowner loans have long been on our radar, they were not the core driver for acquiring Simply Finance. However, the integration has added value, particularly in streamlining compliance and giving us greater control over the full client journey.
Dominik Lipnicki, Director of Your Mortgage Decisions
The upcoming changes to second charge mortgage regulations have sparked concern across the market. Many professionals believe the shift reflects yet another one-size-fits-all approach that complicates broker responsibilities without offering tangible benefits to consumers.
Despite the FCA’s aim to enhance borrower protection, these changes may simply become another compliance checkbox, failing to expand viable borrowing options or improve customer outcomes in any meaningful way.
“We’ve chosen to delegate regulatory implementation to specialist secured loan brokers, whose experience ensures compliance while easing the operational burden,”
— Dominik Lipnicki, Director at Your Mortgage Decisions
Second Charge Lending: Low Demand, Higher Cost
Our internal reviews of remortgage cases throughout the past year indicate that genuine demand for second charge applications remains limited. In most cases, second charges are more expensive than traditional remortgages, especially when early repayment charges or tie-ins aren’t an issue.
That said, there are isolated cases, such as borrowers tied into fixed-rate products with steep exit penalties, where a second-charge loan may be the most practical option. Even then, it’s usually regarded as a last resort rather than a proactive lending option.
A Measured, Forward-Looking Approach
As regulations evolve, our position remains pragmatic. We will continue to monitor the long-term impact of these developments on the UK mortgage market and adapt where technology or lender flexibility provides added value for consumers.
Internal Support to Help Brokers Deliver
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