Crystal Specialist Finance's strategy director on why second charge mortgages deserve a place in every adviser's toolkit
Second charge mortgages should no longer be treated as a last resort, according to a senior specialist finance executive, who argues that the product has matured into a legitimate strategic tool that advisers should consider as a matter of course.
Gareth Shilton (pictured top), group strategy director at Crystal Specialist Finance, contends that the starting point for advisers must change. "Increasingly, the question advisers should be asking isn't 'Can my client remortgage?' but 'Should they?'" he said.
Central to his argument is the value of preserving low fixed rates secured between 2020 and 2022. Many borrowers remain locked into rates that are unlikely to be seen again, and replacing the entire balance at a higher rate can prove more costly than raising the additional capital through a second charge.
"Second charge lending allows borrowers to preserve the value of their existing mortgage while raising capital only for the amount they actually require, over an appropriate term," Shilton said. "That simple shift in thinking has transformed the role of the second charge market."
He also challenges the common tendency to compare headline interest rates alone. A second charge mortgage may carry a higher rate than a remortgage, but the full financial picture — including early repayment charges, product fees, legal and valuation costs, and the effect of refinancing the whole balance — can tell a very different story. "In many cases, what initially appears to have a higher cost on paper can deliver a better financial outcome once all costs are considered," he said. "Clients deserve advice based on overall value, not simply the lowest advertised rate."
On Consumer Duty, Shilton argues that exploring second charge options where appropriate is increasingly part of demonstrating that every reasonable lending solution has been considered before recommending a client replaces an existing mortgage.
He also points to the growing use of collaborative models between first charge advisers and specialist distributors as a positive development. No adviser, he notes, can be expected to hold expert knowledge across every niche lending area, and working with specialist packaging partners allows them to broaden the advice they offer without compromising client outcomes.
"That collaborative model benefits everyone," Shilton said. "Clients receive broader advice. Advisers strengthen Consumer Duty outcomes. Lenders reach customers who genuinely fit their lending appetite."
Today's second charge borrowers, he adds, are not in financial difficulty. They include landlords restructuring portfolios, homeowners funding improvements, families helping children onto the property ladder, and those consolidating unsecured debt — a range that reflects how far the market has moved from its niche origins.
Shilton concludes that the opportunity for the industry lies not in growing the second charge market for its own sake, but in ensuring advisers consistently ask the right question first.
"When we consistently start there, second charge mortgages become exactly what they should have always been: another valuable solution within a truly holistic advice process."
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