The Financial Conduct Authority (FCA) is set to tighten the rules on acquiring a second charge loan, otherwise known as a second mortgage.
This somewhat niche financial product is used to borrow money secured against the equity you own of a property.
Unfortunately this means that if you don’t repay the loan, the value of your home that you own (or the amount of your first mortgage you have paid off) can be taken to pay for it.
However, this is going to become a less common occurrence as of 2016, as the FCA plan to tighten control of those who are lent second mortgages.
From March 2016, the City watchdog will be regulating these second charge mortgages to fit in with the mortgage rules which have recently been regulated so much.
Currently, second charge mortgages are treated like consumer credit, but the FCA wants to stop that and ensure they are regulated correctly.
There are fears, just as there were with a first mortgage, that should interest rates rise, people won’t be able to keep up with repayments. Forcing banks to investigate each case closer, they will only be able to lend in the cases where people will be able to repay, taking possible interest increases into account.
Just as the increased mortgage investigations were aggravating and annoying to the market, these changes are likely to be too, but in the long run they should help to prevent people defaulting and losing their homes.
