A consultation published today, sets out the regulator’s proposals to apply mortgage rules on affordable lending, advice, and dealing with payment difficulties to second charges.

Second charge mortgages are often referred to as second mortgages because they have secondary priority behind your main (or first charge) mortgage. They are a secured loan, which means they use the borrower’s home as security. Many people use them as a way to raise money instead of remortgaging.

Second charge lending, along with bridging loans and buy-to-let mortgages, are currently unregulated, meaning that lenders do not need to comply with FCA mortgage regulations and advisers do not need to be qualified to offer and arrange them.

Some lenders and advisr firmes deal exclusively in these unregulated products.

Christopher Woolard, FCA director of policy, risk and research said: “We recognise that second charge mortgages are beneficial for some customers but we are concerned that consumers can be put at risk by poor sales practices and ineffective affordability assessments. Given the risk of consumer detriment, we want to embed good practice and we believe that applying our mortgage rules is the best way to do this.”

Jonathan Harris, director of mortgage broker Anderson Harris, endorsed the move, adding: “Bringing second charge mortgages under the regulator’s jurisdiction is long overdue. It is astonishing that they were previously unregulated when the charge is normally secured against a borrower’s home.”

“It will regulate an area of the market that can be vulnerable to sharp practices and protect those who may be desperate because they need to take on extra borrowing in the first instance.”

Meanwhile, the FCA said a number of other regulatory changes will also be implemented in the mortgage market, including new knowledge and competency requirements, obligations for firms dealing in foreign currency mortgages and new levels of professional indemnity insurance.