Are Second Charge Mortgages Regulated?

Answered on 12 June 2024 by

I want to get a second charge mortgage on my house. Are second charge mortgages regulated? Are they ever non-regulated?

Nicholas Mendes

Are Second Charge Mortgages Regulated? 

Yes just like first charges, second charge mortgages are regulated if they’re on residential properties. In the UK, regulated mortgages are overseen by the FCA (Financial Conduct Authority). 

If a second charge is on a buy-to-let or a commercial property it will be non-regulated, just like a first charge. 

What’s the Difference Between Regulated and Non-Regulated Second Charge Mortgages? 

The main difference between regulated and non-regulated second charge mortgages is the level of consumer protection and regulatory oversight.  

Regulated mortgages are governed by financial regulatory bodies (e.g. the FCA in the UK), ensuring strict adherence to lending rules that protect borrowers, including transparency in terms and conditions, affordability checks and fair treatment.  

Non-regulated mortgages do not fall under these regulatory frameworks and typically apply to certain types of borrowers or properties, such as buy-to-let or commercial properties, offering less consumer protection and fewer mandatory checks. 

How Does Second Charge Mortgage Regulation Work? 

Second charge mortgage regulation works by subjecting these loans to the same regulatory standards as first charge mortgages. This includes oversight by financial regulatory bodies (like the FCA in the UK), requiring lenders to conduct thorough affordability assessments, provide clear and fair terms, and ensure that borrowers understand the risks involved. The regulation aims to protect consumers by ensuring responsible lending practices and offering recourse options if issues arise. 

Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.