What does the FCA's second charge review mean for you?

What problems did the FCA find with second charge advice?

The review found that good practice — where it existed — meant personal advice that openly set out alternatives to a second charge and recorded the reasons for the recommendation (Financial Conduct Authority, 12 March 2026). That is not a high bar. But a meaningful proportion of the advice the FCA reviewed didn't clear it.

Poor practice included not considering alternatives such as arrangements with existing creditors, failing to record the interest rates and early repayment charges on debts being consolidated, and consolidating extra debt simply to help the borrower pass affordability checks (Financial Conduct Authority, 12 March 2026). There were also cases where advisers focused on a lower monthly payment without explaining that a longer term or higher rate means a much greater total cost overall.

The FCA's own case study is striking. A borrower who asked to borrow £12,000 over six years was sold a £24,000 loan over 15 years, including £3,000 in charges and £12,500 of debt consolidation — with no recorded reason for why the loan doubled, or why the term more than doubled (Financial Conduct Authority, 12 March 2026). The monthly payment may well have looked more manageable, but the total cost would not have been.

On affordability, the FCA found that some conversations steered borrowers towards understating their spending (Financial Conduct Authority, 12 March 2026). Some lenders used assumptions that did not reflect reality — for example, assuming no childcare costs once a child reaches primary school age, or accepting implausibly low figures for everyday expenses like food. Affordability checks are supposed to protect borrowers. These ones weren't doing that.

What did the FCA say about fees?

This section of the review is worth knowing before you speak to anyone. Intermediary fees for second charge mortgages varied widely, and the FCA found that some fell materially higher than fees on first charge mortgages — with those fees coming on top of lender fees (Financial Conduct Authority, 12 March 2026). The FCA also found that fees were often not published upfront — in many cases, the actual fee was first stated clearly only at the recommendation stage, well into the process.

The FCA frames this under the Consumer Duty: fees must give fair value. The expectation is not just that the fee is disclosed, but that it is disclosed early enough for you to weigh it before you are committed to a recommendation.

If you are considering a second charge mortgage, asking what the total fee is — in pounds, not just as a percentage — before you go any further is a reasonable and appropriate question. If the answer isn't forthcoming, that tells you something.

What is the FCA expecting firms to do differently?

The FCA has been direct about its expectations (Financial Conduct Authority, 12 March 2026). Firms must act under the Consumer Duty to avoid foreseeable harm. A second charge must not be recommended if it is not suitable. Firms must keep records that support their recommendations — including why certain debts were or were not consolidated, and why a particular loan size was proposed. And fees must represent fair value.

The FCA is contacting the firms it reviewed and will keep monitoring the market. It is also considering rule changes specifically to better support people consolidating debt — so this review is a precursor to potential regulatory change, not the end of the conversation.

A borrower who believes they were poorly advised can complain to the firm first, then to the Financial Ombudsman Service if the firm's response is unsatisfactory (Financial Conduct Authority, 12 March 2026).

What should you do differently as a borrower?

A few practical points follow directly from what the FCA found.

Ask what the total cost is over the full term — not just what the monthly payment will be. A lower monthly payment over a longer period can mean paying substantially more in total. That trade-off should be explained to you, and you should weigh it.

Ask what the fee is, in pounds, early in the conversation — not at the point of recommendation.

Ask your adviser why they are recommending a second charge rather than a remortgage or a further advance from your existing lender. There are genuine reasons a second charge can make sense: you may be on a fixed rate with significant early repayment charges, or your circumstances may not support a full remortgage. But the comparison should be made, and the reason recorded. Our guide to second charge mortgages covers the main scenarios, and the comparison between a second charge and a remortgage is set out in more detail.

Make sure what you actually spend is recorded accurately in any affordability assessment. If a conversation is nudging you to understate your costs, that is a warning sign.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Moving unsecured debts into a loan secured on your home may lower what you pay each month, but spreading them over a longer term can mean paying more in total.

If you'd like to talk through whether a second charge, a remortgage or a further advance makes more sense for your situation, a 20-minute call is a reasonable place to start. There's no obligation and no fee for that conversation. You can book directly through the contact page.

Figures quoted are illustrative only. Your actual outcome will depend on your individual circumstances, loan size, term, and the products available to you.

This is not financial advice. Speak to an independent mortgage broker before making any decisions.

Lawes Financial Limited (FRN 1046161) is an appointed representative of Andrew Charles Consulting Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN 304904).