TL;DR Yes, second charge mortgages secured against your main home are regulated by the Financial Conduct Authority (FCA).
This has been the case since March 2016. Regulated loans come with strict affordability checks, clear disclosure requirements, and access to the Financial Ombudsman Service if something goes wrong. Second charges on investment properties, buy to lets, and holiday lets are generally unregulated.
If you’re a homeowner considering a second charge mortgage, the short answer is yes: they are regulated. Second charge mortgages secured against your main residence fall under the oversight of the Financial Conduct Authority (FCA).
You may also know these loans as secured loans or homeowner loans.
They’re the same product.
One of the first questions people ask is whether these loans are properly regulated, or whether they’re more like unregulated credit products that come with fewer consumer protections. It’s a fair concern. Second charges sit in specialist finance territory, and the market includes lenders you won’t find on the high street.
This article explains what FCA oversight means in practice, what protections you have as a borrower, which loans fall outside the rules, and why working with a broker still makes sense even with regulation in place.
What Is a Second Charge Mortgage?
A second charge mortgage is a loan secured against a mortgaged property you already own. Because you’re using your home as security, the lender registers a legal charge against it at the Land Registry.
Your existing mortgage lender holds the first charge. This new lender takes the second position, which is where the name comes from.
You can borrow against the equity you hold in the property. Equity is the difference between the current market value of your home and the total amount you still owe on your mortgage.
So if your home is worth £550,000 and your outstanding mortgage balance is £300,000, you have £250,000 in equity. You won’t be able to borrow all of that, but the equity figure gives lenders a starting point when assessing how much to offer.
How Is Equity Used?
Lenders won’t lend up to the full equity figure.
They use a combined loan to value (CLTV) calculation, which looks at your existing mortgage plus the new second charge as a percentage of the property value. Most lenders are comfortable working up to around 85% CLTV, though some go higher depending on the borrower’s circumstances.
Second charges are used for a variety of purposes. Home improvements, debt consolidation, business capital, and large one-off costs are among the most common reasons homeowners consider them.
According to the Finance and Leasing Association (FLA), debt consolidation was the sole purpose for 59.4% of new second charge agreements in August 2025, with a further 21.4% taken for a combination of home improvements and debt consolidation.
They can be a practical alternative to remortgaging, especially if your current mortgage deal carries early repayment charges or if your existing lender doesn’t offer further advances at a competitive rate.
The market has grown substantially in recent years: new second charge mortgage business volumes were 12% higher in the first eight months of 2025 compared with the same period in 2024, according to the FLA.
Are Second Charge Mortgages Regulated in the UK?
Yes. Second charge mortgages secured against a borrower’s main residence are regulated by the Financial Conduct Authority. This covers most residential second charges taken out by individual borrowers.
Any lender offering these products must be authorised by the FCA.
What Changed in March 2016?
Before March 2016, second charge mortgages were treated as consumer credit products and regulated under the Consumer Credit Act. The FCA took over regulation of the second charge mortgage market in March 2016, bringing it in line with how main residential mortgages are treated.
This change came from the European Mortgage Credit Directive, which required all EU member states to regulate mortgage credit under a single consistent framework. The UK introduced the Mortgage Credit Directive Order 2016 to implement this, and the FCA absorbed second charge lending into its mortgage rulebook as a result.
The practical effect was significant.
Lenders had to adopt the same affordability standards, disclosure requirements, and conduct rules that already applied to standard mortgages. Consumer protections were strengthened, and borrowers gained access to the same dispute resolution routes available to mainstream mortgage customers.
The Consumer Duty and What It Means for Second Charge Borrowers
In July 2023, the FCA introduced its Consumer Duty rules, which apply to all regulated financial firms including second charge mortgage lenders and brokers.
The Duty goes beyond earlier conduct rules by requiring firms to actively demonstrate that customers are getting fair value, not just technically compliant products.
Under the Consumer Duty, lenders and brokers must be able to show that their fees are proportionate to the costs and services provided. Products must genuinely meet customers’ needs. Information must be clear and understandable. And firms must make it as easy to exit or cancel a product as it was to take it out.
The FCA has specifically flagged the second charge mortgage market as an area of focus under the Duty.
In November 2023, Nisha Arora, FCA Director of Cross Cutting Policy and Strategy, confirmed that the regulator was examining whether customers in the second charge market were “getting fair value,” including whether broker and lender fees were representative of the costs incurred.
What Does FCA Regulation Mean for You in Practice?
FCA regulation places a number of obligations on lenders and brokers, governed by the Mortgage Conduct of Business (MCOB) rules.
These are designed to make sure you understand what you’re agreeing to and that the loan is affordable for your circumstances.
Before any offer is made, the lender must carry out a thorough affordability assessment. This looks at your income, your existing financial commitments, and your overall financial position. The aim is to check that you can maintain repayments over the full loan term without putting yourself under serious financial strain.
Lenders must also provide you with a European Standardised Information Sheet (ESIS).
This document sets out the key terms of the loan, including the total amount repayable, the loan term, the interest rate structure, and any fees or charges. You must receive this before you’re committed to anything, giving you time to compare options.
Brokers are also required to give you a personal recommendation that fits your circumstances. They cannot simply present you with a product and leave you to decide. The recommendation must be explained and justified in writing.
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Which Second Charge Mortgages Are Not Regulated?
Regulation applies to loans secured against a property that the borrower lives in as their main home.
If the loan is secured against a property you don’t occupy as your primary residence, different rules apply and the loan is likely to be unregulated.
The following property types generally fall outside FCA mortgage regulation:
- Buy to let properties (including second charges on a buy to let), though Consumer Buy-to-Let (CBTL) mortgages for accidental landlords can be regulated in some circumstances
- Holiday let properties
- Commercial properties
- Serviced accommodation properties
- Second homes and holiday homes where the borrower does not live as their main residence
Unregulated loans aren’t necessarily unsafe or poorly structured, but you lose the consumer protections that come with FCA oversight.
There’s no mandatory affordability assessment to the same standard, no requirement for an ESIS, and no automatic access to the Financial Ombudsman Service.
If you’re considering a second charge on an investment property, taking independent legal and financial advice before proceeding is sensible. An experienced broker can help you understand what protections are and aren’t in place for unregulated lending, and whether the deal stacks up.
What Consumer Protections Apply to Second Charge Mortgages?
FCA regulation gives you several specific protections that go beyond a lender simply being required to behave fairly.
The affordability rules mean a lender cannot push through a loan they know you’ll struggle to repay. If the figures don’t stack up, the application should be declined.
This protects you from taking on debt that could put your home at risk.
You have the right to receive the ESIS and adequate time to consider it. You cannot be pressured into signing immediately, as there’s a reflection period built into the process. Any fees charged before completion must also be disclosed upfront.
If you’re not satisfied with how a regulated lender or broker has treated you, you have the right to complain through the firm’s internal complaints process. If that doesn’t resolve matters, you can escalate to the Financial Ombudsman Service.
The Financial Ombudsman Service
The Financial Ombudsman Service (FOS) is a free, independent service that resolves disputes between consumers and regulated financial firms.
If you have a complaint about a regulated second charge lender or broker, and the firm hasn’t resolved it to your satisfaction within eight weeks, you can refer the case to the FOS.
Where the Ombudsman upholds your complaint, they can direct the firm to put things right and can award compensation.
If you accept the award, the firm is bound by it. Having this route available is one of the practical benefits of dealing with FCA-regulated businesses, and one worth being aware of before you start any application.
How to Check Your Lender Is FCA Authorised
Before you proceed with any second charge mortgage, it takes about two minutes to check whether your lender is properly authorised. Go to the FCA Register and search by firm name or registration number.
The register shows whether a firm is currently authorised, what activities it’s permitted to carry out, and any past enforcement actions. If a lender or broker can’t be found on the register, or if their authorisation doesn’t cover mortgage lending, that’s a serious red flag you shouldn’t ignore.
Regulated second charge lenders will display their FCA registration number on their website and in their documentation.
Should You Use a Broker for a Second Charge Mortgage?
Working with a broker gives you access to a wider range of lenders than you’d find by approaching the market directly.
Many specialist second charge lenders only accept applications through qualified mortgage brokers and won’t deal with borrowers direct. The FCA has noted this as a defining feature of the second charge distribution model, which means going it alone can significantly limit your choices and the deals available to you.
Why a Regulated Broker Adds Value
A good second charge broker will review your circumstances, explain the options available to you, and give you a personal recommendation that suits your situation.
They’ll also check the terms of your existing mortgage to see whether remortgaging or asking your current lender for a further advance might work out better for you. Comparing all three routes before deciding is always worth doing.
Because brokers are regulated, they must act in your best interest and their recommendation must be justified. If you’re ever in doubt about whether the advice you’ve received was appropriate, you have the same complaint rights described above.
Second charge mortgages can work well in the right situation, but they’re not always the best answer.
A regulated broker will be straightforward about that. If the numbers don’t make sense, or if a more suitable option is available, they should tell you. If you’d like to speak to a specialist, the team at Respect Mortgages can connect you with an independent broker who knows this market well.
Frequently Asked Questions
Yes. Second charge mortgages secured against a borrower’s main residence are regulated by the Financial Conduct Authority. All lenders and brokers offering these products must be authorised by the FCA. You can verify this on the FCA Register at register.fca.org.uk before you agree to anything.
The FCA took over regulation of second charge mortgages in March 2016, following the introduction of the Mortgage Credit Directive Order 2016. Before that date, second charges fell under the Consumer Credit Act. The change brought second charge lending in line with the rules that already applied to first charge residential mortgages.
A second charge mortgage is a loan secured against a property you already own, taken out alongside your existing mortgage. The lender places a charge on your property at the Land Registry, giving them security. You borrow against the equity you’ve built up and repay over an agreed term.
No. Second charges on buy to let, holiday let, and commercial properties are generally unregulated, as are first charge loans. FCA mortgage regulation applies to loans secured against a borrower’s main residence. For an investment property second charge, fewer statutory consumer protections apply, so independent advice before proceeding is advisable.
Regulated lenders must carry out an affordability assessment before approving a loan. They must provide you with a European Standardised Information Sheet (ESIS) setting out the key loan terms. They must give you adequate time to consider the offer before you commit, and they must have a formal complaints process in place.
Yes, it can. Having a second charge in place adds complexity when you come to remortgage your main loan. Your second charge lender will need to agree to their charge being subordinated if a new first charge lender takes over. This is done through a deed of postponement, and not all lenders will agree to it, so it’s worth considering before you take out a second charge.
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