myi: What is the most challenging thing about today’s mortgage market?
The mortgage market has changed exponentially since 2007. In 2007 the pendulum had perhaps swung too far in that many lenders were paying lip service to a borrower’s ability to service debt as many were chasing market share with little attention paid to profitability or the risk that certain borrowers posed to them but four and five years later lenders are now far more cautious, and now operate with much stricter criteria.
In terms of who lenders would have lent to and who they will lend to now they are far more selective and far more rigorous in terms of the level and degree of detail they require to evidence a borrowers application.
This has made navigating the market more difficult, but it also means that borrowers require the services of advisers even more than they did previously as they just don’t know if they will be successful with their mortgage applications particularly if they try to do it themselves.
myi: Are you doing anything differently than you were prior to market collapse in 2007?
Things have improved since 2009, but the market is about one third of the size it was at its peak. There is significantly less housing transactional activity than there was and the number of brokers is about a third of the numbers that operated in 2007.
A lot of advisers who used to specialise in other areas of Financial Services started arranging mortgages when the market was booming but many have gone back to what they did before as the market shrunk or left the industry.
Many mortgage brokers that operated in that market paid little or no attention to protection and general insurance opportunities for clients. However, we have always put great store in protection and general insurance products but have increased our focus further in this area as well as broadening our proposition by offering business protection, wills, trusts and conveyancing. All are income earning opportunities but it’s also about doing the right thing by clients.
If they are taking on a huge debt they need to know that everything is in order that could be affected by it. If you don’t advise a client on their needs, then someone else will and you are likely to jeopardise your relationship with your client.
It’s not necessarily about maximising the revenue from each client at the time of the mortgage – a lot of our business comes further down the line but we have the conversation and make people aware of the issues and consequences.
myi: What do you expect the mortgage market to look like in 2012 and onwards?
We are not expecting there to be any great change in the mortgage market at the end of this year when compared to the end of 2011. However, we don’t think things are as bad as some people have made out.
Consumer confidence is returning albeit slowly, and while unemployment is not falling the rate is slowing, and so while we don’t see a huge increase in mortgage activity in the short-term the signs are better for the long-term. There is now greater competition among lenders with higher LTV products (90% and above) and we have seen an increase in first-time buyer activity.
This will have an impact on first-time sellers and hopefully ripple up the housing market. There has been a change among borrowers who see their property far more as a home rather than as an investment and so people are not moving as much as they did and more people are content to rent.
This has meant that the buy-to-let market has been doing better and we see that as a growth area for 2012. Rents are up, tenant demand is increasing, void periods are down, and there is more competition among buy to let lenders with a number of new entrants joining the market thereby opening up more opportunities for landlords.
On top of this we are still not building enough homes to meet demand so more people will need to rent.
myi: What do you think about lenders returning to the 95% LTV market?
The return of 95% loan-to-value products is a welcome boost to those with smaller deposits who have been unable to save enough to buy in the last few years. There are now almost 60 products available from 21 different lenders, whereas back in early 2009 there were just a handful of products available.
More first-time buyers would be a welcome stimulus to the rest of the mortgage market as it frees up chains and will enable more people to move.
myi: Mortgage Advice Bureau has already announced a deal with the Police Mutual this year so what else is on the horizon?
Mortgage Advice Bureau has been on a growth trajectory in spite of the market. In 2007 at the peak of the market we had around 200 advisers, and while we contracted in line with the market we are now at more than 300 advisers so we are a bigger business in a smaller market.
We will continue to look for opportunities to grow our presence when the right opportunities arise.
myi: If you weren’t in financial services what would you be doing?
I have always wanted to be in financial services and went into the industry at 24. However, if I had my time over again I might have liked to pursue a career as an architect. I’ve always been fascinated with architecture and building design. All the aspects of their design and engineering really interest me, both new and old.
