"We’ll also be looking to enhance our products next year, with particular emphasis on our complex prime range where intermediaries are more commonly used to working through online portals."
FR: Magellan recently launched a direct submission channel for all intermediaries – what response have you received and do you have any other upcoming plans you can tell us about?
Our decision to offer a direct submission option was made in response to requests from intermediaries for greater choice about the way in which they submit business to us. We don’t mind if they prefer to submit cases via packagers, clubs, networks or direct – it’s up to them. However, whichever submission route they opt to use, they are guaranteed the same personal approach to underwriting and service.
During the year ahead we’ll be looking at ways to use technology to further strengthen our service proposition. Manual underwriting will always be a core element of our service offering, but technology can help improve efficiencies and speed-up processing and therefore give us greater operational flexibility and enable us to provide a better service.
We’ll also be looking to enhance our products next year, with particular emphasis on our complex prime range where intermediaries are more commonly used to working through online portals.
FR: The intermediary mortgage lending market has seen strong growth over the past year – is this something you see continuing?
Yes, intermediaries have accounted for the lion’s share of new mortgage business for some time and I don’t see that changing in the immediate future.
However, intermediaries can’t become complacent about their dominant market position. They will continue to feel pressure from new entrants and advisers and therefore need to enforce the importance of professional advice when it comes to a major financial decision such as taking out a mortgage.
The intermediary market share proves that consumers value advice and want the reassurance that comes from dealing with a professional adviser. Yes, homebuyers can get product information online, but most want guidance when it comes to making sense of that information. I’ve said before that I’d like to see the end of the phrase ‘free mortgage advice’ as the market needs to reinforce its value in the mind of consumers and the reality is that procuration fees are priced into mortgage products which is a cost to the consumer.
There’s always the risk that borrowers wanting to simply re-mortgage onto a cheaper fixed rate deal may be tempted to deal direct with a lender, however borrower profiles change and there will always be complexities in applications that will represent the strongest opportunities for intermediaries and I therefore believe these ‘specialist lending’ sectors are where we’ll see greatest growth for advisers in the future.
FR: What are the biggest issues facing the mortgage market in the current economic environment, and what should advisers be aware of when dealing with clients?
The mortgage market has always been heavily dependent on consumer confidence and is therefore vulnerable to global as well as national economic and social issues that may undermine that confidence.
As we enter Brexit negotiations, we’re undoubtedly going to see confidence fluctuate and that may feed through into a more turbulent mortgage market. However, underlying economic factors are actually quite strong at the moment: GDP is rising, affordability in most regions is strong, unemployment is falling and low interest rates are helping homeowners.
It is therefore ironic that low interest rates are reducing the interest in mortgage credit as it’s encouraging some borrowers to use unsecured credit and secured loans rather than risk losing their low mortgage rate by switching lender. When advisers are talking to clients about debt consolidation they also need to be aware of the fine line that can exist between mortgage advice and debt advice. Advisers should be aware, for example, of the potential regulatory implications of inadvertently straying into new territory. To avoid crossing the line some intermediaries have introduced clients to debt management firms, which might initially feel like a sensible option, however this brings its own dangers including the conflicted position many debt management firms are in as they earn higher levels of income by putting some clients into an IVA or DMP. Intermediaries therefore need to go into this market with their eyes wide-open and make a positive decision as to whether they want to provide debt advice or not.
FR: Magellan caters for complex prime customers – do you think they are will continue to receive more support from the industry and what more can be done to help this type of borrower?
Consumer needs are changing and lenders are still getting to grips with their appetite to offer products that meet these changing needs. For example, our complex prime range now caters for borrowers who have recently started a new business, are looking to borrow beyond State retirement age, and those who have more recent minor blemishes on the credit profile.
Our industry tends to lag behind other industries in terms of the speed of change in meeting consumer needs. Consumers are constantly looking for products that make their lives easier and, except maybe for flexible mortgages, there has been little innovation in the basic structure of a mortgage product for decades.
There are lots of opportunities for lenders both new and old to offer more flexible products that can change as the borrower’s lifestyle changes. This starts with markets like lending into retirement, shared ownership and right-to-buy, but there are many more opportunities out there.
FR: How will new technology affect the way advisers, lenders and clients do business?
Technology is all about efficiency of communication, data management and data sharing, such as reducing form filling, faster data access and faster communication. Technology will therefore always play a core role in the mortgage application process.
There has been lots of talk recently about robo-advice which, like any other technology, will find its place in our market. In other markets the move to online sales has meant simpler ‘vanilla’ products that aggregates borrowers, the benefit of which is price reduction however the negative is that larger numbers of consumers are alienated for not fitting the box. This can only be a good thing for intermediaries.
Consumers are comfortable purchasing consumables online, however I personally believe consumers get more comfort in making big ticket purchases such as cars, houses etc, in person. As I have mentioned above, advisers need to start protecting themselves from the threat of ‘robo-advice’ now by reinforcing the value of their advice, this is particularly true in the specialist lending market where many borrowers have already been declined by a high street bank.
FR: If you could see one headline about financial services in 2017, what would it be?
On the assumption that I should avoid self-serving headlines such as ‘Magellan Homeloans is UK's top specialist lender’ then I think it would be ‘UK mortgage market continues sustainable growth’.
