FR: What challenges do you feel are most affecting intermediaries in the current market?
The intermediary market is a positive place at the moment with increased market share as lenders recognise the value of intermediaries in the mortgage event. Even lenders such as Post Office, TSB and HSBC are now working with intermediaries. 65% of borrowers choose an intermediary and that’s down to choice, service, quality and knowledge.
The challenges relate mainly to capacity, and intermediaries should have the confidence to invest in their future by creating more capacity in their business. This may be via technology, additional administrative support or additional advisors. Whichever is chosen, we need to be able to ensure that customers are at the centre of the mortgage event, and that means being fully advised – with brokers having the capacity to provide a holistic review of all their mortgages and protection needs
FR: Should brokers pick a lender based on procuration fees?
Never.
Intermediaries are professionals, and work within a tight regulatory environment. They are however integral in the mortgage event, and so should be remunerated appropriately for the work they do for lenders and brokers. Procuration fees are a cost of distribution for a lender, in the same way that a branch or a branch advisor are, so lenders need to ensure that procuration fees represent the value of the intermediary. Procuration fees are generally too low, and in order to allow intermediaries to invest in the future of their businesses we need to see a gradual increase to reflect the increased amount of time and cost that the advisor has to bear.
FR: Despite increased market awareness, the majority of homeowners do not actively seek to remortgage. Why do you think this is and what can be done to combat it?
There is a lot of complacency and apathy at the moment.
At the peak of the market, remortgages accounted for almost 100,000 advances per month according to the CML, By comparison, the current number stands at around 25,000, which shows the changing shape of the market today compared with the excesses of 2007.
Whilst that may look like a huge drop, much of this is actually good news. The 100,000 figure was made up of many customers funding their lifestyles from the equity in their house, consolidating debts and buying material goods and driving ever-increasing debt burdens. However, because the financial crash increased both regulation and lender prudence, remortgages have returned to their real purpose – allowing customers to improve and add value to their homes, and saving money on monthly repayments by securing a new product from a lender.
It seems however that opportunities are being missed by customers and intermediaries alike, as both groups have become accustomed to historically low rates and can afford their current mortgage payments. This has created an inertia that we need the intermediary industry to disturb.
If a car insurance or energy premium increases at renewal, most consumers simply go online or pick up the phone to see if they can reduce the cost so that they’re not paying any more than last year. However, if a renewal notice is the same price or cheaper than last year, most people are usually happy to simply renew – even if there could be something better out there.
It’s the same with mortgages. If a customer’s payment doesn’t go up, and he or she can afford it, then where is the reason to change?
Well, here are 10 very good reasons that intermediaries should be aware of:
- Two-thirds of borrowers are on some form of variable rate, and many could be saving hundreds of pounds a year if they were made aware of the alternatives
- Rates will be going up soon, and by then many of the best rates will have been missed
- Customers need a plan to cope with 'new normal' base rates of around 3% - are you part of that plan?
- Your customers will think you’re great for finding them a better deal, and are very likely to refer you
- If you don’t speak to your customer, another broker will – and your customers will want to know why you didn’t tell them about all of the options open to them
- A remortgage appointment is a fantastic chance to review your customers’ full financial situation, opening up many other opportunities to help deepen your relationship with them
- Recent house price inflation means that many borrowers have enough equity to remortgage compared to the last time you spoke to them
- Lenders’ criteria has moved towards higher LTV, meaning that more customers qualify and for better rates
- Remortgages tend to be quicker and easier for lenders to process, which means that your capacity is higher
- Remortgages carry full procuration fees, and lenders such as Lloyds Banking Group and Barclays are paying full procuration fees on product transfers
Our latest Mortgage Mood survey shows that 68% of homeowners think there is likely to be a rate rise in the next year. Bearing this in mind, borrowers need to start planning now in order to cope with a rate rise in the future. Talking to a broker now can be very helpful in this regard, and can also help borrowers to mitigate the shock of rate rises by locking in rates now. It’s also a great way to secure the future of your client base and to do the right thing for your customers.
FR: Do you think that housing supply is something that will be addressed in the run-up to the next General Election – and what plan of action would you like to see the Government take?
There is a striking lack of housing supply across the UK. In L&G’s own “Let’s House Britain” report we show that there is a shortfall of over 100,000 new homes a year being built. When demand so significantly outstrips supply, an increase in prices is inevitable. Thankfully, as we finish party conference season and move towards an election, these issues seem to be firmly on the political agenda. Both the government and the industry need to work together if we are going to tackle this emerging housing crisis and ensure a healthy recovery across the country.
Our own report states a 10 point plan to tackle the issue, and we would encourage all parties to look closely at it
FR: What advice would you give someone starting out in the industry?
Focus on the customer, focus on quality and be a holistic advisor not just the person that arranged their mortgage.
Make a customer think of you as their first point of call for anything relating to their finances, and if you can’t help them for everything ensure you have an efficient referral model that mirrors your own quality, reputation and ethics
