"Right now we need to be talking to our clients, all of them."
We spoke to Rameez Zafar, CEO and co-founder of Eligible.ai, about the 'new normal' for the mortgage market in 2020 and why all intermediaries need to re-think their business model.
FR: How will the mortgage market change in 2020?
Whether it’s new normal or back to normal; the unprecedented challenges we are faced with, will impact the market in three fundamental ways:
1. Macro: Rate volatility will mean smaller product ranges per lender and more long-dated fixed rate,
2. Business Model: A core shift in proposition towards customer service for both lenders and intermediaries,
3. Technology: An acceleration of digital transformation plans (fully operational alternatives to face-to-face).
FR: How will the recent rate cuts affect the mortgage market?
We’ve seen a lot of rate volatility, which means we’re going to see a lot of product changes in the next few months.
Macro trends-wise, rates dropping to historical lows in rapid fashion, means lenders will respond in two phases.
Phase 1: Lenders will be ‘risk-off’; which means aggressively narrowing their product range until the dust settles.
Phase 2: Lenders will re-introduce products on the other side of this epidemic. It’s hard to call what the new normal will be; but given low and flat swap rate curves (see chart below); lenders may explore long-dated fixed term products (these could be 20 year) – where they fully hedge the funding to term.
Here’s some evidence that my cabin-fever is descending into madness... it’s also a 3D chart showing the evolution of the rate curve this March.
• Left to right is interest curve (1m to 30 years)
• Back to front is 1st March to 26th March
FR: Do lenders and intermediaries need to re-think their business model?
In short – Yes. Right now we need to be talking to our clients, all of them.
At present, the trend in the mortgage market is that a customer service-based proposition is critical. To be clear, customer-service is not just about convenience - it’s about offering clients peace of mind.
The industry as a whole, needs to be extremely pro-active. We need nurture and educate our clients about what this pandemic and product/payment term changes may they mean for them. Clients will remember who was there for them when they needed them most.
Our engagement data indicates that consumers are clearly very anxious right now. More and more consumers are reading content titled “Worried there are no deals for you?”. So, they’re clearly looking for guidance and clarity.
This trend identified an opportunity for our clients to step in and help. Our comms engine was able to send emails from advisers to these clients; to alert them about mortgage holidays and direct them to educational content.
Intermediaries also need to refocus on their clients’ protection needs. Often, clients disregard protection, because the cover seems highly unlikely and clients plan to ‘chance it’. We are now living in the “highly unlikely” and the value of protection will be tangible to clients.
In terms of why now, much like lenders, insurers will absolutely revisit the cover they will offer (particular if pay-outs hit unprecedented levels). If intermediaries and clients are slow to act, by the summer they could be faced with higher premiums for less cover.
FR: If you could see one headline about financial services in 2020, what would it be?
'Home repossessions remain at historical lows: "When everything seemed impossible, I knew exactly who I could turn to for support"'.
That would be the headline I think the industry would be the proudest of. We’re already seeing everyone do their part to help borrowers.
The risk to consumers, is that they make un-informed and eventually bad decisions because they didn’t have someone handholding them through these difficult times.
Our job is to help people, because they could lose their home, the value of advice has never been more apparent than it is now.
FR: Tell us about Eligible.ai’s proposition and how it fits into the new landscape?
Given the current climate, we’re looking at an unpredictable market that needs to evolve quickly to embrace technology as the primary channel to communicate and understand clients.
At Eligible, all our clients are asking us to help them engage their entire client base.
For advisers, the market has been heavily reliant on face-to-face interactions. Advisers have to adapt to keep writing business. They must be flexible and embrace technology to provide a good alternative to face-to-face client interactions.
Our solution, Retain, works in the background to help firms capture every opportunity to do business. The system learns about each client’s needs, sending them communications relevant to their situation. Clients are taken to content feeds (combining articles and calculators) that are individually personalised and evolve over time.
At present, managers need to find ways to get a real-time view of the business without everybody in one office. The benefit of digital isn’t just about video calls. It’s about having access to a real-time data, to ensure they have their ‘finger on the pulse’ of the business’s performance – particularly in the current climate.
Eligible gives the business a real-time understanding of their client base. We help advisers keep in touch, nurture and inform clients automatically. So, advisers keep every client and capture every referral.
We started in mortgages and have moved into life cycle and help across other products. Protection, which is becoming more relevant in this market, general insurance and even looking at financial planning- but always from the perspective of educating a consumer, understanding when they are interested in a product and notifying an advisor when they are ready to talk about it.