Customers are, rightly, turning to brokers to get the best deals in this competitive market, as well as seeking out advice on what products would actually suit their specific circumstances. In 2015, intermediaries accounted for 70% of the mortgage business written. In 2013, that figure was just 53%.
With continuing low interest rates, rising house prices, new entrants to the market and significant appetite from existing lenders, brokers can reasonably hope for another good year. However, there are also a number of uncertainties to consider.
Certain change
For a start, the steady growth in mortgage lending since 2012 is in some ways deceiving, as it doesn’t actually represent an expanding pool of clients. Transactions last year grew only 1% to 1.23 million, and have been largely flat since 2008. As such, the growth in the mortgage market has been almost entirely down to house price inflation.
In addition, whilst lenders’ desire to offload the risks around advice may mean they’re comfortable with 70% of business coming through intermediaries, it’s harder to imagine they will continue to sit back as it reaches three quarters or 80% – particularly as technology brings down the costs of servicing customers direct. At some point those savings will outweigh the value of outsourcing the advice risk, with lenders most likely to start by looking to remortgage their back books.
A more holistic business
Against this backdrop, brokers essentially have two choices. The first is to remain as they are: focussed on new mortgage business procuration fees, relying on walk-ins and depending on a single income stream. However, this model will leave them badly exposed to changes in the market and, in the longer-term, put them in direct competition with automated services that seek to help customers source the best deals more cheaply and conveniently.
What brokers should be concentrating on, therefore, is building a holistic, proactive offering for clients that not only helps them source the best deal for their first-ever mortgage, but also serves them throughout their life. This covers a full range of products: mortgages, conveyancing, protection and general insurance, bridging finance, secured loans, equity release and buy-to-let.
Building this kind of relationship will mean keeping in touch with clients, alerting them to remortgaging opportunities, helping with finance if they look to extend, helping their children when they come to buy, providing advice to them or to elderly relatives looking to release the value in their home in later years.
Brokers that take this approach – and build their business on service and quality, not just price – will have an offer that cannot be readily replicated or automated. Not only that, but having a diverse range of income streams and the ability to draw much higher lifetime value from each client will also means they will be much better equipped to deal with any changes to the housing market.
