A new world for brokers post-MMR
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As we start a new decade we are all hoping for better times.
More lenders, more funding and better LTV product. I think we will get this in the second half of the year and AMI will continue to push to make this happen sooner. Until then it is going to have to be more of the same.
We have some big challenges dealing with the changes being requested by the FSA in the MMR. Establishing what the role of the intermediary will be in a new world where income verification and affordability rest with the lender will be a challenge.
We need to ensure that our role remains more in than just an introducer in the eyes of the lenders.
It is intermediaries that customers turn to for fair and impartial advice. We need to ensure that lenders value our role in that, as much as we know our customers do.
Being clear about the range and scope of service will also be important.
For those who view the independent label as important, access to the product of enough lenders and insurers will be critical. Keeping and obtaining agencies will be critical.
Also if we see the insurance rules change as currently predicted, you will only be able to call yourself independent if you offer life, CIC and income protection advice. This will complicate the landscape.
Finally, I am being regularly asked if I see the advent of current account discounted rate mortgages being a threat to brokers.
This is a concerted effort by some lenders to do two things. Firstly to get a better handle on the income and affordability issues for more of their mortgages.
Secondly it is to help to cross- sell more product and make it easier to retain this customer. As intermediaries we should be recommending these when it is the right thing for the customer.
We should also be doing good things in staying close to these customers during the term of the loan…..newsletters, updates and “financial health checks” as well as delivering good insurance and other borrowing advice.
This will deliver a relationship that means the customer is not just the Bank’s but “yours”. So when they are looking to renew the loan it is the intermediary that is the natural point of contact for help.
Readers' comments (10)
Mike Davies (ex Infinity) | 8 Jan 2010 11:01 am
Morning Robert. Agree with everything you say. Go to a lender's advisor and you get the best deal from their range. Mortgages are complex products and the wrong deal can end up costing the borrower a lot more than it need do. The independent intermediary should be the first port of call for anyone seeking a mortgage and it is up to the broker then to use the position of trust to manage the client by staying close to them throughout their 'borrowing' lives.
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Anonymous | 8 Jan 2010 11:39 am
In responce to lenders offering current account customers a preferential mortgage we need to clarify what happens if the client wishes to switch current accounts after completion of the mortgage? Does this have any implications on the mortgage? What, as is expected, banks change their pricing policies on current accounts?
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Graham Griffin | 8 Jan 2010 11:48 am
I feel lenders requiring conditional banking arrangements should allow a new customer to open a new current account provided it is their primary bank account. If these lenders are seeking new current account customers a customer is unlikely to open a new account in advance of applying for a mortgage in order to meet their criteria of being an existing customer.
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Michael White CEO Emailmortgages | 8 Jan 2010 11:57 am
With the greatest respect, can I suggest we move away from the waffle and get down to the facts?
Those who would like to move/obtain mortgages but are unable are generally caught in two camps: people who have suffered an equity reduction and now find their loan requirement is beyond the maximum 90% LTV. And those individuals who fall outside of much tougher underwriting and affordability tests to assess suitability - a particular problem for lower income earners. Moreover, there are an estimated one million borrowers who took out mortgages on a self-certified basis and are not currently able to re-apply as such products have essentially been banned, regardless of the people who have never missed payments and just require the same access to the market as others do.
So therefore what does the future truly hold?
In the next nine to 12 months as BBR stays at 0.5%, and as existing product deals end, borrowers will continue to stay on their existing lenders’ SVR as many of them will be below the rates offered for those choosing to remortgage. These will continue to be perceived as uncompetitive rates for borrowers who have not managed to organise a remortgage but will continue to be among the best rates in the market. In short, until Base Rate begins to rise, a very large number of borrowers who would normally seek out ‘fair and impartial advice’ will be content to remain with their existing lender and many will be using the surplus cash to pay down the outstanding mortgage balance while the waiting game continues.
Yes, there is a queue of new lenders waiting to enter the market. However, the major high-street banks and building societies will continue to remain the ‘only show in town’ for the foreseeable future and while it is pleasing to see lenders like Kensington tip-toeing back to the market, they too come with an ultra-cautious approach. There is unfortunately little chance of any meaningful return for the specialist sector which would clearly provide a boost for the intermediary sector, although perhaps we will see more buy-to-let product availability in the coming year. Sub-prime is still the dirtiest word in mortgages and the FSA has ensured this will be joined by self-cert……
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Anonymous | 8 Jan 2010 12:56 pm
I feel I agree with Michael I would like to add I experienced a personal problem of switching my mortgage to a well known high street banking arm (Internet based)on proviso I set up a new account this I was happy to do as it fitted my plans to make savings more efficient using the offset facility agianst my mortgage however. Half way through the process and having paid £500 upfront they refused the mortgage on criteria. Meanwhile they still insisted on pushing ahead and trasnfering my direct debits across to the account without my consent! The way I see things the deal was to be done on my being accepted for a mortgage! Very naughty indeed!
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Anonymous | 8 Jan 2010 5:09 pm
We seem to have been here before, the year was 1995 and the main difference between then and now was that base rates were nowhere near as low as they are now.
"Traditional" lenders had painted themselves into a knee jerk corner and it took a very innovative approach from Kensington to unlock the stall that had been created - the rest is history, but can history repeat itself?
Indeed there is a sub-prime market out there that needs servicing otherwise we run the risk of locking a large percentage of the population out of the home buying process so we do need a sub-prime lender(s), just like we did in 1995, it worked then.
It won't happen if the FSA has anything to do with but market demands will flatten the FSA's resolve, humans are nothing if not inventive so I expect to see the reemergence of the specialist lending sector in the late part of 2010, the FSA will have no choice but to accommodate this sector but will set out “the rules”, it might be a different animal but never the less it will come out of it’s hibernation.
Hopefully this time the greedy little bean counters at the” traditional lenders” will have learnt their lesson and will not interfere in a market they don’t (and never did) understand, never again shall the twain meet, in my view this is the only way the market can move forward and hopefully the intermediary will benefit when the market is eventually unlocked.
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Anonymous | 9 Jan 2010 11:27 pm
The role of the intermediary will diminish if lenders are accountable to the FSA for income verification and affordability. Lenders should increase the availability of more favourable products through the intermediaries than offering these products direct to the customer. This is the least they can do to help sustain and increase the intermediary network. After all it was the intermediary network which played a major role in creating a customer base from which the lenders get repeat business.
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Anonymous | 11 Jan 2010 8:58 pm
Advisers must be aware of industry trends. The facts are:
1. Lenders are looking to distribute in a different way now - that is directly. More and more lenders are offering direct only and advertising heavily to promote this, HSBC is and example of 'how it can be done'. This way lenders retain their cuatomers and pick up all the ancillary products, and refer to in house advisers and IFA's - rather than risk losing their customer.
2. Brokers were only useful when there were self cert and subprime - and lenders paid packagers - these are all now gone, along with the not so great brokers and packagers.
3. Tighter FSA rules on advisers and firms will reduce attractiveness of being a broker or operating as a mortgage IFA.
With all of this in mind, I for one am closing my borkerage and looking to join a major lender - Halifax or Santander as an adviser. The facts to realise are that ONLY the big 5 lenders will effectively be the only ones lending, as only they will be able to securitise and access lending funds. All the other lenders wont be able to compete on pricing - and they definateley wont offer self cert or subprime for a long time.
Now you, the adviser must play your hand - and you know what the dealer has.
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Anonymous | 15 Jan 2010 11:51 am
"After all it was the intermediary network which played a major role in creating a customer base from which the lenders get repeat business"
I just hope the intermediaries left in the market will remember how they were treated by these lenders in their hour of need!
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John Reid | 21 Jan 2010 2:01 pm
After many many years in the Mortgage industry, I am saddened to say I wil be closing my business down before the next fee are due from the FSA.
There is no point, there is no room for these lenders and the intermediaries to work together. They are making it harder and harder for us to do business. Result is goin got be less choice for the consumer and probably more profitability for the Lenders. Dont be deluded, lenders dont care about us r any of their clients - they never have and never will - they only care about profit.
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