The time for self-pity is over
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I think everybody would agree that mortgage brokers have had it rough over the last few years.
The industry has been decimated from 36,000 in 2007 to around 12,000 today. Even those who are left are doing fewer deals than at their peak despite such low numbers of brokers.
Dual pricing against brokers, funding problems and low interest rates have all conspired against intermediaries to make it tough.
But the time for self-pity is over and the fightback must begin now. Brokers can either roll over and die or adapt and survive.
Change is difficult but it is necessary. The first change is cross sell other products such as mortgage protection insurance, buildings and contents and life insurance. No doubt many are already doing so but if not then do it.
The second change must be to re-define and re-brand brokers as advisers. A broker orchestrates a deal whereas an adviser helps a client to find exactly what they need - a real whole of market approach.
Charging for advice is a must. If clients want to know if they should remortgage then a broker should charge them whether they have to or not.
And if there is a direct deal that is better than a broker deal then intermediaries should advise their client to take it. There is no proc fee but there should be a charge for the advice. It doesn’t make dual pricing any less pleasant but it will build trust with clients for the long-term and gain a broker a fee in the short-term.
What has happened in the last few years has been traumatic and devastating for intermediaries. But the doom and gloom advocates should realise there are brokers succeeding even in this environment.
If you are making money, or even merely surviving, now when the industry is £140bn, imagine the possibilities in the next couple of years. The consensus seems to be an mortgage industry settling between £200bn and £225bn.
Are you going to be a broker who adapting in the short term and ready for recovery in the long? Or are you going to be complain about dual pricing fruitlessly and let the recovery take you by surprise? I know what I’d advise.
Readers' comments (8)
chris gardner | 6 Sep 2010 9:59 am
At last somebody is talking sense.
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RMBS_Trader | 6 Sep 2010 10:37 am
Samuel - not sure I agree with your suggestions here. I see the point of offering advice, but the consumer doesn't see it that way.
You go to a broker, because they can do all the work for you, then charge the lender for the service. Now you're suggesting it goes the other way? That's akin to a lawyer, but no one sees a mortgage broker in that light. And nowadays, as we keep reading the best deals are direct anyway, and you can find most of them on comparison sites regardless.
As for your comment on the lending increase to c. £200bn, that figure only works if there are no further negatives to the market, but most fundamentally, it only works if banks are able to lend that much more.
Which they won't - new 'Fosse' deals won't get us there, and with rates so low the deposits aren't going to materialise either....
...and all this before you introduce BASEL II and find the banks needs to raise billions more in reserves.
Not a pretty picture, but the truth is there is far more pain ahead than brokers 'preparing for a recovery'. I'm sorry to say, but the tough times will continue and you need to attract customers (e.g. by diversifying, as you rightly say) but scaring them off with charges, regardless of whether the broker/advisor is needed or not, simply won't apply in this sector.
You're best bet is probably to be a financial advisor anyway with a focus on more generic consumer products, including mortgages. For the next few years, more people will need help on what to do with their credit card debt than buying their next house.
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Glenn Peniston | 7 Sep 2010 1:31 pm
Well said Samual, my thoughts exactly, if we are going to survive we have to be positive and look for the business not moan about things like dual pricing which we cant stop
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Bobby | 7 Sep 2010 6:25 pm
Actually its not well said. The guy works in media and does not have to arrange mortgages. To the brokers who say stop meaning about dual pricing this mens either, they are happy to be an unpaid employee od the banks and pass their clients over to them or, not telling their clients the rate they can direct is better, often much better. the report is disgraceful and kicks brokers when they are down.
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Robert Collins | 8 Sep 2010 2:22 pm
Samuel, I agree to a certain extent that brokers need to diversify. However it is very difficult these days to get in front of clients let alone sell other products.
The main concern appears to be job insecurity and until the economy stabilises and people are more confident about their jobs then it will remain extremely difficult to expect clients to commit to anything.
I know this may soung rather negative but I can assure you that I am experiencing these situations day in day out and unfortunately we have to face up to it.
I'm sure all brokers are trying their best to make ends meet and what is happening with dual pricing and the difficulty obtaining finance even for the most straight forward of mortgage cases is a real stab in the back for intermediaries who have shown great loyalty over the years to lenders.
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bobby | 9 Sep 2010 9:51 am
The guy has no understanding of the market or how the real World is. With so little lenders and competition a client can find the best direct only deal on the internet themselves in 5 minutes. so will this work Samuel " I have looked at your details ( 5 minutes ) and the best deal ia a 2.19% tracker with HSBC with £ 99 fee and no penalties. Yes I saw that in the paper yesterday.
Broker - well there you go, that will be £ 295 pounds please.
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craig | 10 Sep 2010 4:39 pm
i totally agree with Bobby. Its all very well saying charge fees for advising on direct deals but how is this practical? does the client bring a wad of cash to the meeting? do you send an invoice, what obligation is there to pay it?
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Rob | 13 Sep 2010 8:32 am
I think in the long term things will improve but we need to have better rates for higher loan to value cases . I have been charging a small fee for years I have never had a problem with it , and the the area i work is has seen a big drop in house prices . Too many brokers in the past have simply sourced a mortgage product with no follow up advice . You have to offer other products and make the effort to keep in contact with your customers .Clients like face to face contact with somebody they trust .
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