Having just held our fifteenth Complete FS Expo, I know from personal experience how important expos and seminars can be when it comes to informing brokers about new products, services and opportunities.
This year from the expos I have attended, the main takeout has been just how great a time it is to be a broker. Now I’m sure that if you’ve just come back from a tough client meeting, or been waiting on hold with a lender for more time than you’d care to elaborate on, then you might not immediately agree. But, and there was an obvious ‘but’ coming, if you take a step back and look at the bigger picture then I’m hopeful that you will be of the same opinion.
The market has and is becoming increasingly complex. Yes, there are some obvious challenges from a regulatory and administrative angle for all intermediary firms. However, although the pre- and post-millennial generation that grew up with the internet will look to use online facilities, cases with any additional complexity serves to highlight both a growing demand and a rise in the value attached to the human advice process – an important consideration when it comes to assessing or updating business models.
The current market is awash with competition, new entrants, opportunities and technology to bolster service standards and help you run your business more efficiently. This marks an exciting time for brokers, especially within short-term and specialist lending.
Focusing on short-term finance, it’s worth posing the question – how will this sector react to the recent PRA changes for buy-to-let landlords? In my opinion, it is largely business as usual in terms of offerings, support and activity.
The only real change I foresee in the coming months is a potential move from some short-term lenders towards a growth in longer term rates. This should result in some diversification away from more standardised short-term funding.
Much has already been reported around the regulatory changes to how buy-to-let mortgage applications are underwritten for portfolio landlords. Although it’s always worth reiterating the definition of a portfolio landlord according to the PRA, which is: “borrowers with four or more distinct mortgaged buy-to-let properties, either together or separately, in aggregate.”
Lenders are applying these guidelines in a slightly different way which again highlights the importance of the advice process. These changes also push BTL closer to other specialist sectors, including bridging and commercial. A factor which could open the door for brokers to capitalise upon a wealth of additional opportunities.
This shift also highlights the growing gap between mainstream and specialist lending. Technology and automation is swiftly changing the face of mainstream lending. In the modern mortgage market, it’s getting easier to access an abundance of information/resources which may encourage and enable proactive borrowers to go direct. Importantly though, we must remember that this particular route only remains available for the most vanilla cases. So, it is no slight on the value added by the intermediary community or how important this channel remains to the vast majority of lenders.
Growth areas, such as lending to self-employed people or contractors, are still vastly underserved by high-street lenders. And some of the more niche lending areas: adverse, secured loans and regulated bridging, also provide a wealth of opportunities to more than make up for any shortfalls suffered within the prime mortgage market.
To ensure the right levels of support and advice are provided it’s vital for brokers to really understand these sectors. Unlike much of the prime market it’s not all about the best rate on a sourcing system. Advisers have to get to grips with the needs of the individual borrower and match them with a lender who can offer the right deal and service standards to satisfy these needs.
It’s no coincidence that many of the exhibitors at the expos are from the specialist sectors. Not only does this signify that the demand is there but also illustrates their appetite to get in front of brokers to help educate, inform and support them across these sectors.
Adaptation is what the broker community has been good at through numerous changes in regulatory and economic circumstances. The specialist lending market is where today’s brokers are going to thrive.
Phil Jay is director at Complete FS