Entering new markets can create great value to lenders, brokers and customers alike. However, it is essential to do the homework. For a niche building society such as the Tipton, this means adopting a disciplined process to accurately assess the potential of each growth opportunity. In particular, we clearly need to understand if there is a real and sustainable need among customers and our broker partners.
Know your market
To expand into new lending areas requires a great deal of market research in addition to accurately targeting customers. It is crucial for your marketing team to develop an in-depth understanding of market potential, forecasted demand and potential barriers to entry. Equally important is to listen to brokers who have a direct insight to the changing needs of customers and new areas of lending where there may be a gap in the market.
At the Tipton, we relied heavily on broker feedback about the potential that existed in the ex-pat market before launching a series of ex-pat buy-to-let products earlier this year. This was supported by our own market analysis, which estimated some 5.5 million ex-pats living overseas with an increasing number looking to start or add to their BTL portfolio in the UK.
Many brokers tell us that significant opportunities in new markets can be exploited by simply relaxing or tweaking criteria of an existing product. That is why it is important for lenders to constantly review lending criteria to ensure it is fit for purpose and relevant for current and future market dynamics.
Feedback from brokers and the continued growth of Airbnb led us last year to accept applications for second homes and holiday lets where borrowers wished to use said app. This change in criteria clearly gives our brokers and us access to a significant new market where borrowers can rent out on shorter and non fixed term agreements. The changing nature of people’s working circumstances for example, means that some tenants require shorter or more flexible rental periods. It therefore made sense for us to accommodate landlords who wish to attract shorter-term tenancies
Spreading the word
Clearly it is vital to shout about your new lending capability, and we are no different in using key channels of communications. To promote a new product and increase sales, it is always sensible to have a broader plan in place. Direct email campaigns, social media, trade and national press are obvious tried and tested routes to bring your product to the attention of customers and brokers. However, a recent survey of our broker partners found that engagement with our BDMs was crucial when it comes to promoting a new product. When you bring a new product to market, therefore, BDMs should be the key providers of knowledge and support with detailed understanding of lending criteria, unique selling points and market opportunity.
Hitting new business sales targets is an obvious indicator of success, but getting new business at the right levels without causing any processing issues is also a measure of a new product having an impact. On the downside, poor sales performance is a real risk, especially when lots of customer applications are declined because they do not fit the profile of the product. This can be frustrating, so it is critical to adopt a disciplined process to ensure the product meets customer needs.
Involving key stakeholders from the outset is key and is where underwriting professionals should play a central role. We all know that underwriters are required to develop in-depth product and strict guideline knowledge. However, they also need to demonstrate personality characteristics that can really help and add value to the work of mortgage brokers when bringing a new product to market.
There is no doubt that the mortgage industry is changing at a rapid pace and clearly this is set to continue as lenders respond by offering a wide range of new products to meet changing customer needs. Just look at how the later-life market has taken off over the past 12 months, which has made raising money in retirement much easier for the over 55s.
There is plenty of opportunity to see new products for customers that fall outside of the traditional criteria set by many lenders. And there is lots of room for innovation in the mortgage product range. Btu the challenge remains in ensuring your product has a sustainable market that can meet your sales expectations.
Cammy Amaira is sales and marketing director at The Tipton