Over the past year, mortgage brokers across the UK have been grappling with the fallout from buy-to-let tax changes, Brexit uncertainty and FCA scrutiny of the advice process.
Directly authorised advisers face a greater burden to adapt to such challenges without the resources of a large network, but many feel their independence makes them nimble and better able to move with the times.
Plenty of broker firms get back-up and compliance help from mortgage clubs and support services providers, yet still prefer to retain ultimate control over their own procedures.
As well as the wider trends affecting the market, different regions face their own particular challenges. Property market commentary is often dominated by perspectives from London and the Southeast so, to help redress the balance, Mortgage Strategy caught up with six directly authorised brokers from around the UK to seek different views.
From Northern Ireland to Northeast England, and from Scotland to the Southwest, the mood was one of positivity and resilience from advisers confident in their ability to attract business for years to come.
In County Armagh, Northern Ireland, Nixon Financial Services partner Bill Nixon has been giving mortgage advice for 21 years and is not fazed by current turbulence, having been through much worse. He says the consistently high numbers of travellers through Belfast airport - whether people taking weekends away or those travelling for business – are a reassuring sign of the health of the local economy. However, some are still recovering from the last downturn.
“In 2007 we [County Armagh] had the second-highest property valuations in the UK, which based on income was totally ridiculous. Property values [subsequently] dropped by up to 50 per cent and, while the housing market has recovered to a certain extent, there are still people in negative equity in this part of the world.
“A number of people went down the bankruptcy route as they looked at what their homes were worth and thought they would still be in a similar position after 10 years, so decided to hand back the keys. I do not really blame them.”
However, for those in the region looking to step onto the property ladder now, the situation is much better.
“It is comfortably affordable for most people as you can get a nice three-bedroom home for £130,000. There are very high levels of homeownership and, around Belfast, County Down and the north coast, prices have increased substantially.”
One of the major frustrations for Nixon is the much narrower choice of lenders in Northern Ireland compared to elsewhere in the UK.
“We probably have only around 20 or so to choose from and when it comes to any niche or specialist cases you can forget it,” he says.
“I think lenders do not understand that people over here do not like being in debt, and getting the mortgage paid is their primary concern. People love their homes and the last thing they want in such a small community is the stigma of having been kicked out. They will do anything to make sure their mortgage is paid.
“If lenders could come up with a good reason for why they have not come back here [since the downturn], that would help us to understand the situation.”
But Nixon remains positive as he feels house prices have stabilised, employment is buoyant and he has a loyal client bank.
“We have a good business from a retention perspective and I cannot remember the last time I lost a client. We have never had a complaint.”
In Kilmarnock, southwest of Glasgow, Harry McGinn has been offering mortgage advice for 18 years at his firm, HMG Financial Services. His client base stretches right across Scotland and he has some customers south of the border too. He says business is up this year.
“In the towns and villages around the west coast, the market is still fairly buoyant; houses are coming on and being snapped up quickly. There are multiple buyers for
the properties that are available, so demand is certainly higher than we have seen for a little while.
“I do not think Scottish buyers have been particularly affected by Brexit as very few people mention it when they are talking about properties. I think it is affecting the remortgage market, however, because people are getting a little bit more jumpy and want to fix to see them through any turbulence.”
West Yorkshire Money managing director Adele Forbes has also noticed that more clients want the security of a five-year fix, but aside from that she has seen little ‘Brexit effect’ on buyer confidence.
“People have become bored with trying to keep track of what is going on and just want to get moving,” she says.
However, Forbes, a former underwriter herself, has observed lenders taking a more cautious view on property prices.
“I’ve seen several down-valuations and lenders are sending valuers out to the properties if there is less than 15 per cent equity. In one case, where a 95 per cent LTV property was down-valued, I had to advise the client to opt for a product transfer instead.”
In terms of new business, however, Forbes has generated many new clients through social media.
“Around 80 per cent of my leads are coming from social media as I have got around 800 followers on my business pages on Facebook and around 2,500 on LinkedIn, as well as Google and Yell reviews. I also use Instagram to post reviews and say how much I have saved my clients.”
She has confidence in the prospect for the years ahead as she plans to recruit four new advisers to join her firm over the next year.
North of England
UK Moneyman director Malcolm Davidson, with 18 adviser colleagues and 15 administrators, covers much of Northeast and Northwest England. The firm has just appointed a new adviser, who will extend its reach across the Midlands. It has a strong online presence, with individual websites for each of the cities it covers – for example, Hull Moneyman, Newcastle Moneyman and now Birmingham Moneyman.
“Most of our customers find us online because we have hundreds of five-star reviews, which really fuels our marketing. Up until about 18 months ago our business was almost 100 per cent face to face, but increasingly people want to do things quickly and do not want to wait for appointments, so now 50 per cent of advice is over the phone. We are open seven days a week and on weekdays we open until 9pm.”
“A typical customer will be someone who needs a bit of hand-holding through the process, especially first-time buyers, borrowers who are coming up short with their bank on affordability calculations, or those falling short on credit scoring for debt consolidation when they want to remortgage.
“The market in the North has been far less affected by Brexit than the Southeast has, because in a lot of areas people voted ‘leave’ so are therefore not as fearful about prospects as some are in the South, because it is what they wanted and they do not believe it is going to be a catastrophe.”
However, Davidson says some homeowners have put off moving house and opted for home improvements instead, so when the Brexit dust settles there will be a lot of pent-up demand to work through the system.
“Property prices are more affordable in the North, which means we do not earn as much in proc fees as our southern colleagues. However, as we have not seen the massive gains in prices, we have not been affected anywhere near as badly by prices starting to reduce.”
In Cardiff, Mortgage ID adviser Matthew Williams says the housing market has experienced a boost from the scrapping of the toll on the Severn Bridge.
“It has been quite an exciting time in South Wales, particularly in the Glamorgan area,” he says. “You might not find the same out towards West Wales where it is a totally different economy.
“Getting rid of the toll, and the promise of new developments, have both helped. Over the past two or three years, prices have risen by 10 to 15 per cent. It has meant that people have a bit more equity in their homes so they can refinance or get a bigger property when they want to move up the ladder, which encourages activity. The more equity they have, the more flexibility, and the more mortgage activity we see.”
Williams says, however, that the relatively low prices in the Welsh valleys mean there are lots of opportunities for property investors to generate good rental yields. He is optimistic that prices will continue to rise steadily.
“We had a bit of a jump in prices in the past few years and now I think prices are gradually going up the way they should. It does not feel like a bubble that is going to burst all of a sudden, but rather something that has been suppressed for so long.”
In the Southwest of England, TFA director of mortgages Charly Higman is based near Bristol, but her firm has 32 self-employed advisers – 17 of whom are mortgage specialists – working across Devon, Cornwall, Somerset, Dorset and Hampshire.
She says that overall business has been steady but the mix of cases is changing with a drop in standard BTL and a shift towards limited companies. She is also seeing greater reason to use secured loans as an affordable alternative to remortgage for clients who have high exit penalties on their current deals.
For Higman this is a time when brokers should be looking ahead and focusing on how to future-proof their business models against competition from technology.
“Increasingly, we are going to see a lot more borrowers saying ‘Alexa, find me a mortgage,’ or similar, so unless brokers are appearing top in those searches and have a good technology platform they could be left behind.”
TFA has worked hard to improve its search engine optimisation and is investigating how to engage customers at an early stage in their mortgage research. Higman believes clients will be looking for helpful online tools at the start of their mortgage journey, so brokers need to make sure they have this technology in order to attract new customers.
Once a borrower has begun to explore their mortgage options using these free online tools, brokers can suggest a callback in order to begin the advice process, she says.
“People want to enter their details and for the system to tell them something useful – titbits of information such as the typical cost of moving, likely mortgage costs or what their home may be worth now. Then they will talk to somebody once they have got all the basics.
“But our biggest challenge as brokers will be attracting clients to our websites in the first place. We cannot be invisible on the internet.”