The mortgage market has gone from bad to worse in the past couple of weeks. I had hoped that by staying positive and not worrying consumers into a frenzy we could weather the storm but now I believe brokers must batten down the hat-ches and prepare for a rough passage.
The question now is how brokers should prepare for the challenges ahead. The key is to have a plan to identify and react to risks. It is important to consider various scenarios and the effect these could have on brokers’ businesses.
For example, what impact would a fall in house prices, a rise in interest rates or a reduction in business levels have? And how would these changes affect different sectors such as buy-to-let and first-time buyers?
In their planning, brokers should also bear in mind the additional in-come streams open to them.
General insurance is one option, although this is not seen as a priority by many. This may be due to a lack of knowledge about the sector, but that knowledge is easily available to brokers via networks. Brokers can also pass cases involving GI on to specialists and take a share of the commission.
This is a good time to consider the value of networks – as the storm gathers force, it’s beneficial to maintain strong ties with a strong one.
In the past, it was seen as best practice to spread business around distributors, based on which offered the best exclusives at any given time. But for the next year or so, there will be less benefit in doing this.
Brokers can make themselves val-uable to their networks by putting their business through a single channel rather than spreading it.
If restrictive quotas are put in place, exclusives may be hard to come by so brokers should ensure they re-tain access to the best deals.
So planning is the key to weathering this storm. Be clear about your priorities for the next year or so, from where your revenues will derive and which partners can help you implement your plan.
Also, stress test your business so you know what overheads can be sustained against business levels.
I may be overreacting but better safe than sorry. I’ve long been an advocate of talking the market up and I still see many positives in the situation but the time is right to take precautionary action. The worst thing brokers can do is to bury their heads in the sand.