The business environment has changed dramatically since last summer. Funds are restricted, borrowers are more cautious, the housing market is cooling and business volumes are slowing down.
Everyone in the industry has been affected so looking to the future, it’s essential that firms assess the models they have in place and how their competitors will act in the coming months, then adapt their businesses accordingly.
Corporate funding is going to be difficult and expensive to secure for many months to come, so it’s worth considering how lenders will use the scarce capital that is available.
In difficult times, the last thing they want is complexity. If their distributors run into financial problems, it creates a host of problems for them concerning proc fees and incomplete applications.
So there’s little doubt lenders will carefully assess the firms they work with and be more selective about their partnerships.
Restricted funding means lenders can fill their quotas by working with the firms they perceive to be the best bets. They will have neither the resources nor the inclination to generate volume at all costs, so working with firms that make life as secure as possible will be their priority.
A number of brokers and networks have already run aground and this will only intensify lenders’ desire to avoid becoming embroiled in such problems.
It may be that some lenders will look to curtail the amount of business they do through brokers to focus on offering mortgages directly instead. Such an approach obviates the need for proc fees and means they won’t have to rely on third parties. Some may decide only to deal with certain parts of the broker community. For example, they might work only with appointed representatives, directly authorised brokers or perhaps a few carefully chosen partners.
All this will have a significant impact on the broker channel. Fi-nancial security, strong compliance procedures, good service standards and established client bases will be the cornerstones upon which lenders build their relationships.
How this period of adjustment will work out remains to be seen and there can be no guarantees, but in any turbulent and commercially challenging period it is usually the strongest, steadiest and most secure companies that ride out the storm. The challenge for brokers is to be part of that convoy.