Help clients see the bigger picture

Clients are increasingly in need of information on trends in the housing market and the wider economy and brokers should be able provide this, says Justine Tomlinson

In the past six months, some journalists have been accused of portraying the mortgage industry in a negative light and even talking the country into a recession.

The financial services industry generally deplores sensationalism and for the most part market conditions have been reported fairly and accurately in the trade press. If anything, some commentators could be accused of being too optimistic, but I guess nobody loves a pessimist.

Predicting the outlook for the economy and the housing market has never been more challenging, but some regularly published sources are available to guide us.

Each month the Council of Mortgage Lenders publishes a market analysis. This fo-cusses on lending activity and looks at the Bank of England’s economic projections.

Towards the end of February, this analysis indicated that economic growth would halve this year and consumer price inflation would rise to more than 3% by Q3.

BoE governor Mervyn King has warned that two successive quarters of economic contraction are possible – and that’s how econom- ists define a recession. He has warned Brits that their standard of living could fall.

Sobering noises have also been made in the media about a downward trend in house prices. We have seen large estate agencies closing branches and house builders’ share prices falling sharply.

But on a positive note, the BoE expects the economy to grow this year and has a more optimistic outlook on house sales and prices in 2009.

The trend in approvals is a useful barometer when it comes to predicting housing activity in the months ahead. January approvals were lower than in the same period in 2007 and 2006, but higher than 2005. This is a handy reference point for market expectations.

So the media should not be blamed for a possible re- cession – consumers are less optimistic because they have less disposable income.

King may have warned us to expect a lower standard of living but this is already a re-ality for many. And most consumers expect the situation to get worse in the coming year.

Incomes may have risen compared with a year ago but taxes and the prices of food and fuel have risen and are unlikely to have peaked.

Life is getting more expensive and consumers are be-coming more cautious be- cause of that, rather than the influence of the media.

In this context, borrowers and potential mortgage customers are keen to get advice on property prices, rates and the economy.

Providing clients with su-ccinct responses to economic queries is tricky but one op-tion for brokers is to offer dedicated web pages giving information on the situation. For this, they could source data from the economists of lenders such as Nationwide as well as the national press and the CML.

FSA’s approach to helping consumers with remortgaging is simplistic
The Financial Services Authority recently released details of a £2m campaign focussing on borrowers whose fixed rate or discount deals come to an end this year. It aims to educate them about their options.

This well intentioned idea is a mis-allocation of resources and money.

First, the campaign does not encourage consumers to approach brokers for advice.

Second, while there is a need for financial education, this campaign is misjudged because many customers know when their deals will expire and even if they don’t, most lenders will write to them to let them know.

It would have been better for the FSA to focus on an educational campaign explaining credit files or mortgage payment protection insurance to consumers.

In addition to the sources of information already mentioned, newspapers regularly run articles about remortgaging.

The consumer press regularly highlights the issue of end dates and product withdrawals, while also featuring best buy guides.

I’m not suggesting that customers only take their advice from newspapers but the media is better at raising awareness than the regulator. And at least it talks about the importance of brokers.

This campaign is an example of the regulator reacting to a set of statistics by adopting a tick-box approach without understanding the commercial world over which it wields so much power.