Even when times are tough, opportunities can usually be found for intermediaries who want to grow their businesses
I have good news and bad news for you.
The good news is that 2017 is likely to be the year in which gross mortgage advances almost double from their 2010 low point of £134bn to £261bn, according to the Council of Mortgage Lenders.
The bad news is that this could be the top of the curve. Volumes in 2018 are projected to move down to £252bn, with the market flat-lining in the following years.
But hey, let’s be positive. Strong market growth, especially over the past five years, has enabled brokers and lenders to build their businesses. In that time, the buy-to-let sector has put in a particularly strong performance, although we all know volumes are set to fall away this year as tax changes, stamp duty surcharges and more stringent underwriting rules kick in.
Remortgaging has made a strong comeback, however. Volumes increased by 21 per cent year-on-year to £65.7bn in 2016, which equates to 4,300 additional remortgages each month, according to LMS Research. With rates remaining at an all-time low, this part of the market looks like it will continue to be a winner in 2017.
That said, brokers are well aware of the risks of putting all their eggs in one basket. So which other sectors may hold opportunities for them?
Two that spring to mind immediately are large loans and foreign currency mortgages. Yes, they are niche sectors, but ones that have been ignored by too many intermediaries to date.
One of the reasons more brokers have not dealt with large loans is because they perceive them to be supplied primarily by private banks, which they regard as a mystery unto themselves. Historically, this was probably true. But not today.
The regulator defines high-net-worth individuals as those with a net annual income of at least £300,000 and net assets of £3m. These figures are important because, once a borrower crosses this threshold, their application can be treated slightly differently from ‘ordinary’ borrowers.
The FCA recognises that HNW borrowers are usually asset rich, have complex income structures and are often more financially astute than others. As a result, they can sign a waiver meaning they do not need to receive advice in the same way as ordinary borrowers, instead simply stating their mortgage requirement.
That is not to say they would not benefit from the services of a broker; far from it.
Although the HNW borrower may be able to work out a repayment strategy for themselves, nevertheless they need help in finding a suitable lender used to dealing with complex incomes, multiple investments and repayment strategies dependent on the future worth and sale of assets.
This is the bread and butter of private banking institutions. However, because they are usually such bespoke solutions, mortgages from private banks are not listed on product searching systems. So while applications for mortgages of £1m or more may not land on your desk every day, it is worth knowing which lending institutions you can turn to when the occasion arises.
I will address foreign currency mortgages in more detail in a future article but for now it is worth bearing in mind that ‘foreign currency’ refers not just to a borrower’s income. If your client is dependent on using assets held in a foreign currency to repay their mortgage, the deal will be classified as a foreign currency mortgage.
The mortgage market continues to evolve but, as always, opportunities can be found for intermediaries who want to grow their businesses.
There is no need for 2017 to be the top of your growth curve.
Peter Izard is business development manager at Investec Private Banking