Take-up in the seconds market has been disappointing, but is it a technical problem or the attitude of brokers at the core of the issue?
I would like to begin this article, if I may, by recounting a tale of a swimming instructor trying to teach a child to swim.
The child was attending all of the lessons and was quite clearly trying their best but, for some reason, it was just not happening. Despite the best efforts of both child and teacher, this youngster seemed destined to be a non-swimmer.
Finally, with all hope nearly lost, the teacher spotted where they had been going wrong. The child was swimming with his fingers wide open, thus allowing the water through his hands and preventing him from making any headway. As soon as this issue was rectified, the kid was a natural.
You may wonder what this story has to do with the mortgage market and, on the face of it, I will grant you not a lot. However, what it does illustrate is how one small issue in the manner a task is executed can be the difference between success and failure.
This is something at play in the second charge market at present.
Too many could be binning perfectly good business
There is no denying more mortgage brokers are aware of second charge products than five or so years ago. Thanks to the Mortgage Credit Directive and the tireless work of those in the seconds industry in educating the sector, awareness has increased and so too are lending figures. But I think we can all agree that take up has not been as significant as one would have hoped. One reason for this, just like with the struggling swimmer, is how some brokers approach the task.
Seconds are often considered too late in the process – post-fact find when a problem arises. A better approach is surely to assess eligibility for a secured loan at the outset, where opportunities are most abundant. Then decide if it is suitable.
If brokers are not tuned in to second charges and are not familiar with the criteria, too many could be making their minds up in that initial conversation and binning perfectly good business (which, incidentally, is virtually guaranteed to become repeat business).
Most brokers will see a client looking to raise capital and, perhaps subconsciously, decide a remortgage is the way forward. In many cases it will be and, as brokers have been offering remortgages for the entirety of their careers, it is only natural this may be the approach they take. However, too often – perhaps because of a client’s credit history, age, purpose of loan or some other factor – the broker politely sends them on their way.
This is understandable. Nobody wants to be a busy fool. If the broker has already decided he cannot help the client with a remortgage, then he is unlikely to go through the time consuming task of conducting a fact find.
One has to wonder if compliance may be hampering rather than helping. If a client passes those informal “kick out” questions at the outset, the broker is then into a structured process which includes evidencing and justifying every decision or recommendation. No wonder they want to side step the obvious no hope cases and save themselves some unnecessary and unprofitable paperwork.
Again, there are certainly some very good brokers who have a good understanding of the second charge market and, as such, will be considering both options from the start. But if those kick out questions are now out of date and do not reflect the current market, the broker is not doing himself or his clients any favours
Perfect your sale process in order to ensure you are not missing out on lucrative business. Having a preconceived idea based on what you are used to selling or what you are most comfortable offering is counter-productive and will cost you completions in the short term and repeat business in the long term.
An open mind could be the key
Start with a blank page and try not to prejudge. If it seems likely a remortgage is the right option after all, you have lost nothing by going in with an open mind. If not, you will already have seconds as an option in your mind and will be able to refer the client to the appropriate partner firm and earn a commission while doing so.
And because you were able to help that customer rather than turn them away, you have secured a client for life – meaning there will be plenty of opportunity or future mortgage and protection business.
So do what you need to do to get yourself clued up on seconds, whether that be attending training seminars or just having an underwriter on the end of the phone to run potential cases past. There are more opportunities where the funnel is widest and dealing with them more effectively will reap rewards. It is all in the approach.
Steve Walker is managing director at Promise Specialist Lending