This product is better than it has ever been but, ironically, consumers are less aware of it. Brokers – over to you…
A large proportion of the mortgage market has still not got to grips with second charges since the advent of the Mortgage Credit Directive. The sector has yet to reach anywhere near its potential and so it is widely agreed that more promotion is needed.
Perhaps less widely agreed upon, however, is the best way to do this. Back in the day, TV and press advertising was the obvious option. Daytime TV was awash with adverts for so-called homeowner loans and calls to consolidate debts. And this was an effective approach, which raised both the profile and the availability of secured loans.
These days, however, things are a little different. Now that we operate within a more regulated environment, advertising is more difficult. I’m sure everyone remembers that well-used line: ‘Consolidate your debts into one convenient monthly payment.’
Consider, then, the caveats that would need to be added to this in the interests of protecting vulnerable customers and adhering to new regulation. Coming up with a ‘call to action’ tagline is not as easy as it once was.
Then there is the matter of finding a target audience. If we’re promoting loans to the homeowner who wants to keep their current mortgage, we’re not talking about a huge number of people. How do we reach those borrowers in particular?
Of course, the financials of second charge mortgages have taken a big hit too. The bulk of the profit in times gone by was made on PPI sales. Say no more…
Let’s not forget too that the sales process itself can put off some consumers. In the past, they could get some meaningful personalised information upon which to decide if they wanted to proceed. Now an elongated sales process is involved, which customers don’t always want.
So are master brokers prepared to cough up for expensive advertising campaigns knowing they’ll attract less business than in the past due to a toned-down advertisement? And, for the cases they do get, they’ll receive less cash, more liability and a more costly advice process. It’s a brave person who will take that chance.
Ironically, the product is actually better than it has ever been but consumers are less aware of it. Rates are lower than ever; early repayment charges are low to non-existent; and the sales process ensures the consumer gets the right product for them.
If advertising direct to consumers is not as easy – or productive – as it once was, it’s little surprise that, with no direct promotion whatsoever, the comparison websites are hoovering up secured loan customers. With their search engine power and brand recognition, they don’t need to promote second charges or engage in pay-per-click advertising to rank top of page one. Of course, customers may not be looking for nor even aware of second charge loans but, once they tick the homeowner box, they are probably on the journey whether they like it or not.
So, unlike in the past, virtually no one is promoting the features and benefits of second charge secured loans. The closest we get are the few brave souls who engage in pay-per-click advertising or fringe TV channels.
And so, once again, we turn to the mortgage broker market. Brokers are exposed to a massive opportunity and have the ability to converse with the exact target market for second charges. By doing so and spreading the word, they can benefit not just the wider market and their consumer but their own business too.
It’s obvious that, the wider your offering, the more lucrative your business will be.
Clients who come to you for a second charge may actually be better suited to a remortgage, and vice versa. If you offer both, even on a referral basis, you get paid either way. Yet many brokers are currently losing clients to ‘one-stop shops’ in the form of comparison sites simply because those clients don’t know their broker can offer secured loans.
What makes comparison sites so attractive to consumers? What messages do they convey to potential customers? Simply a) that they can save you money and b) that they can save you time.
In reality, probably neither is true, and the comparison site will pass the lead to a favoured specialist demanding a large fee in return, which the customer ultimately ends up paying.
Brokers with a diverse offering can undercut comparison sites on fees and offer a whole-market first and second charge comparison.
Why wouldn’t you? Just ensure your clients and potential clients understand and are exposed to everything you offer. Each element will bring in its own business.
Steve Walker is managing director at Promise Specialist Lending