The biggest business threat is broker apathy
It amazes me when brokers talk about the threats impacting their businesses and always cite the usual suspects: comparison websites offering consumers a quick and easy way of sourcing financial products (regardless of whether such products are appropriate); extra regulation, meaning more bureaucracy; and lenders not responding to consumers’ needs by developing more flexible and innovative products.
Rarely do these brokers look at their own operation and question if they are doing all they can for their business.
In truth, the biggest threat to a broker’s business is apathy. And too many brokers are choosing to ignore general insurance. Current market penetration for home insurance sales against mortgage completions is just 20 per cent.
If your client has to go elsewhere for insurance, why would they not go elsewhere for their remortgage too? By shunning GI, brokers are actively choosing to offer a less holistic service to clients.
I understand brokers’ reluctance: for too long, reward has not been commensurate with effort and time. But providers are recognising this and many are investing in tech and processes to make the broker journey as straightforward as possible.
As you embrace the second charge industry as a result of the MCD, use this period of change as an opportunity to engage with GI too. Your competitors will.
Jason Berry, Uinsure
Advisers must establish the right relationships
To describe a product sector as a ‘niche within a niche’ may not make it sound that appealing to mortgage advisers but, when the reference is to limited company products within buy-to-let, perhaps the opportunity becomes clearer.
Ever since the Chancellor announced his cuts to tax relief on buy-to-let mortgage interest, the limited company option has snowballed in popularity. Just last month it was revealed that, across the market, limited company buy-to-let applications by value had risen from 18 per cent in July 2015 to 32 per cent by 31 December.
When the figures for the end of March come out, they are likely to show even more growth because one suspects landlords purchasing before the stamp duty deadline increasingly opted to do so within a corporate vehicle. And, as the cuts to mortgage interest tax relief for higher-rate taxpayers get closer – they are due to begin next year – I am certain the numbers will be greater still.
There is a key role for advisers in this space around the choice of incorporation for landlords because, despite what the wider press may say, it is not always in landlords’ best interests to move to a limited company structure.
Recently, the buy-to-let narrative has tended to be ‘limited company – good; personal holding – bad’, but this may not be true. Until you unravel the personal circumstances of every existing or prospective buy-to-let purchaser, it will not be possible to work out whether incorporation is right for them.
Advisers may get caught in the middle here with insistent clients, who have not taken specialist advice, blindly assuming a limited company is the right way to go.
Perhaps now is the time for advisers to secure introducer relationships with tax professionals who can examine a client’s circumstances and help them make the right choice about how to proceed.
We are definitely not dealing with a one-size-fits-all solution here and it would assist clients if advisers had the right relationships in place to help them determine the best route to follow.
Richard Adams, Stonebridge Group
Why does pension income deter lenders?
Last week, Mortgage Strategy ran a piece in which equity release experts called for the old SHIP standards to be reviewed to aid innovation.
Although this would be a step in the right direction, why do more lenders not offer traditional repayment or interest-only mortgages to borrowers with pension income?
I have never understood why a cut-off age of 65 to 75 is the norm when a client either already has, or can prove they will have, pension income to validate the mortgage. Lifetime mortgages do help the older borrower but the higher rates and fees, plus onerous tie-ins, can be offputting.
Despite some lenders now offering a term to age 85 or beyond, this is more the exception than the rule.
Carl McGovern, Mortgages 65