Just a couple of months ago at our annual conference I was speaking about how this year is the year of the broker, and how everything is in place for brokers to be the key channel for lenders.
We have lived through lender shareholders demanding that more mortgages go through their branch network rather than the broker channel, and employing dual pricing tactics to deliver that result. All symptoms of a crushed market with restricted lending resulting in a ‘feed our own’ policy, and generally leaving brokers feeling unappreciated for all the business they had provided in the ‘boom’ years.
We have to accept that this is all part of changing market conditions and changing circumstances, and right now mortgages are back in favour, they offer good returns and my favourite words ‘market share’ are back. Those words are key to the intermediary sector and the desire to be at the top of the sourcing systems is also back. Despite mixed messages about the housing market, brokers are reporting all time highs in terms of mortgage applications and certainly we are seeing a 20% increase in the number of applications made when compared to 2014, which is significant because the first four months of the year were extremely strong.
It does seem to be across the purchase spectrum, with a few star sectors – first time buyers, especially new build, and buy-to-let with the addition of some promising new contenders gaining traction. Some lenders are already getting close to reaching their maximum ratio to residential lending. Consumer demand is still high for 2-year fixed products at good prices, although even 5-year fixed products are getting a mention if the rate is low enough.
The interesting misnomer is remortgages. Despite the real saving for borrowers who are coasting on lender’s standard variable rates; they are not rushing to the table to switch mortgages. In my view, it is a little bit like cash savings – most people don’t really bother to shop around to switch. If the difference is insignificant, it just isn’t worth the bother. Even though the differential on the mortgage could be far more substantial, apathy still seems to rule. It could be the thought of all that may be required in terms of time and effort to change, it may be on the ‘too much trouble’ pile, and unless the client is contacted specifically to remortgage they may not even think about it.
There is little in the media for consumers about the positives of remortgaging but with interest rates having been low for so long, arrears at an all time low, if people are managing their finances comfortably there is no incentive to investigate the options.
The threat of an interest rate rise has been publicised a number of times now and that has not made much impact apart from keeping fixed rates as the most popular choice for the consumer. So, it looks as though an actual rise is the only factor that will revitalise that sector of the market, which is probably around 25% of current mortgage lending. Such a different place to two years ago, and it is a good place right now.
As the market continues to be buoyant in the broker space, it is interesting to see how the relationship with the lender’s Business Development Managers (BDMs) is playing a more important role.
The market is exciting and constantly changing in terms of criteria and rates almost on a daily basis. As a distributor we do everything we can to get these messages across to network and club members but that interaction with the lender BDM is clearly adding value.
The feedback we receive is that the broker feels more confidence and trust in the lender when that relationship is good. Unfortunately, a less effective BDM creates the opposite and often a reluctance to use that lender when there are others that are equally suitable.
It’s all about communication and ensuring that the important changes are fed through quickly. Whether that’s at the end of the phone to give clear, correct information or face-to-face, the BDM is of paramount importance.
This sounds pretty simple but the range of service does differ. From a distributor aspect we also find that a good key account manager is a truly valuable asset. They enable us to get messages out to members on time and ensure that they can maximise opportunities. Exclusive products are slowly coming back in vogue and this is a key part of the lender relationship with us, and knowing your customer applies at all levels, and frequently delivers good results.
The new addition to this service is also the increasing ability to speak to underwriters about a case on day one. This is a well received service that can save time; reduce the application to offer time, making the process more efficient and cost effective for both broker and lender. With business levels increasing, it is very important for lenders to continue to look at new ways that they can make their proposition easier to access, as we all know 2015 is all about service.
With another Conservative government at the helm, it is business as usual for many involved in the new build sector. But it is this area in particular that has been given the biggest shot in the arm from several schemes, designed to re-invigorate a housebuilding market that is still lagging behind required volumes.
So with a government adamant they can now focus on new-build in this upcoming term, does the future look good for this crucial industry sector?
The only way is up…
Building up to the election, things were looking good for the new build market. The proportion of first-time buyers has risen from 35% to 50% since 2006, as a result of high rental costs, increased product choice and schemes such as Help to Buy. Meanwhile lending continues to grow, with the Council of Mortgage Lenders’ estimate for 2015 being £222 billion, the highest since before the financial crash. According to one leading lender, there were 118,760 new build purchases in 2014, up 8% from the previous year. There were also 137,000 new build starts in 2014, up an impressive 10%.
The increasing number of consumers that have used an intermediary for their mortgage is a positive outcome to stricter affordability post-MMR. This is especially true of first-time buyers, as they begin their journey up the property ladder with trepidation, making the expert advice you provide invaluable.
Scheme successes…
First-time buyers are still key to the success of the new build sector, which means things are looking good on the back of several governmental schemes designed to encourage and incentivise. Many schemes have been successful, especially Help to Buy, which saw 60% of all new build sales with a mortgage and over 80,000 purchase completions as a result of the schemes.
The Equity Share Scheme, or Help to Buy 2, has also proved successful and the number of new homes built last year would have been even smaller had this not been available. The Conservatives have already pledged that this scheme would continue until to the end of 2020.
A sunny outlook…
Starter homes are on their way. The conservatives have promised 200,000 by 2020, bringing advantages such as removing buy to let opportunities, earmarked brownfield land and reduced development costs. But some experts are dubious as to whether spending cuts can co-exist with promises such as this, putting even more onus on the private sector to supply.
It also looks like we will continue to see a record low Bank of England base rate for most of 2015, which will surely only be a positive thing as lenders continue to offer low deals and increase demand to spur on housebuilding. Experts believe that there are other factors forecasted to remain positive for the new build sector, such as increasing consumer confidence and stamp duty reductions.
With so many struggling to afford the current large deposits for their first home and the undeniable relationship between house prices and housing supply, it is welcome news to hear that the next Conservative government will focus on the new build sector over the next five years.
Despite the popularity of using a Price Comparison Website (PCW) to search for General Insurance, experts and the Financial Conduct Authority (FCA) have raised concerns over not just the compliance of the sites, but also their effectiveness in providing the right cover for consumers.
Do comparison sites really save time and money?
Consumers choose a PCW because of its perceived ability to save time and money. But consumer research by the FCA has revealed that obtaining a quote is rarely a quick process. In fact, research found that some comparison sites demanded answers to over 60 questions in order to obtain a Home Insurance quote, with many finding the volume of information and number of variables surrounding General Insurance products confusing and sometimes overwhelming.
Once consumers did reach the results page, not only did they find the options confusing, but there was also a lack of ability to compare like for like policies as well as cost. Often the lowest premiums would take priority, but the cheapest option is rarely providing the ideal cover, leaving the potential for long term consumer detriment.
Do comparison sites Treat Customers Fairly?
On the back of research undertaken in 2014, the FCA have highlighted that “a focus on price could distract from crucial product features and lead consumers to make an inappropriate policy choice that does not suit their needs and requirements”. In fact, PCWs will actively avoid going into the required detail regarding product options, in order to maintain the perception of speed and ease.
Consumers often have preconceived ideas about comparison sites, assuming them to be impartial and all-encompassing. But as the selling point of the sites is to provide a quick and easy way to compare insurance, it can often fly directly in the face of FCA guidelines on Treating Customers Fairly. Unfortunately some consumers currently use the site as a replacement for an adviser, assuming that the product they are guided towards is the best option for their circumstances.
Why is choosing an adviser a better option?
Choosing an adviser over a PCW gives consumers access to expert advice, industry connections and the knowledge that the adviser will find them cover tailored to their needs. To help in the battle against PCWs advisers now have access to tools like Paymentshield’s Premium Flex, which gives you the option to reduce premiums and bring down the cost of the policy. This means you can now deliver the best of both worlds; the perceived benefits of a comparison site, but with the peace of mind that comes from knowing they are offered the best products for their needs.