It’s crazy out there
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.