All Payment Protection Insurance claims firms should be shut down.
Controversial maybe but let’s look at the facts. Last month the Ministry of Justice shut down 700 claims firms.
Claims firms charge customers a fee for reclaiming PPI which will be repaid to them by the banks at some point anyway.
The banks are under an obligation to repay all PPI customers in a proactive way but the reality is that the banks are incredibly slow at getting their act together to set up the infrastructure to do this.
This has given the claims firms a window of opportunity to earn some money.
Some of the largest are spending millions of pounds on advertising and raking in millions of pounds from fees charged to these customers. However all these claim firms know that it is a trough that is running dry?
Now here comes the really cheeky bit. When the trough does run dry all these claims firms are going to be left with a database of clients who have no cover in the event of accident, sickness or redundancy.
Can you spot the next opportunity? Yes they are going to start selling the clients cover for such events.
In last month’s blog I did predict the closure of Portillion.
I feel very sorry for those staff at Portillion but to be honest the writing had been on the wall for a long time. It must however qualify as the only lender to close having never sold a mortgage.
Last but not least this month is the continued hikes in SVR by lenders.
On the positive side this can only bode well for mortgage intermediaries as it will create remortgage opportunities.
The reality is that there are two significant blocks of customers which won’t have a remortgage opportunity.
Firstly there are blocks of customers whose mortgage is linked to bank base rate and not SVR.
They may have a mortgage that is BBR +0.5% so why on earth would they remortgage?
The lenders would like them to move as they are losing money on these customers with the cost of funds well over 3%.
Some are even mailing these customers to try to move them to fixed rates and guess what some are moving.
In the some lenders’ books this block of customers can account for 20% of their whole book.
The second group are then those who can’t move because there financial circumstances of credit history means that another lender won’t accept them.
These customers have no choice but to accept the rate increases or sell their house and become a renter.
Depending on the lender this could make up a substantial proportion of their whole book leaving only a lucky few who can remortgage.
Talk about the have and the have nots …… this is the mortgage version of it.