One hopes that as an adviser you are never in a position where you wonder where the next client or piece of business is coming from.
If this is the case then something has certainly gone awry because the idea is that you would not just have a regular client bank to rework and revisit but also a series of marketing processes, mechanisms and, for example, introducer arrangements which will be working all the time to deliver brand new clients to your business.
No-one can question that the last few years have been anything but difficult for mortgage brokers, but as the old cliché goes, out of adversity comes opportunity.
One hesitates to use the word ‘adverse’ when it comes to mortgages anymore, however the remortgage market in particular has seen some rather adverse conditions in recent times.
I am certainly not of the persuasion that the ‘remortgage market is dead’ as some would have you believe; yes, many borrowers have been content to sit on their lenders’ low SVR rates however remortgages are still being completed and this number is only likely to increase as we move forward.
Certainly, if we were looking for evidence of the potential for the remortgage market then we only need look at Nigel Stockton’s recent comments about the future make-up of Lloyds’ mortgage customers.
The outgoing sales director of mortgages at LBG outlined how the largest lender in the UK expects between 35-40% of all its customers to be on the bank’s SVR by the end of 2011.
Some may believe this shows a major reawakening of the remortgage market unlikely during the next year or so, yet this viewpoint is predicated on Bank of England Base Rate staying at 0.5% - and the likelihood seems to be that this won’t be the case by the end of next year.
We should also not forget that some lenders can’t move their SVRs until there is a rise in BBR; while others are not so constrained. We have already seen many lenders slowly inching up their SVRs without any such BoE movement and if this continues then, for their borrowers, the SVR becomes increasingly uncompetitive compared to remortgage deals on offer.
I am firmly of the opinion that once BBR moves upwards – by whatever amount – there will be something akin to an almighty rush for remortgage products.
The fact is that most borrowers are happy to sit still while the Bank holds every month; they will be far less happy when the base rate begins its inevitable move upwards, because the perception will be that a series of quick increases over a short period of time will follow.
It is at this point, perhaps even before this point, where the top mortgage advisers will be ready, willing and able to deliver the best deals to their client base.
I talk about ‘even before this point’ because generally any move in BBR can be seen coming over the horizon some weeks beforehand.
Anyone looking at Monetary Policy Committee minutes should be able to judge when the tipping point of ‘hold’ into ‘raise’ has been reached.
At present with just a lone voice angling for a rise it seems unlikely that particular move is coming soon, however, as time progresses we will be able to read quite easily the movement towards such an increase.
While we await the increase, mortgage advisers can put themselves in pole position to ensure they pick up remortgage business. For example, in the case of LBG’s borrowers they are in prime position to offer advice given the bulk of its borrowers came from intermediated sources.
Regular communication with both existing and potential new remortgage customers should be a matter of course. And it is within these communications that you can highlight the reality of the mortgage situation as it is now.
There is currently much talk about the ‘mortgage famine’ and existing borrowers need to be aware that should they wish to come off SVR now or in the future, they will not be coming back to a spectacularly healthy market where lenders are falling over themselves to offer products with market-leading rates.
We no longer live in the pre-Credit Crunch world of ‘mortgages for all’.
Highlighting these facts and the limited lending capacity that exists may cause some borrowers to opt to remortgage now rather than later.
As stated previously, the anticipated ‘scrum’ that will exist come the first increase in BBR will mean many of those looking to remortgage may simply have no products to choose from because they will not fit the new and much more rigorous criteria that exists.
Certainly, as is true now, lenders will cherry-pick the best borrowers however some borrowers may decide they have a better chance of remortgaging now than at some future period when rates have just risen and when, in all likelihood, they are competing with every other SVR borrower in the land who is also looking for remortgage finance.
The statistic from Lloyds is likely to be the same for most of the major lenders and therefore the potential for the remortgage market going forward could be considerable.
It will however need a focused approach from advisers, and for some a concerted effort to encourage those borrowers who they perhaps previously regarded as ‘transactional introductions’ as ‘clients’.
Regular client contact is vital and the focus should always be on education, for example, about the current state of the mortgage market, a rundown of the available products, how they might be of interest and benefit, and also an outline of the future for SVR borrowers should they decide to wait for a BBR increase.
Some will not want to wait, others will, but the point is not to simply assume the remortgage market is dead until rates rise.
This is not the case and those that work on this basis will not only lose out on business now but they will almost certainly lose out when the MPC do make their move and the SVR ‘sitters’ decide enough is enough.
