New business models are the way to negotiate uncertainty

Mark Davies

August 29, 2019

Mark Davies (pictured) is managing director of Link Mortgage Services

This month heralded a surge in housing completions that, admittedly from a low base, was spurred by the fast-approaching Brexit deadline, lower house prices and affordable mortgage rates, with home sales rising 6.1% on last year, according to August data from Rightmove.

August is not traditionally a model month for completions so Rightmove’s new is interesting as it is out of kilter for the norm. They also reported that asking prices fell but less than is usual in August when many people are on holiday, dropping 1 per cent on the month and climbing 1.2 per cent on the year – the highest increase since September last year.

Interestingly, some are speculating that with the average time between agreeing a sale and moving in being more than three months, August was the last-chance saloon for those who want to have finished their move before the Brexit deadline – a point that underscores how long and protracted the process has become even at a time when transaction numbers overall remain muted.

This news runs counter to the sentiment expressed by Savills earlier this month that declared the UK housing market is at the weakest point since the global financial crisis a decade ago as Brexit uncertainty puts off buyers. Brexit bears the brunt of the blame but prices, stamp duty lack of the right stock, sentiment and low wages are all part of a perfect storm.

They pointed to the fact that fewer houses were sold in the UK in the first half of 2019 than at any point since the first half of 2009 with the declines led by London, where prices have fallen after years of rapid inflation.

These two stories make a pertinent point about the management of mortgage business in our modern world. It, like everything else, is volatile and as a lender trying to plan budgets,  being able to make good commercial decisions and be nimble enough to write the business you want as opposed to the business you are left with, means having the operational capacity to meet the ebbs and flows of business.

This is even more true if you are new to the market. In many cases the plans for new lenders have had to be amended or abandoned . Meanwhile the heavyweight players have to contend with operational cost that makes quick change prohibitively expensive.

Even if we park our concerns around current economic and political change, societal trends like our aging population and technological change such as digitalisation and disruption of the current world we know, mean that the need to be fleet of foot and be capable of experimenting without unduly impacting the core business is now an essential element of business development.

The out-sourcing model is not right for everyone but we have seen many organizations embrace it for these very reasons. Of course, regulatory obligations and an ability to originate together with a host of other features means it I not a binary or simple choice. But it remains flexible and allows organizations the room to finesse and even change their proposition ‘on the go’.

Increasingly lenders are, outside of the high street, exploring niches to earn margins and outsourcers are alive to these specialisms. The out-source model has even more attractions to lenders who are imaginative and entrepreneurial.  Volatility has its challenges but businesses that have the capacity to scale operationally to meet the demands of their own lending requirements as well as those of a volatile market will deliver.

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