It was almost a year ago when we really started looking closely at the secured loans sector and, although I’d like to think that this was a visionary move on my part, in reality the secured loan market had taken itself to the point where it could not possibly be ignored.
The world of ‘Treating Customers Fairly’ was firmly upon us at this time and brokers, lenders and pretty much everyone else in the industry were considering ways to adhere to both the letter and spirit of these new laws. Finding the right product was important, but finding the right type of product was crucial.
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Secured loans were nothing new, but there was an almost tangible change in the appreciation of their use when faced with a range of specific client needs. One of the catalysts for growth was certainly the appreciation of this and a host of other circumstances where secured loans were simply the best product choice for the market. Suitability, flexibility, cost and speed are all factors to be considered.
Suitability is a consideration if a client has a large CCJ or default, requiring funding from a specialist lender, and the existing mortgage is with a high street lender avoiding the need to remortgage the whole debt at a loaded rate. Likewise, if the customer has a large early redemption charge on their mortgage, it might make more sense to raise additional funds through a secured loan rather than incur the additional cost of an early repayment charge.
Flexibility is also a factor and there are many cases where a client’s requirements go beyond simply raising finance with complicated criteria considerations. The lack of upfront costs is additionally a significant factor in recommending secured loans. If you add costs such as administration fees, solicitor’s fees and redemption penalties, a remortgage may simply be beyond the reach of many clients. The final gold star, if you will, is the issue of speed. The remortgage process takes anything from six to eight weeks on average, whereas a secured loan can be agreed and paid in under a week.
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No overnight take up?
So, why not an overnight market-wide uptake of secured loans by traditional mortgage brokers? Why doesn’t the recommendation of a secured loan roll off the tongue as if brokers had been doing them for years? I think that the simple answer – if there can ever be such a thing – comes down to a lack of education and availability combined with a misguided belief that secured loans are the exclusive preserve of the ‘specialist’ broker.
Mortgage brokers are experts in their field and have spent a massive amount of time, energy and resource keeping on top of a mortgage market that expanded exponentially and almost beyond compare in terms of financial products. In the non-conforming sector the number of providers increased tenfold, the products a hundredfold and the complexity of criteria almost beyond comprehension.
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Brokers learned how to view, review and recommend these products and obtained a level of expertise and comprehension where the occurrence of a client with some form of ‘non-conforming’ circumstance is more the rule than the exception.
The future for secured loans seems to draw many parallels with the non-conforming market in terms of the journey it needs to take to truly make it into the mainstream consciousness of mortgage brokers. Just like the early days of brokers in the specialist market, you need to know which questions to ask. Who are the best lenders? Which packagers add the most value? Which product is the most suitable for my client?
Of course, entering a new market can be daunting, but there are a few simple things to look for when forging partnerships with secured loan providers. This is not a complicated market but one that does inevitably have its own intricacies in which you may need some guidance. Master brokers are uniquely positioned in the market to provide that advice and guidance. Regard these master brokers in a similar manner to packagers in the first mortgage world, where the main difference is that the master broker is the one actually accepting the compliance risk for the advice.
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The secured loan market is one where there are many excellent products offered by reputable lenders and accessible through service-driven master brokers. I have, for example, been asked which is the best master broker? That’s simply impossible to answer. Talk to a few, submit some cases and find out which ones offer you the best service.
This is an exciting and open market with myriad products designed to fit the needs of your client and my message to mortgage brokers is to not let a lack of experience be a barrier to this market. The experts are out there. Find them, work with them and get the very best out of this market.