Since the launch of our secured sourcing module, we have been conducting research into mortgage brokers’ exposure and attitude to secured loans.
It’s certainly a sector that is gaining prominence in the market with more column inches attributed to it each week, but we were keen to see what brokers really thought about secured loans. The full report will not be available for a few weeks but I’d like to share with you some early results from the survey as the initial feedback has revealed some interesting findings.
Firstly, it was interesting to look at how many secured loan cases mortgage brokers process each month. The message that secured lending can be an additional product to add to a broker’s portfolio certainly seems to be gaining prominence. Of those respondents questioned, 55 per cent said they processed between one and three cases every month while 5 per cent processed more than 10 cases. However, there was still quite a high percentage of brokers not processing secured loans. 40 per cent said they did not offer secured loans business at present – even though all of the respondents questioned held a Consumer Credit Licence.
However, there were still encouraging signs for the sector in that brokers do believe that offering a secured loan can be in the true spirit of ‘Treating Customers Fairly’. Of those questioned, 72 per cent said that the secured loans option was ‘good for clients who needed to raise funds but found that remortgaging was too expensive’. 22 per cent said they were ‘a good way to provide temporary finance’ and ‘a good way for clients to raise cash needed in a hurry’. Only 6 per cent said that secured loans were a means of funding that they would ‘avoid at all costs’ and were a ‘last resort’.
The role of the master broker is also of increasing importance in the secured loans market. Of those respondents questioned, 68 per cent always passed the case on to a master broker while 16 per cent passed it on to another specialist within their own company to take forward.
There were, however, still mortgage intermediaries who chose not to refer clients needing a secured loan. Of those questioned, 5 per cent advised the customer that they could not help at all and their best option would be to consult an alternative company specialising in secured loans. It is this sector of the market that looks set to be the most closely coveted by secured loan providers and brokers in the future.
The provision of ‘holistic’ advice seems to be something of a buzzword at the moment, but I think that more central in this is the benefit for the intermediary in being able to broaden the range of products he can offer. If a client walks out of a brokers’ office because a product is not offered, then it is simply a missed income opportunity.
Extra work, little return?
Secured loans are, of course, a great product to add to an intermediary’s portfolio, but many respondents questioned in the survey said they had been put off by what they perceive to be extra work for little return. Through sourcing systems which offer secured loan facilities, brokers can source secured loans products and refer cases directly to a master broker.
It does seem that we have some work to do to ensure that brokers are aware of the benefits not only of the secured loan itself, but the ease of use of secured loans systems. One of the main reasons cited by brokers for not using the system more fully is that they weren’t entirely sure of the process. That’s certainly a learning point, and one that will need to be addressed by the wider market.
Reticent to change
Brokers – and people in general – are reticent to change and so the job of informing and educating can make the most significant impact in this area. There is plenty of coverage in our trade press about the myriad situations where a secured loan could be the most appropriate finance vehicle for a client, but where and how to access these seems to be the challenge.
Furthermore, it has been suggested by a number of market commentators that in order to provide best advice and treat customers fairly, mortgage intermediaries must consider secured loans as a financing option. Our job is to provide the tools that advisers and brokers need to do their job effectively.
We’re extending our free online trading programme to work towards better education and hopefully this will help brokers access a new product area and crucially a new income stream.
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