There have been big structural changes to the market, claims insurance MD
A national preoccupation with house prices and property as an ever-appreciating asset has diminished in the face of a challenging economy, an industry expert suggests.
Malcolm Guest (pictured), managing director at Source Insurance, believes homeowners have been forced to rethink their relationships with their properties and how they might financially benefit from them.
Source is a whole-of-market GI quotation platform for mortgage brokers and independent financial advisers.
“The housing market, and our national preoccupation with house prices, have both changed,” Guest told Mortgage Introducer. “I think more people are now forced to view their home as somewhere they live, not as an ever-appreciating asset to exploit.”
Casting his eye over the market, he said: “The big structural changes have been with first-time buyers and the buy-to-let markets, with effectively a rationing of affordable housing supply, as a result of the simple failure to plan and build for the anticipated population increase.
“There are many fewer first-time buyers who are being priced out by the substantial increase - until recently - in the buy-to-let market. It is the definition of a dysfunctional market, as there is simply not enough private residential homes for the current population.”
He noted: “We can debate interest rates, stamp duty or even the impact of second homeowners and multi-property landlords, but the key issue is the appropriate level of new build construction which is constrained by a number of factors.
“There are no quick answers. The unintended negative consequences from the increasingly tight and onerous rules for let property, for instance, are now becoming evident. I would rather see a medium to long-term approach, with the government setting credible goals for house building, working closely with the building and lending industries to put in place sustainable delivery which enables more people - particularly first time buyers - to own a place to live, if that is their choice.”
What factors have influenced the current market?
Unforeseen events have contributed to recent market difficulties, Guest believes.
“With the pandemic and the invasion of Ukraine being overlayed on the inevitable turbulence of Brexit, we have had a gaggle of black swan events,” he reflected. “I hope that we have a steady 12 months, with a gradual lowering of interest rates and increasing optimism, which leads to an improvement in buyer and seller activity. I would also expect a continuing up-tick in remortgage levels too, as rates come down and consumers opt to lock in for longer periods.”
Source’s platform is designed to enable mortgage brokers to enhance their earning potential, by offering a choice of policies from leading insurers. Its relationship with advisers is “fundamental”, according to Guest.
“Unless we supply a proposition to which they can subscribe, a high level of service to their clients, which they can trust, an ongoing fair and appropriate remuneration from their renewals, then Source does not have a business model,” he said.
Read more: Source Insurance rehires managing director
How can brokers make the most of their businesses?
Brokers can achieve more, believes Guest, by focusing on ancillary products to supplement their income, offering a holistic service centered around mortgages and ensuring they check in with their clients annually.
“I have been part of the Source story since 1998, and the consistent theme has been two things; do the right thing for the customer, whether that be a mortgage broker or their client, and deliver a proposition which creates simplicity and choice,” he explained, “but not with any adverse impact on insurance prices. This has created a reputation in the market for a trusted, considered and compassionate customer focus. We drive to understand customer needs and pain points.”
Guest began working in general insurance in 1987, a month before the so-called Great Storm - a hurricane force cyclone hit the UK.
“I am quite sure those two events are unconnected,” he quipped. “I moved around the UK as my career progressed working in all areas of insurance before focusing on home as a specialism. The mortgage market was quite freestyle pre-regulation, and the period leading up to the financial crisis of 2008 onwards, frenetic. As we navigated the fallout from Lehman Brothers, mortgage brokers did face an existential threat; one CEO of a large mortgage network told me that their general insurance business was their saviour during this challenging period.
“Fast forward to here and now and the mortgage broker has hegemony once again. There may be fewer firms and regulated advisers, but productivity has increased. The use of rich technology is taken for granted, but in an increasingly complex and fast changing lending marketplace mortgage brokers have increased their profile and professionalism which makes them the ideal start point for consumers who need mortgage advice.”
He continued: “As MD, I think my chief objective is to recruit a team whose IQ is substantially higher than mine – something which I have found to be relatively easy. My main role is to ensure that we set a strategic course and aligned objectives, ensure we stick to our course, make necessary adjustments, and keep asking questions. After many years of working in general insurance I often think about what has kept me here, and it is genuinely all about the people, at all levels, who contribute to the success of our industry.”
Sharing a key business lesson from his career so far, Guest observed: “It is hard to maintain being a disrupter or challenger and we can sometimes become complacent with our position in the market versus the competition. This requires constant vigilance to both keep anticipating your customers future needs and scanning the tech horizon to ensure you endeavour to adopt solutions which both improve your proposition and hopefully keep you ahead.”
