The existing client bank is still the best opportunity for advisers, regardless of market changes
Chris Prior was formerly manager, sales and distribution at Bridgewater Equity Release
As a relative outsider looking in, it has been somewhat intriguing to view the ups and downs of the homeowner remortgage market recently.
It appears that, even with record low rates and ongoing increases in house prices, this is one part of the market which has not seen a noticeable surge.
Indeed, the very latest figures from the Council of Mortgage Lenders for May this year revealed that homeowner remortgage activity was 10% down compared to April and 3% down year-on-year.
Having said this, with June gross mortgage lending coming in at £20bn, it seems safe to assume (without yet knowing the splits) that remortgaging has probably pushed on somewhat.
However, underlying these figures appears to be something of an inertia when it comes to remortgage activity – why should this be?
A combination of factors would seem to attribute for this low activity – namely borrowers unwilling to leave competitive tracker rates, the greater difficulty for borrowers in meeting lenders’ new affordability measures, and a growing perception that existing borrowers are unlikely to be favourably received if they wanted to refinance.
All this adds up to a remortgage market which appears to be bumping along the bottom, however with the growing certainty of a Bank Base Rate rise one can see activity increasing as that first Bank of England MPC move gets closer.
It would seem that MPC members are themselves preparing the borrowing public for such an increase sooner rather than later with various comments, including those of Governor Mark Carney, pointing in the direction of an increase this year as opposed to next.
One can’t help compare remortgage activity in the homeowner space to that in the equity release market; indeed, it too is probably a part of the market which has traditionally seen low activity levels. Again, there could be a number of reasons for this but perhaps most prominent is the fact that many equity release plan holders are simply unaware of the fact they can remortgage.
In a sector which has seen considerable drops in product pricing in recent months, this could well be a good solution; however if the borrower doesn’t know about this option, how can they go ahead with it?
The focus with advisers is, perhaps rightly, on new business activity – getting new leads and customers and taking them through to product completion.
However, for those specialist advisers who have clients with plans over a considerable period of years, there is without doubt an opportunity to review their existing plan and compare it to what are likely to be, far more competitive products available in the market today.
Not only might the price be right to remortgage but, for those who took out products five or so years ago, there could be the opportunity to tap into the innovation that has been prominent in the sector since then.
Of course, price is likely to be one of the key factors in making a recommendation to remortgage but there could also be new products, for example, drawdown options, which are far more suitable to the client now.
Even taking into account the fact that the client may have to pay off their early repayment charge, doing the maths could still make the new pricing more attractive and there’s no doubting that a client which is being saved money, is likely to be a happy one.
This is not a question of the adviser simply ‘rebroking’ the mortgage – a phrase I do not like to use because it suggests a simple product churn – but an opportunity to review whether the existing product is now right for the client while at the same time, also reviewing various aspects of their other financial product needs.
When the focus is all on new business, this type of opportunity can be overlooked but any good adviser should be in regular contact with their existing clients and reviewing ongoing suitability and product availability.
The likelihood is that the homeowner remortgage market is going to pick up in the months ahead and there is no reason why there can’t be increased remortgage activity in the equity release market as well.
It requires a structure and a plan in order to re-contact old clients and it could also mean utilising technology to have set review dates for all existing customers.
Putting this in place shouldn’t be difficult and it will also mean there is less business pressure to continually keep finding new clients – the existing client bank is still the best opportunity for advisers, regardless of market changes.
