Towards the end of November, Charterhouse Research (no relation to the publishers of Mortgage Introducer) revealed some interesting findings on broker attitudes towards commercial mortgages in its quarterly multi-client study entitled: ‘Mortgage Intermediaries – The Regulated Environment’. The organisation has been running this tracking study of 100 interviews with residential mortgage brokers per month since ‘Mortgage Day’.
The latest quarterly survey revealed that 42 per cent of the research group of intermediary firms had already arranged commercial mortgages, with a quarter of those who do not currently do commercial business saying they plan to do so in the foreseeable future. For those of us that operate at the heart of the commercial mortgage sector, this comes as no surprise. A glance through the mortgage trade press will show that other lenders and specialist commercial brokers are also entering the marketplace and starting to gain a profile.
With a range of commercial lenders to provide products, together with a choice of commercial master broker and packager specialists to provide the distribution channel, there is nothing to prevent residential broking firms from starting to diversify into commercial mortgages and reap the rewards of earning more fees and widening their client database for future marketing opportunities.
Accomplishing the move
As many of us will have experienced through our own careers, it’s one thing to express a desire to enter new areas of trading and quite another thing to accomplish this diversification successfully. On this subject, again, the Charterhouse research makes interesting reading. Although most of us would assume that proc fees/commission would come top of the list when it comes to incentives to enter the commercial mortgage arena, actually this factor came bottom of a list of four. Third in the list was good quality marketing support, and the second most sought-after service was the availability of straightforward products. Top of the list was basic training from lenders on how to arrange commercial mortgages.
The good news for all residential brokers who are hovering on the brink of diversifying into commercial business is that all of these incentives are already well developed and readily available. In fact when reading the research results, the parallels with the approach that firms in the market have taken in developing their proposition and marketing strategies are striking.
When it comes to products, we took our lead from the residential lending sector and constructed totally transparent products with clear pricing for risk –ie: LTV, property type, borrower’s income (accounts or self cert) and borrowers credit profile. This product structure is familiar to all intermediaries that deal in niche and sub prime residential mortgages, and was designed from the start to make the cross-over from residential to commercial as seamless and trouble free as possible.
Finally, regarding the most-wanted incentive of “training”, this has also been one of our core building blocks and this summer we appointed two national trainers who fulfil a unique role in running seminars and in house training sessions for brokers, tailored to their specific needs, combined with troubleshooting any underwriting hold ups and generally providing feedback towards new product and service developments.
It is inconceivable that other, newer entrants to the commercial lending market will not also adopt some of these support systems. If and when they do, it should help to stimulate more interest in the sector and open up choice and competition – which is never a bad thing. Clearly, the commercial momentum is really starting to grow and it will be interesting to see how trends are shaping up when Charterhouse publishes future broker surveys.
