After all the gloom and doom which has circulated the market over the last few weeks, it would be easy to think the world was coming to an end and there won’t be a mortgage market in 2008.
With the phrase ‘credit crunch’ haunting every aspect of the industry and the media, data being released by the likes of the Council of Mortgage Lenders and the Communities and Local Government all points to a slowdown in the property market, thereby compounding the negativity.
However, with every cloud there is inevitably a silver lining and within all the darkness, there is a golden nugget which should dispel any doubts anyone might have over the next 12 months. This nugget is absolutely huge and will be worth around £150 billion for the mortgage sector. 2008 will be the year of the remortgage.
But what will the remortgage market of 2008 look like? Yes, it will be huge but the market is a much different animal from six months ago so advisers will face different challenges.
The players
As has already been established, the credit crunch is affecting everything related to mortgages and this will have an impact on who will be in business to provide the products in 2008 and beyond. As we have seen, some of the biggest players in the market in the first few months of this year will not be there in the same capacity come 1 January 2008.
The situation involving Northern Rock has yet to reach a conclusion, leaving a number of question marks over its short-term future, while the securitising lenders who had looked to establish themselves in the market by cutting headline rates and extending criteria are struggling to maintain their presence as liquidity in the capital markets has stalled.
As Mark Sismey-Durrant, chief executive of Heritable Bank, points out: “You have got to look at who was doing all the remortgaging and the stable lenders have been attacked by the securitisers. But they are not going to be there any more. The balance sheet lenders will still be competing among themselves and there will be plenty of business for them, but how much scope will there be for brokers who are remortgaging?”
Therefore, for brokers trying to place record levels of remortgage business, the playing field will be much narrower than it was six months ago. However, as Nigel Payne, managing director of The Mortgage Business, insists, this will be a short-term phenomenon.
“The first big question is when will the liquidity issue be resolved? This is the issue that is underpinning the thinking of the likes of GMAC-RFC and Mortgages plc and they need liquidity to return to the market. How long will this go on for? It is likely to be months. However, the securitising players will return, but whether to the same degree is a different question.”
A different life
However, until they do return, the life of a broker will be different. Peter Wright, financial consultant at CBK, believes that it is going to be much harder work to complete even a simple remortgage.
“It will be a lot more work for each case next year and advisers have got to take that on the chin. It’s good to know that the levels of business are going to be there, but it is going to take longer for each case. Product pricing will dictate much more so you will see maybe a few new names. It is likely that you will also see peaks and troughs in service. Brokers won’t be used to their systems either, so this won’t help service levels.”
Payne agrees that service will dominate to an even greater extent. “Service has always been an issue but brokers may have to take more account of it than before,” he says.
Despite this, the message is that advisers won’t struggle to find homes for this business. It might just take a little longer than before. The question, though, is how will this affect remuneration? If brokers are being forced to spend longer on each case, should they earn more for it?
Wright says his firm is already considering how its future. “We have been thinking about what is going to happen in 2008. Covering our expenses with a fee is one option if cases will take more time, as proc fees look set to stay the same.”
As always, there will be plenty of challenges to face brokers in the coming months. However, the levels of business out there for intermediaries who have maintained relationships with their clients will make it worthwhile.
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