How is it possible we are already half way through 2007? Getting older may unfortunately have its part to play in the way time seems to have speeded up, but we can also blame the amount of things going on in the market and the relentless appetite there seems to be for evolution and development.
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A defining factor
One of the defining factors of the last six months has been the wholesale movement of many high profile and senior industry individuals as well as business development managers. In simple terms, the migration of senior management has been driven by the influx of new lenders coming to the market and seeking out experienced and qualified staff.
Given there is only a finite number of people with the experience these new firms require to bolster their operations and establish themselves in the market, it is not surprising many people have chosen to move on and take up the challenge working for some of the newer providers in the market. Quality staff will always be sought after, and the competition we have seen over recent months bears testament to that. This is something we need to try and publicise as an industry, and for those looking at a career where results are rewarded, then there are few better places than the current intermediary mortgage market.
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New levels of competition
However, it is not only staff and potential recruits that have benefited from the opportunities generated by new lenders, but also the end borrowers. New players have brought new levels of competition and never before have specialist mortgages been so keenly priced.
The choice of products available to borrowers is truly staggering and should further grow the strength of the intermediary market over the coming months. Not only will borrowers continue to seek out brokers to help them find their way to the product they need, but in turn brokers will also continue to utilise the services of the packaging industry to provide the best level of service they can to clients.
Given how competitive the market has become, the challenge for lenders is to integrate and work with distributors as effectively as possible and the coming months should see some significant developments.
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Some packagers are already talking about being able to cascade borrowers across their lender panel via their own websites and the key to this is being able to link into the back office systems of every one of their lenders, so the proposition they have to offer will become even more attractive.
The level of investment we have seen in the packager market has been impressive to say the least and perhaps 2007 will be a pivotal year for the role of packagers and distributors going forward. Few sectors have done more to adapt to the times and the level of volumes they continue to receive is testament to the work they are doing and the service they provide.
Rate movements
No review of the market would be complete without focusing on interest rate movements and the impact these have had and will have in the coming months. So far the market has coped well with rises in interest rates, but pressure on borrowers has increased. The real threat is if interest rates have to remain at increased levels for a number of years, and borrowers who have tried to protect themselves with fixed rate products are forced to take out a deal at a substantially higher rate when their existing one comes to its end.
Tightrope
The challenge to lenders in this environment is not only to remain competitive, but also to set their product criteria responsibly. This is a difficult tightrope to walk, but those who fail to get the balance right run the risk of pushing their clients into financial difficulties and damaging their own books. Neither of these outcomes would be welcome. This is particularly an issue in the specialist and non-conforming markets. There have already been dramatic changes made in some sectors such as buy-to-let where rental calculations have dropped from a standard of 125 per cent, to 110 per cent. Some lenders are even offering products where the rental income only needs to be 100 per cent of the mortgage payments and one wonders how much slack exists in such products for landlords.
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Enticing landlords and investors to either grow their existing portfolios or enter the market for the first time is a positive thing, but luring them with mortgages that may not give them the support they need could end up being a very dangerous strategy indeed.
It is no surprise the Financial Services Authority has chosen to focus on the non-conforming, self-cert, interest only and equity release areas of the market in its latest review and this should help to keep lenders focused on the responsibilities they have to clients.
How the mortgage market copes with these challenges in the second half of 2007 will in many ways determine its health into 2008 and beyond. So far the mortgage industry has shown itself to be robust, innovative and responsible. If it can maintain these characteristics then the whirlwind of activity we have seen over the last six months should not develop into a storm, but see borrowers taken safely into calmer waters over the coming years.
