Justin Caffrey looks at the markets that are ripe for broker development
Sensible, forward-thinking mortgage brokers now realise the need for diversification given poor sales figures for UK housing coupled with the latest crop of economic data on consumer spending.
The figures cast doubt on whether the UK economy will move speedily out of its current stall and present intermediaries with an interesting dilemma. Should they continue on the path they have followed until now and experience static or falling sales figures or should they look to new markets to earn supplementary income?
We watched the trends unfold in 2004 and predicted the emerging markets for 2005. Secured lending, non-conforming commercial lending and foreign mortgages were the three areas where we could see real potential for growth during 2005. We predicted that true success this year would be fought for in these sectors.
The same strategic thinking can work for brokers if they view areas such as secured lending as an opportunity to explore new avenues with their existing clients.
Working the client bank
I know many of my contacts in the broker marketplace have considerable client banks. Although many of their clients may be secured on long-term fixed rate mortgages, they could well require additional borrowing to avoid having to pay a redemption penalty to their existing mortgage provider.
It is worth remembering that some more mature clients might be looking to pay for their son or daughter’s wedding, put down a deposit for their son or daughter’s first property or may even be looking for a deposit to secure their new holiday home abroad.
If you are not actively canvassing your clients and sowing the seed in their mind’s eye that you can help with these sorts of scenarios, you can rest assured that your complacency will be another broker’s gain.
Helping yourself to seconds
The seconds market offers a wide spectrum of versatile products to brokers. For example, one of our most successful products is a 125 per cent debt consolidation loan with Picture Finance.
Picture are an innovative company and have recently come into the market giving the more seasoned players a real run for their money. The product in question is aimed at the unfortunate group of homeowners who have over the past few years fallen foul to the British tendency to load as much as possible on high-APR credit cards.
Such clients are invariably teetering on the edge of the non-conforming cliff. Picture is offering them an opportunity to reschedule their debt and avoid decline into potential mortgage arrears and CCJs.
Better to offer clients a preventative course of action than allowing them to fall into non-conforming and then offering them a higher interest rate remortgage.
The mortgage market has diminished by over 25 per cent in recent months so we all have to fight harder to retain our sales levels. However, it is worth remembering that the sensible business retains its market share and looks for new and emerging markets to enhance profits. The secured loan market offers intermediaries a second bite of business from their existing client bank.
Looking abroad
The same goes for the foreign mortgage market. This area has seen exceptional growth over the past few years as retired couples look to warmer countries to buy their retirement homes, younger families discover they can better afford a second home abroad and property investors seek to maximise equity growth.
Buying an overseas property is a closer reach for many than it was years ago. According to industry estimates, two million Britons currently own a second home in the overseas property market.
That figure is growing as consumers buying a property abroad are getting younger with those in the 35 to 45-year-old age band looking to buy overseas for holiday purposes.
As house prices in the UK have rocketed many average income earners have been able to enter the overseas market by withdrawing equity in their UK property for a deposit.
According to Barclays Private Clients, 40 per cent of all dwellings built on the Spanish Costas were bought by the British in 2003 and of those 63 per cent were bought for holidays or retirement. A similar story is seen in France and other holiday home hotspots.
Eastern European property
The accession of Eastern European states to the EU is adding to the growth already in the market. In one recent survey it was reckoned that investors in one of the eight EU accession countries could realistically see a growth of 731 per cent on their investment in just ten years.
Such growth potential is also evident in the area of commercial loans. The UK commercial mortgage market is estimated to be worth approximately £10 billion-a-year and has traditionally been dominated by the high-street banks.
Brokers have only accounted for around 15 per cent of all transactions which is in contrast to the US where 80 per cent of deals are routinely placed via intermediaries.
As with secured lending and overseas holiday homes, there is great potential for brokers to win for themselves a lucrative slice of the market – if they put their minds to it.
Justin Gaffrey is operations and sales director at c2-financial
