With so many so-called powerful lenders in the UK mortgage market, it would be easy to believe that they hold all the cards. A month does not go by without us reading about a new lender coming to market and the last year has seen an unprecedented number of companies rising from a clean sheet of paper – all, it would seem, with blue chip investments behind them. But although many of these are multi-million pound companies, it is not they who hold the real power.
So, if it is not the banks and investment houses, who exactly is driving the mortgage market and who are the players as opposed to the spectators?
Distribution
The real power is held, not with the lenders, or even with the big packagers and networks, it lies with those who control the distribution; the people who have contact with the customer and who decide where the business goes; it is those who influence the borrower and who have the final decision on what type of mortgage a client takes out and where that mortgage goes.
This power is held primarily by two groups of people:
- Advisers – who can buy in leads, advertise for business, work from referrals, and utilise their database.
- Companies or individual mortgage brokers who have a contract or partnership agreement with estate agents.
Lenders with big budgets and a branch network will also try to persuade a borrower to come to them and they often have the benefit of a well known brand. This is rivalled by estate agencies, which are usually the first point of contact in the purchase market.
For advisers in branches, estate agencies or working alone, the first impressions of the borrower are vital; the individual adviser’s professionalism and passion for the job has to come through within the first few minutes of meeting the client, as once rapport is built, trust quickly follows. Fail in either area and the next friendly mortgage adviser will get in the door.
Advice
At this point the control of distribution is now in the hands of the adviser and best advice will prevail. With thousands of products to choose from, in today’s technical era, the strain for this is taken by the search engines, however not all products are picked up by this system so do not underestimate the adviser’s knowledge to make the final decision.
So if the adviser has the final say on best advice, what drives the decision making process once a short list has been drawn up? Lenders and packagers can influence this process, but they cannot control it.
There has been a lot of talk regarding whether procuration fees or commission should be paid by lenders, or whether clients should pay up front for the advice they receive. Both models are currently in the marketplace and in my opinion will continue to be so. With so many products to choose from, there is little or no danger of a client suffering from product bias, irrespective of whether the broker is directly authorised or working through a network.
Not always price-driven
An adviser’s decision is not always price-driven; if speed is a priority for a client and an adviser has a raw memory of bad service standards with a particular lender, I’m afraid that lender will drop off the list, whereas if flexibility is required, the adviser will start with a lender that offers the flexibility their client needs. Without a doubt, lender trust, and the knowledge of who has delivered in the past, is extremely important to the process.
The exception to all of the above is when a company comes out with a clear market leading product. However we all know what happens next – a press release apologising for poor service levels; if you are one of the lucky ones you will get an offer, unfortunately it is not uncommon for offers not to materialise, with products being pulled with no notice an occupational hazard, so excellent products can be a deterrent rather than a positive.
Offer speed
Speed of offer has become topical with the new breed of lender and if we can have an offer in 24 hours all well and good, but it is not a deal breaker. Service and quality of product will always prevail. If a lead has come from an estate agent it has to go through with no risk of fall outs and no last minute criteria changes.
There are many different strands to our marketplace, all of which can rightly claim they have a role to play within our business environment. Mortgage lenders, networks and packagers will continue to play an important part in the mortgage chain and they can influence mortgage advisers’ decision with competitive products and excellent service; but let us not forget, it is not they who control the distribution – advisers do.
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