The mortgage landscape in the UK is being transformed as a result of the global financial crisis and it is clear that the rules of the game will never be quite the same again. One of the major ramifications is that brokers will be expected to go the extra mile for their customers in the future, more so than ever before, to justify their fee.
The continuing economic crisis means that, for the foreseeable future, large numbers of borrowers will struggle to access mortgage credit due to impaired credit records. Demand for housing remains strong but the liberal lending policies which applied prior to the Northern Rock crisis are definitely a thing of the past.
Where borrowers with weakened credit ratings do manage to secure mortgages, the offers will be specialist packages, subject to much higher rates and fees than would be available from the prime lending sector.
The new rules will be all about caution and risk avoidance and borrowers who have suffered in the current market, often through no fault of their own, are likely to be penalised by lenders unless they know how to play the game effectively.
New opportunities
On the surface the credit crunch appears to spell out doom and gloom for mortgage professionals but delve a little deeper and I believe there are many opportunities to be taken advantage of.
For brokers, I believe the key to success will be shifting the focus away from quantity of transactions and towards quality of advice and excellence in client service.
The readjustment of lending criteria and the growing number of people struggling to secure mortgage funds can be viewed as an opportunity. It challenges brokers to come into their own as expert advisers – the professionals with the necessary skills to help clients project manage their mortgage applications and present them in the most effective way to lenders.
In a constantly fluctuating market there will be a greater onus on the broker to source a product that serves the customer's long-term interests. Simply finding the lowest rate will no longer be the ultimate prize, as balancing penalties, booking fees, free legals and flexibility will all become more challenging.
Brokers are also more likely to be approached by self-employed clients seeking advice on how to secure mortgage credit. Until the credit crunch took hold it was relatively straightforward for these borrowers to find a mortgage because many lenders were willing to overlook the odd gap in their work history or accounts.
The situation has since changed and many lenders now employ much stricter assessment criteria and insist on a meticulous accounting track record. Here again, the experienced broker will be well placed to advise clients on how to put their house in order before applying for credit.
A longer-term view
In the current climate, lenders are under increasing pressure to reduce their costs and consolidate their position. Some have already sought to control credit flow by electing to deal solely with ‘super panels’ of brokers.
Lenders are likely to focus more of their attention on retention strategies rather than spending vast sums on attracting new business. There will be greater emphasis on customer relationship management to support lower-risk and longer-term growth strategies.
This situation calls for a change of approach from many brokers and probably signals the end of the road for ‘rate tarts’ who regularly swap lenders in order to achieve marginally better rates, as such a strategy will no longer be sustainable.
Lenders may attempt to wrestle some of the balance of power away from brokers by restricting the number of products available via intermediaries and increasing the number available directly to the public. However, the lack of credit and the rising number of people faced with poor credit ratings will still force customers to seek the support of professional advisers in securing mortgage funds.
This situation presents a new opportunity for those brokers who can demonstrate the ability to establish strong, long-lasting relationships with clients and lenders. This is the key attribute that will help survivors to differentiate themselves from the competition and forge stable and profitable alliances in the future.
Upheaval
There is no doubting that the property industry is in the midst of a period of great upheaval and transformation and the challenges are immense. However, there are strong opportunities available for the taking by those who follow best practice and focus on the quality of their advice and client service.
Ultimately it will be a case of ‘the survival of the fittest’, where those who are able to adapt and keep pace with the speed of change will come out on top. This is the challenge that brokers must rise to – to refine their proposition, look to the long-term and pay greater attention to due diligence and client relationships, as the new landscape of mortgage lending emerges from the rubble.
