As I write this piece it seems the financial world has gone into meltdown.
All eyes are focused across the pond on the US and the Federal Reserve; will it reduce rates by a significant amount? What will happen to Bear Sterns? And will Lehman Brothers and others follow suit?
It all seems a far cry from 12 months ago when UK commentators were looking across at the US non-conforming market and declaring it to have little impact on our own mortgage market as we operated a different model. How wrong were we?
Then and now
It’s easy to look back and say we saw it coming; indeed many have stated that they just weren’t listened to. But that was then and this is now.
It’s clear that we are not experiencing the meltdown that the evidence suggests, but more of a slowdown, with lenders being very wary of the scale of their lending in 2008.
Risk is ruling the roost with innovation and market share taking a considerable back seat, so it’s understandable that consumers who were considered good risks in 2006 on a two-year fixed rate deal now have a different image for the lender in 2008.
We have many stories about mortgage applications being rejected for no apparent reason, but unfortunately the reasons are too apparent – risk profiles are more sophisticated and lenders are more able to pick and choose.
What to focus on?
So what should the mortgage broker be focusing on in the current economic climate? It’s clear that in whatever part of the mortgage market you are in, the strongest will survive and that just does not apply to lenders, it’s goes right the way through to the one-man band broker.
It’s time to review costs, business plans and customer bases – the more customers you have access to, the greater the opportunity to create income.
With huge numbers of consumers coming off fixed rate deals and the Citizens Advice Bureaux reporting a 35 per cent increase in the need for debt advice, it’s now more apparent than ever that advice is the key watchword. Best buy tables are great but they are no good if you don’t qualify for the products on offer.
Reviewing client banks is the first step but then it’s all about a robust communication strategy, staying in touch with your customers so they recognise that their broker is the one they can turn to when they need advice.
It’s not just about the sale, its about an ongoing relationship. The regulator’s ‘Treating Customers Fairly’ (TCF) rules are proof of that.
Deadlines
That leads me on nicely to the 31 March deadline for the TCF initiative. Anyone with regulated status has to have management information in place to enable them to confirm they are treating their customers fairly – no mean feat if you have a paper-based filing system.
How can the broker tell if TCF is working if all they have to present is letters of thanks from happy clients? The principles-based regulations ask us to go further than that.
So, in the current uncertain financial environment – and I use the word uncertain as a short-term evaluation – there is a lot to be done, even if it does not always end up as income.
We all have to look carefully at our customers, our processes and our TCF measures to make sure that when we see light at the end of the tunnel, it is a very bright one.
