There are three little words that seem to have dominated the mortgage press over the past six months; the recent phrase of choice – doom and gloom.
A dark cloud has descended upon the market since the credit crunch hit and there is no escaping the fact that we are still feeling the repercussions from this turmoil.
Thankfully, however, the darkness doesn’t permeate all sectors and there are still some bright spots for brokers.
A vibrant market
The remortgage market has not entirely escaped the negative press, thanks in no small part to the reduction of loan-to-values, the tightening of lending criteria, the demise of heavy adverse lending and, of course, the pulling of a number of products.
But – and this is a hugely positive, potentially cloud-scattering but – the remortgage market does remain vibrant.
Lending data from the British Bankers Association (BBA) showed that seasonally adjusted lending rose to £5.2 billion in January, following ‘exceptionally strong’ demand for remortgages. It reported that remortgages accounted for the lion’s share of approvals in January at 49 per cent, equating to almost 80,000.
The latest figures released by the Bank of England showed that the value of mortgages approved for house purchases fell by £1 billion between October and November in 2007. Its latest ‘Lending to Individuals’ report showed the total value of mortgages approved for house purchase fell from £12.4 billion in October to £11.4 billion in November 2007.
In contrast, the total value loaned for remortgaging rose by £0.5 billion, from £11.2 billion in October 2007 to £11.7 billion the following month, with the total number of remortgage transactions having risen by 7,000 to 95,000.
But – and unfortunately this isn’t such a positive – the Council of Mortgage Lenders reported that remortgaging volumes declined in November to 73,000; a 21 per cent drop from 93,000 in October.
It explained these figures by saying that it was possible more borrowers were staying with their existing lender due to the lack of suitable deals available in the market, meaning switching lenders wasn’t as attractive.
It also highlighted the anticipation surrounding further rate reductions at the time, meaning people were waiting before making a remortgage decision.
Before we drop back into the doom and gloom pit however, it’s important to reiterate that the 2008 remortgage market will provide fantastic opportunities for brokers. Two major factors to highlight are the interest rate change and the number of borrowers coming to the end of their short-term fixed deals.
The interest rate has fallen to take some element of uncertainty out of the market and demand will hit substantial heights in the next year or so.
There have been many figures bandied around suggesting that anywhere from 800,000 to two million people are due to come off two or three-year fixed products within the next 12 to 18 months with the vast majority of these looking to remortgage. While it is difficult to pinpoint an exact figure, this gives a taste of just some of the opportunities available within the remortgage market.
Maximising opportunities
So, hopefully now I have illustrated that demand will strengthen, it is time to look at what brokers should be doing to maximise these opportunities.
Brokers should be working their existing client base and re-visit clients as they identify their needs. Being in a position where you are aware that certain deals are coming to an end provides the chance to contact the client and be in a good position to advise accordingly.
The key to retaining customers is the relationship the adviser has with them. All things being equal in terms of comparable products and rates, a potential buyer will give their business to the adviser they have the best rapport with.
It is important to remain flexible and open-minded but by having a good quality initial sales process and procedures in place for referral business this will go a long way to maximising this relationship.
Brokers could also look to using lenders with retention schemes. These schemes not only allow existing customers to stay with their lenders but more importantly allow the brokers dealing with those clients to consider the option of staying with the existing lender and be paid for giving what is now regulated advice.
In the current climate, due to a lull in the number of products available, this area could prove even more valuable for brokers going forward.
Products are also being designed to help foster longer term client relationships. Offsetting, for example, provides borrowers with a tangible benefit for leaving their mortgages with their existing lender.
Brokers are also coming round to the potential of offset accounts and I believe we will see more mortgage products being developed in the future which specifically have client retention as a primary objective.
A broker’s utopia is a client bank that stays 100 per cent loyal. While this is not always feasible in the real world, providing the best remortgage advice for your clients will stand you in good stead.
