It’s no secret that the introduction of the MMR has led to a more complex process when applying for a residential mortgage, and stricter lending rules have made it harder for owner-occupiers to obtain one. Added to this challenging environment for buyers are the variety of mortgage products currently on the market, and people’s increasingly time-pressed lives.
The result is a very favourable setting for brokers to offer their services to owner-occupiers and property investors, who need increasing levels of support to find the right product for their needs. It’s now more important than ever that the vital role of our industry is recognised by clients – so how can we ensure that buyers are more aware of the value that brokers add?
Residential brokers vs commercial brokers
Residential brokers already have a reasonable, and growing, profile. We’re seeing more frequent broker mentions within the national press, and many have affiliations with estate agents, being part of a network of brokers the estate agency has established. The residential mortgage market has a significantly higher number of transactions than the commercial mortgage market, with gross mortgage lending in 2014 estimated at £205.6bn (according to the CML) and commercial mortgage lending thought to be around £34-35bn. Therefore the number of residential brokers is naturally higher than that of commercial brokers. As a result people are more aware of the existence of resi brokers than those working in the commercial sphere.
Indeed, large numbers of property professionals and trading businesses are still unaware of the critical role that brokers can play in securing finance. Many will approach their existing bank for a loan and it’s not until their application is declined that they start asking around and realise there are other options. It is this lack of awareness that needs tackling.
Raising awareness
Part of the role of industry bodies, such as the NACFB, is to raise awareness of its members and the role they play. I sit on the board of the NACFB, and a particular focus is working to ensure commercial brokers achieve the same level of recognition as resi brokers. Last year the NACFB launched findSMEfinance.co.uk, a platform designed to link people seeking finance with an independent commercial broker. The media coverage around the launch of this platform tied into the Association’s objective of raising awareness of brokers and the full breadth of lenders out there. There is plenty more to come in this respect, with lending platforms being high on the agenda of many, including the government. Raising the profile of commercial brokers results in more doors being opened for SMEs, and provides the industry with more of a voice, which is well deserved.
So how can brokers make customers aware of the value they add?
Even those who understand what a broker does are still likely to have gaps in their knowledge when it comes to the value that brokers can add. For instance, clients are highly unlikely to think about additional product features. They know to look at rates and fees, but there are a number of factors to consider in the finance selection process, not least of all service and speed. We see it all too regularly where a client is led up the garden path with months wasted trying to obtain finance which realistically was never going to happen with the lender they had been trying to borrow from.
It is important to consider all of the product features for a commercial mortgage in the same way that you would for a residential mortgage customer, tailoring the advice to meet the needs of the client. In particular, those who have an unusual set of circumstances as far as mortgage lending is concerned, such as contract workers, the self-employed who don’t have more than a year’s accounts available, or those who have changed jobs and are on probation periods, can slow the approvals process down. Again, buyers are unlikely to realise this might cause a problem, whereas a broker would raise the issue early on.
By driving home the following messages, you’ll raise awareness of the advantages you can offer:
• Brokers provide clients with the best chance of finding the most suitable product for their requirements, not one that’s just driven by price alone if necessary – saving them time and money
• You get what you pay for. Buyers can rely on Google searches and other online platforms to source the best rates, but with the current availability of products, they could spend a hefty amount of time doing so. What is more, a buyer may make an application and have a credit search carried out before their application is rejected as the product doesn’t fit, taking them back to square one. A broker’s advice is worth paying for as it can save clients’ time and effort
• The cost of brokers’ services is relatively cheap when you consider the time and opportunity cost that goes into doing comprehensive research and completing the application process
• It’s not just advice brokers provide – clients benefit from getting help completing the forms and having the process managed for them from start to finish
The time is right for brokers to take an even greater role in the UK’s residential and commercial mortgage industries. Let’s work together to ensure our positive messages reach more people in 2015.
