A quick look back at 2017 shows that mortgage brokers had a lot to be thankful for.
In spite of a weaker economy, the election and Brexit uncertainty, last year was still a strong year for the mortgage market.
The industry has remained resilient in a low interest rate environment and the Autumn Budget delivered welcome news with the promise of 300,000 new homes a year, £10bn in funding for Help to Buy and the exemption of stamp duty for first-time buyers.
Brokers and lenders have been able to return to work in January with significant optimism for the year ahead. Whether it proves warranted, however, will partly depend on them.
For a start, when it comes to government announcements, we’ve seen pledges to tackle the housing crisis with thousands of new homes before.
What matters is whether it materialises in the form of houses on the ground. The whole industry should be pushing to see that it does.
Advisers need to be loud and clear about the value they bring, including the access they offer to thousands more mortgage products for consumers.In the meantime, affordability will remain a key issue in 2018.
Analysts at Hometrack recently noted that the house price-to-salary ratio in London hit a record high at 14.5 times the average wage.
Stamp duty savings pale beside the size of deposits savers still have to muster and, even if interest rates remain low, the next rise could come sooner rather than later.
Of course, brokers can help here. In fact, this just means they’re more important than ever.
But to do so they need to work hard on three fronts:
1) First, they must be clear about the value they bring.
Our recent 'Value of a Broker' campaign showed worrying misunderstandings about a broker’s role.
Fewer than half, for instance, knew that the broker works primarily for the borrower and more than half of consumers thought brokers offered them the access to the same products as when going directly to a bank or building society.
Advisers need to be loud and clear about the value they bring, including the access they offer to thousands more mortgage products for consumers.
2) They need to make sure they have the knowledge to make the most of opportunity.
Where buyers are struggling to raise a sufficient deposit, advisers need to be in a position to present them with all the options.
For example, could the Bank of Mum and Dad help? If they can’t afford to buy locally, could buy-to-let somewhere else offer an alternative way to secure a foot on the housing ladder? Are they aware of schemes such as Shared Ownership that could be an alternative route?
Brokers need to have a broad view of the market, be aware of all the options available to buyers and be able to tackle any misconceptions clients might have about housing schemes.
If brokers are to also fully showcase their value to consumers, they’ll need to meet growing demand from borrowers with specialist or complex circumstances. Whether that’s advising their clients on equity release or buy-to-let themselves, or referring their customers to a master broker that can offer them the support they need, in 2018 intermediaries will increasingly need to be a one-stop-shop for the consumer.
Retirement lending is only growing in importance and buy-to-let is becoming increasingly specialist, so for those who do intend to support their clients in these areas, education will remain key.
Brokers will also need to look to the growing opportunities that product transfers and remortgaging bring. Both provide a chance for brokers to really add value by saving their clients potentially thousands of pounds on their mortgage, while also deepening their relationship with the customer – stopping lenders or other brokers stepping in to take over.
Product transfers specifically are simple, quick processes that require no new underwriting. Advisers will need to ensure this is the right option for their client, but there is potential to grasp here, including for many buy-to-let clients who are yet to remortgage since the adoption of the Stamp Duty tax.
3) Finally, brokers need to ensure they make the most of technology.
That doesn’t mean they need to switch to robo-advice, but it does mean using the technology available to enhance their efficiency and service.
Whether it’s case management or digitising client and lender communications to speed up mortgage applications, brokers must grasp the opportunity technology provides.
It’s not likely to end well for those who bury their head in the sand, and by the time they try to catch up with the changes in technology, they may find it’s too late.
For those willing to embrace the opportunities in 2018, though, the coming year looks positive.
Jeremy Duncombe is director of Legal & General Mortgage Club
