After a tumultuous few weeks the sentiment among mortgage advisers at the moment is mixed, but many are worried about the future of their business.
A line seems to have formed down the middle, leaving smaller brokers on one side very concerned about the future, and larger firms on the other, better insulated from the market shock.
Firms that rely particularly on first time buyers and buy-to-let mortgage sales are feeling particularly exposed, as increasing interest rates and stretched affordability limit new business propositions.
“There can be no broker that is not currently concerned by the market conditions that we find ourselves in,” Martin Stewart, a director at London Money told FTAdviser.
“That’s not to say we are not busy, but from a commercial point of view we can no longer guarantee how much of the pipeline will complete, which only compounds and compromises a business’s cash flow planning.”
Stewart said brokers are also acutely aware that they may be undertaking work twice, because the speed and volatility of the market means “clients may pivot on a previous decision at some point further down the road”.
A brokerage today should be nimble, well capitalised, well diversifiedMartin Stewart, London MoneyOthers in the industry echoed this concern.
Eternity Home Finance, director and mortgage consultant, Joshua Memour said the outlook for business is “mostly grim”.
Memour said his Croydon-based firm has seen “plenty” of clients cancel their plans to raise capital or move property because the price of borrowing has gone up so much.
“In some cases lenders have pulled their rates after the date of application which was previously very rare,” Memour explained.
“People are caught between a rock and a hard place. In many cases five-year fixed rates are cheaper than two-year rates, so people are caught between paying more now or being stuck in a high rate for a longer period.”
He added: “Lenders also seem to be in a price spiral, whoever is cheapest on the market gets flooded with applications and the next day their price goes up. It’s hard to see prices coming down as quickly as they’ve gone up any time soon without some form of coordination.”
London Money’s Stewart also expressed some concern over the amount of work now being done on five-year product transfers.
He said a five-year fix is great for clients, but awful news for the broker.
“They have lost a client for a period of time that is long enough to not be able to guarantee they will ever see them again. Secondly, the procuration fee in some cases are around 50 per cent less than if the client were to go to a new lender,” Stewart said.
Volatility highlights need for advice
Elsewhere in the industry, anecdotal stories of self-employed brokers pulling the shutters on their business have also been on the rise.
Nottingham-based adviser at Harmony Financial Services, Imran Hussain said he has spoken to colleagues who have decided to exit the sector as a result of the volatility.
“We all know there's a lack of stock. So we all know that there's going to be a slight reduction in possible volumes. But it's the volatility which is the issue for a lot of people,” he said.
“I know of some brokers who have just decided, that's it, they're done, they're going to retire. Others who are self-employed are actually going back to get a job somewhere, working for a lender or doing something totally different.
“So the volatility is going to cause a lot of stress for anyone that's in our space," Hussain told FTAdviser.
Others in the industry have reported an increase in inbound enquiries because of the market volatility.
Mortgage Confidence director, Jo Jingree, said she has spoken to clients who have already spoken to other mortgage brokers and are looking for a second opinion because they just cannot believe the rates they are being quoted.
“They want to check that they haven’t been misquoted by another broker, but in those circumstances the other broker has always been correct. It’s just the rate of change that the general public find it hard to wrap their heads around,” Jingree said.
When asked whether she was worried that new business might begin to shrink because of tightening affordability Jingree said: “I’m not too concerned as of yet, but ask me in a few weeks and that answer might have changed.”
“In these challenging situations the need for advice is greater than ever. Relying on the media for your information is difficult because everyone’s situation is unique, so the need for a real-life, experienced adviser means that we are in a good place in that sense,” Jingree said.
This sentiment was echoed by Moneybox’s head of personal finance, Brian Byrnes.
The digital finance app has a team of 10 mortgage advisers.
In Byrnes view the scale of the Moneybox business has meant it is well positioned to weather the storm.
“We’re seen a lot of customers come to us in the last couple of weeks and make contact because of what they have seen in the media and want to know how the headlines are applicable to them, particularly those who had recently submitted mortgage applications,” Byrnes said.
“It’s been a general level of busy-ness. We’ve seen a couple of down valuations, and a very small number of customers have changed their minds, but really nothing out of line from what we have seen in the last six months,” Byrnes added.
In addition to scale, brokers who have been in the game long enough, or who have at least learned some lessons from the past, should be able to withstand the turbulence, according to London Money’s Martin Stewart.
“Fortunately brokers had a very large and loud wake up call in 2008 with the credit crunch and that told them exactly how they should set their business up for the future.
“A brokerage today should be nimble, well capitalised, well diversified and the advisers should have ensured that they didn’t align their lifestyle too closely to what can often be a very unpredictable market.”
jane.matthews@ft.com
