2016 is turning out to be a very interesting year.
Despite proposed tax changes, the implementation of the Mortgage Credit Directive, a volatile stock market, concerns about the stability of the global economy and a continued shortage of new housing, the UK mortgage market seems to be coping very well.
According to data from the Council of Mortgage Lenders (CML), gross lending in 2015 was just over £220bn which was slightly higher than forecast and the CML is predicting an increase in gross lending to £237bn this year and then £261bn in 2017.
Brokers have benefitted from the continued upward trajectory of the UK mortgage market. From a low point in 2009 when brokers’ share of the market (by volume) fell to 52% of all first time buyer mortgages, 43% of home mover loans and 48% of remortgages, brokers’ share of these markets had risen to 71%, 64% and 62% respectively, by the 3rd quarter of 2015 (CML data).
And there is no reason to believe that brokers’ share of new mortgage referrals shouldn’t continue to increase in the future. Homebuyers value independent expert advice and as more lenders come to market and there are more products to choose from, homebuyers need help to be able to sort the wheat from the chaff.
The contradictory messages we’ve all read in the press recently about a possible rate increase, which has been quickly followed by speculation about possible further rate cuts, has also left consumers in a quandary. What should they do for the best? Making sense of the markets, products and best deals on offer has never been more difficult for even the most clued-up homebuyers.
As I say, there is every reason for brokers to be optimistic about the future.
However, this is no time to become complacent. Some of the larger high street lenders are being very open about their desire to increase their volumes of direct mortgage sales and it’s inevitable that their efforts will be aimed at some of those sectors on which brokers have come to rely, such as first-time buyers.
Brokers therefore need to carefully consider how they are going to continue to grow and develop their businesses in this more buoyant but also more competitive market, which means understanding who your target clients are.
I was speaking recently to a broker who is focused on high net worth borrowers and he told me about a seminar he organised recently within a large investment bank.
The seminar was about mortgages and all staff were invited to attend – but it was entirely up to them whether they did or not. On the day, nearly a 1,000 staff either turned-up or dialed-in, which shows the interest there is in mortgage matters at the moment. The important issue, however, is that this broker had a clear understanding of his target market – young, high-income earning professionals – and he knew how to reach them.
But it’s not simply about understanding your target market, it’s also about understanding which lenders are going to be able to satisfy your clients’ requirements. Yes, sourcing systems can produce a product shortlist, but there’s rarely a clear winner. As we all know, recommendations are usually made taking into consideration a range of factors including rate, criteria, service and the lender’s past track record.
And with an increasing number of new lenders coming into the market at the moment and established lenders extending their product propositions into new sectors, it’s becoming a ‘noisy’ market and therefore more challenging to keep abreast of the latest product developments.
So, as you plan for the future expansion of your business, it’s not only important that you have a clear understanding of what type of borrowers you’re targeting, but also which lenders may be able to help them. Your clients and lender relationships should be at the heart of your future growth plans.
What if your business is more tactical and your approach has been to respond to whatever enquiries land on your desk each day, rather than following a master plan? There’s nothing wrong with that and, as the old saying goes, why look a gift-horse in the mouth? Sure, exploit tactical opportunities, but don’t let that put you off developing a more strategic plan as well.
If you have a clear vision of where you want your business to go, you’ve at least got a fighting chance of getting there. But without a vision, you’ll be making life a lot harder for yourself.
There’s a real danger that as the mortgage market continues to pick-up, brokers assume they can simply ‘ride the wave’. Unfortunately, it’s rarely that easy. Survival in times of recession means living off your basic business instincts, but when the upturn happens, it calls for a different set of skills.
My recommendation is that now is an ideal time to start developing a longer-term plan. And as you do so, ensure it’s based on a clear understanding of who your clients are and knowing how you are going to reach them and satisfy their needs.
It has to be a good starting point as you set out on the road to future growth and success.