How can lenders better support the high street mortgage broker?
A mortgage is one of the most significant financial products that people purchase. With 2018 seeing the highest number of first-time buyers since 2006 this brings plenty of opportunity for mortgage brokers. Use of a broker is common, with estimates suggesting that over 70% of mortgages are arranged through a broker, as borrowers often struggle to understand the process, lack confidence to find the best product or do not wish to spend the time arranging the mortgage themselves.
However, brokers are also facing challenges, particularly the smaller firms where internal processes and systems could be improved while changes to the wider market landscape bring additional pressures. IFF’s recent qualitative research with mortgage brokers from firms with less than 10 employees has highlighted some of these challenges and identified how lenders could better support them in increasing their business.
Dealing with a reduction in buy-to-let
Many brokers depend heavily on the buy-to-let market which has recently seen changes that have resulted in reduced business. Since September 2017 any landlord with four or more properties is classed as a ‘portfolio investor’ where further lending is subject to tougher criteria involving a detailed financial review of the entire portfolio. This not only means that it is harder to get mortgages for additional properties approved, but it has also increased the time brokers have to spend dealing with lenders to get the checks completed, with three months lead time recommended. The increase in stamp duty for buy-to-let properties introduced in 2016 has also had an impact on the market.
Focusing on other products may be the solution for some brokers, with areas such as equity release being a potential way to help with the downturn in buy-to-let, and lifetime mortgages in particular becoming increasingly popular. However, being able to advise on these products requires an additional qualification, so it is not always a simple solution. Any support lenders can offer to help brokers expand their product offering and deal with the challenges within the buy-to-let market would be welcomed.
Supporting new business generation
Despite challenges in maintaining income levels and generating a reliable stream of new business, among the brokers we spoke to there were rarely defined processes for customer acquisition in place. There is a heavy reliance on word-of-mouth and recommendations from existing customers, as well as the prospect of repeat business as customers return to them when a mortgage deal comes to an end. This may be working well for those experienced and well-established brokers, but those new to the industry are also relying on this approach to grow their business, meaning building up business is a slow process. Business generation is an area where lenders could provide additional support to brokers, particularly those looking to get established in the industry.
Maintaining the customer relationship
There is certainly the expectation that lenders will support brokers by sign-posting customers back to their broker when a mortgage deal comes to an end, which helps the broker secure repeat business. Lenders do this in most cases (but not all) although the amount of detail provided on the rate and product options varies and there is still possibility that the customer goes direct to the lender and makes the decision themselves.
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