As we move through 2024 and (hopefully) by the end of the year escape the challenges that swept through the mortgage market in 2023, I look forward to watching where this sector may grow.
I am buoyed to see new entrants, and reduced rates from incumbents, coupled with what I think will be inevitable rate reductions in the third quarter.
I read the market stories about successes in our industry, and that’s fantastic. But I also hear the rumbles around firms that lose talent through redundancy, which is a shame when we want the sector to be buoyant for all.
How can you be sure your product is definitely the one the client requires if you haven’t analysed the full product suite?
I like to feel I am well connected in the market. I spend a lot of time talking to brokers, lenders, industry peers, network heads and marketers. It is interesting to see how people read the markets, and of course we are now in a world of Consumer Duty!
I was asked recently about the impact of the duty on my firm, and the changes I had made prior to the launch and since. I answered honestly that I certainly did make changes to protect consumers, and I had used market analysis to test how to protect them in future. We act upon what we learn.
‘Didn’t know that’ attitude
What I find disappointing is how the second charge market has not yet benefited from the impacts of the Consumer Duty in the mainstream market.
Conversations with brokers around the product value are still met with a ‘didn’t know that’ attitude. Are they genuinely surprised about its value, or just paying lip service? Do they act on what they now know? And do they know that their clients — yes, their clients — use this product all the time?
Second charge brokers, especially in the competitive B2B space, have made great leaps in simplifying processes and reducing costs
When discussing second charges with mortgage brokers, many seem to categorise the product’s values around adverse credit and high-LTV borrowing. But that is simply not the case in the business-to-business (B2B) space. Analysis of our book will tell you our average LTV is 61% including the second charge. In addition, we rarely use a product that is not driven to support the ultra-prime and prime space.
Yes, there are clients with adverse credit that we review, but they are the minority. And those vulnerable clients need exceptional care, especially when using their residence to support borrowing requirements.
So who is our customer? In reality, they were your Halifax customer who couldn’t take additional borrowing; your Barclays client who faced a huge penalty if they were to remortgage and capital raise away to another lender; your Santander customer who would lose their attractive fixed rate that still had two years left at its promotional rate; your Nationwide client who had an historical interest-only mortgage.
Conversations with brokers around the product value are still met with a ‘didn’t know that’ attitude
The Consumer Duty asks you to dig further into understanding your clients’ needs, ensuring that the product is fit for their purpose, that they fully understand all the options. For brokers with a blinkered view of second charges, how can you be sure your product is definitely the one the client requires if you haven’t analysed the full product suite?
Maybe you once approached a secured-loan broker for a quotation, to be told they charged 10%. On a £50,000 loan, why would you pay £5,000 to process it? I get that.
But the market is not the cowboy-driven sector it had the reputation for in the 2000’s. Second charge brokers, especially in the competitive B2B space, have made great leaps in simplifying processes and reducing costs. They are not driven by the lead machines, charging a fortune for pay-per-clicks and forcing up the price.
And, as a broker, you have access to a myriad of options from excellent businesses.
The market is not the cowboy-driven sector it once was
When it comes down to it, you have an obligation to treat your customer right.
If the client has a £5K penalty to move their first charge, or a new-mortgage product fee of the same, yet the processing cost of a second charge is a third of that cost, shouldn’t you be considering all options?
I look forward to your call.
This article featured in the May 2024 edition of Mortgage Strategy.
If you would like to subscribe to the monthly print or digital magazine, please click here.
