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When did a completely vanilla mortgage case last cross your desk?

by: Paul Nye is director of business partnerships at Stonebridge Group
  • 21/03/2017
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At our recent annual conference we put together a panel of experts to discuss the specialist lending market and it soon became apparent, listening to the assembled quartet, just how broad the specialist sector now is.

Paul NyeDuring the half hour we’d allotted, the discussion covered off a whole range of product areas, some of which you would not ordinarily think of as specialist but which – in a new mortgage environment – clearly require specialist knowledge.

It’s also become obvious that there are now a whole host of specialist sub-sectors which would once have been such a minuscule part of the market they wouldn’t have merited discussion, but in recent times have grown in demand and are becoming considerable growth areas for the market, and advisers.

Take buy-to-let, for example, it was once the case that limited company buy to let was a relatively minor part of the sector. However, given the changes to mortgage interest tax relief that will be introduced from April plus of course the Prudential Regulation Authority underwriting changes, more and more landlords are opting not just to purchase their new investment properties through a limited company, but also (where tax-efficient) to move their existing properties into the corporate vehicle.

What was a rather fledgling sector is now becoming rather more fully-formed and clearly advisers are having to adapt to this, to steer their clients through the options available – and how this might impact on the loans they can secure – plus, not forgetting the potential tax implications, although of course advisers should not be getting involved in any discussions which might be construed as advice here.

“growing list of options for first-time buyers

requires some deciphering and perhaps takes

first-time buyer clients out of the realm of mainstream”

 

In other areas we are seeing the necessity of specialist knowledge – for example, second-charge mortgages, recently brought under the auspices of MCOB, also need to be actively considered alongside other capital raising options. Then we have later life loans and how these might couple together with perhaps existing interest-only mortgages, and potentially moving into equity release.

Even in an area such as first-time buyer mortgages, which we previously would never have considered specialist, there is a greater level of knowledge required now than ever before. We’re not just talking about a straight mortgage here, but there is potential for shared ownership, guarantor products, the Help to Buy Scheme, new build, plus various savings incentives like the Help to Buy ISA, and the recently-launched Lifetime ISA. This growing list of options for first-time buyers requires some deciphering and perhaps takes first-time buyer clients out of the realm of mainstream.

Overall, however, the growing complexity of the mortgage market, in particular the depth of product and scheme options within the specialist mix, makes it incredibly difficult for advisers to be fully prepared on all of them. We’re certainly not suggesting you can’t be, but it is a great deal of information to take in, and keep up on, especially if you’re only dealing with a relatively small number of cases in this one area. As we know the market changes quickly, and the information you might have been able to rely upon six months previous, may not necessarily be right for today.

“although a number of master brokers have changed their fee structures recently,

charges have tended to be very high,

unjustifiably so for the work involved”

 

In that respect, there’s no harm in using the services of specialist advisers/brokers who conduct this type of business 24/7. Indeed, given the introducer fees you can now earn via this referral method, you can not only ensure your client has exactly the right advice, but you can earn approximately the same as what you would have done, if you’d provided the advice yourself. A word of caution however, not all specialist operators are the same, and advisers need to make sure they conduct their due diligence particularly in the area of the fees charged. Traditionally – although a number of master brokers have changed their fee structures recently – charges have tended to be very high, unjustifiably so for the work involved, and this will clearly impact on the viability of the deal for the client. Make sure those fees are realistic for what is being provided.

That said, let’s not be in any doubt that the nature of the UK mortgage market lends itself to more niches, more sub-sectors, and therefore an increased level of complexity to navigate. There is no pride to be lost in using those who specialise in this area; indeed you are putting your client in the safest of hands and ensuring they get the right advice for their needs.

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