After several months of speculation that a rate rise was on the horizon, discussions suddenly changed tack and we found ourselves looking at the possibility that rates could fall into negative figures.
Bank of England governor Mark Carney has put such speculation to rest, stating the Bank has no intention of following Japan’s lead and taking the UK into negative interest rates (although he did admit we could see rates hit 0%).
Understandably such uncertainty over rates has left a lot of people considering what they’ll do when their mortgage deal expires and this uncertainty has left me wondering what systems brokers have in place to deal with clients coming to the end of their current mortgages.
Utilise technology
Firstly, are you keeping to date on which of your clients are approaching the end of their term? How are you doing this? As many of you will know I’m a strong advocate of using technology to improve the way you conduct business, and when it comes to managing your client base and keeping touch with customers, technology can be particularly effective. Brokers should be making use of a smart technology system which will not only let them know when a client is approaching the end of their mortgage deal but also contacts those clients automatically to remind them of your services and even arrange meetings.
It’s also important to look at the options open to these customers and ensure you are complying with the Financial Conduct Authority’s Treating Customers Fairly principles by giving due consideration to each one.
Product transfers
Product transfers have been rising in popularity of late and the topic of procuration fees remains an issue. It may be that a product transfer is the best option for your client, particularly if they are in negative equity or tighter criteria as a result of MMR causes issues. A compliant broker would never base his decision on whether this is an option for his client or whether or not their lender pays a fee. However in the interest of fairness I hope we see more lenders recognising the work that goes into a product transfer and remunerating brokers accordingly.
Proc fees aside, what product transfers offer brokers is a quick and easy way to retain clients. A product transfer, while still involving an amount of admin work for the broker, is usually much more straightforward than a remortgage. The adviser is able to satisfy the client’s need and as a result keeps that client away from the competition.
However, again, this shouldn’t sway a broker’s decision when exploring possible solutions for a client.
A product transfer may not be the best option and the broker should take the time to consider what remortgages are available.
Second charge mortgages
Of course there is also a third option that must be considered, particularly in the post-MCD world. Brokers must now evidence the fact they have explored second charge mortgages as a possible route for their clients. To maintain their independent status they must consider secured loans. This means whenever you’re dealing with a possible remortgage and extra borrowing is required you need to look at seconds too.
Borrowers approaching the end of their mortgage term are more in need of expert advice than ever and brokers will be in demand. Make sure you stay compliant – and ahead of your competition – by taking an holistic approach to your advice.
