One year on from the start of the credit crunch and conditions remain challenging for firms. We have now had the Government’s plan to resuscitate the failing banking system and a dramatic 0.5% cut in the base rate, but it is too early to see what impact this will have, whatever happens.
The Association of Mortgage Intermediaries (AMI) will continue to spend much time with stakeholders – the Government, politicians, the FSA, the Bank of England, the Treasury and the Crosby team to name but a few – and continues to engage on the key issue of unlocking the capital markets.
AMI was the first trade body to publish proposals on remedies to the credit crunch. While it has never claimed that it could ‘fix’ the world capital markets, it was important that there was public debate, which is why it published its Fixing the Crunch White Paper. AMI was happy to spark the green shoots of any possible solution, and was determined to do something to benefit consumers, and its members.
However, to AMI’s disappointment the economic outlook shows little sign of improving. In light of this, AMI has now published The Credit Crunch – One Year On: Adapting to a Changing Mortgage Market. The paper sets out the current situation along with our view for the future of the markets and the outlook for intermediaries.
As a trade body, AMI aims to help its members through the production of good practice notes, guidance, or fact sheets, and is in constant dialogue with regulators about issues as diverse as the European VAT Directive, to changes in MiFID systems and controls rules to TCF.
However, on this occasion, the membership has asked for support with business planning. Many firms have been surviving on hope that the market is on the brink of improvement. As time progressed and this hope did not materialise, firms have re-considered their business models. It is important to remember that AMI does not tell firms how to run their businesses, but it does aim to offer guidance to those that need it.
So where are we today? AMI believes we are witnessing a flight to quality. Lenders have less funds, and logically they will deploy this to the best borrowers. That does not mean merely prime applicants; instead, it means appropriately priced products delivered through quality distribution.
A good intermediary can add to the value of a client having performed affordability assessments and offered consumers valuable guidance and support. AMI believes good intermediaries will survive and will eventually prosper.
In the meantime, AMI has published a paper to give firms information that might help in planning their business models for the coming months.
A customer-focused, advice-driven business model, rather than a volume machine, is likely to serve firms well. In the future we will see a smaller, leaner industry but the remaining firms will have the best staff and will be stronger and better diversified. Diversification will be key.
Last September, 71% of larger firms had activities beyond mortgage broking alone, and by March, 85% did. To assist firms to make the necessary changes to survive in the new look market, AMI is offering members diversification workshops.
AMI believes that members should consider other lending solutions and investigate other income streams. It is important for mortgage broker firms to think creatively during these times, for example linkages could be fostered with solicitors and accountants for referrals.
To that extent, relationships are key – this industry survives on relationships, with lenders, customers, and also other brokers. All of these need fostering at present, particularly as we see a decrease in business volumes. Times are hard, but quality will win through. n
Andrew Strange is policy director at the Association of Mortgage Intermediaries
