These types of requirements are there no matter what kind of mortgage you’re applying for, from the sub 60% LTV deals up to the 90% mortgages for first-time buyers.
This is because in the UK, mortgages have become much more complex than in most other countries. Years of innovation and intense competition have fostered complex terms and clauses which can sometimes catch people out, especially if they don’t fully apply them to their own circumstances and plans for the future.
The requirement by lenders for their mortgage customers to do more than just get a mortgage for a couple of years is borne out of both a necessity to onboard cash deposits (UK lenders still have a lot of balance sheet rebuilding to do) and a trend towards relationship management in retail banking.
Our firm arranges most of our clients’ mortgages with private banks, almost all of whom require varying degrees of engagement, sometimes with everyday banking but more commonly with a significant degree of wealth management business.
For years, they’ve understood that client retention depends on a multifaceted share of the client’s wallet. We find ourselves today more of a relationship-broker, with the mortgage as the driver, and must take into account how the client’s needs fit in with all of what the private bank has to offer. This philosophy is slowly seeping into the retail banking sector in the UK.
Whether the banks can do a good job of keeping clients happy with their current accounts and mortgages is another question. It depends on their mortgage retention deals and on the quality of their staff (both of which often seem a bit random and unpredictable).
Often, our own clients seek advice from us rather than from the retail banks which implies they still have work to do if they want this relationship management strategy to work in the long run.
I don’t think mortgages will go back to being the absolute commodities they were before the credit crunch, but I do think that there will always be a place for impartial whole-of-market advice on mortgages.
We’re in a period of transition where the banks haven’t figured out how to balance this trend with their broker relationships, but they will in time. In order to be successful in the new world of mortgage broking, we must embrace this rather than complain about it, hoping things go back to the way they used to be.
Banks’ interest in developing relationships with their customers is a positive thing, and as brokers we must be able to offer the best overall solution, even if it means considering things like current accounts.
Ian Gray is mortgage manager at largemortgageloans.com