Improving conditions in the mortgage market are inducing smaller lenders, in terms of their volume of mortgages, to make big statements about their lending ambitions for 2014.
Bolstered by improving economic conditions, a renewed public appetite for borrowing and government support, outsiders like Metro Bank and Post Office are hungry to make their mark.
Last week Metro Bank announced that it had taken on ex-Kensington head of sales Charles Morley as head of distribution to double its mortgage lending in 2015.
Meanwhile Post Office, owned by the Bank of Ireland, stated it intends to rise from its position of 16th in 2012, according to CML figures, to firmly plant itself within the top ten table of lenders in the UK this year.
Big statements indeed – so how can these underdog lenders gear up their operations to increase distribution and make themselves attractive to mortgage intermediaries?
For this week’s Marketwatch, our commentators are:
Mark Graves, head of Pink network, who advises lenders to have a comprehensive infrastructure already in place before pitching their proposition to the whole market
Lea Karasavvas, managing director of Prolific Mortgage Finance, says broker education and a commitment to delivering on promises is vital to grabbing and keeping a broker’s attention
Jeremy Duncombe, director of Legal & General Mortgage Club, suggests a proposition pitched at a growing area of the market underpinned by service is a winning combination
Mark Graves, head of Pink network
The best way of increasing distribution is through the intermediary market but you cannot increase market share significantly if you launch through just one or two players.
If the companies are serious about increasing their lending then they need to pitch their proposition to the whole market. Following this they can benchmark what good looks and then narrow it down when they know what quality they will receive.
To exploit the whole market any lender needs a comprehensive infrastructure to match. Fall down in either sales support or underwriting and brokers will leave in a rush. It would make sense to benchmark against the best and learn from other lenders’ mistakes.
The intermediary market tends to flood a lender who has a market leading product so I would also advise to pitch a market leading product but not necessarily across the whole of the range.
Feast or famine is not a desirable cycle to get into as it damages a brand which is not ideal when you are trying to establish yourself as a new player.
The systems of these new banks should be the best in the market as one assumes they have no legacy IT systems and have been built for purpose.
So my next tip would be employ quality staff and train them to be the best at processing cases. It is paramount that brokers have the confidence of knowing a mortgage will go through if it is packaged correctly.
Communication is my last tip, get this right and brokers will use you, especially if you have a clear strategy of what you want to communicate.
Lea Karasavvas, managing director, Prolific Mortgage Finance
Given the complexities of the mortgage market at present, a fundamental understanding of each of the lenders criteria is a must for these products and their rates to be successful.
This can be done in a variety of ways whether they be workshops for the intermediary channel (for those that allow it) or a bigger BDM presence to go out and develop this with the broker.
But above all a strong reputation for good turnaround times and responses to enquiries with cases being processed quickly is essential.
For the likes of Tesco and The Post Office, the use of the intermediary channel would create not only greater exposure of rates in the market place and enhance lender awareness, but it should also result in a better quality of packaged cases, allow the speed of transaction to occur quicker and ultimately an upturn in business levels.
A broker in today’s climate is working a lot harder to get cases accepted and their level of involvement is considerably higher than in years gone by so the assistance of quality brokerages that package cases well would be a great asset in an attempt to gain more market share.
Jeremy Duncombe, director, Legal & Mortgage Club
Our discussions with lenders continue to support the view that the market is likely to deliver around £200bn in gross lending in 2014.
Whilst the established lenders continue to deliver strong product ranges that cater for the majority, it is encouraging to hear that challenger brands are also growing their aspirations.
With intermediaries recognised as delivering quality, volume and value for money, the opportunity for non-core lenders is to identify the product areas and the proposition that will allow them to grow.
The five key points for these challenger brands to consider are:
1. Proposition
Getting their proposition right is what will really stand lenders apart from competitors this year. The areas with capacity to grow in 2014 are the higher LTV market, large loans, new build and re-mortgage.
2. Service
Simplicity, consistency and access to underwriters are all winners in the eyes of the intermediary.
3. Distribution
Finite capacity in the retail world means that using the expertise of large distributors to shape the proposition and get to the right audience is vital.
4. Relationships
Critical to repeat business. A great BDM or TBDM can make the difference as can the communication and education provided centrally.
5. All the above
One or two of the above will increase volumes, but delivering all four makes for a powerful and compelling proposition.
