The current climate is one of historically low interest rates, consistent upward movement in house prices, improving employment statistics and an increase in customers with a need to borrow money. There is also a rise in unsecured debt and a desire to improve and develop property. Traditionally these economic conditions fuelled strong demand in our market, and 2016 and beyond should be no different.
Regulation has understandably poured cold, well luke-warm, water on this fire but it is not the only aspect restricting true market growth. A lack of fast-paced product development and innovation has also been missing, but there are signs that lenders and brokers are starting to work together to address this.
Innovation has been reflected in the range of buy-to-let second charge products now available, flexible products where the customer can pay down their second charge earlier at no major cost. There is an increase in the number and type of fixed products, development of hybrid products that take elements of secured loans and bridging solutions, as well as products with no consent facilities.
These are all big steps in the right direction and need to be further developed, but I think as an industry we can do a lot more. For me, we need to focus less on headline rates and more on product and process innovation.
So what products could we see in 2016 that will add further value to our customers?
Personally I’d like to see reducing rate products where customers get rewarded for good behaviour over time. There is also the demand for drawdown products similar to those available in the first charge market, allowing customers to use the facility over time and when required.
Products designed for older customers such as loan / equity release hybrids will offer greater choice and flexibility, whilst there is a need for true rate for risk solutions for customers, as opposed to one size fits all matrices based mainly on loan-to-value.
A further increase in the number and type of fixed-rate products available will also be welcomed by the market place.
On the processing and packaging side of things, self-service products allowing customers to complete much of the process online, with capability to upload documents directly into broker and lender systems could cut down on a huge amount of paperwork and time.
This coupled with an acceptance of e-signatures on all documentation for customers and third parties such as accountants would work to drive efficiency and speed of turnaround. Another couple of important areas that will help to maintain the divide between first and second charge products are accepted uses for the loan and an acceptance of relatively minor credit impairments.
In summary these factors are just the tip of the iceberg and there are plenty of innovators in this market with the ability and drive to add to this list.
That’s our challenge for 2016 – the year of innovation.