Lenders have scaled back their products in response to the fallout from the Covid-19 pandemic, while buyers have been urged to delay moving.
For some advisers this has led to an unsettling drop in new business enquiries, and there could be worse to follow as the hit to the economy becomes clear.
Make cuts sooner rather than later
Veteran advisers suggested that as a matter of priority, businesses should be looking where they can save money and acting fast to put measures in place.
Paul Flavin, managing director at mortgages.online, said: “Look at where costs can be cut.
“Cut deep and cut early, it may be your lifeline.”
Malcolm Davidson, director at broker UK Moneyman, agreed with this sentiment and said he had not cut back quickly enough during the financial crisis.
He added: “Every moment you push back that decision, you put your business at risk.
“There was not a furlough scheme in 2008, but now if there’s any doubt there’s not going to be enough activity, furlough those advisers early on, as you can always bring them back quite quickly.”
Change strategies
Now is the time to review systems and operations, as well as business strategies.
Davidson said: “I’d encourage business owners to reach out to customers, look at internal systems and consider whether now is the right time to invest in technology.
“I think any businesses that have operated on a face-to-face advice model, will probably need to review that.
“Everyone has got used to telephone and Zoom calls and that is here to stay; that will bring challenges and efficiencies.”
Flavin also recommended looking at how technology and channels, such as Zoom and Skype can help business.
He added: “You need to be offering a valued service to your clients that’s ongoing, not just turn up as a deal ends.
“How many brokers have contacted their clients offering advice on lenders’ three-month mortgage break?
“Come to think of it, how many brokers have their clients on a database that allows for such communication?
“Call your customers to offer reassurance. While business is quiet, email out life insurance quotes and follow up with a call.
“Those people who felt indestructible when it was offered at their mortgage may be feeling a little more vulnerable at the moment.
“So, you’ve got time on your hands, start making yourselves productive with offering a quality service, revisiting missed opportunities and swatting up on technology as it’s going to be a different world when we emerge.”
Diversified income
Ben Ramsay, director at Fairfield Financial Solutions, worked at Northern Rock in 2007 and agreed that focusing on protection in the current climate has already proved a valuable lifeline.
He said: “Being at a place like Northern Rock during the financial crisis has shaped the way I think and plan to this day.
“The first and largest lesson was don’t be reliant on just one source of income; I have tried hard to make sure we offer our clients the best possible advice in all areas, mortgages, protection and general insurance, which has meant that even as recently as yesterday we were continuing to place protection cases for clients.
“As part of our client fact find we ask if they currently plan for sickness or unemployment and if they had a three-month buffer in their savings.
“Disappointingly more people say no than yes but it’s a rule I have always applied to my business and its stood us in a good stead in the current crisis as we can continue to trade and support our clients, even though business levels will have reduced by about 60 per cent.”
We’re not in 2008
Although the UK looks set to enter another downturn, there are notable differences to the 2008 crash.
During the credit crunch, banks were brought to their knees by toxic loans or were rescued by taxpayer money, as lax underwriting and risky investments came home to roost.
Neil Ryner, director at broker Ryner & Partners, said: “The banks are now much more strongly capitalised than they were in 2008 and should have less concerns on funding, especially as the Bank of England programmes come back on stream.
“All lenders have had the challenge of being operational while their offices are closed and, of course, even as they progress pipelines the veracity of either valuations already done or the desktops to be completed will leave concerns.
“What we have also been told is Covid-19 may be seasonal, and therefore we will need to find solutions for keeping the industry moving at all times.”
UK Moneyman’s Davidson pointed out that brokers have a different to relationship with lenders today than was the case after the financial crash.
He said: “Coming out of 2008, for the first two or three years, we were up against it as lenders were dual pricing, but I’m confident that isn’t going to happen this time.”
Coming out the other side
Flavin agreed that banks are better placed in this crisis and will bring back product offerings fairly quickly.
But he added: “It’s not necessarily the LTV that’s going to cause most issues in the short term, it’s the ‘tweaks’ to affordability.
“As the number of furloughed staff increase, so more and more people will find themselves in a position where they can’t afford to remortgage or purchase, when their income is accessed at 80 per cent of basic pay with no inclusion of bonus or commission.
“This will lead to more remortgage clients having the one option of a product transfer.”
A huge boost for brokers would be to put them on the same footing as lenders in terms of product transfers, Flavin said.
Davidson said the industry will get back to the levels it had been at, but he does not expect the recovery to be as fast as the initial hit.
He added: “It’s a bit like a light switch going off at the moment, but the return will be a dimmer switch.
“We will get back to the same levels, but it won’t recover as quickly as it dipped.”
