Throw in the panic stirred up by the media and opinions from personal finance commentators, some brokers are reporting that the uncertainty is causing clients to verify their advice.
Brokers actively engaging with clients
Richard Campo, founder of Rose Capital Partners, said the initial wave of rate rises following the mini Budget came as a shock to clients, and an annual four per cent rise in the lowest five-year fixed rate “left some querying if we were indeed offering the best rates possible”.
In the week after the Chancellor’s statement, some clients queried advice given by his firm while others went to their lender to try and negotiate terms and pay early repayment charges (ERCs).
Campo said his firm actively engaged with clients in the final year of their fixed rate term as often as possible and discussed the ERC with them.
“If the ERC was one per cent, based on the rise in costs, this clearly made sense as clients will have saved more money exiting their deal than waiting.
“Of the odd clients that went off to find a deal themselves, they often found that they have already been withdrawn and came back to us to secure a new deal, which sadly was higher than the initial quote we had offered just a few days or week earlier due to the rapid rises in rates that we saw,” he said.
Brokers on a journey with clients
Chris Hall, mortgage and protection adviser at Mortgage Guardian, said it may seem like “decision impossible” now but there was always value in advice.
He said: “Take the following; first-time buyer at 90 per cent loan to value (LTV) with £200,000 of borrowing over a 30-year term who is risk averse. Standard house purchase with client circumstances indicating just one acceptable lender in the marketplace. A five-year fixed rate is available at what might be considered a mouth-watering 6.49 per cent compared to the 3.69 per cent rate available a few months earlier. To throw a spanner in the works, a tracker rate is also on the table at 3.6 per cent which shaves off over £350 from the monthly mortgage payment.
“Like bullets from a machine gun, questions were fired my way, but I stuck to the facts, made a solid recommendation, and felt no pressure to predict what is going to happen in the future should the tracker rate be chosen.
“Whilst I know that the client valued the advice, they appreciated the fact that I am on this journey with them, reassurance is given where needed but also a reality check as rates can be pulled at short notice.”
Clients lose confidence in the market, not brokers
Pete Lloyd, co-founder of Lloyd Wells Mortgages, said the impulse to get a second opinion or go directly to a lender was not because of a lack of confidence in mortgage brokers but in the market.
He said: “It’s almost hard for them to believe that rates are where they are now suddenly. It’s making them hesitant at a time when they really should be very proactive in order to secure a rate.”
Lloyd said he had a few clients who were quoted a rate elsewhere, then went to him for a second opinion to find it had gone up.
He said: “This is always met with a bit of disbelief and often ends with them wanting to go back to the person they spoke to a week ago to secure the rate they originally discussed.
“Unfortunately, that wouldn’t be possible for them but clearly, they didn’t believe the first person, hesitated and then didn’t believe me when I had to quote higher.”
Clients acting independently
Howard Reuben, founder of HD Consultants, said amid unnecessary panic some clients had carried out product transfers without referring to his firm first.
He added: “However, we often get subsequent phone calls asking if they have done the right thing. We then have to troubleshoot deals where there’s been a product transfer and after a full and proper advice review process, we see that a remortgage to another provider would have been a far better solution,” he added.
Reuben said: “The media scaremongering about mass exodus of lenders leaving the market, decimation of mortgage products, and frightening certain borrower sectors thinking that they can no longer get mortgages, has definitely driven people to us asking for our help to give them peace of mind and financial security, but it has also driven people to act rashly.”
Brokers in the best position
Lloyd said his firm made it clear to clients that they did not know what changes could occur overnight and while they had many ‘bad news’ conversations regarding rate rises or withdrawals, he felt that clients ‘hadn’t lost trust in us”.
Lloyd said things were changing on a daily basis and “no one has a crystal ball”.
He added: “If a broker tells you that they know exactly where the market is going, they are lying. But brokers monitor the market all day, every day and are best placed to make sure we act quickly.
“Due to the way we monitor the market, if rates substantially reduce during the application process, we are best placed to potentially make sure we switch you to the best rate before completion, if possible.”
Hall also said brokers were in the best position due to their proximity to the market, adding: “Brokers being well connected with the industry means they hear views from other brokers and lenders about the current climate.
“Like it or not, we are slap bang in the middle between the lender and the client, hence the term mortgage intermediary. Uncertain times mean people need our skill, guidance, and expertise more than ever. This is our day job, and we are known to step up to the mark in difficult situations.”
Reuben said his company, which has been running for nearly 30 years, had worked through numerous economic and property highs and lows.
He added: “This is the difference between a professional mortgage advice brokerage, an online DIY service, and listening to the man in the pub – or Martin Lewis as we like to call him.”
Trust in brokers remains
Reuben said his clients had faith because his firm worked on the basis that it was crucial to present the full facts with the caveat that things could change without notice.
Hall said positioning himself correctly early in the advice process prevented unrealistic expectations, while Lloyd said he was in regular conversations with clients about the pros and cons of remortgaging early.
Campo noted that brokers working late hours to secure deals for clients, making it apparent that the sector is working in the interest of the borrower.
“While the rise in costs came as a shock and there may have initially been some skepticism, hindsight has proved our actions correct and our clients have saved the most money possible, which is what our job is all about,” he added.
