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Broker relationship crucial in supporting struggling borrowers ‒ analysis

  • 04/08/2023
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Broker relationship crucial in supporting struggling borrowers ‒ analysis
Regular communication with clients will help them come forward when they start struggling with repayments, brokers have argued, while some intermediaries suggested that a new awareness campaign from mortgage lenders around support is a missed opportunity.

This week banking trade body UK Finance announced it would be launching a ‘Reach Out’ media campaign later this year, to raise awareness of the support in place for borrowers having issues with their mortgage repayments.

Many brokers told Mortgage Solutions that they are speaking to clients as part of their ongoing management of the relationship, and noted that significant numbers are already adapting their plans in order to deal with higher repayment costs. 

What’s more, while the campaign was generally welcomed, there were concerns expressed around whether struggling borrowers should be pointed towards advisers as well as the risks of accepting support when it isn’t completely necessary. 

Asking the right questions

Martin Stewart, director of London Money, noted that brokers are unlikely to know the “pressure points” in a borrower’s finances unless the client volunteers them, though this may come at the point a broker contacts them to discuss a potential renewal of remortgage.

He said the conversation generally starts with focusing on whether they want to know what the new payment will be or whether they are concerned about meeting their financial commitments, which he said helps focus the client’s mind.

So far, our clients appear to be rolling with the punches but with the caveat  ‘something will have to go’”, Stewart continued.

Creating touch points

Nicola Schutrups, managing director of The Mortgage Hut, said ther business treats clients in a similar way to how IFAs handle their wealth and pension clients.

Our team conducts annual reviews or client calls to review their mortgage, protection and discuss any options they may have,” she said. The firm also keeps up regular contact through emails as well as its branded app.

“It’s just really important to create touchpoints where you can have a meaningful two-way conversation and support clients wherever possible,” she concluded.

Making an informed choice

Between higher mortgage repayments and continued inflation, it is clear that increasing numbers of clients will be struggling managing their finances, said Dominik Lipnicki, director of Your Mortgage Decisions.

He said his firm stays in regular contact with clients throughout, through an existing client team, while it’s important to offer a “suite of products such as mortgages, later life lending” and second charge mortgages in order to help support new clients.

“We have all seen more clients extending their mortgage term or converting to interest only and these discussions are carried out in detail so that the client is in a position to make an informed choice,” Lipnicki continued.

Lee Gathercole, co-founder of Rebus Financial Services, said his firm was starting to see clients consider alternative options like going part interest-only or an increased mortgage term in order to “cushion the blow” and make mortgage payments more manageable.

He added: “The benefit of using a mortgage broker is we are able to help understand what options are available to them from the market and will also be able to keep tabs on the most cost-effective mortgage deals as they change over time.”

A missed opportunity

Michelle Lawson, director of Lawson Financial, suggested that the ‘Reach Out’ campaign was misplaced, given it does not push struggling borrowers towards discussing their situation with brokers rather than lenders.

She explained: “The majority of lender staff that the public will speak to will be order takers and do not have the qualifications, knowledge, expertise and experience that brokers have and could end up unintentionally disadvantaging the people they are trying to help. All in all, a missed opportunity to champion the benefit and right to advice.”

Stephen Perkins, managing director at Yellow Brick Mortgages, said his firm was not directly calling clients, but instead sharing information and inviting clients to get in touch to discuss their situation if needed.

He continued: “We can advise what option may be best, give them the full detail and risks and how they plan to restore it in six months to avoid their credit rating being impacted. Also making them aware of the risk that lenders may still look unfavourably on having this support even if their credit rating is not impacted.”

Perkins added that his firm would advise clients not to use the support unless it is truly needed for this reason.

Turning to more credit

Many borrowers who are struggling to manage their money will instinctively turn towards taking on more credit, explained Ranald Mitchell, director at Charwin Private Clients, who said initiatives like ‘Reach Out’ will push more towards speaking to brokers.

He added: “Short of loss of income, there are usually things that can be done to help customers overcome difficult times and unfortunately, many we speak to would have been much better served if they had contacted us sooner rather than later.”

Lenders have learnt lessons

Stewart said that if a client says they are in financial difficulty, brokers can point them in the direction of the lender and push them to discuss the issue quickly so they can navigate a way through.

He continued: “Thankfully, with the Charter and Covid being a useful proof of concept, we know that lenders are a very different animal to previous property downturns and will be looking to help protect the borrower whilst helping to protect themselves.”

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