Brokers must take a holistic approach or risk losing business – SFC

At Specialist Finance Centre (SFC), we don’t just focus on one form of property-related finance, while this is by design rather than accident, it’s at times like these that I’m even more glad that it’s the path we chose. 

The fact is that first charge residential and buy-to-let mortgage markets have struggled since September 2022 and, while lenders are almost entirely lending again, pricing is so much higher than before and consequently demand has certainly softened. 

Thankfully for distributors and specialist packagers, the bridging sector proved itself a worthy partner during the most difficult months. This came as no surprise to those of us who deal with bridging cases every day, but there would have been plenty of brokers out there who hadn’t previously worked with a bridging application until the ill-fated mini Budget last autumn. With other forms of finance unavailable, they will have found that bridging is not just for refurbishment or dealing with chain breaks. 

For instance, less leveraged landlords used the speed of bridging to take advantage of those property investors who needed to reduce their exposure pretty quickly by selling up. They used bridging loans to snap up properties at a competitive price, often at auction.  

Wide-spanning knowledge 

Why do I bring this up? Because my fear is that there are many mortgage brokers out there who are used to new business coming to them and don’t have a coherent plan for when this situation changes – which I believe is happening right now. 

Inflation is proving to be stubborn in its refusal to fall in any meaningful way; indeed, food-related inflation is continuing to increase. The cost of living is hitting the affordability of not just first-time buyers but equally well-established homeowners as well. This means remortgage options are narrowing for borrowers and so product transfers – which provide less or no income for brokers – will continue to be utilised by those feeling the pinch instead of seeking remortgage advice. 

This is why I think it’s imperative that brokers take a holistic approach to advice. If a broker wants to solely focus on first charge residential mortgages and/or vanilla buy-to-let, they are going to increasingly find it hard to generate enough revenue.  

Diversification is key; that means bridging, commercial, development finance, second charges, later life lending and so on.  

Now I know it’s unrealistic to expect one person to be an expert in each of these fields, and with so many brokers working for themselves they don’t have the luxury of a business partner who many specialise in a different area of property finance from them. That said, brokers can arrange to refer business to others on a formal or informal basis. This may result in an introducer fee or an understanding that it’s part of a ‘quid pro quo’ arrangement. 

Partnering with experts 

Alternatively, brokers can take the case to a packager who has expertise in other forms of specialist finance and who will hold their hand through the process.  

That way, the application is more likely to complete, the broker will get paid and most importantly, the client will be happy and much more inclined to return to the broker in future. And at the end of it all, the broker will be more knowledgeable about a type of specialist finance with which they were previously inexperienced and much less likely to be reticent about dealing with such cases in future. 

Ultimately though, taking a holistic view to advice is the right thing to do, even in less challenging times. Demographic changes mean people’s financial needs are different to those of 10 years ago.  

Back then, 35-year mortgages were a rarity, and later life lending was not the sizeable market it is now – £699m in equity was released in the first quarter of this year.  

Brokers need to be able to match the needs of clients – and their families – with the wide range of specialist finance products available. It could mean the difference between their business flourishing or floundering.