‘Lenders should be applauded and not berated’ – Lea Karasavvas
For example, one of the leading lenders and trend setters of the market, Halifax, has already enhanced its offering by returning to the market with higher loan to value options, having withdrawn all products above 60 per cent loan to value (LTV) last week.
In a matter of days we have seen one of the largest lenders of the industry take stock, evaluate its position and come back stronger with products up to 80 per cent LTV. This is a huge vote of confidence and one that will encourage other lenders to do the same.
We’ve seen Accord adjust its processes to allow for automated valuations up to 75 per cent LTV on purchases and 85 per cent LTV on remortgages.
HSBC continues to work hard on automated valuations at higher levels as does Santander. Metro has held on to lending at 80 per cent LTV and introduced digital valuations; all this while dealing with record levels of payment holidays.
Skipton Building Society has re-entered the market up to 75 per cent after a temporary withdrawal of all products last week.
It needs to be understood these are unprecedented changes. Our lenders may be withdrawing product ranges and making headlines, but let us not lose track of the fact that they are swiftly re-entering the market with sensible, viable solutions and doing so at an exceptional pace.
They are hugely understaffed, due to sickness and unusual working conditions. Throw into the mix payment holidays on a magnitude that lenders have never witnessed before and the need to replace physical valuations with other solutions.
Applause for the banks
Against this backdrop, we should be applauding the work of the banks keeping things going as best they can. The speed and reactions of lenders should be applauded and not berated.
In these most challenging times while there are some dilemmas that we all face and casualties that will arise from this, let us all take a minute to appreciate the huge efforts being made to keep us safe in our homes.
To keep the economy stable and the hard work going on behind closed doors to give us all a fighting chance of surviving this pandemic.
What is different this time round to 2008 is the use of social media. Sure Twitter was around in 08, but barely two years old it was not the beast it is today.
News was not reported as fast, opinions not delivered as quick. Facebook was four years old but was full of students and not quite the diverse medium it is today. As for LinkedIn, nowhere near the monster it is now.
These platforms have helped news travel faster, and with the news come opinions. With the opinions, fear. The spread of the coronavirus has been rapid, but the scaremongering was quicker.
For every 100 bad news stories, you’ll find one positive. Bad news stories circulating in the mainstream media that the mortgage market is in lockdown are being used as ‘click bait’ as a friend of mine so eloquently called it.
Impossible decisions in impossible times
Instead let’s salute the hard working heads of lending in the banks, building societies and specialist lenders who are tasked with impossible decisions, in impossible times, in an unprecedented era.
Let’s praise the business owners, the leaders, the brokers, the underwriters and the business development managers who are doing everything within their power to keep this industry going and keep it moving through something none of us have come anywhere near close to experiencing before.
Businesses like Knowledge Bank have shown their incredible strength giving daily updates even to non members. It is this spirit and this togetherness that will help pull us all through these difficult times.
Our thoughts are with everyone who has lost their jobs, with all the families that have been affected by the outbreak and to all those who have lost someone they love.
These are unprecedented times, but this is a resilient industry. While we will have casualties, we can take stock and we’ll come back from this.
Let’s all unite as we always have done before and find a way through this.
Best of luck to us all over these coming months and see you on the other side.
Income protection enquiries treble as borrowers fear for jobs
Advice firm Lifesearch saw enquiries for protection insurance treble last week, compared to a normal week. The majority of customers wanted to know if loss of income because of the virus was covered.
Borrowers are anxious that they if they have to self isolate or their business closes they will have insufficient income to cover their mortgage costs and household bills.
The government has announced a package of measures to protect homeowners, such as mortgage payment holidays.
However, those who become ill with the virus and have to stay at home will only receive statutory sick pay. Others are concerned that the will lose their jobs or if they are self employed, will only have universal credit to fall back on.
Confused about cover
Managing director of Prolific Mortgage Finance, Lea Karasavvas said the first wave of enquiries he received from worried homeowners were for Accident Sickness and Unemployment policies, fearing they may lose their jobs because of the impact of the virus on health and businesses.
But advisers expect the unemployment part of this type of policy to be removed for new plans. L&G insurance has already temporarily withdrawn its unemployment cover for new customers.
He too has seen an uplift in income protection requests. He says clients are confused about what income protection will cover them for, believing incorrectly that it includes redundancy as well as sickness protection.
Karasavvas said: “What is clear, is that our client base is now understanding the importance of their income and to insure it.
“We pride ourselves on ensuring all aspects of protection are discussed with our clients and issue insurance decline letters to remind them of its importance throughout the mortgage process if they decide not to heed our advice.”
Cover on submisison
Prolific advisers have also reported a rise in life cover enquiries.
The biggest concern among protection specialists, he said, is how providers will get GP reports given how overworked doctors are right now and how long it will take to get these issued and policies on risk.
“Because of this, he added, providers that do not offer accidental death benefit on submission of cases meaning clients are not covered on submission of application rather than acceptance, are being disregarded when it comes to recommendations.”
“Our hope now, is that providers will look to follow suit of the mortgage companies and provide payment holidays for their policy holders in financial strife so people can remain covered through these difficult times,” said Karasavvas.
“However getting any provider to respond to this so far has proved a challenge. What is vital now is that people remain insured when they need it most, rather than lapse policies to try and save a few pounds.”
Now that’s what I call mortgages 2019 – Karasavvas
Placed on my desk before me are nine mortgages. Eight are remortgages.
I can’t remember the last time I had this many applications on my desk ready to go. So no Frankie, I won’t Relax, far from it.
In fact, I want to Shout but I can’t, I have some major keying to do.
A quick sip of my coffee and it’s game on. Another HSBC remortgage, and I am ready to Push it – you can see where this is going can’t you, that’s three 80s classics listed already.
Take my breath away
I am sick to my back-teeth of the doom and gloom that Brexit has brought to the industry, how the purchase market has crumbled and the hugely demotivating stats on how many down valuations we have all witnessed in the last three months.
Enough of the teardrops. My medicine to this, has not only been a throw-back to the good times with Heart 80s playing in the office, it’s been the availability of the ridiculous rates that we are currently blessed with in the re-mortgage market.
My god they are low, really, really low. Two-year money from the big lenders is dangerously close to going sub one per cent and five year deals could possibly go sub-1.5 per cent.
It’s a little crazy and proof that we are not on a road to nowhere in this industry. Business in the remortgage market is rife and the opportunity is there to rip it up. I look forward to seeing the second half year stats on remortgage applications so we can all have some positive reading.
The big lenders are definitely getting Into The Groove; squeezing their margins harder than Vinny Jones once famously squeezed Gazza’s crown jewels.
This big squeeze is seeing a huge benefit to the consumer. Regrettably, it’s also resulted in the loss of some of the lenders out there who have simply not been able to pull up to the bumper.
Thoughts go out to the teams of Sainsbury’s and Tesco to name a few.
Living on a prayer
If lenders don’t have a niche right now, if they don’t have a couple of USPs up their sleeve, it’s survival of the fittest and they are under pressure if their mainstay is Vanilla Mortgages and that alone.
Regrettably it won’t be long before another one bites the dust as the price war continues to consume the smaller, weaker victims.
Santander, HSBC, NatWest, Barclays are squeezing rates so hard, that it’s only a matter of time before the market sees more casualties of what can only be described as the most aggressive price war in our history.
While I fear for the future of some of the lenders out there, we must think of the consumer. This last quarter of 2019 represents probably the biggest remortgage opportunity I can ever remember.
Some lenders are now pushing 5.5 times income, rates lower than we have ever seen, nearly all lenders paying on product transfers.
This all represents a huge opportunity for our clients and for us as brokers if we are successfully managing our client base.
The only way is up
While the purchase side is suffering, there are other opportunities. Opportunities that hugely benefit our client, and hugely benefit our businesses.
As ever, the success to this opportunity lies in our management of client database.
So let’s all Sit Down, Pump Up The Volume on the remortgage market, and make the most of the final quarter of 2019.
I have heard a few brokers ask the question Should I stay or should I go, given how the market is. With the rates and weaponry available to us right now, nothing’s gonna stop us now so let’s get Back to Life and make this a quarter to be proud of.
Okay I make that 16 80s song titles right there.
Time to make our own greatest hits for this last quarter. Lenders, brokers, administrators, compliance, let’s unite and make it a quarter to remember.
Now That’s What I Call Mortgages 2019.
Brokers ‘unearth’ opportunities during purchase slowdown – analysis
Many buyers and sellers are holding off making big decisions until the UK has clarified its future relationship with the European Union.
In the three months to March 2016, house purchase approvals were 215,816. Since then, they have only broken through the 200,000 mark in four quarterly periods, according to figures from the Bank of England. In the latest quarter, ending June 2019, purchase approvals had risen slightly from 195,614 to 198,129.
In the meantime, remortgages have been big business.
In the three months to March 2016, remortgage approvals were 126,580 and despite intermittent slow quarters, they have gradually risen. For the latest quarter ending June 2019, there were 143,708 remortgage approvals.
But not all brokers are just looking to the remortgage opportunities on their doorstep.
Some business owners are turning to protection sales, an often-neglected part of the mortgage process, to bolster their bottom lines.
Lea Karasavvas, managing director of Prolific Mortgage Finance, has hired experienced protection specialist Ria Wotherspoon. The firm’s strategy is to identify protection life cover and business protection sales within its own client bank.
Karasavvas said: “So far it has proved a huge success. While the downturn in the purchase market is apparent for all to see, it has allowed us time to focus on the other avenues of the business that were perhaps not receiving the attention they warranted. We have also unearthed opportunities that are compensating for the homebuying slowdown.”
Colin Payne, managing director of Chapelgate Private Finance, and Richard Campo, MD of Rose Capital Partners, have also hired specialists to improve the level of protection they are offering their clients.
Campo said splitting out the mortgage and protection sales roles, rather than asking one adviser to concentrate on both products, had improved sales rates.
Paul Yates, director of iPipeline, noted the rise in the volume of protection sales from mortgage brokers.
He said: “The mortgage market isn’t exactly quiet, but it isn’t as busy right now as it was in previous years. We’ve seen a clear increase in protection activity from mortgage broker firms who are also covering more needs in each sale, including critical illness and income protection, rather than just life cover.
“This is driven by better distribution processes and technology, but is also down to brokers having more time to deliver better advice.”
Payne has recently taken on one specialist but has ambitions to build a team of protection advisers.
“Less than 10 per cent of our mortgage clients were being protected before we brought in a specialist. That’s improved to around 50 per cent now,” he said.
Protection sales are not the only business stream intermediaries are exploring.
Stuart Gregory, managing director of Lentune Mortgage Consultancy, has recently qualified in equity release advice. He said being able to talk to borrowers about lifetime mortgages has opened up more opportunities as areas such as purchase buy-to-let have fallen quiet.
Gregory expects the equity release business to take around 18 months to take off.
While his new venture builds momentum, Gregory is lessening the impact of depressed mortgage sales by generating income from writing mortgage capability reports for solicitors acting for couples getting divorced, for example.
He also writes reports for developers who have offered shared equity deals on new-build properties. The report examines whether owner occupiers can afford to repay the shared equity debt by remortaging.
Criteria churn is positive, but watch out for the regulator – analysis
Such a vibrant market may be good for clients, but it levels a serious challenge at brokers who need to keep up to offer the best advice and to stay on the right side of the regulator.
Only this month Robert Sinclair, chief executive at the Association of Mortgage Intermediaries, warned that the Financial Conduct Authority has its sights on brokers whose pool of lenders is overly limited.
Advisers have remarked on the volume of criteria changes in the later life, self-employed and buy-to-let segments — as well as a plethora of product updates across the market.
Double, triple check
Adrian Anderson, director at broker Anderson Harris, says it “certainly feels as if banks do seem to be forever changing criteria”, and that there has been a “relaxation of lending criteria on interest-only, with some banks being a bit more flexible on allowing older borrowers.”
He says that it’s “always a challenge for brokers to keep up with criteria which is why we want to speak with our lender relationship manager regularly, why business development managers (BDMs) from lenders often come to see intermediaries and why we read regular updates in the press and from lenders.”
Anderson is confident that brokers can keep up to date with marketplace churn if they research thoroughly, but says “it’s always at the forefront of our minds to make sure that the client is getting the best terms, based on their criteria.
“If someone wants a particular loan size, for a particular value or property, we always do our research, look at the cheapest lender and work our way down.
“Brokers double, triple check criteria with their relationship manager at the bank, or they’ll get their assistant to double check the research online, to make sure that we’re definitely going to the right lender for the right client,” Anderson says.
Lender policy visibility
On the research platform side, Mark Lofthouse, chief executive at mortgage technology and data company Mortgage Brain, suggests that the apparent high level of criteria changes has to do with the rising visibility of lender policies and product features over the past few years.
“It’s not so much that lenders are constantly changing their criteria, it’s more that criteria, over the past two or three years, have become more important to matching a customer to the products available,” Lofthouse says.
“If you go back, historically you were either a vanilla product or you were specialist. And that was it. Whereas now, criteria that lenders may always have had are available to brokers through platforms like Criteria Hub. Brokers are using them more, so there’s more visibility compared to in the past.”
Jason Hegarty, co-founder at Criteria Hub, which was acquired by Mortgage Brain in March, adds that this enhanced visibility across the mortgage marketplace has enabled brokers to transact more easily with a wider range of niche lenders.
“Brokers now have access to more lenders who accept, for example, borrowers who have been self-employed for only a year. We provide criteria from 10 or more lenders who accept self-employed borrowers of this type. That’s considered pretty niche, but yet there are a vast array of solutions available,” Hegarty says.
He adds that certain lenders may have relaxed their affordability algorithms in selected market segments during 2019, giving an impression that customers can borrow more.
And criteria platforms have contributed to standardising the language of lending so that it’s easier for lenders to communicate changes to intermediaries and to benchmark their criteria to see where they may be outliers in a particular market segment.
BTL criteria churn
As well as clues that lenders are tweaking criteria for older borrowers and the self-employed in response to changing work patterns, there is evidence that they’ve been tinkering with buy-to-let (BTL) criteria too, with taxation rules the driver.
Liz Syms, chief executive at Connect for Intermediaries (pictured), says that in this segment, criteria has become a key battle ground for rival lenders who may be restricted as to how low they can cut rates.
“BTL is dominated by the big high street names, which take a very significant share of the market. The remainder of lenders, of which there are many, and lots of new ones coming into the market, collectively are trying to get a share of that smaller part that’s left over after the high street has taken its bit,” Syms says.
“There’s a lot of competition between lenders. When their margins are too tight to compete against the high street on price, they tweak and improve criteria.
“That is one reason that you’re seeing such a change in criteria. For brokers, in terms of more choice, it’s the real bonus,” Syms adds.
Research, research, research
She points particularly to holiday let and Airbnb mortgages, where a lot of smaller building societies and bigger specialist lenders have brought out new products and tweaked criteria.
“That’s off the back of consumer demand because with tax changes, where mortgage interest is not deductible in full for higher rate tax payers, holiday lets or Airbnb, if run as a business, are not counted as BTL — even if held in someone’s name,” Syms continues.
“It’s treated as a commercial business for tax purposes and therefore mortgage payments can be offset against income before paying tax. That has increased the popularity of, and demand for, that type of product.”
She adds that a similar dynamic is at play in the segment for homes in multiple occupancy (HMO) products.
However from an adviser perspective, “it’s a lot of lenders and a lot of criteria to try to understand and navigate through, to make sure you are making the right recommendation to a client,” Syms says.
While the pros are about more choice for clients, the cons come in the form of brokers having to be extra careful about giving the right advice.
“There are more products and criteria than ever, even compared to before the credit crunch, and that creates a lot of work and a lot of pressure for advisers to fully research the market accurately. Brokers need to spread their wings and spend time with lenders to properly understand their offerings, because not everything is black and white,” Syms says.
While there is “no one system that does everything”, it’s beneficial to check criteria and then to research a shortlist within the sourcing system.
“There’s a risk that if brokers don’t open their minds to alternative lenders out there and research only from a narrow number of known lenders, they may be missing opportunities or making the incorrect recommendation,” she adds.
Lea Karasavvas, managing director of Prolific Mortgage Finance, agrees that overall the level of criteria churn has been positive for clients and for the health of the mortgage market, but that it does keep brokers on their toes.
“Criteria changes are the nature of the beast in the mortgage market, but we are seeing a lot of changes at present as lenders look to assist in many areas where they were struggling previously,” he says.
“There have been huge criteria changes in maximum ages on mortgage terms, with many lenders now going to age 80 and even 85 which assists older clients. These changes have been very positive, with people living longer and working longer.
“More changes in interest-only criteria continue to strengthen the market place and have also given people more options on how their debt is repaid,” he adds.
However, Karasavvas highlights that the biggest and most problematic change has been within the BTL sector “where it seems every day a different stress test is applied by a new lender”.
“The number of changes have become so frequent that many networks are now rolling out specialist licenses for brokers to transact in this field to ensure that they are on top of all the changes they continue to give best advice,” he says.
Despite the challenge to brokers from such a level of churn, Karasavvas concludes that “the majority of recent criteria changes have helped brokers to give a lot more options to borrowers and should be applauded.
“Lenders continue to be keen to lend, and while these changes are frequent, the majority are enabling us, as advisers, to perform our roles better.”
Brokers praise Sainsbury’s but fear more lender casualties
Sainsbury’s today announced an immediate end to mortgage lending, following in the footsteps of Tesco Bank earlier this month and others earlier this year.
Prolific Mortgage Finance managing director Lea Karasavvas (pictured) was particularly disappointed to see the lender leave the market, praising the rates and service.
However, he was realistic about the current market conditions for smaller lenders
“It is exceptionally sad news about Sainsbury’s who really were trying hard to become a competitive lender,” he said.
“The deals we placed with them were quick to offer and competitively priced, but with margins being squeezed so heavily right now, and longer-term fixed money cheaper than I have ever seen in 20 years in this job, there is a definite feel that only the strong will survive these challenging times.
“With the big lenders pricing five-year money at under 1.6 per cent below 60 per cent loan to value (LTV), it’s virtually impossible for the smaller lenders to compete.
“Sadly, I’d expect more casualties before the year is out. Our thoughts go out to all at Sainsbury’s and I would like to thank everyone there for all their help they have given us. They will be missed,” he added.
Good for consumers
Matthew Hillyer, associate director at Largemortgageloans.com, echoed much of Karasavvas’ feelings and his predictions for future departures.
“While it is extremely sad, particularly for the staff concerned, we believe that with the increased competition we are seeing in the market and the inevitable accompanying squeeze on margins, the climate for lenders is increasingly tough,” he said.
“This is obviously good for consumers with extremely competitive rates, but we believe this will likely lead to further consolidation and potentially further exits.”
Re-think for lenders
The expectation of further withdrawals from the market was further reiterated by Coreco managing director Andrew Montlake.
He also noted that the competitive market could be a bridge too far for peripheral mortgage players and that things could get even tougher depending on if and how Brexit hit the market.
“The level of competition in the market is causing a major rethink among lenders for whom mortgages are a bolt-on rather than their core business,” he said.
“Just as with Tesco, for Sainsbury’s the margins are no longer there and its mortgage division was almost certainly struggling to wash its own face.
“Lower home purchase levels are rubbing salt in the wound of the exceptionally low rate environment.
“It’s pretty brutal out there right now and more departures are likely,” he added.
Women-only awards break down barriers of inequality – Karasavvas
No, not the record-breaking heat that has resulted in men all over the UK finding a way of making shorts look acceptable in the workplace, but the social media explosion surrounding the announcement of the finalists in the Women’s Recognition Awards.
Leading figureheads have been outspoken about their views on this provocative, taboo subject and the Twitter eruption that ensued has made this perhaps one of the most talked about subjects of my 20 years in this industry.
Whether we care to admit it or not, the mortgage industry has been hugely male-orientated, but the last decade has seen appointments in key roles, that have shown the industry is not a sexist environment, and such appointments have been based on merit, not gender.
We find ourselves in a sector that I believe is trying to tackle this head on, and this is something that has been long overdue.
Reward and promote hard work
The announcement of the finalists for the Women’s Recognition Awards has been met with mixed views.
I am of the belief that it shows the commitment of the industry to acclaim, reward and promote the hard work that has been done by the women of our sector and I congratulate everyone who has been shortlisted.
To be shortlisted for any award is a huge achievement, and I believe this will be the catalyst of great success to those that have been shortlisted.
However, it has sparked the debate that the very notion of Women’s Recognition Awards is a step back rather than forward, by creating a segregation of gender in the first place.
To an extent I can see the merits of this point, but for me we are trying too hard to find a problem, when we should be simply applauding and praising those that have been successfully nominated and shortlisted.
For those that know me, it is no secret that I enjoy an awards evening. At all events, I have seen the huge success that has been enjoyed by Maria Harris, Esther Dijkstra, Louisa Sedgwick, Amanda Fenner and Clare Jupp to name but a few.
Huge success at huge awards by hugely influential people in our industry.
I am sure that all would agree, success breeds success, and the nomination of all those shortlisted for the Women Recognition Awards, will act as a catalyst to excel in our industry and only make the candidates stronger.
The acclaim that comes with the nomination will drive the nominees to be the best they can be and I struggle to see how this can be a bad thing.
Break down barriers
Our industry is trying to break down the barriers of inequality, and for me these awards are doing just that.
It is easy for me to say as a man, I know, but ask any of those nominated and shortlisted for the WRAs and I am sure none would request to be removed from the shortlist.
These awards act as recognition of achievement and I hope they will be viewed as such.
I wish all of the women nominated the very best of luck.
All have contributed hugely to this industry and that is what we should be focusing on here – the contribution made by all to our industry that is trying its hardest to combat inequality, by raising awareness and for rewarding the positive contributions that these women have made.
Mortgage Solutions is a signatory to the Women in Finance Charter and organises the Women’s Executive Finance Forum.
Forget the baked beans. This rate rise is not the end of the world – Karasavvas
Social media nearly crashed with the historic news that the Bank of England had finally, after 10 years, increased the base rate, by 0.25% to 0.50%.
Yes folks, the rate has increased. I mean that’s it now right? Surely the world has ended. That must be it for us all. Thank the Lord, we bought seven years’ worth of baked beans. I always knew those cans of tuna would come in useful one day too.
I have my concerns the dents in my tomato soup will impact on the longevity of them, but I am hoping I have stock piled enough to see my family and I through this financial crisis that has now hit our country.
These dizzy heights that interest rates are now at is enough to scare the bejesus out of anyone. How has our economy become so bad that we are now faced with a base rate of 0.5%? Fixed money for five years now is getting dangerously close to 2%. Maybe the kids could get a job?
The absolute panic that has hit the economy is almost comical. For years we have been stress testing our clients, checking that the mortgage could not only be afforded at the pay rate but at standard variable rate too. Even in some instances at standard variable rate plus 2%. We are no longer lending eight times income, at 100% or asking our clients to self-certify their income.
Borrowers are in a good place and the reason for that is the sense and logic that returned to our industry after the crunch.
The panic from borrowers is born from the false economy many of them have been living in for the last 10 years. A base rate that was historically low, has led many new age borrowers to forget the times gone by when there were queues around the corner of their local bank to secure rates of 12.5%. Let’s get our head around this: 12.5%.
Now it’s breaking news that the Base Rate has risen 0.25%. It’s not a disaster really is it? Let’s take a look at the scenario. We are still blessed with ridiculously low rates. If you are panicking, then why not lock in for the long run? Ten-year fixes are out there. They are priced at a ridiculously high level though. Almost 2.5% with some banks.
Okay, I am almost choking on my sarcasm here, but I think you get the point.
Households have been living off ridiculously low rates for years and people have lost complete perspective over “rate normality” if there can be such a phrase.
The only real concern is that among such record rates, they are starting to show signs of accumulating large debt again, with credit card debt, personal loans and perhaps most worrying of all is the ease at which borrowers have secured hire-purchase finance for motor vehicles, which is what some suggest will ultimately lead to the economy’s next crash.
While borrowers will be cursing the rate rise, savers will be rewarded (eventually) when the increase is passed on. Many lenders moved quickly to increase borrowing rates, yet the increase for savers has been slightly slower.
I think the rate rise was a necessary evil. Consumer debt has been increasing heavily: over the last year, household income had only increased by around 1.5%, while car loans, credit cards and car finance had risen by 10%.
Inflation has eclipsed the magical 3% mark and this rate rise perhaps serves as a timely reminder that rates can go up as well as down. Something that seems to have been forgotten over the last 10 years.
So, while the calm after the storm sets in I think we can all continue to sleep, and rest assured that we are not going to see incremental increases month after month.
This rate rise does not symbolise the end of the world, and the breaking of our economy, merely a reminder that the cost of borrowing can actually go up.
The reason we are asked to look at budgets, to look at stress testing, and to evaluate affordability is because sometimes, rates can go up. It’s a strange concept I know, but it can happen.
Leave those cans of beans for now. We don’t need them just yet.
The two words mortgage brokers dread most of all ..’free legals’ – Lea Karasavvas
Personal hates of my own are things such as “reaching out”, an Americanism that has spread like wild fire and taken over LinkedIn. So many people are reaching out, I fear an episode of The Walking Dead will soon be upon us. People all walking around “reaching out” with their hands in front of them!
“I’m on point” is another one that riles many.
However, over the last six months, a phrase that breaks me every time I hear it and surpasses everything…
OH GOD NO! Please no, not free legals!! Don’t put me through that!!
The mere mention of free legals, and I know what is about to follow. Photos of how long your admin have been on hold for, the infamous “phone dump” where after half an hour of calling, someone answers and then cuts you off. Even worse, when calls are “suspended” and they are no longing taking them. Why dear Lord WHY?! Administrators’ blood is boiling at the thought. Case managers wake up in the middle of the night consumed by the emotion. Brokers are broken. I have never known anything break people more than the level of service given by some free legal firms. “What do you mean, you’ve not received the paperwork?!” Aaaaaarrrrgh!!!!!
The number of GIFs you can post characterising their emotion is endless. In fact, it could be time to develop a new GIF entitled “Free Legal Experience.” Many suitors for the GIF spring to mind and please feel free to share one yourself, but my personal favourite is Bruce Lee when he has just been cut off after 54 minutes being on hold.
It seems free legals are no longer becoming an incentive to chose a lender, more a rationale not to. We applaud those lenders that allow cashback alternatives, that allow clients to take matters into their own hands and use a firm that will actually answer the phone.
Hats off to the likes of Econ and SortRefer who have given back an element of control to the broker. They must be inundated with enquiries themselves right now. What we hope to see now, is more alternative cashback deals for the remortgage products. What was supposed to be an added incentive to generate business, has now resulted in the complete opposite.
I very rarely use an article to rant, but enough is enough. From every broker, every administrator and most important of all, every client that has experienced the atrocities of free legals, can we not do something to improve the service?
Let’s get this back to what it was supposed to be. An added nicety to a product to reward the client for their business – not an experience that could scar them for life.
There…I’ve said it. And breeeeeeathe.
Marketwatch: Is a mortgage lender at a disadvantage if it launches direct first?
Many specialist lenders have launched intermediary-only propositions in the last few years, but when new mainstream lenders like Tesco or AA launch direct first, does this disadvantage the brand in brokers’ eyes, particularly if they need them later?
Find this week’s Marketwatch panel’s thoughts below.
John Phillips, group operations director at Just Mortgages and Spicerhaart
Launching a direct lending service and then opening it up to the broker community doesn’t affect my opinion of a lender at all.
In reality, the broker community is continuing to grow and evolve and, as a result, an increasing amount of lenders are left with no choice but to work with brokers. In fact, mortgage brokers ended 2015 with a market share approaching the 70% mark. This is set to keep growing as an increasing amount of consumers seek professional and impartial advice in uncertain times.
This is also supported by recent figures from the FCA which revealed that mortgage broker revenue soared by 53% between 2013 and 2016, while direct sales plummeted.
However, it comes as no surprise that mortgage volumes in the broker channel have grown. Mortgage advice from a reputable broker is an invaluable service, now more than ever as the economy continues to face headwinds with Brexit negotiations and ongoing economic and political uncertainty.
Consumers will understandably want to shop around to find the best deal. However, by searching the whole of the market in terms of lenders and products, brokers find the borrower the most suitable mortgage based on their needs and circumstances.
It is clear that the lender broker relationship is also key. In fact, earlier this month the director general of the CML said that the relationship should be examined as part of the FCA’s study on competition in the mortgage market.
This relationship is clearly a primary focus for the trade body so it will certainly be interesting to see what emerges as a result of the review.
Lea Karasavvas, managing director, Prolific Mortgage Finance
The fact a lender opts for the support of the intermediary market for me is something that does nothing but enhance the opinion I would have for a lender.
Whilst some may seek solace and comfort in approaching the direct channel alone, my personal belief is that if a lender requests the assistance of a brokerage, this is a result of the fact they have a great USP or a great rate.
I would simply applaud the fact the lender would seek the assistance of broker rather than berate them for doing so.
In terms of thinking less of them for not originally approaching the intermediary channel, I understand the logistics and margins that would result in such a decision, but if the call for assistance from the intermediary channel came along I would not think any less of the lender for doing so. In fact the acknowledgement that our assistance was required would for me be complimentary than anything else.
The release of a controlled, direct product working its way to release through the intermediary channel is more a coup for us as the intermediary than anything else and I would always welcome the option to support any lender should they decide that the intermediary channel is the right move for them, irrespective to whether it was there at the outset or not.
David Hollingworth, associate director, London and Country Mortgages
I think we have seen enough lenders take that approach initially, looking to ensure they’ve got things working as they want, before opening up to brokers that it isn’t really a concern anymore.
The market we are in now, lenders are fully accepting of the fact that broker distribution is crucial to growth.
HSBC is a great example of how important intermediary distribution has become. It was a lender that consistently and vocally declined to use intermediaries but came to realise what we could offer. If you look at more recent launches, Tesco was always clear that it wasn’t ruling out broker distribution from the off.
It’s a brand that has been very clear that it wants to get things right and won’t accelerate that launch at the risk of affecting quality.
Brokers are probably more accepting now when a lender might initially want to start testing its product in the direct market. At one stage, when dual pricing was prevalent, then it was an issue. But that’s not so much the case anymore – there are very few lenders that are not active at all in the intermediary market.
Ultimately, as much as a broker may have preferred to have the products available immediately, the bottom line is that if they are right for the customer you cannot go on bearing a grudge. You cannot deny the customer the right product because of a lender’s launch strategy.