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Market Watch: Product innovation

by: David Hollingworth, Mike Fitzgerald, Ben Thompson
  • 19/07/2010
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Precise Mortgages recently launched buy-to-let exclusive products with Legal & General, Mortgage Intelligence and Mortgage Next. What difference do exclusive products make to the average broker now? With the funding crisis, does every innovative exclusive product help?

Name: David Hollingworth
Company: L&C

The recent launch of intermediary lenders Precise Mortgages and Aldermore is extremely welcome. What brokers really want is as many products at their disposal as possible to serve the needs of their clients in what remains a difficult and restricted market.

These new lenders recognise the importance of the intermediary sector and the efficiencies which it provides in distributing their product. Of course, most lenders have a branch network to think about as well, and dual pricing has not gone away.

Brokers would love a suite of great-value products that cannot be accessed by clients elsewhere. An exclusive deal means that not only is the broker adding value through the advice that they provide, but also in the range of product options on offer.

Despite market conditions, the broker exclusive is not a thing of the past, and I expect it to play a part in many lenders’ strategies. Broker channels that provide controlled distribution offer significant benefits to lenders in a market where managing lending volume is absolutely key.

We have had some very successful dealings with exclusive deals where access to even a small tranche of an exclusive product has been of real benefit to customers, the lender and us as a brokerage.

Exclusive deals are to be welcomed with open arms and anything that provides a broker with something different has to be good for the intermediary sector. However, while I expect that we will continue to see exclusive deals, they may well be carefully targeted at those brokers that can give control as well as the right volume.

Name: Mike Fitzgerald
Company: Emba Group

Mortgage brokers have been struggling for the past few years with dual pricing, and many felt that there was a conspiracy by lenders to edge advisers out of the mortgage market.

It was true that some lenders did seem to be working against brokers, who for many years had supplied them with over 70% of their business. However, it now seems that lenders are very slowly beginning to realise that we all need each other, and that is why we are seeing exclusive mortgage deals for brokers.

Having access to exclusive deals can be a great help to brokers, as the funding crisis has reduced the schemes available. At one time last year, it seemed as though the mortgage broker was going to be a thing of the past.

Now, we are starting to see one or two exclusive deals coming from lenders and this does help to add value to the broker model. There are currently several exclusive deals from major lenders and clients do seem to be impressed with this. In fact, we always show clients a list of lenders that we deal with and they very quickly realise that by coming to a broker, they have a wide range of lenders and schemes to choose from.

However, not all brokers will be able to offer exclusive deals as lenders may only offer these to large networks or brokers who can place a substantial amount of business. It is imperative that brokers seek out the widest range of lenders and they may have to join a mortgage club or good network to be able to offer the widest choice.

Name: Ben Thompson
Company: Legal & General

Legal & General’s Adviser Confidence Index in Q2 indicates that the number of mortgage advisers who think that business will be better over the next three months than in the previous quarter has dropped.

Mortgage brokers are becoming more pessimistic about business prospects over the coming months. Clearly, lenders will need to compete more aggressively if the pool of mortgage customers starts to dry up. To be effective in such challenging market conditions often requires tightly targeted eye catching offers.

This is where exclusive mortgage products come into their own. Lenders can use them strategically to offer brokers access to more innovative and attractive mortgage deals. This can be through restricted distribution if required. For example, a lender might make a product available only to Legal & General’s Mortgage Club and then limit it even further by making it available to appointed representatives only.

A lender might want to do this because funding is particularly limited or because it is piloting different criteria. Tranche management of exclusives can also help in terms of controlling volume as well as service or processing.

This means that brokers gain access to additional (and often more competitive) products for their customers that they otherwise may not be able to offer.

Clearly, choosing the right mortgage club or network to ensure access to the best exclusives available is perhaps one of the most important decisions a broker needs to make in the current environment.

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