The announcement was widely reported in the national press which would surely jolt the general public from its SVR apathy, but is this the case? Moneyfacts released data this week flagging the fact average fixed rates have overtaken variable rates in recent months but the industry is warning that even record low fixed rates will not last much longer.
This week we ask our panel of brokers what remortgage strategies they have adopted in light of Carney’s warning and whether consumers have been jolted into action.
Dominik Lipnicki, director, Your Mortgage Decisions, says many borrowers have never experienced a rate rise so are ignorant of the potential strain it may exert on their household finances
Andre Botes, mortgage and protection consultant, ProtectMe talks about his firm’s strategy of ring-fencing clients who are locked into variable rates or mortgage prisoners and keeping in regular contact with them
Payam Azadi, director, Niche Advice Limited, discusses the leap forward in technology since pre-crisis days which makes keeping tabs on remortgages easier for today’s brokers
Dominik Lipnicki is director of Your Mortgage Decisions
Some would have expected that Mark Carney’s recent comments regarding an imminent rate rise would send clients actively seeking long-term fixed deals, this, however, is not necessarily what we have been finding.
Clients have been spoiled by both the historically low base rate as well as the much publicised lender rate war, which has resulted in jaw dropping mortgage deals being offered in recent times.
It has now been over six years since the last BoE rate move and a whopping eight years since the last increase, meaning that many clients have never experienced a Bank of England rate rise. Unsurprisingly most do not really fear it and very few expect it to rise by much when it does.
Whilst we have enjoyed a solid recovery in the UK, this is still fairly fragile and far from evenly spread. For many households, even a 1% rate rise, can be the difference between being comfortable or really struggling.
Most of our clients are opting for five-year fixed rate deals with some even seeing value in ten-year schemes. All of this of course depends on the borrower’s personal circumstances and views on what Mark Carney and Co will do next. Our job is to ensure that whatever the clients decide, it is a fully informed decision, rather than just the cheapest initial payment drive which for some may prove costly.
Andre Botes, mortgage and protection consultant, ProtectMe
Recent commentary from Mark Carney, the Governor of the Bank of England, suggests we may see a degree of interest rate rises this calendar year. With that in mind, how should mortgage advisers plan for this eventuality? ProtectMe has adopted a strategy to ensure that all of our clients are treated fairly and that we are in a strong position for every eventuality. You might say every mortgage broker gives the same answers and the advice is based on the client’s needs and so on and so on. The difference is that we are trying to focus on a couple of key areas.
We have a book of clients that might be tied to variable rates or even mortgage prisoners after Mortgage Market Review (MMR). What we are trying to do is to make sure that all our clients’ needs are assessed as they might have protection and other important plans in place. We all know that these are the first to be cancelled when a client’s financial situation changes. With this in mind, we aim to do a full review on their situation and make sure that there are no surprises not just for the client, but also for ProtectMe. In communicating with our clients and having grown up conversations, we are able to plan ahead, keep our clients warm and in some cases even drum up new business.
Preventing clawback and ring fencing your clients is vital from a business owner’s perspective. Yes, mortgage brokers will see an influx of clients wanting to fix their mortgages and new clients wanting advice and guidance. Importantly, we also have to look at our existing book and make sure that we help our clients even if we are not able to actually remortgage them. By engaging our clients and treating them fairly, we solidify relationships and lay the foundations for a strong and robust business that is set up for the long haul.
Payam Azadi, director, Niche Advice Limited
Historically, mortgage brokers were guilty of letting remortgage renewal dates slip by because the new business supply through the door was so good, remortgaging was not their primary concern, but the recession caused them to quickly wise up.
Most of the brokers I speak to now have a Customer Relation Management system (CRM) underpinning their business or are regimented users of Outlook. The systems automatically generate ‘pop up’ reminders prompting a call to action. It is arguable as to when you should first communicate with a client to tell them they are due to hit a standard variable rate but I tend to make first contact with a passive email about three months before cessation. It typically takes no more than a month to arrange a remortgage with a new lender so the follow-up calls will have this deadline in mind.
With the helpful hints dropped by both the Chancellor and governor of the Bank of England about rate rises I should imagine in the months to come the client responses will be more positive than in recent years as they will look to lock into the historically low fixes to secure their future.
Brokers should also consider the offers open to them from their existing lenders before finalising their choice.
