Despite the pessimism of some in the industry, there’s plenty to be positive about, writes Buster Tolfree, commercial director – mortgages, United Trust Bank
Which word best describes broker sentiment right now? Optimistic? Cautious? Confused? Excited? Concerned?
At United Trust Bank (UTB) we spend a lot of time talking to brokers to try to get a deeper understanding of the challenges they face and the opportunities and threats they perceive for the future. Even when we’re not talking face to face they’re never more than a month or so away from a UTB broker poll, another source of insight and a pretty reliable barometer of the mood of the broker market. It was almost spot on in predicting the outcome of the Brexit referendum and the split of Leave to Remain votes, so when a new poll seems to indicate that confidence in the post Brexit future has slipped somewhat in the last 18 months, it’s something to take note of.
There are a few factors which may be causing some brokers to have a dimmer outlook than previously. The government has had a difficult time of late and with Brexit little over a year away, we would all benefit from some of the ‘strong and stable’ leadership Theresa May talked about in her disastrous election campaign. In addition, various house price indices have for some months now been pointing to a slowdown of property price inflation. However, the latest stats from the Land Registry show that despite the London market cooling and prices in the capital falling slightly in the last three or four months, they are still 2.4% higher than this time last year and average annual house price growth across the UK is a healthy 5.1%.
Looking at the wider economic challenges which may lie ahead, we asked brokers if they were concerned that the Office for Budget Responsibility had downgraded UK economic growth forecasts for the next three years. Although 45% said they were worried about the more pessimistic outlook, 55% dismissed the forecasts. We’ve seen doom and gloom forecasts several times in the last decade and we know they’re not always the most accurate form of fortune telling. We also know there are businesses which despite adversity and challenges can, and do, buck the trend. I would count UTB amongst those businesses together with many of the successful brokerages we frequently deal with. I have a very positive view of what’s to come over the next few years, but I do believe that brokers should choose their lenders carefully and it seems that most brokers agree. According to another of our poll questions, 60% of brokers are now considering the reliability and stability of lenders when placing new business. It makes sense to work with dependable lenders which will deliver the funds they’ve promised on time. We know from past experience that when the market gets tough some lenders may try to change their credit decisions whilst others have difficulty delivering a prompt service or releasing funds. For most brokers it’s ‘once bitten twice shy’ if they’re let down in this way.
After all, it’s the broker who has to explain the situation to their client and potentially put that relationship in jeopardy.
But let’s not dwell on the dark side. There’s plenty to be positive about. According to the most recent FLA figures, the second charge mortgage market continues to grow, with new business volumes in November 2017 11% higher than in November 2016. Interest rates are still very affordable, inflation is manageable and the rate of unemployment in the three months to October last year was at a 42 year low of 4.3%. What’s more, The Last Jedi wasn’t half as bad as everyone said it was.
Many lenders and brokers, including UTB, have invested in developing some really good technology to improve broker and customer experiences. At UTB we’ve also developed the vital ‘people’ side of the journey by expanding and restructuring our underwriting and administration teams to align with the personal service offered by our regional BDMs. Although this was only implemented in the back end of 2017 it’s a move which is already paying dividends and brokers can look forward to more innovation from us in both products and service delivery.
It’s going to take a while for advisers and borrowers to fully embrace the idea that a remortgage isn’t the only option when a customer wants to release capital from their property. Remortgages have been the only game in town for a long time and negative perceptions of the second charge industry aren’t going to disappear overnight. There’s a great deal of potential for growth in our sector and a bright future ahead of us but lenders and brokers have an important role to play in promoting ourselves as the professional and customer centric industry we all want to be part of.