why you should REALLY support brokers

Ian_Griffiths_Halifax

When I came into the business in 1989 there were no sourcing systems and all you got was a photocopy of a list of mortgages from the trade publication that went on to form one of the sourcing systems, either Mortgage Brain or Mortgage 2000 I think, can't remember which.

Difficult mortgages were usually placed with a lender who's branch manager trusted YOU as the broker or was wanting to hit his lending targets but that was all taken away when lenders started centralizing their mortgage admin and then went on to on-line apps.

I've seen the market when the base rate hit 15.5% (only for 2 days) and people had the radio on all day listening to rates change by the hour, but people didn't have the same level of other debt, credit cards, personal loans, car loans, secured loans, home improvements etc etc as they do now.

Remortgaging wasn't heard of back then! I can remember being one of the first to encourage people to move lenders in return for a better deal and you wouldn't believe the response you would get to the suggestion back then compared to now. The number of people who said "I've been with my lender for 5/10/15 years and they've always been good to me" when all they had was the SVR, was massive and people thought it was disloyal to move!

Anyway, in the time I've been in business I've seen 2 occasions when property values dropped significantly, but they always recover, it's just a matter of time and demand.

People will always need to move house and/or borrow money, and the lenders will always need to lend money. They are just being cautious at present and their is estimated to be only something like £60 bn of funds going to be available for lending over the next 12 months compared to something like £100 bn last year. It stands to reason that the banks will want to make as much money from £60 bn of lending as they did from £100 bn and so they charge a higher rate and/or charge bigger arrangement fees. They've coupled that policy with cherry picking who they lend to and so the lower LTV borrowers are getting a considerably better deal to the high LTV borrowers, whereas there wasn't a massive difference between 75% deals and 90% or even 95% deals until this last 6 months.

I'd say that the current market isn't going through a cycle, as druss pointed out, as previous rises in interest rates and drops in house values have been down to the economy and vote grabbing tactics of the governments in charge of rates at the time, whereas the problem we have now is IMO the economy is being effected by the lenders putting interest rates up and putting the brakes full on on their lending rather than gradually implimenting tighter borrowing restrictions.

A lot of lenders have shut up shop, some have gone into hibernation and some are still lending because they have the funds to do so, but at some point you'll probably find a foreign lender will want to enter the UK market and will have plenty of money to lend and will hit the market with better rates than the norm and this will create the competition again.

Dan_Collins_2

LOL Ian

Another one who cant sleep!

I have heard some scary stories from a more mature broker shall I say! A high street lender would accept anydeal that had £50 cash in for the manager!!

Regulation is a good thing, the fight to justify jobs and salaries that is chocking this and many other industries drives me mad!

Ian_Griffiths_Halifax

Dan_Collins wrote: »

LOL Ian

Another one who cant sleep!

:rotfl:

I never get to bed before 2am. I feel sorry for the good brokers out there who are suffering just now, but don't feel the slightest bit sorry for the poor ones and the ones who blatantly rip people off.

I'm busy day, night and weekends because I have a very big client bank (in small broker terms) and I get lots of referrals too.

My advice to anybody who is struggling but feels that they are a good broker (those who don't think they are good for the client know who they are) would be to put your self in front of people. That doesn't just have to be clients, that's obvious, but speak to accountants about saving their clients money, join the local Business/Networking Clubs and explain your services in a quick 5 minute presentation then arrange meetings with the individuals, these would then support you by either giving their own business or referring you to people they come across. Speak to IFAs who don't do mortgages, they have clients and if you don't do pensions and investments you may be able to pass referrals back.

There are plenty of ways of getting business but most people take the easy option of waiting for the phone to ring.

I don't have a shop front and I switched my web site off 3 years ago because I wouldn't be able to look after the new enquiries.

I hope this doesn't come across as a boast in any way, but just to say that there are clients out there who need your service, but you need to go and find them, don't expect them to find you.

ixwood

druss wrote: »

..
We have much lower interest rates than we had then and much lower unemployment, we also still have a growing population and are not building enough appropriate housing.
..

For now. Looks like a recession is round the corner to me.

Not enough housing is nonsense. There's clearly no shortage with the gazillions of new builds that have been thrown up everywhere. There may have been a shortage of property available to buy cheap.

If there's a shortage, where does everyone live? Why haven't rents kept up with house prices? Why is there 600k empty properties in the UK?

Speculation and lax lending caused the boom, not residential supply and demand.

Ian_Griffiths_Halifax

ixwood wrote: »

Speculation and lax lending caused the boom, not residential supply and demand.

The "get rich renovating property" programmes can take some of the blame for many of the amateur landlords who are having problems, and lenders wanting to lend more and more money at stupid rates then switching off the tap at lightening speed can take most of the blame for residential customers.

druss

ixwood wrote: »

For now. Looks like a recession is round the corner to me.

Not enough housing is nonsense. There's clearly no shortage with the gazillions of new builds that have been thrown up everywhere. There may have been a shortage of property available to buy cheap.

If there's a shortage, where does everyone live? Why haven't rents kept up with house prices? Why is there 600k empty properties in the UK?

Speculation and lax lending caused the boom, not residential supply and demand.

As you say there may be a recession looming, if the credit crunch continues for a long time, this will in itself slow the economy down and impact on all uk sectors, housing, business, jobs.

But the need for new homes has been rising at almost 230,000 per year, and we were not building anywhere near this. As pointed out earlier it's the type of new home that is being built that causes problems. We have swanky 1/2 bed apartments being built in blocks to help with the governments targets of new homes, built by gready developers these 'affordable' homes are often being sold for more money than a house in a similar area would.

Many of these properties lie empty, what we really needed was more houses not more appartments, and they should not have a 20% premium stuck on the price because they are new.

As to your comments about where everyone lives, they are making do, living with families or cramming themselves and their kids into accomodation that is too small for them

As to buy to let, I still have several clients who are buying, in fact they want to buy more as they will take advantage of dropping prices and that people are unwilling/unable to buy or rent a home solely for themselves.

The properties they are buying are typically victorian houses in a good area/location that they rent by the room, demand is high. They can advertise a property with 5 rooms and have over 60 phone calls for people wanting to live there.

The targeted market are white collar workers typically uni graduates, divorcees, NHS foreign doctors(who send money home) who are all looking to get good accomodation without the expense.


The profit is much more than on a normal buy to let, risk is lower (chances of all tennants leaving at same time is very slim)

dunstonh

I think we need to clarify that the events that have caused the current issues are not a cycle but house price growth and drops tend to follow a cycle (albeit one that varies in length and impact). When something like this happens people suffer and the degree they suffer varies.

Contrary to popular belief, people have not borrowed more on mortgages than they did in the last crash. Mortgages in relation to income peaked at virtually the same points as it did in the late 80s and early 90s.

Perhaps a couple of the biggest differences are that interest rates and inflation are still historically low and that banks themselves borrowed significantly more money to lend to consumers rather than using savers deposits. A profitable strategy in good times but higher risk. Also, consumers, whilst not necessarily borrowing more in relation to mortgages against their income, have borrowed far more by other means. Store cards, buy now pay later, personal loans, car credit, credit cards, overdrafts etc. So, overall consumer debt has sky rocketed.

Another issue is that we had 10 good years and people got used to it and thought it was the norm. They forgot bad things can happen and whilst things are not bad compared to other events that have occurred historically they are bad by recent standards. As I mentioned, interest rates and inflation are not high by historical standards yet you have people panicking over affordability and rising prices because a good chunk of the current generation have never experienced a bad period and the media tells them to panic basically.

I've said it before, this is a Darwin event. It will cull the unprofitable and many will not survive. Some of whom will be very good individuals who dont deserve it but fall foul of bad timing and bad luck. It will hit those that are mortgage only more than those that have diversified business models.

Last time round, those that relied on indemnity commission on life assurance suffered a lot as insurances are often the things that get cancelled early on when things are bad. I know a few advisers that lost their homes due to clawbacks escalating out of control. If the lenders bring back equal terms then at least this time round re mortgaging will still be possible (which wasnt very common last time round and was only new at the time).

I would suggest mortgage advisers look to get investment qualifications. The number of IFAs is going to drop in the coming years with the increased qualification standards and with the average age of an IFA at 53, then many of them are not going to take the extra exams. Ive been approached already by a few IFAs who intend to cease at the last possible moment (expectation is FSA will give a 3-5 year transition). Plus with tied agents no longer being able to give financial advice, the market is going to open up more.

payless

Think previously less advisers were truely "self employed" as they are now ( whether be DA or AR) ... whilst many advisers were called S/E they were part of sales teams or were actually employed - so the individuals did not always get hit by clawbacks.

So yes those doing lower end business on indemnity might have problems brewing.

MortgageMamma

Being in this line of work is too much liability, too much hassle & too little money!

Dan_Collins_2

Ian I am glad to see your busy. We have a good client bank, but I only been going 3 years and have given away to much business this yeah to direct deals.

If Ihad known it was going to last this long I think I would have been less honest, but then again I know I can sleep at night.

Good luck