Mortgage advice could be a lifeline
by Mark Graves
Agents have tended to shun their mortgage broker colleagues as poor cousins of the industry, but now their input is crucial to many agents’ survival.
You don’t need me to tell you what is happening to the housing market, nor do you need statistics to tell you how tough it is.
However, what you might not know is how much the mortgage market can not only help estate agents survive, but ease the pain of the current market downturn.
In short, mortgages can quite literally become the lifeline that means agent’s businesses survive.
There is still pent up demand from people wanting to buy houses at an affordable price; the simple fact is there is not enough money in the market to satisfy demand, especially for the people who used to self-certify their income to get a mortgage, or for those with an impaired credit history. So how have we got into this mess?
Before August 2007 the mortgage market enjoyed an incredible few years. Mortgage advisers had become processors – they simply awaited referrals from agents, then pressed a button to access the ‘best’ deal in their sourcing system. In terms of product choice, it was like winning the lottery every day – highly competitive product launches were a daily occurrence. Lenders were more concerned with increasing their volumes, to win market share, than the fact that they were launching loss-making products.
Lenders were also in competition to offer the highest lending multiples, which peaked at seven times income at one point. The credit crunch has proved that such lending practices are unsustainable. A lack of wholesale funds – ie. cheap money – means that competitive loans become less commercially viable, leading to lenders increasing rates to control business volumes at much lower rates than they previously craved. Lenders attempts to recover their losses, such as with rate hikes, have been, unsurprisingly, badly received by borrowers who have quite simply voted with their feet and delayed any plans to move home. Consumer confidence Everyone in the housing market now has to restore consumer confidence and we all need to revive and nurture potential house buyers’ interest in viewings.
Most importantly, we need to ensure that they have the funds ready when they are ready to make a deal, thus they need to be encouraged to talk to a mortgage adviser. These are unprecedented times and it is a very brave person who believes over the next 18 months they can run a successful business on fee income from sales alone. The problem agents now face is that lenders may be about to change their distribution model, as part of their efforts to control their business volumes. Lenders could well decide to restrict their supply of mortgages to a small number of firms to which they will give lending quotas. In other words, lenders will assign pre-selected firms a tranche of mortgage funds to offer their clients. So, how can agents ensure they have access to these tranches, which could not only ensure they earn commission from the mortgage sale, but also that their clients opt to do business with them, rather than their competitor up the road?
Larger independent estate agents will have already entered into discussions with lenders and will be pro-actively working with them to ensure that if quotas are introduced they will be at the front of the queue. Larger networks not only have their own mortgage field force, but they have built personal relationships with key lenders. It means that their clients will have funds - quite a powerful tool when gaining instructions A good starting point for agents, is to decide whether they want to offer mortgages to their clients and if yes, how they will go about doing so. Secondly, they must decide how they will initiate relationships with lenders. Agents out on a limb will be the independents who have no in-house mortgage adviser.
Many estate agents have been reluctant to embrace financial services in the past and there may well be a good reason why they have ditched a proposition. But the market now is a very different place than any of us has experienced before, and is one, which is forcing all businesses to identify new income streams to help plug the shortfall being created by the current downturn. Thus, a mortgage proposition should offer agents a welcome addition to their income streams, as well as help offer clients a value-added service to rival their competitors’. Having a quality mortgage advisor supporting agents’ clients through the sales process is like gold dust.
A reassuring word at just the right time is sometimes all it takes from a mortgage advisor for a deal to stay on track. It is, of course, important that agents’ staff are kept up-to-date with the latest mortgage industry news, and that they receive relevant training to make referrals and avoid offering advice themselves.
A few well-directed finance-related questions at the client registration stage could save a lot of heartache for both clients and agents further down the line.