Advising through uncertainty

Originally Published 24 September 2020

The operating environment for lenders, brokers, buyers and homemovers has changed considerably over the past year or so. We’ve seen a surge in interest rates, mortgage rates have gone up, and soaring inflation has put pressure on many people’s finances.

And while the likes of the British Chambers of Commerce and the Office for Budget Responsibility are confident the UK will avoid slipping into recession this year, growth looks set to be sluggish over the coming months.

So how can mortgage brokers continue offering great advice and add value to clients during this difficult time?

Here are a few recommendations.  

Be realistic with your clients

Delivering great mortgage advice means being upfront with your customers, especially if something is making it less likely for them to be accepted for the mortgage they want.

Although estimates from E&Y show UK mortgage lending will grow in 2023, it will be the slowest rate of growth (0.4 per cent) in more than a decade. So while we’ve seen lots of talk of mortgage rates and swap rates starting to fall, many lenders are still apparently more reluctant to lend than they once were.

You need to be able to deliver hard news to your clients clearly and concisely, and be ready to suggest options to overcome obstacles. For example, could it be a good idea for your client to remortgage if their current deal has finished and they’ve been moved onto a more expensive standard variable rate? Should you recommend a product transfer with their current lender or another company?

Or if your client is self-employed and cannot prove their regular income, or relies heavily on bonuses and overtime, can you help them put together a mortgage application that ticks lenders’ boxes?

Getting the facts out there on the table and sharing your knowledge and insights will ultimately improve your customers’ chances of making the right choices during the borrowing process.

Learn more: Best Practices for a Successful Broker

Keep up to date with the rapidly changing situation

We are in the midst of a rapidly shifting mortgage industry, with rising interest rates, house price growth slowing and the number of mortgage approvals remaining relatively low following last year’s disastrous Mini Budget.

As the sands shift around us, it’s important that you and your employees are up to date on the latest changes to available mortgages and what these mean for your customers looking for a home loan or whose mortgage is coming up for renewal.

Learn more: Keeping in Contact in Today’s Climate

Ask the right questions from your clients and don’t be led by them

In times of uncertainty, your detailed knowledge of the mortgage market has never been more valuable.

The mortgage market remains extremely turbulent, so you, the adviser, are better positioned than your customer to navigate these rough waters. Each week seems to bring about a new ‘normal’ for mortgage brokers, as product changes and external factors complicate an already incredibly complex set of circumstances. 

Unless your client is an undercover mortgage whizz, you will understand better than them the impact of the more conservative and hard-line approach lenders are taking on their application. 

This means you need to delicately ask difficult questions so you can get an accurate picture of your customers’ situations from a mortgage lending perspective. Explain to them that when you have this information, you can use it to build as strong a case as possible to remove any areas of concern the lender might have around their application.

Learn more: What every great broker does every day

Perhaps the only certainty at the moment is that the days of low interest rates are over, and the market is going through something of an adjustment following shocks such as the cost of living crisis and September’s Mini Budget.

Many borrowers won’t have experience of navigating this environment, and even if this is new to you on a professional level, you have the training and expertise to help point your clients in the right direction.

Learn more: Podcast #79 - Economists' outlook for mortgage brokers: Part 2