Advising through uncertainty

Originally published 24/10/2020

The operating environment for lenders, brokers, buyers and homemovers has changed considerably in recent years. We’ve seen interest rates soar to a 15-year high, mortgage rates go up, slowing house price growth, and inflation stubbornly remaining well above the Bank of England’s target of two per cent.

At the same time, we’ve seen sluggish economic growth, with the UK actually slipping into a technical recession in the second half of 2023.

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.

For example, financial information service Moneyfacts has warned that many lenders are offering some mortgage deals for just 15 days before pulling them, which means clients have very little time to think about which one they want to apply for.

You need to be able to help clients navigate this volatile marketplace, explain the situation 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

Buyers and lenders alike are adjusting to a climate of higher interest rates and falling house prices.

In addition, the Office for Budget Responsibility is predicting that average mortgage rates will rise steadily over the next three years and peak at 4.2 per cent in 2027.

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 your clients the right questions 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, at least for now, and that the market is adjusting to the situation.

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: Growth Series Live On-Demand: The Economy and Mortgage Market