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Basic instincts

Selling mortgages through the internet is being viewed in some quarters as a growing threat to the mortgage intermediary&#39s business.

The adviser-introduced mortgage sector has proved very resilient to such threats in the past but market share could be vulnerable. Advisers can make their position stron-ger by being sure they are supplying what their potential customers need most.

Our research shows applicants are still in need of help with the most basic mortgage issues.

In the late 1980s and early 1990s, the demise of the intermediary mortgage sector was widely predicted. Then, the enemy at the gate was telebanking. The reasoning was that, with a phone and call centre at their disposal, the general public would prefer to do their own research and then make financial choices without the benefit of an adviser.

Now the internet is being viewed by some financial institutions as a similar panacea to wipe out the middleman and provide the easy route to even greater profits.

New distribution methods traditionally gain some ground at the expense of other fringe selling routes but so far the intermediary sector has held firm, with 45-50 per cent of the total value of UK mortgage loans still being sold through financial advisers. But those of us committed to intermediary mortgage lending cannot aff-ord to be complacent.

The key to retaining customers is understanding what drives them to consult an adviser. The most obvious reason why people look for external help with their mortgage solutions is that they sit outside the rigid criteria box offered by high-street lenders.

For this pool of potential borrowers, the mortgage adviser&#39s ability to search the whole market for a product that suits the individual&#39s circumstances and offers a competitive deal is an ideal solution. Peace of mind is important for people caught in a situation where they feel inadequately equipped to make a good decision because they do not have enough information about what is available to meet their particular needs.

Information is what mortgage advisers have in plentiful supply. They can bring into play their experience and market knowledge to help steer the borrower to the right mortgage as well as taking away the workload, which can, from the outside, appear daunting.

Nearly all mortgage applications experience delays, problems or hiccups. The adviser adopts the combined roles of investigator, counsellor, helper and solution pro-vider and this is what attracts the many thousands of borrowers though their doors. This is also, crucially, how advisers should be selling themselves to the public if they are not already doing so.

There are over 150,000 divorces every year and 29,500 insolvencies (bankruptcies and IVAs) as well as 3.1 million self-employed people.

The average outstanding consumer debt for every household in the UK is £4,000 and few people realise that missing some regular repayments can result in a credit agency profile that will exclude them from a mainstream mortgage, so it is likely that the pool of people who continue to seek help from mortgage advisers shows no sign of diminishing.

The UK economy and, certainly, the mortgage industry cannot afford to ignore mortgage applicants who are unsuitable for a mainstream mortgage and witnessing the attempts of many big-name len-ders to capture a slice of the non-standard market by various means supports my view. Responsible lenders together with knowledgeable advisers can help such people and keep the housing and mortgage industry wheels turning.

Government departments and quangos appear to be falling over each other to “protect” mortgage borrowers. The Consumers&#39 Association and the Citizens Advice Bureau are concerned about redemption lock-ins and interest rates, the Department of Trade and Industry wants to see lots of competition while the FSA and the Treasury are busy issuing guidelines and regulating len-ders and brokers and have introduced a Cat standard that lenders are reluctant to use and consumers do not want. In addition, the Department of the Environment tried to drive through a seller&#39s pack which many doubt will be workable.

The public&#39s lacklustre res-ponse would indicate that these initiatives are not really add-ressing basic needs.

We conduct regular surveys of packagers to keep a finger on the pulse of what the target public are feeling and what they want. Our most recent survey shows that the vast majority of applicants do not understand the most basic of mortgage issues.

For example, only 1 per cent of packagers questioned believe that their customers fully understood the introductory fees paid by the lender to the adviser, only 1 per cent thought their customers fully understood the concept of interest rates quoted at a percentage above Libor and only 9 per cent believed their customers fully understood redemption lock-ins.

This not only demonstrates just how much hard work mortgage introducers have to do to earn their introduction fee but it also explains why so many people want to discuss their mortgage with a human being who can explain all these mystifying conditions in a way they can easily understand.

So, the solution to retaining market share would appear to be straightforward. Advisers just need to keep in mind the simple fact that 50 per cent of people needing a mortgage will probably be seeking advice about simple principles which the mortgage industry can sometimes take for granted.

One key element in retaining market share will be marketing the mortgage adviser&#39s major assets, which is their ability to give customers peace of mind, a wide market knowledge and simple explanation of the basic issues.

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