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Brokers must survive the 18-month time capsule

There must be readers who, like me, are transfixed and humbled by the Chilean mining story. It provokes countless emotions and the one which is consuming me most is the sheer concept of marking time.

Our industry’s travails pale by comparison but a realisation that there are no quick fixes has now surely dawned on everyone and the recent raft of economic data suggests it could be 18 months before anything resembling an active marketplace returns and that is contingent on some kind of rollover occurring with the special liquidity scheme.

This is not meant to sound defeatist, it is simply where we are. Those still practising should congratulate themselves for having got through the worst of it because we are nearer the end of the cycle than the beginning. I am counting down the months to spring 2012 and to a point at which I believe over £15bn of total monthly advances will comfortably support those intermediaries who have survived.
How do we get from the existing £11bn per month to £15bn within 18 months?

Well, there are three key events which need to occur between now and then. First there is the SLS. This has the makings of a game of blink between the Government and the lenders but I think that behind the scenes the authorities must know that some kind of continuation is unavoidable and sensible.

If public sector job losses this winter do total 500,000, then there have to be rebalancing initiatives elsewhere in the recovery plan, especially as both the ECB and the US government are maintaining support for their own zonal recoveries.

Whether it is autumn next year or spring 2012, I sense that as soon as we get that first base rate rise, then the comatose remortgage market will get a genuine shot of adrenaline because even borrowers on low SVRs will begin to take fright about a rising curve. If anything, consumers’ experiences of the last three years has inbred a greater sense of risk management.

Thirdly, I do not see some of the more ominous portents that surround the mortgage market review becoming statute. Fast-track, for instance, in a re-labelled form may well survive what is at present an ill-informed and shallow consultation process.

Another area where I am predicting that lenders could win the day is the interest-only saga. On some toxic combinations, it may become obsolete, but in the vast majority of cases, interest-only is not inappropriate.

A wise man once said that the longest distance between points A and B is time. By their very nature, brokers can be straitjacketed by extremely short-term phenomena – products change daily, property deals occur weekly and their own bills need paying monthly.

But I am afraid that we are all in an 18-month time capsule. Those that can function within that reality will emerge from it in a great shape because a £100bn intermediary market being serviced by 10,000 brokers is clearly a better place than a £230bn one which in 2006 was serviced by 30,000 brokers.

Kevin Duffy is managing director of Mortgageforce

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. The lenders I’ve spoken to all predict similar numbers or if anything suggest that spring 2013 might be when they are sufficiently capitalised to see the intermediary share of the market back to “healthy” levels. Either way, sadly, there will be plenty more casualties with the next batch leaving in March next year once the FSA starts to directly authorise brokers.

  2. Ancient Wisdom...is a mortgage broker in N3. 10th September 2010 at 2:58 pm

    Mr Duffy must have a crystal balls telling you lies, let me clear the fog for you…it sounds as if you have been sitting in the same chair and clothes for too long:

    1. Brokers will suffer more in 18m – as more lenders dual price and switch distribution to rentention products – the pace of this is evident.

    2. As interest rates rise, the need of advice will increase, but affordability will become an issue, as will lenders downnvlauing eroding remortgage business as LTV’s come under pressure forcing more peopel to stay with their lenders and/or defer property purchase as criteria tightens up.

    3. RDR: The impact of bans on commission will mean less people will want to seek advice from an IFA as they will have to pay a fee – forcing more people to hit the high street lenders for ‘free advice’ thinking its the better option.

    4. Increasing regulation by the FSA will mean fewer advisers – more advisers will leave the industry and fewer will be attracted to enter it.

    5. As a broker myself, I know people want advice – but fewer are prepared to pay for it unless they are savvy and know about rebating commission etc, that unfortunately is only 20% of clients.

    6. Brokers cannot call themselves whole of market or independent any more as over 30% of deals available now are direct only – and they happen to be the most competitive deals in the marketplace. Also, ask any broker now the lender mix – ony 6 lenders are getting the bulk of Business – Abbey, Woolwich, Halifax/HBOS/Lloyds Group, HSBC, RBS/Nat West, Nationwide.

    7. There are 90% fewer mortgage products now than 5 years ago – over 155,000 products in 2005/6 vs 4,500 today.

    Therefore Mr Duffy, its a nice line to try and keep the advisers, but few will be hoodwinked into it. You need to change tactics – the whole distribution from lenders is changing, and unfortunately, brokers are not in their long term plans – just look at Yorkshire BS, mortgages up over 67% on 2008 – without brokers, HSBC, First Direct, RBS, Halifax.

    Yes, my glass is half empty – its fear that drives me, not hope.

  3. 18 months???

    the ways lenders are going, criteria/valuations etc we’ll be lucky to last 18 days

  4. Ancient Wisdom is correct.

    We are currently very busy, the phone never stops ringing, but alas it leads to little business. Lenders are for ever changing criteria, making it hard work hard to get the business through.

    We are dooomed

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