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Flexible loans lift the market

The year got off to a promising start, with almost twice as many brokers

reporting they felt optimistic rather than pessimistic about the mortgage

market. This was lar^_gely attributed to a com^_bi^_- nation of the booming

housing market and the antic^_ipation of a busy spring.

Despite steadily rising interest rates and the impact of the abolition of

Miras, brokers are also optimistic about the outlook for the next quarter.

Over half of the brokers (54 per cent) felt that business was likely to

improve, with one in five taking the view that this improvement could be in

excess of 20 per cent.

Widely tipped by experts as the mortgage of the next millennium, flexible

mortgages are identified, along with mortgages for the self-employed, as

the fastest-growing area of the mortgage market. According to brokers,

customers particularly liked the flexibility of paying off their mortgage

more quickly. The growing interest in flexible mortgages has been fuelled

by competition in the market. This has lead to an increased number and

variety of products, as well as greater public awareness.

More than 13 per cent of the workforce in the UK is self-employed. In

January, the Federation of Small Businesses announced that 400,000 more new

businesses were likely to be started before the end of the year. With this

in mind, it is not surprising that 65 per cent of brokers have seen a rise

in the number of self-employed and self-certification mortgages being sold.

The changing nature of the workplace, with an increasing proportion of the

workforce in various forms of self-employment and short-term contracts, was

identified by brokers as being mainly responsible for the continued demand.

In particular, brokers men^_tioned that customers with more than one job

or flexible working patterns were finding it difficult to prove their


It is natural in such circumstances that brokers will turn to a

self-certification mortgage that does not require proof of income from

trading accounts or accountants.

There is overwhelming agreement about the impact of publicity on the sale

of endowment mortgages. More than four out of five brokers said borrowers

were aware of publicity surrounding the sale of endowment mortgages and

this, combined with the fact that many brokers no longer sell these

mortgages, resul-
ted in a very sharp decline
in sales.

Many brokers felt the publicity about endowments had been exaggerated by

the media and unduly worried many borrowers.

MPPI rise

The benchmarking of mortgage payment protection insurance by the CML and

the ABI last year seems to be paying dividends. Of those surveyed, 60 per

cent of brokers noted
a sharp rise in the number of borrowers taking out

MPPI, with only 13 per cent reporting fewer policies sold.

Although a number of the brokers felt the rise was driven by increasing

insecurity in the workplace, the most widespread belief was that

inc^_reased sales were more likely to be due to the industry working harder

to promote this product. It was also reported there is a growing awareness

among borrowers that the state will not help them if they fall ill or

become unemployed.

Broker choice

Personal recommendation
continues to top the list of
reasons why

people choose to go to a broker rather than direct to a lender. More than

four out of five brokers listed this as the main reason, with
67 per

cent of brokers noting previous customers returned to them again for


Interestingly, this survey reveals that 65 per cent of brokers believe

customers are doing more of their own res^_earch before approaching a

financial adviser. The reason is that people are finding information more

readily available, especially through the internet.

Internet &#39threat&#39

Mortgage brokers are keen to be at the forefront of the technological

revolution. Two-thirds (66 per cent) felt the internet offered an

oppor^_tunity by giving them greater access to a wider potential client


It is clear that many brokers already have a website or are well under

way. As one broker put it: “It is only a threat if you do not get


A third of brokers (32 per cent) felt threatened by the internet because

it gave customers the opportunity of going direct to financial suppliers.

But there was also overlap, with 19 per cent of brokers seeing the net as

both an opportunity and a threat. “We can get more leads off the internet,

but there are more players who can come in to it,” said one.

Another popular concern was that clients will think they are well informed

because they have more information but, in reality, lack the knowledge to

see behind the headline facts.

FSA impact

Will regulation by the Financial Services Authority have an impact on

brokers? Opinion by brokers was divided. Just over half (51 per cent) felt

confident there would be no impact on them because they are already

conforming to the regulations. Many brokers felt the real impact of

regulation would fall on lenders.

But 44 per cent of brokers believe the FSA will drive
“cowboy brokers”

out of business and restore confidence.


There is widespread scepticism that the newly introduced Catmark will make

a difference.

More than half of all the
brokers surveyed (56 per cent) were not

convinced that Catmarks will have any effect.

Brokers expressed concern that Cat mortgages will be difficult to price

competitively and could restrict the number of mortgages that are

available, which would have a detrimental impact on the mortgage market.

Many brokers feel that the Cat standard is not understood by borrowers.

35 per cent of brokers think that Catmarks will be a ben^_-efit to


Broker desire

Brokers have a clear idea of what service they are seeking.

When asked what one thing lenders could do to make life better for

brokers, apart from interest rates, clear favourites emerged.

The most comm^_only req^_uested improvements were
to speed up the level

of communication, feedback and processing. Being kept hanging on the phone

was also mentioned as a key gripe.

With increasing changes in personal circumstances and employment

contracts, brokers also say it is essential to have a more flexible and

“human” approach to underwriting.


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