It has been a tricky few years for mortgage intermediaries, with about 20,000 brokers leaving the market since 2006. It’s not that the demand for advice has disappeared – far from it. The difficulty has been finding appropriate solutions for clients, owing to the increasing nervousness and strict criteria around lending.
Demand for advice is at an all-time high. A recent poll by Money Marketing sister title Mortgage Strategy reported 40 per cent of mortgage intermediary firms thought they had not enough resources to satisfy the demand for advice. What’s more, the changes resulting from the Mortgage Market Review will encourage more borrowers to seek impartial guidance.
The great news is that the housing market is on the up. Bob Pannell, chief economist at the Council of Mortgage Lenders, has said that “improvements in the cost and availability of mortgage credit are underpinning a meaningful recovery in the housing market”.
More creative products are helping to make the difference. Help to Buy, and its apparent early success, has dominated the headlines. Since its launch in April the scheme, which requires borrowers to have only a 5 per cent deposit and to take a shared equity loan – has helped almost 7,000 borrowers reserve a home and 1,000 complete a purchase, according to housing minister Mark Prisk.
The scheme is an expansion of First Buy, which went live in 2011. The new version is open to those looking to move up the housing ladder as well as first-time buyers. Intermediaries need to be familiar with it as it will gain pace.
The uniqueness and complexity of these lending initiatives is driving the need for advice. Would-be buyers read a headline or see an advert and expect the initiative to be perfect for them, which is rarely the case. But the discussion allows us as impartial advisers to engage them on our advice journey and find them the most suitable product.
We have seen other creative products become available through individual lenders, for example, the Lend a Hand scheme from Lloyds TSB, where the first-time buyer finds a 5 per cent deposit and a parent, for example, deposits 20 per cent in a Lloyds savings account. The savings account provides the guarantor surety and the parent earns interest on the deposit. The effective total of 25 per cent deposit also gives the buyer gets access to more attractive interest rates.
Launch of the mortgage guarantee part of the Help to Buy housing package scheme in 2014 can only encourage further market buoyancy as it aims to remove more of the barriers to entry, the result of which will be a more competitive marketplace, to the benefit of consumers. It’s therefore vital that the Government continues to trumpet Help to Buy and similar initiatives.
With a rise in house prices forecast to peak next year, the next 18 months present an excellent opportunity for brokers. All the key ingredients for housing market recovery are in place and the freedom of greater product choice will enable us to do what we do best and enjoy the commensurate rewards.
Rob Clifford is chief executive at If I Were You