There are some interesting parallels between events in Europe over recent weeks and the current state of play in the UK mortgage market. Both have been hit by uncertainty and the need to find long-term solutions. No one would pretend the problems of either have been fixed but there are some signs of optimism.
In the mortgage market, we are increasingly seeing signs of a new age that is being characterised by the need for firms to:
- Look very hard at their business model as the winds of RDR change blow through our profession
- Combat the benign lending market
- Help address the UK’s protection gap.
I believe that tremendous opportunities abound for adviser firms that grasp these issues positively.
Lending levels are unlikely to return to the heights of 2007 for many years. However, there is solace to be gained from the fact that any firm that is able to operate in this tough market will be able to survive in the future. We have seen some significant improvements in the quality of advice to customers, which is having a knock-on effect in terms of higher adviser productivity.
Once again, our profession’s entrepreneurial spirit is shining through as firms use the current recessionary slowdown to redefine their businesses.
In 2011 alone, we have seen some firms grow their business by double-digit percentage increases through remaining focused on costs, segmenting client banks and offering appropriate products at the right time. Firms are being smarter about the way they do business and we are all working a lot harder.
Despite the state of funding markets, we have seen an appetite from lenders to offer more exclusive products, with the result that, in Sesame and PMS, we have seen the number of exclusives virtually double against the same period last year.
This desire by lenders to compete has helped drive volume in a difficult market. Many lenders have supported intermediaries in 2011 and although sadly it has not led to overall growth in the market that continues to be stifled by capital constraints, cautious lending and tight lending criteria, their efforts should be welcomed as we could have faced an even worse position.
I remain convinced that intermediaries will lead lending growth when it returns as consumers shun the high street and continue to use the internet for research and accessing advice.
The cliche is still true that we are all going to have to sell more products to grow business and the market as a whole. Protection remains one of the most undersold products in a market and product providers have never been keener to help support advisers.
I will be keeping an eye on the future of the UK’s at-retirement market. This will become a significant social, political and economic issue. I believe that the mortgage market will have an important role to play in helping solve it.
The dynamics speak for themselves. With equity in property worth hundreds of billions of pounds, how we unlock and incentivise equity and make it a more mainstream form of finance will be a key issue for us all.
John Cupis is managing director of PMS