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Work together

I have been quick to criticise the doom-mongers in the past who have been talking the mortgage market down and negatively affecting overall consumer confidence.

But over the past couple of weeks, the market has taken a battering and it would be wrong to assume that the downturn is just a hiccup.

The number of lenders able to trade has been reducing in the past few months and many have shut up shop for the time being, with a possible return if the securitisation markets reopen.

In order for those lenders still trading to avoid being swamped and failing on service levels, they have to take action. As each lender pulls back from a sector of the market to try to manage demand, that increases the demand for those lenders that are still trading and so on.

What can we do? I am not sure that distributors and intermediaries can do anything to change the situation. This is a wider remit and requires the Bank of England, the Government, investment firms, trade bodies and key lending institutions to get together to try and formulate a plan and take swift action.

We can, however, look at our own businesses and put a plan in place. Intermediaries need to be stress-testing their model so that they recognise the key risks, understand the worst-case scenarios and when they kick in, what action to take.

Some intermediaries may even find out that their businesses could withstand tougher conditions than they first thought. The only way to be sure is by applying different scenarios to the business, for example, what if mortgage rates go up to 9 per cent and house prices fall by an additional 10 per cent? One or both events would have different effects on the businessIntermediaries should also be considering additional income streams. General insurance is an obvious one, mainly because for mortgage brokers it is not at the top of the list and that may be due to lack of knowledge in the sector.

Look for ways in which to gain that knowledge (networks offer that, both AR and DA) or take a share in the commission if you pass fulfilment on to someone else. But most importantly, do not throw it away, it is income and its renewable income, which all counts. Also, do not try to go it alone. This is a time when being part of a network, whether AR or DA, could be valuable. It helps to know what others are thinking and doing.

If the market continues to tighten, it is good to be firmly aligned to a network that knows who you are because you use them regularly and in return they will do everything they can to look after you. This could be the change in the market that is so opposite to life 10 years ago.

It was always seen as best to spread your business around among all distributors, picking up the best exclusives as and when they became available. I feel there will be less benefit in doing that for the next year or so because an intermediary can be more valuable to one organisation by putting all their business through that channel than spreading the business thinly among many.

All I can say is that many of our DA brokers who have substantial businesses are asking for input from us. They want to know our strategy and what our perceptions of the current market conditions are to help formulate their own strategy. This is a time to pull together, stay close to your business partners, give each other added value and know what direction you are heading in.

Always pay attention to your gut instinct. It will have served you well over the years.

Sally Laker is managing director of Mortgage Intelligence


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