With 2023 set to be a challenging year for brokers whether it’s the ongoing cost of living, fluctuating property sales and house prices declining, or increase in mortgage arrears. Brokers must continue to provide excellent service and learn how to best adapt to meet their clients’ needs to maintain their levels of profitability. Diversifying into new lending products can broaden the opportunities available to help ongoing success.
The opportunities for brokers will be amplified as high-street lenders struggle to meet the needs of borrowers, which is where specialist lenders and the experience and knowledge of brokers will affect products clients opt for.
It's predicted that more than half of homeowners with a fixed, tracker or discount mortgage will need their deals renewed in the next two years. This will ensure brokers must focus on product transfers for a large portion of their existing client base. Product transfers will earn brokers potentially significantly less than helping clients secure new opportunities. Embracing alternative lending will provide their clients with options, expand brokers knowledge, opportunities and hopefully increase their income.
Products choices driven by price
A decline in property prices will reinvigorate buyers, but the products for borrowers may not be available on the high street. The days of 2% rates will seem like a distant dream, with many experts suggesting BoE rates to hit 4.75% next year in order to help curb inflation.
A reduction in house price is already being noticed, Zoopla are reporting that houses are currently selling 3% below their asking price. Since the start of September 2022, 25% of properties on the market had their asking prices reduced from the initial advertised price, with 11% discounted by 5% or more. If reductions are continuously needed in 2023 we could start to see negative equity emerging, increasing the likelihood of less properties coming onto the market, as homeowners struggle to acquire future funding in the short term. Brokers will need to help their clients find the right product to meet shortfalls in funding which could also include second charge, to produce higher deposits for investments to drive down LTVs.
Specialist lenders like West One, work on a personalised approach on cases and client requirements, from the more straight forward residential mortgages to the more complex Buy-to-Let or Bridging cases. This personalised approach can go some way in counteracting the Interest Coverage Ratio (ICR) difficulties that will be faced, as a flexible approach is offered.
Opportunities for brokers
The type of products offered by brokers can have a great impact on their revenue, help enhance the relationship between broker and borrower, and the needs of clients’. According to the Guardian, it is estimated that on average around 300,000 borrowers come off their fixed rate deal every three months. Unfortunately, at the moment the products in the marketplace will see monthly mortgage payments rise, disposable income decrease, and general costs increase as a result of continual inflation.
For continued success brokers will need to listen to their clients, work through product transfers so that clients see little benefit in going direct to lender and embrace the opportunities available via specialist lending as mortgage agreements come to an end. Specialist lenders are not only positioned to provide the expertise and support needed for brokers to help find the right solution for clients, but also help brokers to maximize the deals they complete improving customer service, potential income and growing their business.
As the adage goes ‘a jack of all trades is a master of none, but oftentimes better than a master of one’. Brokers need to continually upskill, diversify the type of products they offer and understand the changes in the specialist loan market, the products which reside here. By having a greater understanding of finance solutions, not only will they be able to help their clients migrate from their fixed deal, but also be able to assess the best option, help release equity, reduce repayments, and assess other opportunities which may be presented, but may not be able to place because of the nature of the products needed.
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