Let’s start with the positives
Robert Sinclair, chief executive officer of the Association of Mortgage Intermediaries, gives his view on the challenges facing the broker market in the second-half of 2020 and beyond.
The Government has opened up the purchase and moving market as we move away from lockdown, showing that it sees our sector as a vital component of consumer confidence and a key economic lever in generating GDP recovery.
But it will be baby steps rather than giant strides. We’re limited by how many surveys and removals can be completed in a day (and how many workers should be present). From valuations to viewings, in our new world of social distancing, everything is slightly more complicated.
There are also fundamental issues around other elements of the market. Two million have taken some form of mortgage payment deferment, swathes of the workforce are claiming unemployment benefit or have been furloughed by employers, and their affordability has disappeared. This isn’t just a purchase market issue, it could go deeper into the rental and buy-to-let markets.
As always, the solution centres on the need for advice, and a good broker is the conduit for that advice, with the capacity to make customers make better, more informed decisions. I don’t see a difference between advice given sitting with somebody or by Skype or Zoom or Microsoft Teams. Any tech that allows us to visually communicate is positive.
As we await a vaccine, everybody must adapt, but we’re already pioneering. Mortgage brokers have the capacity to work from home, more firms accept electronic identification and completion of documentation, and more technology is being integrated in end-to-end processes.
It’s a force majeure. Barriers to say ‘consumers won’t accept it, brokers won’t do it,’ have disappeared. We’re embracing fintech because it’s the route to survival as opposed to extinction. Historically, we might have thought the opposite.
Regarding regulation, I describe it best by saying I think there’ll be a period of forgiveness. It doesn’t mean we shouldn’t try to return to strict adherence, but I think the regulator will accept if up front physical disclosures are completed verbally initially and then followed up in writing, for example. The rulebook was written for one situation and we’ve had to migrate to another.
There are regulation changes on the horizon. By the end of June most advisers will have to document where and why they do not recommend the cheapest product. The vast majority of advisers do anyway, it will now just become formalised. The planned certification process and new directory by the end of 2020, I expect to be pushed back a little. The firms don’t have the capacity and the regulator is also not immune from remote working either.
The move back to physical valuations will flush out lenders’ genuine risk appetite and I don’t see a sudden stampede back to higher loan-to-value products. We won’t see house price index data before the end of Q3, partly because the Government has suggested they don’t want data published, which means we are wholly caught on whatever valuers decide is comparable locally. While products halved due to the pandemic, it’s more a simplification of the product set. Unlike the credit crisis of 2008, all lenders have enough capital and liquidity for lending not to be a problem. It’s more about having the capacity to process applications.
The specialist market is more difficult, where pricing for risk becomes an interesting challenge. It’s a shame the Government has not done more to help non-bank lenders to keep lending. While I understand why they might not want to be seen to be throwing public money at firms funded by venture capitalists, the mistake we made in the last crisis was to allow firms to go to the wall and create a tranche of mortgage prisoners.
Also, as we emerge from this, lots of clients will have blips in their credit profiles for many reasons and we are going to need to be more forgiving around the traditional criteria to make sure we have a fully functioning market. I think we need to appraise recent history differently.
Finally, one message I’ll always reiterate is to love your customers. Avoiding conversation is always the easy thing to do when times are hard, but customers respect the fact that you have picked up the phone in the bad times as well as the good. Even if they don’t need or want anything, they know you care, and that will keep the intermediary market vibrant and alive.