A greater desire for longer-term fixes presents a threat to income that must be dealt with now, argue some brokers.
At the end of March, Moneyfacts revealed that the average rate for a two-year fix across all LTVs came to 2.85%. For a three-year fix, the average rate was at 2.86% and, for a five-year fix, 3%. Incredibly, for a 10-year fix, the average rate was 2.92%.
And on 1 March, Private Finance technical director Chris Sykes noted that the best available three-, five- and 10-year fixes were on parity at “around” 1.68%.
“We may well be at the start of a culture change with regard to our borrowing appetite,” says London Money director Martin Stewart. And he is firmly on the side that see this as a threat: “Any service-focused client bank offers diminishing returns.
I would like to see some positive changes across the sector. There is still a significant element to what we do that is stuck in 1996
“Whether through natural wastage, inertia from either side of the equation or through changes in regulation or behaviour, unless you are constantly acquiring new business you are heading for extinction.”
West End Mortgages managing director Graeme Nichols says that he has “definitely” seen longer fixes become more popular — “especially over the past two to three years.”
He says: “We are seeing borrowers at all loan to values, even up to 95% LTV, strongly consider fixing for the longer term.”
And in the buy-to-let space, Connect Mortgages chief executive Liz Syms reports that stronger interest in longer fixes has been driven by rental affordability rules.
However, Charles Derby chief executive Roger Lane says he’s seen no increase in popularity in longer-term fixes — although he concedes that this depends on what markets you are in — but that even if he did, “we would not see it as a threat”.
New products such as Livemore may well become more popular and provide a solution
He explains: “There is more than enough business out there not to have to worry too much about the frequency of product transfers or remortgages. [And] we could look for more adverse business to ensure we have a steady supply of those needing to move back to cheaper lenders.”
Lane adds that regarding holiday lets, “we foresaw the growth… and have done some good business by being trained and ready as the market expanded. We put out plenty of information on our site and social media for the public to consume.”
And Source My Mortgage director Steph Whiting says: “There is plenty of work for all advisers.”
The direction of the sector needs to change. It needs a roadmap of success and succession
She argues: “The need for advice has grown even stronger during the last two years, with criteria being harder to navigate due to increased consumer complexity.” She says using a broker is no longer sensible, “but necessary”.
Syms says longer mortgages “could be” a threat, “but clients should always be given the correct deal for their circumstances and should never be sold a short-term plan that does not meet their needs just because it’s good for the broker.”
For those who do see a threat on the horizon, Stewart says: “The business owner needs a strong visible brand, with a direction and enough incentives to maintain and attract talent. The individual broker, while no doubt self-reliant on referrals, needs to balance that against the long-term future of the industry.”
We may well be at the start of a culture change with regard to our borrowing appetite
He continues: “The direction of the sector needs to change. It needs a roadmap of success and succession. It is sleep-walking into dinosaur territory and with it will come the same result.
“It is time to trim the fat — and there is plenty of it out there — collaborate more with lending partners and regulators, and rotate the whole industry into something resembling a profession.
“I personally would like to see some significant and positive changes across the sector. There is still a significant element to what we do that is stuck in 1996. The supposed Eldorado of technology, which was meant to save us all, has so far failed to deliver, despite tens of millions of pounds of investment.”
Nichols brings up the fact that a client’s life can change considerably in five years. New jobs and growing families present an opportunity to keep in touch, as does any protection needs they may have as a result.
The need for advice has grown even stronger during the past two years, with criteria being harder to navigate
London Money mortgage and protection consultant James Adkin, meanwhile, takes a step back into the process. “One idea is that lenders should pay a higher procuration fee, but on a yearly or monthly basis for the duration of the time the customer is with them, thus providing a regular income for advisers rather than a lump sum,” he says.
On a similar theme, Syms says: “New products such as Livemore, which offers a renewal commission for servicing the customers’ needs between renewals, may well become more popular and provide a solution.”
Additionally, a number of advisers Mortgage Strategy spoke to expressed frustration with various industry bodies for an apparent lack of recognition and consequent leadership on this topic.
