If one door shuts, then another one opens. I was reminded of this piece of positive thinking when attending an event where the speaker was jaw droppingly negative about the immediate prospects for the lending sector. Apart from providing a perfect remedy for insomnia, I became aware that he was also of the generation that joined the market after the last downturn in 2008 and had clearly known only growing business volumes. He had not yet made the leap in understanding that just because something looks bad, it does not mean that you can’t change your approach and still flourish.
Not his fault; but there are many like him, who are still clearly unprepared for the inevitable bumps in the road, like this one, with which those of us who have lived through the ebb and flow of past economic cycles, are all too familiar.
Expanding on my use of contemporary sayings, here is another one – ‘When the going gets tough, the tough get going.’ Good to get a little macho perhaps, but in reality, the answer lies in changing the way we think if we are to deal practically with more challenging times.
Clouds might very well be gathering, but instead of bemoaning the issue that the low hanging fruit we have all been used to picking is proving harder to come by, we need to look at other business channels and ways we can adapt our business models to take us through more stormy times. After all, expecting to get different results by doing the same thing will never change the outcome.
For example, It has been argued that second charge mortgages or secured loans, if you prefer, do not get the positive exposure they deserve, because the fashionable default position is still to recommend a remortgage. As I heard one adviser say, ‘No one ever got sued for doing a remortgage.’
Yet secured loans could be just the channel of which more advisers need to be aware, as the property market cools. The trend towards staying in a current property, rather than moving or trading up or down, and making alterations to accommodate growing families or future proofing for old age, is on the increase. Therefore, there will be a greater call for ‘item specific’ funding, which addresses the actual need, but is not linked to wholesale change by switching the existing mortgage to another provider. So what better way to avoid that kind of upheaval, where the remortgage might mean a more significant hike in monthly cost, than simply by providing the required amount of funding, secured against a second charge and leaving the existing mortgage alone.
The era in which we live is far removed from the rosy one which still persists in the minds of lenders of customers with a job until retirement and a nice cosy pension. The reality that most advisers face is of a growing constituency of prospective customers whose circumstances alter as job security ceases to be permanent, credit status is affected by periods of income uncertainty and where the growing number of self employed struggle to be taken seriously by lenders, who still cling to the old metric that employment is more secure than self employment. Not in today’s market.
This is not meant to be a recruitment advert for second charge lending. Rather, it is an illustration of reassessing where we need to consider doing business. It goes to the heart of looking at the current situation and adapting our thinking to the sectors of the market which are relevant to customers and what they need today. Second charge mortgages and their application are one of those areas.
Jeff Davidson is head of intermediaries at Fluent for Advisers
