Did you know that every time a borrower approaches their bank directly, a mortgage broker dies? I’m teasing, of course. They don’t really die. In fact it’s worse, they have to start shopping at Aldi because they missed out on a proc fee.
Again, I’m teasing… most of them can’t afford Aldi in the first place.
And again, I’m teasing. But yesterday BM Solutions, the UK’s largest buy-to-let lender, sent out an announcement saying that borrowers could approach them direct in order to complete a product transfer. Before they had to go via a broker.
Inevitably, the news ignited the debate about advice, market share, income, choice and the like. You name it, we as brokers, whinged about it.
“They need us more than we need them!”
“Lenders shouldn’t bite the hand that feeds!”
“Clients are stupid, they don’t know what they’re doing!”
I always prefer to approach these things pragmatically; it saves the embarrassment of being seen as hysterically over emotional like North London’s finest.
PAST TIMES
As many of you point out on a regular basis, I am old enough to remember more stuff than most people have forgotten.
This includes how the mortgage intermediated market grew (spoiler alert, it wasn’t a big bang moment in 2005).
I am also old enough to remember the dearth of product switch options, the dual pricing of mortgages and the joys of sitting on hold in order to book funds while in the background the world was falling off a cliff.
I am also old enough to remember that mortgage approvals were GREATER before mortgage intermediation was even a thing. Even today they have yet to regain their previous heights.
“Are lenders paying more today but getting less in return?”
Therefore, has anyone raised the question, are lenders paying more today but getting less in return?
I often wonder what the meetings are like at lender head offices…
“Trevor, can I just check something Trevor on these numbers?”
“Sure thing, boss.”
“We used to have undiluted access to our own customers?”
“Yup!”
“And they could liase with us directly, free of charge to either party?”
“Yup!”
“Then we decided to let a bunch of people sit in the middle of that transaction, take over the relationship we created; and then decided to pay those people a lot of money to look after what was already ours ?”
“Yup!”
“Get out Trevor, I’ve never liked you.”
THE MIDDLE GROUND
I did a presentation once to a new lender in a restaurant using three salt cellars to explain how banks foolishly surrendered the middle ground in their dash for market share.
That was a few years ago now but I have sneaky feeling that those same lenders might want some of that ground back.
And who can blame them? People are moving less these days than ever before.
Our attitude to debt is changing, lenders are seeing mortgage balances reduce, and the ever-changing background demographics suggest in the future less people will be around to borrow less money.
PRIME REAL ESTATE
For the number crunchers at the banks, in an ever-demanding world that seeks more profit, that middle ground now starts to look like prime real estate that would give Sandbanks a run for its money.
Some have suggested that outsourcing advice is down to fear of complaints. But home finance is one of the lowest complained about products in the UK.
Those numbers have been steadily declining of late. It is hard to really dig down into the data but it seems there were around 7,000 mortgage complaints in the last year with 5000 of them for regulated first charge mortgages. Less than a third of them were upheld.
So just over 1500 valid complaints against a backdrop of hundreds of thousands of transactions?
I think Trevor needs to explain why so much of that middle ground was surrendered for what appears to be a small and manageable risk.
STREAMLINED PROCESSES
Of course regulation and standards have improved massively over the years and that will be a significant contributor – and to think we were all lamenting MCD and Consumer Duty when they were introduced.
So, with the FCA now looking at more streamlined processes and giving the lenders more autonomy on how the deal with borrowers, I think we may have reached peak PT.
“The fight back is on and how that plays out will have significant repercussions.”
The fight back is on and how that plays out will have significant repercussions for us, the borrowers and the banks.
As an industry, our survival will be more likely if we support our paymasters rather than criticise them.
They must know paying us £500 for a very basic admin task is unsustainable. Have you ever considered it might be us that is biting the hand that feeds?
A PT can be done compliantly and quickly. This isn’t about advice it is about process. It is better to work with the banks, not against them. Remember, the market can remain irrational longer than you can remain solvent.
Anyone got Trevor’s number? I’ll try and flog him a book to read while he’s on gardening leave.
