"So far the impact has been limited and after the initial shell-shock following the Referendum, confidence appears to be recovering steadily."
FR: Openwork has recently re-structured its business to focus specifically on mortgage and wealth. What does this mean in practice?
The key word is 'focus'. Historically Openwork have operated a generalist model, with the Network’s support to our members being provided by generalist teams. This is changing and we are steadily establishing specialist teams to support our firms based on whether they are predominantly mortgage or wealth businesses. This new infrastructure will be established in the coming months and will mean our firms get far more specialist, tailored, focussed support. The reality is Openwork is a major player in both mortgage and wealth markets and the new structure will help us to drive further growth in both.
FR: What are the biggest issues facing the mortgage market in the current economic environment, and what should advisers be aware of when dealing with clients?
There are numerous issues for client and advisers to face into, but two come to mind.
First, there is no doubt that the coming years as we approach Brexit could be turbulent. Rather than wait for a potential impact on business to materialise, firms/advisers should take action now to insulate their businesses. Broadening income sources should be a critical part of this. Optimise protection and GI sales, take the income on an accruals basis and firms will be far better placed to weather any storms that develop.
Second, and at a more micro level, I’d flag an issue that is still under the radar for many advisers, which is the taxation changes affecting buy-to-let. Whilst mortgage advisers cannot give tax advice they need a greater understanding than ever before on how clients choose to structure their buy-to-let borrowing and businesses in order to give appropriate mortgage advice. Too many advisers (and indeed landlords) have failed to grasp the impact of the changes.
FR: How do you think the Referendum will continue to affect the mortgage market in the coming months?
That’s the million dollar question and I wish I knew the answer. What can be said is that so far the impact has been limited and after the initial shell-shock following the Referendum, confidence appears to be recovering steadily. There will no doubt be bumps along the road, as greater clarity over the way forward emerges (or fails to emerge!), but the cataclysmic prophecies don’t at this point look to be manifesting themselves.
I concurred with the comment made by Persimmons CEO, Jeff Fairburn, “If people have got jobs and they can afford to buy, they just want to get on with it”.
The reality is that any exit from the EU is 2-3 years away, which is a very long time in today’s fast paced world. In the meantime it’s increasingly business as usual, and long may that last!
FR: What do you think will be the pros and cons of the Base Rate cut? Do you think the Bank of England made the right decision and have lenders reacted appropriately?
Mark Carney’s decision to reduce rates by 0.25% and to do so later than the market was originally expecting, was spot on in my view. Making the move sooner, when little or no data on the impact of Brexit would have been a knee jerk reaction, while a larger drop would have left Carney with no room to manoeuvre at a latter day if greater stimulus is required. As for the lenders, most have responded positively and passed on the drop, but it’s disappointing that a few have chosen to increase/protect margins.
FR: Do you foresee mortgage availability moving forward? What more can be done to ensure under-served borrowers continue to have access to the mortgage market?
In the immediate aftermath of Brexit product availability fell as lenders took stock, but the fall was very short lived and within three weeks the numbers of products available were already back up to pre-Brexit levels. Confidence in the lenders, which also fell sharply post Brexit also recovered fast and as such there is plenty of capacity to lend and indeed many new lenders continuing to extend distribution. This is a far cry from 2008/2009 when capacity and product volumes dropped off a cliff. Given the increasing focus of our largest banks on traditional retail banking vs investment business, assuming we don’t face any catastrophic economic meIt-down I cannot see capacity falling off in the foreseeable future.
That said, there remain underserved segments including the self-employed, older borrowers, interest only clients, professional landlords and those seeking shared ownership. Significant progress has been made in all of these areas over the last 12 months, but there’s further to go. Both lenders and the regulator need to step-up to help plug these gaps, particularly in the area that crosses over into ‘at retirement’ planning.
FR: With an increase in FTB numbers, do you think more brokers need to be thinking about including protection as part of their service?
Mortgage advisers have a moral obligation in my view to ensure they have provided protection advice to all mortgage clients. However, this is particularly the case for FTBs who are unlikely to have existing cover in place and indeed buying their first home is probably the first time they will have ever been engaged in a discussion on protection. Openwork are making some radical changes to our mortgage protection sales process later this year, which will mean that every mortgage client will be provided with an assessment of the risks they face during the period of their mortgage and the action required to protect against these risks. We believe this will make a significant difference in ensuring our clients are fully protected if the worst happens.
FR: If you could see one headline about financial services in 2016, what would it be?
“Breaking News: mortgage advisers plug protection gap”
