As we approach the latter part of a year, which in my best footballing parlance has certainly been a game of two halves, there may well be a time over the next few weeks when advisers can stop, take a step back, reflect on events that have just transpired and maybe even get the opportunity to look ahead to 2023.
Thankfully, many advisers and intermediary firms are currently operating from a place of strength. Caseloads are high and confidence levels remain robust, both factors which are significant indicators of how highly prized the advice process is in a mortgage market and economic climate which is becoming increasing complex and testing for many borrowers.
This was evident in the latest data from IMLA which outlined that intermediary confidence in the business outlook for their own firms remained stable, with 51% stating that they were ‘very confident’, down very slightly from 52% in Q2. There was a similar pattern for confidence in the outlook for the intermediary sector, with 91% of intermediaries confident overall, down from 93% in Q2. In addition, average intermediary case volumes remained strong, albeit falling slightly from 97 in Q2 to 93 in Q3.
In addition, the average number of DIPs processed by intermediaries remained stable in Q3 2022, decreasing very slightly to 27, from 28 in Q2. However, the quarter also saw conversion rates from DIP to completion fall for the fourth successive quarter to 38%, from 44% in Q2 – 10% lower than in Q3 2021.
So, what can we interpret from this data? Well, advisers are busy and they remain confident about their business prospects which, as mentioned previously, represent two very important components. This is not exactly ground-breaking news but it’s prudent to point out that we have entered a transitional lending period where – as outlined in the data – the cumulative effects of the cost-of-living crisis, rising inflation and high levels of interest and mortgage rates are creating increasingly complex circumstances for borrowers.
This heady combination is leading to proactive, forward-thinking firms asking themselves a few tough questions around how they can better support the ever-changing needs of their clients as well as those of their own business, especially if mainstream business volumes continue to falter.
The consistent drop off in completion rates is also a concern. Going forward, a rising number of cases will need that extra bit of packaging support to ensure they meet lender’s specific underwriting, criteria and policy requirements. Requirements which differ from lender to lender, especially in a specialist lending space which will continue to rise in prominence.
It’s also apparent that regulatory pressure in the form of Consumer Duty and additional admin burdens across the board are creating increasingly complex circumstances for intermediary firms.
These factors are certainly attracting the attention of some directly authorised brokers who are drowning in admin and/or having to turn away specialist cases because they don’t have the time or resources to be able to fully scrutinise the suitability of each and every specialist option.
For appointed representatives, the period leading up to the new year may be a good opportunity to review the support they are currently receiving from their principal and ensure that their vision, values and aspirations for the future match those of their own.
Looking forward, 2023 is likely to be the year when, at times, specialist supersedes mainstream. And having the right network and packaging support in place could be the key to ensuring that intermediary firms continue to hit the caseload and confidence high notes.
Steve Swyny is commercial director at Envelop