Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, told the audience at the recent Financial Services Expo in Glasgow that: “If you’re going to get business growth in 2017 and 2018, it’s likely to come from the remortgage market. That means you have to talk to existing clients.”
Fair enough. There is an expectation amongst many lenders and brokers that buy-to-let business will slow this year as the effect of tax changes and more stringent underwriting rules start to take effect. The latest CML data (Jan 2017) shows that just under 6,000 buy-to-let cases were purchases and just under 14,000 were for remortgaging.
If you look at the mortgage market as a whole, CML data confirms that buy-to-let mortgages accounted for 14% of all new lending in Q4 2016, which was down from 21% in Q1 last year. Remortgaging accounts for 27% of new lending, home mover loans account for 30% and first-time buyers 22%. The balance is made up of lifetime mortgages, further advances etc. The growth markets are unquestionably remortgaging (both residential and buy-to-let) and first-time buyers.
Robert Sinclair was therefore on the money with his observations in Glasgow. There is little doubt that for most mortgage intermediaries, the greatest opportunity for growth during the next couple of years lies within their existing client base. Never has there been a better time to revisit existing client files and make contact with those clients who may benefit from remortgaging onto a better deal.
L&C Mortgages has also released research recently (22 March 2017) in which they say that over a third (36%) of homeowners still have a standard variable rate mortgage. These four million mortgage holders could see their rates rise in the future, if they don’t take action to switch to some of the fixed rate deals on offer today. Their research also says that 1.1 million households could be wasting £2.78bn by sitting on the wrong mortgage deal. This means that, on average, UK homeowners can save £2,500 per year by switching and yet over half (58%) questioned said they had never remortgaged to save money. What’s more, L&C says 3.4 million households don’t know the current interest rate on their mortgage.
The opportunities to generate business by making clients aware of the benefits of remortgaging are therefore significant. It’s also worth bearing in mind that even borrowers who may struggle to get a mortgage with a high street lender because they have failed credit score, can often be placed with a specialist lender such as Magellan.
We’re not only happy to help borrowers who may have encountered a life event such as redundancy, illness or marital breakdown that lead to financial difficulties, but also borrowers who may have clean credit records but may have complex incomes, immature credit records or be self-employed and have just one year’s trading record. We don’t use credit scoring, preferring instead to underwrite each case manually and assess each application on its own merits.
Simon Read is managing director of lending at Magellan Homeloans