We are only days into a General Election campaign and already you get the sense that a number of mortgage lenders might be slightly concerned about the ongoing dampening effect that a seven-week campaign, and result, could have on market activity.
Product cuts appear to be coming thick and fast, and this tends to be a catalyst for further activity. Mainstream lenders in particular are starting to react and therefore suggestions of a ‘price war’ might not be too far off the mark. Of course, as advisers you will have seen this all before, particularly in days of dual-pricing yore when advisers were often unable to get access to such rock-bottom rates. In today’s market, that’s unlikely to be the case because of the strength of the intermediary market and the reliance that lenders have on it to deliver the volume they need and hit the targets that have been set for them.
In that respect, it’s perhaps no surprise that we’re starting to see significant moves, with historically-significant pricing now up for grabs. Such deep price cuts appear to be the result of a year in which (so far at least) lending activity may not have been as anticipated, particularly for the larger mainstream operators. Which is not to say it’s been completely depressing, but maybe not close to what might have been hoped for.
And now of course we have a General Election to throw into the mix, and its potential for dampening the market even further, particularly when it comes to purchasing. Recent history tells us that these large votes – and the lead up to them – are not exactly catalysts for big increases in mortgage activity; indeed, quite the opposite.
The 2015 General Election and EU Referendum followed similar patterns in subduing the housing/mortgage markets for their duration and for a period afterwards. Mainstream lenders must be looking at their levels of business up until now and, with a belief that the election campaign will have the same impact in 2017, be thinking the time to act and generate business has come.
Hence, talks of a‘price war’ and in that respect these may simply be the early shots across the bows in terms of further cuts, particularly within the remortgage market given this is the prominent market-driving activity.
So, what might it mean for advisers? Well, such rates do tend to generate interest and advisers are likely to be feeling the benefit of this in terms of plenty of people phoning up and asking about their eligibility for the rate they’ve seen. Of course, as we all know, not only will some of these customers not be eligible but, looking at their entire financial picture will show that it wasn’t the most appropriate product for them anyway. However, there are still opportunities to provide advice even if it’s not the product first enquired about and, if you are able to get past their disappointment when you tell them this, then there are opportunities to generate business from such clients.
The important thing is to communicate effectively and be honest with them about what they can and can’t get. Advisers may need to take some time with such clients but there is an opportunity to generate business, even if it’s not the outcome the client might have anticipated. That said, think of the client satisfaction and good will you can generate for those clients for whom these rock-bottom rates are available.
One thing is likely – the rate cuts are likely to keep coming and you should therefore prepare your client pitch accordingly.
Paul Nye is director, business partnerships, at Stonebridge Group