Advice review

Coping strategies for effective mortgage advisers

Gordon Reid

business and development manager, The London Institute of Banking & Finance

Over the last few weeks, there’ve been numerous headlines on the state of the British economy and its knock-on effect on the housing market. Many of these, quite rightly, have focused on the impact on consumers. However, trawling through social media posts, it’s clear those working in the mortgage industry are also suffering. Despite a dip in the number of sales and purchases, many mortgage advisers find themselves busier than ever.

Of course, as a mortgage adviser, your priority should always be to give customers the best possible service and to secure the right deal for them. But to do this, you also need to consider your own wellbeing and mental health.

WORKING MORE EFFECTIVELY

To give your customers the service they demand and deserve, you need to be more effective. That doesn’t simply mean working longer hours, seeing more clients, and completing more applications. It means understanding yourself, knowing what enables you to work effectively – and, just as importantly, knowing what prevents you from being at your best.

This may not seem like a good time to take on another aspect of personal development, but actually, it’s perfect.

In six months, the market may well have calmed down and you may feel that you have more time to focus on yourself. However, there’s a good chance you’ll tell yourself you survived the crisis, so you don’t need to do anything else.

If you develop skills in effective working, self-care, and resilience now, they’ll help you get through this busy period – however long it lasts – and you’ll be ready for the next significant peak in demand for your time and service.

The great thing about this type of development is that it doesn’t have to be enormously time-consuming. Often, it’s simply about following some obvious steps and creating good habits. Sometimes, it’s even about maintaining the routines you’ve already created for yourself, acknowledging what’s important to you, and being a little more protective of it.

For example, if you value time spent with your family, don’t sacrifice this to review a couple of additional fact-finds. You’ll only end up feeling resentful, preoccupied, and begrudging, and may even fail to find the best deal for your customer.

It’s almost inevitable that, in the short term, many of you will need to work longer hours than you are used to. However, you can do this without damaging your mental health.

TIPS FOR PROTECTING YOUR MENTAL HEALTH

 Make sure that you get enough sleep. You won’t do your best work if you’re burning the midnight oil, especially if you do it frequently.  Take regular breaks. That doesn’t mean boiling the kettle and having a cup of tea whilst continuing to work. It means getting up, walking away, switching off and doing something completely different.  Don’t give up the things that are important to you. Whether it’s going to the gym, spending time with your children,

gardening, or watching the football – these diversions will help you switch off, rest, and regenerate.  Prioritise. Not everything needs to be done at once. So make sure you regularly review and, if appropriate, revise your priorities.

Accept your limitations. You’re not a superhero, so don’t try to do everything at once.  Communicate. This means with your customers, your colleagues, and your family and friends. With customers, it’s essential not to overpromise. That only puts more pressure on you and often leads to disappointment, and even complaints.  Consider declining new business.

This may go against the grain, but you need to maintain high standards. If you’re spending all of your time servicing existing clients, is it fair to them, or the prospective new customer, to agree to more work?

IMPROVING YOUR RESILIENCE AGAINST STRESS

 Be self-aware. Understand yourself and how others perceive you.  Develop mindfulness. There are loads of apps to help you learn how to be fully present in what you’re doing at any given time.  Take good care of yourself.

Eat properly, rest, and exercise regularly. Nurture positive relationships. This is about mutual care and support with friends, family, and colleagues.

These are skills you can develop and practice. By looking after your mental health and developing resilience, you won’t just be helping yourself; your customers will benefit, too. M I

Consequences

Shaun Almond

MD, HLPartnership

Iwas not surprised to read a survey that concluded that many brokers are still unprepared for consumer duty and claim not to understand what is expected. According to the survey,* the knowledge gap has contributed to inaction across the sector, with a third of decisionmakers saying their firms won’t be ready by the April 2023 deadline originally set by the Financial Conduct Authority (FCA).

When I say I was not surprised, it doesn’t mean that my opinion of brokers’ preparedness is a negative one. Rather, I mean that the complexities and requirements weigh heaviest on those firms with the fewest resources. I would be particularly interested to know whether, among the third of firms saying they won’t be ready, the majority are small DA partnerships or sole traders.

My guess is that they will figure strongly in that one-third. What is sad is I can see that consumer duty, for all its right intentions to improve customer outcomes, could inadvertently become a barrier that many firms will not be able to overcome. This is not because those firms are incompetent or unwilling to comply, but simply because they may not be able to make the time, develop the understanding, and gain the confidence to make the changes they need to make. Whether in customer advice presentation and more frequent client contact, reviewing and editing written material, or submitting the necessary reports to the regulator that will now be required, the fact is that without a proper template or external support, many firms are going to be in serious trouble by April 2024, when consumer duty will have been live for a year.

To take another example, the regulator understandably expects brokers and lenders to be more proactive when it comes to helping vulnerable customers who might be struggling financially as a result of the increasing cost of living. Clients unable or struggling to pay for their mortgages and protection policies are going to be a test for all of us, but having the necessary resources to be able to offer an ongoing service to help existing clients will mean expense that many firms might not be able to afford.

We have all known for some time that the industry had to evolve and become more professional. It would be fair to say that the requirements of regulation have been a positive catalyst in bringing about much of that change. However, what I see is that independent small firms are facing some potentially painful choices; should they  carry on and hope for the best?  get inside the tent and look at changing to AR status?  buy in extra staff to cope?  buy in external compliance support?  join with like-minded firms to create a bigger entity to share resources?

The latter three choices involve costs that many firms will not have allowed for in their business model, and the last one also involves disruption, expense, and a lot of trust in one’s potential partners.

Let’s not sugar-coat this. Complying with consumer duty is not a box-ticking exercise, and taking the concept on board has as much to do with changing attitudes and modifying behaviour as it does with absorbing the principles and I can see that consumer duty, for all its right intentions to improve customer outcomes, could inadvertently become a barrier that many firms will not be able to overcome

applying them to the client advice process. We are all being ‘asked’ to extend our duty of care to our customers throughout the lifetime of the relationship or product. The days of prospect, advise, write business, repeat will no longer act as a viable template as of 2023.

Customer engagement after the initial business has been completed can no longer be ignored. If the pressure from online providers and other brokers tempting customers away was not enough warning that we need to take care of our client banks, there is now a clear signal that the regulator’s expectations of the need to offer much more than the odd phone call or email go much farther.

Yes, CRM solutions promise and deliver on many levels, especially if they are integrated into fact-finding and sourcing as well as mapping and recording the whole of the customer journey through to completion. Connected to a diary function, a good CRM system will keep brokers from missing crucial follow-up dates with clients – a very useful feature with consumer duty on the horizon!

However, while technology can provide important tools that will help, smaller firms are still going to have a disproportionately steeper hill to climb than their larger peers to achieve consumer duty compliance. Many good firms are going to have to make some hard decisions. M I

New lending era will require alternative lending models

Tim Hague

MD, Sagis

In the aftermath of former chancellor Kwasi Kwarteng’s mini budget and the rout in bond markets it triggered, bank funding costs soared alarmingly quickly. In less than 24 hours after the markets opened on the Monday morning following the mini budget, around 1,000 mortgage products vanished from the shelves. After a mass repricing across the market, average rates on both two- and five-year fixes were sitting around six per cent. Following Rishi Sunak’s installation in Downing Street and confirmation that Jeremy Hunt would remain in post as chancellor, several lenders confirmed another reprice, with some rates coming down by more than 50 basis points and loan-to-values creeping back up. For borrowers – and brokers, insofar as they’re left managing client expectations – this yo-yoing on deal availability is nothing short of terrifying. The majority of households in the UK manage all their household finances based around their homeownership. House-price inflation has forced borrowers to take larger mortgages, scale up the LTV curve, max out their loan-to-income ratio, and stretch out terms from the traditional 25 years to an increasingly normal 35 years. Forty-year terms are not uncommon.

The price dynamics of this economic outlook bear very little in common with the pricing dynamics seen in the mortgage market previously. The combination of low wage inflation, high house price inflation, high consumer price inflation, and unsustainable public borrowing is potentially very toxic.

Past downturns in the housing market have come down to some of these factors – interest rates rocketing, mass job losses, and a far less sympathetic attitude from lenders when faced with borrowers unable to pay the mortgage.

To cope with all of them at once is not going to be straightforward at all. Rightly, it is the people at the front line of the cost-of-living crisis who dominate the headlines, and thus public consciousness. Their struggles are appalling, and policymakers need their plight thrust into the spotlight so they can make informed decisions to support them. They say a team is only as strong as its weakest member; the same can be said of the health of an economy. As an industry, however, we may have an even greater struggle. The responsibility for carrying those at the sharpest end of financial deprivation will rest with the public sector. The responsibility for carrying the vast middle – households on good but not excessive incomes, with children to feed and mortgages to pay on their two- or three-bedroom homes in nice, urbane locations around the country – that rests with lenders. Public finances are not going to recover quickly. The economy has been hooked on cheap money for more than a decade. The splitting headache, sweats, and shaking felt throughout the economy today are hardly surprising now that drug has been withdrawn.

If we accept this and we are to manage it, then we must recognise that it’s not just the pieces on the board that have moved; the board itself looks different.

There are many things to consider when it comes to managing ourselves and our customers through the coming years. These include how to keep customers on the most even keel possible and how to redraw credit policy, risk assessment, and product design to support that aim without compromising lenders’ business resilience – and how to deliver all this while maintaining good borrower outcomes as enshrined in the consumer duty regulation.

There are already signs the market is shifting. A recent freedom of information disclosure from the Financial Conduct Authority, sought by wealth manager Quilter, revealed a significant rise in the number of over-40s taking mortgages with 35-year terms or more. In the first two months of this year, 478 mortgages with terms of 35 years or more were sold to people over the age of 40, and projections showed this figure was likely to grow to more than 3,039 sales of this kind throughout 2022. This would mark a 39 per cent increase on 2021, during which 2,191 mortgages of this type were sold, and a 433 per cent increase on 2020, when just 570 were sold. The underlying numbers are not too concerning as it stands, but the trajectory is more worrying. Far from building a balance sheet with a rolling 25-year maturity, leverage averaging 50 per cent, and that throws off cash every month, lenders now face a very different role. They are now looking at long-term relationships with customers of 35 or 40 years or longer, whose fluctuating income streams are influenced not just by cost of funding, but increasingly by a borrower’s financial stability. Long-term fixed-rate products will address some of these issues in terms of injecting some stability into borrowers’ lives, but will raise other questions along the way about lenders’ business models. What does it mean for funding structures? What does it mean for short-term fixed rates? What does it mean for the intermediary fee model? These are very big questions, and the requirements of lending in the future will demand some answers. The clock is ticking. M I