FR: With the European Mortgage Credit Directive soon to hit the mortgage market, what are the challenges or opportunities you think the industry will face in its wake?
We are examining the implications of the Mortgages Credit Directive and have been engaged in discussions with the Financial Conduct Authority (FCA) around its implementation in the UK. However, we will have to await the results of the FCA’s consultation paper to get a clear steer on how regulation will change in the UK to comply with the Directive’s requirements.
We expect the changes have a relatively small impact on our customers but lenders and intermediaries will face further costs to comply and implement. Lloyds Banking Group is a UK focused Bank and the changes within the Directive will not change our approach to offering mortgages internationally.
FR: What challenges do you feel are most affecting brokers in the current economic climate – and how do they affect the way Halifax interacts with intermediaries?
We track adviser’s attitudes to the market through the Halifax intermediaries Broker Confidence Tracker, and the most recent data suggests confidence is returning to the market. There was a noticeable dip in confidence in Q2 – immediately after the introduction of the changes to working practices in the Mortgage Market Review – but by the end of Q3 96% of brokers were now confident in the outlook for their own firm – 2% higher than the same time last year.
The positive outlook is probably partly due to the fact that business levels have held up, with brokers reporting writing an average of 80 mortgage cases in the last 12 months – 12% more than in Q3. Business volumes are now nearly up to the level they were in Q2 2008 when brokers were reporting writing an average of 89 business cases a year.
The latest market reports suggest that market activity has been slowing recently, so it will be up to lenders to provide the products and the service that brokers need to do the best by their clients.
FR: How soon do you think we will see rate rises and how seriously do you think this will affect the market?
The precise timing of interest rate changes are not easy to predict as the outlook for the economy can, and has been, changing quickly of late. It was only a month or so ago when most market commentators were suggesting there could be an increase early in Q1 2015, but now the most recent reports suggest this may be looking less likely at the moment.
What is more important is that borrowers understand that the Bank Base Rate is likely to increase in the coming months and to be prepared for this. When the BBR does increase its likely to be because we have a situation where we have sustained economic growth, low unemployment and steady inflation. This is a positive situation to be in for the UK, but brokers need to be looking at their clients’ mortgage needs to make sure they are prepared and have the most suitable product for their situation.
FR: What is the most important piece of advice you would give to an intermediary starting out in the market today?
The key differentiator for mortgage advisers is the quality of their advice. It’s a given that they need to know the products inside out but to add real value to clients they also need to understand the important differences between lenders’ service as rates alone do not tell the whole story. The UK mortgage market is highly competitive and borrowers want the comfort of knowing they are getting the best advice and the best product for their needs.
There are some good opportunities for brokers at the moment as there are currently a lot of borrowers sitting on lenders’ standard variable rates and while we don’t know exactly when the Bank of England will begin to raise interest rates but we do know they will be going up and there is a definite need for good quality advice.
FR: What can intermediaries do to ensure better relationships with lenders?
One of the most important things is to get to know the lenders criteria and service standards. Good quality applications, which supply all the required information and meet the lending criteria, will always be well received. It means less time taken going back and forth to acquire all the required information, and that means a shorter time between application and completion.
It’s key here to get to know lenders’ business development managers. This is a two way street and we’ll do our best to get to know you and your business too, but BDMs are a very important link with the lender. You can use them as a sounding board and they can provide excellent support and advice.
