Interest rates

Brokerage in times of rising interest rates

For many borrowers the cost of owning their home could rise by hundreds of pounds a year and yet many brokers in the industry were not in business before the 2007 financial crisis, said Nick Morrey, technical sales manager at Coreco – meaning they’ve never seen what it’s like to be a mortgage broker in times of rising interest rates.

Morrey said: “If a rate were withdrawn by a lender, chances are a similar or even cheaper rate will become available.

“Now the heat will start to rise as lenders will have to raise rates to meet financial market prices when current tranches and funding lines dry up. They are also looking to increase their margins, if only by 0.05%”.

Strong opportunities for brokers, despite rising headwinds, says chief

Mortgage intermediaries often make up over 80% of a lender’s business and lenders will want to accommodate them, but they can’t give much notice about product withdrawals or replacements.

This is because other lenders may be able to gain a competitive advantage if they find out what their competition is about to do and, if an increase is reported, this may lead to a spike in last minute inquiries leading to service issues,” Morroy describes.

He added: “Whether this is good or bad news for brokers often depends on how they see events unfolding around them.”

For some, rising rates and inflation could imply a possible collapse of the real estate market or the whole economy. For others, it’s the start of a great opportunity.

Morrey believes consumers want help in the often complex world of mortgages, which is a product they don’t really want to buy, but need to buy.

He goes on to explain that with prices rising almost daily, a good broker can provide everything consumers need – good, quick advice.

Brokers can sometimes go from “hello” to “request submitted” within hours, Morrey said, which puts them in a unique position to help many consumers secure their products at the lowest possible cost at that exact moment.

Morrey added: “A manager of mine once said, or maybe pinched to someone else, ‘Luck doesn’t exist in business. It’s preparation and opportunity.

“What he meant was that opportunities are constantly coming up, but are we ready to take them when they come? Or do we hesitate or procrastinate and the opportunity passes us by? »

Clients generally want good advice and an efficient and smooth transaction. They want to know what the best deal is and secure it.

According to Morrey, customers currently want to know they have what they need before that cost increases.

“Advisors who are prepared and can help them through the process will be successful no matter what happens with the markets,” he added.

Morrey goes on to say that advisors will place cases quickly and get the right documentation submitted, ensuring the best deals for their clients and often get referrals without even asking.

He said: “So what can advisers do as rates rise? This may all seem a little obvious, but actually doing it requires a bit of application that may not have been necessary in recent years.

Looking for methods to improve customer service and increase retention, Morrey said advisers should look at their customer bank and reach out to every customer even if their contract isn’t expiring soon.

He added that it’s important to make these communications personal to customers and their individual situations.

Morrey said: “Talk to as many customers as possible rather than email, where possible – a conversation sticks more in the mind than a quickly deleted email.

“Advisors should also have a mortgage payment calculator handy so they can give a rough estimate of what a client’s payments would be if rates increased by 1%, before outlining how you could minimize such an increase. .”

Becoming familiar with possible rate change dates, Morrey also said, is important, adding: “If a lender’s current range of rate change products and additional advance rates is poor, why not consider a mortgage for your client?”

Additionally, Morrey pointed out that an adviser should consider how long a remortgage offer is valid, as many are now up to six months, not three, and should consider using a remortgage product. remortgage with cash back rather than “free legal”.

Finally, Morrey said advisors need to be prepared to figure out what it would cost to opt out of a current product and pay the penalties.

He said: “Some borrowers for whom cash flow is a top priority have pulled out of fixed rates to get a new deal, maybe cheaper, even when they’re still two years old – have you looked at that for your customers?”