There has long been talk about holistic advice and ensuring that advisers consider all options to best support their clients. Arguably though, mortgage lenders also need a holistic strategy too; one that covers the front end – securing new business – but also the back end – managing borrowers and specifically, those who fall into difficulty.
After all, the mortgage market continues to face significant challenges, whether it’s interest rates and affordability – swayed by persistent inflation and both political and economic uncertainty at home and abroad - or increasing regulatory pressures, such as those required under Consumer Duty.
A balanced approach that focuses on both responsible lending at the outset and effective support mechanisms for borrowers can help lenders navigate these pressures. Securing new business will always be a priority, but so should measures to understand both the value and potential risk in a mortgage book, and to manage arrears to ensure a good outcome for all parties.
This is where having the right strategy and partnerships in place is not just beneficial, but absolutely essential.
At the front end driving new business
It may sound obvious but lenders need to lend – it’s the principle way that they make their money. Across the market, we continue to see lenders innovating in both their products and criteria to help answer the challenges faced by so many borrowers – particularly when it comes to affordability. Arguably, they are the ones doing the heavy lifting in lieu of any real government support.
In an intermediary-driven market, advisers play an important role in driving new business to lenders. Importantly though, they leverage their expertise and knowledge, along with their strong relationships with lenders to drive the right type of business. At the same time, it is having the necessary due diligence and processes in place to ensure that submitted cases are all above board. Fraud is a huge threat for lenders and advisers, and lenders put a huge amount of trust in brokerages to manage this risk properly.
Just Mortgages for example, which is also part of the Spicerhaart group, is set to host its annual two-day Lender Fayre next month, connecting its team of 650 brokers with lenders from across the mortgage market. The aim is to ensure brokers make those necessary connections and have the opportunity to increase their knowledge on different criteria and important topics such as compliance.
On the back end managing outcomes
Even with the best lending practices, financial difficulties can still be all too common in such a challenging market and economy. Lenders continue to demonstrate time and again that repossession is still very much a last resort. With the right partnerships in place, lenders can strengthen their approach to new business, all while ensuring that if clients do fall into difficulty, mitigating strategies are already in place to keep repossession as that very last resort.
Given the regulatory environment we find ourselves – especially with Consumer Duty demanding good outcomes for vulnerable customers – never has this been so important. Arguably it starts with gathering the right information and market intelligence to first understand value and determine any potential risks.
Given the hefty mortgage books many lenders have, technology continues to play a role in streamlining processes to provide real-time market data and bulk valuations. However it doesn’t always offer the nuance or extra level of detail a lender requires – such as if the property is in poor condition. This is where expert asset managers and drive-by valuations continue to prove their value.
With a full picture of their portfolio, right down to a property level, lenders are able to identify potential risks and act early. Using tools such as Assisted Voluntary Sale, asset managers are able to market the property to achieve the best possible price in the shortest possible time. In the process, the borrower is supported to exit the property and in the majority of cases secure some equity. The result is a good outcome for both the borrower and the lender.
Rather than lenders trying to manage this process in house, the capability exists to outsource this to firms with the necessary knowledge, experience and manpower to accumulate this critical information.
There’s no doubt that lenders need a robust strategy that extends beyond mortgage origination. Given the size and scale of the task, this needs to be a fully holistic approach that integrates the right partners and the necessary intelligence lenders need to make informed decisions at every stage. With our knowledge and experience in the market, we are well placed to help lenders execute a full asset management strategy – supported by our sister firm Just Mortgages to drive quality new business at the front end.
