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Are bargain hunter borrowers stealing your mojo?

Are bargain hunter borrowers stealing your mojo?

There’s a lot of noise surrounding mortgage comparison tools on the market, but what exactly does this mean?

More tools = more choice = more confusion? 

Let’s explore…

The paradox of choice

Robo-advice, going direct or even switching to a new broker – with such a variety of different options to choose, customers can now shop around.

Comparison tools are growing more popular cross-sector. They do more than help consumers choose between a summer holiday in Benidorm vs Barbados (choose wisely).  

decision time

Even big lenders are jumping onboard the comparison tool wagon in a bid to keep up with the digitisation of the mortgage market.

These online tools source mortgage deals using a mix of property data and disposable income details to calculate offers relevant to your situation.

If borrowers qualify for deals, they see the lender’s product transfer rates compared to other products. So, they can see if the grass is greener should they opt to switch. 

New tool features can even allow borrowers to see savings on remortgaging with a new deal vs product transfer with their current lender.  

Jeremy Duncombe, director of intermediary distribution at Accord Mortgages, cited customer choice as the greatest threat to brokers.

He was quoted in the Mortgage Introducer stating:

The biggest risk is what they (the customer) feel is the right thing to do. If they feel it’s better to go direct or execution- only, they’ll do that

 

What does this mean for my clients and me? 

Borrowers could be missing out on cheaper deals from rival lenders. And, similar digital tools are now offering timely options to your clients.  

Is this kind of digital disruption good for brokers? 

HELLO HUMAN

Every disruptor uses technology and companies have been digitising processes for a while now. However, when it comes to your mortgage, it’s a very emotionally driven decision. It’s your home, its where you live- there’s something very human about it.

And, as human beings, we’re wired to talk to people about such sentimental buying decisions. We develop feelings and need advice and support throughout the process- just like a human relationship.

Duncombe added:

If they (the customer) feel that they have a good broker experience of someone looking over them continually over the fixed period, it does not matter what options they get, they will go back to the broker.

By looking after the customer all the way through, that risk (losing customers) is mitigated almost entirely.

Remember our blog on how much time brokers spend on new customers vs retention? Might be a good time to refresh your memory on that one while you’re here.

 

Wrapping up

Borrowers still have needs for real-life brokers. But, this doesn’t mean that technology shouldn’t be used at all- it’s about balance.

Technology should be on your side, its a supportive solution. Something that’s freshening up a process, not entirely replacing it. Especially when you’re dealing with emotionally driven product purchases.

Hate to say it, but I told you so

Hate to say it, but I told you so

So, 10 year mortgages are on the rise…

Remember our Let’s speak in 5 years – A shift to 5-year fixes impacts your bottom line blog post?

 

Well, we said that by 2020, there’s a chance you will see a significant drop in the number of potential remortgage customers – due to consumer shift from 2 year to 5+ year fixed rate mortgages.

This week it was reported that 10-year fixed-rate mortgages are becoming more popular.

We told you so

Lenders are jumping onboard the long-term wagon, which now sees a record high of 157 options existing for fixed rate mortgages, according to Moneyfacts.co.uk.

When we look at the numbers, the average rate charged on a 10-year fixed mortgage stands at 3.01 per cent, a fall of 0.09 per cent year-on-year from the 3.10 per cent recorded in August 2018.

 

Are we ready for the change into the decade of debt?

Keeping up with debt

Newcastle building Society launched two of these products just this week, one available at 80 per cent loan-to-value and one at 90 per cent loan-to-value, charging 2.85 per cent and 2.89 per cent respectively. They also added the touch that borrowers are also able to repay their mortgage after five years without penalty- sounds appealing so far.

 

Has Brexit trigged this behavioural change with consumers? Are borrowers now trying to safeguard themselves from market flux? With such a lengthy commitment is this really what we should be advising our customers?

Rachel Springall, finance expert at Moneyfacts.co.uk, said:

A decade-long fixed rate mortgage is no doubt a big commitment, so borrowers must feel confident that their circumstances are unlikely to change to avoid the expense of refinancing earlier than expected. There is a much larger choice of mortgages within the five-year fixed market and these should ideally be considered as an alternative.

 

But that’s just one opinion, right?

 

Bob Steel, mortgage and protection sales coach at First Mortgage, Steel said that he couldn’t “see the appeal of recommending a client to lock into a product with fairly hefty exit penalties” and added:

Whilst the market is moving towards longer term deals to take advantage of low long-term rates, I think the lenders need to make the exit penalties less excessive.  Although we have seen a slight increase in the demand for a 10–year rate since the vote to leave the EU, this is usually for a very specific type of client – i.e. nearing retirement and 10 years or slightly more left on mortgage with absolutely no plans on moving.

Similarly, Nicola Arbon, managing director at Mortgage Hut, indicated a “slight demand” in 10-year options. She also added that she made sure to always advise her clients to “proceed with caution” in case their circumstances changed and they were left with a “hefty” early repayment charge.

This shift potentially verifies the uncertainty that our customers feel and their confidence in the future of the UK property market.

On the other hand, Paul Flavin, managing director of Zing Mortgages, believed it showed “confidence in the money market” that in the short to medium term the economy was going to be “pretty good”.

Are we surprised? Well Norman is…

Surprised by 10 year mortgages

Norman Philips, director of Drake Mortgages, said:

I am surprised that 10-year fixed rates are popular. In the modern world, you have to balance the certainty of a mortgage payment with lack of job security; and then include the knowledge of early repayment charges plus an understanding of the way that underwriting works on portability.

With such long-term mortgages on the horizon there has never been a more important time to think about innovative ways to nurture our customer relationships in order to ensure we Retain and grow business.

Thumbs Up from TMA

Thumbs Up from TMA

We’re proud to announce our new partnership with TMA Club.

We’re working directly with the Club to combat customer retention for brokers across the UK with our MortageTech product Retain, by Eligible.

In support of Retain, David Copland, director of mortgages at TMA, said:

With up to 30% of homeowners in the UK deciding not to remortgage with the same broker, there is a clear gap in the market.

We are always looking at ways to enhance our members’ businesses and customer retention is a key aspect of this.

What’s all the fuss about?

Put simply and practically:

  • Retain will help brokers save time, make money and increase overall firm revenue generation.
  • Retain contacts clients prior to expiry so brokers are able to keep track of their expiries in a simple, prioritised list.
  • Retain supports brokers by using customer data to track and automatically recontact existing customers who are due to roll off their current mortgage deal, before lenders get in first.
  • Plus, customers will receive an email which links them to a broker-branded web app where they can learn more about their mortgage and are reminded of the value of their broker’s advice.

Ok, so far so good..

So far so good

Copland added:

Platforms like Retain make retaining customers more efficient and much more hassle-free.

By equipping our advisers with the right tools to tackle this, we hope to boost their product transfer and remortgage figures and help them regain time previously spent on administrative tasks, so they can focus on what really matters – providing tailored and holistic advice to their clients.

The automated customer retention tool also monitors client’s activity within the app so brokers are able to contact their most engaged clients.

Clients can notify their adviser at any time that they would like to discuss remortgaging to encourage customer-led retention.

 

If it’s good enough for you, it’s good enough for me.

sold on the product

Rameez Zafar, chief executive at Eligible said:

As one of the UK’s leading mortgage clubs, TMA’s ethos to provide the best possible broker and customer experience, is one we mirror.

Through offering our retention solution to TMA, we will work together to reduce brokers’ workloads, allowing them to focus on doing what they do best – advising customers

We also aim to improve financial literacy for our clients whilst keeping the customer at the heart of the mortgage journey.

In support of the partnership, TMA Club has provided 50 members of the club access to Retain.

Want to partner with us too? Get in touch and we’ll make magic happen.