Liz Booth explores how mortgage intermediaries can ensure that record levels of remortgaging increases engagement with clients
With £38.9bn worth of mortgages up for renewal in 2022, according to research company CACI, the year is set to be extremely busy for mortgage brokers and financial planners alike.
However, the figures also show that mortgage brokers lose 60% of renewal business to direct providers. So, how can mortgage intermediaries make sure they retain a greater number of remortgaging clients?
Fixed for now
According to UK Finance, the trade association for the lending profession, “for most mortgage borrowers, the change in the bank rate will have no effect on their mortgage rate in the short term. Currently, 74% of homeowner mortgages are on fixed-rate deals, with 96% of new borrowers choosing this option since 2019. Therefore, a sizeable majority of borrowers will see no immediate increase in their monthly repayments.”
Furthermore, the proportion of fixed-rate mortgage borrowers opting for five-year fixed rates has increased significantly in recent years, from fewer than three in 10 borrowers in 2017, to around 45% of borrowers in 2021.
UK Finance adds that the Bank of England’s base rate announcement will most likely affect mortgage borrowers who have variable rate mortgages. Approximately 850,000 mortgage borrowers have a tracker mortgage currently – with UK Finance estimating that a rise in the bank rate of 0.15 percentage points will lead to an average increase in repayments of £15.45 per month. For those who are on a standard variable rate (SVR) – approximately 1.1 million mortgage borrowers – this rise translates to an estimated increase of £9.58 per month on average.
However, there are some borrowers still trapped in expensive mortgages – a legacy from the 2008 crash. A report from the FCA found there are 47,000 homeowners stuck on expensive home loans they cannot afford to get out of. In its review, the FCA found 195,000 people who have mortgages with inactive firms, and 47,000 who are defined as ‘mortgage prisoners’. However, 34,000 mortgages were omitted from the overall number because they are in arrears.
So, with all that in mind, how should advisers address the upcoming boom in renewals? Though CACI had released figures showing October was the biggest month of 2021 for remortgage maturities, they also estimated that January would exceed that, with £39.6bn of remortgage business expected to mature, while 2022 as a whole is forecast to be “one of the biggest product cessation years for a long time”.
Mortgage Solutions recently reported Alex Beavis, a mortgage and later-life lending propositions director at Sesame Bankhall Group, as saying: “As the legacy of Covid endures, many clients will find their circumstances significantly altered by the pandemic – increasing the need for advice. Work the back book early and look beyond product transfers where circumstances allow.
“There are some excellent low loan-to-value remortgage rates and many clients may want further funding for home improvements and renovations. A good client contact strategy in the run-up to maturity is key.”
Martin Reynolds, chief executive at SimplyBiz Mortgages, adds: “We know that lenders have a duty to contact the customers but we need to ensure that when that letter arrives, the first thing they do is call their broker.
“We have all seen the statistics around customer retention at the end of a product term and we can improve on this. The number of technology support solutions now around to help means this level of remortgage business is a positive, perfect storm to make 2022 the best year yet for the intermediary market.”
Having a strong customer relationship management (CRM) system and communicating with your clients is essential if advisers are to maintain their relationship with customers and keep mortgage business at renewals, warns Carlos Thibaut, chair of the Society of Mortgage Professionals.
“It is really simple,” he says. “Have a robust CRM system and constantly review your clients. Don’t wait until the 11th hour or else you will find they have already gone direct to the mortgage provider.”
He adds that having an active customer portal helps the adviser to better understand their client's needs, as well as helping the customer by allowing them to engage with the adviser at any time to become better informed, build trust with their advice professional and ultimately get a positive outcome.
Liz Booth is contributing editor of PFP