Brokers are in the midst of a torrid period caused by product withdrawals by lenders. As interest rates rise, slow-to-adapt lenders can quickly become inundated with business they weren’t designed to handle. We hear stories of lenders having to pull out because their back offices are in crisis, leading to another deluge if brokers can beat the guillotine. Others are looking over their shoulders as their backers seek better returns, having to quickly change product pricing. While base rate increases are impacting SVR rates, it is the more volatile swap market that is now driving large increases in new business rates
This required brokers to rework files several times to obtain an offer from a lender. For clarity, this is not the fault of our BDMs or those running the middleman business. They are truly on the side of the brokers. Other lenders need to scale up and better manage products, operations and distribution. But that’s only the beginning of the story. Delays in the transfer of ownership are of particular concern. Average times from supply to completion have slipped outward since the start of the Covid lockdowns and even more so after the stamp duty reductions. When consumers then breach their bid deadline, they find themselves in an impossible position. However, some lenders are friendlier than others and seem to have the ability to extend offers more than others.
The benefits of the 2020/21 stamp duty left those involved in the conveyancing and removals world under intense pressure and the stress levels encountered in 2021 were too high for many. As many qualified employees left their sector, it was a real struggle in the UK labor market to replace them. However, the plight of some transfer agents is compounded by the contracts they have signed with lenders to back the products with “free legals”. These are now the responsibility of the lender, resulting in a loss for the transferee given the recruitment costs and revised salaries in the market. The difficulty in finding staff means that many pipelines are clogged due to the problems faced by companies. It doesn’t serve anyone well.
Since Ami is independent, we discourage free appraisals and assignments. We believe this devalues other parts of the professional home buying and selling process. It trivializes something that consumers should see as offering real benefit and value. Cash back is a much better alternative, combined with greater clarity that the appraisal for mortgage purposes is for the lender only and does not belong to or be relied upon by the buyer.
As we move into the new world of consumer duty, it is likely to introduce the new requirement of the need to avoid causing “foreseeable harm”. This should cause all lenders to take a hard look at their product and service offerings and, alongside the new cross-cutting consumer awareness and understanding rules, prompt thought about what is on offer. The lender will need to be more certain that any third party with which it is associated in the support service, such as the transfer of ownership, has the capability and ability to deliver in a timely and efficient manner.
Most significant might be the challenge lenders might face in offering a product that is pulled with little or no notice, possibly subject to challenge as not being fair marketing. Finally, where the boundaries are drawn will be of central importance in discussions about the implementation of the consumer obligation. It will be up to the lender to articulate their own view of their product’s target and how their products offer fair value. It will be up to the brokerage firm to assess its own value proposition and decide if it believes in the lender’s overall value proposition.
What is to be hoped for is that the FCA clarifies that these structures; operate at the enterprise level; across the entire product set and that the rules of conduct in the individual reference books are the primary driver of product advice for individual consumers.
Robert Sinclair is CEO of the Association of Mortgage Intermediaries