Offering advice beyond the mortgage in the current climate

Last month I focused on my perception of an improved housing and mortgage market, and the opportunities that this might present to advisers if that positivity continued in the months ahead.

Needless to say, a considerable amount of water has flown under the bridge since then, however I still believe that the market has the potential to deliver across a number of areas but, as the politicians are prone to say, we have some considerable ‘headwinds’ to overcome before that can be realised.

The focus on high inflation, and what it is doing to interest rates in general but specifically swaps and mortgage product rates, undoubtedly feels like something akin to an existential threat at the moment.

And I’m sure that any existing borrower whose deal is coming to an end over the next six to 12 months, potentially longer, is sitting there scratching their head and wondering what the current product rate environment is going to mean to them in terms of their future mortgage payments, and the pound in their pocket.

To heighten the worry, this comes after a period when energy bills have rocketed, food inflation is running close to 20% still, and where day-to-day living costs are beyond anything we have seen for a generation.

No wonder we have the headlines screaming about new highs for average mortgage rates and how they compare to two/three/five years ago, and no wonder we have plenty of questions being thrown at the Government about what it plans to do to support borrowers who may well be struggling to find a new mortgage, let alone pay for one.

That is an area which shouldn’t be overlooked for existing borrowers – rate rises have made the affordability obstacle for many that much larger, and there is a real danger that some borrowers may be presented with the choice of SVR and little else. Although it is to be hoped that product transfers can take on a lot of heavy lifting for those borrowers who may not have the options they would like via a remortgage.

At the same time, and this feels a little like ‘perfect storm’ territory, we have lenders pulling a large number of products in response to big increases in swap rates and the need to maintain product range viability/profitability, which puts pressure on advisers to try and secure the better rates before they disappear altogether.

I won’t get into the debate around product withdrawal notice periods, but I have some sympathy for each side, not least because this has a certain element of feeling out of the control for both, with the caveat that lenders should clearly be doing all they can to give advisers as much notice as possible.

It’s a situation which places a huge amount of strain on advisers and their clients, and this ‘new normal’ that we often talked about during the era of ultra-low rates, has turned full circle into a mid-2000s ‘normal’, with average rates beginning with a 5/6%. For those who said the period of very low mortgage rates wouldn’t last forever, today proves them right beyond doubt.

What we also know is that over a hundred thousand households are coming to the end of their current mortgage deals every single month, not just this year but beyond as well, and they will need all the help they can get in terms of keeping – what seems like – a set in stone increase in mortgage costs, down to the absolute minimum.

Of course, advice is going to be absolutely vital for these people and, in that sense, there should be no let up from advisers in terms of offering their skills and experience to those who may not have used an adviser before, or who may be thinking they can walk this tightrope on their own.

Where advisers might also be able to numb some, if not all, of the pain of coming off these deals is through offering advice beyond the mortgage. A full, forensic look at their finances – specifically their outgoings – might present the opportunity for clients to save money in a whole host of areas, whether protection cover, insurance policies, credit card debt, energy costs, indeed any financial outgoing, plus of course advisers have the opportunity to save them time and money in ancillary areas such as conveyancing and legal services.

If you take as read a scenario in which the mortgage costs inevitably increase, then being able to fund that – even just in part – via savings in other areas through adviser consultation and advice, then you are at least numbing some of the pain, while at the same time still getting them the most competitive mortgage they can in today’s environment.

I suspect there will be many difficult questions to be faced and answered by both adviser and client, but the important point is that these conversations happen, the client trusts in your ability to help, and you can not only support them but ensure the ongoing profitability of your business as well. You both need each other, and we certainly need you to keep active in as many different parts of this market as possible.