The importance of actually connecting with customers

A mortgage usually requires a hefty deposit, and with the present state of the property market, many would-be purchasers may feel that owning a home is out of their grasp. However, astute mortgage advisers are using these obstacles to entry as a chance to teach and educate prospective homeowners, giving them the ability to make more informed decisions and realise their ambition of becoming homeowners.

By providing case studies, examples, testimonials, and real stories, advisers can help their customers weigh up their options, while still cementing that their financial journey is unique to them.

The importance of quality advice

The importance of quality, fair mortgage advice cannot be overstated. In an industry that deals with such large amounts of borrowing, the utmost care must be taken with our customer’s financial future.

This is especially important now, in such a volatile market. The following research, conducted by Mortgage Advice Bureau, illustrates the thoughts and opinions of prospective buyers when it comes to the mortgage industry.

Economic uncertainty, fuelled by high inflation and interest rates pushing rents and mortgage rates up, is the biggest barrier standing in the way of homeownership according to 42% of homebuyers. Saving for a deposit (32%), a slowdown in the housing market (27%), and being accepted for a mortgage (25%) also ranked highly as major obstacles.

Difficulties facing customers right now

Before addressing how customer education and connections should be established, it’s worth looking into how customers may be struggling in today’s climate.

Summer product withdrawals

According to data from Market Financial Solutions (MFS), 50% of individuals who have applied for a mortgage in the last year reported that their lender withdrew the product they wanted before they could secure it. The conclusion is based on an impartial poll carried out among 2,000 individuals in the UK.

31% of respondents had an agreement in principle (AiP) that later fell through, and a quarter of cases (25%) saw a loss of fees due to an unsuccessful acquisition.

Mortgage arrears

The second quarter of the year saw a 13% increase in mortgage arrears, and data from UK Finance shows that the number of homeowner arrears reached 87,930 - which is 7% more than Q2 2023.

We can likely attribute these increases to cost-of-living price squeezes and high interest rates, with 14 consecutive base rates placing pressure on budgets across the country.

Landlords and letting agents

In one of two updates earlier this year by the Competition and Markets Authority (CMA), a number of landlords and letting agents may not be following laws put in place to protect consumers. Practices undertaken by letting agents and landlords that may include a breach of consumer protection laws include, but are not limited to, contractual falsities, the offering of inaccurate information regarding their legal tenancy rights, and the non-disclosure of commission incentives.

To correct this, the CMA said they would be updating their ‘Letting Agents Guidance’ to mirror recent changes in property and lettings law.

How to treat customers fairly and educate them

Consumer Duty

The Financial Conduct Authority (FCA) introduced new guidelines to Consumer Duty regulations this year, with new rules in place to enforce a higher standard of consumer protection. Under the Duty, firms should be open and honest, avoid causing foreseeable harm, and support the consumer to pursue their financial goals. Consumer Duty is important, but we should be avoiding foreseeable harm to our customers as a matter of course, not because rules say we must.

It’s also worth noting that these new regulations are working to not only help customers, but educate them too. In a speech delivered in November of this year, Nisha Arora, Director of Cross Cutting Policy and Strategy at the FCA, outlined some of the benefits they have seen three months on from initial introduction. These include: firms simplifying language in materials sent to improve accessibility for vulnerable customers, firms being clearer on their websites about whether products ‘suit their needs’, and firms evaluating their fees with fair customer value in mind.

Mortgages

Intermediaries and other firms are introducing an array of tools to mortgage customers to help them better understand and capitalise on deals in the market.

Mortgage calculators are online tools that help individuals estimate their monthly repayments, affordability, Stamp Duty costs, etc., based on potential factors such as mortgage amount, interest rates, mortgage term, and household income. These calculators are valuable tools for potential homebuyers as they provide insights into the financial aspects of purchasing a home.

These calculators can support customers with their decision-making and risk tolerance when it comes to taking out a mortgage or a new deal.When we consider issues within the mortgage sphere itself, such as affordability and arrears, it’s vital that we’re clear with customers regarding the risks of taking out a mortgage.

Doing the right thing

Homeownership is a dream for many, and while climbing the property ladder can be a rewarding task for both advisers and customers, it’s imperative that we keep our customers safe. Be it market conditions, new product deals, or affordability assessments, we must always keep our customers’ financial wellbeing at the fore.

This is not because we have to, but because it’s the right thing to do. We may not be able to control interest rates, but we can offer impartial, valuable advice that keeps our customers safe in all markets.