EXCLUSIVE: The role of the adviser has never been so important - Brightstar vlog

Rob Jupp, CEO of Brightstar, speaks to Steph Charman, strategic relationship director at Sesame Bankhall Group, about how high-quality advice has never been so important.

The interview took place on the 25th of August 2022.

Rob: How will the cost-of-living crisis affect mortgage underwriting? Will they have to underwrite cases differently?

Steph: I think we're starting to see this play through already. We don't know what the future holds and that's probably the underwriter's perspective. You're underwriting a mortgage for 20/25/30 years - what’s coming next? It's a long period of time.

What we're also seeing is that lenders are already changing their affordability models and some of them will be doing remodelling behind the scenes on a regular basis, and that has had an impact on affordability.

What a consumer could borrow in January this year will be very different to what they can borrow today, and that will have an impact on the mortgage market, on consumers being able to purchase a property or remortgage to the loan amounts they require.

Rob: If people struggle to borrow the same amount as they did six months ago, will that have a direct effect on house prices in the UK? Or will people go for a slightly smaller property instead?

Steph: Probably a combination of both. There might be an element of people having to revise their expectations, but advisers should be having that conversation upfront about their borrowing potential before they start looking so they're looking within their budget and a realistic budget has been set.

The flip side of that is will it have an impact on house prices? Yes, you'd expect some of that to play through. But the shortage of stock and continued high demand, even though it has become more subdued, should see house prices stay in a positive trajectory.

Rob: What are the key takeaways from the mortgage market over the past three months?

Steph: It has been a really challenging time and it has impacted all parts of the chain from consumer, to adviser, to lender.

Advisers are doing their best. They're sometimes having to talk to customers and make recommendations two or three times because products are removed at short notice. They're doing their best to package a case and get it in quickly, but when rates are going up by 35 or 40 basis points it is right to get a decision in principle and an application in to that lender and get that rate secured.

We've not worked in a rising rate environment for a really long time, probably circa 12 years, and it's incredibly fast paced at the moment, so offer validity period and focusing on that post-offer / pre-completion pipeline is really important. Making sure we don’t miss those offer expiry dates and valuation expiry dates is now really key.

Rob: When do you think, realistically, we'll see the volatility of swap rates calm down and start to see those rates climb back down again?

I think we are a long way off that. I was speaking to a lender just yesterday who had taken some products to pricing and in the couple of hours it took them to get those products signed off, swap rates had changed by about 45 bps so they couldn't launch that range. We've not seen this sort of volatility for a long time.

There's so many pieces playing through, I think we need a prime minister decision and then I think what happens off the back of that with the Ukraine war causing a massive impact on energy prices, I think it's going to be a period of time before we start to see any settling and possibly off the back of that, any rate reductions.

Rob: Which areas of specialist lending have the most potential for mortgage advisers in the next 6-12 months?

There's a significant remortgage maturity opportunity this year and into next year. One area I think advisers should consider as part of having a conversation is second charges. If you've got a product transfer, you should look at a product transfer and a second charge at the same time as a remortgage. It's consideration of what's right for the customer and whether they're looking at any additional borrowing.

Customer circumstances are going to get more complex and were getting more complex before we even entered the Covid pandemic. As we come out of the other side, you'll have people who experienced income changes, whether that's going self-employed or have taken Covid support measures, and then people who have experienced adverse credit. But there are a whole range of solutions put into place by lenders and that's an area that will only continue to grow. Advisers shouldn't be scared to try and help those customers and they're actually really loyal once you help someone who thought there wasn't a solution available for them.

Rob: How do you see the UK mortgage market playing out over the next 12 months?

Steph: You can answer that question in so many different ways. We don't know what the future holds - if I was sat in here January, I don't think I'd have said that this year would have gone the way it has. It's more complicated now than it's ever been and the place for advice has never been more vital. No matter what happens over the next 12 months, the role of the adviser and the role of advice has never been so important.