Four years ago there were just over 1200 mortgage products available and, in the depths of the credit crunch as we were then, hardly any of them were specialist lending products. Now, according to Moneyfacts there are currently 5,238 mortgage products and that doesn’t even start to list the various commercial, bridging and other specialist lending products available.
The FCA dictates, rightly, that a broker has to give advice on the right product for each client’s circumstances and attitude to risk, but what chance does a poor broker have of advising a client appropriately when there are just so many to mortgages to choose from?
This becomes almost impossible when asked to advise on a case that you may see once a month at most. Most brokers are very competent with your regular, low LTV, residential mortgage or simple buy-to-let because it’s makes up the bread and butter of most brokers’ businesses, but what happens when you come across a complex buy-to-let with multiple properties or ones in non-standard buildings? What about a borrower with multiple income streams or other irregularity, maybe someone that has been rejected by most of the mainstream lenders? Or how about someone looking for funding to refurbish a property before selling it on? How confident could you be then of providing absolutely the right advice?
There are three options in such a scenario: 1. You turn the client away because you can’t help them; 2. You advise them to the best of your ability and hope that you’ve given them best advice; or 3. You seek expert guidance from a specialist who knows this sector of the market really well and can help you achieve a positive outcome for your client.
Of course, I would suggest that you take the last option, not just because I’m passionate about this area of lending but because it makes sense on every front. If you’re not a specialist in an area it makes sense to get help from someone who is. In the same way that you would get an accountant to do your accounts, or a lawyer to advise you on legal issues, it makes sense to use an expert in specialist lending if you’re faced with such a case.
With the Mortgage Credit Directive just around the corner it will become increasingly important to show that you have considered every option available to the client. It makes sense to start considering all of your options now to ensure that you really do give every client the best advice they can receive.