Helping Your Clients During the Cost of Living Crisis

The current financial landscape is looking bleak for many people. With the increase to the Bank of England base rate, the subsequent rise in interest rates for borrowers, the hike in energy prices and the cost of living crisis taking hold, everyone is feeling the pinch and looking to save money where they can.

No one can know for sure, but many industry commentators believe that this will soon have an impact on the mortgage market. Higher interest rates will make mortgages more expensive. This, coupled with the rise in the cost of living, could make it more difficult for customers to get a mortgage as lenders scrutinise their outgoings more closely to assess affordability. Although house prices are still rising, some experts are predicting a crash in the near future, which could lead to some home owners falling into negative equity, forcing them to delay any plans to move until the market recovers.

The value you provide as a mortgage and protection adviser is even more important now. In this blog, we’ll look at some of the opportunities that are available to generate business and help your clients navigate these challenging times.

 

1 – First time buyers and home movers

The number of home movers fell by 35% in the first half of this year, compared to the same period in 2021, according to research done by Halifax. This apparent drop is perhaps slightly skewed, as there was an increase in purchases last year, largely driven by customers making the most of the Stamp Duty reductions. But with the demand for housing outstripping the supply, there are still plenty of people wanting to move to a new home and many more looking to get onto the property ladder. It’s likely that these buyers will want to make their purchases before mortgage rates increase any further.

This puts you in the perfect position to seek out these potential clients. Your service proposition is key. Finding the time to make appointments and applications, uncertainty and confusion about which mortgage is right for them, and the fear of having an application rejected, are all worries that can weigh on a buyer’s mind. And you, as a whole of market mortgage broker, are in a unique position to help ease those worries.

You will be able to search a wider range of providers than the customer will have access to if they were to go it alone. With your experience and knowledge, you will know where best to place each particular case, increasing the chances of getting the application approved first time. You can advise them on which mortgage product best suits their individual needs, and guide them through each step of the home buying process.

And remember, you don’t just say goodbye to these clients when they move into their new home. Your supportive and responsive service will cultivate a new relationship and lead to further business. As a minimum, there will always be the opportunity to arrange a remortgage and review the client’s protection needs on a regular basis. And don’t forget to ask for referrals – the happy home owner you’ve just helped to get a mortgage will certainly recommend you to their family and friends.

 

2 – Remortgages

As interest rates rise – with some commentators predicting that the Bank of England base rate will go to 2.5% by the end of the year – many customers will want to secure the best possible rate before their current deal comes to an end. Don’t wait for the lender to get in touch with your clients – contact them before someone else does and make an appointment to discuss their remortgage needs.

It’s common practice for brokers get in touch with their clients a few months before their deals are due to end, so that the new mortgage can be arranged in plenty of time. But in today’s climate, it might be worth getting in touch earlier. Although no one has a crystal ball, it seems that interest rates are only heading one way – and that’s up. Can your clients afford to wait until the end of their deal to fix in a new rate?

It all depends on their individual circumstances, but in some cases, it might be better for a client to exit their current mortgage deal early, even if it means incurring an early repayment charge. The benefits and savings made by getting a good deal before rates increase further might outweigh the cost.

It’s likely that some your clients will be watching the rates rise and worrying about what will happen when they have to remortgage. This gives you the opportunity to give them some reassurance, and some proper guidance and advice to help them find the best deal.

 

3 – Second Charge Loans

Some customers will want to raise further capital but they might have a good mortgage deal in place, and be worried about losing their rate if they remortgage.

This is where a second charge loan comes in. There are still some misunderstandings about this type of product and some customers might not even be aware of them, but with a second charge loan, your client can keep their mortgage in place while they raise the money they need.

The regulator expects you to consider whether a second charge loan is suitable when advising your clients, but that’s not the only reason for you to have second charges in your toolkit. It will allow you to provide a solution for a greater range of customers, especially those with complex needs. And as interest rates go up, it might become more difficult to justify a remortgage if it means putting the customer onto a higher rate – a second charge loan solves this problem.

Credit card borrowing in the UK has seen its biggest increase since 2005. Many households have become reliant on credit to bridge the gap between their wages and their increased outgoings. As rates rise and further borrowing becomes more expensive, this debt is likely to become a problem for many. A secured loan can be used for debt consolidation to pay off their debts, simplify their finances and reduce their outgoings.

There are many home owners who have no plans to move house, preferring instead to improve the home they already have. The past two years have seen many people convert spare rooms or attics into office spaces, in order to work from home, or to build extensions and improve their gardens to make the most of their current property. These types of projects are likely to continue, along with improvements to increase energy efficiency, such as double-glazing and insulation, given that another rise to energy price gap is coming in October. A second charge loan is perfect for home improvements projects, allowing your client to borrow the money they need, often over a shorter term when compared to a remortgage.

 

4 – Protection policies

When you arrange a mortgage for a client, you’ll automatically look at their protection needs in relation to their mortgage and recommend that they take out policies like life assurance, critical illness cover and income protection to cover the costs if things go wrong.

But as the cost of living crisis continues, you might have to have a conversation with your clients to encourage them to keep the policies they already have.

Some people won’t see protection as a priority, and as a result might reduce their cover or even cancel the policy to make some monthly savings. Although this might relieve some short term financial pressure, this could have devastating consequences to them and their family should the worst happen.

You will have to reassure these clients, and explain to them the importance of having suitable protection policies in place. Statistics about the incidence of cancer and heart disease in this country paint a gloomy picture – it’s highly likely that the majority of people in the UK will be affected by these illnesses at some point in their lifetime.

It’s worth thinking about other insurance policies that could be useful for your clients. There now 6.6 million people waiting for NHS treatment. As a result, many are seeking to speed things up by going private. A suitable private medical insurance policy could help them get the treatment they need and cover the costs.

 

5 – Expand your service offering

As well as continuing to provide great value with your existing service offering, think about areas outside of your current skillset. One area that has seen a rise in demand in recent years is later-life lending. Many older home owners need to release equity from their home to fund their retirement, pay off debts, make home improvements, or give gifts to family members as part of a “living inheritance.” The need for lifetime mortgages and suitable advice is certain to continue, and is likely to be a growing market.

You’ll need to have an appropriate qualification to give equity release advice, but it will be money and time well spent – providing this service could make you stand out from your competitors.

 

Over to you

I hope this blog has helped you to see some new opportunities available in these difficult times, or just served as a little reminder. If you want to discuss this topic further, give your dedicated account manager a call – they’re always happy to help you find ways to develop your business.

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