www.mortgagestrategy.co.uk ANALYSIS
In the past few years many
experts have tried to convince
us simple folk that equity
release is evil and that should
we deem to glance in its direction it
will turn our business empires to
dust.
In some ways these warnings
should not be taken lightly. Equity
release has had years of bad press
as a result of financially inept
individuals doing the numbers.
And some in the sector are
scared that the rascals selling
sub-prime deals will turn to this
new pot of gold and mess it up for
everyone.
The truth is that equity release
is no more complicated to
administer but its clients may
be less financially aware because of
age or illness, so robust processes
are vital.
Is there still a self-cert market
or are those asking for this
service just whistling in the
wind?
I had a conversation last week
with Association of Mortgage
Intermediaries director Robert
Sinclair and his opinion is that
self-cert provides a vital lifeline for
about 8% of the borrowing
population.
Ironically, those for whom the
self-cert industry was designed and
for whom its destruction would be
disastrous include some of the
MPs currently calling for its
abolition.
Many individuals with more
than one income, with high
bonuses or with any other unusual
earning patterns rely on self-cert to
buy properties they know they can
afford.
Our figures demonstrate that
Releasing brokers’
earning potential
TERRY PRITCHARD
DIRECTOR
CHASE CONSULTING
That’s not to say we shouldn’t be
looking at developing our client
banks – just that we should use
experienced professionals to do it.
Equity release is still a cottage
industry with nuances that make it
virtually impossible to understand
without having spent some time
working in the sector.
Before you rush out and take
your exams consider the following –
a client bank of 250 will yield six
qualifying clients and the total
market is about £1.8bn – about 1%
of the total mortgage market.
Marketing is specialist,
compliance difficult and training
and permissions costs onerous.
My regular column will aim to
help you integrate equity release
into your business because even as
a referrer you could generate
substantial income.
Self-cert remains
a lifeline for many
GRANT STEVENS
MANAGING DIRECTOR
LEADBAY
significant demand still exists – 9%
of all new enquiries for mortgage
advice are in the self-cert area.
There has been a 27% rise in the
number of consumers asking for
advice on self-cert mortgages in the
past year, with more than half of
these being borrowers who need
remortgages and are unsure where
they can find them in the current
climate.
The question is – can we help
these consumers before self-cert is
consigned to the history books?
We are living in a blame culture
in which we increasingly see
individuals trying to absolve
themselves of personal
responsibility.
That’s why it is encouraging
that there is still a product in
demand from consumers who are
prepared to take responsibility for
their own affordability.
As stagnation in the
property market
continues to blight the
land, consumers are
increasingly looking for
alternative ways to meet their
changing housing requirements –
ones that do not involve moving
home.
We have noticed that extensions
are being favoured over trading up,
renovation over relocation and
home offices are being developed in
gardens, or garages being
converted for this purpose.
Equity release continues to play
a vital role in financing home
improvements for retired home
owners. Survey after survey points
to a significant proportion of plans
being used for home improvements
and renovations.
These plans improve living
Collections and recoveries
staff are in huge demand
at the moment due to an
increase of nearly 800%
in arrears.
Between 2000 and 2007 there
were about 70,000 borrowers in
arrears. The forecast is that by the
end of 2009 there will be 500,000 so
it’s clear that banks and building
societies are facing a significant
problem when it comes to
resources.
Recent research published by
Fitch Ratings shows the average
experience of collections staff
deteriorated seriously between 2006
and 2008. In fact, it is now not
uncommon to see servicing
companies with collections teams
that have an average of less than
two years’ experience.
A recent recruitment campaign
we carried out targeting collections
The human face
of our business
JON KING
MANAGING DIRECTOR
HODGE LIFETIME
ALAN CLEARY
MANAGING DIRECTOR
EXACT
standards and have the potential to
increase the long-term value of the
properties involved.
A letter I received recently
reminded me of the human benefits
these plans can bring. One of my
clients took the time to set out a
detailed explanation of the work
she had undertaken with the
released funds.
This work included everything
from new shelves in the garage to a
summer house in the garden. Her
next project is to replace internal
doors scratched by a dog more than
30 years ago.
She finished her letter by
expressing the “great joy” she felt
at being able to repair and improve
her property.
This was welcome a reminder
of the human side of the tough
business in which we operate.
Good collections
staff required
staff saw all manner of applicants
believing they could make the
grade.
One example was a French
polisher who, on reading our
advertisement, suddenly realised a
career in collections was for him.
And in a similar vein, consider
the fish and chip shop worker
whose application form attempted
to convince us that his skills were
transferable.
Obviously, neither of the above
applicants got interviews as we
believe relevant experience is
important, especially in the
collections arena.
This country has not seen a
serious housing-related downturn
for some 15 years and lack of
investment in collections teams can
only exacerbate this problem.
Inexperienced staff is the last thing
we need.
MORTGAGE STRATEGY April 20, 2009 15
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