Are advisers prepared for a more complex homebuyer? – Singh

The ‘new’ Burnham-led government has made clear it wants to increase housebuilding, including more council homes, rather than retreat from the challenge of increasing housing supply. At the same time, the Financial Conduct Authority (FCA) is examining how mortgage rules might allow lenders to serve more creditworthy borrowers who have historically found it difficult to fit standard lending criteria.

Its recent consultation considered greater flexibility for people with variable or irregular incomes, older borrowers and those with previous credit problems, alongside changes involving interest-only and later life lending.

All of this could increase the number and range of people able to buy homes, which should be welcomed, but I think there is another question the industry needs to consider alongside it. What happens to the rest of the transaction when the mortgage market becomes more flexible?

Getting the mortgage is only the first part

We understandably spend a great deal of time discussing whether lenders can accommodate borrowers whose circumstances fall outside traditional criteria, but simply receiving a mortgage offer is not the objective for somebody buying a home because they still need to exchange and complete.

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As access broadens, advisers may find themselves dealing with more varied client circumstances alongside transactions involving gifted deposits, family support, shared ownership, new-build incentives and other schemes designed to help people purchase. None of those automatically creates a difficult conveyancing case, but neither should we assume a more accommodating mortgage market will produce entirely standard transactions.

The same applies if government introduces new initiatives to support its housebuilding ambitions. There has already been speculation around future first-time buyer support and whether some form of Help to Buy successor might eventually emerge, although we should be clear that speculation is all it currently is.

History nevertheless tells us that schemes designed to make purchasing easier can create additional legal requirements, sometimes many years after the original transaction. We are seeing precisely that now with increasing numbers of Help to Buy remortgages.

Specialist mortgage advice deserves specialist legal support

This raises an important point for advisers because considerable effort can go into finding the right lender for a client whose circumstances are less straightforward. Having done all that work, it makes little sense to then treat the conveyancing recommendation as though every firm is interchangeable and simply select whoever happens to produce the cheapest quote.

A new-build purchaser may benefit from a conveyancer regularly handling new-build transactions, while shared ownership, Help to Buy or other specialist circumstances may require different knowledge and experience.

This is one reason why we have always believed matching the client and transaction to the right conveyancer matters so much. It is also why experienced account management remains important alongside technology, because advisers need to understand which firms are best placed to handle particular types of work and their capacity to do so. As the mortgage market broadens, I suspect that ability becomes more important rather than less.

Advisers can make themselves central to much more than the mortgage

There is another development worth considering here. Recent FCA data reported by Mortgage Solutions showed a slight increase in non-advised mortgage sales. It would be wrong to read too much into a small movement, particularly given how important advice remains within the mortgage market, but we should certainly watch whether it has the potential to develop into a longer-term trend.

That matters because the regulatory direction is also towards giving firms greater flexibility around how they interact with customers, with changes already made to make it easier for consumers to remortgage with a new lender and discuss mortgage options without automatically triggering regulated advice.

If technology, regulation and lender processes eventually make it easier for some straightforward borrowers to arrange mortgages without advice, then advisers need to consider where they want to position themselves.

If the entire client relationship consists of arranging a mortgage every few years, any reduction in intermediary mortgage business could present a problem. However, advisers have the opportunity to place themselves much closer to the client’s wider financial and housing needs, supporting them with protection, insurance, surveys and conveyancing while remaining involved throughout the transaction and beyond. That is a much harder relationship to replace.

More opportunity should increase the value of advice

There is an interesting combination developing here, because parts of the mortgage market may become simpler for some borrowers while the range of people lenders can serve becomes broader and potentially more complex. For advisers, I see opportunity in both.

A government that wants more homes, a regulator seeking wider mortgage access and lenders developing solutions for different borrower circumstances could create significant amounts of new business. However, we need to think beyond how somebody gets to mortgage offer and consider everything required to get them successfully through to completion.

The advisers who can bring those different elements together, identify the right specialists and remain central to their clients’ housing and financial needs will be providing considerably more than mortgage advice. If the market is going to serve a broader range of homebuyers, that broader role could become one of the most valuable things advisers offer.