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Challenges bring opportunity and brighter times lie ahead

Working within the mortgage industry for any length of time, you quickly learn that sentiment, outlook, and perspective can change quickly, and what appeared to be an environment which looked predictable for the medium to long term, suddenly looks anything but.

Advisers will know only too well the vagaries of working in this sector, one which is exposed to all kinds of influences, and which is predicated so significantly on ‘confidence’.

However, what this also means is that a mediocre month of business can often be followed by a record one, especially during a year when there has been so much market oscillation to contend with.

The recent results of a survey by Pepper Money – details here – reveal the adviser community is now expecting business volumes to increase in the next year, with 41 per cent expecting this outcome and 10 per cent saying they anticipate volumes to ‘increase noticeably’.

That certainly chimes with our own recent experience at Stonebridge and, after what may have been a difficult start to the year, we still hold a positive outlook for the rest of 2023 and into next year.

After a subdued Q1, and with April being impacted by Easter, May showed a really encouraging improvement in overall activity right across the board, with our purchase application numbers being significantly above forecasts, and remortgage/product transfer proportions being largely as anticipated.

This uptick in purchase activity will perhaps be a surprise to some, but it has been edging up over the course of some months. It is still difficult to say what the future will bring, for example, HMRC UK residential transactions for March this year were 26 per cent up on February, however the provisional figures for April were 29% lower than March. Swings and roundabouts.

Average loan sizes anything but average

For advisers, who are likely to have been relying extensively on remortgage and product transfer (PT) business this year, any sort of resurgence in the purchase market is clearly going to be significant, especially given the income per case that is typically generated from this business compared with refinancing.

Certainly, there are further positives here in terms of average loan sizes and how this translates into procuration fee levels. An obvious way in which advisers can sustain and grow income is via higher maximum loans delivering proportionally higher proc fees, and our data shows that Stonebridge firms/advisers are benefiting here.

Even with the dip in house prices we’ve seen over the last year or so in general, this doesn’t seem to be materially impacting on average loan sizes, where we’ve experienced a 6 per cent increase year to date, across purchase and remortgage specifically.

Product transfer cases are clearly more likely to be like-for-like, but even with this taken into account, and with PTs accounting for a larger share of overall business, we are not seeing the average loan size reduce. Quite the opposite.

With a larger average loan size, clearly the income per case often benefits both from proc fee but also from protection and insurance commissions, commensurate with the mortgage value.

It all adds up to the potential to earn higher income from each client, and certainly for new purchase clients, it can cement a relationship which should hopefully endure throughout their entire lifetime.

This is particularly relevant for first-time buyers who, it would appear, are growing in number, supported by prices gradually becoming more affordable, lenders flexing criteria, and the introduction of products like Skipton’s 100% LTV. Advisers who can win the business of first-timers at the start of their home ownership journey – with all their other financial services needs – can certainly benefit both in the short and long run.

Green shoots appearing

Overall, therefore, after what continues to be a challenging period, there are still shoots of optimism beginning to sprout.

The important point is to remind advisers to make the most of every opportunity and every client – firms who can do this and utilise all the resource and support available to them via networks like Stonebridge, are the ones who are likely to have the very best year of it. I’m certainly confident of that.

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