The UK mortgage landscape has seen no shortage of turbulence in recent years, but there are signs of some green shoots of recovery.
According to the Bank of England, mortgage approvals reached their highest level since the September 2022 mini Budget in July, while the Bank’s August rate cut helped to buoy spirits.
Swap rates, although still fluctuating, have also stabilised significantly since the worst of the recent volatility.
Yet, the impact of the higher cost of living, elevated interest rates, and the mini Budget has been felt by some mortgage brokers. According to the Financial Conduct Authority (FCA), revenue from mortgage broking fell by 13% in 2023.
Despite the improving economic outlook, consumer confidence remains low, with GfK’s latest Consumer Confidence Barometer falling significantly in September, and the instability of recent years has demonstrated that change can be swift.
In this dynamic environment, diversifying can help brokers to future-ready their business through creating new opportunities and supporting resilience.
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The specialist customer opportunity
The growing cohort of specialist customers and under-served segments in the mortgage market offer brokers an opportunity to add new products and services to appeal to new customers.
As Kensington discussed in a webinar earlier this year with Fred Hicks, senior policy adviser at IPSE, self-employment is on the rise again for the first time since the pandemic. IPSE estimates that there are now 4.2 million solo self-employed people in the UK, many of whom are under-served by the traditional mortgage market.
Other specialist segments that could present new avenues for growth include buy to let (BTL), first-time buyers, and people who have previously experienced a small credit blip.
Increased demand for specialist lending solutions among the latter demographic could be likely, with almost a third of people (30%) missing payments on key household expenses in 2023, according to the Money and Pensions Service.
Harnessing the internet and social media
Optimising channels of communication and enhancing digital presence can also help brokers to diversify and attract more borrowers.
Websites or social media channels are often the first port of call for customers, with research from McKinsey and Company revealing that 72% of customers begin their mortgage journey online. Adding client testimonials and information tailored to specific customer segments to your website can be a great place to start.
Brokers can also build an audience on social media by sharing updates and useful insights. Being taggable can help new borrowers to easily find you and proactively asking clients to leave reviews through platforms such as Trustpilot or Yelp can help to build your reputation online.
The upshot
While there are signs that the mortgage market may be turning a corner, in the face of sustained uncertainty, diversification can offer brokers a path to additional income streams and greater resilience.
By considering the best strategy for their operations, brokers can better navigate market conditions and foster long-term growth.
