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Definition of the marketplace
The UK mortgage market place is strongly polarised. At one end there are clients who fit the mould sought by high street lenders and in doing so can attract the best deals and rates within the market. At the opposite end of the scale, we have clients who do not conform to the high street lenders' requirements.
"Non-conforming" mortgage lending is a specialist sector of the market. The world of work is changing. Eight and a half million people are in less secure forms of employment. Temporary and contract workers, divorced men and women, single parents and those suffering illness can all experience poor credit ratings through no fault of their own. While at the same time High Street Banks are excluding more and more people as they increasingly make use of inflexible computerised credit-scoring techniques in the drive for cost savings. Non-conforming lending can, therefore, provide short-term bridging measures to allow borrowers to prove their credit-worthiness. They are also a tailored product for the self-employed, consultants and others with irregular work patterns.
UK consumer debt, including mortgages, is anticipated at a total of one trillion according to recent figures from the Bank of England. Money owed on credit cards, mortgages, loans and overdrafts reached £993bn in May 2004.
Within the mortgage market re-mortgages of existing homes/properties comprise the largest single element (over 75% of all mortgages).
Current market climate
Since September 2007 and mainly due to the Sub Prime lending problems in America, the UK mortgage and secured loan market has seen a steady decline, already dubbed "the credit crunch", it's impact is now more widely spread and I doubt if any industry in the UK will be completely immune to it's effects.
The biggest impact comes from the lack of understanding and confidence from world wide investment in the sub prime mortgage market. Mortgage lenders and
providers are finding it difficult to secure long term borrowing at a cost that was previously available to them, and in some instances their funding has been
completely pulled.
A situation that has hit the headlines is the dilemma of Northern Rock, a dilemma that has hit many companies and lenders since the onset of the credit crunch
and on almost a daily basis news is being received within the industry press of lenders closing, retracting their products, tightening their criteria or increasing
their rates.
It doesn't take long for a situation like this to hit the ordinary "man on the street", with mortgage rates steadily increasing and with only a quarter of the mortgage products now available in comparison to this time last year, many people are finding that they are coming out of a low rate fixed term period to find that the cost of acquiring a new mortgage has significantly increased and in some cases, especially in the sub prime market there are no products available at all.
As a result of this people are now stuck with a mortgage that they can't afford anymore, repossessions are set to dramatically rise this year as the situation compounds itself with people being forced to rely on credit cards, overdrafts and loans to supplement their income. The property market is being flooded with homes for sale but with mortgage costs increasing, first time buyers are decreasing and inevitably this will lead to a fall in house prices which could see a return to the negative equity situation that arose in the eighties.
Before we look at the opportunities we must first understand the weakness of our competitors, many brokerages have enjoyed a buoyant market over the past few years and have seen large profits, as a result of this they have moved into large premises in prominent positions and have many staff, in short their fixed monthly costs are at a level that is becoming increasingly unsustainable and for many this has resulted in the cessation of trading as income received is insufficient to cover these costs.
For every brokerage that closes, their clients become our potential customers, the market is now full of potential clients who previously had somewhere to go, but now haven't.
Due to the "credit crunch" being more pro actively publicised in the national press and prime time news, a small element of panic is sweeping the homeowners of the nation, homeowners who are all now clamouring for a solution to this problem.
At Fortune Networks we could see what was happening months ago and in a positive reaction to a negative market, we decided the most efficient way to run a brokerage in the present climate was to keep costs to minimum, by developing the most highly advanced system available in the current market we are able to offer our franchisees the ability to work from home in a "virtual office", to be able to sell mortgages without the need for qualifications and to earn a good income based on how many hours you want to work and when you want to work them.
We know there are market problems, but because there are a lot fewer competitors coupled with the fact that there are millions of people who can't just go to their own bank to get a mortgage anymore, the market is once again wide open for brokers.