How is rates uncertainty affecting borrowers' behaviour?

Broker says it's changing the way clients approach deals

How is rates uncertainty affecting borrowers' behaviour?

Uncertainty over rates is causing borrowers to hold off from committing to deals, and then trying to rush them through later, according to broker Daniel Emerson. 

Caplon Property Finance, which is an appointed representative of Rosemount Financial Solutions (IFA), sources the whole of market, having established relationships with private and retail banks and other financial institutions.

Emerson (pictured), who is director of Caplon Property Finance and a specialist mortgage adviser, anticipates that a rate reduction will generate a busier period for brokers, but suggests that compliance may make the process slower than clients expect.

Having started as an employed trainee adviser in 2012, Emerson set up his own business in 2015. He was keen to be in control of his time and the clients he worked with. 

“I entered the industry when rates were already low and then, for a long time, rates were stable or heading down,” Emerson told Mortgage Introducer. “The change to higher rates and what seems like less stability has impacted the attractiveness of borrowing for clients and made larger loans unaffordable for many.

“It seems that I am frequently checking Sonia swap rates and trying to interpret when the next short deadline to get applications submitted will be. The lack of certainty on rates has also led to clients tending to hold off decisions and then be in a real rush later on despite our best efforts to get them to act sooner.”

He said: “If rates come down then I think we will all be very busy. However I think that we are going to find more and more that the processes involved in advising on a mortgage and recording it for compliance are slower than what clients expect to receive in a world of AI, Open Banking and instant outcomes.”

What are the qualities of a good broker?

“I think a good broker has to care about people and be motivated by helping others achieve their property plans,” Emerson observed. “Being a good listener, hard grafter and a bit of a creative thinker also helps.

“The best thing about the industry is the amazing clients you meet, seeing their homes and learning about their lives. Being a mortgage adviser has really opened my eyes to lots of little-known professions and the huge amount of wealth that exists.”

Emerson believes transparency and equal access to lenders’ products is of the “utmost importance”.

“I don’t think broker exclusives are necessary as we are already adding value to clients, compared to going direct,” he reflected. “My main area for concern is that there shouldn’t be a scenario where a client has to go direct in order to make amendments like extending the term or switching repayment type, that a broker is prevented from making.

“I think it’s important to remember that we aren’t paid based on how busy we are but how effective we can be. Another point which is important for new advisers to realise is that unfortunately cases can fall away after you’ve done all the work and got everything right. There’s a lot of ‘uncontrollables’ in the house buying process and so you need to have a spread of business.”

Which key housing issues need addressing?

With an impending general election, Emerson considers the building of enough affordable and good quality housing stock a key priority for any government, incumbent or incoming.

“Simply making debt more accessible will not solve a housing shortage,” he said. “Honestly, I’d rather that politicians stay away from direct action in the industry. I don’t think they should be setting the case for 100% mortgages or changes to mortgage products if they do not understand the impact of this or how it would be implemented within the highly regulated environment we advise in.”

Clearly ambitious, Emerson is keen to expand his business by building a team of advisers on specialist protection, and financial advisers to service his existing client bank. But he undoubtedly values his time away from the financial services industry too.

“I have a great family, with three kids,” he shared. “All my time with them is precious and helps me switch off from work.”