There's money to be made in these underserved specialties, suggest experts
Mortgage brokers are being urged to capitalise on what are perceived to be some of the most underserved markets in the industry.
Later life borrowers, clients approaching retirement and those seeking Sharia-compliant finance, are key areas which intermediaries can explore to generate new business, experts suggest.
While the market as a whole delivers impressive figures - the value of gross mortgage advances was £60.2 billion in Q2 2024 (up by 16.7% on the previous quarter), according to the Financial Conduct Authority - it is, of course, made up of a patchwork of specialties; each sector serving a different demographic, and each offering fresh opportunities for brokers.
Darren Deacon, head of intermediary sales at Family Building Society, believes the most underserved sector in the market is likely would-be borrowers coming up to or in retirement, who still require a mortgage and whose current term is expiring soon, but who may not know what options are available to them.
“Most of the major lenders still see later life borrowing as a niche area, but many of the smaller and specialist lenders offer a number of loans for these clients who may still need a mortgage,” said Deacon (pictured left).
“Brokers must be aware of the various options available to their customers in the market, not just to be able to satisfy the needs of their clients but to ensure their clients experience good outcomes to meet their regulatory requirements under Consumer Duty. It takes a lot of time and effort for brokers to find out what is available for the older borrowers. For those not already active in this market, the time and effort put in will prove to be fruitful.”
The over 55s represent the fastest growing demography as the population ages and lives longer, Deacon declared.
“This market will continue to grow,” he said. “There are over a million borrowers who are on interest-only mortgages with the end of their terms looming. Many have no repayment vehicles and dread the prospect of having to sell up and being forced to leave their homes. They need to be assured that in all likelihood they may be able to remortgage or take out a new loan.”
Deacon advised brokers to take the opportunity to meet business development managers from the smaller, niche lenders to learn more about the various ways in which they can solve clients' concerns.
“There are many products out there which may be more suitable than an equity release or a lifetime mortgage,” he noted.
How much potential is there in Sharia-compliant finance?
The Muslim population of the UK is 3.87 million, or 6.5% of our total, according to the 2021 census, and estimates suggest that financial wealth in Gulf Cooperation Council (GCC) countries is expected to grow by 4.7% annually, reaching USD 3.5 trillion by 2027.
Digital bank Nomo specialises in Sharia-compliant finance. Its senior business development manager, Zeenat Shaffi (pictured centre), considers that the UK is well placed to attract business from countries in the GCC, such as United Arab Emirates (UAE), Oman and Bahrain.
She believes affluent GCC customers, including UK expats, many of whom need to comply with Sharia law, have been traditionally underserved when it comes to property purchases in the UK market.
“This is changing,” Shaffi said. “There is clear commercial opportunity for the UK’s property finance market to improve its offering to GCC residents.”
Traditionally, those buying or investing in a UK property would need a UK address, identification and credit footprint to progress a purchase. Now, property finance providers who understand the issues traditionally faced by GCC investors can support these buyers from thousands of miles away, through the use of digital processes, Shaffi explained. She added that the most important thing a broker can do is work alongside a specialist provider with expertise and a track record of delivery in this niche.
“Without being able to demonstrate adequate knowledge of these principles, brokers risk offering unsuitable products to potential customers,” Shaffi said. “Learning to use the same terms as your potential customers, will demonstrate your dedication to understanding the cultural and regulatory nuances involved. You do not necessarily need specialist training. Contrary to some misconceptions, you do not need to have additional regulatory clearance."
READ MORE: Access FS teams up with Nomo Bank to offer Sharia finance
Are brokers making the most of later life finance?
Will Hale (pictured), CEO of Key, a specialist later life finance company focusing solely on the over 55s, believes the market is under explored.
“Apart from the small group of specialists that are regular operators in that space, I don’t feel the rest of the market has really tuned in enough to the opportunities that exist and the real requirement to serve its customers in that space,” said Hale. “There are approximately 16,500 mortgage advisers in the UK at the moment. About 9,000 of those hold the equity release qualification, but there’s probably sub-2,000 regular advisers advising on lifetime mortgages.
“I think a lot of advisers have looked over time to expanding their qualifications, but then probably have not utilised those qualifications because they feel that they don’t come across the profile of customers that need those solutions day in, day out. But, I would argue that maybe those advisers are not looking hard enough and are maybe not keeping up to date with the developments in the market that have made those later life lending products relevant to a very wide cohort of customers.”
There is plenty of support, tools and training for brokers available to get up to speed with the market, Hale said, including through its business AIR, a platform specialising in retirement financial solutions.
“We just need brokers to engage with the opportunities that are there for them,” he said. “Make yourself aware of all the products options available, and then make sure you equip yourself with triage tools to allow you to identify where certain products may be applicable for your customer - and then, if you don’t want to advise on this area yourself, make sure you have got a trusted referral partner that you can work with.”
