www . simplybizmortgages . co . uk 17
Not quite , but now may be a good time to consider your options
Steven Howard
Head of Mortgage & Lending Intermediaries Compliance SimplyBiz
In 2007 , when the banking crisis and credit crunch hit us , many industry commentators talked about the need for industry diversification within the mortgage market . Indeed , a great many insisted that it would be imperative for mortgage brokers to diversify into and ensure that cross-selling of insurance and protection was paramount and at the forefront of adviser ’ s minds in order to ensure survival .
Advising clients to implement potentially invaluable insurance alongside a mortgage should now be second nature to most brokers , especially when considering the Insurance Distribution Directive ( IDD ) of October 2018 brought in a number of requirements that now apply to firms distributing insurance :
1 identify customers ’ insurance demands and needs [ 1 ] , and ensure that products offered are consistent with them
1 have in place product oversight and governance [ 2 ] arrangements
1 adhere to the customer ’ s best interests rule [ 3 ]
With regard to this ‘ best interest ’ requirement , it is clear the FCA has always expected firms to do what was right for their customers , but the IDD really put an emphasis on the need to act honestly , fairly and professionally in the customers ’ best interests at all times with an ongoing expectation that firms always focus on and meet this requirement .
Three years on from IDD and any firms that are either inactive or struggle with saturation / conversions within the protection and general insurance ( B & C ) arena should really be asking themselves in the strongest possible manner , whether they are acting in their clients ‘ best interests ’ by not giving this area of advice an appropriate level of emphasis .
This is only one consideration for diversification and many firms will already be heavily committed to delivering an appropriate and compliant protection and GI process , so what else could and should firms be thinking about during the present time ?
Well , as I have confirmed regularly over the last 12 months , lenders and their internal fraud teams are at pains to highlight they are busier now than they were at the height of the banking crisis and credit crunch of 2007 / 8 and it is evident that this situation is unlikely to change in the short term . Pressure will continue to be exerted on clients to demonstrate appropriate levels of income and affordability and this could undoubtedly have an effect on mortgage completion levels in 2022 .
Additionally , the furlough scheme , which protected millions of jobs during the pandemic , was wound up at the end of
September and as a result , the Government has stopped paying towards the wages of people who couldn ’ t work , or whose employers could no longer afford to pay them . Approximately one million workers were still on the scheme at the end of September 2021 and so many employers may have found out they cannot afford to keep them on post-furlough . Many forecasters ( including the Bank of England ) are therefore expecting a rise in unemployment rates in the short term .
Finally , we have also seen a ‘ Quarter 2 2020 ’ to ‘ Quarter 2 2021 ’ year on year rise in the number of County Court Judgements ( CCJ ’ s ) of 222 % from £ 66,474 to £ 214,120 with much of this huge percentage rise over the year being due to the fact that judgement numbers were artificially low in Q2 2020 . Government and regulatory measures such as creditor forbearance ( COVID payment deferments ) protected many households from the economic impacts of the pandemic , but as these measures have now ended and as we see the end of furlough and a return to some kind of ‘ normality ’, we should reasonably expect the figures to continue rising .
I don ’ t have the time and space here to consider what effect inflation and potential increases in interest rates could also have , but I would bet good money that this will be ‘ significant ’.