Build the new, don’t fight the old – Mortgage Strategy
At the start of every year we see a flurry of articles predicting what we can expect in the months ahead. New trends that will emerge in our market, or new challenges and opportunities.
But if there is one thing that we have learnt over the past few years, from the pandemic to the war in Ukraine, to the ‘mini-Budget’, is that making predictions is a fool’s game.
Instead, I want to focus my efforts on what change we are already seeing in the mortgage market, and how we can turn that into opportunity in 2023. And the secret to adapting to this change is to focus our energy not on fighting the old but building our businesses to embrace the new.
Despite the challenges of Q4 2022, last year saw £109.5bn worth of completions through Legal & General Mortgage Club. This year the early signs suggest that things will begin to slow down, with UK Finance and Imla suggesting a smaller gross lending market in 2023 and 2024.
However, we must recognise the positives and the opportunities that this new market presents. An estimated 1.8 million borrowers are set to see their fixed rate end in 2023, so remortgaging will clearly continue to support against a quieter purchase market. There is already some proof in the data – SmartrFit search volumes have hit new records throughout January, and diaries for our digital valuations team are full once again. One swallow doesn’t make a summer, as the saying goes, but this is a good sign of healthy demand.
And despite predictions of ruin in the papers for the housing market, claims of property prices falling need to be put into context. Let’s remember just how much prices have risen over the past year alone. Data from Hometrack suggests it has been as much as 7.2%.
Embracing a new era
A move away from record low rates of the past decade means our market is in a transition, but this isn’t the only change we are seeing. A continuing shift is also taking place with technology.
Technology can play a huge role in helping to improve our market. Last year, we saw our industry face challenges to service levels, especially following the ill-fated ‘mini-Budget’. A result of this was product withdrawals and rate rises, not exactly a great customer outcome – let alone delays later down the journey with conveyancing adding to frustrations. I am hopeful that this will drive fundamental change in our industry so that the impact of dramatic peaks and troughs are lessened and ultimately customers get the best of us.
We plan to play our part, starting with the decision to take the technology remit out of Legal & General Mortgage Club and into its own home within our Mortgage Services business, enabling us to work not just with our own mortgage club business, but to help other clubs and their partners embrace technology too.
Embracing regulatory change
Perhaps the biggest shift for our market in 2023, even our working lives, is the Financial Conduct Authority’s Consumer Duty. Regulation is far from everyone’s favourite topic, but the key dates we all need to have ingrained in our minds are 30 April 2023 (when firms must have completed their reviews to enable them to meet the regulation’s four rules), 31t July 2023 (when open products and services must comply with the Consumer Duty and any remedies made) and 31 July 2024 (for compliance of closed products).
Our industry starts from a positive place, but there remains plenty to do before the first deadline. Many of us already meet the higher standards the regulation sets, but now it is a case of recording, measuring and proving those high standards we work towards. One aspect we must all remember, however, is that the Consumer Duty is not simply about individual transactions. This is the big picture work that matters, and about how we operate our businesses as a whole.
Embracing diverse leadership
With so many issues competing for attention, we must not lose sight of our mission to create a more diverse and inclusive mortgage market either.
I was delighted to welcome my colleague Clare Beardmore as Legal & General Mortgage Club’s first female director in October. This was long overdue but still a positive moment for the business.
But diversity in our sector cannot simply be prescriptive. We will all be aware of the figures. Ami’s Diversity and Inclusion report found that more than a third (37%) of women disagreed with the view that the mortgage industry attracts a workforce representing the diversity of our communities. That figure rose to 44% for ethnic minorities and 53% for LGBTQ+ respondents.
Not only do we need more women and minorities in senior roles, but we need to keep them there by fostering a culture that includes and supports all. We need more male allies, specifically more white, middle-aged men to do more to encourage diversity in our sector. Just as footballer Ian Wright spearheaded women’s football with a speech urging a lasting legacy following the Lioness’ victory last year, we must do the same in the mortgage market and the wider corporate world. It’s not just the right thing to do, but it will also put our market in a better position to overcome challenges like those we face today and grasp new opportunities in the years ahead.
I for one will continue to push for positive change and work alongside the great initiative spearheaded by both Ami and Imla under the banner of Working In Mortgages – Shaping the future – please join in.
Kevin Roberts is managing director at Legal & General Mortgage Services