Mortgage - the dual pricing effect

Dual Pricing - what effect is it having on the mortgage market from a consumers perspective and what effect is it having from the mortgage brokers viewpoint? To give you an indication as to what dual pricing is we'll take a look at the dictionary definition which states that 'dual pricing is the selling of identical products in different markets at different prices.  In effect, in laymans terms, what the banks and lenders are doing is offering their most competitive products direct to the consumer themselves therefore negating the need to use intermediaries and mortgage brokers.

From the consumers perpective what do they do? They pick up their mortgage calculator, work out what repayments they can afford, go along to their bank, have that amount reinforced and bingo, if they meet the criteria they are given the mortgage.  Is this an advised mortgage though? Has the consumer thoroughly had their financial situation looked at by a skilled mortgage broker, or have they simply been offered the cheapest but perhaps not the best deal?  At a time when financial advice is needed the most, in the midst of an economic crisis, the consumer is not being provided the best truly 'independent' advice that can be offered.  The likelihood is that they will be 'sold to' by a bank adviser/salesperson rather than provided financial advice. The other likelihood is that they will also be 'sold' protection products that they don't need to achieve some target somewhere. Of course, there is the benefit of being provided a cheaper mortgage deal and to be brutally honest, although its not part of TCF, thats pretty much all the majority of consumers care about in the current economic situation.

Almost 70% of all mortgage business was introduced prior to the credit crunch and the introduction of dual pricing, so for the lenders to bite the hand that feeds them as it were, by negating the need for intermediaries and mortgage brokers throughout the difficult period was, silly, to say the least. Of course, the lenders were swift in stating that dual pricing wasn't a conspiracy however, most mortgage brokers will certainly remember which banks and lenders stood by them. The question to be asked is why the lenders would offer the same mortgage products through mortgage brokers if they are so poorly priced in comparison to the same product provided by them? Is it simply greed?

From the perspective of the mortgage broker, dual pricing, although in its 2nd year now, and expected to be a stealthy killer of the mortgage broker and the industry as a whole, has not yet destroyed the market as expected.  Many of the mortgage brokers we speak to have simply moved towards offering a more rounded financial advice offering, covering investments and pensions as well and the consumer appears in most cases to be responding. Although, to survive, many brokers are now providing a fee based mortgage service, it hasn't been to the absolute detriment of the mortgage industry, suprisingly. Every mortgage broker and intermediary has an opinion as to the validity of dual pricing and of course, it doesn't champion TCF in any way, shape or form but what the consumer has to weigh up is whether the lack of advice can be justified for a cheaper mortgage and for many, the reality is - it does.

Financial professionals report a market surge in property sales

Supposedly, the Property market is showing clear signs of recovery. What this signifies for the financial services industry and the financial advisory and mortgage advisory markets , it is too early to tell. Longer term stability in the financial services arena is still elusive and financial advisers and mortgage advisers will start to see a clearer picture I feel towards the end of the year.

The headline stems from the fact that, the Agency Express Property Activity Index,a measure for the property market in general, which is based on the use of 'For Sale' and 'Sold' boards across the UK is currently revealing that the number of 'Sold' signs instructed by estate agents last month rose to its second highest level since the same time last year.

The use of 'Sold' signs increased negligibly in May, although 1.2 per cent, compared to the previous month and a massive 123.2 per cent on December's low. March has been the only month so far to have a higher level.

The thing is, May's new 'For Sale' board activity was still significantly down, 44.6 per cent on May last year and 63.6 per cent down on May 2007 - the highest recorded month in the last two and a half years. So are we really seeing a significant recovery? Or is it just a dead-cat bounce? Mortgage advisers, I'm sure, will have their own idea's.

The Agency Express Property index has also reported a just over 2 per cent increase from April to May in the number of 'For Sale' boards being erected. Now obviously this doesn't mean that all those houses will convert to sales, however, it does give an indication as to the thoughts of homeowners and whether or not they are seeing a recovery.

This is the fourth month out of the last five that the number of new 'For Sale' boards has increased on the previous month. Personally I think that its more than likely wishful thinking on the part of the consumer, especially given the difficulties still faced in securing a new mortgage. You're going to find it hard to sell your house if the person trying to buy it is unable to secure a mortgage! Many financial advisers are reporting that its still virtually impossible to find lenders that will release money to people with a less than squeaky clean credit rating and less than a 40 per cent deposit - and lets face it, the amount of people that can raise that capital are pretty thin on the ground.

Regionally there are differences in the amount of boards being moved from 'For Sale' to 'Sold' with the largest increase coming from the affluent south east. Reporting a 26 percent monthly rise it is followed closely by Scotland with 23 percent. Conversely there are also regions that are perhaps not faring so well with increases in 'For Sale' signs but no convergent increase in 'Sold' signs and these include both the East midlands and London with Yorkshire next up.

Despite the still turbulent economy and the shaky lending practices some Estate agencies, mortgage advisers and financial advisers are saying that properties are still being sold and more so than they have been for the last 12 months and there are definitely more and more people that are deciding that this is the time for them to try and sell their house.

Also the Agency Express Property Index is confident that because their information is taken from the beginning of the house sales process that it gives a good indication of activity and the way the market is swinging, this will also be reflected further in three or four months time.

As a financial services recruitment consultant I certainly hope so. Any upswing in the financial services market is a good thing for us - it brings about movement in the job market and more jobs are created in the mortgage advisory arena particularly. Because of our focus this is the indicator we are more inclined to use as a more stable measuring tool of long term stability in the financial services industry and it will afford us a better picture of the financial services industry in general. The recruitment industry in this sector, have however, reported a small increase in the number of opportunities available for financial professionals across various arenas, seeming to indicate some sort of recovery across a wider area. We can only hope so!

Lead Generation

Whether you work as a financial or mortgage adviser or even, god forsake us, as a recruitment consultant in the UK financial services market, chances are you will have been approached by a  lead generator.  Usually its a company located in India or in some cases in the UK but it almost always consists of banks of cold callers who will pre qualify a lead, usually with a scripted questionnaire of inappropriate questions.  Most will take your money and run whilst supplying you with ridiculously poor leads that have once upon a time, maybe last year, asked about a mortgage or a bond or if a recruitment consultancy, a job.

A year or perhaps two year ago, how many business's needed to employ the services of a lead generator?  Most were basking in the warm glow of a booming economy and leads were coming from traditional means, referral and recommendation, networking, cold calling yourself even.  As business dried up so did the leads and now most firms, whichever segment of the financial services market they work in are finding that lead generators are a viable and most times valuable resource.

I think its very much dependant on the initial outlay.  Well qualified leads from outsourced generating companies can be expensive and the ratio for success is something like 2 or 3 out of every ten.  So, imagine if each lead costs 50 GBP, to get a good return you will need to buy a large amount and that means a significant outlay.  And how many companies these days have that money to spare?

I would suggest that even if its difficult to find, it could be money well spent.  With most organisations finding it hard to see where the next business is coming from, a source of well qualified leads from a well managed and reputable company are a lifeline not to be scoffed at. It does however require finding a good company to use.  Find out what your colleagues or your peers are using, get a recommendation and don't be afraid to contact these companies and ask to speak to companies that have or are using them.  If they are any good they will supply you with names.

In any case lead generators are here to stay and until the economy starts to resemble, once again, the boom times of two years ago they are a viable source of income.