Insurance Leads Mortgages 16th April 2010

With so many changes to the mortgage market since 2007; the demise of competitive intermediary products, the loss of adverse credit, self cert mortgages and packagers, it has certainly been a time where Darwinian adaptation has been vital in terms of survival.

These changes are nothing new, the there are for example many, many instances of now obsolete products and services. We no longer tend to use VHS tapes and CD players, many people don't even use their landline for phone calls now. On the whole we don’t dress the same, have the same hairstyles or eat the same food as we did ten years ago. Now obviously some are still attached to the old technology and fashions and there is nothing wrong with that it’s just not so easy to run a business that way with an ever dwindling client base.

One broker told me a story the other day of a milk man who drives down his street at 7am every morning delivering milk to no more than two houses in the street. He was using this analogy to demostrate that brokers have failed to adapt to the brave – or in terms of lending – timid new world.

Those intermediary firms who have managed to continue and even prospered over the last twelve months have done this mainly by selling protection.

Of course mortgage advisors have always offered life insurance alongside mortgages, or at least a large proportion of them have.  Often though this hasn’t been done in a very committed way. Having pondered this at great length - well maybe while sipping coffee over breakfast - it occurred to me that there are at least two main reasons for this. Firstly, it’s more work and let’s face it in the glory days if you’d just pocketed an £800 proc fee, taking an early one for a round of golf might seem a lot more appealing than dealing with more paperwork. The next problem is people “want” a mortgage – or rather they want either to buy a new home or they "want" to reduce their mortgage payments. So there is a juicy carrot dangling in front of them. Selling mortgages is more about convincing Mr and Mrs Client to use your brokerage - they are sold on the product.

With protection there isn’t a means to an end, it won’t allow you to get the lovely new home or save you enough for a fortnight in the Maldives, protection is generally something you don't want to have to use. So insurance is something that very often needs to be actively sold – pushed rather than dangled.

Survival in the world of mortgage advice has meant that it isn’t easy to recommend broker only mortgages that have larger fees because either the client will find out you're not offering the best rate or the nagging feeling of guilt that you know there are better deals that available will make life uncomfortable at very least.

So a successful strategy adopted by brokers who have kept going is to offer advice which will include recommendations of direct to lender deals, probably with a fee - and sell protection as part of the package. Let’s face it, certainly at the time of writing the usual difference in the cost between intermediary mortgages and direct mortgages will more than pay for a very decent level of cover.

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