On 3 August 2023 the Bank of England raised the base rate from 5% to 5.25% – its highest level in 15 years. The increase is intended to reduce the UK's annual inflation rate, which sits at 7.9% – well above the target rate of 2%.
Whilst few would disagree that inflation needs to be contained, the rising base rate unfortunately spells trouble for many of Britain’s homeowners and potential buyers, as banks and lenders pass rate increases onto borrowers.
Gordon Reid, LIBF’s Learning and Development Specialist – Financial Services, and John Somerville, Head of Financial Services, discuss how improving your qualifications and skillset as a mortgage adviser can help you provide the best possible service for your clients during these challenging times.
Why should mortgage advisers consider upskilling?
Any good mortgage adviser will of course be able to help their clients navigate the various products on the market, but as both Reid and Somerville note, the market presents a much more challenging environment today compared to recent years.
“Because of the stability of the market over the last few years, many advisers have no experience of the turbulent times we’re experiencing right now. Up until very recently, there have been a lot of what we call execution only transactions,” says Reid. “Even advisers who've been doing the job for decades, and may be familiar with some of the scenarios we’re experiencing today, won’t have dealt with them for maybe 15 years or more.”
“Additional development and training support an adviser’s ability to cope with something out of the ordinary,” he says. “It gives you an understanding of more complex situations and allows you to develop your skills to cope with them accordingly.”
“Mortgage advisers can't have a crystal ball,” adds Somerville, “but an advanced qualification enables them to make a highly accurate analysis of the current mortgage environment and then help a customer understand the ongoing implications of what’s going on.”
How an advanced mortgage qualification can add value for your clients
“Advanced qualifications get you looking at the bigger picture,” says Reid. “They give you more insight into the types of things that you should be thinking about and the types of questions you should be asking to ensure you can deliver the best possible outcomes for your customers.”
As an example, Reid notes that customers may be looking for deals that will alleviate financial pressure in the short term, without necessarily realising the longer-term repercussions.
“Customers may think switching to interest only will make life easier for six months. But do they realise that this means that either their payments are going to increase six months later to pay back what they haven't paid over that time, or the term of their mortgage will be extended? So instead of finishing at retirement age, they may end up paying it off well beyond retirement age or might have to significantly change their long-term financial planning?”
“Another important consideration is the implication for the borrower and lender in the event of non-payment,” comments Somerville. “What does that mean, and what are the different options available to somebody who is potentially struggling with their mortgage?”
“A skilled mortgage adviser will be able to fully understand the implications and how they will affect the client over the long term,” he adds.
Weighing up the risks and the importance of protection
Having an understanding of the wider economy, customer circumstances, and the different options available, means advisers can help their clients to better understand risks, which in turn helps them make more informed decisions.
“Customers need to understand the counterbalance of any risks that they're taking,” says Reid. “For example, they might pay an early repayment charge of several thousand pounds to switch mortgages but then in six months’ time interest rates have reduced anyway so they didn't really need to pay that cost. On the other hand, if they don't do that, then in six months’ time, will interest rates go up again and they end up not able to afford their new mortgage payment?”
“Of course, no adviser will say there’s a best approach for every single person,” adds Somerville. “But there's a lot of choice out there, and a balanced, highly skilled adviser will be able to bring up all discussion points, outline the arguments for and against and work through everything with the client.”
Another key consideration is protection.
“Those that are doing well with their mortgages may not have protection, yet they may be more exposed to risk than they realise,” says Reid. “This gives a highly skilled mortgage adviser bigger impetus to go back to those clients and say: ‘You can afford your mortgage now, but if rates increase will you be able to pay higher mortgage payments, and have you thought through different scenarios, for example, if something were to happen to the main breadwinner?’”
“An advanced qualification, such as CeMAP Diploma, looks at protection in greater detail – giving advisers enhanced capabilities to consider what protection options are suitable,” he continues.
Upskilling with CeMAP Diploma
“Having CeMAP will give you a really good grounding in how to make a recommendation based on customer circumstances, as well as a solid understanding of the financial services,” says Reid. “But it doesn't necessarily give you that in-depth understanding of how changes in the economy and changes in personal circumstances can dramatically impact on what the best advice is for a particular customer – that's the type of thing that CeMAP Diploma really helps them with.”
“It can also give you that additional knowledge, understanding and confidence to really be able to communicate complex issues effectively to your customers. It doesn’t give you all the answers, but it broadens your perspective on what's going on and by broadening your perspective it makes you more curious. You start to think: what else do I need to know?”
“CeMAP Diploma will give you more insight into the types of things that you should be thinking about and the types of questions you should be asking to ensure that you are delivering the best possible outcomes for your customers.”
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