In her first blog Emma Green, Head of Intermediary Sales, takes a look at the changing mortage market, what this could mean for your business and asks 'if not now, then when?'
Your business is changing. The popularity of mortgages with an initial term of five years overtook two-year deals for the first time in Q4 2017, according to the Paragon FACT Index, and longer-term deals now account for 45% of all business. This compares to 2013 when 5-year initial terms accounted for just over 20% of the market.
It’s a significant shift in business cycle and, with more clients tied into five-year products, you can no longer rely on the traditional two-year rhythm of remortgage business to deliver a regular income.
For many clients, a longer-term fixed rate mortgage represents best advice for their circumstances, so how can you look to replace the regular remortgage income to which your business has been accustomed?
In two years, there will be some clients, for whom you would ordinarily arrange a remortgage, who are still less than half way through their initial term, and to prevent a hole in your income in the future, you need to think about your options now.
One way of building a robust income stream alongside your mortgage business is by having a conversation with all of your clients about general insurance.
Unlike a mortgage proc fee, which is a one-off payment every few years, the income from a general insurance sale can be earned every year, while the policy remains in place.
A typical general insurance case takes around half an hour and the average commission is just over £80 each year. If the policy stays in place over the course of five years, this adds up to a total payment for that half hour’s work of £400.
What’s more, as the commission is paid out each year, total earnings can quickly add up in year two and beyond.
The latest Mortgage Market Tracker from IMLA found that advisers write an average of 90 cases per year. If you were able to make successful general insurance sales on around 40% of mortgage completions, just three submissions a month, you could expect to earn around £3,000 in commission in the first year and then each year those policies stay in place.
Assuming you make the same number of general insurance sales in year two, even factoring in some client attrition, you could expect to earn around £6,000 then £8,500 in year three and so on.
The cumulative effect of general insurance commission quickly adds up and delivers real embedded value within a business as future earnings can become more predictable. Over the course of five years, total earnings from doing just three cases a month could be more than £40,000.
At Paymentshield, we make it our business to make it easy for you to incorporate general insurance advice as part of your business and have made significant enhancements to our proposition in recent years to improve the experience for you and your clients.
These include the launch of Adviser Hub, which gives you full transparency and real time information on how their book is performing, interactive resources to help ongoing development and stimulate conversations, and further investment in our sales team to provide you with all of the support you need.
We've a carefully managed panel of insurers, all selected to provide you with depth of coverage and affordable, accessible options for your clients.
This panel also means that we are able to provide an auto-rebroke facility, which means that if your client’s policy increases by 2.5% or more at renewal, we will automatically rebroke that policy across our panel to try to find the client a better price or better cover, providing you and your client with peace of mind that they won’t be penalised for loyalty.
The shift to longer term mortgage deals is happening now and it means that you could miss out on proc fee income. Use this as a stimulus to include general insurance sales into your advice process and you could find that you build more consistent income and embedded value within your business.
If not now, then when?
Got a question for us about General Insurance, our proposition or this blog? Ask away!