BankingThe Future For Mortgage Brokers - Part 5
Mortgage Brokers in the UK
The mortgage broker industry in the UK has been negatively affected by the credit crunch more than any other country in the world, apart from the USA. The boom of the late 1990s and early 2000s officially ended in late 2007 when the credit crunch became a reality. The following few months saw the closure of hundreds of estate agents and mortgage brokers up and down Britain as the property market came to a standstill.
Lenders pulled products from the market by the thousand. It seemed that all that remained was products for existing home owners with lots of equity in the homes. This left first-time-buyers and home owners with little equity in their properties with no options for remortgages or new mortgages when moving home. The property market ground to a halt and the boom was officially ended.
In the meantime the Financial Services Authority was uncovering widespread fraud within the mortgage advising industry. Brokers were being suspended, fined, banned, and even jailed as sophisticated property scams were being unearthed. Through the investigations conducted by the FSA it was becoming evident that unscrupulous mortgage brokers were involved in activities designed to defraud lenders with loose lending criterion out of millions of pounds.
The combination of performing few checks on borrowers' credit histories, earnings etc and the ease at which properties could be overvalued by surveyors led to a situation in which brokers who knew how to play the system could apply for mortgages greater than the actual value of the properties they were buying. Those involved in the scams would purchase the properties with the majority of the proceeds of the mortgage and simply pocket the difference.
Needless to say the credit crunch and subsequent drop in the average value of property in the UK helped reveal such indiscretions. Individuals who had previously secured mortgages against properties over and above the true value of the underlying assets were now unable to remortgage their properties as surveyors were no longer overvaluing the same properties. While it should be noted that it was not only mortgage brokers involved in these scams, some brokers were and have subsequently helped to give the profession a reputation it does not deserve.
After the initial fallout of the credit crunch the property market in the UK has begun to stabilise. Net lending of mortgages is no longer plummeting and more favourable products are returning to the market. Borrowers are starting to be given more choice with regards to the products they can choose from which means that lenders are beginning to see some light at the end of the tunnel.
For mortgage brokers, this means that there are more products to market to their clients than there were a year ago. This is welcome relief for the industry but is nowhere near the level it was during the heyday of the property boom. It could be said that a return to those days would not be a good things for the property market and the mortgage profession because the crash has helped to uncover and weed out inefficiencies in the industry.