With residential property sales in the UK reaching a six-year high in the final quarter of 2013, thanks to less stringent mortgage lending conditions and a rapidly improving housing market, many people would say that now is a good time to be an estate agent. But does the same ring true if you’re looking to be marketing mortgages?

The latest report from the Royal Institution of Chartered Surveyors (RICS) showed that the volume of UK homes sold per surveyor has doubled since the depth of the housing market downturn, with 21 sales per agency branch recorded in Q4 2013. This was the highest number since March 2008, and up from just 9.8 in January 2009.

Peter Bolton King, RICS Global Residential Director, commented, “The housing market is starting to thrive once more. Sales are at their highest level in almost six years and this is being reflected right across the UK.”

The increase in sales has added to the growing supply-demand shortage in the UK, driving up property prices in the process; another attractive proposition, in one way, for estate agents. During December, a net balance of 56 per cent more RICS members reported growing property prices. Significantly, every area of the UK saw prices increase with London and the South East experiencing the biggest leaps.

Sue Foxley, Cluttons’ Research Director, like various housing experts, is not surprised to see property sales and prices rising.

She said, “The residential property market reaching the highest number of homes sold since March 2008 is a result of easing credit conditions in higher loan to value mortgages as well as an imbalance in supply and demand.”

CHEAPER MORTGAGES FUEL CONFIDENCE

There can be little doubt that this recovery in the UK housing market is fuelled by the fact that mortgage lenders, supported by initiatives such as the Funding For Lending Scheme and Help to Buy, have loosened their purse strings in the past year or so in efforts to improve the quality of their future mortgage book.

“The market is reaching the highest number of homes sold since March 2008 as a result of easing credit.” Sue Foxley, Cluttons

Some mortgage deals are on o er at enticingly cheap rates, by historical standards, particularly to those with healthy deposits.

David Newnes, Director of LSL Property Services, said, “Borrowing conditions have eased, which combined with a range of attractive mortgage deals, has caused flocks of buyers to dash back to the market. Lenders have been key and clearly they are now more willing to lend to high LTV borrowers, which in turn has led to a substantial rise in first-time buyer activity.”

The latest figures released by UKMortgages’ quarterly product data analysis show that mortgage rates have fallen by as much as 32 per cent over the past 12 months.

For instance, a two-year Tracker mortgage is down from 2.49 per cent to 1.69 per cent, while a two-year fixed rate mortgage at 60 per cent LTV is currently available with an interest rate starting from just 1.48 per cent.

Mark Lofthouse, CEO of UKMortgages, comments, “There’s no doubt that the drop in interest rates, when compared to this time last year, will be welcome news to today’s potential homebuyers or those currently looking to remortgage their property.”

CONSUMERS ON THE MOVE

The latest report from the Council of Mortgage Lenders reveals that gross mortgage lending was an estimated £17 billion in December 2013, which represents a 49 per cent rise on the £11.4 billion recorded in the corresponding month last year and the highest total for a December since 2007. This brings the estimated total for 2013 to£177 billion, up from £143 billion in 2012.

“Short-term growth prospects for the housing market and the wider economy look very positive,” said Bob Pannell, CML Chief Economist. “Mortgage lending was stronger than we expected in the closing months of 2013.”

“A good volume of agents will earn a decent level of income by simply sending a broker an email with the buyers details.” Alastair McKee, One 77

He added, “While some of these gains reflect Government schemes, the rationale for the positive narrative is a much broader one, reflecting such factors as the improving economy and jobs market, consumer confidence and competitive mortgage deals.”

And the brokers agree. Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), says that it’s clear that switched-on consumers made the most of opportunities offered by Help to Buy and historically low mortgage rates to get their homeowning dreams back on track.

“As the market picked up, so has demand for higher loan-to-value (LTV) mortgages. Bank of England data shows an increased willingness among lenders to support buyers with small deposits, as the number of products at LTV ratios greater than 90 per cent doubled in 2013,” he says.

The Help to Buy mortgage guarantee has helped normalise high LTV mortgages and prompted lenders to offer 95 per cent mortgages regardless of their participation in the scheme. A stronger housing market and easier access to funding has transformed consumers’ chances of securing mortgage finance.

“In many ways 2013 represented a sigh of relief for consumers restricted by the stale housing market of recent years. Lending conditions significantly improved, particularly benefitting first-time buyers, while affordability and responsibility have become industry buzzwords. Initial concerns over an over-heating market were put to bed by the Bank of England, who demonstrated their power to intervene through the removal of Funding for Lending, and the market is primed for even further growth in 2014.”

The availability of attractively priced mortgage finance is the key to driving positive sentiment with 92 per cent of respondents to Zoopla’s latest consumer confidence survey stating that they felt prices would be the same or higher in 12 months time.

Lawrence Hall of Zoopla.co.uk commented, “Across the country, homeowners have started the New Year far more positive about the health of the property market. Early indicators suggest that we can look forward to a busy first few months to 2014, as current levels of confidence are likely to fuel more transactions.”

The growing availability of mortgages has not only released some pent-up demand from a market that, in recent years, has seen many viable buyers unable to enter the market, but it has also provided estate agents with an
opportunity to earn additional income from mortgage brokers in the form of referral fees.

Referral fees

A large segment of the mortgage finance industry is commission based. Consequently, it is not uncommon for mortgage brokers to pay referral fees to estate agents in order to generate more business.

Alastair McKee, Director at One 77 Mortgages, estimates that around 50 per cent of a mortgage broker’s business will typically come from estate agents.

“A good volume of those estate agents will earn a decent level of income each month for simply sending a mortgage broker an email containing information about a buyer, including their name, email address and telephone number, enabling us to qualify them [the purchaser] and find them the best mortgage deal,” said McKee.

McKee reports that the agents can generally expect to receive a referral fee of in the region of 25 per cent of the overall deal, which could potentially equate to well over £100 per successful recommendation.

“Based on a £150,000 mortgage, a mortgage broker can expect to earn around £525, which should see the agent receive just over £130, said McKee. “Make no mistake, mortgage referral fees can be a good money earner for some estate agents, especially if they can secure multiple deals each month. It could even help a company pay for a member of staff’s annual salary.”

Missed opportunity

Despite the potential to earn additional revenue, McKee estimates that around 60 per cent of smaller independent estate agents “foolishly” fail to refer business to mortgage brokers, losing them potential added income in the process.

McKee continued, “The fact that all the big estate agency firms have in-house mortgage brokers shows that they recognise that mortgages are a big money-spinner. Yet, far too many smaller independent companies think that it is not possible to financially benefit from this sector of the market, perhaps due to a lack of time and resources, when in fact they could add an extra string to their bow, and boost revenue in the process, by offering clients a mortgage service. This could be made possible by simply teaming up with an external mortgage broker, in what would be an easy money-maker for the estate agent.”

And there are other benefits too, given that the successful estate agent is one who doesn’t just talk the talk, they get the deal done, says McKee, “We boost lending by properly qualifying prospective buyers to ensure that they are in a position to secure a mortgage, aiding a property sale and protecting the agent’s commission in the process.”

“Offering a mortgage service can also act as an instructions winner, as it can reassure vendors that all prospective buyers will be properly vetted by a mortgage broker. The benefit of having a buyer properly qualified is that fewer property sales are likely to fall through.”

Could mortgages be good for you?

With the UK economy continuing to improve and unemployment levels falling, many experts expect the UK mortgage market to strengthen further in 2014, with gross mortgage lending set to hit close to £200 billion. Clearly, this presents plenty of opportunities for proactive estate agents to earn a high level of referral fees from mortgage brokers in the process. How much is achievable is ultimately up to you.

Contacts:

• Cluttons www.cluttons.com
• Council of Mortgage Lenders www.cml.org.uk
• LSL Property Services www.lslps.co.uk
• Mortgage Advice Bureau (MAB) www.mortgageadvicebureau.com
• One 77 Mortgages www.one77fs.co.uk
• Royal Institution of Chartered Surveyors www.rics.org
• Zoopla www.zoopla.co.uk