Why diversification is good for your (business) health

But diversity really can be good for the health of your business as a mortgage and protection adviser, particularly in a challenging market. And the market certainly remains challenging. Having contracted by 27% in 2023, the UK mortgage market is forecast to fall by around a further 10% in 2024 to £210bn. The shrinking market is not just a result of higher interest rates and the cost-of-living crisis making it harder for people to get onto and move up the housing ladder, but also an increase in cash transactions. In 2023, a record 54% of housing transactions were financed by cash, and that figure is set to rise to 58% in 2024.

So the bad news is, the total mortgage cake is getting smaller. The good news is that intermediaries’ share of the cake is getting bigger every year, growing from 82% of the market in 2022 to 89% this year, and set to rise to over 90% in 2025, according to the ‘New Normal’ report published by trade body the Intermediary Mortgage Lenders Association. But even this year’s rise in intermediaries’ share of business will not be enough to prevent the value of lending arranged by advisers from falling by around 6% in 2024.

As a mortgage adviser, there are many steps you can take, not just to prevent yourself from losing business in a contracting market, but to get ahead of the competition. These include clever marketing, using technology to enhance efficiency and fostering a positive workplace culture, for example. But diversifying into different product areas might be most effective key to genuine growth. Broadening the market sectors in which you operate immediately grows your potential pool of business. And one of the most promising sectors to consider at this juncture might just be the specialist market.

The size of the specialist mortgage market has mushroomed in the past 10 years, with some estimates suggesting this sector is now more than four times larger than it was in 2014. In that time, many people’s personal finances and borrowing needs have become more complicated along with their changing circumstances. The number of self-employed borrowers, people with multiple income streams and those with complex credit profiles has been growing for some time and accelerated during the pandemic. The difficult economic environment has certainly caused an increase in missed payments, with the number of County Court Judgements issued in the British Isles hitting a record 279,785 in Q1 2024, a 21% increase in two years.

As more and more people fall outside the standard criteria for mainstream mortgage borrowing, the demand for specialist mortgages - and the accompanying essential mortgage advice - looks set to keep rising. Advisers who do not currently deal with specialist cases may be wise to consider exploring the possibilities.

Indeed, the need for specialist borrowing solutions is likely to keep growing, even as interest rates fall and economic conditions improve, simply due to the changing nature of society, family structures and working patterns. Life is becoming ever more complex. Advisers who take action now to widen their skill set may be better placed to serve the increasingly diverse needs of their clients, both in the short term and into the future.