An Opportunity to Grow Your Business

I’m always looking for new business opportunities and for you to succeed as a mortgage broker, you need to be doing this too. Here’s a goodie for you with my compliments. Firstly there’s 3 issues facing us:

  • The mortgage business is in a bit of a lull at the moment and the home moving market pause is “stubbornly persistent” as the Council of Mortgage Lenders commented recently.
  • The Buy to Let market is weak following the introduction of the taxation changes at the beginning of the tax year.
  • Re-mortgages are up as more homeowners are being released from their pre-crisis mortgages now that there are lenders available to take a pragmatic view on underwriting compared to the “computer says no” regime brought in by MMR in 2014. Lending to the elderly is on the increase as well.

So, where’s the opportunity for us? The answer is Residential Development Finance. 60% of brokers this year have received enquiries in this area but the vast majority have no experience or expertise in the medium. Let me explain.

The Government’s White Paper on Housing suggests that nearly 60% of all new homes are built by just 10 big builders. They want to change this by encouraging smaller developers who they hope will use modern methods of construction to speed up how quickly homes are built. New methods are exciting, just google Legal and General and their house construction going on in factories the size of football pitches.

Back to these small developers because they’re our new target market. The White Paper positively encourages small builders to construct on small plots. Two or three property type plots not the huge one hundred plus developments from one of the big builders.

These small builders need finance. The Government have proposed setting up a national investment bank to lend to channel money to this sector but we can steal the game by gaining knowledge in this type of lending and help these builders to finance their projects.

Ostensibly, you borrow on the gross development value of the completed works and it’s possible to secure funding of up to 70% of this, giving the builder cash flow to construct.

Action plans for you if you’re interested, here’s a 4 step plan for you.

  1. Research this market more thoroughly.
  2. Pal up with some lenders who specialise in this area and make sure your sourcing software allows for it, if not, get it changed. Sourcing software is never a “done deal” – software should be controlled by humans not the other way around.
  3. Check your Local Authority’s Local Plans for development. The White Paper has shaken this up opening up smaller plots of land for building.
  4. Prospect your new customers. Google local builders, check out their associations – Federation of Master Builders – https://www.fmb.org.uk/ – you could even rock up at an event and do a talk on the topic. They run events and conferences regionally. If you’re nervous about public speaking, call me, I’ll help you, public speaking is my day job.

Remember running a mortgage broking business requires constant prospecting, the mistake is to expect business to roll through the door, it doesn’t.

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