From order taker to educator – the ever-evolving role of the mortgage broker
Ashley Pearson, National BDM at The Loughborough for Intermediaries
Financial literacy is the cornerstone to building wealth. It gives people the confidence and ability to make smart decisions when faced with financial choices by providing them with greater insight into how to budget, save money and avoid getting into debt.
Having these skills has never been more important than in the current economic climate where fast-changing interest rates and rising living costs are forcing many people to reassess their household budgets as they learn to prioritise financial demands and make some sacrifices along the way.
Recently, I was invited into a local pre-school to talk to 17 three-year-olds about how to save money and I started by giving the children a Loughborough Building Society piggy bank and four pence each. I also had some sweets for sale at a rate of two pence per sweet.
The children were given free rein on how to spend their money and could either save the four pence with opportunity to gain another four pence; buy one sweet, save two pence and gain another two pence; or buy two sweets and spend the lot.
Unsurprisingly, 10 children spent all their money, but seven chose to hold back leaving them with the option of purchasing some bigger sweets at four pence each. At this stage, six of the remaining children decided to spend all their money on the larger treats, leaving them with nothing. At the end of the game, only one child had money left and had managed to turn four pence into 16 pence by saving her money.
The experiment taught the children an extremely valuable lesson about basic money management skills and though it had to be simplistic given the children’s age group, the underlying message about the importance of saving money was clear.
Conducting this experiment made me think about the importance of financial education in schools and why basic money management skills such as savings, debt, tax and mortgages should be taught in the classroom. It also made me acknowledge the current changing financial landscape and its impact on the role of the broker from order taker to educator.
Over the course of the last 15 years, historically low interest rates meant mortgage deals were plentiful and finding a suitable product for the majority of clients was a relatively simple task. However, in the current climate, this is no longer the case and brokers are having to work harder than ever before to secure a good rate for their clients in a rapidly changing and frustratingly volatile mortgage market.
Brokers are also having to manage and reset the expectations of many of their clients about why operating in this new normal means their money may not go as far as it once did and how this may impact their homeownership aspirations.
Conversations like this can be very difficult, particularly if a basic understanding of the fundamentals of finance is lacking. As the initial point of contact for borrowers looking for a mortgage, brokers have involuntarily become the educator, which means they’re under more pressure to help borrowers understand every single aspect of their finances and how it relates to their mortgage application.
As lenders, we have a duty to step up and support brokers in this new role by seeking out ways to help customers understand the basic principles of financial literacy and mortgage borrowing. Brokers come to us to discuss the best solution for their clients, so working with brokers to identify the challenges they’re facing and any gaps in consumer knowledge is imperative.
Like many other building societies, Loughborough Building Society plays an active role in the community and was established with the aim of helping people in the heartlands to save money and buy a home. While this ethos still rings true today, my recent visit to the local pre-school reminded me of the importance of giving back to the community and highlighted the ongoing responsibility of the industry to ensure that we educate consumers on all aspects of finance.
While instilling these values early can help to lay the foundations for more financially savvy consumers in the future, for those borrowers currently facing an immediate increase in their monthly mortgage payments, the industry needs to find ways to educate consumers on changing mortgage dynamics and the impact of this on their finances going forward. And the intermediary market remains at the forefront of this.