Picture the scene. Your client is looking to remortgage their existing loan, has enjoyed the last 10 years on the lowest interest rates since records began in 1694, when rates stood at 6%. Their current deal ends shortly and they don’t want to revert to their lenders Standard Variable Rate. You organise a search of good deals for a 5 year fix and discuss the numbers with your client over a coffee.
Typical situation, nothing unusual at all, except the monthly payment is more than the amount they are paying currently, so they push back, even though the increase in minimal.
They say they’ll probably just go back to their existing lender and switch products. “Its too much hassle” they add.
Here’s some ideas to handle this situation:
All reservations or objections should be dealt with early on rather than letting them surface later when its often too late. Bring up the issue in your early conversations with the client.
If the issue is an increase in the monthly payments compared to their existing deal, then start a discussion around this. Mention in the last 10 years since the financial crash, most mortgage payers have enjoyed rock bottom interest rates and many people, like yourself, have become used to them. Continue the discussion around your reasons for rates increasing over the next few years, lenders know this so fixed rates are higher than a few years ago and SVRs are floating around the 6% mark.
You might want to hand a calculator to your client so they can see what the payments could be at the maximum stress rate, say 6%. Take their views on this which will be extreme alarm. See how they feel about a slight increase now to prevent larger increases later. Take their views on this early and it’ll pre-empt them for the higher monthly cost later.
No one knows what will happen with rates but everything is pointing to higher rates, consider:
- Our Chancellor of the Exchequer, Philip Hammond, reported that a Brexit deal will cause a bounce in the economy, as companies and individuals complete their spending plans, which they’ve been holding off with the current uncertainty.
- Inflation will pick up as the economy heats up. The Bank still has their target of 2% inflation so will put up rates to dampen this.
- QE has finished now, this will charge up rates, it’s happened already in the USA, and the Fed’s rate is currently 2%, pretty much where ours should be.
- There’s huge pressure on wages at the moment as we enjoy full employment, wages rises cause price increases as companies compensate.
- The Living Wage uptake is slowly gathering pace. Amazon announced this week that all their UK workers will be put on the minimum Living Wage (£10.20 in London) rather than the minimum wage. More and more companies will be doing this as public pressure increases
Say the issue is a small saving in their monthly payments and the challenge is the hassle involved in remortgaging for such a small saving. Sometimes mortgage advisers may think it’s a “no brainer” to remortgage and expect the client to agree straight away. Here they can be very wrong since the client fears or dreads the change.
You’ll need to deal with the change problem early on. Explain that it is hassle to remortgage, but you’ll take care of all the paperwork and liaising with lenders and so on, you’ll not have to worry about all of this.
The final idea is to change your own mindset on this issue. You see when clients object or push back when you’re presenting your advice, it often means they weren’t right for your advice in the first instance. I’ve seen brokers rather too keen for the business and forget to qualify the client.
Qualify, qualify, qualify early is the motto to reduce objections later on. Is the client motivated to remortgage, do they have ability to make the payments and be approved and finally, do they have the need to do so. I call this MAN – motivation, ability and need. Remember to check this early on and if in doubt about their motivation to proceed with you, challenge them early.
You could persuade them otherwise, of course, with the usual methods but you could try reverse psychology here. Say “I understand Mr Brown, that my services are not right for everyone, my clients are precious to me but I’m not always a fit. Maybe, just maybe I may not be the right person for you.”
Now wait and gauge their reaction. Many clients will totally disagree with you and will assert the fact they would like to work with you. You’re making your service rare and scarce, people want it more then.
Human nature is to say that you are a fit and they really need your advice
If you really want to bring the bacon home and are personally convinced of the value of your service, picking up some subtle sales ideas will reap dividends.