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MIp18-19_0110:MI 12 Jan 15/12/2009 14:11 Page 21
Distribution | 19
Kensington’s recent expansion and re-entry,
lenders are also being particularly focused
For mortgage advisers the
about the distribution they use with limited
numbers of distributors being trusted with new
product lines. This is a mortgage market where important point to recognise is that,
manufacturers are adopting a much more
circumspect approach to intermediary lending;
in particular where new lenders are looking to
while there are positive signs, the
control the acquisition cost of distribution like
never before. Those who have been away from
the market, such as Kensington, will clearly
market is still likely to be restricted
have taken the time to understand the costs of
using differing distributors and are extremely
for some time yet.  For every
keen to only use those distributors who can
deliver the very highest quality and value. The
days of lenders having to deal with every
rumour of 30 or so new lenders
distributor are long gone – limited and
controlled distribution is the order of the day
particularly for any lender dipping their toe waiting to enter the market, the
back into the market.
Higher LTV
reality is that the usual suspects
While we have seen small steps back to higher
LTV lending, it is unlikely that we will have a
glut of 90%-plus products any time soon,
continue to dominate
particularly from new lender entrants. It is
pleasing to see a growing number of 85% LTV
deals, however, low risk remains the name of been a prevalent factor in the all areas of those involved are now far better informed, and
the game for lenders; LTVs will continue to financial services, for example, the number of I would say clearer about their objectives for
remain proportionally lower not least of all mortgage networks now trading is far removed the future.
because of reduced capital adequacy needs, but from the raft of players who first sought AR
even there risk tolerance remains low. While a principle status back in the heady days pre- and Innovate
number of lenders have announced 100%-plus post-‘M-Day’. From a peak of 70/80 networks Firms will need to continue to adapt, change
deals for existing borrowers who want to move we are now left with 20 or so propositions. and innovate combining these skills with the
but have fallen into negative equity, these types Consolidation in this area is only likely to no-doubt solid management focus on cost and
of deals are reserved for those who the lenders continue as, by my money, there are still some income ratios which have seen them survive
deem to be the cleanest of the clean. In a very networks that are not fit for purpose and this recession. Those in charge do need to play
true sense the Credit Crunch continues to hit running on empty. This decline has also left a to their strengths, however I would warrant
lenders and they have had to respond with a particularly nasty taste in the mouth leaving that diversification has played a major part in
whole new set of lending metrics. For this many ARs worried about the financial stability many firm’s survival; if the bread and butter of
reason we should not expect any meaningful of their own network. Any network showing the mortgage market does return it is
return to specialist lending opportunities be signs of financial difficulty results in serious important that they continue their
that sub-prime, buy-to-let or self-certification – reputational damage and even if the diversification work not just to maintain the
whose very survival depends on the FSA’s say- management are able to show strength in this income stream but from a compliance point of
so post-MMR. area, mud often sticks and AR firms are likely view where firms have a duty to manage their
By now advisers should be used to the new to be worried at best or at worst looking for a clients needs in these areas in the future.
‘rules of the game’, including the tighter lending new Principal very quickly. Firms should also not be afraid to continue
market, and their position within it. Those In effect, the number of mortgage to seek out new opportunities but the focus as
who have survived will already know that the distributors – be they intermediary firms, always must be on thinking and planning
old ways of conducting business no longer networks, packagers or mortgage clubs - has carefully before offering advice and products in
suffice; indeed if the firm has been conservative shrunk dramatically and it seems inevitable a new area. Initiatives must be targeted and
in both its outlook and deeds then it is unlikely there will be further squeezing in the sector at selective – a scattergun approach is no good;
to still be functioning. Official statistics are not least for the short-term. From the broad this is where firms should look for ‘ready made’
plentiful but as lenders were forced to fall out industry perspective this is sad news and, with opportunities that distributors like Paradigm
of the market so advisory firms have followed. regards to advisory practices, many may now can deliver with little start-up cost or fuss.
It was estimated that prior to ‘M-Day’ mortgage feel that this represents a lack of access to Recognising that mortgages is not the only fruit
adviser numbers sat around 40,000. Today the advice for the Great British public. A key on the tree is the first step that allows firms to
number of mortgage firms trading is objective of the RDR is to create greater access look at the breadth of opportunities in the
significantly lower and estimated at nearer to to financial advice for consumers, and one has marketplace; it also mean various other income
12,000. to question if post-RDR there are likely to be streams are added which all adds up to
sufficient numbers of advisers to deliver quality, delivering a sustainable and profitable
Consolidation professional advice to the UK consumer. That business. The market is not what it was,
It is not just firms being unable to keep trading said, in the mortgage market there is still a neither will it ever be the same again; moving
as going concerns that have seen the number of sizeable intermediary distribution arm for with the times is vital and there is no better
advisory practices shrink. Consolidation has lenders (new and old) and in particular all time to start than the present. January 2010 Mortgage Introducer
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