News Review: Specialist Prime


Assessing the lie of the land by


Colin Snowdon chief


executive, residential mortgages, Aldermore


How many of us can remember the days when we bought car insurance from a friendly high street insurance broker? Yes - this article is already starting to sound like something from history, isn’t it? So, what happened to those long-standing stalwarts of the uK high street who used to provide us with cover for our cars? The answer is that most motor insurance brokers fell victim to that pioneer of car insurance telesales: direct Line, a business which has subsequently been much copied. The ‘coup de grace’ came for car insurance brokers when the internet comparison websites entered the market: moneysupermarket and the rest. Today, the only people who use high street brokers for car insurance are those with unusual risks or car fleet requirements.


Under pressure Perhaps one of the most tangible signs of a tougher market is that the number of mortgage brokers has fallen from approximately 30,000 to 12,500 over the past few years. What’s more, there is currently concern that the FSA’s plan for the individual registration of brokers may result in the number falling still further. Some in the industry are predicting that broker numbers may eventually end up below the 10,000 mark. You may argue that, in contrast to these gloomy


statistics, is news from the intermediary


mortgage


Lenders Association that brokers currently account for almost two thirds of all new mortgage lending. Santander, one of the giants of the uK mortgage market, estimates that 80% of its business is done via intermediaries and Nationwide, another leading player, says 60% of its lending comes from brokers. Brokers therefore continue to play a pivotal role, but in a much smaller market. unfortunately, it’s also a


fact of life that the number of lenders who distribute mortgages via brokers has fallen, as has the number of mortgage products available to brokers.


Broker centric


if you take the mighty Santander and Nationwide out of the equation, there are very few lenders who can be described as truly broker- centric. A number of traditional lenders who supported specialist


intermediary


businesses in the past, like the West Brom, have closed down and withdrawn from the intermediary mortgage market and others, although they do continue to make products available via brokers, have a confused attitude towards intermediaries. This confusion has manifested itself in the form of dual pricing and service levels which sometimes, i’m sure many brokers will confirm, have been less than satisfactory. This apparent lack of interest


in intermediaries is being driven by two related factors. Firstly, as brokers know only too well,


6 morTgAge iNTroducer JULY 2010


some lenders have cut back dramatically on their lending volumes and are not keen to encourage new business and secondly, those with high street branches have an over capacity issue to address. research by the Association


of mortgage intermediaries shows many high street branches are operating at less than 50% capacity. That’s a real problem which cannot be allowed to persist and, as we’ve seen already, the way many financial institutions will choose to address that issue is to give their branches preferential treatment: cut- throat mortgage deals available via branches only. most brokers have known for a long time that being able to offer a whole of market proposition is no longer possible. it’s also worth remembering


that although Santander, which currently has a 20% share of the uK mortgage market, is the uK’s largest intermediary lender, it is not particularly intermediary- focussed in other parts of the world. The reality is that Santander inherited a broker focus almost incidently when it acquired Abbey, Alliance and Leicester and Bradford & Bingley, all of which have now been rebranded Santander. This is a bank which wants to create a global consumer brand and its long-term commitment to brokers cannot be taken for granted. don’t misunderstand me, i’m not saying for a moment that Santander is thinking of pulling out of the uK broker mortgage market but neither can brokers take it for granted that they will remain committed to intermediaries.


What affect will the likes of


Tesco,Sainsbury’s and Virgin. These companies all recognise that the mortgage market is in a weak and vulnerable position and they smell a profit-making opportunity. There is no doubt that they will make a move on the mortgage market and their impact will be significant. unfortunately for brokers, the likes of Tesco and Sainsbury’s will almost certainly market their products direct to consumers; i don’t see a role for intermediaries in their new business strategies. Brokers who dismisses supermarkets and high street retail brands as not being a significant threat are, i suggest, deluding themselves. So, in summary, the number of brokers has reduced to a third of its pre- credit crunch level; many traditional lenders don’t need or want the additional distribution opportunity that brokers represent; branch- based lenders have already demonstrated that they will favour their own distribution networks; the number of lenders and products available to brokers has diminished significantly; and the mortgage market is under threat from a new breed of ‘super-brands’ who have big marketing budgets and big ambitions. And to cap it all, the mortgage market, housing market and economy are all in the doldrums with little prospect of any immediate upturn. So, it would be easy to conclude that the future looks bleak. However, i’m pleased to report that just because brokers are down doesn’t mean that they’re out of the game for good.


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