News Review: Specialist Prime


Food on the table for resourceful brokers by Charles


Haresnape, managing director, residential mortgages Aldermore


given the volume of mortgage lending has fallen by two-thirds since the onset of the credit crunch it’s no surprise mortgage brokers’ income has taken a battering over the past few years. to compound the problem


brokers are also reporting that they’ve seen a reduction in the income they earn from each product sold. a recent report published by datamonitor confirmed that 70% of brokers say they earned less commission per product sale in 2010. the report pins the blame


for falling commission levels on lenders, saying they no longer have the same incentive to maintain high proc fees in a market in which they have less appetite to lend. the report also says that most brokers believe that over the next twelve months intermediary share of the mortgage market will either fall or remain the same as this year. the reasons behind


brokers’ falling income are not difficult to understand. a shrinking market and less commission income make it tough trying to earn a decent living. and unfortunately the council of mortgage Lenders is forecasting that 2011 will, in gross mortgage lending terms, be very similar to 2010. Brokers


therefore


have every reason to be pessimistic about the future.


Keep your chin up the danger with statistics is that they often treat markets as if they are homogenous entities but, as brokers know only too well, the mortgage market is anything but. From a broker’s perspective there are several sectors of the market which have traditionally generated the majority of their income and none more so than the remortgage market. in 2008 remortgaging accounted for just under half of all new lending and three-quarters of all remortgages were generated via intermediaries. By comparison during the final quarter of 2010 remortgaging accounted for less than a third of all new lending and brokers’ share of that market had slipped to just over 50% - an unwelcome double- whammy.


remortgaging, which


formed the bedrock of many brokers’ business plans, has therefore been badly hit. But there are reasons for brokers to be more optimistic about the future prospects of this important market.


connells recently


reported that remortgage valuations increased by 52% month on month in February and even more encouragingly increased by 107% compared to the same period last year. now we all know that mortgage applications and valuations don’t necessarily translate into completed cases but increases of this magnitude are an encouraging sign for the future.


Rates will rise Why a renewed interest in remortgaging? Because borrowers are coming to terms with the fact that Bank Base rate is likely to rise this year and it therefore makes sense to secure a competitive mortgage deal whilst they’re still available. there is also no doubt


that lenders have started to offer more competitive deals, with LtVs rising and criteria becoming more accommodating. no wonder that a survey conducted by the mortgage alliance has confirmed that 88% of directly authorised brokers say they expect to see an increase in remortgage business this year.


Lending revival the buy-to-let market has also been an important cornerstone for many brokers businesses but in common with other sectors of the mortgage market has been hit by the downturn. the good news is there has been a steady revival with gross lending figures rising every quarter to £3bn by the fourth quarter of 2010; a year in which the cmL confirmed the sector grew by 7%.


mortgage brokers have


always accounted for the lion’s share of buy-to-let lending and there is no reason to believe their influence will change in the future. Buy-to-let is also another sector where lenders have improved the competitiveness of their products and increased the number of products on offer. We’ve seen a number of new


lenders enter the market, with a number of established lenders promising to do likewise during the year ahead. even in those markets


which have been hardest hit by the downturn, such as the house purchase and the first time buyer markets, brokers have reasons to positive. Sure, the volume of house purchase business has fallen from a high point of £157bn to £77bn last year, but brokers’ share of that market has remained remarkably robust.


Value service in the fourth quarter of 2006 brokers accounted for 54% (by volume) of house purchase business; at the end of 2010 that number was only marginally lower at 52%. Likewise, the first- time buyer market has shrunk from £48.6bn in 2006 to £23.3bn in 2010, but brokers’ share of the available market has fallen only marginally from 68% to 62% over the same period. consumers clearly value the specialist service provided by brokers. there has been much scaremongering that the days are numbered for brokers but i don’t believe it for a second. Brokers always have and always will play an important part in the mortgage market and many have worked hard to replace lost income via insurance sales and other ancillary services. i have no doubt that the mortgage market will enable brokers to put food on the table for some time to come.


mortgage introducer APRIL 2011 25


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