Slater Hogg across to MI because we now have a place where those sorts of firms which need to be independent can sit under our own scheme. “So am I in the market to buy more ARs? Absolutely I am and where would they go? We’d fit them into MI.”


BIgger and BeTTer It seems as though Mortgage Intelligence is the first in a series of acquisitions Stockton has planned for Countrywide. Just this year the firm has been linked with various potential deals including Savills Private Finance and Personal Touch Financial Services, though neither came off.


“For the right money I think everything is up for sale bar Legal & General and Sesame,” he says. “The issue is the money. Frankly the industry is littered with undercapitalised, non-scaled firms. ”The mortgage industry is currently a £130bn-£140bn market. When it was a 280bn market everyone could survive, everybody could eat, everybody was fine. In today’s half sized market smaller firms have to work much harder to maintain market share.”


Industry estimates on the number of


brokers still surviving vary but most agree that numbers have dropped to roughly a third from around 33,000 to 10,000. “You’re getting this firm merging with that firm and that firm merging with this firm and all the time it’s all about a cost cutting not a revenue growth play,” explains Stockton, who thinks cost cutting is only half the acquisition strategy. Diversification is also key.


“The concentration on protection and General Insurance has made a big difference to firms,” says Stockton. “You have to look at total cost per transaction and total revenue per transaction. Get the mortgage and then make sure you get your GI, make sure you get your life assurance. Only by getting those two extras are you going to survive. “Everybody has now taken that on


board and if you look at income from protection at other networks, quite often they’re making as much money from that as they are mortgages.”


Laker says this diversification has been


a feature of good brokers as well as the big networks. “The brokers who have survived are the entrepreneurial brokers,” she says. “They’ve reshaped their businesses: we’ve seen that with our ARs. Bigger ones have been able to downsize, re- shape and re-tweak and it’s those people who have survived. “It’s those people who are likely to have


great ideas but perhaps not the capital to invest. Those are the kind of businesses we would be looking for.”


dIsTrIBuTIon models The market as a whole has already diminished in size and changed in shape but Stockton is of the view that the adjustment isn’t over yet. “There is already a flight to quality,” he says. “My own view is that we’re not far away from some lenders joining the market and only dealing with four distribution firms. There is also a flight to scale. You only have to look at the insurance industry where there are six main distributors.


“The FSA makes no bones about the fact they quite like that and that’s where things will go. There are various firms with the clout to get a seat at the lenders’ top table including L&G, Sesame, and LSL Property Services and I wouldn’t be at all surprised if LSL and Sesame don’t make more acquisitions in this space.” Lenders are already flying to quality and scale but that doesn’t necessarily exclude the independent DAs who can still access lenders via mortgage clubs. “There’s no disadvantage to using a


club for DAs,” says Laker. “It’s quite lonely being a broker in Scunthorpe on your own. When you’re part of a club you’re part of an organisation that keeps you informed with what’s going on.”


markeT ouTlook That’s the how but what about the how much?


Neither Stockton nor Laker is especially optimistic that lenders will up their volumes this year, despite a likely improvement in remortgage. Buy-to- let, which others have suggested is the bright spot for brokers on the horizon, will likely be steady this year they say.


“My own view is one more of £140bn to £145bn in 2011 gross, which is up about 4-5% but we’re going nowhere at the moment,” says Stockton. Morose. But he’s more animated about what that restricted volume breaks down into. “It’s encouraging to see more lenders coming in with higher loan to values with both Skipton and Nationwide taking their LTVs up to 95%. Yes it’s direct to consumer but the fact of the matter is we’ve now got two lenders which are openly promoting a 95% LTV product.


“When they want to do some serious volume they’ll want to use the broker and the broker will be there to help. The same is true in new build where Santander look like they’re at 90% LTV on houses and maybe 80% on apartments. If they are there we only need to get another 5% on each and we’ve got the first-time buyer able to put 10% down and buy a home. That’s a massive difference from even 12 months ago when you had to put 25% down if you wanted to buy a flat.”


Laker is also positive about the outlook for brokers.


“The number of mortgage products is now at about 11,000,” she says. “It wasn’t that long ago when there were 3,000 and that was a good news story.” She believes we’ve now hit the point


where the industry has to sit up and speak out. “There are two reasons why the broker is so important,” she says. “People will be thinking they can’t get mortgage but if they go and see a broker, he can clarify whether they can or they can’t and most of the time it can be done.


“The other side is that branches can only do so much and will always be there but for lenders that want volume and to get products out to the market, brokers are second to none.”


Just when the scales will tip in favour of intermediaries remains to be seen but it is reassuring that companies such as Mortgage Intelligence and Countrywide are getting themselves into a shape that fits with the future of financial services rather than the past. And for the moment, it looks like bigger is better. n


mortgage introducer JUNE 2011 47


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