Cover
Pawns and kings
The best in business know how to react to opportunity and plan to create it. Brokers have a chance to take advice to the masses but they may not be seizing it. Sarah Davidson reports
It’s not quite checkmate but the past few months in the mortgage market have seen some interesting moves. If business was a board game then lenders would be quietly pleased with their position of power. And brokers should be worried because it is their king that has his neck laid bare.
OPENING GAMBIT
The balance between intermediated and direct mortgage business is shifting. And not in brokers’ favour. The Financial Services Authority reported that 8.1% of appointed representatives quit the industry in December last year – a slower exodus than the year before when 30.8% left. But its numbers say there are now just 2,425 firms left compared with 5,123 at peak in December 2007. The directly authorised side of the fence fared less well with more than half leaving the industry since 2006 when there were 3,533. The number of directly authorised firms whose main business is mortgages fell by 2.8% between September and December 2011 to just 512 – an annual drop of 12.4%. It compares with a fall of 21.5% in 2010. Overall DA firm numbers totalled 5,193 by the end of last year, down 4.5% year-on-year and 27.6% less than the peak of 7,174 in December 2007.
SECOND MOVE
Add to this the decision by the Council of Mortgage Lenders to adjust the way it calculates its own intermediary
30 MORTGAGE INTRODUCER MARCH 2012
figures. It said after many years of including some bank advisers in the intermediary numbers it was revising its intermediary market share figure from 58% down to 52% in the fourth quarter of last year.
The CML says the discrepancy between its numbers and the FSA figures prompted it to stop including in-bank adviser business arranged under a separate FSA number from the provider – as in Lloyds Banking Group brands for example. But there are those in the industry who are asking why make the change now? Robert Sinclair, director of the Association of Mortgage Intermediaries, poses the question directly. “The thing we have to ask ourselves is why the CML has decided to change its methodology now after all these years? And if they’ve admitted they were wrong in the past, are they now right? Whose agenda is being served here?” He leaves the question hanging in the air before going on to observe it’s worth remembering the gap between statistics and reality.
“The market has downsized to a place where there’s enough business so everyone left can survive,” he says. “To that extent it doesn’t really matter if the broker share is 30% or 70% of mortgage business as long as each broker is surviving. I speak to brokers every day who tell me they’re doing really well this year and are writing loads of business – in that sense the statistical argument is interesting but futile.” It’s one way of looking at it and
indeed it’s easy to think with brokers in the market still bringing in commission that the bigger statistical picture isn’t relevant but there are other moves in the market that should be sounding alarm bells.
LENDER CONTROL Product changes and creeping criteria tightening reflect cost of funds and economic confidence but they also reveal lender appetite. This year has seen a spate of rate rises and loan to value cuts and interest-only take a deep hit as lenders slice LTVs in half. February saw some lenders pulling products and delaying relaunch which has pushed the number of products on Trigold’s systems down.
BROKER BACKFOOT And in spite of overwhelming support for individual registration of all advisers – bank and intermediary – the FSA revealed last month it just can’t do it. After repeated delays to implementation the regulator, which is due to be dismantled later this year, held up its hands and said: “We remain committed to extending the approved persons regime to those selling mortgages, but given our broader priorities to deliver two new regulatory bodies, we will not be able to deliver the necessary changes before the Financial Conduct Authority is established. We will introduce the changes as soon as practically possible and in doing so will make sure firms have enough time to make the necessary arrangements.”
www.mortgageintroducer.com
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