The whole notion of intermediary market share seems to be providing a big talking point at present, probably in large part due to the year the mortgage market has had, but also in terms of whether the future might continue in the same regard or could we see business moving back towards direct channels.
Recent predictions however that intermediary share could hit 80 to 85% over the next few years, as a number of lenders potentially give up on selling direct, seem somewhat fanciful when you look at the most recent CML data. It shows, rather than intermediary share forging ahead, there has actually been a pull-back in quarter three compared to the business written in quarter two.
Whereas the proportion of new loans written by brokers stood at 67.7% in Q2, this had dropped back to 64.4% in the most recent three-month period, although year-on-year figures are well up on the 60% posted in the same period in 2014. Breaking down the figures by sector we can see that first-time buyer loans stood at 71% (down from 73% in Q2), homebuyer loans were 64% (previously 65%) and remortgages at 62% (previously 64% in Q2).
So, while the drop is not staggering by any means, and is somewhat surprising given the perceived level of activity in the intermediary sector, the figures do perhaps reveal the intermediary market is not on a one-way ticket to total domination. Indeed, perhaps this is the first sign – certainly since the introduction of the MMR – that advisers are not always the first port of call for customers that we might think they would be.
Certainly, there are still positives to be gleaned from these figures – notably the level of first-time buyer business going through the intermediary channel. Given these individuals are the lifeblood of the marketplace, it is very encouraging to see almost three-quarters of first-timers currently opting to use the services of a professional adviser that can take them through the process.
There are numerous reasons why this might be the case including the fact we are increasingly dealing with savvy consumers who conduct their research and then utilise the broker to access all available products in the market. This trend can only be good news for the broker community as these first-time buyer clients hopefully continue to use the advice option and they move through the system remortgaging, becoming second-time buyers, etc.
But, there is also a cautionary tale for brokers to understand in viewing these figures and it effectively revolves around the fact that the sector is not going to have it all its own way in the months ahead. Yes, there may be a number of smaller lenders, perhaps building societies, who decided that the cost of providing mortgage advice direct to its customers is not worth it and they pull out of this type of distribution. Dudley Building Society is the most recent example of this approach. But I tend to expect the bigger banks and lenders to keep reviewing their arrangements, and if anything, put more resource into enticing customers back direct.
Certainly, in the technology space we are aware of a number of lenders looking closely at the way they sell direct to consumers and how they can utilise the changing technology. Advisers should certainly anticipate something of a battle on this front in terms of acquiring new clients and holding onto them. Plus of course those institutions who still have branch networks will want to keep footfall up and perhaps they might do this with rates/services/products, etc, which are simply not available to the broker market. Might there be another big push on dual-pricing in the future?
So, advisers certainly need to keep their wits about them and not take any uptick in business levels recently for granted. It is an old message, but still rings true – there must continue to be a focus on maximising the services you can offer to your clients around mortgage advice itself – which means of course protection and general insurance, and any other product want or need that your client might well have. We have recently partnered with two conveyancing distributors and are urging our AR firms to become more engaged with the provision of conveyancing advice which can be a simple but effective add-on.
However much we would like it, the market is not going to stay the same. No-one would be happier than I if intermediary share breached the 70% and then 80% mark, however this would require a considerable shift. I’m not sure direct lenders are quite ready to cede this ground yet and therefore the need to make the most of every opportunity, not just the mortgage, remains of paramount importance.
Richard Adams is managing director of Stonebridge Group