It’s not often you get four of the biggest hitters from the lending industry sitting on a panel, so when you do, you want to ensure you get the most out of the experience for those present. This was the situation at our annual conference earlier this month where we were fortunate to have representatives from Santander, Lloyds, NatWest and Nationwide all available and open to questions.
There is much said about the large, mainstream lenders in this country – not all of it positive – but considering these are lenders who provide the vast majority of mortgage funding in this country, it seems fair to allow them their say and, in particular, to outline how they are dealing (and working) with the intermediary sector.
Even now, as the broker share of the mortgage market has been predicted to hit 70% this year by IMLA, there can be a deep-seated suspicion about what is going on ‘behind the scenes’ in terms of how lenders are preparing for the months and years ahead. This was a question raised at the panel – with intermediaries in the driving seat at the moment, how might lenders respond?
The good news is that the commitment to intermediary lending doesn’t appear to be waning; however at the same time there also appeared no intention on their part to give up on direct channels, whether that be via branch network or direct to customer through other methods. The Nationwide, for example, talked about tackling potential in-branch adviser shortage issues by utilising technology for ‘video interviews’ between customers and its advisers, thus getting over the requirement to have a qualified adviser(s) in each and every branch. Santander suggested that direct online activity, particularly in the product transfer arena, was picking up with 40% of its product transfers now being conducted online by borrowers with no advice.
It was suggested by the lenders that intermediaries would need to keep pace with this focus on technology, and be willing and able to counter such activity in order to hold onto existing clients and to generate new enquiries, rather than see them drift back into going straight to a lender. It also gives intermediaries some concrete examples of the resource lenders are prepared to put into the direct space, which could ultimately have a negative impact on broker market share. The message did seem clear though – the bigger lenders, who have traditionally secured large market share via direct routes, are not going to give this up.
In other areas, the somewhat contradictory approach that some lenders can have to the intermediary market is also still in effect. Take, for instance, the issue of paying procuration fees to brokers for retention business. Only Lloyds, of the four lenders represented, is currently doing this, and while the other three acknowledged it was an area being looked at, they did not suggest such a payment would be happening soon. Nationwide argued that the cost of paying a retention fee would be significant to the lender as it would cut straight into the margin, while Santander said it was not in a position to pay “at the moment”.
When looking at 2016 and their own appraisal of where the mortgage market might be going, there was a general feeling of optimism about the future and there were also some clear product sectors which were felt to be evolving. Chief among these appeared to be the lending into retirement portion of the market which, by the lenders’ own admission, had suffered from something of a post-MMR hangover for the past couple of years.
There was however a genuine feeling that there could be both a relaxation of criteria in this space and also some product innovation, which would ease the concerns of many individuals who have come up against brick walls in their attempt to secure finance over a term which took them into the traditional retirement age. The same feeling also appeared to be there with regards to existing interest-only customers; indeed, this could be tied up with the lending into retirement situation. Again, it was anticipated that lenders would be able to come up with funding and product solutions for those who may be coming to the end of interest-only deals but might not have the money available to pay off all the remaining capital.
Finally, one of the great unknowable’s appeared to be the buy-to-let market and how it might react and develop through the year and beyond. There was a general consensus that the stamp duty increases for additional properties would have much less of an impact on landlords than the changes to mortgage interest tax relief. However, what that overall impact would be was still up in the air. Certainly, there was the anticipation of a slight tail-off in buy-to-let activity post-Q1 this year but how deep that might be was up for debate.
The lenders represented were clearly focused on the intermediary market and expect it to be a mainstay of their business volumes for some time to come. However, this didn’t mean they’d be moving further in its direction and/or allowing their direct business to continue to drop. Indeed, the overall impression was that these lenders, and I suspect others of the same ilk, would be doing all they could to return to the days of a 50/50 split, rather than the 66/34 we saw at the end of last year and perhaps even the 70/30 we will have in 2016. The onus is therefore on intermediary firms to firstly, be aware of this potential pressure, and, secondly, to put everything in place to counter it.
Richard Adams is managing director of Stonebridge Group
