The introduction of the Mortgage Market Review (MMR) 18 months ago has been followed by growth in the intermediary mortgage market, according to the latest edition of the Mortgage Efficiency Survey conducted by technology provider IRESS.
The survey, which analysed the responses of lenders comprising 53% of gross lending in 2014, found 78% of mortgages were introduced by intermediaries, a significant rise from 56% in 2014. This growth has been in part driven through lenders such as HSBC and Tesco Bank starting to engage with and lend via intermediaries, having been direct only lenders for many years.
The combination of a growing market share and increasing mortgage lending volumes across the market means intermediaries are seeing increasing lending volumes. As a result, 85% of lenders noted an increase in lending via intermediaries over the period, with 69% expecting broker numbers to increase over the next 12 months as a result.
The intermediary channel was most popular with mutuals, who sold an average of 82% of mortgages via intermediaries, whilst banks sold 74% via this channel. Intermediary distribution was also highest among the smaller lenders, rising to over 90% of sales at Tier 3 lenders, compared to 65% at Tier 1.
The intermediary channel has also proved the most effective at progressing offers to completion. Intermediaries boasted a completion rate of 84%, while the next most effective was telephony (81%), followed by branch (76%) and online (58%).
18 months since it was introduced the MMR is still impacting the time taken to generate a mortgage offer. On average, 43% of offers are currently issued in less than 14 days. However, this represents a slight improvement of 1.17% since 2014, with several lenders investing to boost the originations process, enhancing their platforms to straight-through processing and case automation.
However, the introduction of the MMR has clearly caused a divide between different sized lenders. Since 2013, Tier 1 lenders have seen an 6% increase in the proportion of cases going to offer within 14 days (59%). The opposite has occurred across Tier 2 and Tier 3 lenders, with the percentage of cases going to offer within 14 days dropping by 46% and 12% respectively, to 39% and 32%. This can be attributed to their relative ability to invest in process automation technologies.
IRESS said the impact of MMR can also be measured by examining individual efficiency among lenders’ workforces. The productivity of each employee engaged in offers and completions has dropped by 42% and 41% respectively. This is a consequence of the additional time required for more stringent affordability checking and longer manual processes, it added.
“Many are under the impression that the impacts of the MMR are behind us, but this is clearly not the case,” said Henry Woodcock, principal mortgage consultant at IRESS.
“Even 18 months on, lenders and consumers alike are still coming to terms with the more stringent and rigorous processes required. With the added complexity, intermediaries are playing a more vital role than ever before, helping consumers navigate the mortgage process, and their market share has grown as a result.
“2016 will be another year of change. We expect an increasing use of digital technologies to help boost lenders’ consumer execution-only sales, augmenting their direct to consumer business. On top of this, challenger banks entering the market without the constraints of legacy systems, will bring higher levels of efficiency and automation.”