The Intermediary Mortgage Lenders Association (IMLA) has published a new discussion paper, Insights into the changing shape of the lender broker relationship, which explores the relationship between mortgage lenders and brokers in the UK, and how this might evolve into the future.
The paper asked four representatives from mortgage intermediaries and four from mortgage lenders to discuss the key issues affecting their relationships, as well as the steps that could be taken to improve them.
Two and a half years after the introduction of the Mortgage Market Review in 2014, both are both broadly content about how the new regulatory environment has defined their roles. The industry now hopes for a period of relative calm after several successive rafts of regulation over the past few years.
Both the lenders and brokers questioned acknowledge that the needs of the customer are most important, with the lenders also acknowledging the critical role that brokers have to play in the post-MMR marketplace – particularly when it comes to arranging mortgages for non-standard borrowers. The Lenders and brokers agree that this complexity has made the intermediary channel more attractive than it has ever been, and the share of mortgage lending conducted through the channel reflects this, having risen to nearly 70% from 50% in early 2012.
The relationship between the brokers surveyed and lenders remains strong, but as with all relationships there are differences of opinion. The brokers, keen to provide an ongoing service to clients, raise questions about who owns the customer relationship and when lenders should get in touch with their customers over product renewals or transfers. Equally the question of procuration fees for product switches continues to be aired, with many lenders showing movement on this particular point.
Peter Williams, executive director for IMLA, said: “The mortgage market has become much more complex in recent years, following several waves of regulation, while the number of non-standard borrowers has also increased. As a result, the work of mortgage brokers has become even more important, and there is a clear imperative for brokers and lenders to work effectively with one another.
“It is therefore encouraging to see that leading brokers and lenders are positive about their relationship, and clearly feel there are solid foundations on which it can grow further. Both groups firmly believe that the needs of the customer are paramount, and are supportive of innovations that can help meet these.
“There are some areas of discussion between brokers and lenders on subjects like procuration fees and customer retention strategies. However, the paper demonstrates that there has been increased dialogue between the two groups about these, which is a very encouraging start.”
The lenders and brokers are broadly supportive of ongoing initiatives to roll out best practice across the whole industry. The IMLA-AMI (Association of Mortgage Intermediaries) Lenders and Intermediaries Governance Framework is popular among both parties, and it is felt that the framework has improved the clarity around the process of removing brokers from lender panels – which was previously opaque. There is also agreement that the Working Together document, to which IMLA, AMI and the Council of Mortgage Lenders (CML) have contributed, will also help to clarify how brokers and lenders interact with one another.
There is also support for the senior managers’ regime, which will come into force in the intermediary sector in 2018-19. Both groups feel the regime will help enforce good practice in the sector by giving responsibility for broker behaviour to senior intermediary managers, thereby diminishing the need for individual broker registration, which the FCA lacks resources to drive forwards.
Williams added: “It is very encouraging to see support for initiatives like the Lenders and Intermediaries Governance Framework and the Working Together document. These schemes will help improve the working relationship between brokers and lenders by spreading best practice across the entire industry, and help the sector to meet the needs of an increasingly large and diverse customer base.
“Schemes that bring brokers and lenders together like these are good for the health of the sector, and should be actively encouraged.”