The intermediary channel saw its share of news mortgages by value pass 70% for the first time during Q2 2015 to reach 71%. The third quarter witnessed brokers arranging loans valued at £33.3bn: the highest quarterly total since Q2 2008.
As a result, IMLA’s analysis shows brokers were responsible for 69% of new lending by value during the first nine months of this year, up from 61% for the same period in 2014. It puts them firmly on track to surpass the record 66% annual share achieved during 2007. The £85.9bn of lending intermediaries arranged from Q1-Q3 2015 already exceeds the annual totals of 2009-2013, and was just 12% short of the 2014 total of £98bn.
The IMLA report examines how mortgage distribution has changed following the deregulation of the market in the 1980s, and looks at how technological advances could change distribution in the future.
It attributes the general upward trend in brokers’ market share over the past three decades to several key changes: the widening range of lenders, including the emergence of lenders exclusively using broker distribution; growing complexity of mortgage features and pricing; and most recently regulatory changes including the Mortgage Market Review (MMR).
By requiring mortgage sales staff to provide advice rather than just information, with the additional qualifications that requires, the MMR has led many lenders to de-emphasise their branch networks and some smaller lenders to end direct distribution altogether.
With increased lender competition, a greater range of products and more would-be borrowers falling into ‘non-standard’ categories, today’s market also leaves brokers well positioned to identify those products that are best suited to a particular customer’s needs.
However, IMLA’s analysis also shows brokers’ increased share of activity has not been uniform across the market. Proportionally remortgagers and homemovers are using the intermediary channel more than ever, yet the proportion of first-time buyers arranging their mortgages directly with their lender increased from 32% to 37% between 2006 and 2014.
Despite brokers reclaiming market share this year, the percentage of first time buyers going direct remains higher than it was in 2007 when the intermediary channel was at its strongest. This may be influenced by lenders’ marketing activities to first time buyers.
Percentage of mortgage borrowers going direct vs. using intermediaries (volume)
|
First time buyers |
Home mover |
Remortgage |
All |
|||||
|
Direct |
Int. |
Direct |
Int. |
Direct |
Int. |
Direct |
Int. |
|
|
2006 |
32% |
68% |
45% |
55% |
45% |
55% |
43% |
57% |
|
2007 |
27% |
73% |
44% |
56% |
41% |
59% |
39% |
61% |
|
2014 |
37% |
63% |
44% |
56% |
38% |
62% |
40% |
60% |
|
2015* |
29% |
71% |
36% |
64% |
36% |
64% |
34% |
66% |
While technological advances have traditionally strengthened direct channels within financial services, the IMLA report observes that this has not happened in mortgage lending where the majority of customers still feel the need to speak to a professional.
It suggests this is partly due to the complexity of mortgages as a product, and the sheer number of products available on the market. Furthermore, considerations such as term-length and the size of the transaction mean that many consumers feel more secure when lending is part of an advised process.
There is an ongoing debate about the role that artificial intelligence (AI) could play when it comes to distribution. While AI has the capacity to ask a consumer the necessary questions, it remains to be seen whether it can replicate the ‘softer’ skills that successful mortgage advice demands.
Peter Williams, Executive Director for IMLA, commented: “The intermediary channel has been revitalised and looks like ending 2015 having arranged an unprecedented share of mortgages, as the emphasis on advised sales changes the landscape. Today’s market is more regulated and more competitive than at any point since the recession, and brokers’ expertise and impartiality means that they are well-suited to navigating the mortgage maze on behalf of borrowers.
Distribution of some financial products has been revolutionised by changing technology, yet as things stand and despite execution-only options being available, the overwhelming majority of consumers still prefer to speak to a professional either in person or over the phone about getting a mortgage. Changes undoubtedly lies ahead, but whatever the advice process of the future looks like, consumer interests must remain at its core.”
