A frank discussion at yesterday’s Council of Mortgage Lenders (CML) conference examined exactly how regulation may affect the intermediary market and what the future holds for distribution channels.
The panel suggested that intermediaries have come out of the MMR fairly well, with the biggest change affecting the market surrounding advised sales proposals, which can only help to improve practices.
Advice is the key commodity of intermediaries; the quality of this advice has been worked upon over the past two to three years and means that any focus is now on quality applications, which are more complete and cohesive, and not just quality applicants.
Intermediaries’ relationship with customers is unlikely to fundamentally change, as most professional brokers these days would say that they already carry out a full fact-find with their client; most facets of the consultations have already been taken into account, so there will be few reactive measures to the MMR.
By making advice central to the MMR, intermediaries can benefit as lenders will be more inclined to outsource expertise to distribution firms rather than taking on this burden themselves.
The quality intermediaries that remain in the industry – some 30,000 mortgage intermediaries in 2010 have streamlined to 10,000 – will be there to pick up this business.
There is, however, further work to be done in terms of case submission and intermediaries need to be better equipped to deal with lenders’ requests at an application stage.
In the spirit of regulation, a ‘know your broker’ ethos will be a focus for lenders, who will be closely looking at exactly who is distributing their products and how they are doing so.
Interest only products were another key theme of the discussions; despite their negative press, they have provided valuable niche solutions.
The regulator has obviously attempted to curb the over-selling of such products, which, according to the panel, has resulted in ‘over-reactionary’ measures to stem their widespread use. This may result in a ‘swing-back’ effect – whereby a small growth of sales is seen after such a strong regulatory focus – but this is merely speculative.
But where is the intermediary market heading?
Panellists did not expect a significant uplift in the number of intermediaries entering the market but, in terms of where intermediaries are positioned, there is a move towards larger-sized firms who have their own compliance departments to shoulder some of the regulatory burden.
Ultimately, consumer choice will drive the market and this is exactly what intermediaries can help to facilitate by allowing individuals to access more firms.
In terms of the intermediary demographic, firms are on the look-out for ‘young-blood’ graduates to drive the market forward.
The market is likely to remain strong in the coming years as mortgages are now a commodity; advice is needed because the vast majority are unable to self-select the most relevant product.
Despite the advent of the digital age, consumers aren’t yet ready to complete an end-to-end mortgage transaction online and personal contact is still in demand. There may, however, be a place for such ‘virtual’ deals in the future.
A further part of the ‘know your broker’ ethos is likely to include a bespoke approach to procuration fee pricing; some lenders have already adopted a quality-based commission, but there is yet to be any real consistency in this practice.