Will the MMR tighten the lender-adviser relationship?
Speaking at The Mortgage Event last week, Aldermore Mortgages managing director Charles Haresnape said the cost for lenders with big branch networks to implement the MMR rules making the vast majority of mortgage sales advised staff was so large, many would establish relationships with or recruit from the intermediary sector.
For this week’s Marketwatch, our commentators are:
Aldermore managing director Charles Haresnape, who argues that in the forthcoming age of increased regulation and consumer protection the role of the broker cannot be under-estimated.
Stonebridge managing director Richard Adams, who remains less than entirely convinced that the cost of fully-advised mortgage sales will influence lenders’ attitude to brokers.
Your Mortgage Decisions director Martin Wade who says mortgage intermediaries need to get the word out that applicants looking for a fully-advised service can do better than relying in a single lender.
Charles Haresnape, managing director, Aldermore Mortgages
MMR is a good outcome, thanks to a positive approach during consultation with all stakeholders. One thing that should be noted is the need for lenders to give full advice in all but a few limited circumstances. However, increased branch and call centre costs may not be worth it for some lenders. Lenders also do not need to give advice where they provide a retention product on a pound for pound switch.
I think lenders should also give full advice, irrespective of whether there is additional lending. MMR is a great opportunity for brokers to promote the benefit of advice and I think the intermediary community should be on the front foot.
Ever since Adam was a lad, there has been a push, particularly by banks, to promote mortgages via branches. But in the end, during a more normal market, they under-achieve and lenders revert back to higher reliance on brokers.
In the forthcoming age of increased regulation and consumer protection the role of the broker cannot be under-estimated and will, in my view, mean that intermediaries will once again be responsible for significantly more than 50% of all mortgages – which is not the case now. Branch based mortgage sales will not end, but they could be reduced significantly.
Richard Adams, managing director, Stonebridge Group
The implementation of the Mortgage Market Review is still a fair way off, but Charles Haresnape’s comments prove that lenders are already carefully evaluating the effect it will have on their distribution. Many lenders value the relationship they have with intermediaries for a number of reasons, but I’m not entirely convinced that the cost of fully-advised mortgage sales will necessarily have much influence over the number of mortgages directed through independent brokers.
Having said that, lenders will want to have relationships based on quality, so will be keen to maintain and establish partnerships with mortgage brokers who are able to provide them with the right type of business. The days of brokers (and lenders) chasing volumes have long gone and the emphasis is correctly on suitability and quality rather than quantity.
In all honesty, at the current levels of lending, all this is something of a moot point. Until such time as genuine competition returns to the lending market and banks are competing with each other for first-time buyer and remortgage business, they won’t be desperately seeking ways of delivering extra volume anyway. Therefore, it is the re-ignition of rate rivalry and lending competition that is just as likely to drive the need for intermediaries’ services as the introduction of the Mortgage Market Review.
Martin Wade, director, Your Mortgage Decisions
Assuming the Banks can get their act together to offer a fully advised service for new customers come 2013 then I do not think we will see a massive change in consumer habits. The mortgage intermediary market needs to get the word out that, if you are to undergo a fully advised process, why do this with the limitations of a single lender when in fact you could invest the same amount of time and receive advice from the whole of the market? Without this campaign being vigorously promoted I fear consumer apathy will still rule, and the banks will continue to benefit from customers who will not identify the limited range of products a bank has to offer.
However, we do now have a golden opportunity to showcase our channel as the most cost effective means for banks to acquire new business. By ensuring that every application is dipped and fully packaged before submission, leaving very little else for the underwriters to do other than process it, I am sure the powers that be in charge of distribution would quickly look more favourably on this cost effective channel for new business acquisition.