At its heart, that’s down to two key facts: the first is that there are still a lot of brokers in the UK – 5,210 DA firms, according to the Financial Conduct Authority.
The second is that most of them are small. Previous research found more than two thirds of firms employed only one or two mortgage advisers, with almost nine in ten having no more than five.
For lenders that’s an unwieldy market and much of the continued popularity of clubs is down to the demand for their services from lenders. For them, mortgage clubs make distribution more efficient and manageable.
That’s invaluable for those lenders without the resources to research and conduct due diligence on these firms themselves.
It’s also essential for new lenders, who need to build scale quickly and would otherwise be wholly reliant on the few big brokers in the market.
Mortgage clubs greatly simplify payment of procurement fees, for instance, removing what would otherwise be a huge administrative burden for lenders dealing with large numbers of brokers.
The cost of paying firms individually can otherwise be substantial – over £100,000 per year for a large lender.
Benefits to brokers
The benefits a mortgage club delivers to lenders are reflected in those enjoyed by its brokers.
Some of these are direct and explicit for members when they join such as compliance support, educational events and exclusive rates.
Even when it comes to just keeping up to date with products, mortgage clubs are a significant support to the market.
Finally, many of the benefits brokers receive from clubs are less direct, but no less important, and they are understood precisely because of a lender’s attraction to mortgage clubs.
Smaller fee to direct brokers
The reduction in admin that clubs bring to lenders, for example, leaves a greater margin for them to pay procurement fees to brokers.
That’s why some lenders won’t pay a procurement fee direct or will pay a much smaller fee for a case submitted direct by a broker.
Likewise, by providing a route to market for new lenders outside the big brokers, clubs also get these products to brokers more quickly, and give them access to a greater range of products.
Mortgage clubs’ are not just a valuable tool for brokers or lenders – they play an essential role in the industry, bringing the two parties together and making the market work for both.
However, there is a need for mortgage clubs to evolve, as lenders and brokers do, and embrace the benefits technology can bring.