In Q1 2010, intermediated sales still accounted for more than half at 51% of the market.
However, the FSA’s annual product sales data revealed that intermediated sales have shown a “clear decline” since reaching a peak of 64% in Q1 2008.
It said: “Since intermediaries are more likely to provide advice, we would expect a decline in the number of mortgage sales with advice.”
The FSA noted that most customers getting new mortgages receive advice, but the proportion doing do has fallen over the last year, from 74% in Q2 2010 to 68% in Q1 2011.
The FSA said: “This is consistent with the observed decline in the relative importance of intermediaries; since they typically sell with advice (97% of their sales in 2010/11 were with advice).”
Overall, it is not just the intermediated mortgage market that is suffering, with total mortgage sales down 6.9% in 2010/11 to around 870,000 compared to the previous year’s total of 930,000.
This was, once again, the lowest level of sales the FSA has seen since it began recording the data in Q2 2005.
Sales were down 0.7% in Q1 2011 year on year, but the FSA said that the rate of contraction is slowing.
In 2010/11, the top five mortgage lenders accounted for 62% of all sales by volume, the top ten for 83% and the top 20% for 94%, reflecting the increased consolidation of firms with provider numbers down 4.7% in the last year.
The market share of the top 20 mortgage lenders has risen 9% in the last five years. However, the increase has tailed off in the last year, after growing by 11% between Q1 2006 and Q1 2010.
Large banking groups dominated, providing 83% of mortgages in 2010/11, followed by building societies and credit unions providing 8.6%. Yet large banks saw their market share fall 3% compared to building societies and credit unions gaining 3.5% market share.
In breaking down the sales’ categories, the FSA showed that first-time buyer sales dropped 10% in the year to March 2011 to account for 21% of new mortgage sales.
The proportion of home movers remained roughly the same at 36% despite a 3.3% drop in new sales, while remortgage purchases dropped 9.6% in 2010/11 and now account for 37% of new mortgage purchases.
In addition, the proportion of interest-only mortgage with an unknown repayment vehicle has also continued to drop, from 13.5% in Q2 2010 to 10.8% in Q1 2011. Before the collapse of Northern Rock in Q3 2007, the proportion was 25.5%.
Meanwhile, sales of protection products fell by 1%, driven by a drop income protection and standalone critical illness sales – down 7.7% and 25.6% respectively.
The FSA said that the fall in mortgage sales has hit sellers and providers of pure protection, with the trend towards higher market concentration.