‘If you have a branch-based business, you have to feed it with product.’
Over the years, certainly when sales through direct channels were in the majority, I have heard this said (in various guises), many times. This was particularly the case back in the day when dual-pricing appeared to be the norm and many intermediaries felt they were on the wrong end of that particular strategy, unable to secure the products and rates that consumers could obtain by phoning or walking into a lender’s branch.
Now, however, we are in a rather different world. A post-MMR environment has seen the requirement for lenders’ ‘advice staff’ to be fully qualified, interviews and borrower assessments taking that bit longer, and borrowers much more savvy about finding a route to gain access to the entire mortgage market, rather than just the products of one lender.
Market share
Ultimately, this combination of factors has led to the upsurge in intermediary share of mortgage distribution. It has placed the intermediary in a position which it perhaps has never enjoyed before, with other commentators sharing my view that this share could rise to 80-85% of all mortgage sales very soon.
To put that into context, in 2012 when the gross market was £145bn, circa 45% was intermediated, equivalent to £65bn. Forecasts for 2016 suggest a market size of c£225bn, which at 75% share equates to £168bn – a two and a half times increase in market scale for intermediaries over four years.
This change in fortunes might lead to the assertion that some lenders may effectively throw in the branch-based mortgage advice towel soon. So instead of covering the increased costs and resource requirements, they would alternatively send the customer to an adviser rather than attempt to cover off their needs in-branch. It is, for example, an approach the Dudley Building Society went with and judging by its latest results, intermediary-only was the way to go.
While some smaller societies and lenders might be looking to follow the Dudley’s lead, I can’t see the bigger banks being quick to copy this approach. However, clearly less emphasis is being placed on ‘walk-in’ branch customers taking out mortgages, as the focus moves to utilising the advances in technology in order to get products and services in front of the customer.
Advances in technology
For the existing and potential mortgage borrower, we have heard much over the past few months about the work going on behind the scenes in terms of the utilisation of technology to sell mortgages. Some may say this is a response to the growth in intermediary activity, a way to combat it if you will, rather than a move to flow along with it. I can’t agree with that. To me, this shift is inevitable.
You’ll doubtless recall the quote about ‘death and taxes’ being the two certainties in life. Perhaps now is the time to add a third – ‘advances in technology’. Anthony Thomson, founder of Metro Bank and more recently Atom, said at the Festival of Marketing last week that, with the growing pace of digital disruption, there will be “more change in the next 24 months than there has been in the last 200 years”.
Change is a constant, and in my view, intermediaries have a significant role to play in this changing landscape – the positive is that, in my discussions with lenders, they too see the intermediary’s role as central to these developments. The thought of 85% market share will clearly be music to the ears of intermediaries but for me the bigger gain is the improvements in services these advances will give to us and our customers.
