Last year saw a number of acquisitions in the master broker sector, including Y3S Group’s 50% shareholding in Pink Pig Loans and Freedom Finance’s acquisition of Sensible Home Finance.
Tim Wheeldon, chief operating officer of Fluent for Advisers, said consolidation is one of the answers to overcapacity.
He said: “Post Mortgage Credit Directive, many providers thought wrongly that discounting fees, rather than working at winning new brokers via reasoned argument and education would be the path to success.
“Some have already found that their business models will not work in the absence of increasing volumes. For them, consolidation is likely to be a feature of this year.”
Barney Drake, joint chief executive officer of Y3S, believes the seconds packaging market is very much under-funded.
“The companies in our sector that will grow the most will be the larger companies whose infrastructure and scale will appeal to smaller companies, who can instantly bolt into such resources, therefore enabling existing management to focus more on business growth.”
And as distribution channels open up, allowing brokers direct access to second charge lenders, master brokers will have to work even harder to attract business.
Broker network Personal Touch Financial Services (PTFS) launched its direct-to-lender panel for second charge business, last week.
TenetLime launched its direct-to-lender second charge lending panel in November last year.
Gemma Harle, managing director of TenetLime, said use of the direct to lender second charge panel started slowly as brokers familiarised themselves with the sourcing system and process. “However, four months from launch, 75% of our second charge business now goes through this route, which is firm evidence that brokers prefer having more control over the advice process and customer journey,” she said.
From its initial five lenders at launch, it recently added Central Trust, with a further addition lined up for April, Harle said.
Figures from the Finance and Leasing Association last week showed the second charge lending sector advanced £869m of loans in the 12 months to January, just 1% higher than in the previous 12 months.
Steve Walker, managing director of Promise Solutions, said pre-MCD, many lenders were predicting a 20% to 30% drop in volumes as a result of the new affordability calculations, so in many ways, a 1% increase in business could be seen as a “great result”.