Digital broker Habito’s leap into buy-to-let mortgage lending yesterday shows the possibilities offered by technology and the changing and diversifying potential of the broker role.
However, lead generation is still the biggest challenge for any broker firm as many new digital advisers have found as without a database of clients, the cost of acquiring those clients is simply too high for a sustainable business model.
Estate agents have historically provided a decent source of referrals for mortgage brokers, but Knight Frank’s move into equity release earlier this week underlines the struggles agency firms are having to diversify their business as the sales market slumps.
The slump in residential property sales affects mortgage brokers as it means fewer leads from estate agents and a need to look elsewhere for business.
John Phillips, national operations director at Just Mortgages, said he has seen a shift in the level of referrals.
“Back in 2017, around 75% came from estate agency referrals, with 25% from remortgages, client services, recommendations and referrals from other professionals such as accountants and solicitors,” he says.
“By 2018, the percentage of leads we got from estate agency had dropped to 71%, now it is 64%. Overall, the property market is down about 20% over the past three years, so brokers need to work hard to get their leads from elsewhere.
“At Just Mortgages we are good at shifting with the market, so while some brokers have been hit hard as estate agencies struggle, we have diversified and actually seen our business increase overall.
“So despite the fact that we get fewer of our leads from estate agency, we are up 14% year on year.”
Business development is key
Mark Harris, chief executive of SPF Private Clients, says one third of its business typically comes from professional introducers, while the rest is from existing clients or their recommendations.
He says: “I would expect the percentages to be different for younger businesses and/or those with high staff turnover.”
Jonathan Harris, director of mortgage broker Anderson Harris, says the market has become “more stodgy,” adding; “Brokers have always relied on referrals from professionals and other introducers.
“A brokerage cannot survive on direct business, regardless of how effective their branding, reputation and longevity.
‘As a general rule, 50% of business comes from existing clients and existing client referrals, and the balance has to be made up from introductions.
‘Business development, both new and looking after existing contacts, is a key part of the broker’s role.”