In a trading update yesterday, the firm said the mini Budget in September had “created a significantly heightened level of uncertainty which had a direct negative impact on the mortgage market”.
However, it said that it had continued to grow its market share to seven per cent for the nine months to 30 September 2022. This is up from 6.1 per cent in the same period last year.
MAB said that the “extreme market and lending conditions” created by the mini Budget had “severely impacted” all activity levels across the group’s product lines, with written business in October and November around 50 per cent below expected levels.
It continued that this reduction in mortgage activity and new house sales was expected to continue into early next year, after which activity levels would start to recover.
MAB added that adviser recruitment had also been impacted as most of its Appointed Representative (AR) firms had decided not to onboard new advisers as planned and had paused growth plans until there was more certainty.
It said that the number of underperforming leavers had “continued at normal levels” and in most cases advisers would not be replaced until mortgage volumes “pick up significantly”.
MAB: Pipelines holding but expectation of slightly higher fallouts
MAB continued that in recent weeks it had seen “early signs” of “highly congested pipelines of new business completing”, which it attributed to lower new business levels and said this trend was likely to continue.
The firm explained: “Buyers with mortgages reserved prior to the mini Budget are strongly motivated to complete their purchase at the lower mortgage rates they have secured.
“Where mortgage offers expire, typically after six months, there is a risk of some transactions aborting if they are not renegotiated. Pipelines are still holding together reasonably well, but we do now expect slightly higher fallout rates than usual.”
MAB added that it was “disappointed” that property portal Boomin had been put into liquidation and said this had led to a £2.8m non-cash write off for its investment.
Transactions next year will fall but refi big opportunity
MAB said that purchase transactions would be “markedly lower next year” but said that it expected this to recover in the second half of the year as consumers adapt to a “more stable macroeconomic and interest rate outlook”.
It said that refinancing opportunities in its own client bank were at a “record level” for nextyear and 1.8 million borrowers’ current deals were due to expire next year, presenting further opportunity.
It noted: “It is widely anticipated that product transfers will represent a higher proportion of refinancing transactions than in prior years. Accordingly, we will ensure our resources are redeployed where our advisers and customers need them most, with lead generation being a major area of focus.”
MAB added that it expected its adjusted profit before tax at year-end next year to be “considerably impacted” and “may see no improvement on 2022”.
“This reduced expectation for 2023 is directly due to the extreme market conditions following the September mini Budget, which have also led to a reduction in expected adviser numbers at the year end.
“Lower housing market activity than originally anticipated, combined with potentially flat overall adviser numbers (with a fall in existing adviser numbers expected in H1 2023) and tighter levels of underwriting criteria introduced by lenders, will also be contributing factors,” it explained.
MAB said that it expected organic adviser numbers in the second half next year to “stabilise and start to build again as market conditions ease further and new lead sources and initiatives start to impact on business volumes”.
It also said it expected a “strong year ahead” for recruitment of new AR firms as a more cautious market outlook encouraged broker firms to seek partners.
MAB said that its long-term fundamentals “remain very strong” and Fluent’s successful integration positioned it well to service increased lead numbers from new lead sources.
The company said it would continue to take a “rigorous and proactive approach to management of costs” and it would progress with planned proposition investment.
It added that this would ensure market share growth and ensure the “strongest possible recovery in 2024 and beyond”.
The firm said it was “highly cash generative and retain a strong balance sheet”, which would allow it to take advantage of opportunities.
MAB: Mini Budget consequences ‘quick and far-reaching’
Peter Brodnicki (pictured), MAB’s chief executive, said that the consequences of the mini Budget had been “quick and far-reaching”.
“Overnight our market moved from being fairly stable and reasonably confident, to almost the polar opposite. The sudden and unexpected pace of mortgage rate increases, combined with the tightening of mortgage lending criteria, have resulted in some customers pausing both home-moving and refinancing plans,” he said.
Brodnicki added that the recent Autumn Statement and various government changes had helped to stabilise the market but macro uncertainty “remains for many reasons”.
“We expect mortgage rates to continue to stabilise, allowing some customers to reenter the home-moving market and also refinance at more competitive mortgage rates than those seen in recent months,” he said.
Brodnicki said that MAB was “well positioned” to grow its market share strongly though 2023, and although there may be a reduction in organic advisers its new AR recruitment “performs strongly”. Overall, he said total adviser numbers could remain flat.
He said: “The refinancing opportunities in 2023 are significant, and with the technology enhancements we have delivered, MAB is in a better position than ever to optimise those opportunities.
“As expected, protection attachment rates have already started to improve in the current environment, and our focus to ensure that continues has never been greater. As we see in housing downturns, transactions are delayed, they are not lost.”
