Rob Clifford, Mortgageforce

Aggregation of the mortgage volumes generated by smaller broker firms is in full swing and gathering pace. IFA franchises and mortgage franchises like Inter Alliance and Mortgageforce are prime examples.

While neither Inter Alliance or Millfield claim to be dedicated to mortgage origination and neither have a consumer-facing mortgage brand, they are significantly respected firms. Stuart Wilson’s Inter-Alliance mortgage operation is hugely impressive and I suspect Millfield will welcome and benefit from his expertise.

This further consolidation may not have a dramatic effect on the mortgage market but is further indication that smaller intermediaries will find it tougher to survive in the statutory regulated world.

Unless either firm or the combined entity has a major strategic shift towards mortgages as opposed to general IFA business, I suspect that the merger will have little effect on other large brokers. The new firm becomes a larger and more powerful competitor, which could bring increased pressure to bear on lenders for better commercial terms such as higher procuration fees and keener-priced bespoke products.

John Rattigan, Cartel

The merger between Millfield and Inter Alliance will not have a significant impact on the mortgage market but it will send a warning to large broker firms and networks. The merger appears to have been completed out of necessity – two large firms, both reporting large losses, and both previously failing to find a suitor.

They have now decided to merge with each other. The next step for them logically would be to strip out as many of their costs as possible. The quickest way to achieve this would be to rationalise distribution, retain the top business producers and let the low business producers go. This, however, would take considerable courage.

The warning this gives to other large broker firms and networks is that low business producers can change what should be profitable into a loss situation. What is required is a model that not only works in theory but also works in reality. I wish both parties well with their merger.

Paul Howard, Portman Building Society

The merger of Millfield and Inter Alliance will give the new company a precious commodity – greater scale, in terms of financial muscle and distribution. As the industry changes at such a rapid pace, increased scale is something which, I believe, many businesses will be chasing.

The reasons are clear to see – certainly within the mortgage market. The post-31 October world will be very different to the one we work in now. Regulation will bring additional costs to bear for all players – lenders, intermediaries, networks and clubs – amid increased competition and reduced margins. The fight for distribution will be the main battleground both to protect our current business supply, and also to grow it. Increased size helps to achieve this by allowing the introduction of economies of scale to the costs, and an automatically enlarged distribution.

We have recently seen similar ‘coming togethers,’ such as when Portman Building Society merged with The Staffordshire, and the acquisition of Premier Mortgage Services and Norwich Union Mortgage Club by Bankhall, as well as several others. The frequency of these developments will increase as we all strive for the Holy Grail – increased distribution at reduced cost.

Andy Pratt, Alexander Hall

It is interesting that the Inter Alliance brand will disappear if the deal is sanctioned by the Financial Services Authority, and the merger goes through. I think Inter Alliance is at least two or three times better known than Millfield as a brand. I also think it was driven by the way the two companies have been created and the backing they have taken in terms of loans and I do not think they were sustainable in their own right.

I think it is sad, as it would have been nice if a couple of IFAs had established themselves and actually proved the economics of the model and existed in their own right as two separate IFAs providing great service to clients.

Payam Azadi, Mortgage Times

Mergers are relatively new to the mortgage industry but my view is that mergers are often like arranged marriages – you may meet all the tick-box criteria, but can you actually live together?

I hope that the combined new management team makes a success of this merger. The IFA market has great experience in successfully merging organisations and we certainly feel that the new regulatory world we are entering will see many smaller companies being either absorbed or merged.

Andrew Frankish, Mortgage Talk

The question on everyone’s lips is: ‘Was this a shrewd move?’ My view is that, while the deal is referred to as a merger, the truth is that Inter Alliance was targeted by Millfield for a very specific reason.

Inter Alliance’s back-office system is acknowledged to be highly competent and, at a time when all brokers are looking to differentiate themselves from their competitors, the customer service management capabilities that this will provide could give Millfield a worthwhile competitive edge.

Looking to the future, we will see more acquisitions and mergers of this type, as Mortgage Day looms on the 31 October, as firms clamour to gain valuable market share, allied to a means of differentiating themselves in the marketplace.

Lenders will also see more brokers requesting exclusivity on deals and products, although this will cause its own issues and problems. Despite the size of some of these brokers, many lenders will be reluctant to offer exclusives, unless the broker can promise a significant business advantage.