After Co-Op Bank last week announced it would no longer offer mortgages directly to consumers and focus on sales through broker-arm Platform, we asked this week’s Marketwatch panel why lenders are placing greater emphasis on their broker channels and if more could axe their direct offering.
Andrew Montlake, director at broker Coreco predicts more lenders will go intermediary-only, as advice stays in vogue for the foreseeable future.
Jackie Uhi, HSBC UK’s head of distribution for mortgages and wealth explains why customer demand meant the lender had to opt to open-up to brokers after many years of being direct-only.
Rachel Springall, finance expert at Moneyfacts.co.uk believes pressure on costs could force many lenders to cut down branch presence, in-house mortgage advisers and the direct offering altogether.
Andrew Montlake, director at broker Coreco
The move by Co-Op Bank to move exclusively into the intermediary market to distribute their mortgage products is something that is eminently sensible, practical and will not be the last such move.
Of course, I am just a biased broker.
But in an age where customers and clients expect to do business in a very different way, the long-standing view that if you price differentiate with lower rates in your branches, you will get more footfall, has long-since been dashed on the rocks.
Indeed, unless banks can afford to re-imagine the very idea of what a branch is, much like Metro Bank, they will continue to close at a rate of knots.
Once the branches close, advertising your products to the general public is expensive when compared to letting the broker market do it for you.
The procuration fee paid for a highly motivated task-force to distribute products to the exact type of people who need them – with the added ability to turn the tap off and on as required, pilot different products and control distribution tightly – is surely a cheaper and more efficient method than running an expensive direct network.
Add the fact that intermediaries also assist with client retention and you can see why it will make more sense for lenders to opt to take the broker-only route.
Many lenders already do more than 75% of their mortgage lending through intermediaries, so borrowers have already voted with their feet.
Technology is the only threat to all of this.
But many lenders are woefully behind being able to put together a technologically efficient service to roll out to consumers and many brokers are already way ahead of the game in being able to do this.
Even when a client is faced with the choice of an online service through a lender with limited or no advice and only one set of products, versus an equally speedy online service through a broker that takes in the whole mortgage market, plus comes with the stamp of advice – there really is only one choice.
Intermediaries are the new black and destined to stay in vogue for the foreseeable future.
For many years HSBC was a direct-only mortgage provider, but we regularly received feedback from customers that they wanted access to our products but through their channel of choice – which for many was the intermediary market.
Brokers were also keen for their clients to have access to our competitive mortgages.
As such, we’ve been steadily growing the number of broker partners we work with and after two years we are up to 27, adding more regularly.
We have recently introduced a new platform for brokers, a game-changer for us in terms of the functionality we are able to provide.
All this helps broker partners help their clients navigate the home buying process.
We shouldn’t underestimate the role brokers play in that respect.
Many will have an established relationship with their clients, helping them with diverse financial needs or a full market check, but like our own in-house advisers, also giving home-buyers, especially first-timers, important peace of mind during what can be a complex and daunting process.
Our entry into the broker market has been a success and we are continuing to develop our offering, bringing on board even more partners.
We absolutely appreciate the importance of serving our customers within their preferred channel of choice and at the same price point.
It is equally important they have a good experience, just as we want our broker partners to have a good experience.
The mortgage market is expected to see an unfortunate upturn in costs over the next few months, as speculation of not just one base rate rise, but several, appears to be on the cards.
Increasing the cost of mortgages may seem like a logical path for providers to follow in the face of a rate rise.
But in these uncertain times, lenders may be considering alternative ways to offer the best price to customers, such as by reducing their branch exposure.
Lenders have to consider how the economic outlook will impact the cost of running branches or appointing branch-based advisers – this could be a significant reason why some brands, such as the Co-operative Bank, are deciding to do mortgage business solely through brokers.
Intermediary-only Atom Bank has singularly demonstrated how to successfully build a mortgage book online and maintain competitive pricing for multiple loan-to-values.
Indeed, Atom Bank’s expansion last year prompted it to seek further investment – a positive sign, which could help cement its place in the mortgage market.
However, by ruling out a high street presence, other brands such as Metro Bank could well gain more customers who prefer to arrange their mortgage in branch, face-to-face.