Stay cool and think ahead
Share
Recent pronouncements from the Council of Mortgage Lenders, the Financial Services Authority and the Association of Mortgage Intermediaries have served to raise the temperature of the debate between the lending industry and the intermediary sector - a disagreement that IMLA has been at pains to steer clear of.
The spat at the FSA's recent mortgage conference overshadowed the more important debate on mortgage funding that needs to take place, and obscured the reality of the relationship between lenders and brokers.
But it did serve to highlight sensitivities on both sides, although IMLA believes that lenders need intermediaries and vice versa.
Part of IMLA's role is to bridge the gap between the sides and find common ground. Attacks on brokers or lenders are ultimately unhelpful - we need to work together to find ways forward.
It is for this reason that IMLA has been reviewing the shape of the market and considering the issues that will affect its evolution.
This is perhaps timely as there are tentative signs of those fabled green shoots emerging.
There may be an element of wishful thinking here, but there is evidence of a modest pick-up in housing market interest, a slight increase in loan availability and a small improvement in business confidence.
So as we all focus our minds on the future rather than the past, IMLA is conducting research among members about their views on the shape of the market and the direction in which it should be heading.
Contrary to popular belief and some in the trade press, the intermediary sector is not dead and buried, nor is it moribund. It has not been choked by lenders favouring the direct channel.
True, like the whole mortgage industry, brokers have seen a significant fall in business volumes but the fact remains that more mortgages are still originated through brokers than not.
Looking forward, as lending volumes pick up and we reach some sort of new normality we will need to find a consensus regarding the nature of the relationship between lenders and brokers.
It seems clear to me that consumers will continue to need the advice and choice they can access through brokers and that lenders will continue to need to distribute through them.
Nothing said at the FSA conference challenged that belief. Indeed, it is clear that intermediaries will continue to be at the heart of the mortgage market.
But this raises some important questions. For example, who owns customers? This has always been a bone of contention and now it needs to be addressed.
Equally, the way brokers are remunerated is up for discussion as part of a wider debate about remuneration and the flow of information between the two sides. And what will the shape of the sector be? A significant number of companies have disappeared but that does not represent a divide between large and small firms.
Some big national firms do a great job for their customers, just as some one-man bands have outstanding local footprints and command strong customer loyalty.
Ultimately, the survival of brokers depends on consumers' need to access choice and independent advice.
There is an argument that lenders should own some broker distribution but this arrangement must exist alongside independent mortgage advisers and IFAs who can guide consumers to the right products at the right prices.
Mortgage sales - a theme raised recently by the CML and the FSA - will be a sensitive issue in the future.
It is not right to lay the blame for overenthusiastic lending during the boom - and I think we can all admit this occurred - at the door of brokers. The industry as a whole needs to look at what lessons can be learnt.
A fresh approach and a new consensus will be needed for in mortgage market of the future. But again, the way brokers are remunerated - by fees or commission - will colour this issue.
We all have an interest in the future prosperity of the broker sector. Individuals will always need help and support through what is likely to be the most complicated financial transaction of their lives.
But ultimately, all this has to be seen in the context of mortgage funding and the size and shape of the sector after the reopening of wholesale markets and the re-emergence of specialist lending.
Securitisation and whole loan trading in the form we saw two or three years ago are unlikely to return any time soon, but I am convinced that an adequate level of mortgage lending to sustain home ownership and property in- vestment cannot be financed exclusively from retail deposits, especially at the present level of interest rates.
As for the recent heated exchanges, we at IMLA echo the comments of AMI director Robert Sinclair - that the blame game is backward-looking and serves no purpose.
We strongly believe that the industry must build a consensus over the future shape of the market.
We are in regular dialogue with AMI on a range of issues, including our research, and the shared views that emerge will inform our conversations with the FSA.
While we will not always agree on every point we recognise that intermediary lenders and brokers agree on some important subjects, not least the value to consumers of being able to access choice and independent advice on a range of mortgage products.
The world is changing and the pressure on companies in this sector is intense, whether lenders or brokers. The way forward will involve careful reflection and debate, and this is the path we and AMI have chosen.
Source:
Lending Strategy
