MMR obligations could lead lenders to limit distribution, says Swiss Re
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Responsibilities placed on lenders as a result of the Mortgage Market Review could result in lenders limiting distribution, warns Swiss Re.
In its Insurance Report 2009, the insurer predicts competition between insurance providers will increase as they look to secure deals with large mortgage suppliers.
The report says: “As providers become more selective in the products they offer, they will equally be selective in the advisers they do business with.
“We expect product providers to reassess their adviser relationships, choosing not to deal with those firms where there is a lack of alignment or where the volume of business is not likely to justify a relationship.”
But it says it is not necessary for broker firms to be large to be successful and the biggest threat is to ‘stuck in the middle’ firms, that neither have the scale to grow or the competence to specialise.
It believes the trend of young adults entering into shared ownership with their parents could lead to a rise in demand for protection as they seek to protect themselves against the other party being unable to meet mortgage costs.
But the report adds: “Many firms in the long-term insurance sector have been dependent on the mortgage market for business, with the arrangement and conclusion of mortgage finance providing a key trigger for long-term cover sales.”
Swiss Re’s research also suggests that consumers are unable to distinguish between whole-of-market advisers and those advising on a limited range of products.
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