Consolidation is inevitable in all industries and the mortgage sector is no different. The relentless search for operational efficiency forces institutions to permanently examine their business models to identify where efficiencies exist and where savings can be made. But sometimes businesses can be victims of their own success and the fact they are doing well flags up to predators that they are ripe for possible takeover.When small, innovative lenders get to a certain size – say, with around 2bn worth of completions annually – they tend to be bought by large financial institutions and lose their independence. Morgan Stanley moved into the market at the end of 2005 after identifying a launch platform in Advantage Home Loans. Merrill Lynch has also entered the market via acquisition, while Deutsche Bank has launched its own lending arm, DB Mortgages, as has Close Brothers. These are interesting developments and could lead to further consolidation since these institutions also have the ability to access capital more cheaply than many traditional buy-to-let and sub-prime lenders. But where does all this leave mortgage brokers? In the prime mortgage market, lenders with large branch networks must absorb significant overheads. While a branch network is a good thing for consumer choice, the fact is the lion’s share of mortgage business comes via intermediaries. Furthermore, in the sub-prime sector brokers are predicted to grow their market share. There will be an increased demand for advice as product choice and complexity continues to grow. The expected consolidation among networks has failed to materialise with a few exceptions. That’s because most large intermediary businesses will remain unattractive consolidation targets as many are under-capitalised and come with the baggage of a much greater compliance burden. It stands to reason that if you are a mortgage broker you should ally yourself with a network whose primary focus is mortgages. Where consolidation could be seen to have an effect in the broker sector is in the reduction in the number of one-man band directly authorised firms, although I don’t believe they will disappear altogether. Demands placed on them by the regulator will cause many to either cash in their chips or opt for appointed representative status. But the most important point here is that whether a broker chooses the DA or AR route they do not have to work alone. Networks are there to support them and help them develop. This may be in the form of compliance support, access to exclusive, market-leading deals or IT or marketing support. Latest figures show that at least three-quarters of mortgage lending originates from the intermediary sector and I see no reason why this should not continue to be the case. And with the threat posed by Home Information Packs fast disappearing over the horizon, the outlook for intermediaries is bright, whether it be as independents or as part of a larger group.
- Top trends
The Council of Mortgage Lenders has named BM Solutions as the top buy-to-let lender for the first half of 2006, measured by gross advances. This sees BM beating off Bradford & Bingley subsidiary, Mortgage Express and the Paragon Group into second and third place respectively. Tim Hague, director at BM Solutions, says: “BM securing the […]
Dear Delia, My client is relocating abroad for the foreseeable future and wishes to remortgage her residential property as a buy-to-let investment. Her mortgage balance is 118,000 and the property can be rented out for 600 per month. Can anyone help?
The industry is moving towards a cultural shift which will see lenders working together to gain competitive advantage, says Frank Eve, managing director of Frank Eve Consulting. Eve says that technological advances are breeding a generation of lenders that will work together to make life easier for themselves and brokers. He says: “Lenders are starting […]
They say bad news comes in threes so after a surprise base rate rise and the press awash with stories around the explosion in individual voluntary arrangements, what are we to expect next? Affordability crisis as personal debt soars, perhaps?
The Pensions Regulator (TPR) has issued its first fines to employers for failing to meet their auto-enrolment duties, along with 163 compliance notices giving employers a deadline to take action.
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