London-based IFA Inter-Alliance is in discussions regarding merging with rival Millfield.
The two firms have previously had merger talks but say those negotiations failed for technical issues.
Stuart Wilson, mortgage development director at Inter-Alliance, says if the firms merged it would mean bigger distribution as the number of members would exceed 2,000.
He says: “This is a sign of the times. It will be difficult for smaller firms to survive in the regulated environment without merging.”
Wilson says the result of the talks is expected to be announced in the next few weeks.
And in a separate announcement Inter-Alliance says it has taken another step towards realising an all-of-market lender proposition by agreeing terms with five major mortgage clubs.
The clubs are Mortgage 2000, Pink, TMA, Legal & General and Source.