I could be accused of being a little too full of festive cheer when it comes to my predictions on the mortgage market in 2007. I feel rather bullish. And why not? Last year was a fabulous one all round, based on both my own experience and feedback from my industry peers.
But it seems that it’s not just me who is talking up the sector. Recent research by Mortgage Trust has revealed that advisers are receiving record levels of commission from lenders.
This news not only justifies my positive view of the success of the sector over the past year or so and confirms my prediction that it will go from strength to strength but it also highlights that the importance of mortgage intermediaries is on the increase.
Now more than ever, consumers seem to be turning to brokers for advice and guidance through the mortgage maze. The percentage of intermediary business is increasing and for some lenders now represents around 80% of their business.
But when you consider the ever increasing number of products that are available to consumers from a widening array of lenders, this is not surprising.
It seems crazy for anyone looking to buy or move home to even try to analyse the market without engaging the help of an expert.
But this raises another question. Does demand for the services of brokers outstrip supply? We should be encouraging new blood to enter the industry, and a number of established brokerages are willing to ‘grow their own’, encouraging fresh talent to train alongside their experienced advisers and gain their qualifications.
Some larger firms have specialists for different areas, and as more products take on more variations of criteria, the need for expert advice increases.
For example, to calculate the various versions of affordability across numerous lenders is an everyday event for most brokers, but for consumers it would be a challenge.
Buy-to-let contains almost every combination of LTV, rental income and rate – it just depends on the requirement. And from the lenders’ perspective, who better to sell these products than brokers?
Intermediaries are the vital link in finding consumers what they need and effectively form a sales force for lenders. This is great news for all concerned – as more tweaks to product criteria come along there is a greater need for intermediaries to sell and explain them.
My understanding is that most lenders have produced ambitious lending targets for 2007 so they are clearly feeling positive about the future, with many no doubt planning to chase market share.
And with distribution playing such an important role in the mortgage sector it stands to reason that the link between consumers, networks and lenders – i.e. brokers – is key to the success of the chain.
While 2006 was the year of the new lender, 2007 could be the year of the new broker.