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The changing landscape

Amidst all the going’s on in the secured loan industry in the last six months one thing that stands out is that the distribution methods of lenders appears to be changing, if only in the short term.

When funds were awash and lenders were bending over backwards to get brokers support, in between the golf days, racing trips and liquid meetings in Puerto Banus all that was required to secure a distribution agency with a secured loan lender was sight of the appropriate licences and a signed accreditation form.

Good sales staff that worked for large brokers admired the Bentleys in the car park so they went off and got their Cemap qualification, took a couple of good staff colleagues, borrowed the broker database and they were quickly up and running in competition.

What has become evident to lenders in recent months and perhaps is an indication of what lays ahead for distribution even when the good times return is that in the niche credit broker market of secured loans ,lenders don’t need an army of reps ( sorry , I do apologise- BDM’s) and don’t need to accredit every broker in the country directly to get their business.

New lender launches appear to be moving down the route of a soft launch with a handful of known partners and these are then creating a pyramid system of ‘satellite packagers’ underneath them.

Although there has been some initial resistance from established brokers they have now reluctantly accepted that if they want access to the products they have to go through someone else .This model has now proved lenders can get distribution to all credit brokers simply , effectively and cheaply without the need for a large network, sales team or cost base.

John Maclean, managing director of the Hertfordshire based bridging company Link Lending that rebranded in 2006 with the backing of industry guru David Johnson has indicated it plans a similar strategy when it rolls out its second charge proposition in the next few months. Others considering entering the market all seem to favour the ‘tried and trusted’ route through established connected and respected partners they can rely on to provide quality packaging to ensure that when a customers file arrives at the lender it merely needs rubber stamping for approval and payout.

Established lenders seem to be moving down the same path. Prestige Finance stopped granting new agencies in March and informed selected brokers that agencies were being withdrawn and recently Welcome have been informing many smaller volume brokers that they would no longer be able to submit business directly.

Only last week Swift confirmed that they would now operate through a select panel of up to 16 brokers.

The credit crunch has already claimed many broker victims , with the likelihood of many more to follow and lenders will look closer at its partners track record, creditworthiness ,reputation and packaging quality as the consolidation of the loan sector continues throughout 2008.

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