Time for a rethink on business model

Figures published recently by the Council of Mortgage Lenders which detail the number and value of mortgage advances in 2008 paint a stark picture of just what has happened to activity in the mortgage and housing markets.

2008 witnessed a dramatic drop in the volume of mortgages for house purchase, from a little over one million in 2007 to slightly more than 500,000 in 2008 – a 49% reduction.

The number of remortgages, although also reduced in terms of volume, has in part shielded many brokers from the full ravages of the downturn.

Numbers in this sector are 860,000, down from the 1.06 million in 2007 – an 18% reduction.

The statistics suggest that in 2008 brokers accounted for around 66% of the market.

To put this into context they would have written about 917,000 house purchase and remortgage transactions in 2008.

By contrast, industry commentators are forecasting that the gross mortgage market in 2009 may only be £145bn and of that, the intermediary share may only be £65bn.

By applying a fairly crude average loan size based on 2008 data, this corresponds to less than 500,000 mortgage transactions for the broker market.

If advisers needed any more convincing that business models built around proc fee income only were unsustainable, this may finally get the message home.