Duncan Berry is director of mortgage sales at GE Money Home Lending
The direct-to-broker channel is a part of the future of mortgage distribution but all distribution channels are important and will continue to be so.
To succeed and grow, large lenders must ensure they have a broad mix of channels available to them, including going direct, which offers good growth potential.
Recent research shows that the direct channel is likely to outstrip the general level of growth in the specialist market, contributing to almost three-quarters of its expansion by 2009. Small wonder that brokers want a seat at the table.
There is already a significant segment of the broker community that prefers to deal directly with lenders for some or all of their business. But this will not always be the case and despite attractive growth indicators in the direct channel, packagers will continue to play a crucial role in the mortgage market.
This seems poised to be an interesting year for the industry with brokers increasingly looking to the specialist market for products such as buy-to-let, sub-prime and self-cert deals. These specialist products are consistently growing in number to meet the diverse needs of consumers. Rising interest rates will add to the complexity of the situation, squeezing affordability in an area where consumer debt is already a major concern and driving adverse credit business.
Sub-prime and buy-to-let are predicted by brokers to be the biggest movers of the year and the key drivers for growth in the market. As more brokers look to do business in the specialist market it is imperative that lenders have the capability to serve them direct. Without having a diversified distribution strategy which embraces the packaging community as well as the direct channel, growth and progress in the industry will be limited.
Bob Sturgess is director of marketing at Money Partners
For lenders, the direct-to-broker route is an important distribution channel that cannot be ignored. But it is not the only route and lenders will continue to choose the model that best suits their business objectives.
When deciding on a distribution strategy, lenders have two options – they can either go directly to consumers or work via brokers. The former works best for lenders with recognised brands supported by retail propositions such as branch networks or proven direct marketing techniques. But this is an expensive and generally inefficient way of getting business.
Many established direct-to-consumer lenders including high street banks and building societies continue to rely as much if not more on intermediaries.
Other providers, particularly specialist lenders, are likely to rely almost entirely on brokers. This gives them immediate access to consumers while effectively allowing them to outsource the selling process.
Whether a lender chooses to do this on a direct-to-broker basis or via packagers depends on its business proposition, but a mixed approach is the favoured option among specialist lenders. This may change if the direct-to-broker route reaps tangible benefits for lenders and brokers. The factors likely to determine this are cost savings through reduced proc fees, improved processing efficiencies and a better understanding of how distribution models work in a regulated environment.
But while accessing brokers directly has become easier, packagers still have much to offer. Their ability to adapt has become legendary and the best continue to add value to lenders seeking enhanced distribution. The broker sector will continue to accommodate a choice of channels for lenders for the foreseeable future.