In just 298 days time the mortgage market will be regulated. Securing a solid distribution channel will be paramount for success post-N3 – both for brokers and lenders.
The problem for lenders though is that just as business comes in at the front end they invariably lose it at the back end. The remortgage market is booming and, with rates expected to remain low well into next year, it's a market that is expected to grow.
Indeed, the Bank of England's Monetary Policy Committee meets on Wednesday and Thursday this week and could well cut rates by a further 25 basis points. All this is good news for consumers – as well as the economy. Borrowers are enjoying some of the best deals ever. Last week Charcol was offering a five-year fix at 4.99% (95% LTV) with no strings attached through Portman. And today Derbyshire launches a five-year fix at 4.99% (75% LTV). Clients thinking about remortgaging or stepping onto the property ladder for the first time have never had it so good.
For lenders, hanging on to borrowers is becoming more difficult by the day and ways to increase client retention are scarce.
However, trail commission is quietly being mooted by some lenders as the golden chalice that could help shore up their mortgage books and bolster profits. Indeed, Standard Life Bank, Yorkshire Bank and Intelligent Finance are already among those paying introducers trail commission. And Halifax, the UK's largest mortgage lender, is actively considering whether or not to adopt such a system.
Trail commission may be good for lenders' client retention but is it as rosy for brokers?
As Kim North, director of London-based IFA Pretty Financial, says in our trail commission cover feature starting on page 21, “trail commission is good for IFAs because they will have to look after their clients”.
The problem though, she says, is that brokers may be tempted to leave a mortgage with a lender paying trail commission even though it may not be the best deal for the client, rather than remortgage the client and lose an income stream.
It seems the jury is still out on whether trail commission will work for the benefit of both lenders and brokers. What's more certain is that lenders are chasing market share like never before and commission -whether up-front or trail – is on the way up.
Which means that there really hasn't been a been a better time to be a mortgage intermediary.