Brokers see light in the darkness

Last Monday\'s news that Lehman Brothers had suspended lending was another sign of how rapidly the UK mortgage market is contracting.

The US lender has not confirmed what the future of Southern Pacific Mortgage Limited and Preferred Mortgages will be or what will happen to the firms’ staff. But with Bill Bilsborough, head of Lehmans’ European Mortgage Capital Division, already having walked and managing director Simon Hinshelwood set to depart at the end of the month, things don’t look good.

John Malone, managing director of Premier Mortgage Service, says the market could see be-tween 1,500 and 2,000 redundancies by the end of this month. A sobering thought.

Meanwhile, the packagers that were relying on the likes of SPML and Preferred to place sub-prime business now have only a couple of providers to choose from.

Volume distributors are having a hard time placing cases as mass distribution is the last thing lenders want right now. It’s like feeding time at Bird World – any provider with a market-leading product quickly sees the sky darken as a thousand hungry beaks swoop down to snap it up. The only logical res-ponse is to run for cover and pull the deal.

But while volume distributors are suffering, the sole brokers and small firms that Mortgage Strategy speaks to every day say they are doing OK.

And despite the market turmoil, so are house prices. Halifax’s chief economist says that although mortgage applications have dropped 40% with further falls expected this year, he is confident house prices will hold up.

Just as the fundamentals of the housing market are still sound, so are the fundamentals of broking. Borrowers are confused and frustrated and the benefits of using brokers have never been more evident. So despite the gloom, there’s light at the end of the tunnel. And it’s no longer a train coming your way.