A drop in the number of brokers applying for authorisation could be attributed to the regulator’s new stringent application process, according to the Association of Mortgage Intermediaries.
Research published last week by IMAS Corporate shows that 76 mortgage brokers applied for Financial Services Authority authorisation last year but there was a significant fall in Q4 2009.
Only nine mortgage brokers applied for authorisation in Q4 compared with 23 in Q1 and 22 in both Q2 and Q3.
Robert Sinclair, director at AMI, says it’s good that some firms still want to be in the mortgage industry and feel they can make money.
But he adds: “The regulator is making it harder for firms to gain authorisation. For example, before a brokerage is granted authorisation it is tested on a number of worst case scenarios.”
Sinclair says these could include questions such as what would happen to the firm if oil prices go up or there is a housing crash.
Sinclair adds: “Firms have to show the FSA they understand the market and have business structures that can survive changing conditions.”
IMAS says that last year saw the fourth successive decline in annual net authorisations after deducting cancellations across the industry.
Total new firm authorisations are running at just over 25% of the peak of the most recent comparable economic cycle in early 2007.
Latest figures from the FSA show that as of December 2009, 3,810 companies were authorised as appointed representatives to carry out mortgage-related activities, down from 4,818 during the same period in 2008.
This compares with 5,832 directly authorised brokers appointed in Q4 2009, down from 6,725 in Q4 2008. Of these, 2,199 still classify mortgages as their primary regulated activity.