Volume is irrelevant with supply of funding so low and demand so high – lenders need to maximise their margins on the few mortgages they can actually sell.
In this vein NatWest Intermediary Solutions’ 90% LTV deal available exclusively for the LSL Group this week makes sense.
NatWest must feel that demand for higher LTV products is so high that it can pick the exact distributor it wants.
The problem with this approach is that it could lead to consolidation among networks, mortgage clubs and brokerages.
This has already happened in the banking sector where the Big Five – Santander, HSBC, Royal bank of Scotland, Lloyds Banking Group and Nationwide – totally dominate lending.
And perhaps a similar consolidation is underway for the broker sector this year.
Smaller firms will continue to feel the pressure and larger firms will be ready to pounce on them as they look to expand.
Last year the LSL Group swooped in for Home of Choice – now First Complet -, and Pink Home Loans, and there could be more.
Also in 2010 Countrywide made a bid for Personal Touch Financial Services and bought Hamptons.
It would appear natural that these two empire-building mortgage giants will look to grow again in 2011.
If and when volumes begin to pick up again then lenders will have to open up their deals, brokerages will be strong enough to grow and start-ups will flourish again.
But for the next year at least it is likely that brokers will experience a more concentrated market and not just from the lenders they use but from networks, mortgage clubs and brokerages too.