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Are large brokerages pushing out the small ones?

The number of mortgage intermediary firms operating in the market has shrunk from a colossal 3,394 in June 2007 to 1,641 as of March 2011.

The latest figures from the Financial Services Authority show the number of firms operating in the sector has more than halved over three years – but is this necessarily a bad thing?

It’s hard to gauge an accurate assessment of how many mortgage brokers are operating in the sector because the data focuses on firms and not individuals.

The likes of Countrywide will have hundreds of brokers working under just the one firm.

But in many cases a firm might also represent just one broker.

It is not surprising that the number of broker firms has fallen dramatically in line with a drop in gross mortgage lending.

The number of broker fraud charges coming out of the FSA show there are firms the industry is better off without, but for every unscrupulous firm that crumbles, no doubt there is an honest hard-working one that closes as well.

The last few years have seen the large as well as the small players fall by the wayside,but it is hard to know what effect the falling figures are having on the local one man sole trader.

The sector has always been able to maintain a strong directly authorised proposition, as well as one for appointed representatives.

It would be a shame if the mortgage sector started to mirror what has happened in the supermarket sector for example, with only the strong surviving and the small local shops being wiped out.

Robert Sinclair, director of the Association of Mortgage Intermediaries, says the sector is one of swings and roundabouts and while the large firms may have the lion’s share of the market at present it may be different in a couple of years.

But does it really matter where the advice comes from and whether this comes from a larger brokerage or a small one-man band? Both routes have their advantages – a smaller firm will have less overheads and may be able to offer more of a personal service to the customer, whereas a larger firm is likely to have financial backing and better resources at hand.

Let’s hope Sinclair is right and the sector will soon swing back in favour of smaller firms, as both large and small are needed for the sector to survive.

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  • Jonathan Burridge 29th June 2011 at 6:37 pm

    The market is close to parity now, there is no benefit in looking back.Consolidation is affecting all areas of business.

    There are chain restaurants, High Street Brand retailers, international hotels as well as boutique shops and hotels.

    If you are fit you will run with the rest of them, no matter your size, its like Rugby where there is a position for every body type, you just need to what fits.

    We will probably see some more consolidation (what about Countrywide and MAB next???) but it will be the larger firms eating up one another, the smaller businesses that survive now have proved to be fit enough if they still want to run with the pack.

  • Mark 28th June 2011 at 12:25 pm

    Great to hear some positivity Stuart.

    Normally it’s all doom and gloom in the ever declining broker market.

    I have been in the industry as an employed mortgage broker for 9 years
    and to can see the potential over the coming months.

    Stuart what is your company called?

    Thanks

  • Maurice Edgington 28th June 2011 at 11:38 am

    It has become very difficult for small mortgage brokerage firms for more than just being squeezed out. Here are some more reasons. 1. Since 2008 banks do not want to support mortgage brokers with overdraft funds or development loans. 2) The housing market has contracted considerably. 3) The new build homes market has shrunk. 4) Internet comparison websites give applicants a chance to source their own products and go direct. 5. Many lenders offer better deals to direct customers. 6. Estate agents tend to use the larger firms so a small broker can do 90% of the job then find out that the client has been stolen.7. Potential clients see brokers as a free sourcing service to go direct. 8. Small mortgage broking firms have to charge low fees to top up minute proc fees even though the lenders want more and more work out of them so revenue versus work has diminished. The best option for a small firm is to specialise or go into a different industry. I do not see much of a future for the small mortgage broker. Sorry!

  • Stuart Gregory 27th June 2011 at 5:09 pm

    It all comes down to confidence.

    I turned down the ‘opportunity’ to work for two of the ‘big’ brokerages in order to set up my own firm.

    There’s no greater success story than David v Goliath.

    There’s room for all now, and hopefully we’ve seen a ‘cleansing’ of the market over the last couple of years.

    It’s been tough, but exciting. Put it this way, I don’t regret turning them down.