Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- Intermediaries need to highlight how they add value
- Embracing transparency to stay ahead of the game
- Appealing to an older demographic
- Communication and transparency could improve lender/adviser relationship
Market in Brief
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- The number of mortgage intermediary firms is in decline
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- Figure 1: Number of mortgage advice firms and annual house prices (England and Wales), January 2006-December 2008
- Intermediary share declines in 2008
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- Figure 2: Overview of the proportion of gross mortgage advances, by value, by channel, 2007 and 2008
- Intermediary market squeezed, as direct products take centre stage
- Mortgage lending declines by 29% in 2008
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- Figure 3: Gross and net lending secured on dwellings, 1997-2008
- Lenders pledge support to intermediaries
- Regulation moves up the agenda
- Growth in demand for online advice
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- Figure 4: Sources most likely to be used for mortgage advice, January 2009
- Financial advice – the consumer perspective
- Key mortgage adviser survey findings
- Mortgage intermediary confidence is on a downward trend
- Top mortgage intermediary challenges and priorities
- Intermediaries seek more consistency and better communication
Market Background
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- Key points
- Different types of mortgage advisers
- Overview of complex mortgage distribution structure
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- Figure 5: Overview of distribution channels within the mortgage marketplace since mortgage regulation
- The DA or AR question
- Growth of specialist mortgages spurs distribution growth
- The balance of power shifts
- Packagers – a sector in decline
- Mortgage clubs provide bargaining power for DA advisers
- Looking forward
Internal Market Environment
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- Key points
- Background to credit crisis
- UK mortgage market seizes up
- Housing transactions plummet
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- Figure 6: Number of UK property transactions with a value of £40,000 upwards, seasonally adjusted Q2 2005-Q1 2009
- House prices suffer a dramatic decline
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- Figure 7: Various UK house price indices, annual percentage change, January 2007-March 2009
- Revaluations cause headache for mortgage brokers
- Bank base rate falls to an all-time low…
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- Figure 8: Bank of England base rate and three-month (monthly average) LIBOR, January 2003-March 2009
- …which produces mixed results for mortgage advisers
- Government support for mortgage market…
- …but it doesn’t extend to intermediary sector
- Asset Protection Scheme should help kick-start lending
Broader Market Environment
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- Key points
- A deteriorating economy – a summary
- Desire for home ownership drives UK mortgage market
- Growth in household debt slows in 2008
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- Figure 9: Total household debt, 1992-2008
- Arrears and insolvencies increase as recession bites
- Mistrust becomes an issue for the mortgage sector…
- …and advisers need to be aware of consumer sentiment
Consumer Sentiment
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- Key points
- Consumer confidence falls throughout 2008…
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- Figure 10: UK Consumer Confidence Index, January 2002-March 2009
- ...but appears to have bottomed out
- A time for financial caution
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- Figure 11: Savings, investment, borrowing and debt repayment – consumers’ expected activity, 2002-09 quarterly indices
- Demand for borrowing remains low
- Drop in bank rate is having little impact on mortgage intentions
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- Figure 12: Expected mortgage and property purchase activity, 2002-09 quarterly indices
- Negativity about house prices increases…
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- Figure 13: Response to the statement ‘How do you think property prices will perform in the next couple of years?’, 2008 and 2009
- …but property still regarded as good investment in the long term
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- Figure 14: Agreement with statements concerning current conditions in the housing and mortgage markets, January 2009
Regulatory Challenges and Developments
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- Key points
- FSA warns of market dangers during the downturn
- FSA proposals could place cap on mortgage products
- Ongoing concerns about quality and suitability of advice
- Commission-based remuneration under scrutiny
- Potential overlap of the RDR
- 2009 brings regulatory changes
- OFT studies to encompass mortgage intermediaries
- Mortgage fraud cases tarnish intermediary sector
- FSA raises additional £117 million from firms
- PPI restrictions could damage income further
Lending Market Overview
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- Key points
- Mortgage lending declines by 29% in 2008…
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- Figure 15: Gross and net lending secured on dwellings, 1997-2008
- …but intermediary income falls by around 40%
- Advances for house purchase fall by more than 50% in 2008
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- Figure 16: Gross advance, by type of loan, 2002-08
- FTB activity remains low
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- Figure 17: Number of loans for house purchase and number of first-time buyer loans, 2002-08
- Tightening of lending criteria changes landscape
- The demise of specialist mortgage sector
- BTL market under growing pressure
Strengths and Weaknesses in the Market
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- Figure 18: Market for mortgage intermediaries – SWOT analysis, 2009
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Market Developments and Innovations
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- Key points
- Overall decline in intermediary products
- Intermediary lenders withdraw…
- …and direct products take centre stage
- Steps towards fee-based advice
- Lenders assert greater control over distribution
- Consolidation in the intermediary marketplace
- Distributors look to strengthen position
- Diversifying income streams
- Increased focus on cross-sale and new business opportunities
- An industry perspective on diversification
- Lead generation grows in importance
Trade Perspective
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- Participating companies
- The lender’s perspective
- Challenges facing the mortgage market
- The changing landscape
- The future of mortgage distribution
- The mortgage intermediary perspective
- A lack of supply is undermining mortgage market
- Balance of power has shifted towards direct channels
- An evolving market
- Online channels present opportunity and threat
- Intermediaries call for improved transparency
The Intermediary Marketplace
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- Key points
- Mortgage intermediary firms suffer in second half of 2008
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- Figure 19: Number of mortgage advice firms and annual house prices (England and Wales), January 2006-December 2008
- 9% of mortgage intermediary firms close in 2008
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- Figure 20: Overview of the sector for mortgage advice, directly authorised and appointed representatives firms, January 2006-December 2008
- DA firms in decline…
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- Figure 21: Number of directly authorised retail intermediary firms, by primary category, January 2006-December 2008
- …while ARs are gaining ground
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- Figure 22: Number of appointed representatives sponsored, by primary category firms, January 2006-December 2008
- Distribution changes could increase number of mortgage ARs
Intermediary Share of Mortgage Market
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- Key points
- Intermediary share declines in 2008
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- Figure 23: Overview of the proportion of gross mortgage advances, by channel, 2007 and 2008
- Intermediary share declines across all sectors
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- Figure 24: Intermediary share of new mortgage business, by type of loan, 2006-08
- Intermediaries set to be squeezed further in 2009
- Possible scenarios for intermediary lending in 2009
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- Figure 25: Potential scenarios for distribution of gross mortgage advances in 2009
Key Intermediary Mortgage Lenders
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- Key points
- HBOS accounted for 25% of intermediary share in 2007…
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- Figure 26: Top intermediary mortgage lenders, 2007
- …but intermediary lenders undergo profound changes in 2008
- Looking forward
- Lenders to provide more funds in 2009
Key Intermediary Players
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- Legal & General
- PMS
- Sesame
- Openwork
- Personal Touch Financial Services
Brand Communication and Promotion
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- Key points
- Advertising financial advice
- £19.4 million spent advertising financial advice services in 2008
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- Figure 27: Overview of adspend on financial advice services, 2004-08
- Direct mail and press are favoured when promoting financial advice
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- Figure 28: Adspend on financial advice (independent and non-independent), by media type, 2008
- Advertising to intermediaries
- Advertising to mortgage intermediaries was slashed in 2008
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- Figure 29: Total intermediary-directed adspend, 2004-08
- The Mortgage Works was the top advertiser in 2008
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- Figure 30: Top advertisers of products and services to mortgage intermediaries, 2006-08
- Lenders use specialist publications to target advisers
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- Figure 31: Top publications used to advertise mortgage products and services to mortgage intermediaries, 2008
Key Advice Channels
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- Key points
- Current account providers appear to be in pole position…
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- Figure 32: Sources most likely to be used for mortgage advice, January 2009
- …but intermediaries write more business
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- Figure 33: Overview of main sources most likely to be used for mortgage advice, January 2009
- Lifestage influences the choice of channel
- The vast majority of intermediary sales are fully advised
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- Figure 34: Advised sales, by selling channel, April 2007-March 2008
- Significant growth in the internet as a source of mortgage advice
- Internet has positive and negative implications for intermediaries
- Growth in online broking
- A multichannelled approach
The Consumer – Perspective on Professional Advice
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- Key points
- Mortgages are the most popular topic for advice…
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- Figure 35: Financial matters previously sought advice on and interested in seeking advice on in the future, January 2009
- …but future demand for mortgage advice appears much lower
- However, there are future opportunities for mortgage advice
- More than a third opt to do their own research
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- Figure 36: Attitudes towards professional financial advice, January 2009
- The cost of advice
The Mortgage Adviser – Overview of Business Confidence
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- Key points
- Mortgages account for less than 50% of business, for half of all advisers
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- Figure 37: Proportion of business currently generated from mortgages, March 2009
- Mortgages look set to decline as a proportion of overall business
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- Figure 38: Proportion of business expected to be generated from mortgages in three months’ time, March 2009
- Confidence in mortgage market declined over the last six months…
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- Figure 39: Mortgage adviser confidence measure for the mortgage market as a whole, March 2009
- …but individual prospects appear to be a little more positive
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- Figure 40: Mortgage adviser confidence measure for indiviidual business prospects, March 2009
- Confidence is linked to business diversity
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- Figure 41: Confidence about the mortgage market in future, by percentage of business from mortgages, March 2009
- Figure 42: Confidence about your business in future, by percentage of business from mortgages, March 2009
The Mortgage Adviser – Current Challenges and Priorities
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- Key points
- Market conditions and low bank rate are the main challenges
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- Figure 43: Main challenges currently facing mortgage intermediaries, March 2009
- Mortgage-dependent intermediaries face different challenges
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- Figure 44: Challenges currently facing mortgage intermediaries, by percentage of business from mortgages, March 2009
- Diversifying business activities is the top priority
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- Figure 45: Mortgage adviser priorities over the next six months, March 2009
- Mortgage-dependent intermediaries less likely to consider additional training
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- Figure 46: Main priorities, by percentage of business from mortgage/other activities, March 2009
The Mortgage Adviser – Perspective on Lenders
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- Key points
- Two fifths expect lender numbers to fall further
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- Figure 47: Based on current market conditions, do you envisage more or less lenders in the intermediary market in three months’ time?, March 2009
- Advisers would like greater consistency from lenders
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- Figure 48: Mortgage intermediary perspective on lender activities, March 2009
- Procuration fees a greater issue for mortgage-dependent intermediaries
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- Figure 49: Mortgage intermediary perspective on lender activities, by percentage of business from mortgages, March 2009
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