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Mortgage Intermediary Focus - UK - May 2012

INTRODUCTION
Market definitions
Abbreviations
EXECUTIVE SUMMARY
The market
Figure 1: Forecast of gross mortgage advances, 2006-16
Proportion of intermediary products expected to decline further
Figure 2: Proportional distribution of regulated mortgage sales, by channel, 2006/07-2010/11
Market factors
Hopes of an increase in intermediary product numbers dashed
Figure 3: TrigoldCrystal Product Index, average number of intermediary products available, April 2007-February 2012
Regulation is hot topic for mortgage intermediaries
Consumer confidence and buying intentions fall
Companies and key players
The number of mortgage advisers continues to decrease
Figure 4: Number of mortgage and home finance firms, January 2006-December 2011
The bigger intermediary businesses are in a safer survival position
The adviser
Competition from direct products is the biggest challenge facing intermediaries
Figure 5: Biggest challenges currently facing mortgage intermediaries, March 2012
Increasing marketing activity is the top priority for intermediaries
Figure 6: Main intermediary priorities for next six months, March 2012
The threat from direct sales is increasing
Figure 7: Threat from direct sales, March 2012
Mortgage intermediaries are struggling to help some clients….
Figure 8: Proportion of clients intermediaries unable to assist, March 2012
… with affordability issues and maximum LTV being reached responsible
Figure 9: Main reasons that intermediaries are unable to assist clients, March 2012
What we think
ISSUES IN THE MARKET
Will the increase in direct sales pose a serious threat to intermediaries?
Increasing regulation – friend or foe?
What can intermediaries do to secure their position in the market?
Will Buy-to-Let be the saviour of mortgage intermediaries?
How can the relationship between lenders and intermediaries be improved?
FUTURE OPPORTUNITIES
Mortgage intermediaries can guide applicants through the mortgage maze
Relationship building and cross-selling are the key to intermediary survival
INTERNAL MARKET ENVIRONMENT
Key points
Bank of England base rate remains low but SVR mortgages are no longer falling in line
Figure 10: Bank of England base rate, three-month (monthly average) LIBOR and new mortgages effective rate, January 2005-February 2012
Number of intermediary products remains low
Figure 11: TrigoldCrystal Product Index, average number of intermediary products available, April 2007-February 2012
Number of monthly mortgage approvals
Figure 12: Number of monthly mortgage approvals (seasonally adjusted), by type, January 2009-January 2012
Number of direct mortgage products on the up
Figure 13: Trigold crystal product index, average number of direct products available, April 2009-February 2012
Mortgage switching levels
Figure 14: Proportion of mortgage-holders who have changed mortgage provider in the past 12 months, 2007-11
Repossession rates increased slightly in 2011
Figure 15: Mortgage arrears and repossessions, Q1 2008-Q3 2011
MMR will lead to fewer mortgages and higher costs
Changes to the mortgages being sold
Growing market for buy-to-let
Figure 16: Annual percentage change in gross advances – buy-to-let versus total mortgage market, 2002-11
2011 saw an increase in demand for BTL
Figure 17: Demand for buy-to-let and prime lending (house purchase), Q1 2008-Q4 2011
Government scheme to help buying – NewBuy scheme
BROADER MARKET ENVIRONMENT
Key points
Low level of consumer confidence is hindering the property market recovery
Figure 18: GfK NOP Consumer Confidence Index, January 1988-December 2011
Consumers are dubious about their ability to find a new mortgage
Falling housing market intentions show that people lack confidence in the property market…
Figure 19: Expected mortgage and property purchase activity, Q3/Q4 2002-Q3/Q4 2011
... yet property as a long-term investment is very much valued
Figure 20: Attitudes towards mortgages, January 2012
Property prices set to remain low
Figure 21: Annual house price growth in the UK – comparison of four different sources, Q1 2005-Q3 2011
Property prices expected to remain stagnant over the next 12 months
Figure 22: Property price expectations over the next 12 months, January 2012
REGULATORY CONTEXT
Key points
General intermediary view of regulation
Mortgage Market Review – an Overview
The Conduct of Business Reforms part of the MMR looks at:
The Prudential Reform part of the MMR looks at
The Niche Markets part of the MMR looks at:
Impact of the MMR on intermediaries
Responsible lending
Distribution and disclosure
European Commission mortgage review
COMPETITIVE CONTEXT
Key points
Instability in the market sees lenders keen to offer more direct products
Figure 23: Average number of intermediary and direct mortgage products available, April 2009-February 2012
Warning of potential return to dual pricing strategies…
… yet intermediary exclusive deals are returning with NewBuy
97% of intermediary products arranged with advice
Figure 24: Advised sales, by selling channels, April 2010-March 2011
SWOT ANALYSIS
Figure 25: SWOT analysis
LENDING MARKET OVERVIEW
Key points
Gross mortgage lending figures show some resilience
Figure 26: Total mortgage lending, by gross and net advances (not seasonally adjusted), 2001-12
Remortgaging activity increases by 17% over the last year
Figure 27: Gross mortgage lending, by type of loan, 2005-11
FTBs still struggling to meet deposit requirements
Figure 28: Loans advanced for house purchase, by type of borrower, 2005-11
BTL lending accounts for 10% of all mortgage lending
Figure 29: Number and value of new BTL mortgages sold, 2003-11
INTERMEDIARY SHARE OF THE MORTGAGE MARKET
Key points
Direct channels account for 52% of regulated mortgage sales in 2010/11
Figure 30: Proportional distribution of regulated mortgage sales, by channel, 2006/07-2010/11
Opportunities for intermediaries in 2012
Intermediary business looking to diversify to survive
MORTGAGE INTERMEDIARY MARKETPLACE
Key points
The number of mortgage advice firms continues to decline
Figure 31: Number of mortgage and home finance firms, January 2006-December 2011
Intermediaries must differentiate to survive
Both DA and AR numbers are falling
Figure 32: Number of mortgage and other home finance ARs and DA intermediary firms, by type, December 2007-December 2011
MORTGAGE LENDERS/INTERMEDIARY RELATIONSHIP
Key points
Dual pricing and direct selling – what are the reasons?
How can the relationship be managed for mutual benefit?
Where are the opportunities for intermediaries?
Procuration fees – a threat to the lender – intermediary relationship
COMPANY PROFILES – KEY INTERMEDIARY PLAYERS
Intrinsic Financial Services
Legal & General
Openwork
Personal Touch Financial Services
Sesame Bankhall
BRAND COMMUNICATION AND PROMOTION
Key points
Mortgage intermediary advertising spend starts to creep up
Figure 33: Amount spent on advertising in the mortgage intermediary sector, 2007-11
Mortgage market conditions could boost this sector
Mortgage Works from Nationwide tops intermediary adspend in 2011
Figure 34: Top ten advertisers in the mortgage intermediary market, 2009-11
Press advertising dominates mortgage intermediary adspend
Figure 35: Advertising channels in the mortgage intermediary sector, 2011
MORTGAGE ADVISER RESEARCH – CONFIDENCE AND MARKET CONDITIONS
Key points
Market conditions mean that intermediaries are struggling to help some clients
Figure 36: Proportion of clients intermediaries unable to assist, March 2012
A lower standard of client is harming the intermediary business
Figure 37: Main reasons that intermediaries are unable to assist clients, March 2012
Confidence levels remain buoyant amongst mortgage intermediaries
Figure 38: Intermediary confidence for the future, March 2012
MORTGAGE ADVISER RESEARCH – CHALLENGES AND PRIORITIES
Key points
Competition from direct products is the key concern for mortgage intermediaries
Figure 39: Biggest challenges currently facing mortgage intermediaries, March 2012
Threat from direct sales is increasing
Figure 40: Threat from direct sales, March 2012
Intermediaries take steps to safeguard their businesses
Figure 41: Main intermediary priorities for next six months, March 2012
APPENDIX – MARKET BACKGROUND
Figure 42: Overview of distribution channels within the mortgage marketplace since mortgage regulation
Different types of mortgage advisers

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