Lenders at risk through competition
He believes that despite the UK retail mortgage market having been one of the fastest growing, most innovative financial services markets in the world, volume growth has masked falling profit margins on lending advances. He claims the lifetime value to providers of an average mortgage sale fell from £700 in 1995 to £350 in 2002, due to more frequent remortgaging, price competition and a shift from branch-based sales to less profitable mortgage broker sales.
The UK mortgage market now stands on the brink of significant change, according to Weil. Volume growth looks set to slow or even reverse, plus the competition for a shrinking profit pool will force further consolidation among lenders. Consumers can expect very attractive offers, improved service and more aggressive solicitation for them to remortgage.
He believes the winning lenders will be those that can exploit sophistication, scale or specialisation; the losing lenders will be those that lack sophistication or scale to compete in the tougher market environment.