Lenders strengthen broker ties as market recovers
Despite the increase in applications due to higher lending volumes, 29% of intermediary lenders reported an improvement in the quality of introduced business during the first six months of the year while a further 65% said quality had remained stable.
And while 67% of brokers stated a borrower not fitting a lender’s profile was the main reason for a rejection, mortgage availability has improved. The number of brokers who stated they were unable to get arrange a mainstream mortgage for their client dropped from 63% to 37%.
Peter Williams, executive director of IMLA, said: “It is encouraging to see evidence of greater cohesion in the face of a more active market with brokers successfully matching mortgage applicants to lenders’ requirements.
“IMLA believes a customer who receives advice is much better served than one who does not and these results should instil further confidence that the market is ready for continued growth.”
Other reasons why lenders rejected applications were cited as existing or historic financial difficulties, 52%, and limited deposits at 41%.
But over recent months new entrants to the market, focused on borrowers who have suffered from historic credit problems, look set to offer brokers more choice in serving their clients’ needs.
Signs of improvement away from the mainstream market have already been seen. In the last quarter of 2012 67% of brokers were unable to source a mortgage for a near prime borrower compared to 46% in quarter two this year.
Lenders identified two key factors in deciding to work with a particular broker: the credit quality of the business they introduce and the quality of their loan application information.
More than half of brokers reported that lenders’ service to them has been consistent or improved since January 2013.
Brokers’ priorities for lenders to address include providing better systems for applications, more information about target profiles and a greater range of products.
Flexible underwriting and an end to dual pricing also appear on brokers’ wish-lists.
Market growth has prompted both intermediary lenders and brokers to revise their predictions for total gross lending in 2013. Having forecast £150bn in January 2013 lenders have raised their expectations by 5% to £157bn.
Brokers remained more conservative but a busy six months has had an even bigger impact on their annual forecast: up by 12% from £139bn to £155bn in July 2013.
More than four in five brokers feel the market is currently improving compared with 37% in January.
And one in five report a significant improvement , ten times more than January.
Lenders are unanimous in their view that market conditions are currently improving with almost two thirds reporting a ‘significant’ upturn.
Having forecast 940,000 total residential transactions and £9.3bn net lending for the year back in January both predictions have been revised upwards to 1.01m and £12.6bn respectively.
They are similarly optimistic about intermediaries taking some three fifths of total mortgage business in 2013.
Intermediaries’ 2012 market share in terms of business volume amounted to 55% of first-time buyer loans, 44% of home mover loans and 45% of remortgage loans.
Brokers anticipate business volumes will increase by around 3% for each category in the second half of the year with first-time buyers experiencing the biggest rise.
Williams said: “Both lenders and brokers have high hopes that business will continue to grow for the remainder of the year. A key challenge will be to manage that growth while also preparing to implement the Mortgage Market Review from April 2014.
“Any upsurge of activity when the Help to Buy mortgage guarantee arrives in January 2014 will put even more emphasis on broker-lender relationships so close cooperation will be essential to make these endeavours a success.”
Williams said the quality of advice and service were essential to the consumer experience and IMLA was working hard to uphold good practice among brokers.
He added: “Together with other industry representatives we are exploring the case for a framework for an adviser registration scheme to provide a single, authoritative source of information on the entire broker community.
“As well as helping lenders, brokers and regulators to work together more efficiently it will give even greater consumer protections which can only be a good thing as business volumes continue to increase.”
Directly Authorised and Appointed Representative brokers held an almost equal share of intermediated business in the first half of the year with AR market share marginally higher at 51% versus 49% according to IMLA members.
Although the majority of lenders, 57%, predict this balance will remain the same more than one in three expect more emphasis on ARs in the second half of the year impacted by structural changes in the intermediary market and the anticipated trend for more DAs to become ARs.