Toni Smith, sales operations director at First Complete and Pink, thinks 2016 will see brokers provide lenders with the lion’s share of applications.
Whilst I don’t expect huge changes in the mortgage distribution market this year, I do expect there will be a few things that will make a notable difference.
Given the importance and focus on regulation and quality, we may see further consolidation in the network sector. It is increasingly apparent that whilst both scale and financial strength are needed to survive, expertise and an ability to manage quality within distribution is also essential.
I am sure the Financial Conduct Authority will continue to monitor the sector following its thematic review and there will be a continual focus on quality and transparency of advice.
A priority within both First Complete and Pink will be the continual education of our brokers, while clear, transparent customer recommendations and documentation will continue to be of great importance.
At the same time, it is likely the broker market will further grow in prominence and may exceed 70% share of mortgage business.
I question how long this split will remain so heavily in favour of the intermediary however, as lenders are already working on direct to consumer propositions, especially in the digital sphere.
It will undoubtedly become more attractive than it is today for borrowers to go directly to the lender especially for remortgages.
Digital and social media will become increasingly important for brokers. Over the next year or so it is likely to become as unacceptable not to have a social media presence as it is not to have a website, especially for brokers who want younger customers.
Keeping this within regulatory parameters will of course remain essential.
Despite Legal & General winding up its mortgage network, I expect the split between directly authorised and appointed representative advisers to stay roughly the same.
The competition in the club market is fierce and many brokers use the mortgage club they are used to dealing with, so any club that wants to attract new distribution must ensure its proposition is compelling, and not just in rates but across the whole proposition including service and compliance support.
The DA model works well for businesses that have an existing infrastructure allowing them to interpret and implement regulatory changes for themselves, but the risk of getting it wrong cannot be taken lightly.
However mortgage clubs offering an array of services and exclusive products, alongside the network model, ensures there is choice for all.
As a result, I very much expect First Complete and Pink to continue increasing their market share in 2016 as brokers search out the sound networks which will provide them with the support and guidance that they need.
The scale of the FCA’s regulatory fees remains the real challenge to the sustainability of the network model.
These will remain an issue while life and pensions continue to be lumped together for the Financial Services Compensation Scheme levy.
Some networks have already passed these fees on directly to their ARs and I believe we will see this happen further across the majority of networks in 2016.
The Mortgage Credit Directive is just two and a half months down the line but I do not see this presenting a huge challenge; it is just a case of implementing it. We have already been through the same process with the Mortgage Market Review and the MCD will require much smaller changes as the FCA did well ensuring that the MCD affected the UK market as little as possible.
Most networks should have been working closely with lenders and have planned training for all their brokers in the run up to April so they are fully prepared.