Paul Shearman, mortgage, protection and general insurance proposition director at Openwork, reveals his predictions for distribution in 2016.
2015 saw seismic shifts in the mortgage distribution landscape and in my view there’s more to come.
The biggest shift has been in channel mix, with bank based business, particularly via branches, migrating towards intermediaries in the post Mortgage Market Review world.
We ended 2015 with around 70% of mortgage transactions undertaken by brokers, a far cry from the 50:50 market that we saw only a couple of years ago.
The strength of buy-to-let, new build and the re-emergence of specialist business has all helped emphasise the shift to brokers, but the reality is that there are some lenders who have virtually given up on their direct channels. Costs, complexity and risk have all proved too much for some to bear.
We’ve also seen significant change in the broker community with some of the giants of the industry undergoing major transformational change, whilst simultaneously a number of smaller and new players have gained real traction.
It was inevitable that as the market recovered we’d see models evolving and more competition emerging – it’s a positive sign of a gradual move to a more stable (almost normal!) market.
As for 2016, I think we’ll see brokers continuing to dominate. Lenders are facing further challenges as a result of the Mortgage Credit Directive, which will take up investment and resource and will constrain any fight-back from direct channels.
That said, I don’t doubt that many lenders would like to see their direct channels sweated harder, but with everything else going on I just can’t see them making much progress in 2016.
There’s also lots of talk about the role of price comparison websites at the moment, but so far they’ve had limited impact from a transactional (rather than informational) perspective and I don’t see that changing in the year ahead, albeit technology and the use of digital channels will play an increasing role.
Fundamentally, clients need advice and with increased complexity in the buy-to-let market, more solutions in the new build and first-time buyer markets, lending criteria still proving challenging, an increasing role for second charges and over 10,000 products available in the market, brokers remain fantastically placed to support clients.
The broker landscape will, however, see significant change in the months ahead with major brokerages across the market moving models – some selecting to go directly authorised, while others decide to join new networks.
There are also a number of emerging distributors with significant financial fire power, who may well be tempted to purchase their way to greater scale.
Expect plenty of corporate activity during the year as a result.
Finally, with ever greater regulatory scrutiny and with the senior persons regime looming, lenders will also play an important role in shaping the landscape through their decisions on distribution partners.
All in all, as ever, the year ahead promises to be a lively one in distribution!