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Will brokers still dominate the marketplace by 2030?

Mortgage Introducer

March 31, 2020

Within the next 10 years, the head of the FCA may be sitting in front of the Treasury Select Committee being asked why they brought back execution-only.

This is according to Andrew Montlake, director of Coreco, who was speaking at a panel debate earlier this year organised and hosted by MRM Communications.

Montlake, along with other industry stalwarts including David Whittaker from Keystone Property Finance, Jane Cross from e.surv Chartered Surveyors and Lynda Blackwell, were discussing what the mortgage market may look like in 2030.

Montlake continued that currently brokers take an estimated 77% of business which he predicts will decline by 2030 and that lenders will continue to move into the technology space over the next decade.

He said: “It’s slowly moving but will change over the next 10 years.

“Brokers take around 77% of business now, with some lenders relying on brokers for 85% of their business.

“Lenders are starting to move into the tech space and that will start to take market share away from brokers.”

Despite not having three quarters of the market in 10 years, Montlake believed brokers will have a “really good future” but they will need to adapt.

Montlake added: “It’s all about adapting to consumer demand; reacting to how they want to be dealt with; embracing tech, rather than being scared of it; and looking after their customers better.

“There will be fewer brokers in the market but if those that are left can do this, they will have a good relationship with their clients.”

Cross believes that due to people’s lives being increasingly more complicated, brokers add the most value by face-to-face advice, something which she believes will still be present by 2030.

This follows recent industry figures suggesting face-to-face interaction may become a thing of the past as virtual takes over during the current coronavirus outbreak following governmental isolation restrictions.

Blackwell, who is currently non-executive director at Molo Finance, believes broker markets will be a lot smaller in the future.

She said: “I think disintermediation is really starting to happen and intermediaries are definitely going to be impacted.

“I think it will shadow what is happening on the lending side.

“Big lenders are going to look for efficiencies, digitalise and move away from brokers because it is such an expensive distribution channel.

“We are more likely to see the building societies of this world – those that survive – continuing to rely on traditional brokers.

“I expect in 2030 the market will have changed a lot.”

Dev Malle, group sales director at My Home Move, expects to see a ‘tech takeover’ in the next decade.

Malle believes that technology will increase intelligent underwriting and execution-only, with the panel claiming a “better and more responsible market” is afoot thanks to data.

He said: “We tend to overestimate what will happen in the next two years and underestimate the next 10.

“I would say 50% of the market in the next 10 years will be execution-only.”

Montlake added: “Lenders have the biggest issues here.

“Going too far down the road of technology, execution only and doing deals with price comparison sites could mean that lenders will just become product.”

Whittaker claimed that in the short-term, the “misalignment” between lenders and brokers will need to be addressed. 

He said: “As we see more longer-term mortgages, there will emerge a difference in payment structures where lenders and brokers align their interests in the interest of the consumer.

“There will be a political push for longer-term mortgages but that is an irrelevance – we are going to head to that over the next five to 10 years anyway.”

As a result of this, Blackwell believes there may be move back to local building societies.

She added: “With an amorphous mass in the prime area, there might be a move back to the traditional model that appeals to younger borrowers with ethical, green and local values.”

Montlake believes that the government “missed a trick” during the financial crisis of 2008, and that there should have been a nationalised housebuilder. 

Blackwell added: “That would have made a big change, because some of the current builders are not incentivised to build the properties the market actually needs.

“The housebuilders don’t think about older people.” 

Paul Thomas, a senior consultant at MRM, said: “The financial crisis changed the face of the UK’s mortgage market beyond recognition and is directly responsible for the sector we see before us today.
“Just as that crisis shaped the past 10 years, our panel was unanimous that technology will shape the next 10.
“If they are right, then we could be about to witness a tectonic shift in distribution, the way products are made and the way borrowers interact with the industry.
“One thing for sure is that brokers will always play a part, no matter what happens to the industry.
“They have faced some incredibly tough times in the past decade and have always shone through.
“There is no reason why they can’t find a way to adapt in the future.”

The panel discussed various issues, from the Bank of Mum and Dad to individual risk pricing, and the event was part of the Future Finance initiative which aims to gather industry experts to discuss the future of their respective markets.


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