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Mortgage Advice - UK - May 2016

“Independent advisers have an advantage over branch-based advisers in being perceived as responsive to customers’ needs, but many people will still opt for a lender and product selected through their own research. Online advice carries the potential to address lingering accessibility issues among the high street names, with video appointments rivalling robo-advice services as a route to market.”
– Patrick Ross, Financial Services Analyst

This report examines the following issues:

  • Execution-only mortgages represent a thorny issue for lenders
  • What does an advice-led mortgage market mean for adviser competition?

The mortgage advice market has undergone a realignment process following the MMR (Mortgage Market Review) and advisers are beginning to settle into the new order of things. As the main point of contact for almost every mortgage customer, lenders value the role of the adviser more than ever. Whether investing in their own branch-based advisers or partnering with the huge broker networks, it’s all about reaching customers through the most convenient channels.

This Report looks at the drivers of advice business and how consumers perceive different types of mortgage advice. Mintel’s consumer research examines mortgage ownership, sources of mortgage advice, the impact of interest rate changes on advice-seeking and attitudes towards mortgage advice.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • The MMR has effectively mandated advice on most mortgages
            • Figure 1: Distribution of regulated mortgage sales, advised versus non-advised, 2009/10-2014/15
          • Gross mortgage lending is expected to continue growing into 2020
            • Figure 2: Forecast of gross mortgage lending, 2010-20
          • The consumer
            • A third of people have a mortgage on their main home
              • Figure 3: Residential mortgage ownership, by age, December 2015
              • Figure 4: Main source of advice used in arranging last mortgage, December 2015
            • Online is the most popular channel for researching mortgages
              • Figure 5: Channels for mortgage advice-related activities, December 2015
            • A third of mortgage holders are likely to seek advice if an interest rate rise occurs
              • Figure 6: Likeliness to seek advice on how to cope with an interest rate rise, December 2015
            • A third of mortgage holders think it is important to get advice early
              • Figure 7: Attitudes towards mortgage advice, December 2015
            • The value of independence is well appreciated
              • Figure 8: Attitudes towards different types of mortgage adviser, December 2015
            • What we think
            • Issues and Insights

              • Execution-only mortgages represent a thorny issue for lenders
                • The facts
                  • The implications
                    • What does an advice-led mortgage market mean for adviser competition?
                      • The facts
                        • The implications
                        • The Market – What You Need to Know

                          • The mortgage market is growing despite affordability issues
                            • The MMR has placed advice at the heart of the mortgage market
                            • The Mortgage Advice Market

                              • The MMR has effectively mandated advice on most mortgages
                                • Figure 9: Distribution of regulated mortgage sales, advised versus non-advised, 2009/10-2014/15
                                • Figure 10: Number of regulated mortgage sales, advised versus non-advised, 2012/13-2014/15
                              • Brokers benefited from the post-MMR capacity crunch
                                • Figure 11: Distribution of regulated mortgage sales, direct versus intermediated, 2009/10-2014/15
                                • Figure 12: Number of regulated mortgage sales, direct versus intermediated, 2012/13-2014/15
                              • Advising, selling and arranging complaints edge upwards
                                • Figure 13: Home finance complaints made to finance companies, by cause of complaint, 2012/13-2014/15
                            • The Mortgage Market

                              • Mortgage lending advanced throughout 2015
                                • Figure 14: Gross mortgage lending, not seasonally adjusted, 2011-15
                              • Gross mortgage lending is expected to continue growing into 2020
                                • Figure 15: Forecast of gross mortgage lending, 2010-20
                              • Buy-to-let lending shows strongest activity since the financial crisis
                                • Figure 16: Forecast of new buy-to-let mortgage advances – fan chart, 2010-20
                              • Traditional names continue to dominate lending
                                • Figure 17: Leading residential mortgage providers, market share by gross new mortgage lending, 2015
                            • Market Drivers

                              • Growth in house prices slowed during 2015
                                • Figure 18: Annual change in average UK house price – Comparison of four sources, by quarter, Q1 2008-Q4 2015
                              • Low interest rates mean advisers can support deal-hunting behaviour
                                • Figure 19: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for two-year variable rate mortgage at 75% loan to value, two-year fixed rate mortgage at 75% loan to value and standard variable rate (SVR), January 2010-March 2016
                              • Market begins to settle following the MMR
                                • Advisers experienced a rush from buy-to-let customers ahead of regulatory changes
                                • Companies and Brands – What You Need to Know

                                  • Advisers and lenders refresh advice strategies following the MMR
                                  • Competitive Strategies

                                    • Video mortgage advice sessions to ease pressure on branches
                                      • Lloyds Bank and Halifax
                                        • Nationwide
                                          • Providers remove friction to speed up the application process
                                            • HSBC
                                              • Property Franchise Group
                                                • Habito
                                                  • Partnerships continue to dominate strategy
                                                    • Tesco Bank launches Tesco Mortgage Intermediaries
                                                      • Mortgage Advice Bureau
                                                      • The Consumer – What You Need to Know

                                                        • A third of people have a mortgage on their main home
                                                          • Half of mortgagors used a branch-based adviser in the last five years
                                                            • Online is the most popular channel for researching mortgages
                                                              • A third of mortgage holders are likely to seek advice if an interest rate rise occurs
                                                                • 34% of mortgage holders think it is important to get advice early
                                                                  • The value of independence is well appreciated
                                                                  • Mortgage Ownership

                                                                    • A third of people have a mortgage on their main home
                                                                      • Ageing population is creating new challenges and opportunities for mortgage advice market
                                                                        • Figure 20: Residential mortgage ownership, by age, December 2015
                                                                    • Main Source of Mortgage Advice

                                                                      • Half of mortgage holders used a branch-based adviser in the last five years
                                                                        • Figure 21: Main source of advice used in arranging last mortgage, December 2015
                                                                    • Channel Preferences for Mortgage Advice-related Activities

                                                                      • Online is the most popular channel for researching mortgages
                                                                        • Figure 22: Channels for mortgage advice-related activities, December 2015
                                                                      • Full online advice does have appeal among key audiences
                                                                        • Figure 23: Seeking advice on the most appropriate mortgage, by age, December 2015
                                                                      • The majority of mortgage holders have used or would be interested in using only one channel
                                                                        • Figure 24: Number of methods used to complete mortgage advice-related activities, December 2015
                                                                    • Likelihood of Seeking Advice in the Event of an Interest Rate Rise

                                                                      • 38% of mortgage holders expressed concern about a potential interest rate rise in 2016
                                                                        • Figure 25: Level of concern about potential interest rate rise in 2016, December 2015
                                                                      • A third of mortgage holders are likely to seek advice if an interest rate rise occurs…
                                                                        • Figure 26: Likeliness to seek advice on how to cope with an interest rate rise, December 2015
                                                                      • …rising to half of Millennials
                                                                        • Figure 27: Likeliness to seek advice on how to cope with an interest rate rise, by generation, December 2015
                                                                      • Tracker mortgage holders are only slightly more likely to seek advice
                                                                        • Figure 28: Likeliness to seek advice on how to cope with an interest rate rise, by ownership of different types of mortgage, December 2015
                                                                    • Attitudes towards Mortgage Advice

                                                                      • A third of mortgage holders think it is important to get advice early
                                                                        • Advisers have to compete with online sources of information
                                                                          • 17% would be happy to use online advice channels
                                                                            • Figure 29: Attitudes towards mortgage advice, December 2015
                                                                          • Millennials need more than online information to support their mortgage purchase
                                                                            • Figure 30: Attitudes towards mortgage advice, by generation, December 2015
                                                                        • Attitudes towards Different Types of Mortgage Adviser

                                                                          • The value of independence is well appreciated…
                                                                            • …but bank-based advice leads the way on perceptions of being low cost
                                                                              • Figure 31: Attitudes towards different types of mortgage adviser, December 2015
                                                                            • Older Millennials are more likely to favour banks and building societies
                                                                              • Figure 32: People who think mortgage advisers at banks/building societies would be best able to provide each service, by age, December 2015
                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                              • Abbreviations
                                                                                • Consumer research methodology

                                                                                Companies Covered

                                                                                To learn more about the companies covered in this report please contact us.

                                                                                Mortgage Advice - UK - May 2016

                                                                                £1,995.00 (Excl.Tax)