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Mortgages - Intermediary Focus - UK - April 2013

“Intermediaries will continue to battle with direct lenders for the lion’s share of the market, with some direct lenders choosing to up-skill their existing sales staff to offer advice. The growth of aggregators provides an opportunity for brokers to win business, but also poses a threat by driving down prices and forcing brokers to bid for business.”

– Alexander Hiscox – Financial Services Analyst

Some questions answered in this report include:

  • Who will win the battle between direct lenders and intermediaries?
  • How can intermediaries demonstrate their value in the mortgage market?
  • Can aggregators work with intermediaries?
  • Will there be a move from face-to-face to remote advice?

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • For now the threat from direct sales remains
                • Figure 1: Proportional distribution of regulated mortgage sales, by channel, 2007/08-2012/13
              • Market factors
                • Number of intermediary products increases
                  • Figure 2: Avelo Product Index, average number of intermediary products available, April 2007-February 2013
                • Companies and key players
                  • Number of advice firms continues to fall
                    • Figure 3: Number of directly authorised firms in the mortgage intermediary sector, September 2006-September 2012
                  • The adviser
                    • Cautiously optimistic about the future
                      • Figure 4: Expected change in intermediary annualised income over the next three and 12 months, January 2013
                    • Advisers are spending more time with clients
                      • Figure 5: The effect that market conditions have had on the time that intermediaries spend with each client, January 2013
                    • Direct lenders still seen as a challenge to intermediaries
                      • Figure 6: Challenges faced by mortgage intermediaries, January 2013
                    • Developing cross-sales is a main priority
                      • Figure 7: Intermediary priorities for the next six months, January 2013
                    • The consumer
                      • Consumers use a mix of resources in arranging their mortgage
                        • Figure 8: Sources of advice and information likely to use when researching/arranging a mortgage, December 2012
                      • Consumers are self-sufficient in undertaking their own research, but still need the reassurance of intermediaries
                        • Figure 9: Mortgage application expectations and intentions, December 2012
                      • What we think
                      • Issues in the Market

                          • Who will win the battle between direct lenders and intermediaries?
                            • How can intermediaries demonstrate their value in the mortgage market?
                              • Can aggregators work with intermediaries?
                                • Will there be a move from face-to-face to remote advice?
                                • Trend Application

                                  • Advisers can take the hassle out of buying a home
                                    • Target future first-time buyers
                                      • Mintel Futures: Generation Next
                                      • Market Drivers – Broader Market Issues

                                        • Key points
                                          • Consumer confidence remains low
                                            • Figure 10: GfK NOP Consumer Confidence Index, January 2007-December 2012
                                          • Property prices flat line
                                            • Figure 11: Annual house price growth in the UK – comparison of four different sources, Q1 2007-Q3 2012
                                          • Upward swing in buying intentions
                                            • Figure 12: Expected mortgage and property purchase activity, Q3/Q4 2002-Q3/Q4 2012
                                          • Mortgage rates remain separated from the Bank of England base rate
                                            • Figure 13: Bank of England base rate, three-month (monthly average) LIBOR and new mortgage effective rate, January 2006-January 2013
                                          • Monthly mortgage approvals remain flat
                                            • Figure 14: Number of monthly mortgage approvals (seasonally adjusted), by type, January 2009-December 2012
                                          • Number of repossessions continues to fall
                                            • Figure 15: Mortgage arrears and repossessions, Q1 2009-Q4 2012
                                          • Buy-to-let continues to outperform, but the gap has narrowed over 2012
                                            • Figure 16: Annual percentage change in gross advances – buy-to-let versus total mortgage market, 2002-12
                                        • Market Drivers – Internal Market Issues

                                          • Key points
                                            • Number of direct products continues to rise
                                              • Figure 17: Avelo Product Index, average number of direct products available, April 2007-February 2013
                                            • Number of intermediary products increasing slightly, but nowhere near 2007 highs
                                              • Figure 18: Avelo Product Index, average number of intermediary products available, April 2007-February 2013
                                            • Only half of direct sales are advised
                                              • Figure 19: Advised sales, by selling channels, April 2011-March 2012
                                            • The Mortgage Market Review
                                              • Government help to kick-start the mortgage market
                                                • The Funding For Lending Scheme
                                                  • Help to Buy scheme
                                                  • SWOT Analysis

                                                      • Figure 20: SWOT Analysis, mortgage intermediary market, 2013
                                                  • Lending Market Overview

                                                    • Key points
                                                      • Little change in gross and net advances in 2012
                                                        • Figure 21: Total mortgage lending, by gross and net advances (not seasonally adjusted), 2006-12
                                                      • House purchasing increased in 2012, but remortgaging activity fell by 13%
                                                        • Figure 22: Gross mortgage lending, by type of loan, 2006-12
                                                      • First-time buyer loans reach their highest level since 2007
                                                        • Figure 23: Loans advanced for house purchase, by type of borrower, 2006-12
                                                      • Buy-to-let continues to grow
                                                        • Figure 24: Number and value of new BTL mortgages sold, 2004-12
                                                    • Intermediary Share of the Mortgage Market

                                                      • Key points
                                                        • Intermediaries slightly increase their proportion of mortgage sales
                                                          • Figure 25: Proportional distribution of regulated mortgage sales, by channel, 2007/08-2012/13
                                                      • Mortgage Intermediary Marketplace

                                                        • Key points
                                                          • The number of mortgage intermediaries continues to fall
                                                            • Figure 26: Number of directly authorised firms in the mortgage intermediary sector, September 2006-September 2012
                                                          • Sole traders and partnerships feel the strain
                                                            • Figure 27: Number of mortgage and home finance ARs and DA intermediary firms, by type, September 2008-September 2012
                                                        • Company Profiles

                                                          • Intrinsic Financial Services
                                                              • Figure 28: Key financial data for Intrinsic Financial Services, 2010 and 2011
                                                            • Legal & General
                                                                • Figure 29: Key financial data for Legal & General (housing and protection business segment), 2011 and 2012
                                                              • Tenet
                                                                • Openwork
                                                                    • Figure 30: Key financial data for Openwork, 2010 and 2011
                                                                  • Personal Touch Financial Services
                                                                      • Figure 31: Key financial data for Personal Touch Financial Services, 2010 and 2011
                                                                    • Sesame Bankhall
                                                                        • Figure 32: Key financial data for Sesame Bankhall Group, 2010 and 2011
                                                                    • Brand Communication and Promotion

                                                                      • Key points
                                                                        • Advertising budgets have improved, but are a long way off pre-2009 figures
                                                                          • Figure 33: Amount spent on advertising in the mortgage intermediary sector, 2008-12
                                                                        • Top five advertisers made up two thirds of expenditure in 2012
                                                                          • Figure 34: Top ten advertisers in the mortgage intermediary market, 2010-12
                                                                        • Internet advertising to mortgage intermediaries has almost doubled since 2011
                                                                          • Figure 35: Advertising channels in the mortgage intermediary sector, 2011 and 2012
                                                                        • Websites becoming a favoured form of advertising to intermediaries
                                                                          • Figure 36: Top ten advertising media used by the mortgage intermediary sector, 2012
                                                                        • A note on adspend
                                                                        • The Adviser Outlook

                                                                          • Key points
                                                                            • Advisers are cautiously optimistic about the future income
                                                                              • Figure 37: Adviser expectations of change in income over next three months and 12 months, January 2013
                                                                            • Intermediaries cite clients remortgaging to get more competitive rates as a key reason for growth
                                                                              • The slow mortgage market is the main cause for concern
                                                                                • Advisers’ cautiously optimistic outlook is similar to last year’s
                                                                                  • Figure 38: Adviser expectations of change in income over next three months and 12 months, January 2012
                                                                              • The Adviser – Time Spent with Clients

                                                                                • Key points
                                                                                  • Mortgage advisers are spending more time with their clients
                                                                                    • Figure 39: How the time intermediaries spend with their clients has changed, January 2013
                                                                                • The Adviser – Challenges and Priorities in the Mortgage Intermediary Market

                                                                                  • Key points
                                                                                    • Competition from direct lenders remains a challenge, according to 43% of intermediaries
                                                                                      • Figure 40: Challenges facing mortgage intermediaries, January 2013
                                                                                    • Difficult economic conditions for first-time buyers seen as a challenge for advisers
                                                                                      • Advisers do not see the rise of online comparison sites as a challenge
                                                                                        • Almost half of advisers see developing cross-sales as their main priority
                                                                                          • Figure 41: Mortgage intermediary priorities for next six months, January 2013
                                                                                        • Increasing marketing activity is a priority for almost 40% of advisers
                                                                                          • Few advisers planning to invest in new technology
                                                                                          • The Consumer – Mortgage Arrangement Preferences

                                                                                            • Key points
                                                                                              • Online sources are gaining popularity
                                                                                                • Figure 42: Sources that consumers are likely to use when researching or arranging a mortgage, December 2012
                                                                                              • Consumers are more likely to turn to advisers in their own bank as a first port of call
                                                                                                • Consumers are likely to use a mix of sources when arranging their mortgage
                                                                                                  • Price comparison sites are key for remortgage customers
                                                                                                    • Figure 43: Sources that consumers are likely to use, by mortgage application intentions, December 2012
                                                                                                  • FTBs to look to their own bank/building society and the internet
                                                                                                  • The Consumer – Attitudes towards Applying for a Mortgage

                                                                                                    • Key points
                                                                                                      • Almost half undertake their own research to find the best deal
                                                                                                        • Figure 44: Mortgage application expectations and intentions, December 2012
                                                                                                      • A third of consumers need advice in order to apply for a mortgage
                                                                                                        • Consumers are less likely to expect advice when remortgaging
                                                                                                          • Figure 45: Agreement with statements relating to arranging a mortgage/remortgage, by type of mortgage customer, December 2012
                                                                                                        • Experienced consumers are the least trusting of bank-based advisers
                                                                                                          • Bank/building society mortgage advisers are less trusted
                                                                                                            • Figure 46: Agreement with statements concerning trust in advisers, December 2012
                                                                                                          • Self-sufficient consumers research the best deals before going directly to the lender
                                                                                                            • Figure 47: Agreement with statements relating to arranging a mortgage/remortgage, by sources likely to use, December 2012
                                                                                                          • Consumers that use friends and family expect to need professional advice
                                                                                                            • Intermediaries used to take the hassle out of applying for a mortgage
                                                                                                            • Appendix – Market Background

                                                                                                              • Different types of mortgage advisers
                                                                                                              • Appendix – Consumers Arrangement Preferences

                                                                                                                  • Figure 48: Most popular mortgage research, by demographics, November 2012
                                                                                                                  • Figure 49: Next most popular mortgage research, by demographics, November 2012
                                                                                                              • Appendix – Consumer Attitudes towards Applying for a Mortgage

                                                                                                                  • Figure 50: Most popular attitudes towards applying for a mortgage, by demographics, November 2012
                                                                                                                  • Figure 51: Next most popular attitudes towards applying for a mortgage, by demographics, November 2012

                                                                                                              Companies Covered

                                                                                                              • Aviva Plc
                                                                                                              • Intrinsic Financial Services
                                                                                                              • Legal & General Group PLC
                                                                                                              • Lloyds Banking Group
                                                                                                              • Mansfield Building Society
                                                                                                              • Metro Bank
                                                                                                              • Openwork
                                                                                                              • Sesame Bankhall Group Limited
                                                                                                              • Skandia UK
                                                                                                              • Standard Life Assurance Company
                                                                                                              • Tenet Group Ltd
                                                                                                              • Zurich Financial Services

                                                                                                              Mortgages - Intermediary Focus - UK - April 2013

                                                                                                              £1,995.00 (Excl.Tax)