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Mortgages - Intermediary Focus - UK - November 2014

“Although non-advised sales will now be uncommon, the threat that lenders will try to cut intermediaries out of the sales process remains. This is naturally something that the mortgage advisor community will need to keep an eye on and continue to seek ways in which they can offer added value that cannot be replicated by lender-based advisors.”
– George Zaborowski, Senior Analyst – Financial Services

This report looks at the following areas:

  • The MMR is a short-term headache not a long-term problem
  • Non-advised sales fading, but lenders will still seek ways to sell direct
  • Buy-to-let provides a hedge against a potential slowdown in FTB activity

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The Market
            • Intermediaries gaining a larger share of regulated mortgage sales
              • Figure 1: Proportional distribution of regulated mortgage sales, by channel, 2008/09-2013/14
            • Market factors
              • MMR now officially in force
                • Advised sales set to increase further
                  • Number of intermediary mortgage products is on the rise
                    • Figure 2: Average number of mortgage products available, by type, August 2009 to August 2014
                  • Consumer confidence levelling off after reaching its highest level in five years
                    • Help to Buy set to continue but Funding for Lending has been withdrawn
                      • Companies and key players
                        • Decline in the number of authorised mortgage business firms has slowed
                          • Figure 3: Number of UK authorised mortgage business firms (non-deposit taker), 2008-14* and 31 July 2014
                        • Advertising to mortgage intermediaries has fallen sharply in 2014
                          • The adviser
                            • Prime residential property the primary driver of mortgage business
                              • Figure 4: Anticipated sources of mortgage business over the next three months, by advisers as a group, August 2014
                            • Increase in home purchase loans predicted to drive income growth
                              • Figure 5: Main reasons for an expected increase in income over the next three months, August 2014
                            • Intermediaries view regulation as their biggest issue
                              • Figure 6: The biggest challenges facing mortgage intermediaries, August 2014
                            • Current views of the MMR tend to be negative
                              • Figure 7: Agreement with statements about the impact of the Mortgage Market Review, August 2014
                            • Lenders are not generally viewed in a favourable light
                              • Figure 8: Level of agreement with statements about mortgage lenders, August 2014
                            • What we think
                            • Issues and Insights

                                • The MMR is a short-term headache not a long-term problem
                                  • The facts
                                    • The implications
                                      • Non-advised sales fading, but lenders will still seek ways to sell direct
                                        • The facts
                                          • The implications
                                            • Buy-to-let provides a hedge against a potential slowdown in FTB activity
                                              • The facts
                                                • The implications
                                                • Trend Application

                                                  • Twitter can help put lenders and advisers in sync
                                                    • Advice back in fashion under the MMR
                                                      • In uncertainty is opportunity
                                                      • Market Drivers – Broader Market Factors

                                                        • Key points
                                                          • Consumer confidence at a five year high
                                                            • Figure 9: GfK NOP Consumer Confidence Index, January 2008-October 2014
                                                          • Property prices have risen throughout 2013 and into 2014
                                                            • Figure 10: Annual house price growth in the UK – comparison of four different sources, Q1 2008-Q2 2014
                                                          • Interest rates remain low but the next move will be upwards
                                                            • Figure 11: Bank of England base rate, three-month (monthly average) LIBOR and new mortgage effective rate, January 2007-September 2014
                                                          • Mortgage approvals starting to flatten out after a nice rise in 2013
                                                            • Figure 12: Number of yearly mortgage approvals (seasonally adjusted), by type, 2008-Q3 2014
                                                          • Repossessions and arrears continue their descent
                                                            • Figure 13: Mortgage arrears and repossessions, Q1 2010-Q2 2014
                                                          • Buy-to-let lending moves into parity with the overall market in 2013
                                                            • Figure 14: Annual percentage change in gross advances – buy-to-let versus total mortgage market, 2003-13
                                                        • Market Drivers – Internal Market Factors

                                                          • Key points
                                                            • MMR regulation now in effect
                                                              • Affordability assessment:
                                                                • Removal of the non-advised sales process:
                                                                  • Implementation growing pains are short-term in nature
                                                                    • Number of direct and intermediary mortgage products continues to grow
                                                                      • Figure 15: Average number of mortgage products available, by type, August 2009 to August 2014
                                                                    • Nearly eight in 10 sales are advised
                                                                      • Figure 16: Distribution of regulated mortgage sales, advised versus non-advised, 2008/09-2013/14
                                                                    • A large proportion of customers are comfortable arranging loans online
                                                                      • Figure 17: Preferred methods of mortgage arrangement, December 2013
                                                                    • Help to Buy has helped stimulate mortgage lending activity
                                                                      • Funding for Lending Scheme no longer available to mortgage lenders
                                                                        • EU Mortgage Credit Directive compliance on the horizon
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • Intelliflo introduces guide to help reduce MMR confusion
                                                                              • Lenders and advisers can now communicate in real-time
                                                                                • vScreen enabling remote face-to-face advice
                                                                                  • AdviserPost allows advisers to outsource their social media activity
                                                                                    • Sesame Bankhall introduces automated online tracking system
                                                                                    • Lending Market Overview

                                                                                      • Key points
                                                                                        • Gross mortgage lending breaks out of slump 2013
                                                                                          • Figure 18: Total secured lending, by gross and net advances (not seasonally adjusted), 2007-13
                                                                                        • Rise in all types of mortgage lending in 2013
                                                                                          • Figure 19: Gross mortgage lending, by type of loan, 2006-13
                                                                                        • First-time buyers account for over two fifths of house purchase volume
                                                                                          • Figure 20: Loans advanced for house purchase, by type of borrower, 2006-13
                                                                                        • Strong growth in new buy-to-let advances
                                                                                          • Figure 21: Volume and value of new buy-to-let mortgages, 2007-13
                                                                                      • Intermediary Share of the Mortgage Market

                                                                                        • Key points
                                                                                          • Intermediaries grabbing a large share of regulated mortgage sales
                                                                                            • Figure 22: Proportional distribution of regulated mortgage sales, by channel, 2008/09-2013/14
                                                                                        • Mortgage Intermediary Marketplace

                                                                                          • Key points
                                                                                            • Decline in the number of authorised mortgage business firms has stalled
                                                                                              • Figure 23: Number of UK authorised mortgage business firms (non-deposit taker), 2008-14* and 31 July 2014
                                                                                            • The MMR improves the appeal of the mortgage advice business
                                                                                              • Figure 24: Adviser numbers, estimated 2012 and actual December 2012, July 2013 and January 2014
                                                                                          • Company Profiles

                                                                                            • Intrinsic Financial Services
                                                                                              • Company background
                                                                                                • Number of advisers/members
                                                                                                  • Key business/financial indicators
                                                                                                    • Figure 25: Key financial data for Intrinsic Financial Services, 2012 and 2013
                                                                                                  • Recent activity
                                                                                                    • Legal & General
                                                                                                      • Company background
                                                                                                        • Number of advisers/members
                                                                                                          • Key business/financial indicators
                                                                                                            • Figure 26: Key financial data for Legal & General (housing and protection business segment), 2012 and 2013
                                                                                                          • Recent activity
                                                                                                            • Openwork
                                                                                                              • Company background
                                                                                                                • Number of advisers/members
                                                                                                                  • Key business/financial indicators
                                                                                                                    • Figure 27: Key financial data for Openwork, 2012 and 2013
                                                                                                                  • Recent activity
                                                                                                                    • Personal Touch Financial Services
                                                                                                                      • Company background
                                                                                                                        • Number of advisers/members
                                                                                                                          • Key business/financial indicators
                                                                                                                            • Figure 28: Key financial data for Personal Touch Financial Services, 2012 and 2013
                                                                                                                          • Recent activity
                                                                                                                            • Sesame Bankhall
                                                                                                                              • Company background
                                                                                                                                • Number of advisers/members
                                                                                                                                  • Key business/financial indicators
                                                                                                                                    • Figure 29: Key financial data for Friends Life Group Limited UK operating segment*, 2012 and 2013
                                                                                                                                  • Recent activity
                                                                                                                                    • Tenet
                                                                                                                                      • Company background
                                                                                                                                        • Number of advisers/members
                                                                                                                                          • Key business/financial indicators
                                                                                                                                            • Figure 30: Key financial data for Tenet Group, 2012 and 2013
                                                                                                                                          • Recent activity
                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                            • Key points
                                                                                                                                              • Advertising to mortgage intermediaries declines sharply in 2014
                                                                                                                                                • Figure 31: Amount spent on advertising in the mortgage intermediary sector, year to September 2010-14
                                                                                                                                              • Top 10 advertisers in the mortgage intermediary market
                                                                                                                                                • Figure 32: Top 10 advertisers in the mortgage intermediary market, year to September 2012-14
                                                                                                                                              • More than 90% of advertising done via the press in 2014
                                                                                                                                                • Figure 33: Advertising channels in the mortgage intermediary sector, year to September 2012-14
                                                                                                                                            • The Adviser – Mortgage Business Outlook

                                                                                                                                              • Key points
                                                                                                                                                • Prime residential property the chief driver of mortgage business
                                                                                                                                                  • Figure 34: Anticipated sources of mortgage business over the next three months, by advisers as a group, August 2014
                                                                                                                                                • One in four say prime residential drives 90% to 100% of business
                                                                                                                                                  • Figure 35: Proportion of mortgage business that will be driven by prime residential over the next three months, August 2014
                                                                                                                                                • Just less than a third derive 30% or more of business from buy-to-let
                                                                                                                                                  • Figure 36: Proportion of mortgage business that will be driven by buy-to-let over the next three months, August 2014
                                                                                                                                                • Increase in home purchase loans seen as key driver of income growth
                                                                                                                                                  • Figure 37: Main reasons for an expected increase in income over the next three months, August 2014
                                                                                                                                              • The Adviser – Key Challenges

                                                                                                                                                • Key points
                                                                                                                                                  • Dealing with regulation viewed as the biggest issue for advisers
                                                                                                                                                    • Figure 38: The biggest challenges facing mortgage intermediaries, August 2014
                                                                                                                                                  • High property prices hindering FTB activity still seen as a key challenge
                                                                                                                                                    • Direct and online channels now perceived as less of a threat
                                                                                                                                                    • The Adviser – Impact of the MMR

                                                                                                                                                      • Key points
                                                                                                                                                        • MMR affordability assessment requirements are slowing down advisers
                                                                                                                                                          • Figure 39: Agreement with statements about the impact of the Mortgage Market Review, August 2014
                                                                                                                                                        • More clarity about the interpretation of the new rules needed
                                                                                                                                                          • Nearly a third believe media coverage is scaring off potential business
                                                                                                                                                          • The Adviser – Relationship with Mortgage Lenders

                                                                                                                                                            • Key points
                                                                                                                                                              • Scope for improvement in adviser-lending relations
                                                                                                                                                                • Figure 40: Level of agreement with statements about mortgage lenders, August 2014
                                                                                                                                                              • Role of advisers may not be adequately appreciated
                                                                                                                                                                • The MMR may allow for more synergies
                                                                                                                                                                • Appendix – Adviser Regulatory Definitions

                                                                                                                                                                  Companies Covered

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

                                                                                                                                                                  Mortgages - Intermediary Focus - UK - November 2014

                                                                                                                                                                  £1,995.00 (Excl.Tax)