Lenders are preparing to fight back in the battle for market share by ramping up their execution-only digital sales platforms. But does this represent a threat to growth in the broker market?
Under MMR, a residential mortgage sale can only be non-advised where there is no interaction with the borrower. This means it must be carried out through a pure online process or by post.
Customers with total assets worth over £3m or income above £300,000, and mortgage professionals, can also be sold mortgages without advice.
According to FCA data, as of Q1 2014 brokers held a 57 per cent share of the mortgage market, while Association of Mortgage Intermediaries chief executive Robert Sinclair has since forecast brokers’ share will reach 75 per cent by 2019.
Technology providers say lenders have already begun discussions around improving their online execution-only platforms to stem the flow of that business to the intermediary channel, potentially threatening brokers’ market share.
MAC Consulting chief executive Mark Chilton says: “Lenders are looking to enhance their non-advised sales platforms but they need to be very careful about what they want to achieve and how they go about that.
“At the moment, any application on a lender’s system or even through a comparison site like MoneySupermarket will leave a hard footprint on a consumer’s credit file and that can then make any subsequent applications more difficult, particularly post-MMR. Consumers are increasingly savvy to these factors now.
“If lenders are incorporating that into their systems to make sure only a soft print is left on credit files, they could very well take back some market share. Brokers would be very worried to see lenders or comparison sites offer an application process that does not then affect the applicant’s credit score. That could be a game-changer.”
Despite this, Sinclair remains bullish about the future of the broker channel.
He says: “Technology is always moving on and of course lenders need to stay up to date with that. However, I think the FCA has made its position clear on how it wants mortgage sales to be conducted and fundamentally advice is at the centre of that process.
“I’m sure as consumers become more savvy, a higher proportion will want to go through their own applications online but my view is that will remain a niche sector of the market.”
Middleton Finance managing director Daniel Bailey adds: “You have to be very well-informed to compare the massive array of products available, learn criteria and application requirements. Lender platforms don’t provide all of that, whereas a broker can research the entire market. Consumers want advice on what has become a more complex application process and I’m confident that’s the way the market is going to continue.”
APAC Systems director Wayne Smethurst says a lack of investment by lenders since the financial crisis means their existing technology has become outdated.
He says: “Lenders had a hibernation period during the crisis as far as technology was concerned, while consumers went through a tech revolution and that changes the way they want to make purchases.
“Lenders have to catch up with today’s technology and they are starting to look at that now.”
Halifax director of intermediaries Mike Jones says: “We support and invest in both our direct and introduced mortgage business and our direct execution product transfer proposition is popular with borrowers who are confident about what product they want.”
Nationwide says it is constantly monitoring its systems across its direct and introduced business.
Santander and HSBC declined to comment.