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The dawning of the age of acquisitions

M-Day was tipped to be the dawn of a new era of distribution in the UK mortgage market.

Almost four months on, Mortgageforce announced its acquisition by West Bromwich Building Society for an undisclosed sum. What could arguably be described as one of the biggest mortgage intermediary franchises in the UK has decided it can further its expansion plans with the help of a big building society partner.

This is certainly the way many commentators expected mortgage distribution to turn after M-Day although the wheels were in motion well before November 1.

Scarborough Building Society started legal proceedings last September against Mortgage Next after a failed 22m takeover deal. The two founders of the broker network eventually secured a sale to Freedom Finance.

What this revealed to the mortgage market was that lenders are prepared to spend a lot of money to secure distribution. Scarborough claimed it had spent 243,000 on external advisers and just over 100,000 internally in preparation to buy Mortgage Next.

Mortgageforce is set to double the size of its distribution in the next two years. It aims to have between 300 to 500 consultants over time.

But there is concern over the extent to which mortgage intermediaries such as Mortgageforce can remain truly independent. Rivals say lenders rarely enter these deals for investment purposes only.

Manchester-based broker Cartel has made it clear that it is planning to tie to a single lender. Managing director Carl Wright predicts that broker firms will increasingly look to create these type of relationships as the market becomes more competitive.

He estimates that the independent mortgage intermediary market will shrink to just 10 per cent of market share and lenders will accelerate their drive to control distribution.

In December, Principality Building Society acquired Cardiff broker Loan Link, creating 160 new jobs in South Wales. It seems to be a case of if you can’t beat them, join them.

But looking at the other side of the coin, Charcol did the opposite by breaking away from Bradford & Bingley last December after much speculation as to what B&B would do with what was becoming a wholly unprofitable organisation. John Garfield made a small sum out of a tidy break and we are told to expect great things from Charcol.

Meanwhile, B&B allegedly lost 40 mortgage advisers following the reduction of its lending panel from 50 to 25 members. Where have they gone?

February saw The Mortgage Operation close down its network to focus on packaging, with only nine appointed representatives on its books. There are plenty more networks out there wondering how they are going to make their AR targets and continue to survive in a competitive marketplace.

Before the disintegration of the MCCB, there were 35,000-plus registered mortgage advisers and a further 40,000 to 50,000 tied to banks and building societies. That makes a pool of around 85,000-plus to share out.

Packagers and mortgage clubs continue to fight for survival as well as the networks. Lenders are also keeping their eyes peeled.

Lenders will be looking at mortgage firms within the M25, including Savills and London & Country, wondering when they will jump on the bandwagon while others look keenly at Charcol and wonder whether it can make it alone.

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