In the UK, banks are becoming more and more reliant on brokers as a distribution channel following a raft of regulatory changes.
A closer look at NAB’s soon-to-be divested UK banking assets reveals that home loans represent more than 70 per cent of Cyldesdale’s loan book.
The company has a national reach through brokers, however 48 per cent of its mortgage book is concentrated in London and the South East.
Brokers play a key role in the UK mortgage market. The latest figures from the Council of Mortgage Lenders put broker market share at 64 per cent, with many UK mortgage market figures tipping 75 per cent as a realistic target for 2016.
The UK regulator introduced the Mortgage Market Review (MMR) in April last year, which worked in favour of brokers in much the same way the APRA’s lending curbs are driving more borrowers towards the third-party channel in Australia.
In its investor presentation last week, Clydesdale made no secret of the fact that brokers are the primary distribution channel for home loans in the UK.
“Benefits of the intermediary model to banks,” it stated, “include broad geographical distribution, scalability at low marginal cost and improved asset quality."
“Benefits of the intermediary model to customers," include “face-to-face advice, application processing support and access to a wider range of providers, allowing customers to shop for best deal.”
“New rules following the Mortgage Market Review (MMR) in 2014 are supportive of intermediary market dynamics,” the group said.
Specifically, the bank noted that increased regulation had also increased processes for in-branch mortgage applications, driving a “re-direction” of flows to the intermediary market.
Clydesdale has a selective “invitation-only” panel of brokers who write 74 per cent of new volumes. Other UK banks have an even greater dependence on brokers. Aldermore Bank receives 88 per cent of all new lending from brokers while Virgin Money receives 87 per cent.
Increased regulatory supervision of the UK mortgage market has been a windfall for brokers. With global regulation showing no signs of slowing down, and APRA firmly on the front foot when it comes to responsible lending, Australian brokers are likely continue to dominate the home loan market.
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James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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