It will be interesting to see what the mortgage market will look like five years from now and how MMR has changed it. In my view, MMR certainly will have changed the way the mortgage market works.
So far MMR has impacted the market in many ways. Intermediaries have been managing increased business levels at the same time as getting to grips with all of the different lender nuances in affordability calculations and what documents they require.
However, lenders have had to overhaul the way they operate in branch. Their mortgage advisers have all been trained to give fully advised sales and mortgage appointments are taking 2-3 hours for each case, so we are all working in a level playing field. I think it is fair to say that lenders have been surprised at the time it now takes to arrange a mortgage for a customer from start to finish, and appointment booking has been a challenge.
With customers unable to get an instant appointment and possibly having to book an appointment quite far in advance, lenders may well lose that business. Where will this lead? Do the branches sell enough mortgages to provide the lender with the volume they need? And is the process of training and retaining a direct sales team cost effective?
That is yet to be proved but in the current market recruitment is not easy and it takes time and money to train people up to competent adviser status, only to lose some who feel they could earn much more as an intermediary.
In every business, if you are looking at cost efficiencies and improved service you would question the business model. When the cost of operating something in-house becomes too expensive, outsourcing is an attractive option. Many years ago when MMR was just a rumour, I suggested at a conference to a panel of lenders that maybe they should consider outsourcing mortgage advice to intermediaries. Needless to say they felt that shareholders would never consider that, well I am convinced that it may well become an attractive option.
Firstly, intermediaries have the capacity to deliver far more mortgage business than the branches. There are no expensive recruitment costs, no training costs, no perpetual topping up of advisers, and no delays in arranging appointments for the lender.
By outsourcing the mortgage advice, the lender is able to concentrate on delivering the mortgage, selling current accounts, savings accounts, ISAs, credit cards etc., all the services that are becoming more important to banks and building societies. Suddenly we are playing to each other’s strengths and the customer gets a very rounded service ensuring all aspects are covered. There is clarity in who does what and it offers an opportunity for a different relationship between lenders and intermediaries.
Each lender will look at future business differently. Again, it will depend on retention strategies and what they need in their back book, as we have seen a period when lenders needed customers to move on and periods when they need to retain them but that would be possible to agree a solution.
Effectively lenders become intermediary only lenders. It would be easier to manage business levels, manage service and everyone ends up with a satisfied customer. Lenders will have a fully advised sales force of circa 10,000 to provide advice on its mortgages for the cost of a proc fee.
When I suggested this all of those years ago, the feeling was that shareholders wouldn’t like the idea but as we know, everything changes in this industry and some lenders are already looking at such a proposition, so we should all watch this space.
This article has kindly been reproduced with the permission from its author, Sally Laker, MD of Mortgage Intelligence.