Which products are offering new possibilities for brokers?
Brokers are playing an ever more important role in mortgage distribution, with the Intermediary Mortgage Lenders Association (IMLA) expecting intermediaries’ share of lending to rise to 89% this year.
Furthermore, IMLA’s research suggests that this share will climb further still in 2025, to an impressive 90% of the market.
“The proportion of mortgage cases arranged by intermediaries rather than directly with lenders has surged from 61.9% in 2014,” observed its executive director Kate Davies (pictured left). “This is more than a trend and shows a structural shift in the mortgage distribution landscape, due to a number of factors.”
The UK mortgage market is one of the most diverse and competitive in the world, Davies pointed out, offering consumers a huge variety of choice. But it does mean that selecting the most appropriate product for a borrower’s needs can be confusing, requiring the services of a professionally qualified adviser, particularly in the case of specialist mortgages which tend to be assessed individually.
“Our market has become ever more complex over the last decade, with demographic trends and socio-economic changes contributing to a boom in demand for specialist mortgage products,” she said, “from equity release plans to second charge loans and mortgages for the self-employed and those with complex income
“The specialist market is estimated to have tripled in size since 2014. Recent market volatility and economic uncertainty have added to demand, with more people than ever seeking help and reassurance from a qualified professional who can hold their hand through the mortgage process and make sure they secure the right deal, in a changing market.”
What impact is specialist lending having on brokers’ business?
Specialist products such as expat buy-to-let and self-build mortgages are among those garnering greater interest from borrowers currently – and therefore driving further business to brokers.
Robert Oliver (pictured right), distribution director at Dudley Building Society, commented: “There are still many areas of the market where we’re just beginning to tap into their potential. Self-build mortgages, for instance, hold huge potential, especially considering the chronic housing shortage in the UK. While these cases may present more complexities than usual, they can be rewarding and interesting to work on for brokers.
“At times, certain features of a case might seem off-putting for brokers – for example, we handle a lot of expat cases, and if the borrower’s income is in another currency, brokers may hesitate. While this does add another layer of complexity, most brokers, working alongside lenders, are more than capable and might be surprised at what can be achieved.”
Oliver has spent over three decades in the industry and has seen a lot of change; particularly a lessening of distribution through branches and a greater regulatory emphasis on advice. The rise in specialist borrowers has further underscored the value of advice and the indispensable role brokers play, he believes.
“One of the most significant shifts I’ve seen is in the distribution of mortgages and the growing recognition of mortgage brokers, but this certainly wasn’t always the case,” he said. “It’s only in the last decade or so that we’ve seen brokers fully cement their position in the distribution channel – which is fantastic.”
Read more: Intermediary confidence in mortgage market hits two-year high - IMLA
State of the market
Oliver considers the current market to generally be ‘in a good place’. Overall, it has coped well with a higher interest rate environment, while borrowers are still adapting to it.
“Despite the Bank of England’s base rate remaining higher than some had expected at this stage, a number of lenders – us included – continue to reduce rates, offering plenty of options for borrowers,” he said and pointed to recent Bank of England figures showing mortgage approvals had reached their highest level in 18 months.
“Brokers and lenders have played a part in this, ensuring borrowers still have options, whether it’s extending a mortgage term or thoroughly examining all of a borrower’s available income.”
On a cautionary note, IMLA suggests that a rise in share of business is not enough to prevent the value of lending arranged by intermediaries falling by 6% in 2024. But, it anticipates that 2025 should be a better year and predicts a 4% rise in brokers’ business volumes.
