For something that is talked about in terms of being on its last legs, the packager market is looking remarkably spritely. The doom-mongers, who, in the run up to ‘Mortgage Day’, were predicting the imminent demise of packagers have since been silenced, as not only has the concept of packaging survived but it is evolving to secure its survival well into the future.
A changing market
Packaging as a business model is changing and the term ‘packager’ fits fewer and fewer distributors these days as we see an increasingly polarised market emerge in response to market pressures.
We are witnessing the bigger distributors, formally the large packagers, evolving into aggregators offering a range of services. All Types of Mortgages (AToM) now refers to itself as ‘wholesale mortgage design and distribution’, Mortgage Times ‘offers a one-stop solution for intermediaries’, and Mortgage 2000 offers a range of services including a sourcing system, packaging arm, mortgage club, tracking tool, network, leads generation, conveyancing panel and compliance. At the other end of the spectrum the smaller, niche players are carving out market share by offering something local and different – just look at Council Homebuyers, which pretty much does what it says on the tin and The Money Centre, which focuses on buy-to-let.
Those distributors that rightly ploughed on through the volley of scepticism surrounding ‘Mortgage Day’, have largely emerged stronger thanks to their ability to adapt and evolve. In the process, many have outgrown the term ‘packager’.
State of flux
A little over two years into operating within a regulated market and there are many success stories. That is not to say, however, that there were no casualties, nor that there won’t be any in the future. The market is in a state of flux and it is the smaller, traditional packagers whose margins are being squeezed. In their current form, these distributors could struggle to maintain market share. Their demise, however, is anything but inevitable and the detractors have yet to have their day.
Distributors and packaging associations have reacted in different ways to those market pressures. Some have launched their own lending arms such as the Professional Mortgage Packagers’ Alliance and Unity, the Regulatory Alliance of Mortgage Packagers and Beacon, and likewise, em-financial, Solent and TFC joined forces to form Spectrum. Others, such as Trustguard and Mortgage Choice, have looked to integrate their IT systems into lenders’ systems to enhance their service proposition. Another idea on the table is a remuneration model based on delinquency and asset quality, although whether this is workable remains to be seen.
Lenders face similar market pressures as their distributors and are looking at how they can best work towards a profitable future. A key component to securing that future is for lenders and distributors to work in partnership to ensure the maximum level of business quality, capacity, service and margin.
By focusing on a more defined group of distributors, lenders hope to increase quality and efficiency through heightened interaction and understanding.
Whatever label you want to give it, without doubt distribution in the UK is changing. Despite being a relatively young component of the mortgage industry, ‘packagers’ have proved themselves already to be extremely adept at exploiting market trends. When you consider their entrepreneurial roots this is hardly surprising. Their ability to adapt and innovate leads me to believe that the new breed of packager is most definitely on the right side of Darwinian evolution.
Alison Beech, business development director, Rooftop Mortgages
