The packaging sector is never a dull one and opinions regarding it are rarely insipid. Historically there have been widespread and outspoken views by a number of commentators revolving around the sector and opinion continues to be divided as to its merits.
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The value lenders place in packagers has always been an intriguing area of discussion and interest has recently been stimulated by a couple of lender announcements stating that packagers have no part to play in their future business model. RBS has gone on the record saying that it will no longer deal with packagers and, while its volumes through this sector were not that great, it is still a bold statement to totally ignore the market and the potential opportunities that it may offer. Coventry’s new specialist mortgage lender, Godiva Mortgages, has also said that it will not be using packagers, which as a specialist in the non-conforming area is an interesting move. It remains to be seen if these moves will be followed by other lenders, especially the new entrants in the market and it remains to be seen just how they will look at tailoring their offerings.
Trouble in the sector?
Considering these announcements it might be fair to imagine that the sector is in a bit of trouble. It’s almost as if we are travelling back in time to the days of pre-regulation when some industry commentator’s voices were ready to sound the death knell for the sector. So the question is; should the packager community be looking over their shoulder at lender relations, expecting to be cast adrift and ignored?
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However on the other side of the coin we are now see a plethora of packaging figureheads contributing regular columns to a number of mortgage titles. If you were to go back, even only as far as 12 months ago, and compare the number of news stories, articles and features revolving around the packaging market in the trade press, the increase is pretty significant and still growing.
The Association of Mortgage Intermediaries (AMI) has also confirmed it is to discuss the possibility of a unified trade body for the packager and distributor community. There is obviously a place for mortgage packager and distributor organisations within the industry and the statistics back up this view. Moreover the announcement of AMI’s intention to create a ‘packager task force’, will provide tremendous support to the industry. Regarding future lender relations, it has even been reported that some lenders are ‘courting’ packagers to help with distribution and enable them to meet targets. This leads me to counter the previous question by asking; is it fairer to say that the sector has been reborn?
Engaging packagers
General market conditions suggest that the packager market continues to perform strongly and harking back to recent research, our Packager Confidence Tracking Index has risen for the third consecutive quarter to a record level of 138 for Q1 2007, from 126.6 in Q4 2006.
The research also estimated that the packager market has grown by 30 per cent since pre-regulation, valuing it at £28 billion to £30 billion. Prior to regulation two years ago, the estimation was that the market was worth around £22 billion to £23 billion.
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It is going to be interesting to see how many of the new lenders react to packagers and the steps they take to engage them. The problem for many of the packager firms is going to be catering for these new lenders and really understanding the type of volumes they can deliver, the attitude they have to the market and their position for the long term.
What no one wants to see is new lenders entering the market and then deciding it is not for them or that their attitude to risk has changed significantly. Not only would this create problems for intermediaries and their clients, but also see packagers having to ramp up and ramp down their operations, undoubtedly affecting their ongoing business.
Competition is welcome, but it will be those that are able to forge and maintain long-term relationships while working increasingly closely with each other that will unlock the best benefits for themselves, their brokers and their clients.
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People will continue to have differing views so it is up to mortgage intermediaries to draw their own conclusions to this debate. The relationship between mortgage intermediary, packager and lender has not always been in full bloom, and indeed, there remain a number of issues to be ironed out. However what is certain is the role that mortgage packagers play in the market, the value they add and their ability to deliver real benefits for intermediaries and lenders alike.
