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The Mortgage Event

The Mortgage Event. Mortgage lending and the intermediary - business as usual? Tony Ward 13 th October 2005. What I will cover. Market and economic backdrop Economy and market looking forward Regulation The Market – what next? Strategies for intermediaries and lenders Conclusions.

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The Mortgage Event

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  1. The Mortgage Event Mortgage lending and the intermediary - business as usual? Tony Ward 13th October 2005

  2. What I will cover • Market and economic backdrop • Economy and market looking forward • Regulation • The Market – what next? Strategies for intermediaries and lenders • Conclusions

  3. The mortgage market - 2005 • The UK Mortgage Market is one of the largest in the world on turnover of c£265bn and outstanding balances of c£800bn • BTL as a separate sector circa £50bn • No clear stats on non-conforming but probably circa £60bn – depends on definition • Distribution – all loans 60/40 brokers/direct • BTL/Sub Prime majority intermediary distributed • Manufacturing and distribution roles blurring • “Arranging, advising and lending” now regulated but doesn’t affect BTL for now

  4. Economic backdrop

  5. Housing Market

  6. Regulation

  7. Regulation • Single biggest industry change processfor 20yrs • Proving to be a driver for further change – market still evolving • Intermediary and lenders under pressure - business models converging

  8. Post Regulation Impacts • Better governance • Disclosure regime – the answer to a borrowers prayers? • Higher costs….. • Not sure we have seen value for the customer yet….. Having got that out the way

  9. Market outlook Market and competitive outlook • Post regulation impacts on: • Lenders – volumes, pricing, behaviours and costs • Brokers –as above and changes to model

  10. Looking Forward • Lenders • Product trends • Volumes • Risks • Pricing • Distribution models – a move to align interests of customer, broker and lender • New lenders – who are they and why are they coming into the crowded market?

  11. Looking Forward • Intermediaries: • Direct authorised • Clubs, networks and packagers • Role blurring with that of lenders • Looking to share in the long term value of the mortgage

  12. Broker– enhanced model • To take a share of all other revenue as well as proc fees including: • Margin • Insurance commissions • Fees: front-end, annual and redemption fees, thus • Maximising revenue, exit value and protecting the business against economic downturn

  13. Conclusion • Mortgage lending at lower levels than 2004 • Margins compression here to stay • Remortgage activity will escalate to “fill the gap” • Lending requires: • Scale, or • Smart products • Efficient machine – no unnecessary links in the food chain • A link between distribution and manufacturing • More blurring between lenders and brokers to follow • B. Socs down to 63 – expect more consolidation – and paradoxically – new lenders to emerge

  14. In Summary • Market still has a voracious appetite for mortgage lending • No expected boom or bust scenarios on the horizon • With significant regulatory burdens and intense competition the market is not of the faint hearted! • New lender models based on alignment of interests and cost efficiency • Product and technology innovation will continue apace

  15. The Mortgage Event Mortgage lending and the intermediary - business as usual? Tony Ward 13th October 2005

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