Unemployment is certainly a statistic that prudent mortgage brokers should keep an eye on during the coming year and beyond. Recent dramatic decreases in the Bank of England Base Rate will hopefully provide some sort of relief for businesses that are heavily financed and could have a knock-on affect of reducing the need for them to lose staff in order to survive. This is a scenario that mortgage brokers should be praying for.
While the local property market can provide some insight into the future for the mortgage broking industry it is also worth gauging the profession in other parts of the world to see if there are any trends emerging that could happen in the UK as well.
Mortgage Advisers in Australia
Much like the UK, the land Down Under has experienced substantial growth in the independent mortgage advice industry. Unlike the UK, however, the typical Australian broking model focuses on franchising. Franchise networks are huge in Australia and many thousands of brokers have set up their own businesses by purchasing a franchise from one of the many franchisors.
Mortgage advisers working under this arrangement specialise in helping their customers arrange home loans with non-bank lenders. These lenders include Aussie Home Loans, RAMS, and GE Money. In correlation with the rest of the world the past decade has seen a boom in non-bank lending and at its height these lenders were responsible for about fifteen percent of all home loans. Non-bank lenders often specialise in products that are designed for people who cannot prove their income or who are unemployed, much like self-certification mortgages in the UK.
Australia has not felt the full brunt of the credit crunch as the UK and USA have, however they are not immune to it. Because of this, mortgage advisers are beginning to struggle and the franchise business model is showing signs of becoming inappropriate. Franchisors often have strict rules with regards to how their subordinates may operate and usually allow their franchisees to only work in certain geographical locations in order to avoid cannibalisation.
This model has become unworkable for many mortgage advisers who need to diversify in order to survive. Non-bank lending now comprises about five percent of all home loans approved which means that brokers need to find other income streams to supplement their declining mortgage fee income. Because of this many franchisees are looking to become independent and work directly with aggregators, who in turn deal with the non-bank lenders, and who do not have such strict rules with regards to how their advisers operate their businesses.
The result of these circumstances is that franchisors have to become more efficient and flexible if they are to attract and retain experienced brokers. Mortgage advisers are merging with each other, even at the small end of the market, in order to combine their efforts and create efficiencies. It is unlikely that mortgage brokers will disappear from the market completely as many home owners like dealing with them due to the independence of their advice and the variety of products they can advise on. This is despite the fact that many no-doc and low-doc home loan products have been pulled from the market.
