A new study has revealed the value of taking advice before getting a mortgage, with brokers shown to have taken a larger share of the market last year and having a far higher rate of success for applications proceeding to offer.
The proportion of mortgage sales conducted via an intermediary rose this year to more than 56 per cent, reversing a trend which saw intermediary sales fall by nearly 14 percentage points to 53 per cent in 2013, an annual review of the UK mortgage market by Iress has revealed.
The third annual review of the UK mortgage market surveyed lenders who represented over 66 per cent of gross mortgage lending in 2013.
The ‘intermediary channel’ proved most effective for buyers, with 70 per cent of applications going to offer, up from 62 per cent a year ago. Across all channels, on average, nearly 40 per cent of mortgage applications do not proceed to offer.
Following the implementation of the Mortgage Market Review, nearly a third of lenders expect lending via intermediaries to increase. Twice as many forecast that execution-only sales will increase, while 80 per cent now expect ‘advised sales’ will rise.
Under the new rules, almost all sales except execution-only sales to a tightly-defined demographic of sophisticated or higher net worth buyers are now defined as ‘advised’.
Mutuals relied heavily on intermediaries, with 63 per cent of their mortgage business conducted in this way, although this was down 5 per cent. Banks conducted 52 per cent of sales via intermediaries, while 26 per cent of bank lending was conducted in branch, a 15 per cent drop.
Henry Woodcock, principal mortgage consultant at Iress, said that it was clear that intermediaries have played an increasingly important role helping consumers navigate the “murkier waters” caused by regulatory change.
“We are likely to see lenders develop their execution-only offerings in the coming year, but that won’t diminish the part being played by brokers in securing the best outcomes for customers.”
Research also showed that mortgage application process significantly slowed following the implementation of the MMR, with just 9 per cent of mortgage offers now produced within five days, compared to 13 per cent last year.
In 2012, one quarter of offers were produced within five days.
Iress stated that this trend has accelerated as more stringent affordability tests have been introduced. In total, only 44 per cent of mortgage offers are now produced within two weeks, much lower than the average of 56 per cent a year ago.
Mr Woodcock added: “There’s no doubt that the MMR has taken its toll on the time taken to secure a mortgage... That said, demand for mortgage finance has been so strong in the year so far that lending has continued at a rate of knots despite the disturbance.”
