"This allows us to reinvest the retention fee back into making the group and brands bigger. It becomes a self-fulfilling business model.”
Still in its early stages, TMG is also considering developing its own direct to consumer app. It is currently assessing the route of gamification, in order to educate individuals on mortgages - though the group is clear this will not verge into a robo-adviser model.
“Evidence shows young people still don’t understand how mortgages work,” said Stewart.
Last week, Mortgage Advice Bureau (MAB) released research which found around 89 per cent of mortgage advisers believe first-time buyers need more education on purchasing a property and what is needed for a mortgage application.
One cohort of companies targeting first-time buyers is digital mortgage brokers. In the last year, the space has enjoyed significant investment.
Habito landed a £35m funding round back in August 2020, and this month two US firms bought digital mortgage brokers Mojo Mortgages and Trussle - although the latter reportedly only sold for £6.5m.
“There is money out there,” said Stewart. “Investors are buying into the dream of digitising mortgages. But a lot of this money has been burnt. We’re not going to spend millions on a load of kids wearing converse playing pool in the kitchen. [...] We can manage the tech threat.”
Fleshing out protection
As well as focusing on the lending side of the brokerage business, TMG also intends to tackle the age-old protection gap - that is, the gap between the number of borrowers who own a mortgage and those who have mortgage protection.
“We’re building out our protection network,” said Corbett. “But we don’t want to be a call centre mortgage broker or protection provider. That’s a very risky business with an average 40 per cent customer fall off rate.”
Looking back at past brokerage and protection networks such as Network 300 - which fell into insolvency back in 2005 - Corbett said the “safety in numbers approach” is clearly no longer a viable business model.
“The current tranche of networks are pretty safe and well-capitalised,” he said.
Currently, TMG’s brokers are operating on a less than 50 per cent mortgage protection penetration rate, compared to the number of mortgages they’re processing.
The network intends to double this rate to 100 per cent over time. “It’s a huge revenue opportunity,” said Corbett, who previously worked for the PRIMIS Mortgage Network - where he said they took an “aggressive approach to protecting every pound of debt”.
It will also be an education piece for brokers, according to Stewart - echoing a sentiment held by much of the industry.
“What’s really resonating with brokers now is the ‘freedom’ we can create for them. Freedom from micro-management, freedom from overly-rigid and enforced processes, freedom from unfair contracts, freedom to run their business as they see fit.