When it comes to the intermediary share of the mortgage marketplace, I can remember a time — perhaps before we had full industry-wide statistics on this — that it was widely considered to be a parity situation.
By this, I mean that generally, there was a 50:50 split between the number of mortgages sold through intermediaries and the number that were sold direct by lenders.
Certainly, we have seen a big shift in that regard. IMLA’s most recent annual report, published at the tail-end of last year, suggested the intermediary share of lending was up to 84% in 2023, was anticipated to increase to 89% in 2024, and may well go over 90% in 2025.
Now, at those levels, you might think advisory businesses might be hard-pressed to go much further. However, as IMLA points out, share of business is not enough to prevent the value of lending arranged by intermediaries falling by an estimated 6% in 2024. Nevertheless, the association does predict a 4% rise in broker business volumes in 2025.
It’s a complicated pattern to unravel, and we of course have to factor in — particularly in the residential space — a significant increase in product transfer business, and how this might impact intermediary income levels, given most lenders pay a lower procuration fee for such business.
If this is a pattern that does continue, then quite rightly, advisers are going to be looking for business which is going to deliver them higher levels of income, and it is here where we might see a focus in areas such as complex BTL, specialist residential, or other sectors such as seconds, bridging, debt consolidation and the like.
Focusing specifically on BTL, it’s pretty clear we have seen a move towards a more professional, portfolio-landlord-focused sector in recent years. These borrowers tend to have more complex wants and needs, wanting to leverage portfolios to purchase more, and looking at more specialist areas of property investment, such as HMOs, holiday lets, short-term lets, multi-unit blocks, semi-commercial and the like.
That being the case — and given how financially savvy the vast majority of landlords are — you might expect their use of advisers to be up there with those IMLA figures, given what they might be wishing to achieve, and the significant array of products they might want to access to get the most suitable mortgage.
However, that is not necessarily the case, and this does present a real opportunity for advisers to focus on landlord borrowers who are not currently using their services.
What we perhaps can say, certainly with regard to BTL borrowers, is that according to our most recent research among landlords, carried out by Pegasus Insight on our behalf, there is a very sizeable number of landlords who are not receiving independent advice, are going direct to a lender, and therefore missing out on access to the full range of products available to them, as well as missing out on the protections afforded to them by advice.
So, while adviser-led transactions do account for the majority of BTL mortgage arrangement — 68% said they arranged their most recent mortgage via this channel — 18% said they went direct to a lender without receiving any lender advice and 8% said they went direct and secured lender advice.
That phrase ‘lender advice’, of course, is also laden with plenty of potential for misunderstanding. This can only be on that lender’s products, and is clearly going to be very different from what they will get from a whole-of-market intermediary.
That in itself leaves a wide, open door for advisers to work through, as a quarter of all landlords went direct for their last BTL mortgage, according to our research. The data also shows that landlords with one to three mortgages owe an average of £251,000, while those with over four owe £1.1m.
Those are significant mortgage amounts and would clearly present a sizeable income per mortgage for advisers should they be arranging these, rather than the landlord going direct.
In that sense, advisers should be able to sense the advice opportunity for these landlord borrowers, and as an intermediary-only lender, we would strongly argue — particularly in this consumer duty world — that borrowers should always seek advice from a broker with access to a very wide panel of lenders in order to ensure they get the most positive outcome possible.
Advisers should not be afraid to push this marketing message hard, to target both existing and new clients, and spell out what they are missing out on by not using their services.
