The third-party channel in the UK - known as the intermediary channel - has historically been very strong but was hit hard by the financial crisis in 2008.
In the years following the financial crisis, broker numbers (and new mortgage lending) fell by close to 60 per cent. New mortgage volumes only began increasing in 2013, but have rebounded strongly and are up by close to 40 per cent on a year-on-year basis in 2014.
As a result, there is a lot more mortgage business being spread over fewer brokers, resulting in them being more buoyant than they have been for several years.
Technology is helping customers make more informed choices about different lenders and what products they offer. While the level of online product research is increasing, most customers are still opting to speak to a mortgage advisor or broker to apply for a mortgage.
In the UK, there is a trend for customers to do more simple servicing transactions online such as switching to a new fixed rate once the existing fixed rate term has matured.
Over the past few years, the UK market has seen the entry of a number of new lenders; including new players such as Metro bank and established retail brands such as Tesco. There has also been more competition from regional building societies, which is ultimately good for the market and for customers.
In April this year, new mortgage regulations were introduced in the UK. This has meant that a majority of mortgage applications are now completed on a fully-advised basis. Mortgage providers require an increased level of information and evidence from customers about their income, expenditure and also any known future changes to their circumstances; which is very similar to the regulatory requirements for lenders and mortgage brokers in Australia.
This has generally meant that interview times have increased and some transactions - such as rolling over one fixed rate mortgage to another fixed rate – must now be conducted on an advised basis, unless the customer chooses to make an execution-only transaction where they are able to state precisely what their requirements are without any interactive dialogue with the lender or broker.
Most brokers were already operating on an advised basis, while some banks operated on a ‘non-advised basis’. It is the non-advised lenders that have had the biggest adjustment to make.
The outcome is that it is taking customers longer to get an appointment with some bank branches and as a result, brokers are writing a proportionately higher share of new business. Only time will tell whether this becomes a permanent feature of the market or is a temporary phenomenon.