The death of packagers was greatly exaggerated

There has been much speculation since the financial crisis about the death of the specialist distributor model – formerly known as packagers.

Related topics:  Specialist Lending
Michelle Westley
22nd June 2017
Michelle Westley Brightstar
"Post-2008, banks thought they could cut out brokers with direct deals but demand for brokers has increased exponentially over the last five years."

The crisis swept away the vast majority of the industry as mortgage lending plummeted and lenders tightened their criteria. Only a few survived and it seemed the model was done for.

That’s not the case today. In 2017, the specialist distributor market has found a new lease of life with tough regulation and solid mortgage lending figures.

The mortgage market review and the mortgage credit directive have clearly revolutionised the market in the last five years.

Combined with some lenders reticence to dive into more specialist areas, it has made it tough for certain borrowers such as the self-employed, those with irregular incomes or borrowers seeking additional secured loans.

It is not just first-charge mortgages but second charge, bridging and buy-to-let that has been radically altered.

It cuts against the grain of modern business, which is becoming more and more disintermediated. Amazon has taken away the need for many retail stores. Netflix has wiped out Blockbuster.

And post-2008, banks thought they could cut out brokers with direct deals but demand for brokers has increased exponentially over the last five years.

And brokers have seen they need specialist operators to get access to the best niche deals around for their clients.

This was laid bare in our latest research of our mortgage broker clients. Seven in 10 brokers believe some advisers are turning away clients with specialist lending requirements, often with little or no information when products are available.

And more importantly perhaps, our poll shows 94% of brokers agree that there is a moral obligation to make customers aware that there are specialist lending options available, even if the broker doesn’t want to provide the advice.

It shows how borrowers are not getting the information they need to make decisions in the specialist finance sector. And it demonstrates the clear need and demand for specialist distributors.

When asked, brokers said the main reason clients were being turned away without the proper information is concern over service levels for clients, the complexity of specialist lending deals and the time-consuming to process.

The FCA plan to investigate this very issue, as outlined in their business plan for 2017/18 under section: Sector Priorities within retail lending ‘Some consumers who can afford credit may have trouble accessing products and services’

A mortgage is not like buying a book from Amazon, it can be an emotional, life-changing decision that lets clients buy the house they want.
That is why service is so important and why brokers and distributors are thriving in today’s market. Rather than disappearing off the face of the earth to an automated bank service, they are more important than ever.

Brokers who refer to specialist distributors are understandably worried about service levels for their clients and it takes time to build trust.

There are a lot of packagers in the market today and it is important to build relationships with those who will handle your clients’ needs.

Once trust is established then distributors can open up much needed options for clients that were not previously available.

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