28 January 2009 | Published by Datamonitor

London - Mortgage intermediaries are turning away from their standard business model and looking to diversify into new fields, according to independent market analyst Datamonitor*. Intermediaries are moving into advising-on or selling other products, particularly general insurance. Some are even looking into cross-selling electricity and gas to make up for the current shortfall in mortgage business. ‘Despite the government’s efforts to get banks lending again, lending levels remain low and so intermediaries need to find different avenues in order to survive the downturn in the hope that they’ll be in a stronger position when the upturn comes’ comments Rod Logan, financial services analyst at Datamonitor and author of the report.

Mortgage intermediaries are looking to increase cross-selling

As conditions in the mortgage market remain difficult due to the constriction in supply, mortgage intermediaries have sought to stem the fall in their regular income. Three-quarters of respondents in Datamonitor’s mortgage intermediary survey stated that they were maximising cross-selling and commission opportunities in order to compensate for lost income in other areas of their business. Some intermediaries told Datamonitor that they are speaking to existing customers more as well as looking to increase their advertising expenditure. Intermediaries are looking at cross-selling and commission opportunities in general insurance in particular as well as utilities and debt management. Affinity partnerships with existing insurers are an effective way into the market.

Diversification is not always straightforward

Nearly half of the UK population (47%)** does not hold any protection policies against loss of income, health issues or death which suggests plenty of scope for growth. However, negative publicity, tightened regulation and a perception that protection policies are expendable when budgets are tight suggests that mortgage intermediaries will have a tough time selling them over the coming months. Almost three-quarters of respondents stated that they were looking to diversify into other sectors by offering advice on areas such as investments and pensions. However, stringent regulation and qualification requirements make it costlier for intermediaries to offer these products compared to general insurance.

The mortgage intermediary market will recover

Despite the potential difficulties inherent in diversification, Datamonitor expects the mortgage market to recover in 2010. The complicated nature of mortgage products will ensure that the demand for the intermediary channel will remain strong with their share of the overall distribution of mortgages expected to grow compared to the direct channel.

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