European mortgage markets: what can we learn? - Hypsotech ...

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Smaller advisors are losing ground to larger advisors in this market, according to the
Hypsotech research ‘Blueprint Hypothekenverwerking’ (2005). Although the increase in
sales in the Dutch market can be contributed almost entirely to the activity of intermediaries,
these players are necessitated to liaise themselves to large distributors. There are a number
of arguments to this point; intermediaries are only attractive partners when these are sufficiently
large. In addition, intermediaries gain provisions, support and assortment by relating
to one or more larger lenders. Lastly, due to rising costs, new legislation and a stagnating
market, the intermediaries have to gain economies of scale in order to overcome incurred
costs. The result is that a shake-out takes place between intermediaries in which mostly the
smaller, independent, non-focussed intermediaries bear the brunt. Based on the above, the
expected trend is a decrease in distributors: Hypsotech foresees that within a few years 80 to
90% of all mortgage distribution will be done by less than 50 entities.
Although the internet has become an important information source for acquiring mortgage
product information, at the moment the proportion of mortgages sold via this channel at the
moment is only modest. The current trend in product development of discounted standardized
products makes the internet medium a more viable sales channel in conjunction with traditional
channels. In figure 5 a summary is given:
Processing
Figure 5: the importance of
intermediaries in the distribution
of mortgages in the Dutch market.
In the Dutch market a typical description of the mortgage value chain includes the following
three steps:
1. Front-office activities; including sales, such as lead generation, advice to customers, sales
and customer service;
2. Mid-office activities; including all activities related to loan application assessment, creating
offering letters, final acceptance and preparation activities for the notary;
3. Back-office activities; including all activities related to processing the mortgage loan.