Mortgage Advice Bureau (MAB) is expecting a fall in adviser numbers across in the first quarter of the year but anticipates this number to stabilise and then gradually grow over the second half of the year as business volumes improve.
It noted that as a result of the sharp slowdown in all mortgage activity following the disasterous September mini-Budget, most of its appointed representative (AR) firms suspended adviser recruitment and reassessed their staffing requirements for 2023 with some making cutbacks.
However, a trading update for the year ended 31 December added the mortgage and protection adviser expects a strong year for re-financing and a slow but steady improvement in consumer confidence and housing transaction levels.
It said this would combine with increased new AR recruitment and the incremental impact of new lead generation initiatives.
MAB’s total number of advisers at the year end was up 20% to 2,254 from 1,885 in 2021, which includes 182 advisers at newly acquired Fluent Money.
Over the short term, MAB expects to see a fall in adviser numbers in its AR firms during Q1 2023 as firms cut headcount in line with expected H1 2023 purchase activity.
It added lower lead levels would result in a tightening of adviser numbers and an increased focus on maximising opportunities and productivity.
However, it also expects AR adviser numbers to stabilise in Q2 2023 and then build gradually in the second half of the year as business volumes improve.
The group added it expects recruitment of new AR firms to be boosted by the quieter market and the tightening regulatory environment.
Despite the more challenging housing and mortgage market outlook for 2023, it contends its long term fundamentals remain “very strong”, with current trading in line with expectations.
Revenue and adviser numbers up in 2022
The group noted it increased revenue over 2022 by 22% to around £230m, with organic revenue growth of 10%, and that adjusted profit before tax was expected to be in line with expectations.
This was despite the immediately negative impact of then chancellor Kwasi Kwarteng’s September 2022 mini-budget on the mortgage market.
The group’s acquisition of The Fluent Money Group on 12 July 2022 added £22m of revenue to the business.
However, the group reported that following a leap in mortgage interest rates, the withdrawal of many mortgage products and a rapid tightening in lenders’ underwriting criteria, Q4 saw “significantly” reduced house purchase and re-financing activity.
Buy-to-Let activity was also significantly affected. And as a result of the sharp slowdown in all mortgage activity, most of MAB’s AR firms suspended adviser recruitment and reassessed their staffing requirements for 2023.
MAB revealed this resulted in cutbacks in advisers by some firms, particularly due to the significant short-term fall in purchase transactions requiring a mortgage.
But the group also pointed to the then current chancellor’s Autumn Statement which reassured markets and caused mortgage rates to stabilise and then improve a little towards the year end, while the number of mortgages available also started to increase and this trend has strengthened into 2023. And while markets expect further rises in the Bank of England base rate, MAB says it expects lending conditions will continue to improve throughout 2023.
The group added that as expected, its congested pipeline of written new business started completing at a faster pace in Q4 due to lower new business levels freeing-up conveyancing capacity to process cases and it also expects this improving trend to continue throughout 2023.
Lower activity levels
Looking ahead, the group conceded that current activity levels are below the levels seen this time last year.
But it added that towards the very end of this month there had been early signs of increasing lead volumes and written business across the group, which it expects will build steadily as borrowers gain confidence in a more stable macroeconomic and interest rate environment.
Peter Brodnicki, CEO of MAB, said: “Despite the uncertain macroeconomic outlook, MAB remains very well positioned to grow its market share strongly again through 2023.
“In times like these housing transactions are typically postponed, not lost, and the opportunity these conditions generate for new AR recruitment will benefit MAB in the medium term.
“We anticipate a very strong year ahead for re-financing, a slow but steady improvement in consumer confidence and housing transaction levels, combined with an increase in new AR recruitment and the incremental impact of new lead generation initiatives.
“I am confident that whilst continuing to grow market share this year, MAB will be in a very strong position to regain significant momentum in 2024,” he added.