Mortgage brokers see earnings double in five years: FCA

Mortgage brokers have enjoyed another year of strong earnings growth, according to the latest information from the Financial Conduct Authority.

Total report earnings increased by 23 per cent to £1.2bn in 2017, when compared to the previous year.

Of this figures £767m was earned from mortgage broking, and £410m was from the sale of insurance products (up 8 per cent year-on-year).

These figures include revenue from second charge mortgages, which feature in this data for the first time, having become a regulated product in March 2016.

But even when these second-charge mortgages are stripped out of these figures, mortgage brokers still saw rising revenue streams. Between 2016 and 2017 revenue increased by 26 per cent on a like-for-like basis, from £807m to £1.02bn.

This continues the strong upwards trend over the past five years, with the earnings reported by mortgage brokers almost doubling between 2013 and 2017.

The FCA says this strong growth is down to a number of factors, including the general growth of the mortgage market, and an increase in business being transacted via brokers and mortgage advisers.

Within the mortgage broking market, 65 per cent of revenue came from sales of mortgages, 35 per cent from insurance sales and 1 per cent from the sale of investment products.

These figures come from the regulator’s Retail Mediation Activities Return form which is submitted by around 12,000 regulated intermediary firms from across the financial services sector.

There has also been an increase in the number of firms reporting earnings from mortgage sales. These have increased by 4 per cent to 3,917 in 2017. The FCA says that many of these firms though were businesses whose primary focus is investment.

Of the firms categorised as mortgage brokers, more than half (53 per cent) are small firms with only 1 member of staff, and 87 per cent have five or fewer advisers.

A small number of firms account for a large proportion of advisers in the sector: the 30 firms which have over 50 advisers account for nearly 70 per cent of advisers in the sector.

The figures also show that  these smaller one-man-band were losing ground against their larger competitors. For firms with just one adviser, the average mortgage revenue per adviser was £37,500 – a fall of 1 per cent on the previous year.

This figure had increased for all other sizes of business.

For the largest businesses, firms with over 50 advisers, the average mortgage revenue per adviser was £56,876. However it appear that firms in the medium-sized bracket are bringing in the most profitable business. The average earnings per adviser for firms employing between 6 to 50 advisers was £85,277. 

For those providing mortgage advice, commission continues to the be the main source of revenues. This accounted for 76 per cent of revenue earned in 2017, although this figure is down from 79 per cent in 2016.

Conversely the share account for by fees and charges has increased from 20 to 23 per cent over this period.

These figures show that the intermediary sector as a whole also saw rising revenues from the sale of insurance products. In total 96 per cent of financial adviser firms – which include IFAs as well as mortgage brokers – reported a pre-tax profit in 2017.