Mortgage Market Tracker Q4 2020 Summary: Confidence Subdued, Business Flows Stagnant

IMLA Mortgage Market Tracker Q4 2020 Prepared for the Intermediary Mortgage Lenders Association (IMLA)

Contents 1 Background & methodology 2 Executive summary 3 Business volumes and confidence 4 Business flow

Background & methodology

Background & methodology The Intermediary Mortgage Lenders Association (IMLA) launched the Mortgage Market Tracker in November 2015. The Tracker uses data provided by BVA BDRC s Project Mercury. Project Mercury is a continuous monitor of intermediary lender marketing effectiveness and broker sentiment, launched in 2007. Existing business confidence questions on the survey are supplemented by additional questions measuring the conversion of Decision In Principle (DIP) to completion. This report contains the results for Q4 2020. WHO? HOW? HOW MANY? Total of 301. Achieved sample weighted by firm size & type to be representative of the Autus universe Mortgage Intermediaries advise customers on which lender to use, 24+ mortgages pa, not tied wholly to one lender, GB based. Sample sourced from Autus Monthly telephone interviews (100 per month), average interview c.30 minutes. Fieldwork by PRS (our sister company)

Executive summary

Executive summary Intermediary confidence remained relatively subdued in Q4 2020. After showing some signs of recovery in Q3, the proportion of intermediaries who were feeling very confident dropped back slightly in Q4. Intermediaries continued to feel more confident about their own firm than the market. Intermediaries who were feeling less confident were discouraged by the amount of uncertainty around what is ahead. There are a number of factors that they are unsure about and unable to control such as the ongoing pandemic, what happens with stamp duty, and lenders appetite. Business flows in Q4 were in line with what was seen in Q3. 34% of DIPs resulted in a completion, stable vs. Q3 (33%), but someway behind the levels we saw the same time last year (55% in Q4 2019). Taking a closer look at business flows, 53% of full applications resulted in a completion in Q4. This was the same proportion we saw in Q3, but again was lower than in Q4 2019 (76%).

Business volumes and confidence

Claimed volumes of mortgage cases, per year The claimed intermediary case load, when looking back over the last 12 months fell this quarter. Business mix remained relatively stable. All mortgages Average business mix (% of all cases per year) bn Gross lending on all mortgages per qr (Source Bank of England)* Average no. of cases per year (21) First Time Buyers 20 (19) Movers 20 66% residential (15) Full remortgage 15 90 90 87 87 86 86 84 88 81 81 81 81 80 80 78 77 74 (10) Product transfer 11 74.6 (17) BTL 1- 3 properties 16 26% BTL (7) BTL 4+ properties 6 Limited Co BTL 4 (4) Q2'19 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 (2) Adverse 4 8% Specialist Average number of cases 2020 by month: Other specialist 4 (5) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 74 88 81 n/a 86 87 95 94 81 72 82 80 * Note Bank of England gross lending figures for Q4 have not yet been released

Confidence in outlook for mortgage industry Confidence in the outlook for the mortgage industry remained relatively stable through Q4. Confidence increased slightly in October vs. September, but still remained someway below the levels seen at the start of the year. 2020 by month 14 16 16 19 20 22 22 22 23 24 27 28 29 29 30 31 34 37 39 40 40 40 41 42 42 43 43 45 45 45 53 37 60 61 63 58 56 66 69 63 64 56 57 45 60 63 60 61 58 28 56 53 56 55 54 52 53 55 52 51 52 52 44 19 12 21 13 3 Q2 20 19 15 2 Q3 20 12 3 Jul-20 16 8 4 12 1 Aug-20 12 11 8 1 10 7 1 7 1 6 1 7 5 1 4 1 6 4 1 3 1 5 4 4 4 4 2 1 2 1 4 3 3 1 May-20 Mar-20 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q4 20 Oct-20 Feb-20 Jan-20 Jun-20 Sep-20 Nov-20 Dec-20 Very confident Fairly confident Not very confident Not at all confident QH1a. Currently, how confident do you feel about the business outlook for the mortgage industry? Base: All respondents (301)

Confidence in outlook for intermediary sector After some recovery in confidence in the outlook for the intermediary sector over the summer, confidence dipped in September, and has stayed relatively stable since then. 2020 by month 20 32 32 34 34 34 34 35 36 40 41 43 44 44 46 46 48 48 49 50 51 51 52 52 54 56 57 58 60 60 63 40 53 54 55 56 58 61 55 57 40 54 53 49 49 48 52 47 46 46 24 44 48 46 46 43 46 41 41 39 37 37 33 9 5 15 14 10 1 Q2 20 8 2 Nov-20 5 3 May-20 8 1 Sep-20 6 1 Q4 20 6 1 Dec-20 5 1 Q4 18 5 1 Q3 20 4 1 Oct-20 6 4 1 Q4 19 4 1 Jul-20 4 1 Q3 18 4 1 Q3 19 5 4 Q2 18 2 1 Q1 18 4 Feb-20 1 1 Q1 16 3 Aug-20 3 Q2 16 1 1 Q4 16 2 Q3 16 2 Q1 17 2 Q2 17 2 Q3 17 2 Q4 17 1 Jan-20 Mar-20 Q1 19 Q2 19 Q1 20 Jun-20 Very confident Fairly confident Not very confident Not at all confident QH1b. And how confident do you feel about the business outlook for the intermediary sector of the mortgage industry? Base: All respondents (301)

Confidence in outlook for their own business Intermediaries continued to feel most confident about the outlook for their own business in Q4. Whilst the vast majority of intermediaries felt confident, the proportion feeling very confident dropped back slightly, particularly in December. 2020 by month 22 36 38 39 41 42 45 47 51 51 51 53 54 55 55 55 55 57 58 59 59 60 60 61 61 64 64 64 67 68 75 63 53 54 55 61 46 51 51 43 42 44 45 42 40 40 41 44 38 38 41 43 36 39 36 37 34 35 33 32 31 21 9 5 9 1 Jun-20 6 2 Jul-20 4 2 Q1 20 7 4 1 Q3 20 6 4 1 Nov-20 4 Oct-20 4 Q2 19 2 1 Q1 16 4 Q4 18 4 Feb-20 4 May-20 2 1 Q1 19 3 Q3 18 3 Q3 19 3 Q4 20 3 Q2 17 2 Q3 17 2 Q4 19 1 Q2 16 1 Q3 16 1 Q4 16 1 Q1 17 1 Q4 17 1 Q1 18 1 Q2 18 1 Aug-20 1 Dec-20 Sep-20 Jan-20 Mar-20 Q2 20 Very confident Fairly confident Not very confident Not at all confident QH1c. And how confident do you feel about the business outlook for your own firm? Base: All respondents (301)

Reasons for felt level of confidence in ones own business Intermediaries confidence in their own business was boosted by the perceived strength of their business, coupled with increased business and demand for advice. However some were worried about market uncertainties and felt less confident about the economic outlook. Reasons for feeling more confident Reasons for feeling less confident Uncertainty Not sure where things are heading. Depends on what happens Covid, stamp duty, how lenders react 1 Qualities of the business Established business, trading for a long time, good reputation and client database, referrals, mortgages represent only a part of business, managed well throughout 2020 1 Economic outlook Feeling pessimistic about unemployment levels, ongoing impact of Covid, Brexit. Expect the market to drop 2 Busy Lots of enquiries and referrals, ongoing impact of stamp duty relief, people looking to move out of the city, increased appetite among lenders 2 Difficulties working with lenders Lenders changing criteria/ tightening criteria. High rates. Slow service. Makes it difficult to do business 3 Demand for intermediaries Clients will turn to brokers for advice specific to their situation, as well as to be reassured, as borrowing becomes more complex 3 I just think we will be going into a recession and house prices will be dropping and people will be hesitant to move. Once the stamp duty holiday ends the housing market will die. (Not at all confident) I have been in the business 29 years, am resilient and can adapt to what's going on. (Very confident)

Business flow

Average number of DIPs in last 3 months The average number of DIPs that an intermediary dealt with remained stable in Q4 vs. Q3, and in line with the levels seen at the start of the year. Q4 2018: 28 Q1 2019: 26 Q2 2019: 27 Q3 2019: 28 Q4 2019: 28 Q1 2020: 24 Q2 2020: 17 Q3 2020: 25 Q4 2020: 25 30 30 30 29 29 27 27 27 27 27 27 26 26 26 26 26 26 26 25 25 24 24 22 20 17 17 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec QHX1. In the last 3 months, approximately how many DIPs have you dealt with personally? Base: All Q4 respondents (301)

Average number of DIPs By business The biggest movement in the number of DIPs by sub-group was a drop among larger firms (by sales decile), down 4%. Q3 2020 Q4 2020 25 (=) 25 Directly authorised Appointed representative 26 (-3) 24 (+3) 23 27 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 43 (-4) 26 (+2) 18 (+2) n/a 39 28 20 N/A Base size too small First time buyer* 22 24 (-2) 27 (-2) 25 (+2) 26 (=) 25 (+1) Mover* 25 Remortgage* Buy to let** Other specialist*** 27 26 26 North 26 27 (-1) 25 (-1) 24 (+2) Midlands South 24 26 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QHX1. In the last 3 months, approximately how many DIPs have you dealt with personally? Base: All Q4 respondents (301)

DIPs resulting in a DIP accept (%) The proportion of DIPs resulting in a DIP accept remained stable in Q4, still slightly below the levels seen before the pandemic hit. Q4 2020: 81 Q4 2018: 84 Q1 2019: 86 Q2 2019: 85 Q3 2019: 83 Q4 2019: 85 Q1 2020: 85 Q2 2020: 82 Q3 2020: 80 87 87 87 86 86 86 86 86 85 85 85 84 84 83 83 83 83 82 82 82 81 81 81 80 79 78 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec QHX2. In the last 3 months, what proportion of these DIPs have resulted in a DIP accept? Base: All Q4 respondents (301)

DIPs resulting in a DIP accept (%) By business Conversion from DIP to DIP accept recovered among intermediaries working for smaller firms, and those in the north. Q3 2020 Q4 2020 80 (+1) 81 Directly authorised Appointed representative 79 (+2) 81 (+1) 81 82 83 (-1) 83 (=) 78 (+4) n/a 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 82 83 82 N/A Base size too small 77 (+4) 83 (+2) 81 (-1) 80 (+3) 79 (-2) First time buyer* 81 Mover* 85 Remortgage* Buy to let** Other specialist*** 80 83 77 78 (+5) 79 (-4) 81 (+3) North 83 Midlands South 75 84 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QHX2. In the last 3 months, what proportion of these DIPs have resulted in a DIP accept? Base: All Q4 respondents (301)

DIP accepts resulting in a full application (%) The proportion of DIP accepts resulting in a full application remained at 79% throughout the last five months of 2020. Q4 2020: 79 Q4 2018: 82 Q1 2019: 84 Q2 2019: 83 Q3 2019: 80 Q4 2019: 85 Q1 2020: 81 Q2 2020: 75 Q3 2020: 78 86 85 84 84 84 84 84 83 82 82 82 82 81 81 81 80 80 79 79 79 79 79 78 76 75 74 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Noc Dec QH3. In th3 last 3 months, what proportion of these DIP accepts have led to a full mortgage application? Base: All Q4 respondents (301)

DIP accepts resulting in a full application (%) By business Whilst overall conversion from DIP accept to full application was stable in Q4, it increased among smaller firms (by sales decile), and those in the north. Q3 2020 Q4 2020 78 (+1) 79 Directly authorised Appointed representative 77 (+1) 78 (+2) 78 80 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 80 (-1) 76 (+4) 77 (+5) n/a 79 80 82 N/A Base size too small First time buyer* 75 (+3) 82 (=) 78 (=) 77 (+2) 77 (-2) 78 Mover* 82 Remortgage* Buy to let** Other specialist*** 78 79 75 74 (+7) 81 (-6) 78 (+2) North 81 Midlands South 75 80 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QH3. In th3 last 3 months, what proportion of these DIP accepts have led to a full mortgage application? Base: All Q4 respondents (301)

Full applications resulting in an offer (%) The proportion of full applications resulting in an offer remained stable in Q4 vs. Q3. Despite seeing a slight recovery since Q2, this measure remains below pre-pandemic levels. Q4 2020: 81 Q4 2018: 89 Q1 2019: 89 Q2 2019: 90 Q3 2019: 87 Q4 2019: 89 Q1 2020: 87 Q2 2020: 76 Q3 2020: 81 91 90 90 90 90 90 90 90 90 89 89 88 88 88 86 86 84 84 83 83 82 80 79 77 76 75 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec QH4. In the last 3 months, what proportion of your full applications have led to an offer? Base: All Q4 respondents (301)

Full applications resulting in an offer (%) By business Whilst overall conversion from full application to offer was stable this quarter, there was some variability by business. Directly authorised firms and those in the midlands saw the largest drop. Q3 2020 Q4 2020 81 81 (=) Directly authorised Appointed representative 80 (-5) 81 (+4) 75 85 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 81 (+4) 83 (=) 77 (+6) n/a 85 83 83 N/A Base size too small 78 (+3) 85 (-1) 81 (-2) 79 (+2) 78 (=) First time buyer* 81 Mover* 84 Remortgage* Buy to let** Other specialist*** 79 81 78 82 (+1) 81 (-4) 79 (+2) North 83 Midlands South 77 81 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QH4. In the last 3 months, what proportion of your full applications have led to an offer? Base: All Q4 respondents (301)

Offers resulting in a completion (%) Conversion from offer to completion was stable quarter-on-quarter at 65%. However, conversion levels remain someway behind the levels seen prior to the start of the pandemic. Q4 2020: 65 Q4 2018: 87 Q1 2019: 86 Q2 2019: 88 Q3 2019: 84 Q4 2019: 85 Q1 2020: 79 Q2 2020: 59 Q3 2020: 66 89 89 88 88 88 88 87 87 86 86 86 86 85 83 81 81 78 73 72 67 67 65 63 62 62 57 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Offers resulting in a completion (%) By business Conversion from offer to completion saw the biggest improvement among larger firms (by sales decile), whilst the biggest drop was among intermediaries handling mover cases. Q3 2020 Q4 2020 66 (-1) 65 Directly authorised Appointed representative 62 (-1) 70 (-1) 61 69 63 (+13) 71 (-5) 68 (+4) n/a 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 76 66 72 N/A Base size too small 63 (-2) 72 (-4) 67 (+1) 66(-3) 65 (-1) First time buyer* 61 Mover* 68 68 Remortgage* Buy to let** Other specialist*** 63 64 71 (=) 71 (-3) 60 (=) North 71 Midlands South 68 60 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Conversion from DIP to completion Conversion from DIP to completion was stable quarter-on quarter (34% in Q4 vs. 33% in Q3). Conversion was lower than the same time last year (55% in Q4 2019). # clients Initial pool of DIPs 25 (average number of DIPs in last 3 months) Conversion of DIPs to DIP accepts: 81% (vs. 80% in Q3) 21 Pool of DIP accepts Conversion of DIP accepts to full applications: 79% (vs. 78% in Q3) Conversion of DIPs to completions: 34% (vs. 33% in Q3, 27% in Q2, and 47% in Q1) 16 Pool of full applications Conversion of full applications to offers: 81% (vs. 81% in Q3) 13 Pool of offers Conversion of offers to completions: 65% (vs. 66% in Q3) 9 Pool of completions QHX1. In the last 3 months, approximately how many DIPs have you dealt with personally? QHX2. In the last 3 months, what proportion of these DIPs have resulted in a DIP accept? QH3. In the last 3 months, what proportion of these DIP accepts have led to a full mortgage application? QH4. In the last 3 months, what proportion of your full applications have led to an offer? QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Conversion from DIP to completion By business Conversion from DIP to completion saw mixed trends by business size. Conversion decreased among those in the midlands and increased across other regions. Q3 2020 33 (+1) Q4 2020 34 30 (-1) 36 (+2) Directly authorised Appointed representative 29 38 33 (+9) 37 (=) 31 (+9) n/a 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 42 37 40 N/A Base size too small First time buyer* 28 (+3) 41 (-1) 34 (-1) 32 (+2) 31 (-2) 31 Mover* 40 Remortgage* Buy to let** Other specialist*** 33 34 29 North 35 (+5) 36 (-7) 30 (+3) 40 Midlands South 29 33 QHX1. In the last 3 months, approximately how many DIPs have you dealt with personally? QHX2. In the last 3 months, what proportion of these DIPs have resulted in a DIP accept? QH3. In the last 3 months, what proportion of these DIP accepts have led to a full mortgage application? QH4. In the last 3 months, what proportion of your full applications have led to an offer? QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301) * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed

Conversion from full application to completion Just over half of all full applications resulted in a completion in Q4, consistent with Q3 (53%), but below the levels seen the same time last year (76%). # clients 16 Pool of full applications Conversion of full applications to offers: 81% (vs. 81% in Q3) Conversion of full applications to completions: 53% (vs. 53% in Q3, 45% in Q2 and 68% in Q1) 13 Pool of offers Conversion of offers to completions: 65% (vs. 66% in Q3) 9 Pool of completions QHX1. In the last 3 months, approximately how many DIPs have you dealt with personally? QHX2. In the last 3 months, what proportion of these DIPs have resulted in a DIP accept? QH3. In the last 3 months, what proportion of these DIP accepts have led to a full mortgage application? QH4. In the last 3 months, what proportion of your full applications have led to an offer? QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Conversion from full application to completion (%) Since the pandemic hit, conversion from full application to completion has remained relatively low when compared to 2019 levels. Q4 2018: 77 Q1 2019: 77 Q2 2019: 80 Q3 2019: 73 Q4 2019: 76 Q1 2020: 68 Q2 2020: 45 Q3 2020: 53 Q4 2020: 53 81 79 79 79 79 79 78 77 77 76 76 76 76 73 71 68 67 62 60 55 54 53 50 47 47 42 n/a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec QH4. In the last 3 months, what proportion of your full applications have led to an offer? QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Conversion from full application to completion By business Conversion from full application to completion increased the most among larger firms, and dropped the most among firms in the midlands. Q3 2020 Q4 2020 53 (=) 53 Directly authorised Appointed representative 49 (-3) 57 (+2) 46 59 50 (+15) 58 (-3) 52 (+8) n/a 1-2 (sales decile) 3-5 (sales decile) 6-8 (sales decile) 9-10 (sales decile) 65 55 60 N/A Base size too small 49 (=) 61 (-4) 54 (=) 52 (-1) 51 (-1) First time buyer* 49 Mover* 57 Remortgage* Buy to let** Other specialist*** 54 51 50 59 (=) 57 (-5) 47 (+2) North 59 Midlands South 52 49 * At least 4 out of every 10 residential mortgages placed ** At least 2 out of 10 mortgaged placed *** Any mortgages placed QH4. In the last 3 months, what proportion of your full applications have led to an offer? QH5. And in the last 3 months, what proportion of your client s mortgage offers have led to a completion? Base: All Q4 respondents (301)

Any questions MARK LONG, DIRECTOR SAM BURTON, RESEARCH DIRECTOR +44 (0) 20 7400 1016 +44 (0) 20 7400 0396 +44 (0) 7966 454 958 Sam.Burton@bva-bdrc.com Mark.Long@bva-bdrc.com