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The effect of mortgage brokers on banks’ business models

Author

Listed:
  • Marcus Buckmann

    (Bank of England)

  • Buckmann Eccles

    (Bank of England)

Abstract

We study the effects intermediaries have on the UK mortgage market by exploiting the strong increase in broker intermediation between 2013 and 2020. Our findings indicate that this rise coincided with more households choosing mortgages with a short fixed term, due to brokers steering households towards these mortgages to increase fees from repeat business. Increased broker intermediation also enabled smaller lenders to reach more customers by geographically diversifying their mortgage portfolios, which gave smaller lenders the opportunity to specialise their mortgage portfolios, concentrating on long fixed-term and high LTV mortgages.

Suggested Citation

  • Marcus Buckmann & Buckmann Eccles, 2025. "The effect of mortgage brokers on banks’ business models," Bank of England working papers 1104, Bank of England.
    • Handle: RePEc:boe:boeewp:1104
    as

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    References listed on IDEAS

    as
    1. Mark Egan, 2019. "Brokers versus Retail Investors: Conflicting Interests and Dominated Products," Journal of Finance, American Finance Association, vol. 74(3), pages 1217-1260, June.
    2. Benetton, Matteo & Eckley, Peter & Garbarino, Nicola & Kirwin, Liam & Latsi, Georgia, 2021. "Capital requirements and mortgage pricing: Evidence from Basel II," Journal of Financial Intermediation, Elsevier, vol. 48(C).
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    4. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    5. Guiso, Luigi & Pozzi, Andrea & Tsoy, Anton & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2022. "The cost of steering in financial markets: Evidence from the mortgage market," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1209-1226.
    6. Viral V. Acharya & Iftekhar Hasan & Anthony Saunders, 2006. "Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1355-1412, May.
    7. Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
    8. Martin R. Goetz & Luc Laeven & Ross Levine, 2013. "Identifying the Valuation Effects and Agency Costs of Corporate Diversification: Evidence from the Geographic Diversification of U.S. Banks," The Review of Financial Studies, Society for Financial Studies, vol. 26(7), pages 1787-1823.
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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