it’s not fair One of the major areas of concern for brokers is that of dual pricing. It’s become a duel fought out in the trade media, on online forums, during conversations between lenders and brokers and in pubs after work. It’s an emotive subject for everyone.
Brokers feel they’re being stabbed in the back as lenders offer mortgages more cheaply through the direct channel, undermining the value they can offer their clients in the form of advice. They argue, in cash-strapped times, consumers will come to them for advice and if there’s a cheaper deal direct they’ll then opt for that, leaving the broker out of pocket. Lenders on the other hand have commercial businesses to run and many argue that it costs less to arrange a mortgage direct with the borrower than to take introduced business. The overhead costs of branches have to be paid so why not use this outlet as a place to sell mortgages and compete
with the introducer channel? Steven Marks, intermediary services executive at Newcastle building society, recognises that advisers are becoming increasingly frustrated about the number of products lenders are offering direct to consumers.
He said: “Distribution is driven by the cost to the lender. Most lenders already have the cost of their infrastructure, so they’re taking that hit anyway. In this situation, proc fees can be construed as an extra cost. Many lenders are of the view that direct business helps them to build a deeper relationship with the customer, which could induce other forms of business.” AMI director Robert Sinclair acknowledges the challenge facing the industry: “Dual pricing was a very significant issue in early 2009 and I think there’s still evidence of it in certain parts of the mortgage market landscape. But as more lenders come back to the market and as lenders continue to
appreciate good intermediary work, though we’ll still see an element of dual pricing, it will be less. At least, I certainly hope it won’t be as big a problem as it has been in the past. “I think it’s genuinely hard for lenders to justify charging higher rates on an intermediated product, which should be logically cheaper because the lender has to do less work at the application stage. I think it’s as much about the amount of business they want to do and their preferred channels.”
Michael Coogan, who as director general of the lender trade body speaks for the majority of lenders, says that there is lender recognition that if the market is £150bn gross lending this year there isn’t capacity within branches to facilitate all of that business. He said: “Intermediaries are going to continue to be a main focal point for distribution. If lenders are trying to get people to come into their branches they’ll use that as part of their strategy;
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