Duel action

30 April 2010 8:00 am | By Lee Jones

Dual pricing is still a major stumbling block for many mortgage advisers but it could be seen as an opportunity for them to prove their worth.

Mortgage sourcing system Trigold, which has been showing direct-to-consumer mortgages since April 2009, says advisers should use the rise of cheap direct rates as an opportunity to prove themselves as “mortgage myth busters” and dispel the assumption that best-buy mortgages are the best buy.

Trigold business development and marketing manager James Anderson says dual-priced products are unfair but brokers need to show their expertise in the face of this.

He says: “You could strike it lucky and find that the direct deal is the best bet but you are never sure until you get advice. Advisers need to market their impartial advice as it will always pay off.”

Trigold found the number of direct-only products on its sourcing system rose every month from November to March while intermediary-only products reduced by a fifth in March.

Anderson says: “It has always been a way for high-street lenders to use a headline rate to get people through the door. It is not always a bad deal but it does not tell the whole story.”

This can be illustrated in the current best-buy mortgage in the UK - HSBC’s 1.99 per cent two-year 60 per cent loanto-value variable rate. It may be the mortgage that most people initially aim for but it will not necessarily be the best deal for everyone.

The Mortgage Practitioner principal Danny Lovey says: “The mortgage reverts to a standard variable rate of 3.94 per cent. That is not the most attractive among the lenders but is middle of the road. Also, it does not track the Bank of England base rate, so if the bank did put the base rate up by 0.5 per cent there is no guarantee the mortgage will only go up that much.

“It is all dependent on what HSBC decides its variable rate will be. It might decide to raise that by 0.75 per cent or more in that instance.

“The fee is £999, middle of the road again, but you need 40 per cent equity, which is a struggle for most clients. Also, if you have a small mortgage, that fee is a lot. You have to amortise the fee over the period of the deal to get an idea of these loans. When you do that you will find if you have a small mortgage then a small fee is preferable.

“This mortgage is not that special. It might be that you could find a different deal to the 1.99 per cent one and save the client £30 a month. Over time, that is a lot of money. People can be led down the garden path simply as there is not the beauty of advice.”

The problem for advisers is having influence to push those consumers back up that garden path. HSBC spends hundreds of millions on marketing and was voted by Marketing Week as the 41st most powerful international brand. In fact, HSBC attributes much of its UK mortgage success, which saw it meet lending commitments of £15bn in 2009, to its rate matcher campaign.

So can the small adviser compete with the big brands?
Unbiased.co.uk chief executive Karen Barrett says the unbiased website is proof that you do not need millions to get the message out there:

We spend a fraction of what the banks spend in a year on sponsoring rugby, for example, but we can get in front of half a million people a year.”

Barrett says there are still a large number of people who wonder where they can find help and they go straight to the internet. She says: “There has never been a better opportunity for advisers to get their proposition in front of the consumer in this online world.

“Ten years ago, when it was all about display advertising or adverts in the papers, brokers did not stand a chance of getting in front of consumers as they could not compete with the brands. But online advertising has changed all that - you can put those key terms into a search engine and be found by consumers by advertising your special selling point.”

“All the millions the banks spend on marketing is pretty meaningless on the internet,” says The Mortgage Broker Ltd marketing director Terry Ruddy. His brokerage specialises in promoting its services online through search engines and generic information on its website.

“That is how we battle against the banks,” he says. “If you can get to the top of the search engines, people think you are a big player. You can compete online with anyone just by having the right knowledge.”

Ruddy says brokers have to invest in the internet now so they can promote their myth-busting services in the face of direct deals and best-buy tables. “The broker’s job is to take the complication out of the deals that could be hiding things. It is making clear things that are unclear,” he says. “That is more crucial than it has ever been because you have all the high-street stuff being advertised more and more - but under the bonnet it is not what it seems.”

Emba Group sales and marketing director Mike Fitzgerald says people prefer the personal service a broker can deliver to a direct service but it means hard work on the broker’s part: “If brokers fight back a little bit they do start to win.”

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