Halifax specialist lender Birmingham Midshires is axing 150 packagers from its distribution network this week following a formal review of its third-party relationships.
Midshires head of corporate accounts Alan Lawson says letters have been sent out serving 30 days' notice on the companies in a move which leaves the lender with only a handful of major packagers on its panel.
Lawson says the decision is a natural progression following Midshires' shift away from mainstream lending to concentrate on the specialist and sub-prime sectors in September.
Some brokers see the move as likely to have been motivated by forthcoming FSA regulation, which could force lenders to disclose the high fees that packagers are paid, particularly in the sub-prime market.
There are also suggestions that Midshires' success since September – its total lending is thought to have leapt 50 per cent – has allowed it to terminate much of its expensive packaged business in a bid to cut costs.
Mortgageforce managing director Rob Clifford says: “I think Midshires has the same concerns all lenders have – their compliance obligations at N3. They will not only have to ensure that packagers operate properly but they may well have to disclose the fees they pay. HBOS may also be involved, as it is always concerned with protecting its brand strength.”
The Mortgage Operation managing director Mark Charlesworth says: “There is a cost of dealing with packagers and Midshires is doing a lot of business at the moment. They probably just cannot justify sustaining packaging fees.”
Lawson says: “We have simply taken the opportunity to review our packager relationships and form alliances with leading brands in the marketplace. It establishes some strong mainstream values in the specialist sector.”