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Branch line

Paul Thomas on how advisers are taking the lion’s share of loans business and the impact on lenders

Intermediaries processed nearly two thirds of all mortgages in the first quarter of 2010 although the Association of Mortgage Intermediaries and the Intermediary Mortgage Lenders Association disagree over the ramifications of these statistics.

AMI director Robert Sinclair believes the consequences of last month’s figures could lead to a campaign from lenders to claw back some of the market share to boost business going through their branches.

He says the costs of running a branch and justifying the number of people employed in them means that they will have to do something to drive business back through their doors.

He says: “I’m concerned that, given that we are running at about £10bn a month or £120bn this year, and if the numbers are right and 62 per cent of mortgages are going through intermediaries, there isn’t enough going through the branches to justify the number of people employed. They’re going to have to step up their marketing activities. How they are going to do that will be interesting.”

However, Imla chairman Peter Williams has taken a more positive view of the figures and believes intermediaries will not suffer in the near future.

He says: “Clearly, lenders have gone through a very difficult time in terms of supply of funds. And the fact is, the broker channel has remained strongly supported. As funding recovers you would expect to see that continue. I would envisage that the broker channel would continue to be the strongest route to market.”

The big banks rely heavily on intermediaries, with Santander saying that 80 per cent of its business comes from intermediaries. Barclays, Nationwide and Lloyds all confirmed that more than 50 per cent of their business comes through brokers. All four say intermediaries are, and will continue to be, vital to their businesses.

But Sinclair still believes lenders will try to redress the balance – and one option is dual pricing.

He says: “Dual pricing is nowhere near as bad as it was 12-15 months ago, but there is still a bit of it out there. It is one of the options open to lenders, but I hope it is not a route they go down.”

He suggests that one way to combat this would be to maintain a relationship with previous customers.

He says: “What the broker can do, however, is make sure they have an ongoing relationship with customers. The good brokers have started down that road.”

Chadney Bulgin director of mortgages Jonathan Clarke also believes that dual pricing could re-emerge at the same high levels seen in the past couple of years.

He says: “Dual pricing has gone away a lot recently. That is the only way they can really steer business through the branches – it is the obvious way. There are an awful lot of people working in branches and they’ve got to get business in. It looks like the gaps on the pricing are likely to widen.”

’Different customers have different needs. While somewill be happy to go direct to a lender, others value the advice and market knowledge that an intermediary can provide’

Abacus Financial director Matthew Fleming-Duffy says splitting products due to the way they are distributed goes against the FSA’s treating customers fairly initiative.

He says: “I feel very uneasy with dual pricing. If you look at the issue of treating customers fairly, I don’t see how you can justify dual pricing.
“I don’t see how you can justify splitting products based on the route to market.”

But London & Country head of communications David Hollingworth believes that there is a limit to how much business lenders can accept through its branch doors and the expertise of brokers will be utilized as borrowers find it difficult to meet lenders’ required criteria.

He says: “Lenders still have a limited amount they can handle. They don’t have an army of advisers in each branch, generally just one or two people. There’s only so much they can really hope to deal with.

“Customers will have a very frustrating purchase if they go from lender to lender and get told ’no’ because they don’t fit the criteria. That’s going to very quickly send them back to a broker, who will be able to target their search more effectively.”

Building Societies Association head of mortgage policy Paul Broadhead says customers will always need choice.

He says: “Different customers have different needs. While some will be happy to go direct to a lender, others value the advice and market knowledge that an intermediary can provide. As such, intermediaries complement lenders own branch networks by providing borrowers with an important choice over how they buy their mortgage.”

Relationships between lenders and intermediaries will always vary over time, he says: “The relative proportions of the market accounted for by lenders and intermediaries will, and should, vary over time as the market responds to customer, intermediary and lender needs.”


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