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Broker boost as Tesco becomes latest lender to widen distribution

The broker market received a boost this week after Tesco Bank confirmed plans to launch into the intermediary channel.

The lender has been offering mortgages directly through its stores since 2012, advancing more than £1bn in loans since then. In October, Money Marketing sister title Mortgage Strategy revealed the supermarket was considering launching through brokers.

In an interview with The Telegraph last week, Tesco Bank chief executive Benny Higgins confirmed the lender plans to move into the broker market early next year.

He said: “We’ve been in the direct market for over two years now, and we realised that, while we’re happy with how it’s going, we are only serving a modest proportion of Tesco customers.”

A Tesco Bank spokesman says no product or fee details have been confirmed yet. He says the lender will launch into the intermediary market in the first half of 2016.

Association of Mortgage Intermediaries chief executive Robert Sinclair says Tesco’s decision reinforces the importance of intermediaries in the post-MMR market. He says: “We’ve had an idea that Tesco was looking to make this move but this confirmation shows that lenders are recognising the best way to do business post-MMR is through brokers.

“The arrival of Tesco to market continues this phase that will certainly push the broker share of the mortgage market further upwards.”

Neil Soundy Financial Services managing director Neil Soundy adds: “It’s great that another lender is turning to the broker channel for growth, and the signs are all pointing that way. 

“Proc fees are slowly on the increase and that also shows lenders understand training up a whole staff to give advice is far more costly than paying a slightly higher fee to those who know the industry.

“We would hope to see Tesco getting their stall out right in terms of criteria, fees, SVRs and so on.”

Tesco is the latest in a stream of lenders to announce a launch into the intermediary channel. Last October HSBC announced a surprise U-turn on its distribution strategy by entering the broker market for the first time. The lender had previously been accused of “arrogance” for ignoring the broker market.

TSB and Bank of Ireland UK have also announced plans to offer mortgages through brokers in recent months.

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