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Crunch time

This week has seen seven of the biggest UK mortgage distributors joining forces to call on mortgage brokers to understand and make allowances for the huge strain the credit crunch is placing on lenders.

This unprecedented move by Premier Mortgage Service, Sesame, Openwork, Pink Home Loans, Personal Touch Financial Services, Legal & General Mortgage Club and Home of Choice is bound to spark debate in the mortgage market.

The open letter to the mortgage intermediary market, written by PMS managing director John Malone, says intermediaries are wrong to accuse lenders of acting irresponsibly and breaking the requirements of the FSA’s treating customers fairly regime by withdrawing products at short notice.

It says: “This action by the lenders in our opinion does not constitute part of treating customers regime but more a commercial decision to protect their own liquidity position in keeping with running their business in a commercially sound way.”

The letter calls on brokers to encourage clients to save more regularly with lenders to alleviate some of the liquidity problems.

Money Marketing has already heard from other brokers who agree with the sentiments of the letter. Hamptons managing director Jonathan Cornell says he thought the letter was interesting and that it was perfectly correct regarding the complaints about lenders not being TCF.

He says: “TCF does not require a lender to lose money or to go out of business. If lenders went out of business that would be even worse for the industry.”

Alexander Hall chief operating officer Andy Pratt adds: “It is something which I support. I would be surprised if there were many that didn’t support it. In Concordia we’re telling our brokers the same thing. It’s too easy for brokers to jump on the bandwagon and bash lenders.”

But some brokers still remain concerned that lenders are taking advantage of the situation to cut brokers out of the system.

The Mortgage Practitioner sole trader Danny Lovey says: “I agree that everyone needs to understand everyone else’s situation. I understand it’s the world we live in today. When I am critical of lenders is when they are trying to cut us out of the system. I think some lenders are cross selling where they shouldn’t be. That’s where they are open for criticism.”

The open letter suggests the situation will not improve until at least halfway through 2009 unless the Bank of England and the Government intervene to restore confidence in the wholesale markets.

What’s your view on the open letter revealed in Money Marketing this week? Email me with your comments at


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