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Differential equations

Mortgage brokers have slammed leading lenders for offering substantially better rates through direct channels.

Halifax, Nationwide and Cheltenham & Gloucester are some of the big names to be criticised for massive disparities between direct and intermediary pricing.

Last week, Halifax was offering a three-year fixed-rate homemover mortgage to direct customers at 5.74 per cent up to 75 per cent loan to value with a £999 fee. It is available at 6.22 per cent through brokers with the same fee.

A three-year fix is offered at 5.54 per cent through C&G’s branches while the intermediary rate is 5.89 per cent, both with a £995 fee.

Nationwide has a three-year direct deal at 5.75 per cent with a £599 fee but is not offering an equivalent deal to brokers.

Abbey claims it has one direct product priced lower than through intermediaries – a two-year fixed rate at 5.49 per cent – after it changed several direct deals last week to make them equivalent to broker deals.

In an open letter to the Association of Mortgage Intermediaries, The Mortgage Practitioner sole trader Danny Lovey called upon the trade body to defend the intermediary market from lenders’ recent actions.

Lovey said: “The genie is out of the bottle and the intermediary market is in freefall – not such a dramatic statement when you realise that lenders are offering direct products so different to the intermediary market.”

Highclere Financial Services partner Alan Lakey believes lenders are taking advantage of the situation.

He says: “Lenders’ actions are presenting people like me with a moral dilemma. If I can get a deal through a lender at 5.7 per cent but it is cheaper to get it through that lender’s branches at 5.6 per cent, should I tell them? It is unfair of lenders to put advisers in that situation.”

Lakey believes lenders should be straight with brokers and admit what they are doing. “They don’t have the guts. They are saying it is because of market conditions but it is all about making profits by cutting us out of the loop,” he says.

Hamptons managing director Jonathan Cornell says the firm has had to tell many clients they will find a better deal if they go direct.

He says: “When the difference between products is as much as 0.3 or 0.4 basis points, we have to point some clients towards lenders’ branches.”

John Charcol senior technical manager Ray Boulger believes that the worst culprit has been Nationwide. He says: “They have a three-year fix and tracker only available through its direct channel. When we asked Nationwide why it has done this, its explanation was that only 4 per cent of its three-year fixed rates were through the broker channel so there was no demand for it. That is a very poor excuse. In the current climate, a lot of brokers would use that deal.”

AMI director general Chris Cummings says the trade body fully recognises the seriousness of the situation. He says: “We have major reservations about the actions of certain lenders and the detrimental effect it is having on intermediaries and ultimately on consumers.

“We have raised these issues with lenders directly and also in meetings with the representative bodies, the Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association. We will continue to fight for a healthy intermediary market which is best placed to serve the needs of consumers.”

A Nationwide spokeswoman says: “As a mutual, it is important that we offer our members good deals but can effectively manage the demand for our products. Restricting the channels through which these products are available will have an impact on the great demand for them.

“Several other lenders offer different pricing on intermediary products and to ensure our products do not become overly competitive in the marketplace, we had to review our range in light of this. We value the strong relationships we have with intermediaries and continue to support the broking community through our development of a sales support team and our investment in intermediary technology.”

A Halifax spokesman says: “Halifax remains committed to the broker channel and believe the vast majority of consumers prefer the choice, advice and service of a broker. This can be verified by the fact that we have not seen a material change in our split of business between the broker and direct channels over the last 12 weeks.”

Lakey points out while Halifax’s point might be correct, the lender has increased the differential over the last two weeks. “It is unsatisfactory. The differences are massive and they cannot be defended,” he says.

A C&G spokeswoman claims that differential pricing in the intermediary and branch channels has been a feature of the mortgage market for years and that, as a result of the market conditions, the differential has shifted across the industry.

She says: “We fully understand the concerns that this may cause intermediaries and we would like to reassure them that this is not part of a strategy to offer higher prices to the intermediary sector but is driven by the need to ensure prices remain competitive and reflect the demand in the different channels.”

An Abbey spokesman says: “Sadly, the current market does not allow us to offer intermediaries the same price advantages across the whole of our mortgage range that they have enjoyed for so long. However, where possible we will continue to offer some competitive advantages to intermediaries.”

There may be some light ahead, with Abbey announcing it will start offering exclusive deals to its key account partners from last week. The lender will begin by soft-launching three deals with six of its key accounts, including a mixture of tied networks and directly authorised firms.

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