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Dual purpose

Advisers are calling on lenders to be up front about their dual-pricing strategies.

At last week’s Abbey key accounts conference, Abbey and Alliance & Leicester managing director of intermediaries Ricky Okey said the lender had to pursue as many opportunities as possible in the current climate and make full use of all its distribution channels.

He said: “As a business, we clearly have an obligation to maximise opportunities in the market and bluntly we have offset dual pricing with exclusive products in the intermediary market.

“Intermediary distribution is not an island within Santander but we have to achieve a balance between both channels – we have a very substantial investment in branches and mortgages feed that investment. It is a really sensitive subject. You might not like it but I hope you understand it. The difficulty that intermediaries have trouble in accepting is that dual pricing has always favoured the intermediary, let us be candid about it.”

Abbey is not the first lender to defend dual pricing. In a recent interview with Money Marketing, Lloyds Banking Group sales director of mortgages Nigel Stockton said the bank had to find a balance between intermediary and direct channels, which might mean some dual pricing. “It is not an explicit strategy, we look at the competition on the high street and we look at competition in the intermediary sector,” he said.

Advisers concede they do understand the banks’ dilemma but the banks could do more to help the situation.

The Mortgage Practitioner proprietor Danny Lovey says lenders should do more to work with intermediaries. He says: “We do understand the banks’ predicament but they should not maroon us on our island. We need more transparency and we need them to stop cross-selling because that takes the consumer away from us and away from the opportunity to get other providers’ financial products.”

Abbey says it is offsetting dual pricing by offering more broker exclusives, developing retention strategies through intermediaries and also offering advisers the opportunity to sell other products such as savings accounts.

Alexander Hall chief operating officer Andy Pratt says that, on the whole, mortgage brokers will welcome the bundled product initiative.

He says: “You can understand why lenders might want to do it because they need to generate savings business and if it means there is a slightly better headline rate or a reduction in fees on the mortgage, then the customer and brokers will welcome it.”

He says advisers are used to selling savings-linked mortgages due to the existence of offset deals. But he warns: “The FSA is going to have to be consulted quite heavily by lenders, because if you are forcing a client to buy one product in order to access another, you have to consider how it is sold and marketed.”

Pratt says there is potential for a misselling scandal if more complicated products were linked together or if the deals are marketed in the wrong way.

Quantum Mortgages director Fahim Antoniades is confident that advisers will triumph over banks’ attempts to access mortgage customers directly. He says: “History says customers value the advice of intermediaries – that is why the sector controlled the majority of the market. Consumers are very savvy right now and will not trust a bank if it says its mortgages are the best out there.”

Mortgage expert Jonathan Cornell agrees. He says: “People do not want to be sold a mortgage, they want to talk about a mortgage, it is about relationships.”

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