Before you stop reading this, thinking what is the point of reading a column written by some idiot who cannot even spell, bear with me.
Some brokers feel lenders are dual-pricing to kill them off, hence the title of this column. In the boom times, brokers’ positions were unassailable. Lenders desperate for market share could only get a finite amount of business from their direct channels and brokers delivered the rest. Brokers called the shots and typically could offer cheaper rates than many in-house direct mortgage advisers.
When we were benefiting from dual-pricing we were very quiet. Now the shoe is on the other foot, the accusations grow faster than a viral marketing campaign.
The FSA had a good look at dual-pricing and correctly observed that lenders are entitled to use a variety of distribution strategies and price them accordingly, so could offer cheaper rates via their direct distribution routes if they choose to.
Most lenders will employ some kind of salesforce to sell their direct mortgages. These people are a fixed cost. If they sell no mortgages per month, they still need to be paid. Brokers only get paid when they sell mortgages.
Pretty much every survey shows people value brokers’ service. If you give a broker and a direct adviser the same rate, most people will choose the broker and the direct adviser will end up twiddling their thumbs. Lenders found that by dualpricing, brokers will still submit the lion’s share of the business but the branch advisers were kept nice and busy.
What made the situation worse was HSBC’s entry as its pricing was extremely aggressive, so lenders had to reduce their direct pricing to compete. Some lenders took things further than others. Brokers could not compete. Some lenders, notably Nationwide and Woolwich, do not dual-price but most of the others do to some degree. These lenders devote significant resources to looking after brokers so they have no intention of killing brokers off. They are trying to keep their branch staff busy. Brokers need to realise we cannot change what is going on, threats to boycott lenders when the good times return are not going to make any difference.
Jonathan Cornell is head of communications at First Action Finance