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Egg rolls into supermarket

Supermarkets are emerging as tough competition for IFAs. Egg&#39s launch of a

mortgage supermarket, closely following its mutual funds supermarket, marks

it out as a prominent direct seller, although IFAs are not totally

excluded.

Mortgage supermarkets are set to provide a big business challenge to the

UK&#39s IFAs. Egg&#39s decision to offer other lenders&#39 products as well as its

own indicates it will be in the vanguard of organisations encouraging

homebuyers, as well as mutual fund investors, to shop around on the

internet.

Mutual fund supermarkets, established for years in the US, are further

down the road but both are set to bec^_ome part and parcel of the UK

financial services scene.

Egg set up a fund supermarket last month, offering 169 funds from fund

management groups including Jup^_iter, Invesco, Mercury, Flem^_- ^_ing and

Aberdeen.

That move attracted criticism from Fidelity because it neglected IFAs.

Fidelity is launching a fund supermarket in July which will offer an IFA

route and pay commission.

Now Egg has bought acc^_ess to a wider range of products by investing 15m

in the IFA electronic mortgage platform IFonline. Egg chief executive Mike

Harris has pledged to “search the market for further lending products”.

Egg director of home finance Andrew Deller says it will give the more

sophisticated borrowers the information they need to make an informed

choice. The focus would be on providing a direct channel to the buyer. He

says: “The direct channel will be the most important outlet.”

But he adds: “We are talking to one IFA group about offering our mortgage

thr^_ough them.”

Deller says Egg is working on the basis that there will be increasing

transparency in the mortgage market, allowing homebuyers to identify

cho^_ices more readily.

Egg has now set out its
policy on two key issues for mortgage lenders –

online broking and Cat standards.

The Government&#39s Cat^_mark mortgage scheme has provoked a mixed reaction

from the UK&#39s biggest lend^_ers. Some lenders, brokers and MPs have accused

the Treasury of risking a mortgage misbuying scandal by banning

intermediaries from charging fees on Cat-standard mortgages.

Brokers can still receive a procuration fee, which must be disclosed in

cash terms to the client, but those who charge for advice stand to lose

out.

Egg is among a handful of lenders which have so far hit the Cat-standard

trail. It launched a mortgage price promise for new and existing customers

to coincide with the Government&#39s announcement of mortgage Cat standards.

It pledged that Egg&#39s basic variable rate would be capped not to exceed 1

per cent above base rate for the term of the mortgage.

Egg welcomes the introduction of Cat standards launched by the Treasury.

It says its mortgage range will comply fully with the standards. All

customer literature and the website will be revised to reflect the changes

by May.

Prudential and rivals such as Standard Life have taken substantial

business away from high-street lenders with lending policies seemingly

designed to buy market share. Egg offers a basic variable mortgage rate of

6.69 per cent. It has also spearheaded its drive for remortgage business by

eliminating arrangement fees and redemption charges.

Egg claims it is now competing on price for Cat business on 10,000-plus

mort^_- gages. It says its price promise of being no more than 1 per cent

above base rate improves on the Cat standard, which requires a 2 per cent

cap.

Egg Bank marketing director Andrew Firth says clients will be able to make

overpayments and withdrawals and take payment breaks

Egg is applying the Cat standard terms to exist-
ing borrowers.

However, as cash bonus mortgage holders had previously opted
for a

product with redemption penalties, these would continue to apply.

Cat standards are des^_igned to ensure that interest is calculated daily.

This allows overpayments to cut the total amount of interest charged as

soon as they clear.

Up to 90 per cent of Egg mortgage applicants are now choosing to apply online.

Egg&#39s concentration on online direct sales will make it a prominent

competitor to IFAs. Its fledgling mortgage supermarket puts its further

down the direct road.

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