IFAs claim their sales of Nationwide mortgages have plummeted since it dropped discounted rates from its range.
The UK's biggest building society sparked a mortgage war in February when it called on rival lenders to stop ripping off existing borrowers to subsidise cheap deals for new customers.
Nationwide introduced a low variable rate for new and existing borrowers but stopped offering discounted mortgages which traditionally attract new business.
As a result, IFAs are reporting a freefall in the amount of new mortgage business they are writing for the society.
Charcol says it has experienced a “very dramatic” fall-off in the number of new borrowers choosing Nationwide.
London & Country says it now sells very few of the society's loans.
They claim Nationwide's failure to offer discounted rates means it now fails to register on best-buy tables and barely makes the top 20 of cheapest new deals on mortgage-sourcing websites such as Moneysupermarket.com.
Charcol says the strength of Nationwide's brand may help it sell new mortgages through its branch network but points out that the national coverage IFAs provide will be sorely missed as most of the society's branches are located in the South.
London & Country believes Nationwide may have to revise its mortgage range as losing such a substantial share of the market is unsustainable.
Charcol senior technical manager Ray Boulger says: “We have experienced a very dramatic fall-off in new business for Nationwide.”
London & Country mortgage specialist David Hollingworth says: “It would not surprise me if Nationwide sharpened the new range within six months but there would be a few blushes if they did.”
A Nationwide spokesman says: “Over time, people with a focus on long-term value will do business with us.”
Clerical Medical fears life offices preparing to offer external fund links on stakeholder are creating a situation that could go “horribly wrong”.
It is concerned the costs of external fund links could push stakeholder charges above the 1 per cent cap.
Clerical has also slammed Legal & General over its boast about supporting stakeholder's charging cap from the outset. It has branded L&G's claim that advice is not necessary as foolish and misjudged because it demotes the role of advice.
L&G pledged last week that it will absorb the costs if external fund links on its stakeholder plan bust the 1 per cent price cap. Other life offices looking to offer external funds include Norwich Union and Scottish Mutual.
The problem may arise where investors choose higher-risk and higher-charging external funds which could skew costs above the 1 per cent cap.
Clerical says margins are so tight that direct salesforces have been axed and IFAs have been pushed out of the individual stakeholder market, meaning many people will not get the advice they need.
Pensions strategy manager Nigel Stammers says: “There is potential for external fund links to go horribly wrong. I am not convinced the target market want external funds links or IFAs want them because they cannot supply the advice needed within 1 per cent.”
Head of strategic marketing David Shelton says: “L&G is sticking out like a sore thumb. It is very odd it should associate itself with an initiative that is causing the industry problems. The outcome of 1 per cent is a huge proportion of the target market is disenfranchised from advice.”
L&G director of retail pensions Randle Williams says: “The challenge of 1 per cent is for companies to work within it. The Government was stuck on 1 per cent so we had to live with it.”
l Perspective, p28