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Journey back to the core

Bradford and Bingley revealed this week that it is to axe its mortgage panel of 18 firms and return to selling only its own-branded mortgage products.

The bank is returning to a direct-sales model and will close down its mortgage broking service in November. B&B says that this is to consolidate its position in the specialist mortgage market, focusing on buy to let, self-certification and lifetime mortgages as well as giving it time to strengthen its presence in other sectors. It says all pipeline business will be administered by B&B to completion and its 300 brokers will be trained on selling a single range of products.

Several industry commentators suggest it has been evident for some time that B&B’s prime mortgage division has not been meeting in-house expectations. In January last year, it halved its panel of mortgage lenders from 50 to 25 and this was reduced further in October to 18. At the time, it did not rule out cutting the panel to 10 or fewer by the end of 2005.

In the past two years, B&B has had two different chief executives who have had radically different strategies. In February 2004 , chief executive Christopher Rodrigues was adamant that B&B would offer independent, multi-tie and tied options. But the appointment of Steven Crawshaw as chief exec brought the sale of B&B’s IFA businesses and specialist mortgage IFA John Charcol, the scrapping of the Market-place brand and the move in November 2004 to tie to Legal and General for investment, pensions and protection business.

B&B has said that its decision to sell only its own mortgage products will not affect its other multi-tied product ranges with L&G employed advisers using Cofunds for pensions and investments.

The new chief executive tried to return the mortgage business to what he says are its core strengths and where the firm is most profitable. The success of Mortgage Express – B&B’s specialist mortgage arm—- has been notable and it writes around a fifth of all the specialist mortgage business in the UK.

Mortgage Express head of mortgage distribution Adrian Scott says: “We had a review which revealed what our core strengths were. As a result, we sold our non-core businesses and decided to focus on what our customers wanted which was more specialist products.”

John Charcol senior technical manager Ray Boulger says the decision has come as no surprise. B&B bought John Charcol in 2000 and sold it in 2005.

He says: “It was clear when they took the decision to dispose of us that there had been a definite change of strategy. Mortgage Express is where it makes most of its profits and its strategy in a sense is to go back to its roots and concentrate on where it is strong. From a profitability point of view it makes sense.

“It has been steadily cutting back on broking and now it is in the same position as all the other high-street lenders. The competition in this market is cut throat – to be a player in the two-year market is very hard. I get the impression that although it will offer other products, it will be focused on specialist products.”

Alliance and Leicester head of intermediary mortgages Mehrded Yousefi believes the move will not be damaging to B&B’s brand as for the last five years it has not been active in the prime market as a major player.

He says: “It makes sense to continue in the specialist market, especially with Mortgage Express, which is the biggest brand with around 21 per cent of market share.

“People have known for some time that B&B do not deal with the prime market as around 98 per cent of their business is specialist. It wants to consolidate its business where its greatest strength is. There is a lot of competition in the prime market, especially among the top 10 lenders and B&B is not one of those.”

The question of whether people ever understood the concept of B&B selling other companies’ mortgages is another factor, according to London and Country mortgage specialist James Cotton, and a reason why it will not be damaging to its brand.

He says: “Did Joe Bloggs understand that you can walk into a branch of B&B and buy a Halifax mortgage? I am not sure they did. It will be interesting to see what B&B does in the prime market now. Its link-up with Mortgage Express has been successful and it offers good products.”

B&B managing director of strategy Mark Stevens adds: “We firmly believe that our core strengths lie in meeting our customers’ needs for specialist lending and savings products. The change to the branch mortgage proposition will not in any way affect B&B’s commitment to brokers and intermed-iaries via the Mortgage Express brand.

“All our chosen areas of specialist lending are growing markets with demographic and social trends creating more customers who require these type of products. We believe we are the first high-street lender to respond to such customer changes.”

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