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Malone says churning rising in loan market

Premier Mortgage Service managing director John Malone says churning is becoming as big a problem in the loan market as it is in long-term savings.

He claims some lenders already refuse to do business with certain brokers, typically London-based, that are involved in “rebroking” mortgages.

Malone says these intermediaries are not treating customers or lenders fairly. He says: “Some brokers will only support products without redemption fees so they can churn. Some of it is being done for very short periods such as nine or 10 months. There are some lenders that are unhappy about that and it mainly applies to big ticket lines.

“I know some lenders have stopped doing business with those brokers. Some advisers may say it is justified but you can’t keep using lenders as a dumping ground. The FSA is looking at it as, if you keep churning, you could have a loan that is larger than you started with, that is still being paid into your retirement.”

Malone says PMS is likely to launch a debt management service in future. He is concerned the unregulated sector is damaging consumers and the expected 345bn of gross mortgage business in 2006, from 288bn last year, is because of a rise in second-charge lending and remortgaging.

Malone says: “Organisations such as ourselves will get involved in this but we will do it in a different way. The market needs regulation.”


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