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Should lenders have some ‘skin in the game’ on service times?

Brokers have urged major lenders to follow Virgin Money in making a financial commitment to maintaining service times.

Major UK lenders are under growing pressure to address service failings after Virgin Money announced plans to compensate borrowers for delayed offer times.

Last week, Virgin Money launched a “broker manifesto” in which it pledges to pay £100 compensation to customers who do not receive an offer within 10 working days of the lender receiving their application.

The offer is only valid where brokers have submitted a ‘fully-packaged’ application.

And with lenders still smarting from criticism over prolonged application times and delayed offers in the aftermath of the introduction of the MMR, brokers are calling for more to be done to improve service standards.

Your Mortgage Decisions director Dominik Lipnicki says: “Ideally, lenders would just meet their promises on service times but that has not been the case far too often, especially since the MMR came into force.

“Something like this will give brokers more confidence that lenders will deliver an efficient service, so it would be a fantastic development if all lenders were willing to stick their neck out and commit financially to doing so.

“Ultimately, neither brokers nor clients want the money, we want mortgages to complete in a timely manner.”

Middleton Finance managing director Daniel Bailey says: “We all went through the pronounced period of delays last year after MMR and while things have improved since then, to see a lender put some skin in the game and promise compensation where it falls behind is a really interesting development.”

Bailey adds more lenders should look for ways to differentiate themselves, outside of engaging in the current rate war that has seen mortgage pricing fall to historic lows.

“Rates cannot simply continue to fall forever, so it’s good to see a lender looking to try and capture business with a different tactic. Hopefully this will put pressure on other lenders to follow suit.”

However, Neil Soundy Financial Services managing director Neil Soundy wants lenders to invest in their processing teams rather than offer compensation for failing to complete cases efficiently.

“I don’t see why lenders have to regulate themselves on something that should be controllable,” he says. “It seems some lenders are unaware of their own limitations in terms of processing capacity, but come out with fantastic rates that jam their systems. I would rather see money invested into improving service standards, not compensation for bad service.”

This looks unlikely, however, with four of the UK’s top six lenders distancing themselves from introducing similar measures.

Nationwide Building Society says it currently sends offers within seven days of receiving applications.

A spokeswoman says: “We will continue to invest in our systems and processes to further improve the broker and customer experience, but have no plans to introduce compensation payments to clients at this time.”

Barclays/Woolwich says it makes offers on fully packaged cases within eight days. It says improving service for brokers and direct customers remains a “priority” but it has no plans to compensate clients for delays.

Neither NatWest Intermediary Solutions, which has an application to offer time of 15 days, nor Santander will offer compensation to borrowers for delayed offer times. Santander is currently issuing offers 8.2 days after receiving applications, and says the longest case time since MMR was 22 days.

Lloyds Banking Group and HSBC refused to comment or state how long they are currently taking between application to offer.

Start Financial Services manager Tom Cleary says lenders risk “creating a rod for their own back” by committing to service times.

“It just come back to haunt them,” he says. “But it does at least show some lateral thinking on the lender side because competition should not just be on pricing alone.”

The Council of Mortgage Lenders says: “This [the Virgin Money announcement] is further evidence that consumers are benefiting from a mortgage market in which lenders are competing on servicing standards as well as pricing.”

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