Brokers fight the good fight on dual pricing

Wednesday 23rd September 2009

By Michael White, MD, Email Mortgages

In the mortgage market a week can bring with it such a raft of news and developments that it can often be difficult to get a grip on everything that’s going on.  Having just taken a week’s holiday I am now left with the distinct feeling of ‘catch up’ brought about not just by the hundreds of emails that need attending to but also the wider industry and market changes that have all occurred in just seven days.

So, where to begin?  Well, some things never change and one of the major issues that mortgage brokers continue to battle with is the continued and destructive dual pricing strategies adopted by those lenders who are still active in the market. 

It is no surprise to return to the country to find the practice still in full effect and one would surmise that we will be in similar situation after we’ve all taken our summer holidays next year.  The fact of the matter is that, while in the past the intermediary sector has probably benefited from dual pricing, the shoe is definitely on the other foot at present.  Those lenders still operating today have significant branch/telephone networks to service and therefore they are choosing to furnish those channels with the more attractive products. 

The lenders may see this practice as being more cost-effective in the short-term, however, the benefits this will have for consumers are less easily discernable.  It certainly continues to be a major worry that brokers will be forced out of business simply because they do not have access to the very best products that sustain them.

If anyone thought there was some movement away from dual pricing – and there still bizarrely appear to be some leading lights in the intermediary sector who continue to argue that dual pricing is not an issue – then one need only look at the latest mortgage product availability figures issues by TrigoldCrystal.  Its product index recently revealed that the number of mortgage products available to mortgage intermediaries has slumped to a seven-year low.  In August the number of broker-only products fell through the two thousand mark to 1,979 from 2,202 in July.

While direct deals also dropped from 1,240 to 1,179 it does not take a genius to work out that a much greater percentage of those products being pulled from the market are the intermediary-only deals.  Lenders continue to focus on their direct channels and unfortunately brokers are suffering because of it.

Of course, consumers are still in need of mortgage advice and this will not go away.  Indeed, the other big news of recent weeks, the lowering of rates on some products by certain lenders to sub –two per cent levels, should provide professional, qualified advisers with a platform to help consumers work through the detail of these products as opposed to a mere concentration on the headline rate.

First-time buyers, for instance, who look at the headlines generated by 1.98/1.99% rates may well be labouring under the misapprehension that this is positive news for them and that the dream of acquiring an affordable first property (and mortgage) is that much closer to becoming a reality.  The fact of the matter is that this type of rate is only available to those low-risk borrowers who have substantial chunks of equity in their property.  First-timers can only dream of picking up a mortgage with anything near such a rate.

And there lies the rub.  While a short-sighted lending community focuses on headline rates and, quite frankly, ‘PR mortgages’ the real facts of the matter are often lost leaving consumers confused about the nature of the current market and their place within it.  Advisers play a vital role in sorting the wheat from the chaff and ensuring consumers are able to view the market as it actually stands not as it is being made to appear by lender marketing departments.
 
As advisers, we can only continue to do the best we can for our clients and this, for many, will mean pointing out that (should they wish to) they may be able to acquire a better rate direct than through ourselves.  However, this is truly a hornet’s nest of a market and the likelihood of getting stung are that much greater if consumers do not have the ‘protection’ of an adviser with them every step of the way. 

The value of our service to consumers has not changed and, let’s be clear, consumers continue to need mortgage advice.  This fact of life will not change in seven days’ or even seven years’ time so be positive and put your best foot forward from now until you (hopefully) get a chance to take another well-deserved break from work sometime soon.

Michael White is both founder and chief executive of online mortgage advisers, Email Mortgages. Email Mortgages was established in 2008 and is a mortgage advisory practice providing consumers with tailored fee-free advice online via email.  Michael has been working in financial services for over 30 years and been involved in a number of new business start-ups including Chase Manhattan Homeloans, Legal & General Mortgage Services and Kensington Mortgage Company.  His last job prior to Email Mortgages was as founding director of the lender London Mortgage Company, established in 2001 and sold to Lehman Brothers in 2006.