Restricting the number of mortgage deals available via intermediaries can mean consumers miss out on the best products and advisers lose business – while presenting an uncomfortable moral dilemma for the broker, opponents of the practice argue.
Matthew Fleming-Duffy, director at Bournemouth-based Cherry Finance, urged the Financial Conduct Authority (FCA) to step in and ensure the larger lenders offer their products to the whole intermediary market.
He told FTAdviser: “I look at it purely from the consumer’s point of view. Surely we must all agree collectively that going through an intermediary is going to have the best possible outcome - as long as we have one model of distribution?”
His comments came after Yorkshire Building Society recently made headlines by offering a record low mortgage rate of 0.89 per cent for a two-year fix - but the product was not made available through its intermediary arm, Accord.
Meanwhile, HSBC, which entered the intermediary market in 2014, only offers its products through a select group of brokers – currently numbering 19 in total.
Mr Fleming-Duffy said: “The problem is [HSBC] have gone to a select few brokers – a couple of big ones and a couple of networks. How does that put me in a position as an honest broker? If a consumer sits in front of me, do I list which loans I can’t help with?”
Although the FCA recognises that not all intermediaries will have access to every mortgage deal, Mr Fleming-Duffy said the current regulatory solution is inadequate.
His firm provides customers with a list of lenders they deal with regularly – but the Cherry Finance director said this can confuse customers, who question whether they are truly an independent intermediary.
He added that if a broker states that a better deal available direct from the lender, consumers will often go straight to them without paying the intermediary.
“If brokers are forced to charge fees to remain in business, it could make their advisory model unsustainable, which will not serve the market well,” he explained.
Jane King, independent mortgage adviser at Ash-Ridge Asset Management, described the limited distribution model as ‘terrible’.
She said: “It is one thing for a mortgage club to get an exclusive, but for a lender to deny their entire range to a broker because they are not in the ‘big five’ is really, really wrong.
“I think it should be everyone or not at all. It is not a level playing field for all firms. You just have to bite the bullet and say [to the client] you can get a better deal if you go direct.”
Mr Fleming-Duffy linked the practice to the issue of procuration fees, which are sometimes paid to larger intermediaries on panels while smaller brokers miss out.
A spokesperson for the Yorkshire Building Society Group said: “We believe it is important to provide borrowers with a choice of mortgage options across all of our brands, including Yorkshire and Chelsea Building Societies and through intermediaries via Accord Mortgages.
“We are dedicated to supporting brokers, and we regularly offer competitive mortgages specifically for the intermediary market. “
Tracie Pearce, HSBC UK's head of mortgages, said: “HSBC already and proudly serves the direct market through the telephony, branch, digital and online channels.
“In August 2015, we responded to the feedback from our customers and chose to make our mortgages available through the intermediary sector. This was a deliberate and fundamental change to our mortgage business.
“In order to protect customer service, it was and is imperative to treat each expansion carefully with the correct levels of resource, training and relationship engagement.
“We are continuing to bring intermediary partners on board with an increasing proportion of the market having access to our products as we move through 2017.”
Roland McCormack, TSB’s mortgage distribution director, said the bank now works with more than 12,000 advisers representing around 75 per cent of the UK mortgage market.
He added: “We’ll continue to grow our broker reach as we build our service and relationship capacity. Our approach is centred on ensuring we can offer best in market service, including face to face relationships, and we can only do this if we manage our broker expansion in a considered and controlled way.
“This has been our consistent approach from day one; providing excellent service to our brokers and customers is of utmost importance to us.”
A Tesco Bank spokesperson commented: "We are always looking at how best to serve Tesco customers and we continually monitor our intermediary network to ensure we are continuing to do so. Should we make any changes to our intermediary network in future we will let our customers know."
Sainsbury’s Bank, which was also accused of the practice, was approached for comment.
The FCA is currently looking into the use of panels in its Mortgages Market Study, as part of an investigation into whether certain commercial practices could be affecting competition in the market and consumer outcomes.
An interim report is scheduled for release in summer 2017, with the final report set for publication in early 2018.
simon.allin@ft.com
