You are here: Home - News -

Future of sub-prime referrals now in doubt

by:
  • 11/12/2001
  • 0
With tighter regulations coming into force next year, the industry is debating how long exclusive r...

With tighter regulations coming into force next year, the industry is debating how long exclusive referrals between mainstream and sub-prime lenders will survive, before regulators bring a firm hand down on the practice, writes Kirstie Redford.

More sub-prime lenders are striking deals with mainstream players, so when potential borrowers fail lending criteria, they are directed into their arms. But some in the industry feel the practice could mean consumers are not receiving best advice.

Barry Robson, managing director of Genesis, said: ‘The difference between sub-prime and mainstream customers is not black and white. Customers may be better off with other specialist lenders, rather than sub-prime lenders. This lack of choice makes you wonder how it will sit with the regulators. ‘

The Financial Services Authority’s regulations do not cover advice, so as far as it is concerned, there is nothing wrong with exclusive referrals.

Referrals also fall outside the Mortgage Code. Brad Baker, spokesperson for the Mortgage Code Compliance Board, said: ‘Lenders do not suggest the referral is the only solution and if they were to give such advice we would step in, but until that point, they are acting as an introducer, not an adviser.’

Kensington Mortgage Company has links with Newcastle BS, a number of estate agents and receives some business from Egg. Mortgages plc also has links with Newcastle BS, is the only sub-prime lender to get referrals from Paragon Home Loans, and is planning an exclusive connection with another building society.

Alistair Pate, general manager of marketing at Kensington, said: ‘Few people are strictly sub-prime lenders anymore. Like us, they deal with mid-prime and other specialist areas. Many customers would stop looking if they were turned down by a high street lender, but this way they are alerted to the fact they have a choice.’


Tags

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Building societies pledge mutuality despite pressure from carpetbaggers

Building societies are standing firm against new attempts from members to force demutualisation and ...

Close