Intermediaries face being frozen out by lenders if they ‘churn’ mortgages on a basis lenders believe is unacceptable, according to John Malone, national mortgage manger at Prudential.
In response to a delegate query during the panel session at The Mortgage Event in Birmingham, which called for clarification as to lenders’ position over rising remortgaging levels, Malone warned that lenders are starting to implement plans to reduce the level of churn in the market.
He said: ‘Now Mortgage Income Relief At Source (MIRAS) has gone, there is no loyalty from borrowers and remortgaging has risen significantly. Lenders will be reviewing their relationships with their intermediaries who are just churning mortgage business for churning’s sake, as there is a subtle distinction between this and just getting the best deal for the client.
‘We have some lenders who are coming out with market leading rates in good faith who find their business is being churned every five months or so. The wider implications are that they will stop doing these rates and it will be the consumers who lose out.’
David Cutter, operations director at Skipton Building Society, was also on the panel and voiced his agreement: ‘This is the number one issue for lenders at the moment. I think we will start to see more lenders offering longer terms with equally long redemption penalties to slow remortgaging.
‘I do not think it should be all or nothing, but the procuration fee system also needs to be more sophisticated. If brokers sold longer-term products, the lender would be able to build a relationship with the borrower and may be prepared to pay a higher procuration fee for this product.’
However, Brian Pitt, sales and marketing director at Future Mortgages, who was on the panel, disagreed: ‘Customer retention management among most lenders is still poor. Lenders are still more interested in the front-end sales. They do not want to waste too much time on keeping customers. If borrowers are leaking away, they just try to add more at the top.’
Pitt warned that brokers should not become frightened of remortgaging their client to a better deal.
‘Intermediaries first loyalty should be to their clients and they should move them about if they need to,’ he said.