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Marketwatch: Is a mortgage lender at a disadvantage if it launches direct first?

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  • 28/06/2017
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Marketwatch: Is a mortgage lender at a disadvantage if it launches direct first?
HSBC is the best-known lender to turn to the intermediary market when its bid for market share and growth began to suffer by excluding intermediary partnerships.

Many specialist lenders have launched intermediary-only propositions in the last few years, but when new mainstream lenders like Tesco or AA launch direct first, does this disadvantage the brand in brokers’ eyes, particularly if they need them later?

Find this week’s Marketwatch panel’s thoughts below.
John Phillips, group operations director at Just Mortgages and Spicerhaart

John Phillips

Launching a direct lending service and then opening it up to the broker community doesn’t affect my opinion of a lender at all.

In reality, the broker community is continuing to grow and evolve and, as a result, an increasing amount of lenders are left with no choice but to work with brokers. In fact, mortgage brokers ended 2015 with a market share approaching the 70% mark. This is set to keep growing as an increasing amount of consumers seek professional and impartial advice in uncertain times.

This is also supported by recent figures from the FCA which revealed that mortgage broker revenue soared by 53% between 2013 and 2016, while direct sales plummeted.

However, it comes as no surprise that mortgage volumes in the broker channel have grown. Mortgage advice from a reputable broker is an invaluable service, now more than ever as the economy continues to face headwinds with Brexit negotiations and ongoing economic and political uncertainty.

Consumers will understandably want to shop around to find the best deal. However, by searching the whole of the market in terms of lenders and products, brokers find the borrower the most suitable mortgage based on their needs and circumstances.

It is clear that the lender broker relationship is also key. In fact, earlier this month the director general of the CML said that the relationship should be examined as part of the FCA’s study on competition in the mortgage market.

This relationship is clearly a primary focus for the trade body so it will certainly be interesting to see what emerges as a result of the review.
Lea Karasavvas, managing director, Prolific Mortgage Finance

Lea Karasavvas

The fact a lender opts for the support of the intermediary market for me is something that does nothing but enhance the opinion I would have for a lender.

Whilst some may seek solace and comfort in approaching the direct channel alone, my personal belief is that if a lender requests the assistance of a brokerage, this is a result of the fact they have a great USP or a great rate.
I would simply applaud the fact the lender would seek the assistance of broker rather than berate them for doing so.

In terms of thinking less of them for not originally approaching the intermediary channel, I understand the logistics and margins that would result in such a decision, but if the call for assistance from the intermediary channel came along I would not think any less of the lender for doing so. In fact the acknowledgement that our assistance was required would for me be complimentary than anything else.

The release of a controlled, direct product working its way to release through the intermediary channel is more a coup for us as the intermediary than anything else and I would always welcome the option to support any lender should they decide that the intermediary channel is the right move for them, irrespective to whether it was there at the outset or not.

David Hollingworth, associate director, London and Country Mortgages

David Hollingworth London and Country

I think we have seen enough lenders take that approach initially, looking to ensure they’ve got things working as they want, before opening up to brokers that it isn’t really a concern anymore.

The market we are in now, lenders are fully accepting of the fact that broker distribution is crucial to growth.

HSBC is a great example of how important intermediary distribution has become. It was a lender that consistently and vocally declined to use intermediaries but came to realise what we could offer. If you look at more recent launches, Tesco was always clear that it wasn’t ruling out broker distribution from the off.
It’s a brand that has been very clear that it wants to get things right and won’t accelerate that launch at the risk of affecting quality.

Brokers are probably more accepting now when a lender might initially want to start testing its product in the direct market. At one stage, when dual pricing was prevalent, then it was an issue. But that’s not so much the case anymore – there are very few lenders that are not active at all in the intermediary market.

Ultimately, as much as a broker may have preferred to have the products available immediately, the bottom line is that if they are right for the customer you cannot go on bearing a grudge. You cannot deny the customer the right product because of a lender’s launch strategy.

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