To remain the dominant source of advice, responsible for nearly nine in 10 new sales – according to the Association of Mortgage Intermediaries (AMI) – brokers are being urged by industry leaders to “adapt” to the new technology and “change their proposition”.
Rob Jupp, group chief executive of the Brightstar Group, said the big banks began gearing up for more automation 10 years ago, spending tens of millions of pounds on technology to make it easier to directly offer borrowers a cheap deal.
Jupp’s comments come as several brokers have expressed frustration about losing clients to the dual pricing tactics of Lloyds Banking Group, after placing them with an intermediated Halifax deal only to be later undercut by Lloyds offering a cheaper “loyalty” rate directly.
Preparing for ‘war’
Speaking at the Mortgage Market in 2035 event, organised by communications consultancy MRM, Jupp said: “Those of us in the specialist boat might think we’re alright because as brokers we focus on customer relationships, but the big banks are getting ready to wage war.”
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He added: “I do worry that some brokers make assumptions that, every year, enough deals will fall into their lap and they just have to have another small talk with their clients and they’ll get paid again. They will need to offer real value to people for their commission and to change their proposition, because AI will be better at taking on the simple tasks of securing people a good deal.”
Removal of interaction trigger
The warning follows the Financial Conduct Authority’s (FCA’s) proposal to remove the “interaction trigger” that would make it easier for execution-only mortgage sales, where no advice is given, to go ahead.
The trigger was introduced by the Mortgage Market Review, which banned an execution-only mortgage sale from going ahead where there had been interactive dialogue with the borrower. It was intended to remove the risk of borrowers thinking they had received advice when they had not.
By taking away this trigger, which would allow borrowers to engage with firms and still proceed on an execution-only basis directly with the lender, the FCA has forecast this could reduce broker-led sales by up to 7.5 percentage points.
That would see the number of cases handled by brokers each year fall by more than 97,000, costing them more than £116m in lost commission and fees.
Brokers must adapt
Tanya Elmaz, director of intermediary sales for specialist lender Together, said: “When I go to a mortgage adviser now, I want advice on retirement and my will and everything else; I want more than just a broker picking up the phone and saying my current deal is coming to an end.”
She added: “Younger people are also far more used to doing everything on their phone or on an app in just a few clicks, so brokers will have to watch their back with technology and adapt to supporting customers in different ways.”
AI is driving direct deals
It is a fear some brokers are already realising.
Mortgage Solutions was approached by a brokerage that wished to remain anonymous that raised concerns about losing business it had placed with Halifax to the lender’s sister brand Lloyds Bank. It’s a threat that it fears will continue to get worse.
The director of a new homes brokerage said: “We have lost three cases in the last few weeks. They were all big mortgages, so it has had a big impact.
“I personally lost one about four weeks ago. Halifax offered 4.63% for the new build product, which offers a longer completion date. For the standard completion date, the rate was 4.43%, but Lloyds offered the customer 4.18% and was told that he could have a longer offer on this standard rate. So it’s not just dual pricing but also different criteria for new build.”
The broker added that Lloyds had not proactively contacted the borrower. The conversation had taken place when the customer had contacted Lloyds about their current account.
He added: “I have not noticed dual pricing to be much of an issue in the past, but my fear is with the growth of AI, that more customers will start looking at direct deals and cutting us out, especially if the direct products are so much lower.”
Another broker who heads up a London brokerage said: “We have lost cases where clients have come across the cheaper Lloyds deal and applied direct. Lloyds appears to be pinching business from their stablemate but may have their motivations – driving footfall into branches [that] are closing, or uptake of their club current account.
“It’s incredibly frustrating, but let’s not forget advisers get advantages from dual pricing and criteria.”
A spokesperson for Lloyds Banking Group said: “Our core mortgage products are the same whether you come to us directly or through a mortgage broker, and we do not vary completion dates.
“Mortgage brokers are clearly important to us as the source of most of the group’s mortgage business, which is why they have access to their own products, such as our 1.5-year fix or early repayment charge-free trackers
“Under the same principle, in Lloyds, which is direct-only, we offer some current account customers who meet eligibility criteria loyalty deals.”
