Responding to contributions to the FCA’s Call for Input on competition in the mortgage sector, networks said the due diligence process to approve lenders onto panels had the customer’s best interest at the forefront of any decision.
In the regulator’s report, lenders raised concerns that smaller firms were struggling to enter the market, with larger mortgage networks described as a major barrier to doing so.
Paul Shearman, proposition director for mortgages, protection and general insurance at Openwork, explained that in Openwork’s case, it operated a panel of 27 lenders, giving its brokers access to over 9,000 products.
He said: “While I fully accept that panels differ in size, for the most part the panels in operation across the market are pretty broad and as such, I am not convinced that choice is impacted negatively.”
Shearman added that an ‘off-panel’ process, used by many networks in the market, allowed advisers access to non-member lenders in cases where client needs could not be fulfilled by its panel offering.
“Under the MMR rules understanding lender criteria is a critical role for advisers – clearly the broader the panel the harder this becomes,” Shearman explained.
TenetLime managing director Gemma Harle, said the FCA is right to challenge any detriment faced by consumers due to restriction in the market, but added that she was not aware of the concerns around panels having any prevalence.
“I’m not sure why networks were singled out in the report because the majority of networks have a whole-of-market panel. So I think the skew of focus on networks is just wrong,” she added.
“It would be difficult for the smaller lenders to meet certain terms for every network, but do they really have the ability to deal with the volume of business they might face if they are on every network’s panel?”
Shearman agreed: “There’s a real danger that the larger networks could deliver such large business volumes that they could ‘blow the doors off’ and completely overwhelm a smaller or newer lender. This is clearly in no-one’s interest. The ability to utilise these players via an off-panel concession process helps to mitigate this risk.”
Workload is also a crucial consideration for networks when taking on new lenders, First Complete’s sales operations director Toni Smith, added.
She explained that each lender relationship required management alongside risk mitigation and ensuring the alignment of sales processes, to name a few.
“From a network perspective we wouldn’t just add lenders to our panel for the sheer hell of it if we couldn’t look after them properly,” Smith said.
One response to the FCA’s paper also noted that the way networks and clubs operate can by their very definition restrict access to certain lender products.
But firms argued networks and clubs in fact enhanced the ability for lenders and mortgage brokers to reach a higher number of firms.
CEO of The Finance Planning Group, Terry McCutcheon, which has recently launched its own network, explained: “It would difficult to see what intermediaries would do if there were no panels because we’d all have to individually approach lenders for their products. So that’s 60 different lenders with 60 different agreements, who will then be in a position where they can decide what they pay brokers.”