In September, analysis from Mortgage Solutions showed second charge distribution deals between networks and packagers meant consumers were facing a fee lottery – a borrower could pay between £2,250 and £5,825 for the same loan, depending on the brokers’ network membership.
The discrepancy was caused by the networks’ insistence on barring their brokers from advising on second charges following the implementation of the Mortgage Credit Directive (MCD), for fear they were entering a sector of the market they did not fully understand.
Six months on, the plates have somewhat shifted. While all six of the networks questioned still had their panels in place, interest in allowing brokers to deal with lenders directly has grown.
Personal Touch Financial Services (PTFS) for instance, plans to launch a direct panel of three to four lenders to sit alongside its master broker partners Promise Solutions and Gateway. It is in the process of finalising the terms of business for launch later this month.
Head of propositions Vikki Jefferies said: “We want to continue to work with master brokers because they are still valuable for our members. But this is about giving our appointed representatives additional options to go directly to a lender.”
Taking back control
Indeed, there is evidence, brokers preferred the direct route. TenetLime, which launched its direct lender panel in November, said 75% of the £3m second charge business written since has been via the direct route. “This is firm evidence that brokers prefer having more control over the advice process and customer journey,” said managing director Gemma Harle.
TenetLime still works with master brokers Enterprise and Norton but is in the process of negotiating the fee structure “now that the market has evolved and matured,” said Harle. In September, the network’s pricing structure was among the highest, with fees of up to £5,825 on £120,000 loans, compared with Intrinsic’s £2,000. It fared better on mid-sized loans but was the most expensive (of those that disclosed their fees) on small loans of £5000, where it charged £1,080.
Rival network Intrinsic has its own ideas for a direct panel. “This is something we will look at when we feel the second charge market has settled after regulation,” said mortgage sales director Emma Hollingworth. “We are likely to look at this later in the year,” she added.
The network still works with Brightstar, Positive Lending, Fluent Money, and Enterprise Finance, its former partner VLoans having exited the market. Intrinsic’s fees were among the cheapest, with maximum charges of £450 for £5,000 loans and £3,830 for loans of £60,000.
Of the six firms questioned, Mortgage Advice Bureau (MAB) was firmest in its resolution to stick with its former strategy. The firm works with Brightstar – its fees at £995 (£5,000 loans), £4,495 (£60,000), and £5,495 (£120,000) were among the highest of those disclosed in September.
“There has been no change in the situation from our perspective in terms of second charge mortgages,” said CEO Peter Brodnicki. “We’ve seen that many of the fee scales published in the second charge mortgage market aren’t straightforward to either the adviser or consumer. This can sometimes manifest itself in the form of an underbelly of hidden fees and uncapped commissions,” he said, adding he felt comfortable MAB’s clients were being offered a “transparent and good value option”.
Sesame has also stuck with its three leading master brokers: Enterprise Finance, Positive Lending and Promise Solutions. As was the case in September, the firm did not disclose the fees.
Openwork declined to answer any questions about its second charge relationships. In September, the network had a sole-tie relationship with Enterprise which it described as a pre-MCD contract which was being reviewed that month. It would not disclose any of its fees. Specialist Lending Solutions understands that relationship remains unchanged.