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Limited distribution exclusive rates raise questions of fairness – poll result

  • 11/11/2021
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Limited distribution exclusive rates raise questions of fairness – poll result
Brokers are split down the middle about whether lenders should offer limited distribution exclusives, with some saying the broker took on more risk and should be compensated and others saying it was unfair to the customer.


According to Mortgage Solutions’ latest poll, which asked whether lenders should stop offering limited distribution exclusive rates, nearly 47 per cent were in favour of exclusive deals.

This compared to around 44 per cent who said lenders should not, whilst just under 10 per cent said they were unsure.

Limited distribution exclusive rates are competitive rates offered to mortgage clubs, mortgage networks and broker partners. They are typically offered if the business or broker transacts a significant amount of business with the lender.

But rewarding some broker firms and not others divides opinion among the intermediary community.

Sebastian Murphy, JLM Mortgage Services’ head of mortgage finance, said: “We think lenders should continue to offer exclusive rates and more competitive products via intermediaries, due to us taking responsibility for the advice and recommendation.

“This as we know is where the majority of risk sits within the process, therefore this should be rewarded with slightly lower rates, compared to those clients who go direct. Lenders should only offer exclusives to consultants who have top-tier business quality metrics, therefore incentivising business quality and not performance.”

Nuanced approach

Dale Jannels, managing director of Impact Specialist Finance, said that in some instances limited distribution rates could be beneficial, but it depended on the market or product.

He said: “They can be good in that they raise the market interest in what can sometimes be a slow or stagnant time. Others can be just good rates and by offering through a limited distribution, the lender can control the exposure, and also get some decent packaged cases.”

He added that he understood why some people wanted it stopped as swift product releases and withdrawals created confusion.

Jannels said: “Where it really does not work is launching a product today and withdrawing it within 48 hours. That’s difficult to advertise, speak to clients, collate information and then get uploaded on to the lender’s system in such a short space of time. Stressful is only the half of it.”

Others said that whether limited distribution exclusive rates are given should come down to whether the product is regulated or unregulated.

James McGregor, director of Mesa Financial, said: “I think this should come down to regulation. With regulated products there should be no preferential distribution as it completely goes against everything advisers are supposed to be advising on.”

He added: “When the transaction is unregulated, it just becomes any other business arrangement. In any other industry, you get a discount for buying in bulk, so why do people expect financial services to be any different? Let’s be honest, Tesco can negotiate a better price with the farmer than a smaller, independent outlet would be able to.”

Consumer benefit

Others said that if the discount was passed on to the consumer then lender limited distribution exclusives were not punitive.

Dominik Lipnicki, director of Your Mortgage Decisions, said that if a lender was receiving a fully packaged case that has been fully checked and criteria checked then it would be cheaper for the lender to process the case.

He explained: “In these cases the lenders don’t have to acquire the client, nor do they have to deal with a large number of clients who wouldn’t meet their lending criteria. This means that the lender can pass on some of that discount to the consumer as an exclusive deal. This is fine as long as it is available to a wide range of intermediaries and not just a select few.

“After the 2009 crash there was a big issue as some lenders were giving clients better deals than they could get through an intermediary. Clients should have access to a broad range of lenders and intermediaries should be able to offer clients the best deal to suit their individual needs.”

Hiten Ganatra, managing director of Visionary Finance, said that it created separate standards as brokers had to adhere to the Financial Conduct Authority’s Treating Customers Fairly initiative, which means firms are responsible for making sure customers receive fair treatment and service.

He explained: “As brokers we have an obligation to adhere to the Treating Customers Fairly initiative – so should lenders by making available the best rates to all despite which network the adviser is associated with.

“There is a client at the end of the advice who shouldn’t be penalised for using an adviser who is associated with the “wrong” network.”

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