OFT explains Mortgage Brain merger decision
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Full details of the Office of Fair Trading’s decision to refer the acquisition of Mortgage Brain and TrigoldCrystal to the Competition Commission have been published.
Mortgage Brain revealed last December that it was in discussions with the board of TrigoldCrystal and had agreed terms to buy the business for £6.8m.
But the OFT recently announced that it has referred the proposed acquisition to the CC as it was concerned that the merger would lead to Mortgage Brain being too dominant.
In its decision document published last week, the OFT says the merger would have made it hard for other technology companies to launch into the mortgage market and could lead to the combined provider increasing prices.
The OFT says TrigoldCrystal is currently the market leader in terms of sourcing with around 50-60% of the market, with All New Mortgage Brain having about 30-40%.
For the financial year ended March 31 2010, Mortgage Brain achieved a turnover of £5.9m.
For the financial year ended November 30 2009, TrigoldCrystal’s turnover was £5.8m.
Mortgage Brain is owned by six lenders - Santander, Barclays, Lloyds Banking Group, Nationwide, Northern Rock and the Royal Bank of Scotland.
TrigoldCrystal’s shareholders comprise private individuals, Prudential and Santander.
The OFT received 28 submissions from third parties, a number of which were unsolicited.
It says with the exception of some of the lenders that are the parties’ shareholders, all third parties viewed the merger as reducing competition in the market.
The report says: “Customers raised concerns that the merger would likely lead to increased prices, reduced innovation and development, and reduced choices in the markets.”
The report adds: “One competitor provided documentary evidence showing that, since the announcement of the merger, a lender, who is a shareholder of one of the parties had discontinued supplying it with mortgage rate updates.”
In terms of competition, the OFT says it is aware of only one new entrant into the market - Client Data Systems.
But the OFT says: “It does not currently have any customers and so its likely success is unknown.”
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Readers' comments (4)
Anonymous | 3 May 2011 10:56 am
The lender that no longer publishes its rates with Mortgage Brain has, I suspect, crap rates. The whole point behind Mortgage Brain and TriGold is to increase competition between lenders - if a lender has crap rates then it doesn't get recommended. The OFT is concerned about the wrong issue - competition between companies offering a rate comparison service. The real issue is maintaining competition between mortgage lenders. Still, who would expect commonsense from planet OFT.
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Anonymous | 3 May 2011 11:21 am
Have you lost the plot, anon?
The OFT are concerned that by merging, the new entity would be able to charge brokers what they like, as there is no real alternative out there at the moment. Also, the costs of entry would be a massive barrier to potential new systems.
This is doing brokers a favour, something that should be applauded.
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perplexed | 3 May 2011 11:42 am
Mortgage Brain and Trigold are commercial entities that exist to provide brokers with a platform to source mortgage products accurately. To suggest they stimulate competition between lenders betrays a poverty of industry knowledge and common sense.
Also, had you read the article properly before commenting, Anonymous 10:56, you will have noticed that it makes no mention of Mortgage Brain not publishing rates, but a lender, who is also a shareholder of either Mortgage Brain or Trigold, not releasing its own rates to a competitor of Mortgage Brain and Trigold.
Whether or not a particular lenders products are any good is not for the sourcing systems to decide.
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Leslie squires | 3 May 2011 2:06 pm
Competition between mortgage sourcing systems is good for advisers and avoids complacency and dominance.
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