Mortgage Strategy readers with a classical education (nope, me neither, but bear with me) will recall the ancient Greek fable of Hercules, who fought the multi-headed Hydra and found, to his alarm, that it regrew its monstrous heads every time the hero lopped one off.
Little did Hercules suspect that mortgage journalists two millennia later would be comparing his struggle to that of developments in the new-build broking arena. Nevertheless, this has come to pass.
The comparison here is with heroic independent brokers who are fighting large property developers that pressure new-build customers to use selected intermediaries.
Of course, this problem is not a new one. Three years ago, several large developers were rapped on the knuckles by the Homes and Communities Agency for just this type of behaviour.
However, like the Hydra’s heads of yore, the problem keeps coming back. Brokers report that big developers still push their customers towards certain intermediaries, but now do so in person or over the telephone, avoiding writing anything down as they did previously.
Of course, technically there is nothing wrong with this practice. The problem comes when consumers feel they cannot use any other broker. Some consumers clearly believe this, perhaps due to pressure from developers.
But the kicker is that developers barely need to pressure consumers at all. When the biggest purchase of your life is at stake and you are desperate to get on the first rung of the housing ladder, it is mere self-preservation to do whatever you deem most likely to keep all the gatekeepers in that process happy. If your developer mentions a certain broker, most consumers will end up favouring that broker.
But restricted consumer choice is never a good thing. What incentive does a broker have to find their customer the best deal if they know they effectively have a monopoly on the intermediary process? What happens if they are unable to access the best deals, perhaps because they deal only with a handful of lenders?
Brokers are right to be angry about this, and in the worst-case scenario consumers end up losing out. The HCA should make it clear to developers that this type of behaviour will not be allowed to stand.