View more on these topics

Editor’s Note: Developers under fire

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.

Recommended

Telephone-Phone-Business-Finance-General-700.jpg

FOS: Lloyds most complained-about mortgage firm in H1

Lloyds was the most complained-about mortgage and home finance brand in the first half of the year, with 769 new cases received, according to the Financial Ombudsman Service. The second was Santander UK with 563, then Barclays with 473, Nationwide with 433 and NRAM with 325. NatWest was the sixth most-complained about firm, with 280 […]

Tan-Ying-Speaking-2013-700.jpg
1

Buy-to-Let Watch: Do your homework on student BTL

Student property is still a lucrative market but it is important to make your clients aware of the restrictions affecting it Can you believe it is already September?  Summer holidays are over (you can almost hear the sigh of relief from parents across the country) and this year’s crop of first-year students are packing their […]

Haresnape-Charles-in-2012-700.png

Aldermore cuts Help to Buy rates by more than 1%

Aldermore is reducing rates on its Help to Buy: mortgage guarantee offering. The lender is replacing its existing two-year fixed rate products with a standard, non-tiered offer. Available immediately, the new product offers: 4.98 per cent two-year fixed rate up to 95 per cent LTV with a fee of £999 The previous rates were 5.99 per cent at […]

In Focus image

In Focus — May 2015: private medical insurance market in Germany

Welcome to the latest edition of In Focus. In this issue, Jelf examines the private medical insurance market for employers with expatriate workforces in Germany. This includes the common challenges faced in sourcing appropriate coverage, along with a selection of available solutions. This will be of particular interest to HR/reward decision makers with employees based in Germany. It will assess the cultural norms, risks and backdrop that are relevant to organisations with expatriate staff in this location.

Newsletter

News and expert analysis straight to your inbox

Sign up