Brokers effectively held lenders hostage when there were fewer direct deals available, says Grenville Turner, group chief executive officer of Countrywide.
Turner, a former chief executive of the business-to-business division at HBOS, caused a stir among brokers last week at the Building Societies Association annual conference in Manchester.
He began by telling delegates that the direct channel now accounts for roughly half of all new mortgage business.
Turner says: “We’ve seen a change in direct mortgages and I think that’s a good thing, so lenders can’t be held hostage by brokers.
“There should be a balanced market whereby consumers are able to get advice but equally lenders don’t become overly dependent on that source of business.”
Turner went on to tell attendees that the vast number of mortgages being arranged by brokers between 2005 and 2007 gave them too much power over lenders. He adds: “I’m all in favour of a healthy adviser sector – I would be because I have 750 business writers who are intermediaries.
But I think a healthy sector is one in which there is a sensible and balanced relationship between lenders, intermediaries and consumers. I’m not convinced that balance was there in 2005 and 2006.”
Jonathan Miller, mortgage adviser at McGirls Money Manage-ment, says: “I fail to see how brokers can have any influence over lenders and their policies. Lenders recognise the intermediary distribution network and in some ways exploit it by turning business levels on and off when necessary, not the other way round.”
And Ketan Yadav, director at Avenue & Co Private Finance, says: “If it wasn’t for brokers most lenders would not have the level of new customers they do. Brokers play a valuable role in mortgage distribution yet many still dual price.
“Unfortunately, dual pricing will lead to a further collapse in market activity and in the number of brokers, but we have to live with it or move on.”
Turner’s view on the future of the Bank of England base rate could also prove controversial. Although low interest rates have been widely credited with keeping borrowers in their homes during the recession Turner told delegates he would like to see a hike in rates to boost the number of transactions.
He says: “We’ve got a mortgage prisoner situation, with many borrowers on 2.5% SVRs. They’ll probably end up paying at least twice that if they want to move home.”