Bill Dudgeon is managing director of DB Mortgages
Looking back at the mortgage market, for many years the majority of business written was done direct to consumers through retail branches. There were some referrals by financial advisers but dealing with consumers directly was lenders’ main focus.
The past 10 years have seen many retail branches clos-ing but the big change has been the swing towards broker-introduced business. This now represents up to 60% of the mortgage market. This is partly due to the changing life patterns of consumers, who now have the internet as an alternative to going into branches. But more importantly, they have more varied requirements, these days.
Add to this the complexity of the UK market with its wide range of products and it’s no surprise that intro- duced business has come into its own. Customers trust brokers who offer them choices when it comes to lenders and increasingly prefer this option to taking the single lender approach.
Retail outlets are losing out, especially as they now need to compete with internet providers. There is room in the market for all three options and no doubt over time more distribution types will appear as long as demand continues to evolve.
But it will be interesting to see how the Financial Services Authority with its Treating Customers Fairly initiative approaches dual pricing. Under dual pricing, the same customer enquiring to a lender directly through a branch and then again through an intermediary could be offered differently-priced products. A further TCF question is whether the service behind these two options differs. It is often said that you are only as good as your last deal and if brokers don’t feel they are being treated equally, some will vote with their feet.
Bob Sturgess is director of communications at Money Partners
The broker sector is flourishing because it works – it works for consumers and it works for lenders. In most cases, it works for brokers and packagers too.
All lenders recognise the value of intermediaries. This applies equally to those with branches and those whose distribution is solely through brokers. Indeed, many well known high street brands admit to relying on intermediaries for upward of 70% of their business.
So it is strange to suggest these lenders would seek to bite the hand that feeds them. It’s equally strange to claim that they automatically make poorer partners for intermediaries. The evidence suggests otherwise.
Lenders with branch networks are likely to invest as heavily in their intermediary relationships as in their branches. In an ideal world they might prefer to access all customers directly but are sufficiently realistic to know this is not attainable.
This is why so many operate expansive and expensive sales teams dedicated to intermediaries, and why they are following the lead of specialists in investing in broker-friendly processes and technology.
It should also be remembered that branches serve a range of purposes, many of which do not compete directly with the interests of brokers. While clearly not sacrosanct to head office cost-cutters, they nevertheless represent a deep investment in the fabric of UK financial services.
The same cannot yet be said of all of the recent lender entrants, many of whose global parents are probably just as eager to exploit direct-to-consumer opportunities as are established players. But the new boys’ appetite and stamina have yet to be tested in less benign conditions. So there is room for brokers and branches. They are not mutually exclusive.