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MMR likely to hike costs of providing direct deals


The cost of offering direct deals could be driven up by the latest Mortgage Market Review consultation paper, says the Association of Mortgage Intermediaries.

Last week the Financial Services Authority revealed that all mortgage sellers will have to be trained to CeMAP level 3, including those in branches.

A cost-benefit analysis of the MMR by Oxera shows there are currently 3,000 to 5,000 non-advised sellers which could cost lenders £5,600 each to train, totalling between £17m and £28m.

But the FSA does not know how many non-advised sellers are already trained to the right level so expects the final costs to be less.
Robert Sinclair, director of AMI, says: “With the creation of a level playing field for the industry the proposals may drive up the cost of banks delivering mortgage products direct.

“This would be good news for brokers who could see a rise in demand from lenders and good news for consumers who value the independent advice they receive when applying for a mortgage.” 

Stephen Smith, director of housing and external affairs at Legal & General, also believes the cost of direct business will rise for lenders.

He says: “Any imbalance between the costs of originating business via intermediaries or branches will change and lenders may find it even more evident that intermediary distribution is cost-effective, flexible and capable of growth.”

But Linda Will, former sales and marketing director at Stroud & Swindon, says the impact will be small as a lot of the bigger lenders already have mortgage sellers qualified to appropriate levels.

She says: “A lot of lenders also have regional sellers who can move around or use video technology to limit the cost of training too many staff.
“But for smaller lenders with less direct lending it could tip the balance in favour of brokers. For them it is not just the initial payment but the ongoing cost of trained staff.”

Lenders such as Nationwide Building Society already require advisers to have CeMap level 3.

Paul Broadhead, head of mortgage policy at the Building Societies Association, says it is sensible that every seller is qualified but he can’t see direct deals being affected.

He says: “I don’t think smaller societies will stop selling direct – that would be a step too far. Many have qualified staff and should be able to cope.”



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