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Mortgage brokers challenge direct sales trend

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by Gill Montia
Mortgage brokers challenge direct sales trend

The Association of Mortgage Intermediaries (AMI), the trade body for mortgage brokers, has lodged complaints with the Financial Services Authority (FSA) and the Office of Fair Trading about the growing trend for mortgage lenders to offer new loans to customers applying directly only.

Currently, over half of all new home loans are placed through mortgage brokers, who earn a commission from the lender on each successful application.

AMI is basing its complaint on the requirement to treat customers fairly under FSA regulations but an FSA spokesperson has pointed out that lenders are free to make decisions about to how they offer their products.

However, consumers’ personal finances have become increasingly complex during the credit crisis and AMI believes that many potential borrowers benefit from the advice of a mortgage broker.

Lenders are not necessarily only interested in avoiding paying a broker’s commission when their loans are offered on a direct basis.

Many banks and building societies have been withdrawing popular products at a moment’s notice because they have been oversubscribed and excluding brokers from the application process enables them to retain tight control.

Chris Cummings, the director general of AMI, believes that the credit crisis has been reducing lenders’ branch-based business, as more borrowers approach brokers to secure the best possible deals. He sees direct sales as a means of increasing profit margins at the cost of consumers.

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News posted: May 6, 2008

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