Mortgage brokers complain over lenders' direct deals.

Byline: Aled Blake Business Correspondent

MORTGAGE brokers have complained to the City watchdog about moves by high street lenders to limit the amount of business they do through intermediaries.

The Association of Mortgage Intermediaries (AMI) has lodged a complaint with the Financial Services Authority about recent changes some lenders have made to their mortgage ranges, limiting the deals available through intermediaries and raising the cost of the ones that remain.

Increasing numbers of consumers are thought to be turning to brokers for help in negotiating the currently rapidly changing mortgage market.

The credit crunch has led to the most competitive mortgage deals being pulled soon after they are launched, sometimes with just hours' notice, as lenders are inundated with business, and consumers taking out a home loan through a broker have a better chance of catching them before they are withdrawn.

But AMI claims lenders' branch-based business is suffering as a result of the high numbers of people choosing to use a broker.

It said margins on deals taken out directly with the lender tended to be higher as they do not have to pay commission to an intermediary.

As a result, a number of the UK's biggest mortgage providers are trying to redress the balance by offering their best deals only to people who contact them directly.

Nationwide Building Society last month launched an offer under which first-time buyers applying for its three-year tracker or three-year fixed rate mortgages could get a pounds 300 discount on their reservation fee and a pounds 100 discount on legal fees, but the deal is only available to customers who go direct.

Halifax and Cheltenham&Gloucester both recently announced they were increasing their rates by up to 0.6% for people who take out a mortgage through a broker, while keeping the cost of branch-based loans on hold.

The move came just over a week after Halifax had previously hiked some of its broker rates by up to 0.5%. Chris Cummings, direct general of AMI, said: "Lenders have seen branch-based business really suffering.

"So in order to try and balance their business, instead of offering equal access to products across all channels, they've started introducing mortgages that are only available directly and not to intermediaries.

"Lenders are under pressure to rebuild their capital position, and as a result are trying to increase margins and drive more people through their branches. But we have taken this up with the FSA and said it is consumers who are losing out."

The group said it understood that lenders had to protect their business models, but it said with around seven out of 10 borrowers taking out their mortgage through a broker, consumers were not getting a good deal.

But the FSA indicated it would be unlikely to intervene in the dispute, pointing out that under its regulations, lenders are not obliged to offer mortgages through brokers.

A spokeswoman said: "It is a commercial decision for a lender whether they want to offer products directly to the public or via a broker.

"Anyone dealing with consumers should ensure that consumers are treated fairly."

She added that if certain lenders decided to offer cheaper deals to direct customers, it would not be in consumers' best interests to prevent this.

'Moral dilemma' for buyers

MORE than nine out of 10 Britons would try to force down the price of a house at the last minute, despite more than half saying they thought gazundering was unethical, research showed yesterday.

Around 94% of people admitted they would slash their offer for a property if they discovered extensive repairs were needed after a price had been agreed, according to money website Fool.co.uk.

A third of people said they would gazunder if their buyer reduced their offer, and 29% said they would attempt to pay less if house prices fell between the time when they made an offer and exchanged contracts.

But 58% of people said they thought gazundering was unethical and 45% even said they thought it should be made illegal. One in four homeowners said they thought the practice was so underhand that they would refuse to sell a property to a buyer at any price if they tried to reduce their original offer.

Donna Werbner, property expert at Fool.co.uk, said: "Falling house prices create a terrible moral dilemma for buyers. If they don't gazunder, they could potentially find their property has fallen in value before they have even bought it.

"People may think the practice of gazundering is unethical or even immoral. But homeowners have benefited from astronomical increases in house prices over the past decade, and are trying to sell at the peak of the market.

"If the seller's property is no longer worth the amount that has been offered, then maybe holding the other party to the original offer is not all that honourable or admirable either."

Fool.co.uk questioned 1,240 users of its site during April

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Title Annotation:	Business
Publication:	Western Mail (Cardiff, Wales)
Date:	May 7, 2008
Words:	826
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Topics:	Mortgage brokers