Mortgage brokers are claiming that “a big number” of buyers are being cajoled into using estate agents’ in-house brokers.
The Financial Conduct Authority’s recent Mortgage Market Study Final Report says: “Around a quarter (23 per cent) said they [as buyers] chose the intermediary because it was recommended to them by an estate agent. Our Financial Lives Survey 2017 also indicates that, of those who used an intermediary recommended by an estate agent, around one in four [nearly six per cent] felt they had to do so.”
The FCA, calling for more information to be given to buyers about mortgage broker options, says: “This might also help consumers referred to an intermediary by estate agents and/or developers. Consumers would be better placed to identify whether that intermediary offers the level and quality of service that they want.”
Now an article in Mortgage Introducer magazine continues the debate following on from the FCA report, quoting a number of mortgage brokers critical of the agency industry.
Jonathan Burridge, sales manager at The Mortgage Lender, says: “Nearly six per cent felt forced, obliged that to go through estate agent’s mortgage broker. To me six per cent is a big number ... Estate agents might have code of conduct and guidelines but are not held to the same account than that of brokers.”
Meanwhile Ray Boulger, the respected senior technical manager at John Charcol, says: “Recommending a broker is okay but it’s wrong if it goes beyond a recommendation and the potential buyer is intimidated, even if not directly told, that if they don’t go with the recommended broker or solicitor, they’d be disadvantaged.”
Boulger adds: “But the laws are not effectively enforced. I think this area is more of the remit of The Competition and Market Authority to deal with rather than the FCA. I think if you increase transparency that gives more positive consumer outcomes. The more people understand what’s happening the more sensible decisions they’ll make.”
Another broker quoted in the Mortgage Introducer piece is Chris Oatway of LDNfinance, who comments: “We would certainly agree that there are benefits to estate agents validating an offer by way of referral to a mortgage adviser, but this should never be under the guise of ‘conditional selling’. A recommendation is fine, but the purchaser should always be free to make their own decision on who they use to arrange their finance.”
The debate gets to the heart of the referral fees issue now under the spotlight. New guidelines from the National Trading Standards Estate Agency say that agents now need to disclose in writing, at the earliest opportunity:
- the price of services, including any ‘compulsory’ extras;
- where a referral arrangement exists, the fact that it does exist and with whom;
- where a transaction-specific referral fee is to be paid, its amount;
- where a referral retainer exists, an estimate of the annual value of the retainer to the estate agent or its value per transaction; and
- where the referral is rewarded other than by payment, an assessment of the annual value of the reward or the value of the reward per transaction.
You can see the Mortgage Introducer article here.