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.
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Many agents and new hone companies do recommend inhouse solutions regarding finance, but the alternative is often waiting a fortnight to get in to see your existing lender who will of course only advise on their own product. It is of course not permissible that an agent makes a buyer use a certain mortgage solution recommended by them, as a condition of buying a property through them, and buyers must have the freedom to use who they want to. But, on the flip side the vendor or housebuilder does want a transaction to go through, and if the selling agent has control over the finance, a key element in getting to exchange, is this such a bad thing? If there is transparency regarding any referral fees I think that inhouse advice should be seen as a service, rather than a way to get the buyer to use them. Yes property finance is a multi million pound industry and financial services makes up a large amount of some estate agency companies income, but if agents and housebuilders did no 'inhouse' advice where would the buyers go to get their mortgages? and would these providers be the ones making profit out of this service? For me it is like buying a car on finance, if I wanted to go down that route, every large dealership has an inhouse 'finance' person ready to quote, I can choose not to use them, but it acts as a starting point in my exploration of finance options, and if I use them, well probably someone gets a fee for getting me to speak to them, but is that not commerce?
Completely agree with Andrew Stanton, at One 77 Mortgages we work with many estate agents and they recommend our services because we don't charge a fee, we work from the whole of the market, we have expertise in all areas of property finance and provide a very good service. We also operate a qualification process with the client where they are not at liberty to use our services unless they want to, which puts the client at ease and more often than not they choose to work with us. Providing this is how the process works then there shouldn't be an issue with a mortgage broker recommendation for the agents and vendors peace of mind to know the client is qualified and able to proceed with the purchase.
I have found that estate agents are getting very aggressive in their sales tactics. One would not put an offer forward unless she saw the in house adviser, another insisted that they HAD to go and see their adviser and yet another agent would not take the house off the market until survey was booked. ALL of these had the agreement in principle. sometimes buyers are scared they will lose the property if they do not do as they are told and are bullied into using the in house adviser and the linked solicitor as well. As long as the agent has the proof of mortgage or funds, that should be enough but of course it isnt, as they earn more or as much from mortgages and insurances as they do selling houses
Agents should not do this but the issue is far more with property developers selling an estate of new homes and shared ownership housing associations who require applicants to pre-register on the HA website and strongly 'advise' them to be financially assessed by the HA's 'suggested' FS broker. In both of these cases applicants are very much steered and manipulated by Big Brother. yes many corporate estate agents act in a similar but much smaller way. Independent agents have very little manipulative impact on buyers in this way. And this is not to mention those large property developers who expect buyers to use their in house conveyancer too, in order to meet the '28 day to Exchange' requirement. Individual estate agents are nothing compared to housing estate developers and housing associations.
you obviously do not live n the Medway Towns! Here, they ARE forced into dealing with in house brokers every day of the week
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