Bridging lenders have called on brokers to ensure that they are placing their business with the most suitable lenders for their clients following concerns raised about the mainstream mortgage market by the Financial Conduct Authority.
Lynda Blackwell, mortgage sector manager at the FCA, expressed concerns that some mortgage brokers could be sending at least 80% of their cases to just one lender.
As such the regulator has been looking at where brokers distribute their business and has warned it will be keeping a close eye on what is happening in the sector.
Blackwell said: “When we looked at this in greater detail, we saw instances of brokers doing 80% of their business with one lender.
“That raises questions for us in terms of whether the customer’s needs are being fully taken into account.
“We’ve seen a tendency for some brokers to point the customer in the direction of a favourite product – hopefully not because of the commission it pays. This is an area we’re interested in.”
The regulators comments have been welcomed by the bridging industry but lenders have warned that it should act as a wake up call for brokers in the sector who may be doing similar.
Michael Strange, managing director of Funding 365, said: “This statement from the FCA is highly significant for the bridging industry and needs to be noted by all brokers in the market. The FCA’s focus on where brokers are placing their cases, and analysis of the fees they are getting paid to do so, should put an end to any inappropriate relationships between lenders and brokers.
“From Funding 365’s perspective, this is a more than welcome announcement. Our interest rates are amongst the lowest in the market and we therefore believe that every broker needs to obtain a quote from us if they are truly to demonstrate that they have obtained the best bridging loan for their client.”
And Keith Aldridge, managing director of Amicus, said it is “hard to believe” that brokers are giving clients whole of market advice if 80% of their business is going to just one provider
He said: “It is the brokers responsibility to ensure they satisfy the regulatory requirements but as a regulated lender it is also our responsibility that we forge relationships with responsible brokers
“At Amicus we have a distribution model that targets a specific group of introducers who are major players and who will work with us in delivering our targets. By the very nature of the demands of these targets we fully understand that it is unlikely that any broker will direct more than 20% of his business to us
“The specialist sector demands much from its lenders and the more successful lenders know that they will only be able to satisfy a proportion of its introducers demands so we are very relaxed about getting acceptable levels of business from an individual introducer in the knowledge that they will be supporting at least half a dozen other providers
“Brokers and lenders know it is their responsibility to widen their distribution if they are not to attract unnecessary attention from the regulator. ”
The regulators research saw it analyse data from all 4,800 plus firms in the market to establish distribution patterns.