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Dual mortgage pricing

Journalist: Paloma Kubiak, YourMoney.com

ended 10. November 2022

Last week Just Mortgages revealed it is seeing the return of dual pricing. Widely covered by the B2B press, I want to know what this means for consumers.

It could mean consumers going direct to a lender get a cheaper deal than using a broker. What other pros/cons are there?

It seems the major drawback is that customers going direct won't get the regulated advice that many now need given the market turmoil/house price predictions. What are your thoughts/why should people continue to use brokers eg can save thousands in the long run etc.

This is a very straight piece looking at what dual pricing is, why it fell away a decade ago, why it's returning and what it means for consumers and brokers. All comments/angles welcome to give readers of our personal finance site the relevant information on this.

Many thanks, Paloma

7 responses from the Newspage community

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Matthew Jackson
Director at Mint FS
Dual pricing essentially means that a customer going direct to a bank or building society could obtain a cheaper rate than if they consulted with a mortgage broker. Situations like this were commonplace in the past but they fell away as lenders focused more on intermediary channels for their lending and reduced the amount of in-branch advisers available. Lenders are continuing to reduce the volumes of employed mortgage advisers and in some situations as much as 90% of their lending comes from mortgage brokers and this is the key reason that dual pricing dropped off the radar. The recent move by a limited number of lenders to offer direct-only deals to market has been driven by a need to combat the effects of the cost of living crisis. For example, in the case of Lloyds Banking Group, they released a direct only product transfer because there was a need to service their existing customers at a specific loan to value. And the reality is that it is quicker to get products to market direct than to brokers. I think all brokers would agree that in situations like this the customer is king, but given the reliance of lenders upon brokers for the majority of their business and to drive the green agenda I personally cannot see the levels of dual pricing from a decade ago returning.
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Imran Hussain
Director at Harmony Financial Services
The main reason some lenders have decided to do this is to service existing clients or those with masses of equity they wish to keep on their books it may have been commonplace a decade ago but lenders receive over 90% of the mortgages via the intermediary market and consumers are always best placed to get indepdant advice to ensure they are looking at the best deal across the whole market for their circumstances as many advisors such as ourselves can see direct deals also and guide accordingly.
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Riz Malik
Independent Financial Adviser at R3 Wealth
I have never understood this practice and some lenders are more blatant than others. Clients may be redirected away from receiving advice and be dazzled by headline-grabbing rates that may not be suitable for their needs. Rather than competing with the intermediary community, lenders should concentrate their efforts on manufacturing products. According to the FCA, the outstanding value of all residential mortgages was £1,648 billion at the end of Q2 2022. Even with an economic downturn, there is plenty of business for everyone. Also, brokers are like elephants. We have long memories.
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Justin Moy
Managing Director at EHF Mortgages
For a number of years I have been surprised that more lenders haven't stopped selling mortgages through their own distribution networks, and rely upon the Broker market instead - with around 75-80% of all mortgages already arranged via Intermediaries, why should the remaining clients only have access to a limited range of products from one lender, rather than a more holistic service with a wider choice of lenders? But dual pricing makes for uncomfortable relations between brokers and lenders - how can any client be provided with suitable advice and an informed recommendation, if a lender continue to offer products directly to the client, without advice, and price products to cut brokers out of the equation? Lenders need to think carefully about who is their extended sales force, how we cover so much advice and compliance in this space, and importantly, making sure clients are given correct advice. Work with the brokers, not against them - we don't forget..
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Dual pricing is a nasty, horrible practice that shows some lenders' arrogance towards the brokers they then still expect to support them. We've not seen it on any large scale for a long time, thankfully, and I hope it's something that remains a historical issue, and that new bankers are taught under the heading "how not to treat your business partners".
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Ritesh Sood
CEO & Founder at Soul Mortgages
There have been hints of dual pricing, particularly on specific fixed-rate periods, e.g. 3yr, fixed exclusive rates being available direct only. We have been here before, and this was widespread during the credit crunch. The difference now is lenders have since reduced branch advising staff, some who have eliminated them entirely and only choose intermediary channels. The compliance landscape has improved vastly and regulated advice is as important as ever with bank mortgage advisers often falling short. Dual price at your peril as brokers have a good standing memory.
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Hannah Bashford
Director at Model Financial Solutions
Dual pricing makes no sense- the lenders use brokers to provide an advice service to protect those consumers to make sure they’re getting the right deal for their circumstances which reduces the risk of repossession and if a client is going direct to do a product switch, for example, there is no one checking their current situation- this is a dangerous place to be for lenders and consumers as their situation can have changed in 2-5 years. Clients going direct also lose out on other deals that may be out there with other lenders- it may be best for them to stay with their lender but have they checked the other 90+ lenders out there to make sure- we will!