Contributions to the FCA’s Call for Input on competition in the mortgage sector, revealed that lenders believe larger broker networks have a stranglehold on the mortgage market, with the ability to control visibility and access to lenders’ products.
Similarly, intermediaries also fed back to the FCA that due diligence carried out by lenders on distributors, which is balanced against the volume of business expected, meant smaller brokerages may have trouble accessing certain products.
One respondent noted that the way networks and clubs operate can by their very definition restrict access to certain lender products. In contrast, another broker explained that being part of a network could provide the access to a larger range of products that an intermediary might not otherwise have.
Transparency over how panel criteria is communicated to prospective members was also highlighted as an issue, which the FCA noted could make it more difficult for firms to expand their remit if they are unclear as to why an application has not been accepted.
The FCA added that these issues were likely to be amplified in certain sectors of specialist lending where there are strong, established relationships between brokers and lenders.
One trade association commented that the range of relationships within the second charge sector was even more limited than in the mainstream market and that new entrants have not experienced difficulties in joining brokers’ lender panels. Another respondent commenting on the bridging sector stated that new lenders have found it difficult to enter the broker channel because of the existing relationships between broker networks and lenders.
The FCA plans to launch a targeted market study in the fourth quarter looking at consumers’ ability to make effective choices, with a view to improving how competition works in consumers’ best interests.