Mortgage lenders look to retail sales

The refusal of lenders to offer their products through brokers may be one of the reasons behind the higher interest rates faced by borrowers in the UK.

As mortgage rates have increased in recent months the blame has been laid at the feet of the high London Interbank Offered Rate (Libor) – which has meant the cost of securing wholesale finance has been increasing.

This trend has occurred despite efforts from the Bank of England ease liquidity concerns in recent months, cutting the base rate twice in recent months to 5.25 per cent.

However, independent financial data collection Defaqto has pointed to the number of lenders which have temporarily stopped accepting business through intermediaries as a less publicised reason for the increase in lending rates.

As lenders have only limited amounts of funding available, they are therefore concentrating on lending to borrowers of higher credit quality than in the past, removing product ranges and withdrawing deals offered through intermediaries.

"There's nothing to stop brokers recommending a 'direct only' mortgage but unless the broker charges the borrower an advice fee they won't earn any commission on the mortgage," said David Black, principal consultant, banking at Defaqto.

"To do this they could help the borrower fill out all the paperwork and then get the borrower to submit the application."

However, this also presents something of a quandary for prospective borrowers.

If they go through a broker they may not necessarily be getting access to the whole market. If they do their own research they will have to put a lot of effort into it.

"The reduction in supply of mortgages generally will mean that people seeking mortgages will have to carry out more extensive research into what is available," said Mr Black.

"Whereas before the credit crunch, mortgage lenders sought out borrowers, now the boot is on the other foot. Unless people are prepared to go to considerable effort to secure a mortgage, they may not find the best deal."

Lenders who do not currently distribute their products through intermediaries

• Allied Irish Bank (GB)
• Barnsley BS
• Cambridge BS
• Chorley BS
• Clydesdale Bank
• Co-operative Bank
• Cumberland BS
• Derbyshire BS
• Dudley BS
• Egg
• First Active
• First Direct
• Giraffe Money
• Hanley Economic BS
• HSBC
• ING Direct
• Leek United BS
• Loughborough BS
• Mansfield BS
• Marsden BS
• Newbury Building Society
• Northern Bank Ltd
• Pi Mortgages
• Post Office
• Stafford Railway BS
• Teachers BS
• Tipton & Coseley BS
• Vernon BS
• Yorkshire Bank
• Yorkshire Building Society

Additionally there are a number of lenders such as Bradford & Bingley, NatWest, Royal Bank of Scotland and The One Account who do not distribute through intermediaries but operate separate arms that do.