Kati Tyler is HML commercial director
Building societies and intermediaries enjoy a positive relationship, and it’s one that’s growing in importance. National Counties offers 78 per cent of its mortgages through brokers, while Teachers Building Society’s intermediary channel accounted for half of its total mortgage lending in 2012. This is a significant increase from 15 per cent in 2011.
Of course, there are many more building societies which sell the majority of their mortgages through intermediaries and it’s a relationship that works well. Building societies are largely regionalised and promote a customer-friendly, face-to-face ethos. Therefore, if they want to extend their geographical reach, the mortgage broker channel perfectly complements this ethos.
We only need to look at previous surveys that reveal building societies are more trusted than banks to know that intermediaries are keen to work with them, while customers are increasingly attracted to the benefits of having a home loan from a mutual, particularly since the banker backlash following the economic crash.
One of these surveys was carried out by the Building Societies Association (BSA), which found that during June and July of last year, trust in banks had declined for 66 per cent of Britons. On the other hand, 79 per cent of people stated that trust in building societies had increased or stayed the same.
In addition, 16 per cent of customers who had accounts with the big five banks had already moved their money elsewhere, or were planning to do so. In the words of BSA director-general Adrian Coles “large numbers of consumers are now looking for a different approach to financial services”.
However, this cultural matching doesn’t mean the building society-intermediary relationship will simply continue without any maintenance and effort from both parties, particular lenders.
Many building societies have taken advantage of the Funding for Lending Scheme (FLS). As of March, of the 39 lenders that had signed up for FLS, two-thirds were mutuals – and mainly building societies. By the end of 2012, five mutuals alone had taken £2.3 billion from the pot – 17 per cent of the total amount drawn.
While it’s fantastic that building societies are taking advantage of FLS to ramp up lending, there’s something of a catch-22 situation occurring. With interest rates at a record low, there simply isn’t room to slash rates and compete on price. However, building societies are well positioned for growth, so they are instead turning to more innovative and higher LTV products.
Should one of their mortgages end up on a best buy table, it can open the floodgates for a rush of customers coming through intermediaries to get their hands on the deal. This can prove to be a shock to building society resources, resulting in a good deal being pulled early if the caseload can’t be effectively managed – especially if the deal consistently heads up a table.
Intermediaries can easily get frustrated if they’ve a fantastic mortgage deal to recommend to a customer, for it then to be pulled earlier than expected because a lender can’t cope with the volume of interest. Brokers need a level of certainty that offers won’t be suddenly withdrawn, and it’s the responsibility of lenders to ensure this.
Building societies might have the front-end tied up, supported by a trusted intermediary channel, but it’s essential that they don’t neglect the back end. This is where outsourcing this latter part of the mortgage application process or having an overflow arrangement with a third-party can help, and ensure the successful relationship between building societies and intermediaries continues to go from strength to strength.