The HBSI uses information generated by the Home Buyer sourcing system to produce a “true cost” analysis of the differentials between direct-to-lender and intermediary mortgage products. This analysis shows how much brokers can potentially save clients each month by recommending the cheapest direct product rather than restricting their researches to products that are only available via intermediaries. As direct-to-lender products do not pay a procuration fee, the broker can charge the customer a fee for the research and (if the customer takes up the option) an additional fee for the administration of the direct-to-lender mortgage application.
The HBSI shows comparative data across three types of product (remortgage; first time buyer; and second time buyer) using CML figures for the average purchase price of properties: £182,000; £127,500; and £185,000 respectively. Products details are sourced from Defaqto – the database that supplies the FSA with information for its own comparison tables. Taking note of feedback from users, the results shown on the HBSI index are grouped by LTV, which is believed to be the most useful and relevant way of comparing true costs for the mortgage borrower.
In all cases, the greatest savings are to be made at the higher LTV end. At 90% LTV, the broker can save a second time buyer £5,674.00 over a two year period (£236.42 per month) by recommending the cheapest direct product over the cheapest intermediary choice. For remortgage customers, the savings are £5242.00 (£218.42 per month). The differentials reduce along with LTVs as far as 75%, but then rise again in all three categories at 60% LTV.
Richard Angliss, managing director of Home Buyer Systems, commented: “Contrary to popular belief, the problem of differential pricing has not disappeared, and it is still a threat to the income streams of mortgage brokers that are wholly dependent on procuration fees. Not only does dual pricing persist – ie the same product, but more expensive via a broker – but comparable products are also cheaper direct from lenders that do not offer intermediary products, for example HSBC. Going forward, more and more brokers are looking for a system that enables them to research direct products and charge a research fee to the customer.
“Mortgage intermediaries with access to HBSI information can offer customers valuable savings totalling several thousand pounds by recommending the cheaper direct to lender products. The analysis factors in fees being charged for choosing a direct product and forms part of the cost comparison with the intermediary products. Fees can then be taken using the debit and credit card payment-taking facilities in Home Buyer where the customer has decided they want to have a direct deal. It is possible to still provide an administration and support service as with intermediary products, which is paid for in the fee charged.
“Our new HBSI data provides our users (both for Home Buyer Systems and HBSLite) with detailed generic product information to show to the client as an example of the savings that can be made, without having to quote actual products and lenders. If customers have already tried to do their own research on consumer comparison websites, the HBSI also provides a valuable demonstration of how brokers can add value to customers by using a professional sourcing system that covers the whole of the market.”
The HBSI index, plus a free trial of HBSLite is available at www.homebuyersystems.com
