Matthew Wyles, group development director for Portman Building Society, said he knew several lenders were interested in and researching retention strategies, but that the schemes could lead to the ‘nightmare scenario’ of dividing intermediaries between lenders that offered retention schemes and those that did not.
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He said: “If lenders have retention fees and charge high rates at maturity or no retention fees and low rates at maturity, it creates a real conflict of interest for intermediaries that is unwelcome. Do they move to a lender with higher rates that creates a stream of income for them or not? Clearly, the best intermediaries will go for what is best for their client.”
Wyles added that now was the time for debate, as, while lenders were looking with interest at Halifax’s retention strategy, no one had been bowled over by it and most were just watching the market.
Halifax itself revealed its retention strategy had not met with the success it expected. A spokesman for the company maintained the scheme itself had worked well and would continue unchanged, but admitted that the pricing strategy had been misjudged.
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However, Mark Chilton, chief executive of Homeowners Mortgages, said: “If procuration fees for retention schemes remain the same, the situation already exists for potential conflict of interest. Intermediaries work for the customer, so the conflict has always been there.
“Halifax proves that retention only works when new business products and retention products are very competitive. I think lenders will start offering differential procuration fees for the length of the term of the deal instead.”
