Direct-only deals dominate the market

Homeowners using mortgage brokers to find a new deal have been warned that two-thirds of deals are now only available directly from lenders.

Research by Moneyfacts.co.uk, the financial website, has found that intermediaries can advise on only 33 per cent of the new mortgages on the market, with 66.8 per cent of deals available directly from lenders via branches, directly or over the phone.

Last year, 72 per cent of new mortgages were available through brokers.

HSBC is one of the biggest lenders which restricts its competitive deals to customers who visit its branches, to the frustration of brokers. Other high street lenders are followed suit and it is now common for banks and building societies to hold back deals to control the flow of new lending, leaving borrowers to walk up and down the high street in search of the best deal.

Peter Williams, of the Intermediary Mortgage Lending Association (IMLA), the trade body, said: "These figures raise the serious issue of whether consumers are being given a clear choice in the market and whether they have access to the right advice. Borrowers are still turning to brokers for a new deal and they still expect to get advice on a broad range of options.

“Sadly, banks and building societies do not have much to lend and are keeping the lid on applications by restricting access to their branch networks,” he added.

Figures from the Council of Mortgage Lenders show that 64 per cent of mortgage lending by volume was conducted through brokers in the first quarter of 2009.

Darren Cook, of Moneyfacts.co.uk, said: "Brokers will need to diversify into other types of advice services to stay in business or revert to a upfront fee-based model where they advise on mortgages available directly as well as those on their own systems."

David Hollingworth, of London & Country Mortgages, a broker, said: "By switching to a fee-based charging structure you discourage borrowers from getting much needed advice. In this market, where lenders have ever-tightening criteria, independent advice is more important than ever."

Mortgage lending jumped 17 per cent last month, according to the CML, which said that gross mortgage lending hit a six-month high of £12.3 billion in June, from £10.5 billion recorded in May.

However, it remains 48 per cent lower than June last year.

Meanwhile, homeowners looking to avoid increasingly expensive fixed-rate mortgages are facing a dwindling number of alternatives as lenders pull variable-rate deals, according to the latest figures.

There are currently only 366 deals that are pegged to the Bank of England base rate on the market, 15 per cent of the total deals available.

Last year borrowers had the choice of 1937 trackers, more than a third of the total mortgages on the market, according to Moneysupermarket.com, the price comparison website.

Mortgage brokers have begun to recommend base-rate trackers again because the cost of fixed-rate mortgages has risen so sharply in recent months.

Leeds Building Society is the latest lender to hike the cost of fixes, pushing up the rate on a two-year fix from 4.99 per cent to 5.49 per cent for a borrower with a 40 per cent deposit.

The best tracker loan is available from HSBC, which is pegged at 2.24 points above base, a pay rate of 2.74 per cent. The term deal is available to borrowers with a 40 per cent deposit.

The overwhelming majority of homeowners continue to opt for fixed-rate mortgages because of fears that interest rates may rise in the future, according to John Charcol, one of the country’s largest mortgage brokers. It has reported that more than four out of five borrowers are choosing to fix their mortgage rate.

Louise Cuming, of moneysupermarket.com said: “The decision between a tracker and a fixed rate is always somewhat of a gamble, and whilst some people like the certainty a fixed rate mortgage affords, the savings on offer from tracker mortgages are hard for borrowers to ignore.”