Brokers demand clarity on rates

Brokers have called for lenders to be more up-front about interest rates offered on lifetime mortgage products, after both Norwich Union and Prudential were named as charging higher rates through direct channels compared to sales through intermediaries, reports Mortgage Solutions (12/3/07).

Norwich Union's annual rate on lifetime products is 6.65% through direct selling, compared to 6.3% through intermediaries. Its drawdown product is 6.8% direct, versus 6.35% through an adviser. Elsewhere, Prudential has an annual equivalent rate of 6.69% direct, ­compared to 6.37% intermediated.

The issue was raised at the London leg of the Equity Release Roadshow. Dean Mirfin, business development director at Lifetime Advisory Services, said many brokers and clients were not aware of the differences. He commented: "The lender's argument is that it has a sales force to run, but over 50% of clients went direct last year, and if they knew about this, they would go elsewhere."

Both lenders defended their interest rate policies, and said they would ensure borrowers had reviewed all the available options.

Prudential said its higher rate for direct sales was implemented to cover costs of administration and fact find, which must be undertaken to ensure the client is getting best advice. Norwich Union said the higher rate covered advice and marketing costs, and pointed out that a direct sale would often entail five or six home visits.

However, neither company said it was their policy to tell customers that the interest rate charged would be lower if they went through the intermediary channel.

Sixty Plus comment: As it was I who raised this issue at the Roadshow, I strongly feel is yet another reason why customers should seek independent advice. The extra interest at 0.35% on £50,000 over 20 years would amount to around £5,500. Compared with our standard fee of £595, it is clear which route will save the client money. Are these providers ‘treating customers fairly’?