Industry figures have been responding to the announcement yesterday that Cumbria Mortgage Centre Limited – the subsidiary company of Penrith Building Society – will operate as an appointed representative of Mortgage Advice Bureau Limited (MAB).
Following Mortgage Solutions’ interview with MAB CEO Peter Brodnicki about the partnership, Penrith BS CEO Tim Bowen revealed more details about how the partnership will operate.
“At the present time, Cumbria Mortgage Centre, the wholly owned subsidiary of Penrith Building Society will continue to distribute through its existing channels,” said Bowen, when asked if the partnership would be run out of more than one office.
“The current channels are face-to-face advice within our offices in Penrith or by telephone. We endeavor to transact with our customers through the methods that best suit their needs.”
Did Bowen think the market will see more partnership like this one?
“When any small to medium sized society reflects upon the cost implications associated with the compliance aspects relating to the delivery of mortgage advice, and the investment required to maintain knowledge levels, consideration should be given to all options available,” said Bowen.
“We considered the potential of outsourcing elsewhere or expanding our internal teams. Ultimately the network proposition seemed the best and most robust fit for us as a business.”
Brokers were generally positive about the move, but did include some caveats when responding to the news.
Paul Flavin, managing director at Zing Mortgages, told Mortgage Solutions: “It’s an interesting concept and would allow the smaller banks and building societies a ready built and compliant delivery system to the public. With banking profitability squeezed through low margins and rising high street costs, any initiative which promotes fair competition should be encouraged.
“As we all know, the banking industry has historically wielded a great deal more power than deserved. In recent years, and with unprecedented socio-economic changes, the power of the banks and their practices has fallen in to question, giving rise to the emergence of the challenger banks – something which would have been unimaginable a decade ago.
“The smaller operators now have to actually operate as a highly efficient business to stay afloat and the kind of out of the box thinking we see in a partnership like the one between MAB and Penrith needs to be encouraged. With the increasing adoption of technology and client acceptance in our arena, anyone who thinks it’s more of the same when looking at the future is in for an almighty shock.”
Pioneering but beware of potential biases
Lilla Dilliway (pictured), mortgage and protection adviser at BlueWing Financials, gave a more cautious response, saying: “If I understand the set-up correctly, MAB supports the new broker firm with training and compliance, like any other AR belonging to them and it just so happens that this new firm is a subsidiary of a lender.
“The question is whether there’s a conflict of interest or if there’s a basis for a bias. But I’m sure that the parties have worked through the details of the partnership to avoid both potential pitfalls.”
Miles Robinson, mortgages sales director of One77 Mortgages, shared the concern about bias, but still hailed the news as “quite a pioneering partnership”, noting it was good to see any form of progress or change within a market.
“However, I would be keen to understand how the subsidiary company plan to operate from a polarisation perspective, as it’s clear they are brokerage, so this partnership could potentially suggest opportunity to increase lending solely at the benefit of the building society,” he said.
“This would need to be made clear from the outset of how the influence of that partnership affects the advice being given to clients.
“This is a great opportunity for Penrith Building Society to utilise the resource of MAB and scale up their operation. On this basis, I see the benefit in a partnership like this.
“But if this is the first of many strategic partnerships, it could mean that for other smaller building societies to remain competitive, they may also be forced down this route and have to utilise resource from large networks to increase or maintain their market share,” he added.