B&B leads way out of market

As Halifax and Nationwide slug it out in the "mortgage war", Bradford & Bingley this weekend becomes the first major lender to effectively quit the market and just sell other banks' home loans instead.

Bradford & Bingley believes that it is no longer profitable to offer its own ultra-low discount and fixed rate mortgages, as home-owners are becoming increasingly astute at remortgaging from one provider to the next.

In its place it will this weekend launch "The MarketPlace" in all of its 500 high street branches, which will act as an independent service offering advice on mortgages from 35 other lenders who make up 90% of the UK home loan market.

Bradford & Bingley has for years stood alone on the high street as the only independent provider of advice on pensions, insurance and investment products, and is now extending the principle to mortgages as well. Commercial director Ian Darby says: "How long would a supermarket last if it only sold own-label products? Banks have got away with that for years because consumers didn't have a high street alternative. Now they do."

First Direct has also switched to offering independent financial advice, although in mortgages it is tied to those offered by parent group HSBC only.

B&B insists that its advisers will be paid on a flat-rate irrespective of what mortgage they select for a home buyer. "Because our advisers are not biased by differing commission levels, B&B can truly say it offers customers what's best for you, not for us," says Mr Darby.

But B&B's altruism extends only so far. It will charge a fee for advice of 0.4% of the loan, with a minimum charge of £200. It says its average loan size is £60,000, so the average fee will be £240. Bradford & Bingley also earns a "procuration" fee from the lender. According to mortgage advisers, these fees can run as high as £1,000 per loan, but are usually in the hundreds of pounds.

Some customers may be surprised to hear that the range of mortgages on offer at MarketPlace is less comprehensive than that available to customers of mortgage broker Charcol, which Bradford & Bingley bought last year for £100m and which operates a highly popular mortgage website, charcolonline. co.uk. Users of the website (and marketplace.co.uk) who do the entire transaction online, will also avoid the 0.4% fee.

Bradford & Bingley sees its in-store MarketPlace concept appealing to middle England, while the Charcol brand will be separately marketed to higher income brackets.

Despite taking the moral high ground in the mortgage market by going totally independent, Bradford & Bingley is maintaining its 7.49% standard variable rate for existing loan customers.

Shouldn't they now just walk into a B&B branch and ask an independent mortgage adviser to find a better loan deal for them?

Mr Darby says: "We have factored in an increase in remortgage business. If someone doesn't have a penalty attached to their mortgage, I have to admit it is hard to find a reason why they pay 7.49%."

He says that B&B customers who want to remortgage should first call their local B&B branch, which have "retention" products which borrowers can switch to, but if they are not tempted by these then they can see an in-house independent mortgage broker.

Unfortunately, Bradford & Bingley is not stretching its MarketPlace concept to savings, where it will continue to offer its own-brand products only. B&B's instant access account currently offers an interest rate of just 1.7% gross, compared with the 6% savers can earn on an equivalent account at Intelligent Finance or Capital One Bank.

Mr Darby says Charcol has looked at a "sweeper" savings account using the internet to place a saver's money in the highest-rate account, but it has hit stiff resistance from providers.