US intruder stokes up home loan rivalry

Two of the biggest providers of internet mortgages have locked horns over how best to serve the growing number of borrowers taking out a home loan over the net.

On one side is E-Loan, the California-based "global market leader" in online mortgages, which opened for business in this country a fortnight ago. John Charcol, this country's best-known mortgage broker, is the chief opposition.

Since setting up four years ago, E-Loan has grabbed a quarter of the online home loan market in the US (a share worth $4.5bn in 1999), and is promising "a simple and transparent way for the British to finance their homes" far removed from the world of "commission-hungry" mortgage brokers and financial advisers.

The company, whose UK launch came just days before the government announced a clean-up of the £115bn-a-year mortgage industry, said: "If consumers are given all the right information, many could make better financial decisions than a broker or an independent financial adviser."

Such fighting talk ruffles the feathers of John Charcol, founded in 1974 and which launched its own net service - Charcolonline - in November. Chief executive Keith Scott says: "E-Loan's experience in the US, where they have been particularly successful, is not going to be replicated in the UK because of the structure of the marketplace and the nature of the competitive landscape."

Where the two companies differ fundamentally is on mortgage advice. E-Loan is a strictly non-advice service - it says that by allowing people to research and select loans that best fit their circumstances, it puts the consumer in the driving seat.

Critics say that surveys by the Consumers' Association and others have shown that the public rely heavily on advice when it comes to finding the best mortgage for their needs. So who is winning the battle for borrowers in the UK? This is not easy to answer.

The UK online mortgage market is still in its infancy but few doubt its multi-billion pound potential. Home loans are already the most popular financial services product researched on the net. One survey found that more than four in 10 people said mortgages were the personal finance product they were most likely to buy online.

John Charcol is only prepared to say it is writing millions of pounds of online business a week, though Mr Scott is quick to add: "By that I mean much more than £1m." E-Loan is even cagier and will only disclose that its website had more than 10,000 "unique users" in its first week of operation.

Kent-based Independent Mortgage Brokers, the first online mortgage brokerage to be set up in the UK, is not so reticent. "It was started back in 1997 by me and another guy in my spare bedroom," says Anthony Webb, its 34-year-old chief executive. Now with 27 staff and looking to move from its Dartford offices to larger premises, it was valued two months ago at £14.4m.

"It's absolutely incredible, the explosion of interest," said Mr Webb. In December 1997, four months after the company started trading, its web site had a total of 102 users; last month it played host to 5,247 users. The amount of business it is writing has tripled in a year - from £1.5m worth of loans arranged in January 1999 to £4.7m last month.

Two years ago, the average client was very much the "high net worth" individual, and it was not unusual to see mortgages in excess of £1m being taken out. Now the typical loan value is between £70,000 and £80,000, and it is younger people who have never owned a home before leading the charge.

"Since the start of last year first-time buyers have made up 40% of our business," says Mr Webb.

"This generation is now so switched on to internet purchasing that they have no hesitation in coming to us as their first port of call, whereas the older, more traditional consumer often seeks us out due to frustration when conventional services have failed them."

Charcolonline
E-loan