National Irish Bank says brokers send very few customers its way even though their clients expect them to find the mortgages with the best terms and prices.

"In our experience, very few customers who switch to us advise they have done so on the recommendation of a broker, " says NIB spokesman Brendan O'Hora.

Yet, he says, the cheapest mortgage on the market is NIB's tracker rate of 4.5% (ECB+0.5%).

The reason NIB doesn't get recommended could have something to do with the fact that, unlike other lenders, it doesn't pay handsome commission to brokers for bringing it business.

So what are brokers to do? If they recommend NIB, they don't get paid any money. And if they fail to do so, they could be in trouble with the Financial Regulator under the consumer protection code which came into force last month.

A spokeswoman for the Financial Regulator explains: "The general principles of the code set out that a regulated entity must act honestly, fairly and professionally in the best interest of its customers and the integrity of the market."

It must also ensure that "where it recommends a product to a consumer, the recommended product is the most suitable product for that consumer".

Yet industry sources told me that NIB, the lender with the lowest interest rates, gets recommended by mortgage brokers only one time out of 10.

I put this to Michael Dowling, spokesman and, until fairly recently, president of the Independent Mortgage Advisers Federation (IMAF).

Firstly, Dowling points out that not all brokers are members of IMAF. As the federation points out on its website (www. imaf. ie), half the mortgage brokers in the country have no more than two agencies. (None of these is an IMAF member. ) If, as the Financial Regulator maintains, "a mortgage intermediary can only recommend products of lenders with which they hold appointments", it's hardly surprising that the brokers who represent no more than two lenders are not recommending NIB. But what about the others?

Every IMAF member has at least five agencies, but none of these is likely to be for NIB.

Does this mean that borrowers are missing out on the cheapest mortgage deals by going to a broker? Dowling's interpretation of the new code challenges this.

"The introduction of Consumer Protection Code 10 (in July) means we have to offer best advice in any given circumstance. If someone asks 'What's the best tracker rate with a loan-to-value ratio of 45%?', you'd be remiss in not saying that it's NIB. A broker also has to issue a 'Reasons Why' letter to justify why he recommended a particular product and this must be signed by the customer and retained on file for inspection by the Regulator."

But when the cheapest lender is not prepared to pay them anything, and won't even award agencies, doesn't this present brokers with a bit of a problem? The situation is "not ideal", Dowling admits.

"We've met with NIB. They are leading on price and don't have the facility to pay brokers, " he says.

However, he insists that when a client is a suitable candidate for the NIB deal, the broker's "only choice is to tell them so. I've certainly done it. I would have no hesitation is stating that NIB has the cheapest rate for people with a loan-tovalue ratio of 50%or less who are prepared to fulfil the criteria (such as opening a bank account with NIB)."

When asked how many clients he has passed on to NIB, Dowling admitted that he has only lost "two customers" to the cut-price bank.

However, he insists that clients make choices based on many factors.

They may be told that NIB is the cheapest in certain circumstances, but that doesn't automatically mean that they will choose NIB. Some may not want to open a bank account with NIB, or they may not be exactly blown away by NIB's perceived reputation for speed or quality of service.

He also points out that the competition is hot on its heels. "You point out the alternatives." For example, Bank of Scotland and AIB's equivalent tracker rates are at 4.6% . . . just 0.1% more than NIB. And they can get those without having to open a bank account."

NIB spokesman O'Hora strongly denies that AIB and Bank of Scotland are "neck and neck". He calculates that even a 0.1% difference would cost borrowers thousands over the lifetime of a loan.

"I feel there is a lot of confusion here, with introductory offers being used to induce customers into switching their mortgage, without offering a look at the longterm value. National Irish Bank does not have any 'introductory' or 'one-off ' offers. Our customers have the same rate for the entire life of their loan."

He also plays down the significance of having to open a bank account. "NIB requires a customer to open an account simply to service the mortgage. This, I believe you'll find, is common practice in the industry. We do not require our customers to change their banking arrangements or their salary mandate."

He absolutely rejects the suggestion that there are any issues with speed or service for NIB customers.

"We have approved over 1.7bn in mortgages in the year to date. Over 20% of mortgage switchers in the last nine months have moved to NIB. We consistently benchmark our customer service levels against those of our competitors."

O'Hora maintains that customers "choosing to use our switching service through (insurer) First American, this process can take as little as three weeks."

Dowling concludes by putting a positive spin on the new consumer protection code, saying it is actually good for brokers.

"It's a cornerstone that now protects the broker from any questions raised about his advice, " he says.

The NIB spokesman responds that it's "too early" to comment on the impact of the new code.

However, he suggests that vigilance is required to ensure that brokers don't "present information in a light that best suits them and may cast doubts in the mind of the consumer about their most suitable mortgage options".

BEST TRACKER
RATES 50%
(LTV)
Loan to Value Ratio

NIB 4.5
BoS 4.6
AIB 4.6 75%
LTV NIB 4.59
BoS 4.7

Ulster, FA, AIB 4.75 Rates with some other lenders may depend on the loan amount or may involve a discounted period