Charcol asks founders for fresh funds as credit squeeze hits brokers

The turmoil in the housing market continued to bite yesterday as the mortgage broker John Charcol admitted it would have to call on its founders for cash while its trade body complained to the City watchdog that banks were unfairly excluding brokers from the best home loan deals.

Charcol, one of Britain's best-known mortgage intermediaries, has been in need of fresh financing and seeking a buyer since last November. In its most recent accounts auditors warned that the loss- making company's liabilities exceeded assets by 150,000 and said there was "a material uncertainty which may cast significant doubt on the group and the parent company's ability to continue as a going concern".

While the company said it had received "expressions of interest" about a sale last year they came to nothing, and it will now have to tap its largest shareholders - founders Charles Wishart and John Garfield - for cash to keep the company running.

In a statement issued yesterday it said: "John Charcol has been in a process of reviewing its ownership and structure. Whilst this review has yet to be finally resolved, the changes are likely to be a refinance from our current shareholders, most notably John Garfield and Charles Wishart, who will make significant further investments into the business."

Drew Wotherspoon, head of communications for the company, insisted that the two had always planned to put the money in should the company fail to achieve an acceptable offer.

The company said the fresh investment would "give the business a solid financial base and leave John Charcol in an excellent position to capitalise in a mortgage market where increasing numbers of borrowers are seeking mortgage advice".

Charcol was founded in 1974 and named for its two founders along with Colin Studd, who is no longer involved in the business. It was bought for 100m by Bradford & Bingley in 2000, but subsequently sold at a loss to a consortium made up of the founders, the private equity pioneer John Moulton, the private equity house Advantage Capital, the former director Ian Darby and staff.

Like many businesses, however, it has suffered as the credit crunch has taken hold of the housing market, resulting in falling prices and making it hard for buyers to secure mortgages.

Estate agents are predicting widespread job losses in their industry and even Tesco has found the housing market a tough nut to crack. It is in the final stages of talks to sell its property website to Spicer Haart for what it is expected to be a knockdown price.

Increasingly banks and building societies have reacted to the conditions by freezing brokers out of the market, with their best deals available only through their branches.

Mr Wotherspoon said: "Deals tend to be available for only limited periods because finance is so hard to find, and over the last four or five months consumers have rushed to anyone with a market- leading rate. The rate is then withdrawn, and so they go to the next best, and this has left companies with big service issues.

"In the good times we are fantastic news for banks, and they put lots of exclusives with us because they know we can sell them. In the bad times they don't want us so much, but we think the situation is improving."

The Association of Mortgage Intermediaries (AMI) has complained to the Financial Services Authority that freezing out its members is detrimental to consumers, and is seeking to bring consumer groups in to attack the lenders' position.

"Consumers are increasingly turning to our members in the current climate because they need advice, but the lenders are disadvantaging those that do that," said Richard Farr, from the AMI.

Hector Sants, the FSA's chief executive, said the watchdog had no plans to act. He said: "Lenders are not obliged to deal through brokers. How they choose to price and distribute their products is a commercial matter. There have always been certain lenders who choose not to offer their products through brokers, and others who differentiate pricing depending on the channel."

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