Mortgage brokers have called on lenders for more action on procuration and retention fees, stating the payments have not matched increased workload.
Brokers have claimed changes brought about by the Mortgage Credit Directive, following hot on the heels of Mortgage Market Review, have made the same work more time consuming and onerous.
But they argued fees have not increased to reflect the fact advisers are now having to do more to meet regulatory requirements
Dale Jannels, managing director at All Types of Mortgages, argued lenders have failed to increase fees in line with the “onslaught” of new regulations.
“If anything, the fees to clients have increased as a result to cater for the increase in hours that it now takes to deal with a consumer application,” he said.
The MCD requirements took effect from 21 March and saw some buy-to-let mortgages becoming regulated, along with a reflection period of at least seven days being introduced. The majority of the MMR changes came into effect on 26 April 2014 and included the removal of the non-advised sales process.
Nick Green, a broker at Alternative Estates & Financial Services, praised Halifax, BM Solutions and Woolwich for having easy systems to carry out business with, but suggested others are streamlining IT systems to cut out advisers and get consumers direct once it comes to remortgaging.
“I understand the lenders not paying a full fee as they have already paid us for introducing the client to them, but it should be worth our while, so a compromise is needed.”
Michelle Lawson, director of Lawson Financial, called for brokers to be paid for further advance, porting and retention.
“It would offer a better all round service for the client, because a lot of them don’t understand why we can’t speak to the lender when we are the ones that gave them business in the first place,” she said.
John Charcol’s senior technical manager Ray Boulger called for more lenders to offer product transfer fees and transparency around policies at the end of a mortgage term.
“The economics have changed since the MMR, so it’s more challenging to do transfers on an execution only basis, which has encouraged more lenders to offer retention fees; but there’s still a long way to go.”
Last September, Metro Bank launched one of the first switching portals, designed to offer access to information and fees. Head of mortgage distribution Charles Morley said this makes it one of only about seven lenders paying fees for product switching - the others being Barclays, Lloyds, Clydesdale, TSB, Skipton and Kent Reliance.
“Our residential proc fee is 4 per cent and for buy-to-let it’s 4.3 per cent, which is around the average, but I think the big market discussion at the moment is around retention fees; other lenders will consider it over the next 18 months.”
At the end of April, Skipton Intermediaries launched a six month mortgage retention pilot, with director of intermediary relationships Paul Darwin conceding as brokers carry out a full research process before making a recommendation to stay with the lender, “it’s only right to pay a procuration fee on retained business”.
Skipton Building Society was one of several lenders to increase procuration fees around the start of 2015, pushing them up to 0.4 per cent.
Of those to follow suit, Family Building Society upped its gross fee paid from 0.45 to 0.55 per cent; Clydesdale Bank moved to 0.4 per cent gross for networks and 0.38 per cent to directly authorised brokers; Leeds Building Society also went for 0.4 per cent for appointed representatives and 0.37 per cent for DAs; and Accord Mortgages upped rates to the same level.
Keith Barber, director of business development at the Family Building Society, explained their family mortgage is set at 0.55 per cent, the offset mortgage is 0.5 per cent and the low start mortgage is 0.45 per cent, while parent National Counties has a standard flat rate of 0.35 per cent to the adviser across its owner occupier and buy-to-let ranges, as less work is required by brokers.
“Following a gradual increase in rates in the buy-to-let market we’re reviewing the level of fee paid for that business and I expect that we’ll announce an increase shortly,” he added.
A TSB spokeswoman said as they only launched last January, customers via the intermediary channel are not yet reaching the end of their terms, but that the business is “firmly of the belief that brokers should be compensated for the work they do” and will be revealing a new approach later this year.
Charles Haresnape, group managing director for mortgages at Aldermore, admitted this was a popular topic, given the increasing propensity for clients to remortgage.
“At present, Aldermore does not pay broker retention fees due to prioritising system developments towards new business portals for brokers,” but added “we are looking to develop our systems later this year to enable such fees”.
