Larger mortgages due to higher house prices have made up for unchanged broker proc fees, it was said at The Mortgage and Protection Event (TMPE) in Bolton today.
Taking a question from delegates, panel chair Clare Beardmore, director of Legal and General (L&G) Mortgage Club, asked why broker proc fees had not risen in 10 years and why there was a disparity between what specialist and mainstream lenders offered.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, responded: “One of the positive elements of having a percentage base as a proc commission fee is the UK economy has enjoyed increases in the property value effectively year-on-year.
“Over the last 10 years – I’m trying to think, have we ever actually had a decline in property values? – the certain percentage, while it’s not an increased percentage, invariably it’s going to be an additional procuration fee whenever that mortgage actually inflates.”
He added: “If you [did a mortgage] 10 years ago on property and do it again today, you will get more money for that.”
Stinton said that, considering the average house price growth over the last 10 years, that was probably “in line with or higher than inflation”.
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He continued that if brokers wanted a fixed proc fee and to earn a certain amount per case, then the fee should be reviewed more often. He said there would also be an argument to do this if house prices were not increasing as it would not be sufficient.
“Where it sits right now, with the level of consistency across the board and hopefully it does reflect that actually, as house prices increase, procuration fees will be increasing as well,” Stinton added.
Beardmore said this was also an advantage to lenders as it meant they lent more due to higher average loan sizes, which grew their books and retained more money.
Emily Hollands, group head of distribution at OSB Group, said from a specialist perspective, these lenders paid higher proc fees because the cases were more complicated.
She also said brokers should “be careful what you wish for” regarding higher proc fees as these were “sensitive” in the motor finance sector and had been looked at by the Financial Conduct Authority (FCA).
Stinton said that, in order to give consumers a competitive product, lenders needed to balance the cost of funding, operation and procuration fees.
Jeremy Duncombe, director of intermediaries at Accord Mortgages, said lenders needed to compete on criteria and price of product, and it became a “whole different ball game” if lenders started to compete on proc fees as the regulator would take action.
Duncombe added: “You choose to use a certain lender because a product, proposition, service or rate is the right rate or product for the customer, the proc fee shouldn’t be part of your factoring in as to why you’re using that lender.
“If we started to get into that… that’s a really dangerous place to get to. Let’s have a level playing field where lenders choose what they think is the right rate, and then we compete on products and propositions and price, and also service to the broker.”
More work needed for product transfer advice
Beardmore followed up with a comment from a delegate who said unchanging proc fees did not mitigate the extra work needed to process each mortgage case.
Stinton said while he was not suggesting things had gotten easier for brokers, lenders had also invested in technology to try to make it easier to place business.
Interested in attending The Mortgage and Protection Event? The conferences continue next week in Southampton [13 November] and London [14 November].
To register click here: https://www.mortgagesolutions.co.uk/events/mortgage-protection-event/
