Abbey cuts broker fee on some interest-only ports

However, customers can only go direct to branches to agree these deals so no procuration fee will be available to brokers in these cases.

The conditions attached allowing customers to port include taking on another new mortgage on an interest-only basis, total borrowing at no higher than 75% and if the customer is borrowing the same mortgage amount or less.

However, where a customer wishes to port their existing product(s) and borrow more on their new property and the new LTV is over 50%, applications can be processed in the normal way if the loan is capital and interest. If so, brokers receive a proc fee on the total mortgage loan as usual.

This follows Abbey's announcement on the 8 February it planned to drop the maximum LTV on its interest-only deals from 75% to 50%. The broker note which went out this morning further clarified these changes.

Lloyds followed shortly after that last Thursday with plans to restrict its own interest-only criteria.

An AFI spokesperson said: "Today's note just confirms that for existing interest-only customers who are seeking like for like porting, where they wish to borrow the same amount or less, they would be able to port on interest-only up to 75 per cent LTV. Our usual porting criteria would apply.

"Any change to a customer's mortgage will be assessed in line with our lending criteria at that time," she added.

Ray Boulger, senior technical director at Charcol said it's hard to find a reason behind Abbey's decision not to pay a broker proc fee on these remortgage deals.

"If this is an incentive to brokers to encourage clients on to capital and repayment loan, any decent broker should be doing this anyway if appropriate. But by choosing to remove the proc fee from the deal, this could even incentivise a broker to give the wrong advice. Abbey could pay a proc fee if it wanted to. It is  just choosing not to."

Andrew Montlake, communications director at Coreco said this is a bit of a slap in the face for brokers.

"I suspect that when a client wants to port interest-only, they're going to need advice more than usual given the changing times and reducing interest-only lender options."

Borowers may want to move to a part-repayment, part-interest-only deal so talking to a broker could also help lenders reduce their risk profiles, he said.

"Everyone understands why lenders are making these changes and no lender wants to be the last man standing offering interest-only. But a lot of lenders are over-correcting, fearful of being sued in the future," added Montlake.

Meanwhile, Santander was hit with a fine of £1.5m this morning for failing to clarify the terms under which some of its structured investment products are covered under the Financial Services Compensation scheme.