Nationwide and The Mortgage Works (TMW) brands will begin paying fees of 20bps on residential and buy-to-let business following substantial back- end technical system development.
Nationwide, which lent £30.5bn in 2015 and has a 14% market share, is the last of the big five to commit to paying the fees.
Ian Andrew (pictured), managing director of intermediary relationships at Nationwide, was keen to thank brokers for bearing with the lender.
He said: “We value our intermediary support and are grateful for their patience. We’ve been signposting this move for some time but we needed a technical fix before we could prepare to announce when it would be ready.
“All intermediaries will have access to the full range of switcher products, including the loyalty products that go with them. We want to continue to reward customer loyalty.”
The lender’s switcher products offer a 10bps discount from its prime loyalty products if a customer elects to stay with the lender.
Earlier this week, NatWest Intermediary Solutions joined the flurry of lenders confirming plans to introduce mortgage retention fees to brokers this year.
Since the start of the year, TSB, Coventry Building Society and last week, Family Building Society all confirmed intentions to launch, if not the detail or timeframe.
One to one with Peter Brodnicki, CEO Mortgage Advice Bureau Group for the broker view
Q: Will lenders holding out on retention proc fees be at a big disadvantage?
A: In essence, I think they will, but with LBG, Barclays, Santander, NWIS, TSB and now Nationwide – six of the big seven offering retention or the intention to offer retention in the near future a seismic shift has occurred in a matter of weeks, so it is highly likely that other lenders, in particular the smaller regional building societies will either be developing their propositions in this sector or rushing to now do so.
Family BS announced its proposition a little over a week ago. Virgin Money, Metro and Precise have retention propositions already, Coventry has announced the intention to start, Accord are in a pilot phase and others like Platform and Leeds have all voiced comments about likely introduction in the near future. For many smaller or specialist lenders and societies many of whom receive either all or a very large proportion of their business through the intermediary channel, not engaging with brokers by offering this facility is likely to threaten their appeal and even their business models.
Q: Nationwide has opened its loyalty products out to brokers – what sort of impact will this have on your advisers?
A: This really places the broker at the pivotal point of the advice process. Until now if a lender offered a retention range to existing customers but made that range ‘direct to consumer-only’ by not allowing the broker to compare and contrast those products with others in the market, their ability to work truly independently on behalf of their client is somewhat compromised, almost regardless of whether the broker is receiving a procurement fee from the lender.
We know that with a number of lenders the loyalty products that they have offered clients are often better than new business acquisition rates and other market leading products, so the customer will invariably get a good deal in terms of what that lender can offer. However, where the client may in some instances have been disadvantaged is that the wider client circumstance will invariably not have been discussed or even considered when the lender offers that direct loyalty product. With brokers now gaining access to those retention loyalty products together with those products that may be available and suitable from the wider market, the client’s current and future circumstances can be considered and advised upon as appropriate.
Q: At an individual firm level, how are these income drivers adding value to broker firms?
A: The current procurement fee level that most lenders that have recently entered the retention fee sector is around 0.2%. Clearly, around half of the new business acquisition level and therefore looks out of kilter particularly when measured against LBG who of course pay a full proc fee on retention products.
The role of the adviser in the retention process still requires advice and recommendation and the adviser and firm are responsible for that in the event of any mis-sale or complaint… therefore the remuneration in relation to retention we believe should reflect that.
We are pleased to see that Santander has now put in place a minimum procurement fee level of £400. This is a more reflective value and recognition of the brokers work level and advice process. But this is still not at the level that the broker channel believes is reflective of the responsibility.
Q: Do you expect other lenders to follow and launch a minimum proc fee floor like Santander?
A: We think the announcements that have taken place in recent weeks may, for some lenders, be the opening “salvos” in terms of proc fee levels as the market finds its feet. Twelve months ago you could count on almost one hand the number of lender brands offering brokers a retention proc fee proposition.
Today we have almost all of the major players either up and running with a retention strategy, approaching a go-live date or planning one, with others clearly slightly further behind. As the market matures and lenders start to see the effect on retention take up (or not) it is likely that retention proc fees may increase further, reflecting the competitive mortgage market that exists in the UK.
The changes from lenders can only be good news for customers, so many of which massively value the role the intermediary plays. These moves towards creating a level and more transparent playing field for advice are positive steps indeed.