You are here: Home - Your Community - Poll -

Early product switch risks arrangement fee roundabout – Star Letter 04/11/2016

by: Mortgage Solutions
  • 04/11/2016
  • 0
Early product switch risks arrangement fee roundabout – Star Letter 04/11/2016
Each week we round up some of the most thoughtful, intriguing and downright provocative comments on the Mortgage Solutions site to select our Star Letter.

This week’s Star Letter is awarded to two readers, Chris and then separately, John Azopardi for their comments under the post: Broker fury over Santander’s move to attract clients to switch six months early.

Chris

My biggest concern is that we are advising our clients on two, three or five-year rates for which they are paying Santander an arrangement fee in most cases of £995. This fee covers the two, three or five- year period and therefore surely by letting and offering the clients the ability to change rates every 18 months they are just making more money by doing so and in most cases these are being added to loans on which interest is being paid.

This surely is an advice issue? It might sound like a good idea at the time but the extra fees will soon mount up?

John Azopardi

Chris – this is an excellent comment which has made me think more deeply about Santander’s actions and how they should be investigated by the FCA. They cannot know – because they are not privy to Client Suitability Letters – why a broker has chosen them over another lender with a similar product specification. It may be that the broker chose to recommend a two-year fixed rate with a £995 fee with Santander because that was the cheapest and most suitable product “for a full two years”. It may well have been that the next best choice was a product with NO FEE. But due to the lifecycle of the product on a particular amount of borrowing it was worth paying a fee and taking lower payments. By switching clients out of existing products early they are compromising advice which was not given by them. I can foresee a regime where NO LENDERS can contact broker introduced cases and that product switches/transfers only take place after the existing product has ended. So for any broker who needs a defence for not recommending Santander – here it is “I cannot recommend Santander because they will contact you in 18 months’ time and compromise the advice I am giving you today.”

There are 0 Comment(s)

You may also be interested in