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Lenders should consider increasing proc fees to match longer term fixes – McCoy

by: Rob McCoy, senior product and business manager at TMA
  • 31/05/2018
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Lenders should consider increasing proc fees to match longer term fixes – McCoy
Five-year fixed rate mortgages have grown in popularity as consumers look for greater financial certainty – our lenders are now issuing 30% more five-year fixed rate deals compared to 2017, the highest we’ve seen in years, maybe ever.


With a sizeable shift in borrower attitudes towards longer-term fixed rate products, it is putting pressure on the traditional payment patterns for brokers.

The previously more popular two-year product terms gave brokers the opportunity for regular engagement with borrowers, to ensure that their mortgage provision remained competitive and matched their needs and lifestyle. A new deal could be sought every two-years.

With a relatively recent increase in popularity for longer-term products, this engagement with clients is much less frequent – which could potentially erode the broker-borrower relationship.


Broker’s job isn’t finished

As brokers, ensuring that this relationship remains strong is essential – a lot can happen in five-years.

It is crucial then that advisers and borrowers continue to engage throughout these longer-term deals and brokers continue to deliver support.

For example, protection needs may change and there may even be instances where cheaper, more competitive products are launched which make transferring a cost-effective option.

It’s important to remember that a broker’s job isn’t finished when clients have completed a mortgage.

There are also annual opportunities for advisers to engage with borrowers for their buildings and contents insurance.

These policies tend to be year-long and provide an ideal opportunity to speak with clients to ensure they’re properly insured for their property – and the contents within it.


Proc fees and trail commission

As an industry, we need to come together to ensure that brokers and borrowers are benefitting from the evolving market landscape.

For lenders, this could mean an increase in proc fees. While this has been a contentious issue, increasing proc fees could help to encourage borrowers to consider five-year fixed rate terms.

For brokers introducing clients interested in longer deals, it’s only fair they too are rewarded for this.

Reintroducing trail commission could be another solution to consider. This would help to establish a steady revenue stream and further promote the value of broker business.

At the end of the day, it is no secret that successful brokers build long-term relationships, and that has benefits for everyone.


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