Advisers could be offered trail commission on long term mortgage deals if proposals being discussed by Yorkshire Building Society come to fruition.
The lender told delegates at a recent Scottish Amicable roadshow that it may be introducing extended procuration fees for advisers that encourage customers to opt for long term deals, in a bid to stop customers shopping around for cheap initial rates after discount periods expire.
The proposals follow research conducted by the lender, which revealed that less than 20% of borrowers are active rate chasers. According to David Holmes, corporate affairs manager at Yorkshire Building Society, the new commission policy could benefit the remaining 80% of borrowers that are happy to stay where they are, by encouraging advisers to find the best long term deal in the first place.
‘By offering advisers less commission up front and then continued payments each year, we feel that more borrowers will be encouraged to take out the best long term deals ‘ reducing overall costs and eliminating the hassle of shopping around. Rather than paying £200 up front, we feel it could be more beneficial to pay advisers, say, £100 up front and then £40 each year.
‘We are in no way trying to stop borrowers from moving to the cheapest deals as there has to be freedom of choice. We are just letting borrowers know that there are deals that provide a long term low rate,’ said Holmes.
But Andy Frankish, business development manager at brokers Mortgage Talk, said that although the news was not unexpected, it could limit advice and lead to less client reviews, meaning less contact with customers and failure to advise on the best deals.
‘A lot of clients may be losing out on cheap deals after the initial discount period.We actively re-broke deals after discounts have finished and a large proportion of our business comes from remortgaging commission,’ said Frankish.
