Where Lloyds suggested its changes did not discrimintae between DAs and ARs, Nationwide became the first lender to confirm it has cut the fees it pays DA mortgage advisers.
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John Malone, executive chairman of PMS:
“The reason for lenders slashing their proc fees is down to cost of acquisition.
“Cost is at the heart of it. If you look at Nationwide, they would say that probably their proc fee arrangement at the moment is out of line with the rest of the lending community. Therefore, they have brought there’s in line very much with the rest of their competitor colleagues.
“I think Nationwide are responding to one or two changes that took place earlier this year.”
Another key distributor said:
“With a vast majority of lenders, AR gross fee payments are higher than DA fee payments.
“Other variables will be around business quality and volume. So, network A, who might be doing an unbelievable amount of business and have top quality business submission is likely to get paid a lot more than network B, a smaller network, with not so great quality.
“As a general rule of thumb, ARs get paid more than DAs.”
Gemma Harle, managing director at Tenet Lime:
“My concern is what is going to happen next. We know one lender is about to make some fee changes rewarding quality, but lenders cannot reward for volume though – we know that. Getting the metrics right on how you assess broker business will be key, however, especially if one rogue broker is in a position to skew figures.
“This is just not good news as brokers will either have to start charging higher fees or personally take the hit. Brokers are being held to ransom really with only five big lenders playing in this space at the moment.”
Ben Thompson, managing director of Legal and General Mortgage Club:
“Nationwide are tidying things up to the point where they’re bringing themselves into the pack in terms of what they see as their obvious competition and the Lloyds move constitutes a tidying up generally.
“Yet again, it’s the intermediary that feels the pain of these cuts, probably right at the time when it’s never been harder to place business. Over the last decade, intermediaries have picked up a lot more work on behalf of the case being placed and none of that recognition has really manifested in proc fee increases.
“There has to come a point where you can’t cut anymore from there and although a general tidying up is efficient and delivers cost savings for any particular lending group, it does also clearly take thousands of pounds out of an intermediary’s pocket. When the market comes back, what we need is a healthy, financially motivated intermediary existing in the market. If the cuts continue, we might not see that.
“However, I don’t expect other lenders to cut proc fees anytime soon. It would take a very brave lender to make that move now.”
Richard Adams, managing director, Stonebridge:
“The quality issue is a good argument because the larger network providers who argue they know their brokers and that they have control can demand more money for it. How will this all play out? The question is how many standalone DAs are there out there left out in the cold?
“Lenders have pressure on margin and are much more difficult to negotiate with. The FSA has asked them to prove they know the brokers they are dealing with so lenders may be happier if they can audit brokers in a hub. Or perhaps they don’t care?”
