Showered with attention during the good times when banks have sought distribution, but given the cold shoulder when times have been tough.
After many ups (and more downs) during the worst of the global financial crisis, it does seem like proc fees have stabilised somewhat and there is every reason to believe that lenders will grow ever more dependent on brokers as the Mortgage Market Review (MMR) ushers in a new era.
We have already witnessed a gradual shift in emphasis over the past few years from quantity to quality – both in terms of lender attitudes to distribution, applications and even proc fees themselves – and it would be no surprise to see the MMR cement this transition.
With ever-more onerous requirements around affordability assessments and income verification (not to mention immigration checks with regards to buy-to-let loans), we can expect to see lenders work even closer with brokers through this process and reward those who make the whole ‘Know Your Customer’ process that much easier.
Lenders want good quality business that doesn’t require too much additional legwork and brokers who can provide them with this are within their rights to expect preferential treatment.
Regardless of how procuration fees evolve in the coming years, any adverse changes are unlikely to have as integral an effect on a broker’s day to day operation as they once would have done.
Proc fees today represent a smaller part of the overall transaction and we are increasingly seeing borrowers requiring more advice around their protection requirements and, incidentally, this is where brokers can receive greater reward.
The way regulation has developed over the past few years, it is perhaps right that less importance is attached to the procuration fee in any case. With brokers charged with finding the most suitable mortgage for their clients, the size of the fee should be more of an incidental factor than a motivational one.
We have already seen legislation in other areas of financial services encouraging advisers to adopt a fee for the advice they provide rather than be solely remunerated by the lender or provider and it wouldn’t be a great surprise to see mortgage brokers persuaded down this path eventually.
There are a number of different factors that have prevented this from occurring already, but anything that helps brokers to budget and plan more effectively – ensuring their clients receive impartial, independent advice – could be beneficial. It may be a case of brokers charging a basic advice fee in addition to any proc fees they receive, but reliance on proc fees may well gradually lessen.
Richard Adams is managing director of Stonebridge Group
