Brokers need to have confidence that the lenders they recommend are sound and solid and are going to be around for the long term. Lenders need to know that the broker firms that they deal with are well managed, financially stable and in it for the long term.
This has become even more important as the proportion of business coming to most lenders via intermediaries has grown and grown, leaving many lenders critically dependent on the intermediary sector to get anywhere near their lending targets.
So lenders have a real vested interest in a strong intermediary sector. They should be encouraging broker firms to invest, in technology, in back office administration to improve efficiency, in good management and in business quality. After all Heinz has a pretty keen interest in the health and future of it’s partner retailers – from corner shops to big supermarket chains, doesn’t it?
My recent conversations lead me to believe that the far-sighted and thoughtful amongst the lender community have realised this, and are planning, or in some cases have already done (Coventry, Newcastle, Leeds) something about it.
They have realised that since M-Day, broker firm’s regulatory costs have increased markedly, the combination of FSA / FCA, FOS, and FSCS have gone up by about double for small firms and about fourfold for larger firms. P.I. costs have gone up too.
And brokers have to do more work per case than ever before – since MMR in particular, as the Legal & General Mortgage Club research has shown.
So it’s not unreasonable for broker firms to ask, calmly and politely, for an increase in what they are paid by lenders, who themselves have been experiencing almost record margins on mortgage lending over the last few years. We hope and believe these requests will be listened to.
And for those lenders who turn a deaf ear to these requests and say “why should I pay more”, I’d say that those who invest in the future generally reap their rewards earlier than those who don’t.
Stephen Smith Legal & General’s director of housing and mortgage club
