A number of comments I received following my article on proc fees suggested I was living in cloud cuckoo land.
The prediction which ignited the responses read: “The good news is that we are moving towards a standard 40 basis points for prime business and 50 basis points for buy-to-let – a significant shift upwards.”
This month I would like to combine both the subjects of proc fees and trail commission and map out a blue print for the true partnership that should exist between lenders and intermediaries.
But first, I want a moment to gloat as the new norm does indeed appear to be 40bps for residential property and 50bps for buy-to-let. To those outliers still paying 35bps on residential, I say “Do come on guys catch up!”.
So where next for proc fees? Whilst not popular with lenders I still believe that paying trail commission after an initial period of 24 months is the right way to go. Of course the lenders will resist this, usually citing system issues as an excuse, or the really brave ones will suggest that brokers would not like to see their upfront commission reduced to pay for the trail – however this is not what I’m suggesting.
Earlier in the year Santander was paying 70bps on longer-term fixed rates which really equates to my proposal which is: pay 35bps up front and 5bps per annum for every year after that so on a ten year fixed rate mortgage the fee would equate to 70bps.
Sadly, Santander removed this product for fear of product bias due to the size of the initial procuration fees. There is definitely a difficulty post MMR for one lender to raise their proc fees very much above the norm purely for the reason of perceived bias.
I appeal to the industry therefore to consider a new norm: proc fees, followed by trail commission, plus full product transfer fees, fees on further advances, oh and great secured loan rates with similar procuration fees to first charge lending.
If second charge loans are going to be regulated and sold in the same way as first charges, then they should be rewarded the same way too as the amount of work for both first and second charges will now be the same.
David Copland is director of mortgage services for LSL Property Services
