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Do fees reflect the rising value of mortgage advice? Marketwatch

by: Paul Robertson
  • 07/01/2015
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Do fees reflect the rising value of mortgage advice? Marketwatch
In 2015’s first full week back at work three lenders announced increases to procuration fees, but why?

All expressed heartfelt gratitude to the advice channel for the work it does, but is this really a sea change in the attitude of lenders to intermediated business?

Areas commonly concerning advisers in this market are product criteria and any innovations, lender service with attendant technology and renumeration through procuration fees.

So do the fee increases from Leeds Building Society, Skipton and Virgin Money herald a new era in the Mortgage Market Review (MMR) world? It would appear that some in the advice channel think they do.

Peter Brodnicki, chief executive officer at advice group Mortgage Advice Bureau, believes post-MMR procuration fees are under value in terms of the distribution brokers provide and the work they do.

He said: “Lenders appreciate this and appreciate fees should be higher, even than increases we have seen lately.

“I don’t think that even recent rises represent true market rates and we can expect a series of increases going forwards, through regular updates.”

David Carrington, marketing director at network Personal Touch Financial Services, is in broad agreement that recent rises in procuration fees are part of an ongoing trend.

“The recent flurry of rises is just because this time of year is a neat time to do this sort of thing,” he said.

“However, there is a realisation amongst lenders that there is an expense to the distribution they receive through advisers and that there is a challenge to the advice given and thus there is a value to the outsourcing they offer.”

As the the MMR dust settles lenders will have time to reassess the features of their product lines which Carrington and Brodnicki want to see become more flexible.

Carrington said: “I suspect that lenders are still focussed on MMR implementation and on not falling foul of the regulator’s review on the subject.

“But product innovation tends to be led by the niche players. The challenger banks need to show that they are different to the mainstream ones. It is at this point that the big payers will follow in order to not concede the niches to the new banks if someone uncovers a sizeable need in the market.

“For example there is a need for some product innovation in the market for those in their late 40s. How do we create products around that scenario? These cases need a genuine repayment strategy.”

There is evidence that some lenders are taking more interest in loan criteria than others. However, Brodnicki cautioned that the market needs a commonsense approach and does not need to be associated with loosened criteria, but a different criteria.

“This is all down to a firm’s risk management approach. There are some in the market the regulator has said have interpreted recent regulation in too literal a manner, with over tight algorithms. I think that we will see this working itself out for these firms this year,” said Brodnicki.

Both are united in the view that, when it comes to service, lenders will be striving for consistency over coming months.

Brodnicki pointed to Halifax as a good example, citing success in industry awards. He said: “Other lenders move in and out of providing a set standard of service but consistency means lenders do not have to buy business. This has been proven by one or two and the rest will be looking to emulate them.”

Those lenders that drop into the market with leading products then spend “months” on the backlog concern Carrington.

“They tend to come in with great offers and garner lots of business, then spend three months catching up, before repeating the cycle,” he said.

“Other lenders are not quite as spectacular but always turn over a decent amount of business, advisers will always vote with their feet on this because it makes good commercial sense.”

So, have adviser-lender relations taken a turn for the better? It would seem so.

 

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