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AMI fears ‘commission bias’ is driving lenders to offer cheaper product transfer rates

  • 12/02/2019
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AMI fears ‘commission bias’ is driving lenders to offer cheaper product transfer rates
The Association of Mortgage Intermediaries (AMI) is calling on lenders to review procuration fees on product transfers.


It said this is aimed at ensuring any gap with those awarded on remortgage lending fairly reflected the amount of work undertaken by intermediaries on both.

The trade body said it had long argued for increased transparency in this part of the lending market and believes doing so will provide better outcomes for consumers if regulators and the wider industry understand how existing customers who transfer internally onto new deals are dealt with.

As such, AMI is now also asking UK Finance to disclose the split between intermediated, advised and execution-only product transfer lending.

“Currently, intermediaries earn a far lower procuration fee on most product transfers, resulting in a bigger margin available to lenders securing this type of refinance over remortgage,” the trade body said in its quarterly report.

This risks creating a bias within lenders, which are pushing for product transfers over remortgage and purchase business.

“It is natural that lenders should wish to protect profit and retain their customers, particularly when there is so much pressure on their direct business and branch closures are ongoing.”


Side-step MMR

However, AMI warned that this might side-step the spirit of the Mortgage Market Review (MMR) rules that support the value of advice.

It added: “A commission bias driven by cheaper pricing on product transfer rates than on traditional remortgage rates could be created and lenders should assess and measure this as part of their product monitoring.”

AMI admitted there was little information available to test this theory, so is pleased that the Financial Conduct Authority has agreed lenders must start to submit lending figures on this critical segment of the market.

And it urged the regulator not to overlook any unintended consequences created by the banks’ control over customers taking product transfers.



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