The decision to offer intermediaries an alternative to using master brokers, which typically charge borrowers a fee of around 10 to 15% of the loan, is the latest in a series of blows to the second charge packaging and broking model.
Following the arrival of the Mortgage Credit Directive, mortgage intermediaries now have to tell their clients, looking to remortgage, that a second charge or further advance may be suitable. Until recently, intermediaries choosing to advise on seconds instead of referring them to a secured loan broker, have faced restricted distribution channels controlled by master brokers.
Jane Benjamin (pictured), head of lender Relationships at PMS, said: “We have certainly seen increased interest in second charges following the introduction of the Mortgage Credit Directive. We want to ensure that we continue to champion the needs of the DA intermediary market by offering advisers as much choice and flexibility as possible for how they do business.”
Earlier today, Legal & General Mortgage Club, unveiled its second charge lending panel which will accept direct business from member brokers. Precise Mortgages, Prestige Finance, Paragon Bank and United Trust Bank have been named so far, with plans to add more lenders in the coming months.
The benefit of the direct-to-lender submission route will be keenly felt by the borrower, who will no longer have to pay a fee of around 10% of the loan, charged by the master broker, which it shares with the introducing broker. The applicant will have to pay a lender arrangement fee and valuation costs if they are placed directly with the lender, but this expected to be significantly less.
To remain competitive, some master brokers have already begun dropping their fees. Master broker and packager Positive Lending announced today it would charge borrowers a flat fee of £995 and would pass on 100% of the proc fee paid out by the lender. This would replace the arrangement fee a lender would charge for direct business.
Specialist packager Complete FS changed its fee structure to a flat application fee of £199 along with the lender’s valuation fee and disbursements.
Readers responding to a Specialist Lending Solutions story about the perceived risks of second charge lending named ‘colossal’ fees as one reason they did not recommend secured loans to their clients.