From today, 25 July, the specialist finance broker has scrapped its master broker fee, exclusively reported by Mortgage Solutions a few weeks ago and replaced it with an application fee, similar to those levied in the first-charge mortgage market.
Set at £295, The Loans Engine will collect the fee at application stage once the decision in principle has been confirmed, but before The Loans Engine packages the case. Intermediaries referring cases will also be able to charge their client a fee, creating flexibility for intermediaries, networks and clubs.
Prior to the Financial Conduct Authority’s regulation of second-charge mortgages, The Loans Engine (under the rules of the Consumer Credit Act) was prevented from retaining any fee greater than £5 on cancelled applications. This resulted in a bundling of direct costs, such as valuation and lender reference fees, into one master broker fee.
Now that second-charge mortgages fall under the Mortgage Conduct of Business (MCOB) rules, master brokers can adopt a charging structure which will be more familiar to intermediaries in the first-charge market.
Ryan McGrath (pictured), chief executive of The Loans Engine, said: “By changing to an application fee model we are leading the field in our sector and this is a big, bold, first-adopter move that should sit much more comfortably with those first-charge mortgage advisers who might have previously been uncomfortable with the level of fees charged in the seconds market.”
The move has been welcomed by intermediaries and Jeremy Duncombe, director, Legal & General Mortgage Club, commented: “Scrapping master broker fees is a bold move by The Loans Engine but one the market certainly needed. We work closely with our panel of master broker firms and this move should encourage intermediaries to re-look at their proposition in order to ensure the best possible solution is found for the customer – which may include a second charge. With reducing rates and charges, there really is no reason for intermediaries not to include second charges as part of their holistic mortgage service to clients.”
Martin Reynolds, chief executive of Simply Biz Mortgage, added: “The second-charge mortgage market is currently in the midst of big changes and this will continue for a while as all parts of the distribution chain realign their models. Fees have always been a contentious area and it is good to see The Loans Engine taking a bold step and moving to this new model. As one of our preferred partners I believe our members will embrace this new stance and engage in greater numbers to fully understand the opportunities and benefits to their clients within the second-charge market.”