Last month Specialist Lending Solutions published an article where mortgage advisers were calling on the FCA to put a cap on broker fees on second charge mortgages in an attempt to make seconds more attractive to their customers.
I agree there is some work to be done on broker fees charged by specialist lenders, master brokers and packagers.
However, I don’t think there is enough appreciation for the level of work required on a second charge mortgage, in comparison to a first charge, and that in my view justifies a higher fee.
Specialist packagers and master brokers can offer mainstream advisers an invaluable service.
They can access specialist lending products that mortgage advisers may have not otherwise been aware of, they can offer assistance in terms of researching the market to find the right product for the adviser’s customers, and they can take the pain of packaging by working with the lenders on the needs required, giving the adviser more time to work with their customers.
But this service does come at price.
The market is shifting however with direct access to lenders in the specialist lending market becoming more commonplace.
Knowledge Bank is a great example of this. This new sourcing system is helping advisers to source lenders that will offer a product based on the customer’s criteria, reducing the time that advisers need to spend researching.
This is an innovative idea and could potentially justify making fees cheaper as the adviser now has the tools to do a portion of the work themselves.
I can see why in this new environment advisers would want to own the deal, especially if they can work directly with lenders on packaging requirements, as most lender portals now produce full needs once the case is keyed onto their system making the whole process much easier.
Fee reflects the work
There is still a place for everyone however – packagers and master brokers included. It really depends on the mortgage adviser and how much involvement they want to have.
They can either invest the time in working with a customer throughout the journey, or they can focus on identifying customers and then referring them to work with an intermediary. Both are valid, it just depends on your own business model.
If you do choose to partner with a specialist, the key is to align with one that suits your business and where the fee reflects the work done, remembering to ask for a break-down of the fee and what it includes.