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Buy-to-let lenders loath to raise proc fees after Keystone hike

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None of the main buy-to-let lenders are set to follow Keystone’s example by raising procuration fees to compensate brokers for extra work undertaken from 1 October.

Incoming Prudential Regulation Authority changes mean lenders will have to adopt a specialist underwriting approach for portfolio landlords, including gathering more detailed information than before.

Last week Keystone said it would increase proc fees on its classic range to 0.7 per cent due to the extra complications brokers would face when handling these cases.

Keystone currently pays 0.6 per cent to directly authorised intermediaries, although some network brokers receive slightly more.

More work

Brokers say they expect their workload for portfolio landlord cases to increase and they should be paid more as a result.

London & Country Mortgages director David Hollingworth says: “It’s not getting any simpler, that’s for sure. I think already there’s a greater degree of complexity even on the basic, standard buy-to-let. With portfolio landlords that layer of complexity will only increase.”

Coreco director Andrew Montlake says: “I think this is the first of a few moves in buy-to-let proc fees going upwards. There is more to do and lenders will see the amount of extra work that brokers are doing going up for buy-to-let landlords.”

Mortgage Strategy contacted the following lenders to ask if they intended to review their proc fee levels: Accord, Aldermore, Barclays, BM Solutions, Godiva Mortgages, Kent Reliance, Leeds Building Society, New Street Mort­gages, Paragon Mortgages, Precise Mortgages, Skipton Building Society, The Mortgage Works and Vida Homeloans.

But none confirmed plans to pay extra commission.

BM Solutions says it aims to be competitive but has no plans to raise its fees.

A spokeswoman for the lender says: “We regularly review our proc fee policies and arrangements in line with the market  to ensure we continue to offer value and excellent service designed to support brokers’ needs.”

A Godiva Mortgages spokesman says: “We have no plans to alter these rates.”

A Barclays spokeswoman says: “It’s not something that we can confirm at this stage.”

Paragon Mortgages managing director John Heron says: “We’ve no immediate plans to change our procuration fees. Our key objective is to keep the application process as simple and efficient as possible and offer extra support to guide customers and intermediaries through the process.”

A Kent Reliance spokesman says: “We have no comment regarding changes to our proc fee. But we will be communicating our PRA proposition in due course.”

Precise Mortgages managing director Alan Cleary says: “We have no plans to increase the fee as we are at the top end already paying 60bps to clubs and networks.

“We will be announcing our portfolio proposition next month and brokers will find our process very efficient.”

Spokeswomen for Accord and Skipton Building Society said the lenders had no immediate plans to introduce the fees. Vida and Aldermore declined to comment. Leeds Building Society, New Street and TMW had not commented at the time of publication.

Barclays pays a standard 0.4 per cent proc fee for buy-to-let. Godiva pays 0.43 per cent while BM Solutions and TMW offer 0.44 per cent. Aldermore pays brokers 0.45 per cent, while Accord, Leeds, Kent Reliance, New Street, Skipton and Vida pay 0.5 per cent. Paragon pays 0.55 per cent.

Lender silence

Few lenders have revealed how they will interpret the PRA’s portfolio landlord changes and what they will demand from brokers as a result. The only lenders to give full details are Aldermore and Paragon.

Earlier this month, Aldermore said it would split portfolio landlords into two categories. The lender will require face-to-face interviews for cases where landlords have 11 or more mortgaged buy-to-let properties with Aldermore, or have total borrowing of £1m or more.

Other checks will include portfolio affordability testing, rental income validation by postcode, and, where personal income is used, assessment of living costs and essential expenditure.

Paragon says the new standards require only a minimal change to its current approach. The lender implemented the new rules this week, two-and-a-half months before the official start date.

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