There is mounting support for a new not-for-profit mortgage club, after London Money director Martin Stewart mooted the launch in a cover feature for Mortgage Strategy last week.
Stewart aims to rally 100 or so directly authorised advisers to form DA Alliance and use their collective buying power to negotiate better deals with lenders.
He suggests each broker would pay £500 a year to cover the alliance’s running costs, but would then keep all of the procuration fee quoted on the mortgage offer.
Stewart hit upon the idea after growing frustrated with the level of fees charged by some clubs, which can be up to £60 of a £700 procuration fee. He says: “Mortgage clubs will come up with a counterargument about why this is justified. But I’m struggling with that.
“If we do 200 mortgages a year, you’re looking at £12,000 in revenue for using a particular mortgage club. If I’m losing £12,000 a year, there have to be 100 DA brokers also losing that a year. I think that’s quite a big price to pay.”
The idea is already gaining support among the broking community.
Coreco director Andrew Montlake says: “I really like the idea as it offers freedom and transparency for members and could be a real success if run properly, even if on a smaller scale with a few DA brokers. “
Edinburgh Mortgage Advice director Mark Dyason says: “Martin is a clever guy and I think this is a very interesting proposition for DA brokers who are underserved in the current market. For it to work as a not-for-profit proposition you need to have someone willing to undertake this and I think Martin has the motivation for that. I don’t think it will be difficult for this to gain traction as it has certainly created a ripple of interest.”
Cornerstone Mortgage Consultants director Gerry Weir adds: “I would welcome this. I understand Martin’s frustration with existing models and I think that, if he can build enough support to have purchasing power, there is certainly mileage in the idea.”
But Brightstar financial director Rob Jupp, while supportive of Stewart’s not-for-profit plan, still sees value in the role played by existing clubs.
He says: “It’s an interesting idea and I wish Martin well getting it off the ground. But we work with a number of mortgage clubs and they offer considerably more than a glorified commission club.
“These include commission rebates, preferential terms, compliance support, exclusive products, technology and a wealth of educational roadshows.
“Lenders see significant value in working with established networks and mortgage clubs and any new entrant may find it challenging to get the buy-in of the same lender partners.”