The FCA has threatened to intervene in the mortgage market if it believes rising procuration fees are influencing which products brokers recommend for clients.
Several mortgage lenders – including Accord Mortgages, Leeds Building Society, NatWest Intermediary Solutions and Skipton Building Society – have recently raised the fees paid to brokers for completed mortgage deals. Last week, Virgin Money increased its procuration fee by 10 basis points to 0.5 per cent gross – significantly higher than the average fee paid by Lloyds Banking Group subsidiary Halifax for Intermediaries, which currently sits at around 0.35 per cent.
An FCA spokeswoman says the regulator will investigate if evidence emerges suggesting rising proc fees are leading to bad consumer outcomes.
She says: “We regularly monitor market developments and would certainly want to investigate further into this area if we feel increasing procuration fees are influencing product choice.”
Start Financial Services manager Tom Cleary says: “Before the crisis, there were a lot of brokers directing clients to some of the sub-prime lenders – and their higher rates – simply because of the massively higher proc fee they paid out.
“We’re not in the same market any more but the FCA should be looking out for such activity to make sure clients are always being treated fairly.”
In recent months, many industry commentators have argued that proc fees should rise to account for increased workloads since the Mortgage Market Review came in.