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Cheap mortgage deals without proc fee could have a place in the market

Lenders may start creating cheaper mortgage products for brokers without a proc fee, the Association of Mortgage Intermediaries claims.

Robert Sinclair, director of AMI, says he expects lenders to try to offer a cheaper product via brokers without proc fees in the coming years.

He says: “When the market is as difficult as it is any lender will look at value. In a market that isn’t that competitive it is easier to do.

“But a model of business based solely on transactions and proc fees is not one for long-term stability. Some pro-active firms will start adapting but we are not at the promised land yet.”

However, Sinclair insists proc fees will not disappear. He says the negative consumer response to paying fees for mortgage advice will take time to change and refers to the investment industry as an example of how to move away from a solely transaction-based model.

Meanwhile, John Malone, executive chairman of PMS, says proc fees could see major changes in the next few years.

He says: “Lenders with a major branch network may see products being more of a feature whereas the proc fee would be less of an issue.
For these lenders the proc fee is not the most important ingredient.

“But those without branches may need to keep proc fees and focus on niche products. These include buyto-let and specialist lenders.”

Malone adds that brokers will have to sell more protection and charge fees for advice.

But Alan Cleary, managing director of Precise Mortgages, says he can’t see lenders turning away from brokers or proc fees. He says: “All the main lenders are pretty reliant on brokers and can’t afford to alienate them.”

From January 1 Barclays is stopping enhanced proc fees on offset deals, The Mortgage Works is cutting fees for certain distributors and Lloyds Banking Group is making changes to key accounts.

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