Problems will arise when lenders are forced to decide what is meant by an inducement come regulation. This could put a stop to hefty bonuses.
One source tells Mortgage Strategy that cash bonuses of £200-£300 are being offered by some lenders to brokers for each case that is passed.
Ray Boulger, technical manager at Charcol, says: “The main problem is in the sub-prime market. Some lenders offer brokers valuations in exchange for guaranteeing mortgage business. However, if the valuation is offered on another basis and there is no direct link between the two this would not be seen as an inducement. The difficulties will come when lenders have to decide what to disclose to the FSA.”
Boulger believes there will be a variation in what brokers disclose as incentives, with some not declaring free holidays and hospitality events.
Robin Gordon-Walker, spokesman for the FSA, says: “We have been told that some product providers and intermediaries not in the same corporate group are contemplating payments, in some cases upward of £1m, as a condition for the provider's products being placed on, or considered for, the intermediary's panel or recommended list.”
Bill Dudgeon, managing director at TMB, says: “We do not offer cash inducements but we have heard some lenders do. At the end of the year if a broker has placed a lot of cases with one particular lender, they might get bonuses for the amount they did.”