Brokers face £625m proc fee shortfall

A whopping £625m could be wiped off brokers\' proc fee income due to the liquidity crisis, according to edeus.

The prediction is based on research by the specialist lender which assessed recent lender and product withdrawals. This revealed a 30% funding deficit.

This news comes as the Council of Mortgage Lenders revealed that gross mortgage lending fell £1.9bn to an estimated £24bn in February, down from £25.9bn in January and a 6% year-on-year decline.

Alan Cleary, managing director of edeus, says it is vital that brokers cut costs or diversify their income to en-sure they can still operate.

He says: “Although an exodus from the broker sector is unlikely, brokers are going to find life tough in the next few months.

“The liquidity crisis has led lenders to dramatically scale back their targets and gross lending could be down by as much as £114bn.”

He adds: “There will be less proc fee cash and many brokers will struggle to earn as much as they used to in recent years.”

Edeus expects the self-cert market to suffer the greatest shortfall this year, with a massive £28bn potentially wiped off lending volumes.

But the lender’s research indicates that brokers will be most affected by a projected £26bn shortfall in the sub-prime market.

Edeus estimates this could result in a £260m proc fee shortfall, based on average case fees of 1%.

Independent marketing consultant Julian Wells says: “There’s probably less lending capacity in the whole ad-verse sector now than there was in a single sub-prime lender last year.

“Brokers and packagers focussed on sub-prime without diversified business models will be hardest hit.”

He adds: “Their best revenue opportunities have been cut off so brokers must maximise other opportunities, and there should also be an increased focus on technology.”