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Keeping it simple at the margin

Added fees and charges make the sales process more complicated for brokers and clients and a standard margin added to everyone’s rates would be more fair, says Sue Read

I like it when something I’ve said provokes a response, such as Chris Poole’s (Mortgage Strategy Letters October 10). And I like it even more when we agree.

Like Poole, many of my clients are staying with their existing lenders because they are being offered reasonable deals (not market-leading, but definitely competitive). I have recent experience of both Abbey and Halifax doing this.

At the risk of becoming repetitive – because I know I have talked about it before – this, coupled with the rising setting up costs lenders are now charging, makes life more difficult for intermediaries.

There may even be a few less scrupulous (or perhaps just hungry) intermediaries who will advise their clients to remortgage away from their existing lender anyway. They might do this because they have to generate procuration fees to pay towards the time involved in researching a recommendation to stay put.

And added to this in the near future will be the iniquitous deeds release fees or account closing fees now being incorporated into mortgage deals. This will make it even more costly to move lenders.

Thank goodness there already seem to be many voices piping up on this subject. How can it be described as treating customers fairly, or does this worthy objective not apply to lenders? I’m with Poole and any other lobbyists on this. These fees cannot be justified.

I’ve also argued for many years against the higher lending charge. As I usually explain it, this is a premium the client has to pay for an insurance policy which protects the lender against the possibility of negative equity. I have never come across a client who understands why they have to pay for it. And nor do I, in fact.

Some lenders, notably Cheltenham & Gloucester, has taken the decision it will not charge clients for this. Presumably it incorporated it somewhere in their its cost structure. Wouldn’t it be nice if all the other lenders did this too? And if they really got their marketing hats on they could probably incorporate some of these other charges as well.

If most lenders started to go this way, wouldn’t it be simpler for clients? It would make the sales process easier because we wouldn’t have to spend hours explaining endless types of setting up and closing fees to clients. The objection from lenders about paying us a retention proc fee could be dealt with, as a margin for this could be built in. I guess 0.1% on everyone’s rates might cover all the charges and costs needed.

If this became standard practice it would be accepted by everyone – industry and clients – and there would be no more bad taste left by all of those nasty charges. That really would be treating customers fairly.

And by the way, Chris, any new client who has been with The Woolwich in the past is usually delighted to move away. Why do you think it is one of the first lenders to pay us a retention fee?

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