There are rumours that some lenders are considering cutting the proc fees they pay brokers. This would be short-sighted. Although there is no good time to cut brokers’ income, this is a particularly bad time to ponder such a move.
The liquidity crisis means this is a challenging period for the industry, with lenders pulling deals with little or no notice because of lack of funds and pressure on service.
This means there is more need than ever for the sort of quality independent advice that is not available in lenders’ branches.
Lenders may be keen for proc fees to reflect what they regard as a shift in the balance of power, but this would be wrong. The relationship between lenders and brokers is a partnership – one can’t survive without the other.
We have a joint responsibility to treat consumers fairly, recommend the right products and give tailored advice.
Brokers recommend the best deals for clients regardless of commission but it is important that they receive reasonable payment for this or there’s a danger some brokers could go out of business – and not just the smaller ones.
If a prominent distributor such as John Charcol is struggling, with KPMG warning that it faces ‘material uncertainty which may cast significant doubt on its ability to continue as a going concern’, these problems could hit any firm. Blackandwhite is another high profile company that has gone to the wall.
At a time like this, it’s worth emphasising what we brokers do – how we are responsible for advice, take on the time-consuming job of keying in applications online and deal with queries from clients so lenders are not inundated with calls.
This is why proc fees have edged upwards in recent years, and it’s money well spent.
So where would ditching brokers leave lenders? First, they would be forced to spend heavily on advertising to raise their brand awareness.
Second, they might want to sell mortgages via their branches but the overheads involved in having high street sites with large numbers of trained staff are considerable.
Figures from the Association of Mortgage Intermediaries show that 70% of all mortgages are sold by brokers. Lenders get this on a plate for relatively small proc fees and low marketing costs.
So lenders get what they pay for – guaranteed business for a few hundred pounds. Surely that is a price worth paying in these uncertain times.