Distributors have urged lenders to hike residential proc fees by 30 basis points to compensate for the increased workload faced by brokers since the MMR.
Research from L&G Mortgage Club shows the time taken per application has risen from 11 hours to 12.3 hours per case, with average earnings falling from £50 an hour to around £48 an hour.
Until now, many commentators have suggested proc fees should rise but nobody has said publicly by how much. And while the average proc fee has risen to around 0.4 per cent in the past year, distributors say this should increase to 0.7 per cent to reach a “fairer” level.
Homeloan Partnership commercial director Neil Hoare says: “I think 12.3 hours per case [as suggested by L&G] is a low figure. Our members are spending an average of 20 hours on cases now and I’m inclined to refer back to the £50 per hour figure, meaning they should be getting paid at least £1,000 per case.
“Based on the average mortgage size of £142,000, that works out to 0.7 per cent gross and I think that’s fair remuneration for what brokers have to do in the current market.
“Fees are paid when lenders get new business; the cost of getting that business to them is rising, and faster than fees are.”
SimplyBiz Mortgages chief executive Martin Reynolds supports the call and adds that lenders have room in their margins to support the increase.
He says: “While many will say 0.7 per cent is a high level of fee, there’s no reason why it shouldn’t be there. Clearly the workload for all brokers has soared and fees need to reflect that in a fairer way.
“Lenders are working off fantastic margins at the moment, even with fixed rates being so low. Appetite seems very healthy and that indicates there could be further rises in fees – there is definitely room for lenders to do that.”
Moreover, Pink Home Loans director Mark Graves has suggested lenders sign an agreement on proc fees where they all pay the same.
He says: “Why can’t we introduce a charter that says all lenders pay the same proc fee and remove any uncertainty? The workload has increased for brokers and we’ve seen some lenders push up their fees, but others are still lagging.
“An industry standard removes any scope for conflicts or compromise of product choice and lets brokers know exactly what they are getting for their work, regardless of where their business is placed.”
A spokesman for the Council of Mortgage Lenders says: “As ever, it is up to lenders to set their own procuration fees and these may reflect a range of factors, including approaches to mortgage distribution, commercial strategy and the way in which the industry responds to regulatory reform.”
Several lenders, including Accord Mortgages, Leeds Building Society, NatWest Intermediary Solutions, Skipton Building Society and Virgin Money, have raised their proc fees in recent months but no major lenders contacted by Mortgage Strategy said they had plans to increase fees further.