Proc and bull story on retention fees

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Brokers have to do just as much research and compliance for retention cases, so why should lenders pay them only half?

There are times when you wonder if lenders really want business from brokers. A recent experience of a product transfer with a high-street lender is a case in point.

With product transfers, we are told it is great if lenders pay us anything at all for retaining the business. But are we meant to be grateful? Paying 50 per cent of the ‘new’ business procuration fee for retaining a client is one thing, but the lender in question’s policy of paying only on the segments of the mortgage being retained, instead of on the full balance, shocked me.

I had a client who had three parts to their mortgage: one on a term tracker, which was too good to lose, and two others that were not. Had this been new business to the lender, we could have expected a proc fee of around £1,630. But it paid 50 per cent less for retention.

On that basis, we would receive approximately £815 for retaining a mortgage of more than £400,000 for the lender. Correct?

No. On its retention policy, it pays only on the elements that are switched. So instead we received a gross payment of £268 for the two smaller elements we did within a £400,000 mortgage. When questioned, the lender’s response was: “We do less work on retentions, so we pay you less.”

Lenders should ask the networks that supply them with so much business each year if they give their brokers the leniency to treat product transfers differently from a standard remortgage. They may get a shock.

Brokers have to do the same amount of research and the same amount of compliance to justify a client remaining with their current lender. It is time for some lenders to recognise this fact and pay accordingly.

Stuart Gregory is managing director at Lentune Mortgage Consultancy