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Proc fee levels do not sway brokers’ choice of lender: FCA

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The FCA says it does not believe that variations in the level of procuration fee paid by different lenders lead to bias among brokers or poor outcomes for borrowers.

The watchdog reached this conclusion in its interim report into mortgage competition today, which drew upon analysis of 2016 home loans sales.

The figures exclude the wave of retention proc fees from mainstream lenders that emerged through 2017.

However, the FCA says it does not think the widespread and sudden payment of retention proc fees by many lenders has biased brokers.

Speaking to Mortgage Strategy, FCA director of competition and economics Deb Jones says: “The question we asked of ourselves was: are proc fees influencing business?

“We investigated and found no significant influence on consumer outcomes.

“What we were really looking at was, where there is a difference in the level of fees, did more business go to that lender via fees?

“The analysis showed no evidence of bias.”

In today’s report, the FCA revealed that the median level of proc fee paid is around 0.4 per cent of the loan amount.

Based on the typical mortgage size of £147,000, it says that proc fee differentials could lead to a broker earning £120 more by referring a case to the lender that pays the highest commission.

But it says: “While we recognise that there is potential for procuration fee bias where intermediaries face products with large differences in procuration fees across lenders, we find little evidence that intermediaries selling more costly mortgages is linked to high procuration fees.”

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