Mortgageforce managing director Rob Clifford believes that brokers are being underpaid on prime cases and he wants higher charges for borrowers to pay for increased proc fees.
Clifford told the Mortgage Business Expo in London last week that borrowers are getting a “free lunch” as brokers earn far less than counterparts in other markets.
He said intermediaries in Australia get an average 0.7 per cent fee on a typical prime case compared with 0.3 per cent in the UK and lenders are using brokers as a cheap way to sell their products.
The call comes as many lenders and brokers believe sub-prime proc fees need to be reduced from levels as high as 3 per cent on fully packaged cases. Some commentators fees will fall as technology, such as instant offers and online applications, helps reduce workload.
Clifford said: “Lenders get broker business on the cheap. The proc fee barely equates to the minimum wage. Brokers in a regulated environment cannot make a profit and that has to be wrong. Lenders will argue that market forces set proc fees but lenders need to bite the bullet so consumers pay enough so the broker can be remunerated for intermediated work. Why should consumers get a free lunch? Brokers need a fair day’s pay.”
But Freedom Lending chief executive Colin Snowden said: “I do not agree. You cannot look at other markets on proc fees without looking at the different margins. Who would be the first lender to do it? Why have a worse product and better proc fee?”