Directly authorised brokers are likely to have been paid tens of thousands of pounds less in commission than ARs since the financial crisis.
In an investigation carried out Money Marketing’s sister title Mortgage Strategy, historical procuration fee rates were obtained from a linked major mortgage network and a major mortgage club dating back to 2008.
The data shows that, on average, Halifax paid appointed representatives five basis points more than DAs between 2008 and 2010, but since then the gap has widened to around 8 bps. Santander paid 2 bps more to ARs in 2008, rising to an average 6 bps difference this year.
Woolwich paid ARs an average of 10 bps more than DAs in 2008, but the difference has since shrunk to 5 bps. NatWest has paid ARs 3 bps more than DAs since 2010.
Based on these indicative numbers, a DA broker would have received gross proc fees of roughly £485,100 if they submitted five cases a month worth £150,000 to Halifax, Woolwich and Santander between 2008 and 2012. An AR submitting the same business would have been paid gross proc fees of £554,400 – a difference of £69,300.
For Halifax alone, a DA broker submitting five cases worth £150,000 a month would have been paid £27,900 less than an AR since 2008.
The final figure paid to brokers is less the amount taken by networks and clubs, and depends on commercial arrangements.
PMS executive chairman John Malone says: “The regulator should be looking at this. Lenders’ new metrics are now exposing the argument the network principals have put out over many years that their business is better quality.”
Writing in this week’s Mortgage Strategy, Precise Mortgages managing director Alan Cleary he says: “I have never seen at any of the lenders I have worked at a conclusive difference in the quality of business from ARs or DAs. We are paying all brokers for quality business and the work involved in doing that is not altered by the broker’s regulatory status.”
The FCA refused to comment.
London & Country associate director of communications David Hollingworth says: “It is up to DAs to demonstrate the quality of their business and show they merit higher proc fees. This focus on business quality is becoming very much a part of the way some lenders are structuring their proc fees.”