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Equity offer sparks fears of fee war

Equity Management Services has sparked fears among lenders of a fee battle in the sub-prime mortgage market after offering brokers £1,000 for every loan completed.

The deal, which is twice the sector average for broker fees, is available on loans of over £30,000.

Rival sub-prime lenders have raised concerns that they will come under pressure to boost their own broker fees. They warn that this will lead to borrowers paying more.

Equity&#39s guaranteed minimum payment of £1,000, or 1 per cent of a loan, is available to business placed directly with the lender rather than through a packager.

Brokers can earn up to as much as 2 per cent of a loan if they write regular business with the lender.

Kensington Mortgage Company chief executive Chris French says: "If fees go up and there is a fee chase, then the customer will end up paying."

Preferred Mortgages chief executive David Cameron-Moore says: "The marketplace is in danger of becoming fee-dominated. Fees will always be a necessary part of the marketing mix but excessive dependence on the fee is not in the best interests of the customer in the longer term."

The procuration fee is available on Equity&#39s Equifund mortgage which has an interest rate 4 percentage points over Libor for loans of up to 75 per cent loan to value.

Equity general manager Danny Mahon says: "We have had a tremendous response. We understand that brokers are coming away from established lenders in the sub-prime market to use us."

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