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Fears over sub-prime fee bias

IFAs fear high procuration fees are encouraging unscrupulous advisers to inappropriately recommend sub-prime mortgages.

Advisers and rival sub-prime providers claim some lenders are paying as much as 3 per cent of the mortgage value in procuration fees, raising concerns that certain products may be favoured over others.

Many sub-prime lenders are not covered by the mortgage code so have no obligation to disclose their fees, leaving some homebuyers unaware that the mortgage they have bought may be unsuitable.

Advisers say there is no good reason for the abnormally high procuration fees, arguing lenders are only encouraging ruthless brokers to sell mortgages that benefit them rather than the customer.

Savills Private Finance managing director Mark Chilton says: “There is no commercial justification why len-ders pay such high procuration fees other than to attract high-margin business.

“You have got to question the morality and ethics of any business so driven by procuration fees.”

Future Mortgages marketing manager Michael Bolton says: “Mortgage misselling is rife in the sub-prime market. If it wasn&#39t, then why don&#39t the lenders voluntarily disclose how much they pay in fees?”

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