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Lenders come to end of trail

Mortgage lenders say there is no demand for trail commission despite the changing regulatory outlook.

Intelligent Finance, Standard Life Bank and Bank of Scotland One Account, which used to offer trail, say they would be surprised if any lender reintroduced the option as there does not seem to be a demand.

IF sales director Cammy Amaira says: “Before we withdrew our trail commission, we spoke to our brokers for feedback and the overwhelming response was that they prefer an up-front, one-off fee to help with their business planning.”

But Mortgageforce managing director Rob Clifford says that with the changing regulatory outlook, particularly following the retail distribution review proposals, there will be more pressure on the market to put commission on a recurring basis rather than up front. He says: “The fact is that brokers are not adequately remunerated by lenders over the medium term. Trail commission helps to build future income streams. The current up-front fee system lacks emb-edded value and mortgage brokers have to start all over again each year.”

Both the Australian and US mortgage markets rely heav-ily on trail commission rather than a one-off, up-front fee.

Australian firm Mortgage Choice Limited chief financial officer Tony Crossley says: “Trail commission has the effect of locking in brokers to their business for far longer than any short-term incentive package. We are very impressed with the longevity of broker business and the continuity that this provides customers.”

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