Mortgage lenders could use the current market problems to cut the cost of acquisition and reduce procuration fees for brokers.
Speaking at the Money Marketing sub-prime round table, Mortgage Force managing director Rob Clifford said that he is concerned that if more mainstream lenders broaden their criteria to mop up some of the market share left behind by ailing sub-prime specialists, there could be a risk that those lenders will look to cut proc fees.
He said: “Some of the more traditional lenders may seize the opportunity to depress the cost of acquisition.
“I think there is some risk that if you are a mainstream lender who used to pay 0.35 or 0.4 per cent for your acquisition, even though you are moving around the credit curve and seizing some market share that was not yours before, it will not necessarily pay the going rate for that acquisition.”
Em financial managing director Roger Morris suggested if the erosion affects packagers and brokers, it is because lenders want a ticket out of the whole equation.
But John Charcol senior technical manager Ray Boulger said that while brokers cannot completely write off the risk, he does not believe it is a big risk because it would be a short-term strategy that would annoy a lot of brokers. He added: “It would be a short-term gain for a long-term loss.”
Morris said: “One thing I can guarantee is that once we come out of this, the packaging market will get together and blacklist lenders that have suppressed packager incomes at a time when any amount of income is needed.”