View more on these topics

Quality control

As lenders are increasingly putting quality of business before volume, Paul Thomas asks if this is a way of introducing proc fee cuts by the back door

Legal & General Mortgage Club says a number of lenders are looking to change their broker remuneration model to focus on the quality of business submitted rather than the volume.

Earlier this month, Money Marketing’s sister publication Mortgage Strategy reported that one unnamed lender is looking to pay brokers based on the quality of cases submitted.

In the run-up to the financial crisis, lenders were criticised for chasing volume at the expense of quality. This may no longer be the case but remuneration models do still place a significant emphasis on volume.

However, L&G Mortgage Club managing director Ben Thompson believes the shift to quality is more widespread and is being considered by a number of lenders – something he thinks would benefit lenders, consumers and the wider market.

He says: “The brokers who are in the market now are generally very good but if I could offer them one tip it would be to focus on ensuring the quality of submissions and to prepare each case as well as possible.”

Brokers are concerned that lenders could cut procuration fees and use business quality as an excuse, without providing evidence of poor quality.

Oakhurst Financial Planning managing director Frazer Horton says: “It does not sound like lenders would move towards this model for any other reason than to cut commission.

“If this is to work, lenders need to tell brokers exactly what business they want and how they want it and this needs to be easy to understand.”

London & Country associate director of communications David Hollingworth says: “In this climate, I understand why looking at the quality of business would be a key concern for lenders but I think it would be misguided for lenders to do this just as an excuse to cut proc fees.”

Association of Mortgage Intermediaries director Robert Sinclair says: “Many lenders still want volume of business but at the same time they want to ensure it is of sufficient quality.

“We are in an interesting position where lenders are assessing how to get the type of business they want. I think we are going to see change over the next 12 months and which way things go will depend on each individual lender.”

PMS executive director John Malone does not think lenders will use a move towards quality business to cut proc fees.

He says: “Lenders are looking to reward good quality business more than they have in the past but we have no reason to suspect that any lenders are going to dramatically change the level of proc fees they pay – it is simply to ensure quality is maintained.”

If lenders decide to reward intermediaries for the mix of business they submit, brokers who operate solely in niche sectors, such as newbuild or buy to let, could be unfairly disadvantaged.

Thompson has issued a plea for lenders to consider that some intermediary businesses operate in niche sectors.

He says: “We would make a general appeal to lenders to ensure intermediaries who operate in niche areas are not inadvertently disadvantaged. For example, it takes longer to complete on new- builds, where some brokers solely operate.”

The Council of Mortgage Lenders declined to comment on the issue, saying proc fees are commercial decisions made by individual lenders.


Standard Life’s platform assets up 26%

Standard Life increased the total assets under administration on its platform by 26 per cent from £10bn to £12.6bn to the year ending March 31, 2012. In a first quarter interim management statement released today, the firm says the total assets under administration in the UK increased from £11.4bn in the three months from the […]


Sesame reveals restricted panel providers

Sesame Bankhall Group has announced the initial product providers for its restricted advice arm. The proposition will launch in Q3 and will include Aegon, Aviva, Friends Life, LV=, Partnership, Prudential, PruProtect and Zurich. The firm says a few more names are likely to be added to this list which covers investment, pensions, protection and at […]

Leek United BS caps interest-only LTV at 50%

Leek United Building Society has become to latest lender to tighten its interest-only criteria by limiting its maximum loan-to-value on this type of lending to 50 per cent. Previously the building society lent up to 75 per cent LTV on an interest-only basis. The building society has also placed a minimum property valuation of £100,000 […]

2016 Global Survey of Individual Investors: How is investor behaviour rewriting the job description for financial professionals?

Trapped between expectations for near double-digit returns and strong apprehensions about investing in persistently volatile markets, investors worldwide are of the opinion that professional financial advice is worth the fee. But even though they believe individuals who work with a financial professional are more likely to achieve their goals, investors have a clear vision of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment