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‘Retention fees are web of sin’

Edeus managing director Alan Cleary has launched a scathing attack on retention fees, branding them a “web of sin” and insisting they contravene treating customers fairly principles.

Cleary says lenders do not have brokers’ best interests at heart and are only out to kill the remortgage market, which could mean considerably less business for brokers in future.

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi says a fairer way to remunerate brokers would be via trail commission.

Accord, BM Solutions, First Active, Halifax, and Woolwich all provide retention incen-tives while Abbey, A&L, Cheltenham & Gloucester and Nationwide are considering their retention options.

Cleary says: “Lenders are not paying retention fees to be nice to brokers. They are paying intermediaries to kill off the remortgage market and that has got nothing to do with helping brokers or treating customers fairly.

“They beckon you to enter their web of sin. The tactic they tout as a solution is to flash a bit of cash and persuade brokers to collaborate. Then the two sides collude in stopping customers from remortgaging elsewhere and protect the lenders’ huge and overpriced back books. TCF goes out the window.

“If these retention fee strategies succeed in all but killing off the remortgage market, the impact on intermediaries will be serious indeed. Fifty per cent of lending in 2006 will be remortgages – between £140bn and £160bn. Any contraction in that volume will mean curtains for many brokers.”

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