As Chorley Building Society introduces new fees, brokers debate what's fair
One of the most contentious issues within the mortgage industry, procuration fees continue to spark debate, and no time more so than when a lender reappraises how it will acknowledge mortgage brokers for the work that they do.
So, with Chorley Building Society’s announcement that it has introduced procuration fees for all residential and buy-to-let product transfers, this perennial issue is back in the spotlight.
The introduction of its 0.2% fee, with immediate effect, comes after feedback from brokers and is a reflection of all the detailed work needed to complete a product transfer, the building society said.
Broker Sheena Campbell (pictured left), managing director at Campbell Financial, responded saying she is encouraged to see lenders increasing procuration fees for product transfers – but she believes this needs to go further.
“I do think this should become the standard across the board,” Campbell told Mortgage Introducer. “In reality, the work involved in a product transfer often mirrors, if not exceeds, the service we provide for a new mortgage.”
Such work includes reviewing rates continuously, she explained, sometimes over several months, until a client’s current deal expires.
“This can mean repeating much of the same work without the same financial recognition,” Campbell said. “We don’t charge clients a fee for arranging product transfers, so naturally, they don’t pay as well. Of course, there’s always an opportunity to explore a client’s wider needs, but that shouldn’t be used to justify lower remuneration on the core mortgage work, especially when we’re running businesses that rely on fair income from every case.”
Campbell pointed to the business model of one Denmark-based lender as an example of fair procuration fees.
“I think lenders like Danske Bank have got it right,” she said. “They pay the same proc fee for product transfers as they do for new business, and really, it should be as simple as that. Consistency like this across the market would go a long way in making brokers feel properly valued for the work we do in bringing new clients in and retaining them for the lender.”
Sam Mason (pictured second from left) runs his own business, as founder and managing director of The Mortgage & Protection Hub. Does he believe that lenders are going far enough in rewarding mortgage brokers properly for the work they do?
“My view is no,” Mason said. “For us, the same work normally applies, for research, advice, spending time with the client to understand their needs, compliance, and monitoring rates across the market up until completion. Yes, we save time on the actual application process to get a mortgage offer, but we still have to do everything else. Also, charging broker fees is often a challenge as clients can switch directly, so couple that with half the proc fee, it quickly becomes non-viable commercially.”
Like Campbell, Mason cited financial services businesses who lead by example in the way they renumerate brokers. “Lenders like Halifax & TSB pay full proc fee on product transfers,” he noted. “I believe this should be uniform across all lenders.”
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How big an issue are procuration fees for mortgage brokers?
Bob Singh (pictured second from right), director of Chess Mortgages, who has around 41,000 followers of his TikTok advice account, The Mortgage Maharaja, acknowledges that procuration fees remain a big talking point among mortgage brokers. He urges that lenders go further, with a higher fee.
“The subject of many broker forums, proc fees remain high on the agenda,” Singh said. “Proc fees need to be harmonised to 0.5% to create a level playing field when all types of mortgages take almost equal time and effort. Some brokers see the 0.2% as derisory, and the fact that the lenders encourage borrowers to switch with them direct is another bugbear. Product transfers are an advised process - the same level of paperwork and due diligence are required to decide and advise upon on the options. Proc fees have remained static and grown in value only due to the increase in the size of mortgages. A geographical disparity exists, with London brokers raking in larger fees.”
By comparison, Brett Walker (pictured right), a self-employed broker who currently works with Poole-based BWM Mortgages, seems content with the current fees.
“In my view, product transfers are relatively straightforward,” Walker said. “They require minimal effort to process, are quick to apply for, and often involve fewer compliance and documentation requirements, depending on the firm's policies. By contrast, a full remortgage demands significantly more time and effort, so I accept that a reduced procuration fee for product transfers reflects the lighter workload.”
He continued: “Some lenders, notably Halifax, offer a full procuration fee for product transfers, while most others pay a reduced fee - typically around 0.2%. Ultimately, procuration fees are our reward for introducing clients to a lender. A lower fee when renewing an existing client’s mortgage product seems a reasonable approach.”
Shane Dye, senior business development manager at Chorley Building Society, said its introduction of proc fees to its intermediary network demonstrates the value it places on the ongoing support they provide to its members.
“We understand that in the current economic climate, members will be proactively speaking with their brokers and we are very supportive of this approach,” Dye said. “I’m looking forward to talking to our network about how we can continue to work together in partnership to support our members and provide the best outcome for them.”
