Steve Hoare, managing director of Home Loan Partnership, said that despite greater competition and tighter margins procuration fees will equalise in the next twelve months and both prime and sub-prime lenders will be paying around £500.
"Some prime lenders are moving towards a 0.5 per cent fee, which, on a £100,000 mortgage, would give a fee of £500. If there are comparable products from different lenders what are you going to go for?" said Hoare.
Hoare said: "The level of work for sub-prime mortgages is getting smaller and so the reduction in some fees can be justified, although the level of work does depend on the lender and/or the packager. As sub-prime lenders become more comfortable with their lending criteria it is often just a case of collecting the right information."
However, this has been dismissed out of hand by a number of other industry players. Mark Charlesworth, managing director of The Mortgage Operation said: "I cannot see where the logic for this is at all. The sub-prime sector is more profitable than the prime and procuration fees are not going to be drawn down to the same level even if margins are becoming tighter. There may be some convergence but they will not be the same."
Stephen Knight, executive chairman of GMAC RFC, agreed. He said: "I cannot see it happening. The sub-prime market requires much more effort from brokers to get the loan accepted. Due to the nature of the business, applications are not completed in the same volume, so those that are completed generate a higher fee for brokers, otherwise they just would not be financially viable."
And, Jennifer Stodart, spokeswoman for Nationwide, confirmed that the lender was not preparing to raise fees. She said: "Although we negotiate our procuration fees with intermediaries, we have no plans to increase our fees this year."
