I recently read an industry article that asked three respondents to state what influenced them in the placement process; two of them said the procuration fee had no part in the decision – hogwash.
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We should all be upstanding when Stephen Knight steps down from GMAC-RFC later in the year – it was unashamedly his original company Private Label that forced lenders into recognising that obtaining and presenting the client merited a reward.
The pitfalls in mortgage broking are, I believe, greater than the insurances – your client could be gazumped, be made redundant, have their overtime withdrawn, work for a company that refuses to give a reference or confirm the bonus is regular, have an accountant with the wrong qualifications, instruct a solicitor who the lender says does not have enough partners, have a poor survey, forget they had a personal loan, did not realise that they had to always make a minimum credit card payment, thought they had the permanent right to reside, or indeed someone in the chain did.
Then there is the advice chain in a regulated environment itself, with tens of thousands of products to sift through.
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Much has been written about how packagers have not only survived ‘Mortgage Day’, but now are buoyant businesses – mortgage clubs too are thriving. While lenders plead poverty and present sad, violin-accompanied stories about how their margins have been eroded, the truth of the matter is they have never been fair with us since that happy day when Knight managed to pay us £100 for a case. Let’s face it, a lot of successful lenders in the UK don’t even have a shop front, so it’s perhaps unsurprising that the broker business is pushing towards 70 per cent of the total market. They need us to complete the sales process.
A couple of lenders have told me recently that they earn slightly less than some packagers now – before I reach for the tissues, I think they should remember that typically we pay on at least half of that and invariably subsidise the valuation cost as well. Reading between the lines of that admission, allowing for packager deduction, they are still netting roughly twice as much as the broker.
Newsflash – the indictors for lenders are showing that their cake is likely to be further split.
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Take the latest spat as competition bites; Northern Rock and BM Solutions, or perhaps the once untouchable Together versus Mortgage Plus. This started at 0.50 per cent, plus £150 and back and forth between them it has reached 0.60 per cent, plus £300 in a month or so.
Halifax surprised everyone with its lower-than-expected net lending, despite the introduction of its well-publicised retention strategy, and is now paying an extra £150 for remortgage business on top of its standard arrangements. Just think – if we would’ve had £150 in its entirety back in the pre-Knight days, we would have all been cock-a-hoop.
There also appears to be an accelerated trend towards paying networks more for accessing their appointed representatives. This appears right as it recognises the extra help given to comply with regulation, and it is, after all, secured distribution.
Traditional building societies and banks are moving away from a single procuration fee structure to reflect the market forces brought about by the centralised lenders. For example, many now pay 0.50 per cent for buy-to-let.
The pendulum is swinging in our favour and the lenders should not get disheartened – rather rejoice in the fact they have fleeced us for so long.
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Mainstream
High loan-to-values (LTV) seem to be the flavour of the day – Abbey is the latest to launch a 100 per cent mortgage. The maximum loan size is generous at £500,000 and it also boasts up to five times income.
The Mortgage Works (TMW) has introduced a quirky 99 per cent LTV, presumably on the basis that if someone contributes they are less likely to default on the loan.
Buy-to-let
Clydesdale now allows applicants to split their mortgage to part fixed and tracker to take advantage of offset on the latter element. It is also worth remembering Clydesdale allows current accounts or savings accounts to be offset.
TMW has added an extra adverse category on its buy-to-let range allowing two CCJs to £500 and any number of CCJs registered 12 months.
First National has introduced a scheme with a relaxed approach to its standard criteria. Gone are the minimum employment period and salaried income requirements.
Bank of Ireland has launched a light refurbishment product aimed at landlords with at least five properties. The applicant can borrow 85 per cent of the property’s purchase price initially and then up to 85 per cent of the ‘after works’ valuation. Importantly, the rental cover is based on the latter.
Self-cert
Edeus has launched fixed rates and this should help it tremendously.
db mortgages is poised to launch its direct-to-broker IT solution.
Mortgages plc has extended its affordability calculator onto self-cert.
Advantage has increased its first-time buyer LTV to 90 per cent.
Adverse
db mortgages looks set to tighten its unlimited range. It has also reset its LIBOR at 5.85 per cent and GMAC-RFC has gone to 5.84 per cent. This puts them both slightly higher than the majority of the market that reset on 1 June.
