Kevin O’Donnell, long time mortgage guru, then editor at FA, talks in the Mortgage Extra supplement about procuration fees, which he thinks should be called ‘introductory mortgage commissions’. Having once been ‘rare’, procuration fees are on their way to becoming the standard way of remunerating mortgage intermediaries.
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This he sees as common sense and recognises that mortgage advice is worth paying for, but it is not free and never will be. In the days of the endowment sales boom, insurance commission on the products effectively cross-subsidised home loan advice. That no longer happens.
Griffiths says: “O’Donnell slips up later by calling them procurement fees, which is at least marginally better than calling them procreation fees – which I have seen in writing from one building society marketing manager. But introductory mortgage commissions? No way.”
MI looks at how credit repair mortgages have been used in the past. The conclusion is that there is no easy answer to the increasing problem of debt. People will continue to have to push their affordability to get on the property ladder as house prices increase. It is up to the industry as a whole to help people who fall into trouble, with flexible products and sound advice.
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In MS, Dev Malle of Personal Touch says lenders must scrap paper and move online. Malle thinks there are dangers for advisers who do not adopt the online process. With more and more lenders becoming electronic-only, clients may be disadvantaged if they are not offered a ‘whole of market’ panel.
In MSL Jonathan Cornell of Hamptons International reviews lenders’ arrangement fees and their explosive growth over the past few years. Cornell says he thoroughly welcomes product innovation and, despite that fact that some lenders’ product guides are becoming the size of telephone directories, choice is good for all of us. It is only worth paying an arrangement fee if you get some value from it. If a fee secures you an outstanding mortgage rate, it is worth paying.
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Griffiths says: “Cornell says any decent sourcing system makes it possible to compare what a client will pay over a period. Surely this is the crux of the matter? You shouldn’t look at the initial pay rate or fees out of context. You should focus on the total cost over a defined period.”
In LS, Rob Griffiths of the Association of Mortgage Intermediaries (AMI) says lenders should engage with the ‘challenges’ broker firms are facing. AMI is keen on outlining the responsibilities of lenders and brokers to ensure fair treatment of clients.
Publications mentioned
Financial Adviser FA 08 Mar
Mortgage Introducer MI 10 Mar
Mortgage Strategy MS 12 Mar
Mortgage Solutions MSL 12 Mar
Mortgage Distributor MD February
Lending Strategy LS February
