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Do you expect to see less or more second charge mortgage lenders in 2018?



Over 60% of brokers find targets distract from TCF


Over 60% of brokers find targets distract from TCF

A poll conducted by Loan Talk revealed that over 60 per cent of participants believe that volume targets can work against TCF in some scenarios.

In response to the question: Do volume targets in the sector work against treating the client fairly in some scenarios?, 25 per cent of participants said yes, 37.5 per cent said no and the other 37.5 per cent felt that they do on occasion. Meaning that over 62 per cent of respondents feel that targets can sway a professional’s ability to Treat Customers Fairly (TCF).


 
Managing Director of Gateway 2 Finance, Paul Woodworth, said he was not surprised by the results.

“In reality, [the majority] agrees that the volume-driven targets could be seen to be a reason for business to potentially be introduced to one lender as opposed to another,” he said.

Paul also felt that the commission model in place within the secured loan industry has influenced where business is directed for several years.

“Secured loan lenders obviously believe that offering enhanced volume-driven commissions can influence where broker business is directed, otherwise, why would such incentives exist?”

In October last year, Managing Director at Promise Solutions, Steve Walker, said on the issue of volume targets: “Brokers can easily get caught out by offers which are dependent on hitting monthly volume targets or requiring loans to pay out within a defined period.

“There are very few mortgage brokers who realistically expect three loan completions in one month in order to qualify for a particular incentive. I have also seen some clever wording where the offer is time-bound; meaning over half of the loans won’t qualify due to the processing period involved. Our incentive simply doesn’t do this.”

Some, including Paul, believe that the practice of lenders offering volume-driven incentives makes it difficult for smaller brokerages to compete with larger brokers, as the enhanced volume driven commissions enable the larger brokers to invest more in marketing and allow them to offer higher payment terms to introducing partners.

“A fairer solution would be for the industry to replicate the first charge mortgage model where procuration payments from lenders do vary, however they are not volume-based,” said Paul.

“The larger brokers would still earn more on a pro rata basis due to overall volumes, and as an industry, there could not be any potential complaints about customers not being treated fairly due to a broker being close to achieving an enhanced commission target. The TCF issue is then down to the brokers sales process and lender panel.”





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