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Master broker calls for review of fee models
Master brokers need to review their fee models or risk not giving first charge mortgage brokers the support they need within the seconds market, according to Ryan McGrath, Chief Executive of The Loans Engine.
Speaking at Precise Mortgages’ MCD and Second Charge Lending Conference, Ryan revealed that specialist broker The Loans Engine will scrap its master broker fee on 25th July in a bid to make complex second charges more appealing to the first charge mortgage market.
“Lenders have been telling me for 18 years that [second charge loans are] going to become easier to sell and package, but that’s just not the case,” Ryan explained.
“It hasn’t happened so far so I think master brokers do need to look at themselves, they do need to look at their models, and in particular, fees.
“Because there’s a whole bunch of customers out there, and I mean first mortgage brokers, that will need help and support in order to offer seconds in a really good way.
“But unless master brokers sort out their fee models, that won’t happen.”
Ryan suggested that first mortgage brokers may already be intimidated by the complexity of second charges.
“I think first mortgage brokers will have a go at [second charge loans] and some will make a success of it, and others will decide actually it’s not for them.
“I guess one of my biggest concerns is that if some of the barriers aren’t resolved, then the first mortgage market could just switch off to seconds.
“…That would be real shame for customers and the second charge market.”
Jeremy Duncombe, Director of Legal & General Mortgage Club, stated that the best way to attract first mortgage brokers and thereby grow the seconds market was to simplify the process.
“If we want to keep the market the same size and we all want to fight over the same business, then none of us are going to really benefit from it.
“…A first charge broker who’s not familiar with second charges will look at the market and say: ‘You know what, this is not for me. It seems expensive and I’m going to walk away and do it through a different route’.
“…The way to [grow the market] is to make it as familiar and as simple as normal to a first charge broker as they’re used to.”
Meanwhile, Nicola Mooney, Head of Secured, Intermediary and Business Finance at Freedom Finance, said brokers fees were part of the business.
“I think a fair thing to say … is all we’re looking for is a fair day’s pay for a fair day’s work and it’s about obviously rewarding the broker for the work they do.”
However, Nicola admitted that altering fee models may be necessary in order to attract business.
“Obviously we’re in it for business, we’re not here as a charity, but it is all about the right customer outcome.
“…With the fees, obviously if we can give [it] back to the customer, it is going to be a much better outcome and it’s the only way I think we can start to look to regrow the opportunity that’s out there in the market.
“I think we need to all follow and work together.”
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