Procuration fees – are they too low?

Brokers give their views

Procuration fees – are they too low?

While notable lenders have amended the conditions of their proc fees in recent months, the consensus seems to remain among brokers, that more needs to be done.

Saffron Building Society has removed proc fee caps on all products, Quantum Mortgages has raised proc fees by up to 0.30%, and Catalyst Property Finance now offers all brokers 2.50% proc fees.

Despite this, brokers have demanded lenders take another look at proc fees, especially when considering product transfers.

Small loans

Imran Hussain (pictured), director at Harmony Financial Services, said proc fees are the same percentage for the majority of lenders on purchase or remortgage loans, but he added they take a massive dive should a broker transact a product transfer.

Hussain believes proc fees need to be reviewed by lenders, as he added the cost of operating has risen massively in recent times.

“I hope mortgage trade bodies can instruct lenders to introduce a minimum proc fee of £500, as smaller loans still take the same amount of time to administer,” he said.

Rhys Schofield, brand director at Peak Mortgages and Protection, said that mortgage proc fees need looking at across the board. Schofield agreed with Hussain that this is particularly the case on smaller mortgages.

“Lenders are getting an absolute steal with brokers doing all the advertising, advice and client work, if they are paying anything under a £500 proc fee,” he added.

Darryl Dhoffer, mortgage expert at The Mortgage Expert, said proc fees have always been a topic of contention.

“The amount of work now required from brokers has escalated over the years, and yet proc fees have largely remained the same,” he said.

Dhoffer believes proc fees have been due a huge overhaul for a long time and warrant an uplift, especially given today’s climate. He added that lenders will argue their profit margins have tightened in recent years, but some lenders, he said, have in fact seen record figures.

Positive spin

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, agreed with the previous points that the proc fee for a purchase or remortgage case should be higher than a product transfer, as it is new business to a lender.

“However, my personal view is that this is not a deal breaker - while the upfront work is the same whether the advice ends up being a remortgage or a product transfer, the work involved in making the application and chasing this through to completion is far less, so, for the time spent, the hourly rate likely works out to be similar,” he said.

When all is said and done, Taylor-Barr added that what is right for the client should be the driving factor in the process.

Stephen Perkins, managing director at Yellow Brick Mortgages, said proc fees for remortgages and purchases are at a decent enough level for brokers.

“The challenge in the current market is that due to the affordability calculations being tougher, the non-assessed product transfer is more often the most suitable option for the client, but these pay a lower proc fee,” he said.

However, doing right by the client, giving good advice and exceptional service, Perkins said, will always pay dividends in the longer term.

Do you believe proc fees need a further looking at in today’s market? Let us know in the comment section below.