Today’s move by Nationwide and Lloyds Banking Group to “review” their proc fees for directly authorised brokers is perhaps more a necessity than a choice.
There’s the obvious reason for this move which is that lenders can pick and choose the business they do and whether they give it to brokers.
Especially while demand is high and funding limited.
But there’s another less obvious reason that might be driving this decision.
It’s worth remembering that these two lenders in particular have large back books of existing business – much of which is on lifetime tracker rates.
The rates they’re being forced to honour are low and borrowers aren’t going anywhere.
Lifetime trackers are paying anywhere between Bank Base Rate and around 2%.
Meanwhile the cost of funds out in the market is averaging around 3.5% to 4%.
If you consider the gap between what they’re being forced to pay out on retail deposits and what they’re having to accept from borrowers on lifetime tracker rates – they’ll be taking a big hit.
There’s the added fact the savings market has been particularly competitive in the past month in the run up to ISA season.
With most savers putting off choosing their ISA until the last week before the deadline it’s perhaps unsurprising that LBG and Nationwide have made this proc fee decision now.
Until this week they probably wouldn’t have known what effect this would have on their cost of funds and the volume of retail deposits they’d win in the ISA showdown.
Lenders are being attacked on regulatory and capital fronts and as much as this move may be to limit volumes done by lenders via the intermediary channel in favour of branches, it also undeniably raises a question.
Are lenders forcing intermediaries to share their pain and pay for the advice they gave to borrowers to sit tight on attractive rates?