The Loans Engine has scrapped its master broker fee and replaced it with a flat £295 application fee charged after the decision in principle is confirmed by the lender.
The specialist finance broker will give brokers, networks and clubs the ability to choose client costs by setting their own fee.
The Loans Engine said the move will keep second charges in line with the first charge market and comes after the Financial Conduct Authority raised concerns about fee levels in the second charge market.
Ryan McGrath (pictured), chief executive of The Loans Engine, said: “By changing to an application fee model we are leading the field in our sector and this is a big, bold, first-adopter move that should sit much more comfortably with those first-charge mortgage advisers who might have previously been uncomfortable with the level of fees charged in the seconds market.
“We will give control to the intermediary, network or club, to set their earnings at a level which works for them and is fair to the client.
“We hope to draw in those mortgage intermediaries who may have felt previously disenfranchised from the sector.”
Before the FCA started regulating second charge mortgages The Loans Engine wasn’t allowed to retain any greater fee than £5 on cancelled applications which resulted in a bundling of the valuation and lender reference fees into one master broker fee
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “Scrapping master broker fees is a bold move by The Loans Engine but one the market certainly needed.
“We work closely with our panel of master broker firms and this move should encourage intermediaries to re-look at their proposition in order to ensure the best possible solution is found for the customer – which may include a second charge.
“With reducing rates and charges, there really is no reason for intermediaries not to include second charges as part of their holistic mortgage service to clients.”
Martin Reynolds, chief executive, Simply Biz Mortgage, said: “The second-charge mortgage market is currently in the midst of big changes and this will continue for a while as all parts of the distribution chain realign their models.
“Fees have always been a contentious area and it is good to see The Loans Engine taking a bold step and moving to this new model.
“As one of our preferred partners I believe our members will embrace this new stance and engage in greater numbers to fully understand the opportunities and benefits to their clients within the second-charge market.”