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FSCS ups mortgage broker levies by £3m for nine month period

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  • 19/01/2018
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FSCS ups mortgage broker levies by £3m for nine month period
The Financial Services Compensation Scheme (FSCS) said it expects to levy brokers £17m over the 2018/19 financial year - £3m up on the £14m for 2017/18.

The FSCS said this was largely driven by an increase in claim volumes and compensation costs in recent years.

However, the estimated number of completed claims will fall from 1,044 in 2017/18, to 624 in 2018/19.

In particular, a “large proportion” of the forecast costs resulted from claims against one firm, Fuel Investments Limited.

Claims against Fuel Investments typically relate to advice given to remortgage residential properties to raise funds for high risk property investments.

“Customers are paid compensation for losses directly caused by the regulated mortgage advice, which can include significant losses arising from the property investments,” said the FSCS.

“These meant a marked increase in our uphold rate and compensation paid over the past few years, which are also reflected in our levy forecast.”

Yesterday, Mortgage Solutions reported that brokers within the home finance intermediation sector will pay £1.19m in 2018/19 towards the FSCS’ management expenses. This is down 13% from £1.36m this year, despite total expenses rising by 5%.

 

Short, sharp shock

The figures were announced in the scheme’s plan and budget for 2018/19, published today, which outlines the scheme’s expected management costs and levy forecasts for financial services firms.

The 2018/19 levy will cover a nine month window, instead of the usual 12 months, in order to match the levies with the financial year as opposed to the calendar year.

In total, the scheme expects to levy the financial services industry £336m over the nine months from 1 July 2018 to 31 March 2019, against the £320m levied in 2017/18.

The FSCS was created to protect consumers in the event that authorised financial services firms fail, and has paid out £26bn to more than 4.5m people since 2001.

A new single outsource partner to handle the majority of claims in the 2018/19 period will be also announced shortly, and FSCS will confirm the final levy in April 2018.

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