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Mortgage brokers’ FSCS levy halves to £1.5m

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  • 21/05/2020
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Mortgage brokers’ FSCS levy halves to £1.5m
The Financial Services Compensation Scheme (FSCS) levy for mortgage brokers has more than halved to £1.5m for the 2020/21 financial year.

 

Mortgage lenders will also be contributing £500,000 to cover compensation for failures in the sector.

The FSCS had originally projected that brokers would need to pay around £3m in levies for this year, but the regulator has since revised that figure down.

Its estimates for the Home Finance Intermediation sector show a £1.5m predicted drop in compensation claims from just over £8m to £6.6m.

However, the FSCS warned that these figures had been calculated before the Covid-19 crisis hit and that there could be further unexpected costs coming as a result of this.

 

£100m increase

The mortgage intermediary sector remained one of the smallest costs for the FSCS.

Overall, the regulator’s levy increased to £649m – up £14m from its earlier estimate of £635m and up from the £549m in 2019/20.

General insurance brokers will contribute £18m – up from £12m in 2019/20, but down from the earlier estimate of £23m.

The largest increases and greatest costs for the scheme came in the Life Distribution and Investment Intermediation, Investment Provision and General Insurance Provision sectors.

The FSCS highlighted the ongoing issues with London Capital and Finance (LCF), self-invested personal pensions mis-selling and the British Steel Pension Scheme.

The Life Distribution and Investment Intermediation forecast has increased by £48m, mainly due to the inclusion of LCF which the FSCS has provisionally estimated will cost £44m in compensation.

This means that the amount of funding required by this class, including levies payable as provider contributions by other classes, has increased by £41m to £280m

 

Unexpected future failures

Commenting on the figures, FSCS chief executive Caroline Rainbird said: “The levies were agreed prior to the Covid-19 lockdown, and there may be some future failures in the market that we have not planned or budgeted for in this forecast due to any economic downturn that may come.

“We will keep all stakeholders updated throughout the year.”

She added that although the pandemic has altered working practices it has not impacted on the day to day delivery of FSCS’ service.

“We have continued to adapt and improve our approach to protect our staff and serve our customers and, as a result of those efforts, business has continued as usual.”

 

 

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