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Most broker fees kept stable but a fifth will increase following lender caps – poll results

  • 17/06/2024
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Most broker fees kept stable but a fifth will increase following lender caps – poll results
Almost three-quarters of brokers say they will keep their fees the same in light of lender fee caps, but around 20% of brokers say they will increase their fees, a poll has found.

According to a Mortgage Solutions poll, around 8% said that they would lower their broker fees, while 72% said that their fees would stay the same.

In May, Halifax said it would bring in maximum broker fees for mortgage services following the implementation of Consumer Duty from 1 June. This would be a cap of 1% or £1,500, whichever is greater.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said: “Consumer Duty sets an interim deadline of the end of July for firms to review how the first year has gone. I believe that it is this that is influencing future broker fee rates more than any broker fee caps.

“The vast majority of lenders are working with advisers on a firm-by-firm and case-by-case basis and are not applying blanket policies. It is regulated intermediary firms’ responsibility to set their own fees policies, not incumbent on lenders to police the market.”

Sinclair has previously said that publicising broker fee caps “stretches their Consumer Duty accountabilities to an extreme”.

Karl Wilkinson, CEO of Access Financial Services, said that a fee cap of 1% of the loan amount or £1,500, whichever is greater, is “actually a really high fee”.

He continued: “I don’t understand why brokers would ever charge £1,500 or 1% – which would be £5,000 on a £500,000 mortgage – for a mortgage that’s going to go to Halifax, a relatively straightforward high street lender.

“It would really put the customer off if brokers were to end up charging that much for a vanilla case. The maximum we charge at Access FS for simple cases is £795.”

Wilkinson said that it would only charge more, up to 1% of the loan, for complex cases that involve multiple sources of income, a commercial loan, bridging finance or houses in multiple occupation (HMOs).

“I would suggest that such high fees would put off customers with simple cases. I can understand, though, people thinking that lenders dictating brokers’ fees is a bit inappropriate.

“Then there is the concern that specialist lenders may pick up the gauntlet and impose fee caps that are unsuitable for complex cases, deterring advisers from taking on complex cases, which could ultimately end up causing Consumer Duty conflicts,” he added.


Broker fee adjustment should be ‘carefully considered’

Jason Berry, group sales director at Crystal Specialist Finance, said that the “priority for the industry is to continue providing exceptional service and value to clients, and any adjustments to a fee structure should be carefully considered to maintain this standard”.

“The very best brokers operate by charging fair amounts for the work they conduct and effectively communicate this value easily to their clients,” he added.

Berry continued: “Brokers continue to work longer hours, and due to the influx of product transfer transactions, many are earning up to 40% less annually than they have in previous years.

“According to the latest survey by the Mortgage Industry Mental Health Charter [MIMHC], 62% of brokers work over 45 hours a week, with 13% working more than 60 hours. Fee caps could place further strain on an already overburdened workforce.”

Jay Naylor, Primis’ marketing director, said: “Obviously brokers have to make their own commercial decisions that reflect the markets in which they operate, the complexity and workload of the type of cases they deal with, but also the fair value borrowers require.

“The poll results imply many are already comfortable with those dynamics, but it is encouraging to see others embracing the need to keep these charges under review.”

Lender fee cap not ‘green light’ to increase broker fee

David Hollingworth, associate director of communications for L&C Mortgages, said that lenders are “likely to put the level of broker fees being charged under greater scrutiny in today’s Consumer Duty world, which should be seen as a good thing”.

He continued: “Lloyds Banking Group may have been very transparent in publishing its stance and drawing some clear parameters, but many others will also be applying a similar lens to the broker fees charged in the background. The fact that most feel no need to alter their fees as a result suggests that, unsurprisingly, most brokers will be comfortable that they are within a reasonable range. Some do concede that they will lower their fees, which should hold some positive for consumers.

“The fact that others seem to see this as a green light to hike their fees is perhaps a more surprising reaction. That is perhaps the downside of placing set caps on fees, as those below it deem the maximum as setting the fair price to charge. Competitive tension will of course also have a say in that, and savvy customers will no doubt shop around for better value.”

Hollingworth added: “We’re fully committed to maintaining our no fee stance for our customers. That will give more consumers the chance to access advice on their mortgage, increasingly important in a difficult market.

“Those charging fees should be consistent in their approach and at reasonable levels. The outliers are clearly going to find themselves under the microscope and, anecdotally, some fees just don’t sit in the right ballpark and will no doubt be stamped out over time. “

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