According to research from Boon Brokers, which surveyed around 1,000 people who have applied for a mortgage through a broker in the past 24 months, around 8% said fees and commission were barely mentioned.
This has an impact on trust, with 87% saying that transparency around client fees and commission would improve their confidence in working with a broker.
To be compliant with the Financial Conduct Authority (FCA), brokers provide a written disclosure of commission and fees, but the research, the broker argued, shows that borrowers may still struggle to understand exactly what they are paying for and why.
Approximately 96% of respondents wanted “clear, jargon-free explanations” of both broker fees and commission, delivered in writing and verbally, to “fully understand how brokers are compensated”.
There is also a discrepancy when disclosure exists but is unclear or when brokers charge a direct fee in addition to earning lender commission.
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Two-thirds of respondents did not fully understand how brokers earn both fees and commission, while the remaining 34% had only a “general idea without confidence in the details”.
Just under a third understood that lender commission varies by case and 69% were uncertain about how broker income is structured.
Some borrowers believed all lenders pay the same commission, coming to 12%, while 5% thought commission is standardised to prevent bias and 8% thought brokers receive a fixed fee regardless of the lender.
When asked about brokers earning both a direct fee and lender commission, 85% of respondents said this practice should be “clearly explained” to ensure “complete fairness and trust”.
Only 4% of respondents assumed that by paying a direct fee, the broker would not therefore also receive commission.
There is also a generational difference, with 55% of borrowers aged 25-34 more likely to prefer written and verbal explanations of broker fees and commission.
This compares to 72% of 55-64-year-olds who prefer written breakdowns, with only 27% of this age group preferring verbal explanations.
Gerard Boon, managing director of Boon Brokers, said: “Mortgage brokers are required by FCA regulations to provide clients with clear breakdowns of their commission.
“However, what is often missing is a jargon-free explanation that helps borrowers fully understand both the broker fees and commission that they earn. Providing transparent, easy-to-understand information is essential to ensure clients can make informed decisions and maintain trust in their broker.”
