Network imposes fee cap on second charge master brokers

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  • 26/07/2016
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Network imposes fee cap on second charge master brokers
Financial advice network Intrinsic has imposed a maximum fee limit on all master brokers on its panel to help mortgage advisers secure the best deal for their clients.

The cap has been set at 4% of the balance of the loan and will apply to all master brokers appointed to its panel following a tender process which ended in June. The names of those master brokers have yet to be announced.

A spokesman for the network said it has used its scale as one of the largest networks in the UK to secure the ‘favourable’ terms for its clients.

Before the launch of the Mortgage Credit Directive (MCD) in March, mortgage advisers were not obliged to offer their clients a second charge loan, with many citing expensive fees and rates as market deterrents. Under the EU rules, an adviser must disclose a second charge as an alternative to a remortgage or further advance.

Traditionally, master brokers charge their customers fees of up to 10% of the loan balance. The justification for setting the fee at this level was to allow them to cover the costs associated with processing the loan, such as a valuation and mortgage consent as charging borrowers upfront fees was prohibited under the Consumer Credit Agreement (CCA). In some cases, the borrower would pull out, leaving the broker out of pocket on a deal which had not completed.

Second charge firms are now subject to the Mortgage Conduct of Business rules and can charge borrowers at the outset for third party services, removing the need to impose an expensive fee structure.

An Intrinsic spokesman said: “At Intrinsic we want to support advisers to achieve the best possible outcomes for their clients through a well-controlled advice process.

“Following a detailed tender process we have appointed a panel of master brokers in order to allow advisers to offer second-charge advice according to regulatory requirements. All master brokers must agree to limit their charges as a condition of inclusion on the panel and no exceptions have been made for any master broker firms.”

Many master brokers, including The Loans Engine and Positive Lending, have already moved to a flat fee structure in a bid to become more competitive in the mortgage market.

Intrinsic will announce its master broker panel in the coming weeks.

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