Complete FS urges master brokers to ‘renounce’ old fee model

The firm said all master brokers should move to a flat fee system and leave the advice fee to the intermediary.

Master broker the Loans Engine already cut its master broker fee and replaced it with a £295 application fee in July, similar to those levied in the first charge mortgage market. But Complete said more needed to be done.

Director Tony Salentino said: “What is important is that the client can see exactly what he is paying for. Advisers now have more clarity which means that they can confidently compare a first charge remortgage more clearly with a second charge loan.

“Costs are going to come under the microscope and if the second charge sector is to continue to grow, then reduction of fees and more transparency are going to be very important in persuading first time adviser users to properly consider a second charge option for clients.”

The Mortgage Credit Directive (MCD) implemented in March brought first and second charge mortgages closer together, effectively treating them under one regulatory regime.

This allowed master brokers to adopt a more flexible charging structure, singling out advice and application fees.

Prior to the MCD – under the rules of the Consumer Credit Act – master brokers were prevented charging customers upfront for costs to process the loan which meant they would foot the bill for cancelled applications. This resulted in a bundling of direct costs, such as valuation and lender reference fees, into one master broker fee, which included a cost for its time, which was then added to the loan on completion. To compensate for the loans which cancelled, leaving the broker out of pocket, those which completed were charged up to 10% of the balance of their loan.

Complete introduced its own £199 flat fee in March, getting rid of any master broker fee and leaving the advice fee up to the intermediary to charge.

The firm charges £199 along with the lender’s valuation fee and disbursements on all second charge cases.

Salentino said he was “delighted to see that some master brokers have followed our lead by cutting fees” but said they should go further and eliminate the old fee structure altogether.

“There are plenty of good reasons why a second charge loan is suitable, but costs are a major factor in that calculation,” he said.