Name: Mike Fitzgerald
Company: Emba Group
The recent announcement by the FSA that they are to increase broker fees has certainly provoked anger and comment from the broker community. The increase ranges from a 34% rise for mortgage brokers up to an 86% jump for firms with a turnover in excess of £5m.
The reasons for this rise are to pay for increased work created by the Mortgage Market Review and extra staff to combat mortgage fraud.
The increase comes at a time when brokers are struggling to survive, and many are angry as they feel that they are being blamed for the financial crisis. Of course, there have been cases where brokers have been found guilty of fraudulent practices. However, the brokers that I speak to feel that the recent hike in fees is just another indication of how they are viewed by the regulatory authorities.
It is well known that the worldwide recession was caused by greedy and dubious bankers and traders, and loose regulation did not help. Now the screw is being turned and the stable door is being shut long after the horse has bolted.
Instead of piling more and more fees onto the broker community, the Government and regulatory authorities should be helping small broker firms. These firms provide a service that I feel is second to none. The advisers in these firms usually have a wealth of experience and they can advise clients on a whole-of-market basis. They are also spread widely around the UK and provide access to a wide variety of products. Any further reduction of broker numbers will harm consumer choice.
Name: Rob Clifford
Company: If I Were You
I am not naturally a pessimist, but I cannot think of a time when so many factors conspired to make running a mortgage brokerage completely unpalatable. As the lowest business levels for ten years combine with unrivalled regulatory costs, it is a wonder that brokers are motivated to get out of bed each morning.
I realise that the FSA employs 3700 people and its funding requirement for the sector has shot up from £10.9m to £14.4m this year. But the reality is that mortgage intermediary firms are now much more likely to pack up and go home, faced in some cases with 33% to 100% increases in costs. It is not just the FSA fees causing pain – it seems that FSCS funding requirement for insurance intermediation generally, increased from £8m to £50m in 2010-11, such that a broker with an income of £200,000 paid a £167 FOS levy last year but will pay £938 this year.
AMI has rightly been resisting the increase in FSA fees for intermediaries, and I cannot help thinking that the costs facing smaller firms start to bring the FSA’s principles of good regulation under strain, particularly in respect of proportionality and competition.
Jon Pain, the FSA’s managing director of supervision, is a chap with integrity and experience, and I like and trust him. He points out that 80 brokers were banned for fraud, and he outlines that small firms’ supervision tactics, including road shows and workshops, will increase costs. I just hope that the new model does not drive good firms out of the sector and hit the consumer in the pocket yet further.
Name: Vince Sammon
Company: Sammon Mortgage Management
The FSA’s decision to increase its annual fee levy could be the final nail in the coffin for some mortgage brokers. Its decision to hike its fees could not have come at a worse time for an intermediary market that is still on its knees after the financial crisis.
Mortgage firms have seen their annual fees increase from £745 in the previous year to a flat fee of £1000 – an increase of 33%. Larger mortgage firms and networks will have to use the FSA’s calculator to work out what they will have to pay on top of the flat fee. According to the Association of Mortgage Intermediaries, calculations show a firm with a turnover of £500,000 will have to pay a 32% increase on their fees from last year, while a firm with a turnover of £5m will see an 87% increase.
The FSA has warned that the rise in fees is needed to beef up its supervisory role. However, the intermediary sector now accounts for almost one-fifth of the overall funding requirement.
A fee increase of this level is disproportionate; mortgage intermediaries did not create the global economic crisis, however, we seem to be picking up the tab for the mistakes made by the banks. The intermediary mortgage market has shrunk to a fraction of its size, lending levels remain historically low and procuration fee levels are constantly being reduced.
The cost of this fee increase will be felt by the client who will not only have to shoulder higher brokerage fees but will ultimately have a smaller selection of mortgage brokers to choose from.
