This is where we keep you informed about all the latest mortgage industry developments.
This time we'd like to share with you just WHY mortgage brokers charge fees.
Now, if I had one pound for each time I’m asked this, then I wouldn’t have to charge for mortgage advice in the first place….
The explanation of this is going to be a bit of a history lesson first of all, and will explain why the public think that we should all give ‘free’ advice.
Firstly, what is ‘free’ advice? Are we talking about initial discussions when the adviser gives several hours of their working day (sometimes with little notice) to run through different permutations to establish whether their plans are viable?
Is it the regular evenings they give up, instead of spending time with their families?
During the ‘housing boom’ I used to deal with mortgage brokers every day as part of my role with a high street bank. I was an adviser, but also a mortgage underwriter.
I can say, hand on heart, that probably 99% of mortgage brokers at that time didn’t charge a fee. It was pure commission, paid only on completion – so, if a client pulled out of a purchase halfway through, the broker would be paid nothing.
Not a thing – potentially for three, or six months of work. Imagine that!
Since the recession began in 2008 the mortgage market has gone through, continued, unprecedented change. Increased regulation, supervision and restrictions on lending have changed the market completely, with many borrowers not even realising – yet.
For mortgage brokers, what does that mean? More work required on behalf of the lender in order to satisfy the regulator’s increased requirements, and greater amounts of research required before a recommendation can be provided and an application submitted then managed to completion.
So, as brokers we’re all working harder for you, our clients – and our ‘commission’ income has in most cases, flatlined as lenders look to still make a profit themselves whilst having to cover additional regulation charges.
A £100,000 mortgage can in most cases, provide a commission of around £350 – before a compliance company can take a proportion (normally around 10%), then the broker can look to cover the following – compliance membership charges, Regulator Charges (up 10% this year), FSCS levies (up 528% this year), Professional Indemnity insurance and other operating costs.
So, there you have the explanation of WHY mortgage brokers now have to charge in order to continue to provide their professional services.
Is the same question asked of Accountants, Solicitors and other specialist Advisers?
All of whom would require some form of payment in advance of the hard, lengthy work they complete.
Is 'FREE' advice really better value?
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
For mortgages we can be paid by commission, or a fee of £495, or a combination of both.
Lentune Mortgage Consultancy
Tel : (01590) 718083
Monday to Friday
9am until 5.30pm
Evening and Weekend
appointments available upon request.
FREE INITIAL CONSULTATION
You may be used to 'FREE' mortgage advice - here's why we charge..