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Brokers defend fees after ‘double-dipping’ claims

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Brokers have refuted claims they overcharge customers by charging them a fee while also taking a commission from lenders.

The issue has been thrust back into the spotlight by One 77 Mortgages, which yesterday said borrowers are wasting £370m a year on unnecessary mortgage advice fee to brokers.

One 77 Mortgages managing director Alastair McKee says consumers throw away a “colossal sum of money” on fees each year by brokers “double-dipping”.

The Chippenham-based adviser takes a procuration fee from lenders but does not charge clients a fee.

The ‘no-fee’ model is not the norm but is also used by firms including the country’s largest broker, London & Country.

South Coast Mortgage Services director Gareth Davies says: “Fees are justified and they’re commonplace.

“As long as they’re clear, fair and not misleading and communicated from the outset then I think clients are happy.”

Davies’ firm charges a flat fee to customers, which he says is vital to staying profitable.

He adds: “Procuration fees haven’t really increased in the past seven or eight years but, because of regulation changes, the administration and time involved in getting a mortgage through has probably trebled in that time.

“The job of mortgage advisers goes far beyond just finding the best rate and, at the end of the day, we are a business and we need to make money.”

But McKee argues that taking both fees is ‘shocking’. He says advisers ‘being paid twice for doing the same work is simply unjustifiable’.

White Financial Services managing director Dan White says the debate about charging a fee is one which has been going on for years.

He adds that charging both fees is important and justified.

He says: “You pay a solicitor or an accountant to do work, a mortgage is the same. We get a commission from a lender because we are doing the admin work for them. And we get a fee from the client because they have come to us for professional advice.”

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  • Stuart Gregory 20th September 2017 at 10:51 am

    Stuart Duncan
    I am always a bit doubtful when we are put in the same box as Solicitors and Accountants as their fees are their sole source of income and they pass many more exams than most Mortgage Brokers. It comes down to viability though. Unless you are doing high average case sizes then a fee is needed to produce a working profit nowadays.

    Solicitors and Accountants still get paid if a mortgage doesn’t complete though – brokers don’t if you only rely on procuration fees at 2007 levels.

  • Stuart Gregory 19th September 2017 at 5:50 pm

    Clients have choices – and that’s key. What isn’t helpful are viewpoints that are aired where brokers who do charge are described as ‘ripping off the client’. Firstly, this isn’t true – as all fees are either agreed upon with a client prior to commencement of the work. Secondly, it shows more than anything how you value your own time if you think all clients want your services for ‘free’ – that’s not the case in most circumstances. What they want is VALUE. I’ll give you an example, a company director came to our company after being unhappy with the potential loan amounts offered by a ‘free’ broker. One meeting later, and we identified lenders who would look at their incomes differently – and got them over £80,000 more, which enabled them to move to their ideal home – something they thought wasn’t possible. ‘Free’ doesn’t always mean ‘better’.

  • Stuart Duncan 19th September 2017 at 5:38 pm

    I am always a bit doubtful when we are put in the same box as Solicitors and Accountants as their fees are their sole source of income and they pass many more exams than most Mortgage Brokers. It comes down to viability though. Unless you are doing high average case sizes then a fee is needed to produce a working profit nowadays.

  • Neil Ryner 19th September 2017 at 2:13 pm

    It is simply not viable to do some mortgages without a fee. It should also be noted that poor service by lenders often means more chargeable work for brokers, the harder they make it the more we are needed, the longer/more difficult the process the more expensive, that is the commercial reality. Finally, I urge all brokers to value their experience and knowledge, not to charge extortionate fees, but to ensure you charge fairly for the time you have taken to learn your trade and build your contacts so you can help people get mortgages.

  • Darren Walker 19th September 2017 at 10:52 am

    Just because fees are commonplace, it doesn’t make them justifiable. Clients need to be better educated on the fact they do not have to pay a fee for advice and it in no way affects the advice or service they receive.

  • Chris Hulme 19th September 2017 at 10:52 am

    It all depends on the level of service you are providing to your client and the complexity involved in the process doesn’t it? You get what you pay for… If you’re also working with much higher loan amounts then proc fees based on percentages may well work. I believe as a general rule fees can also help avoid commission bias and minimise the risk of add on sales being forced upon clients to make up any shortfall in income – something this industry has had levied at it for some time!
    If Mr McKee is happy to take a £300 proc fee alone for all the work needed on a £100k loan at 95% ltv for a self employed client with 1 years accounts then good luck to him. I cant see him driving across the county for a face to face client meeting in their own home or office for that reward.