Ban brokers from paying referral fees to estate agents, urges OFT

The Office of Fair Trading is urging the government to ban mortgage brokers from paying referral fees to estate agents.

A study on home buying and selling published by the OFT last week recommends that the government should consider additional rules on fees received by estate agents for referring buyers to providers of ancillary services such as mortgage advice, surveys and conveyancing.

The report says: “The prospect of additional income may give estate agents a financial incentive to prefer some buyers over others.

“We recommend that, as part of its work on the future of estate agency regulation, the government considers further whether the potential for conflicts of interest should be removed, including a ban on such payments.”

Andrew Montlake, communications director of Coreco Group, says the OFT is probably concerned about some estate agents that force buyers to go to a particular broker and then use the information the broker gathers to assess the borrower’s affordability and push up a property’s asking price.

But he says most mortgage bro-kers, including Coreco, would never disclose clients’ borrowing capacity.

He says: “When we deal with an estate agent we are completely independent. Estate agents want their clients dealt with by a firm that will give them good independent advice.”

But Montlake adds that it is common for brokers to pay an introductory fee to estate agents as they would do to any introducer.
The OFT is also encouraging sellers to negotiate on estate agents’ commission. It says failing to shop around can cost sellers £570m a year.

The OFT’s report recommends that rules dating back to 1979 are updated to pave the way for firms such as Google and Tesco to offer rival estate agency services, which could be cheaper alternatives to traditional estate agents.