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Ex-broker MP calls for more transparency on bank advice costs

Liberal Democrat MP for Eastleigh Mike Thornton is calling for banks to disclose to customers how they charge for mortgage advice services in order to level the playing field with brokers.

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Thornton, who is a former broker and was elected at a by-election in March, says intermediaries have to disclose more information about charges than banks, which can falsely lead borrowers to believe they are being “ripped off” by brokers.

Brokers must disclose their advice fee as well as the amount they are being paid through the lender procuration fee. For bank advisers, staff are usually paid either a salary or bonuses for each sale as part of a firm incentive structure and Thornton says the cost of the advice service is often factored into the product. 

From next April, all mortgage sales must be conducted on an advised basis under MMR rules. Thornton says the new rules make it more important customers realise they are paying for bank mortgage advice too.

Thornton says: “The trouble is most people think mortgage advisers are trying to stiff them or get extra money so it has to be absolutely clear.

“If someone goes into a bank branch for advice it is important they realise they are paying for advice as well.

“The trouble is that mortgage brokers have to declare their earnings whereas when borrowers go into a branch their advisers don’t have to declare anything so it looks like it is better value to go into a branch.”

Association of Mortgage Intermediaries chief executive Robert Sinclair says: “I agree it is not fair on brokers and banks should have to disclose full and fair costs.”

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Comments
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  • Bobby 1st July 2013 at 2:22 pm

    I agree with all of the above but a broker must charge the fee on the offer letter. If 1 in 4 fall through after that you have done mountains of work for nothing.

  • The sceptical one 28th June 2013 at 3:36 pm

    Seriously? Are there people who think that banks provide anything for nothing? The fact is use a broker and the bank pays them a procuration fee. They disclose this as well as charging a professional fee for a professional service. Use a bank on an identical product and the bank does not directly pay the branch sales man for the sale, it goes towards his/her target. The bank makes ( I imagine) a similar profit irrespective of the source of the business direct or via an intermediary.
    The issue with professional fees is that there are a few brokers who don’t charge them in the false belief this sets them apart from the crowd and secures business. Wrong. It may get the odd transactional client but does nothing to keep the client and show value in your service. The broker needs to have confidence in their own worth and explain to the client what they get for their fee. Home service, convenience, independent, regular 1-1 contact, wider review of finances etc. There are loads of things the broker does that banks do not (I have worked in both) and the client will always pay a fee if they a) understand why and b) can see the value and/or what they get for it. I charge a fee and always wait until completion. I never ever charge an upfront fee and never ever does a client not pay (and no I don’t insist the solicitor sends it). It’s all about valuing your own worth and demonstrating this to the client

  • ricky66 28th June 2013 at 10:18 am

    Agree with both JD and Ancient Wisdom. The old FSA said that dual pricing had nothing to do with TCF.

    Maybe the FCA could be persuaded to revisit that stance with a bit of parliamentary pressure?

  • Martin Tapper 28th June 2013 at 10:07 am

    Good stuff and the support is great to hear, but since when do banks offer independent advice?

    Most of my clients pay me a £490 fee on mortgage offer. Why do they do that?

    Because my service includes independent advice, saves time, saves money, gets the best deal…

  • Dazed & Confused 28th June 2013 at 9:29 am

    At long last a genuinely positive step. A shame that the initiative could not have come from the AMI, but as JD @9.04 says “Thanks Mr Thornton”!

  • Ancient Wisdom...is a mortgage broker in London 28th June 2013 at 9:23 am

    I don’t think anyone cares – if the rate is better than they get from a brokers, they will go with it. However, what most consumers fail to realise is that there is a lot of choice out there. A bigger problem is lenders dual pricing – which causes confusion with borrowers.

  • J D 28th June 2013 at 9:04 am

    Thanks Mr Thornton, we at last have a voice at the top who can clearly see the disadvantage we are at not only from non-disclosure of bonus/ bank incentives for Bank Advisers and Direct Only deals – last one left don’t turn off the lights just yet = we may have a fighting chance come 2014 !!!!!