Brokers can’t ‘roll over’ clients just to get a fee
The intermediary sector was unimpressed by an article in a national newspaper in which it was claimed that brokers were being paid retention fees for ‘simply rolling over’ clients onto new deals…
Mortgage advice is, quite rightly, heavily regulated. It protects clients, it protects the public from further bailouts to the ‘pesky banks’ and it protects some brokers from themselves. As a result, running a mortgage advice business is not cheap.
We pay to trade – whether it be for regulator charges, network compliance charges, or industry levies to pay compen-sation to people poorly advised on different financial products by ‘other’ advisers. That’s just so we can trade.
Then you’ve got normal running costs such as offices, staffing, professional indemnity insurance, marketing. The list goes on.
When the work actually gets done, we put in many hours of research time before advising the clients on the most cost-effective route to take.
No mortgage broker is going to get rich by earning £300 on a £100,000 mortgage.
Some mortgage brokers charge fees to clients for their advice, some don’t. That choice is based on risk – will a broker risk their time, maybe for three or six months of a house purchase transaction, to potentially not be paid a penny from the lender should a mortgage not complete as planned?
Documentation is strict and potential clients are fully aware of any charges that could apply before they begin working with a broker. Clients get full illustrations which detail the mortgage deal advised, and a mortgage suitability letter. If the best advice is for the client to take a deal that doesn’t produce commission for the broker, that’s what we do.
It’s about trust. We can’t just ‘roll over’ a client to earn commission.
Modern-day banditry over leaseholds
And leasehold new-builds were in the spotlight again for the wrong reasons…
I must admit I cringe when a client advises they are purchasing a new-build property. I know I will start receiving the twice/thrice daily phone calls from the sales office demanding to know when the valuer will be making an inspection.
I am reading more and more reports where new-build purchasers have been sold property which is leasehold, subject to escalating ground rent and huge sums to purchase the freehold.
The sales office and nominated conveyancers, in most purchases, nominated by the developer have glossed over the fact that the property is leasehold and not freehold.
The developer sells on the freehold and the new owners receive escalating ground rents, increasing rapidly over the years. Owners face large bills and solicitor costs to purchase the freehold and escape the escalating rents.
This amounts to modern-day banditry.
Award an endorsement of everyone’s efforts
Finally, the best of the industry attended the Mortgage Strategy Awards last Wednesday night and the feedback has been phenomenal. The winner of the Mortgage Personality of the Year award was keen to acknowledge the work of others in the industry…
I was absolutely bowled over to receive the Mortgage Personality Award – recognition by lenders and the leading industry magazine really does count for something.
But as I said in the video interview, it’s an endorsement for everything that everyone such as Phil Rickards, Liz Sims, Doug Hall and many others do as they travel around industry events getting the message on tax changes and PRA rules on BTL to brokers of all shapes and size.