Most UK brokers already charging fees for service

By Tim Neary | 30 Jun 2009

At a time when opinion on charging a fee for service among Australian brokers remains divided, an exclusive poll in the UK has revealed that more than half of all mortgage brokers operating in the UK are already doing exactly that, reported mortgagestrategy.co.uk.

Of the more than 1,634 UK brokers surveyed by Mortgage Strategy, 53% said they charged fees for advice while the rest confirmed they took commission.

These results come as the UK's Association of Mortgage Intermediaries said it expected the Financial Services Authority not to ban mortgage broker commission as it had in the investment market.

A more likely outcome was that brokers would be encouraged to give clients the option of paying for advice or them receiving commission income, according to Robert Sinclair, director at AMI.

Earlier in the month in what may have been an Australian first, new mortgage manager Vanilla Loans ditched the commission-based income model in favour of a fee-for-service one.

Vanilla's idea is to have brokers charge borrowers a fee of between 1% and 1.5% of the loan amount and have lenders support and assist brokers to charge and collect the fee.

The launch was met with a mixed reaction from the local industry.

HSBC to become fee for service broker

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Commented by: Xerxes at 01 Jul 2009 09:03 AM

With the state of play in the UK (& Europe & the US) why do we look to them for the lead?

Australia is a world leader in residential finance & lending. We have come through the GFC relatively untouched.

I suggest they should be looking to Oz for the lead.

Ensuring brokers are paid a reasonable commission for the work they do rather than brokers living on a subsitence level in a more desperate search for income sounds to me like a safer lending environment.

Fee for service is the death of the broking industry as we know it. Anyone pushing for fee for service in residential lending is (whether they know it or not) doing the bidding of the major Banks.

As we already know Vanilla is hostile to brokers.

All brokers should oppose fee for service in residential lending. Wake up to this attack on our industry!!!

Commented by: Zoidberg at 01 Jul 2009 09:30 AM

Brokers in the US have been charging for ever and look at their mess. The UK is half a step behind the US in doom and gloom anyway. Both countries will be bankrupt by the end of the year so why should we follow their path? The broker commission is supposed to be in line or cheaper than what the cost of the deal would be through the branch network. Basically it costs about 1% to obtain a loan through the branch network, so we are in fact a bargain to the Banks. We just need to make them remember that.

Commented by: 90s Old School Broker at 02 Jul 2009 11:17 AM

The commissions we get paid now are so low it is killing us slowly. Death by 1000 cuts.

We need to move to a Fee for Service model as this will protect our margins. The only difference is we will be selling lower priced products but adding our fee to the principal and getting paid with the disbursements.

Our current model restricts us to products which include our origination costs i.e. they are priced up to pay us. We are excluded from better products because of our commissions.

The banks would hate fee for service as it would mean an end to corralling us into their 3rd party processing units and controlling us via MFAA memeberships etc.

The only solution to us regaining controll of our distibution is fee for service.

Commented by: broker forever at 09 Jul 2009 04:19 PM
Fee for fervice should also positively reflect on clients' interest rates.An extra 0.25% cut on interst rates would easily offset the cost of fees clients are to pay.This would hot up the competition in the mortgage market!

Commented by: Xerxes at 09 Jul 2009 04:22 PM

It has been spelled out so many times I can't believe another broker is pushing for fee for service.

Fee for service is exactly what the banks want. Fee for service means the effective end of the broking industry. Fee for service means the banks will pay no commission at all. Don't be fooled into thinking fee for service is the best direction for broking. It means the end of our industry.

Try this. - Hi new customer. You give me $2000 so I can arrange a CBA loan for you.

Customers reply - Thanks broker. I'll just go straight to CBA. Bye Bye. - Game over.

Commented by: Xerxes at 09 Jul 2009 04:28 PM

Does anyone really think banks will reduce customer interest rates if they cut our commission. Wake up.

They gave us a 30% hair cut last year. Did you see any rate reductions passed onto customers. Wake up to yourself.

If our industry moved to fee for service it would not hot up competition it would wipe it out. As the broking industry would be decimated & we are one of the largest driving forces for competition in the mortgage industry. Think about it!!!

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