"36.6% of respondents paid a fee based on the percentage of the loan sum. As brokers must now justify their fee to ensure fair outcomes for consumers, it is difficult to understand how such a charging model is fair for consumers. "
- Gerard Boon, managing director of Boon Brokers
New research has found that average mortgage broker fees are largely unchanged since the FCA introduced Consumer Duty regulation in July 2023.
Consumer Duty aims to ensure that consumers receive good and fair outcomes and sets clear standards for financial service providers to follow. Mortgage brokers must now be able to justify their fee charging model, rather than setting client fees at their discretion.
New research from Boon Brokers suggests that, although the average fee set by brokers remains largely unchanged at £500 since July 2023, Consumer Duty is starting to have a positive impact on broker fee structures, as less fees are now being charged above £1,000.
13.1% of respondents said they were charged £200 for advice, with just 10.2% being charged £1,000.
However, 36.6% of respondents said they paid a fee based on a percentage of the loan sum, in spite of Consumer Duty. 38.9% said they paid a flat fee to the broker and 88.9% paid the fee on completion of the transaction.
To understand consumers’ perception of broker fees, Boon Brokers asked additional questions, which found that 67% disagree with the practice of mortgage brokers charging a fee based on a percentage of the loan sum.
76.1% do not believe its fair for brokers to charge a fee if they receive commission from the mortgage lender and 9.7% of respondents were not aware that their mortgage broker would have received a commission from the lender in addition to the client fee charged.
Just 19% of respondents believe that the broker fee they paid was justified.
Gerard Boon, managing director of Boon Brokers, said: "Prior to the introduction of Consumer Duty Regulation in July 2023, the Government’s Money Helper service highlighted that the average mortgage broker fee in the UK was likely to be £500. This average mortgage broker fee appears to be unchanged since Consumer Duty regulation was adopted by brokers.
"However, the results indicate that Consumer Duty is starting to have a positive impact on broker fee structures. As a result of the regulation, brokers must justify their charging model. As we can see from the survey findings, this has led to less broker fees being charged above £1,000. This is likely to be because such a fee is difficult to justify, especially when mortgage brokers receive commission from the lender in addition to this sum on completion.
"One of the many interesting findings to highlight from the survey is that 36.6% of respondents paid a fee based on the percentage of the loan sum. As brokers must now justify their fee to ensure fair outcomes for consumers, it is difficult to understand how such a charging model is fair for consumers. Given that the loan sum is not correlated with a broker’s efforts in processing a case, charging on this basis seems unjust. Therefore, it is unsurprising that 67% of respondents disagree with the practice of mortgage brokers charging a fee based on the percentage of the loan sum.
"We will update our research on the topic as more consumers experience a mortgage broker service following the recent Consumer Duty regulation."
