UK homebuyers are wasting £370m a year on unnecessary mortgage advice fees charged by brokers, according to independent broker One 77 Mortgages.
Buyers Wasting £370m on Unnecessary Mortgage Advice Fees, Broker Claims
All brokers receive a procuration fee from lenders for their work in arranging mortgages, the broker explains, which satisfies Financial Conduct Authority (FCA) and money laundering rules, as well as getting the business across the line.
However, One 77’s experts have hit out at the double dipping rife in the mortgage industry, which means that an extra charge for advice is levied on customers in approximately 75% of purchases.
That means that an additional fee, averaging £400, was slapped on 926,220 of the 1,234,960 residential property transactions completed last year, setting customers back a total of £370,488,000.
Homebuyers – who can be charged as much as 1% of the loan balance for advice by brokers – don’t realise that these charges are not essential and that, in many cases, a broker will negotiate these or back down on charging them altogether.
In many cases, brokers will not even raise them with their savvier or older clients, who are more likely to know that these fees are not set in stone. Instead, some brokers will levy them on less experienced or younger first time buyers, who know no different.
A minority of UK brokers, including One 77, only take the procuration fee paid by the lender.
The Managing Director of the firm, Alastair McKee, says: “It’s truly shocking that brokers are double dipping on fees in this way and stinging the consumer in the process. This is a colossal sum of money that’s being thrown away unnecessarily, in many cases by the people who can least afford it.
“As ever, it’s a case of buyer beware but, understandably, many less experienced buyers believe this is the norm across the board and that they have no choice but to pay. Many clients find it hard to believe that some brokers don’t charge broker fees.”
He continues: “This is a costly misconception, as that’s certainly not the case any more. If you shop around, there are a range of firms out there who don’t charge fees above and beyond what they receive from the lender, and that’s exactly the way it should be.
“Being paid twice for doing the same work is simply unjustifiable.”
The latest Home Buyer Survey from Tesco Bank reveals that some recent homebuyers were stung by unforeseen costs during the purchasing process, as well as how difficult it now is to buy a home – the average deposit needed has topped a huge £60,000!