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Broker fee caps

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 08. May 2024

Looking to speak to mortgage brokers about broker fee caps following Halifax's announcement last week that maximum broker fee caps would be in place. 

  • Is this something that is more widespread among lenders? Will it become more common? 
  • Is it within the lenders' remit to do this? 
  • What impact will it have on brokers? 
  • What impact may it have on customers?

15 responses from the Newspage community

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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Lenders enforcing fee caps is a step too far, and rather than tackling the key issue - brokers charging disproportionate fees. The idea is good, but the execution is poor. The problem lies in the percentage model. A customer borrowing £500,000 can be permitted to charge £5,000 (1%) which the same amount of work arranging a mortgage for £155,000 could procure a maximum fee of £1,550. Many lenders issue annual compliance reviews to broker firms, without any questions around fee structure. Perhaps they should look more closely at this, they could refused agency for "over-chargers". That said, understanding the running costs and structure of each firm would be necessary to justify if their charges are fair value. I'm not in favour of lenders dictating to brokers how they should charge. The problem is expansive and detailed, and not one lenders should undertake.
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Justin Moy
Managing Director at EHF Mortgages
It has s become quite a discussion point since this announcement, and many lenders are asking similar questions privately with brokers. Depending on the type of case, and background work required, pricing should be appropriate to the situation, and agreed upfront with the borrower. For example the level of work, support and experience on an adverse case should warrant more income than a more plain vanilla case. Excessive fees on those high street lender cases feel inapprorpriate for the majority of cases, hence the Halifax stance, but lenders should accept that it is up to the broker to justify, in agreement with borrowers, and fee costs are not in their remit - the FCA should be delivering guidance on fees and appropriateness, not the lenders.
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Dariusz Karpowicz
Director at Albion Financial Advice
Halifax's move to cap broker fees has definitely stirred the pot. Although my fees are well below their set limits, I'm not in favor of lenders stepping into this space. Traditionally, regulating broker fees should fall within the remit of the regulatory body, not lenders themselves. If lenders begin to dictate fee structures, we could see a downward trend that may push fees to unsustainable levels for many brokerages. This could start a chain reaction that's hard to reverse, potentially impacting the quality and diversity of services brokers can offer. For customers, while lower fees might seem beneficial in the short term, the long-term effects could include reduced support and choice, impacting their ability to navigate complex mortgage markets effectively.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
It is not within Lenders' remits to regulate what fees introducing brokers can charge for the service they provide. Afterall, the lender has no idea how complex the case was or the work involved. Brokers have their own duty under the FCA to ensure fair value under Consumer Duty. Whilst the limits set by Lloyds banking group, no decent broker would look to charge for the types of vanilla cases that the lender accepts, such limits set a dangerous presidence and can be the top of a slippery slope where lenders reduce these caps or all lenders have varied caps meaning fees could be different depending on the lender. Are Lloyds banking group going to tell solicitors how much they can charge their clients now too? or surveyors? Fair value for fees is between the Broker and the FCA and not within the jurisdiction of Lenders.
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Ben Perks
Managing Director at Orchard Financial Advisers
Not only is it not the lenders place to monitor this, but it could backfire. By setting such high Broker Fee limits in an effort to reduce the amount Brokers charge they might actually cause the opposite to happen. There will be Brokers around the country wondering why they are so far below the limits set and debating increases.
The Financial Conduct Authority have made it clear that fees should be fair, good value and proportionate to the work involved. They should regulate this, not lenders.
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Michelle Lawson
Director at Lawson Financial
Whilst I don't agree with certain levels of broker fees, lenders should stay in their own lane and let the regulators regulate. I think this is a step too far and is a jump towards pricing control. Once they start, what is next? Under Consumer Duty, brokers will have completed their own Fair Value Assessment. This is not and should not be down to the lenders to monitor.
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Elliott Culley
Director at Switch Mortgage Finance
It is common practice for mortgage lenders to ask for fee structures as part of the onboarding process, however a lender should never dictate what a fee should be. It is the job of the broker to justify the fee to the regulator not the lender. There have been instances of high broker fees in the past which do need to be stamped out, but leave this to the FCA to remedy. Broker fees are an essential income to lots of mortgage brokers and a mortgage application takes time. If the case is more complex, then this can take double or even triple the time of a normal case, so higher fees are understandable. Lenders should concentrate internally on their own consumer duty obligations and let us concnetrate on ours.
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Benjamin Blyth
Director at Houz Mortgages
Halifax themselves (via their buy-to-let arm, BM Solutions) have a few products where the lender fee is £60,000.

This is for a £2 million mortgage (their maximum) with a 3% fee.

Show me that fair value statement again...

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James Bull
Mortgage Broker at JB Mortgages
Halifax broker fee caps are very high so i do not forsee this affecting many brokers. You would assume that most applications being placed with Halifax are fairly mainstream so it would be difficult to justify high broker fees on these cases. At JB Mortgages we would be within Halifax limits even on specialist cases with heavy adverse, i think many brokers within my network are similar so i dont see this having much impact on the industry.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
In terms of the caps set by Lloyds Banking Group, these are quite generous and very few brokers will find them an issue in their day-to-day business. However, other lenders may choose to follow LBG's lead but may have a lower limit in place, which could then impact brokers and their customers. Of most concern is how regularly these caps are going to be reviewed by those imposing them; with the ever-increasing costs of running a business; the recent inflation busting increases from the FCA being a notable example, how long will it be before what is today seen as a high cap becomes a broker's typical fee and so is then more problematic? There is a wider point to be debated here too, as to whether it is right, or indeed legal, for one part of the mortgage chain to cap the earnings of another. Surely if this were an issue that impacted on the functioning of the market it would and should be the FCA who acts, not lenders.
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Richard Jennings CeMAP
Founder & Managing Director at Richard Jennings Mortgage Services
The figures quoted by Halifax for their caps are certainly not going to come in to play for the vast majority of brokers.

That been said this doesn't sit well with ourselves as I'm not sure on what basis lenders are promoting dictating how a broker can run his or her business.

The gee structure falls under the remit of networks for A/R firms and then above them the FCA for directly authorised firms.

Whilst it's commendable Halifax want to ensure clients are not being excessively charged fees, doing so by dictating to business owners how to structure their firms fees is not the way forward.

This would be like brokers dictating to a lender what their income multiples should be for affordability purposes.
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David Robinson
Co-Founder at Wildcat Law
A rather opportunistic swipe at brokers hidden behind a facade of consumer duty. Rather than looking at transparent fees paid for valued advice perhaps lenders should be spending the time examining the level of profit they are currently deriving from mortgage products. Perhaps it is time for fully unbundled mortgage pricing?
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Mark Valentine
Managing Director and Broker at MV Mortgages
I am not a huge fee charger anyway, so I don't mind either way, however, it is quite cheeky, I will let you come up with your own description, from lenders when you consider I have just found a really attractive buy to let rate for a client, only to be horrified when scrolling through Sourcing Brain, to see a product fee of £13,300 attached to said deal. You can only laugh.
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Rob Gill
Managing Director at Altura Mortgage Finance
Brokers complaining about a ban on charging more than 1% for a mainstream mortgage is like banning them from dating Taylor Swift. They won't get anywhere near it and deserve a slap for even thinking about it!
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Austyn Johnson
Founder at Mortgages For Actors
Its part of looking after customers. they are making sure the client is not badly advised. To be fair, most cases, even the tough ones dont deserve that high a fee.
Hopefully they will see that they also need to consider the proc fees sent back to brokers. Its time for a payrise dont you think?