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Brokers tell lenders "to stay in their lane" when it comes to fees

ended 30. October 2024

Brokers have told lenders to “stay in their lane” in relation to the fees they charge their clients as they often lack a full understanding of the work that has been carried out. It follows a broker who recently arranged a £40k loan being told by a lender to reduce his fees given the size of the loan. However, had his client borrowed £49k, his fee, according to the lender, would have been justified  — despite the fact the exact same work was being done by the broker. One broker suggested that lenders should “look closer to home” given that some charge up to 5% of a loan in fees simply to secure a rate, “which is simply instant profit in their pockets”. The general consensus is that it is upon the regulator, and networks where applicable, to monitor broker fees, not lenders — although one broker believes there shoudl “always be a conversation between the lender and the broker, so the lender can understand the fee and not just be a policy red line applied to cases with no context”.

8 responses from the Newspage community

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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Lenders questioning brokers' fees based on arbitrary loan size thresholds shows a fundamental lack of understanding about the work carried out by brokers, particularly in complex matters. The Consumer Duty was a welcome step forward, yet some lenders are clinging to outdated fee structures, ignoring that a £40k loan takes the same effort as a £400k one. If lenders are pushing for fees linked to loan amounts, should brokers charge more for bigger loans? This isn’t Consumer Duty; it's restrictive compliance without reason. We've faced instances of post-completion interference where lenders deemed our fees 'too high' yet offered no rationale. Rather than targeting legitimate fees that reflect business costs, lenders should rethink practices that stifle broker independence. Ending excessive fees matters a lot, avoiding exploitation of people in vulnerable positions, but arbitrary caps undermine the industry.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
It's not lenders' place to question the fees of their introducers. That fair value assessment lies with the broker and their relationship with the FCA. The lender should keep in their lane and review their own product fees and early repayment charges, all of which seem grossly unfair in value terms.
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Darryl Dhoffer
Founder at The Mortgage Geezer
The FCA's latest move to involve lenders in policing broker fees raises questions about the regulator's priorities. While consumer protection is undoubtedly important, it seems odd to delegate this responsibility to lenders, who may have their own vested interests. This approach could lead to a less transparent and less competitive market, where lenders and brokers collude to maximise profits at the expense of consumers. A more robust regulatory framework, with stricter oversight of broker fees and practices, is needed to truly protect consumers, and leave lenders out of the pot.
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Simon Bridgland
Director at Charwin Private Clients
The debate about fees will come around every year as firms review their own fee model, but this is down to the individual firm to assess and justify not the lending source deciding then shoving their interpretation down the line. Some cases are far more complex than they first appear and so can end up costing the broker to arrange them. Without the ability to charge a fair fee for the work involved it would make it impossible for a broker to help those who actually need it most.
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David Stirling
Independent Financial Advisor at Mint Wealth
With some lenders charging up to 5% of a loan in fees to secure a rate, they should maybe start looking a bit closer to home. Broker fees have always had to be well-defined, clear to the client and not excessive. Levels of broker fees are monitored by the FCA, and networks if applicable, to ensure customers are protected against extortionate costs, but the banks are free to charge huge percentages, which is simply instant profit in their pockets.
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Craig Fish
Director at Lodestone Mortgages
Lenders have no right to question the fees charged by brokers, especially when many lenders themselves impose exorbitant arrangement fees far beyond what’s reasonable. The regulator must step up and address these issues, which are especially harmful to vulnerable customers. It’s unacceptable to justify higher fees due to a client’s imperfect credit history or to meet affordability rules for buy-to-let mortgages. Both lenders and brokers who exploit these situations can be seen as wolves in sheep’s clothing. Protecting consumers should be the priority, and it’s the regulator’s responsibility to enforce this, not that of the lenders.
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David White
Chief Operations Officer at Simply Lending
Linking a broker fee to the size of a loan doesn’t make sense, nor does it treat customers fairly. The level of work involved remains the same, whether a customer borrows £40k or £400k. Consumer duty should ensure that all firms maintain a transparent fee structure that is reasonable, yet I fear this is not always the case. That said, I believe that lenders should not be involved in this process. The FCA should regulate brokers, not lenders.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
In the main, no, they do not have a deep enough understanding of the work that has gone into a specific case to just make a judgement on a broker’s fee, but it is not that black and white. There is a point where a fee moves from being reasonable to looking to be unreasonable and it's right that a lender should ask the question of the broker; in most cases there will be a completely justifiable and logical explanation. One example would be a portfolio buy-to-let with multiple properties being mortgaged with multiple lenders, but the total fee for all these deals being applied to just one loan, maybe on the property with the most equity. Spread across all the applications the fees are more than fair, but all lumped on one property, it initially looks to be grossly inflated, and the lender may well question it. It should always be a conversation between the lender and the broker, so the lender can understand the fee and not just be a policy red line applied to cases with no context.