The Financial Conduct Authority has responded to criticism over increasing fees for mortgage brokers by blaming the continued cost of implementing the Mortgage Credit Directive.
Changes to charges were consulted on back in April, with most advisers seeing a 1.6 per cent fall in costs, although mortgage brokers were landed with an increased funding requirement of 8.7 per cent, meaning a net increase of 7.1 per cent.
This meant the total FCA budget bill for lenders and brokers now stands at £36.8m, with the Association of Mortgage Intermediaries calling for a proper explanation of why the cost is so great.
The regulator noted this challenge to the 7.1 per cent increase in its 2016 to 2017 annual funding requirement for mortgage lender (A.2) and broker (A.18) fee-blocks.
“The increase in the 2016/17 AFR allocation to A.2 and A.18 solely related to the recovery of our estimated set-up costs resulting from this increase in our regulatory scope,” today’s policy statement read.
“The cost of our ongoing regulation of this increase in our scope has been absorbed within the same levels of allocation to A.2 and A.18 as in 2015 to 2016. In our 2015 to 2016 Business Plan we referenced implementing the Mortgage Credit Directive, but we did not recover any set-up costs in 2015 to 2016,” it added.
The Mortgage Credit Directive was implemented on 21 March, aiming to create a harmonised market across the EU and significantly changed the regulation of second charge mortgages, which were brought within the FCA’s regime by the government.
Yesterday (29 June), Ami accused the FCA of burying bad news of a change to broker fees by publishing a document relating to fees on Friday (24 June), when most were concentrating on the EU referendum result.
A handbook notice from the regulator published last week confirmed board approval for the charges policy in 2016 to 2017, in order to meet its statutory objectives, which include funding for the Financial Ombudsman Service, Money Advice Service and Pension Wise.
Meanwhile, two respondents to the consultation did not support the application of the £200 consumer buy-to-let (CBTL) flat periodic fee to firms that also undertake the regulated activities covered by the A.18 fee-block and the CC2 consumer credit fee-block.
The regulator agreed and modified the draft fee rate rules so that only consumer buy-to-let firms that do not have permission to carry out any regulated activities will pay the consumer buy-to-let flat fees.
The policy paper estimated for a small mortgage broker, their 2016 to 2017 FCA fees will now be £1,384 (£1,084 plus £300), which is unchanged from 2015 to 2016, rather than the £1,584 (£1,084 plus £300 plus £200) fee originally proposed.
Responding to today’s publication, Ami chief executive Robert Sinclair welcomed the CBTL changes, but expressed disappointment at the lack of clarification on costs associated with the MCD.
“The continued inclusion of the consumer credit fee is not insignificant,” he argued, adding that consumer credit activities should not require mortgage intermediaries to hold separate permissions, as they are already accountable under both the broader FCA principles and specific conduct rules.