Mortgage brokers have been accused of scamming British buyers out of £370m a year on unnecessary advice fees.
Independent broker One 77 Mortgages has claimed most intermediaries are slapping an extra charge on more than 900,000 buyers a year – often hitting the less experienced buyers who can least afford it.
This ‘double dipping’ allegedly takes place despite the fact that brokers are already paid a commission fee by lenders.
One 77 said many consumers don’t realise that mortgage broker ‘advice fees’ are not inevitable and they could save an average of £400 each by shopping around.
The firm claimed consumers can be charged as much as 1 per cent of the loan balance for advice by brokers, who often levy them on less experienced or younger first-time buyers.
Alastair McKee, managing director, One 77 Mortgages, said: “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.
“This is a costly misconception as that’s certainly not the case anymore. 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.”
Alan Lakey, partner at Hertfordshire-based Highclere Financial Services, said if brokers did not charge a fee they may have to turn smaller cases away because they would not be profitable.
“If you have got Mayfair offices, you are going to charge a bigger fee, but if you are where I am, in Berkhamsted, it would be less,” he pointed out.
Mr Lakey also said some cases can take a long time to place with lenders, resulting in many hours of work for a relatively small procuration fee.
Robert Sinclair, chief executive at the Association of Mortgage Intermediaries, called for “consistency and clarity for the consumer so they know what is getting charged”.
He pointed out that some large, national firms have economies of scale that allow them to operate without charging a fee, but smaller brokers would not be able to adopt such a model.
But he acknowledged there was a debate to be had about what level of fee was appropriate.