Mortgage brokers have welcomed a drop in their Financial Services Compensation Scheme (FSCS) levy but warned the "unfair" funding model still needed reform.
The FSCS said this morning (May 13) that mortgage brokers will now be charged £11.5m towards the 2021/22 levy, half of the £23m forecast in January but still four times as much as they paid last year.
Martin Stewart, director at London Money, said this was a “much needed piece of positivity for broker firms of all sizes”, especially when the cost of many other aspects of being in business were “rising exponentially”.
Robert Sinclair, chief executive of AMI, also said the fall made a significant difference for mortgage advisers and was “certainly positive news”.
But he noted that the home finance intermediation class was still having to pay for the issues in the pension and investment advice sector, which was not fair.
This sentiment was shared across the industry with Mike Morrow, chief commercial officer at The Openwork Partnership calling for urgent reform of the current funding model.
Morrow recognised that the FSCS played a “vital role” in financial services but argued the funding model needed fixing.
He said: “As Pimfa has consistently argued, policy should be designed to minimise the need for the compensation scheme and to protect customers before harm occurs rather than relying on the FSCS as a safety net.
“Without a wholesale review the total compensation bill will continue to rise for all advisers and wealth managers regardless of any year on year changes.”
Others said the fall in levy reflected how well the mortgage market was performing at the moment, which further highlighted why it was unfair to make this sector pay for the failure of others.
Rory Joseph, director of JLM Mortgage Services, said: “It also serves to emphasise the point that the mortgage intermediary sector is very robust and well-funded, and it is deeply unfair that our sector should be used as a whipping boy to pay for the failures within the wider financial services sector, in particular pension transfers.
“You might even say that one of the biggest threats to the sector is a combination of regulatory fees rising without justification added to the ever increasing cost of PI cover.”
In its Outlook paper, the FSCS said its levy on mortgage brokers had fallen due it expecting fewer firms to fail in this class than forecast in January and a £9m reduction in this class’s retail pool contribution.
Overall, the FSCS announced it had reduced its levy for 2021/22 by more than £200m to £833m, as it expects firm failures and some claims to be delayed over the next few years.
The lifeboat scheme had forecast its levy for the year to be £1.04bn, which was a 48 per cent jump on last year’s total.
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