Mortgages 

Government eyes mortgage broker referral fee ban

Government eyes mortgage broker referral fee ban

Estate agents will need to be more transparent over referral fees they receive from conveyancers or mortgage brokers, the government has said, as it considers banning the payments altogether. 

The Ministry of Housing, Communities and Local Government published yesterday (8 April) its response to the call for evidence on improving the home buying and selling process, which ran between October and December last year.

In its response, the government said its goal is to “ensure that customers are made aware of any potential referral fee before they make a decision whether to purchase”.

Due to this, it will task the National Trading Standards Estate Agency Team to proactively monitor the disclosure of referral fees.

The government will also “look more closely at the case for banning referral fees, particularly for new build properties and instances when buyers are being referred,” it added.

The Ministry of Housing, Communities and Local Government is also introducing new measures to professionalise the estate agent market, driving up standards and bringing an end to ‘rogue managing agents’.

Estate agents will now be required to hold a professional qualification, backed up with a programme of continuing professional development which will “professionalise the industry, improve service and reassure consumers,” the government said.

Housing Secretary Sajid Javid said: “Buying a home is one of the biggest and most important purchases someone will make in their life. But for far too long buyers and sellers have been trapped in a stressful system full of delays and uncertainty.

“So we’re going to put the consumers back in the driving seat. We will require estate agents to hold a qualification so that people are no longer at risk from a minority of ‘rogue agents’ and can trust the process when buying or selling their home.”

The government is also trying to tackle "gazumping", where a seller pulls out of a sale to take a higher offer from another buyer.

Instead, buyers and sellers would be encouraged to sign lock-in agreements, which should reduce the rate of failed transactions and the fear of gazumping.

The government is also developing and publishing guides on ‘How to Buy’ and ‘How to Sell’, to ensure customers are better informed of the process and know what questions they should be asking.

The government will work with consumer groups and industry to develop a consistent set of performance metrics for conveyancers, so consumers can make a more informed choice, it added.

According to Christian Warman, director of central London estate agency Tedworth Property, professional qualifications are likely to mean passing a test or exam of the standards that most agents “currently adhere to as set out by the NAEA and property ombudsman”.

He said: “Voluntary deposits to prevent gazzumping are always a source of debate - they are sometimes used nowadays, but often an inordinate amount of time can be spent determining the terms of the initial deposit so it would be good to have this standardised.