Mortgage Advisers Under Scrutiny

by Gill Montia

Story link: Mortgage Advisers Under Scrutiny

The Financial Services Authority is currently investigating claims that some borrowers are being overcharged by mortgage advisers, amid reports of fees of up to £7,000 for a £100,000 loan. Some brokers are charging extra for selling loans to those with a poor credit history, or those who have their income determined by monthly variable commission payments. The FSO is also looking at whether brokers are selling the more expensive sub-prime mortgages, with the higher commission, to clients who may qualify for a standard loan.

Some brokers are charging 4% (or £4,000) on a £100,000 loan and in the case of smaller loans this may increase to 10%. In addition to this fee, mortgage brokers are paid a procurement fee by the bank or building society lending the money, and they may gain commission from selling insurance in connection with the transaction.

Average commission for a standard mortgage is around 0.4 %, but this can increase to between one and three percent on sub-prime loans. Moneyfacts, the data analyst, has reported that even the commission paid on standard mortgages has increased by 140% in the past ten years because the average mortgage, which stood at £54,000 in 1997, has increased to £130,000.