how much commission is normal?

huwy123

hi there,

Have just seen an IFA and agreed on a mortgage with Abbey (santander). Looking at the keyfacts they get paid £900 from the lender. This seems a lot!
we're borrowing 260k putting down 111k and going for a 3 year fixed.
Its making me question whether I'm being recommended the mortgage that pays them most!?!?!

-H

Leon_W

That's correct.

Mainstream mortgages with high street lenders pay about 0.3% of the loan amount so there is no question of commission bias because they all pay the same.

The commission is paid by the lender, so if the IFA is not charging a fee then you get the benefit of his advice for nowt.

Please do not assume that all this goes in his back pocket either. I can assure you that with regulatory costs, insurance, overheads etc it is very hard indeed for most brokers to make a living in this market let alone a profit.

Your mortgage is a nice size though and these have to compensate for the smaller mortgages we do and the number of cases we spend hours and hours on without any payment at all because the mortgage doesn't complete.

Best of luck with the move.

dimbo61

Santander again came bottom in the customer service table of "which" so let the broker sort out the paperwork for you and earn his commission.

huwy123

thanks for the replies guys - it's put my mind at ease!

Senior_Paper_Monitor

As per the above comments - the broker will also have to be able to show his compliance masters the sourcing of possible mortgages and the reason for his/her recoimmendation if not basically the cheapest.

You might like to know that we recently started tracking time spent on cases as a feature on our new back office administration software (which represents another £100 + a month on our overheads) and the simplest case we have through to completion is just under 12 man hours input and the average looks liking being in excess of 25 man hours - so that's about £35 per hour on average - not ag reat reward rate when we estimate that approximately 30% of available time disappears on non-earning/client specific activity.

Your case was certainly worth doing but they aren't retiring rich on even those - let alone the £100 - 150K jobs that make up the majority of cases for many brokers/IFAs.

MJM10

You could try shopping round for a better deal or ask lenders for quotes direct. However, in the current economic climate you may find that the knowledge and skill of the Broker is worth the fee.

dunstonh

IFA running costs are getting increasingly high. I have a small IFA business and costs are run around £70k to £100k a year. People are usually gobsmacked at how costs can be so high.