Broker fees and insurance

zxcvbnm1

Hi

I am currently going for a mortgage with a broker who charges fees of "up to 0.8%, based on your circumstances" as per the key facts document. She has told us that we will only be charged 0.3% if we take out life cover, however this has not been stipulated in any documentation. The life cover is a lot more expensive via this broker than through the searches my partner and I have made online. Due to the value of the property the 0.8% fee will be difficult for us to meet but I am reluctant to take out cover that I don't feel I need. Are there any rules that brokers are subject to regarding arrangements like this? I find it unethical that life cover is being used as a bargaining chip but I have no idea whether it is standard acceptable practice or not.

Richey_

0.8% is high you could be paying 2-3k just for brokerage services.
I know there will be many brokers on here who will shoot me down, but unless you have special circumstances i.e bad credit, self employed etc are you sure you need to use a broker? The banks loan criteria is published on their websites as well as the online guides as to how much you can borrow. This will give you a strong indicator if you will be accepted or not.
Just seems a high fee and over a shorter fix are they actually likely to save you £2000-£3000 ?
Most brokers charge in the hundreds and often low hundreds.

As for putting life insurance in with it and dropping their fee, I don't see any ethical reason why they can't. They are subsidising the lesser commission they are receiving by charging you less for their brokerage fees, with the commission they will get for selling life insurance. It's not like they are not being up front with you with what they are doing.

There are many brokers out there, are you just using the estate agency brokers?

csgohan4

if you get a paid broker, get one that you pay only on mortgage offer, that way it serves both parties best

amnblog

Your broker can charge her fees in this way but they should be made clear to you in writing at outset.

I would not be confident that you are comparing 'apples with apples' on your online search for life insurance.

As mentioned above, unless your mortgage size is under six figures these fees seem in the high range.

It sounds however, like you have already committed yourself to progressing on the mortgage.

How did you identify this broker?

zxcvbnm1

amnblog wrote: »

Your broker can charge her fees in this way but they should be made clear to you in writing at outset.

I would not be confident that you are comparing 'apples with apples' on your online search for life insurance.

As mentioned above, unless your mortgage size is under six figures these fees seem in the high range.

It sounds however, like you have already committed yourself to progressing on the mortgage.

How did you identify this broker?

We have already committed. The broker did not make this arrangement clear in writing. There was no suggestion on the key facts document that the fees were contingent on taking out insurance. We were offered a lower fee verbally and signed for it.

zxcvbnm1

The broker was recommended by the housing developer. It is a new property.

ACG

The thing is, whether or not it was in writing - you were told. Morally, you are on shakey ground, legally there is probably little the broker can do if there is nothing in writing.

It is not something I do personally, I view insurance and mortgages as 2 seperate jobs and so I charge for one and receive commission on the other.

Richey_ - The fee could also be low. If it is a £50k mortgage it could be between £150 and £400. I say this time and time again, fitting criteria and getting accepted are worlds apart. You still have to pass the credit check...Just to be clear I am not saying do or do not use a broker, that is not why I am on this site.

muhandis

In your place, IF I were sure that the broker acted unethically and was unwilling to address the situation in any way, I would just cancel the life cover after completion. Do note that any commission they make from the life cover will be clawed back when you cancel, so it would be fair to cancel ONLY IF you were indeed treated unfairly by them.

Nothing in the two life policies that I have stops me from cancelling them whenever I wish to.

ACG

muhandis wrote: »

In your place, IF I were sure that the broker acted unethically and was unwilling to address the situation in any way, I would just cancel the life cover after completion. Do note that any commission they make from the life cover will be clawed back when you cancel, so it would be fair to cancel ONLY IF you were indeed treated unfairly by them.

Nothing in the two life policies that I have stops me from cancelling them whenever I wish to.

But then why take them out in the first place?

If there is no intention of keeping the policy, then you should not be taking it out... you are knowingly taking money away from someone elses family/table - and worse still, getting them to work for it. How would you feel if your boss asked you to do paid overtime, then went back on it and said you were just working late of your own accord?

This broker has offered you 2 pricing models, you had the option of saying no thank you to both and finding a broker elsewhere or trying to negotiate a fixed fee.

I was brought up to know if I say something, I stand by it.

kingstreet

The broker's fee agreement probably says the whole fee is due if the protection plan is cancelled in the clawback period.

dunstonh

I am currently going for a mortgage with a broker who charges fees of "up to 0.8%, based on your circumstances" as per the key facts document.

Wow, that is expensive. What made you choose them?

The life cover is a lot more expensive via this broker than through the searches my partner and I have made online.

The premiums would be cheaper online but you would not expect it to be a lot unless the broker is tied to a particular insurer. If they are whole of market on insurance (or close as) the premiums would still be higher but not a lot higher. So, are you sure you are comparing like for like. e.g. not mixing up critical illness cover with terminal illness cover. Or quoting a budget plan against a comprehensive plan?

Are there any rules that brokers are subject to regarding arrangements like this?

Yes. They have to ensure that the insurance they recommend is suitable. However, they are free to offer the terms they decide for their business as long as they are disclosed in advance of you agreeing to them.

I find it unethical that life cover is being used as a bargaining chip but I have no idea whether it is standard acceptable practice or not.

I disagree. it is a common retail model to offer discounts when you buy more. They are not forcing you to do anything. They are saying they will discount their charge if you buy more from them. Seems fair enough.

The broker did not make this arrangement clear in writing.

So, are you saying you have not signed a fee agreement with the broker? The fee agreement would set out the terms agreed. Effectively, until you agree terms, the broker cannot charge them.

We were offered a lower fee verbally and signed for it.

If you signed it then it is more than verbal.

The broker is expensive and you should always avoid using developers own brokers unless the developer is using a local independent and not a tied salesforce. Smaller developers tend to use local independents but larger ones have their in-house sales reps. However, once you employ the broker and commit to their terms then that is it. You have entered an agreement.