excessive broker charges?

ItWasntMe_3

Hi all, Newbie here and hoping for some advice.

My colleague at work has got himself into a bit of a pickle with his finances and i am trying to help him sort things out.

Up until last year he was mortgage free (inherited some funds and purchased house outright). Last Sept, he decided to take a mortgage out on his house to raise funds to buy a car and pay of some huge debts for his partner (love is blind, she left him a month later!)

Anyway, to the point of my query, this young man is quite naive when it comes to these sorts of things and used a broker to arrange his mortgage.

Looking through his paperwork to see what we could do to reduce his outgoings or possibly re mortgage, i was astounded to see that not only did the Broker get £480 commision from the Mortgage provider,
the brokers charged him £1,995.00 - on a £30,000 mortgage!

surely that cannot be a fair charge on such a low mortgage? or am i really out of touch? Its on an 8 year term at £495 per month, to move it he will be charged £2000.00. never seen the likes of it before!

Can anyone help? any words of advice?

herbiesjp

Yes it is excessive

There are plenty brokers who are fee free and so would have been happy with the £480 from the lender.

However if he has signed a fee agreement of some sort then he has agreed to the T&Cs of the broker. Did they give him an Initial Disclosure Document (Key Facts document) explaining if they are whole of market advisers etc, what fees they charge etc and when they are refundable?

What paperwork does he have?

dunstonh

That is extemely excessive. It is a rip off charge. It doesnt matter about the size of the loan, it doesnt justify commission and fees to that amount.

However, financial services companies are required to disclose charges before any work starts where charging begins. So, if you dont shop round and go with an expensive option, there is little you can do about it after the event.

For future reference, the FSA is looking into what is called customer agreed remuneration where you and the adviser agree a charge at the start and the commission can be used to offset that with any difference being rebated if surplus (or used to reduce product charges) or any shortfall being made up by the client. This is only come in with investment business to begin with and only with IFAs. However, it may find its way into mortgage business as the FSA is apparantly not happy with the regulation of mortgages and is considering bringing it in line with investment class business. In the meantime, many IFAs have already adopted customer agreed remuneration as well as some mortgage advisers. Nothing stops you asking your mortgage adviser/IFA to do it that way and at least you know where you stand.

MortgagesInc

It is an outrageous fee, but as stated above your friend would have signed to agree to this at the outset. Given the commission of 1.6% he obviously got placed on an adverse rate too - did he have adverse credit. I'm just glad a lot of these sharks are going to the wall now

Mr_helpful

He ought to go to the OFT and complain

MortgageMamma

it is excessive but if your friend signed documents to say he would pay the fee I doubt there is much you can do about it. Unfortunately he has learned the hard way.

Dan_Collins_2

it is high but I if he signed and agreed then I doubt he would have a leg to stand on. Also what lendder? That is a proc fee of over 1% only a secured loan provider or subprime lender would pay that! he needs to find out why he was put with the lender! If he is a high street client that has been put with a sub prime lender then he should be complaining!

Obvioulsy we need to know more. Did he pay the 2k or was it added. I doubt a good lender would accept that amount on 30k however some secured loan companies may do!

Perspective

It sounds excessive, however these fees probably offset the cost of offering 10 other people sound mortgage advice that they didnt take up with the same advisor and then went to the lender directly. It happens all the time......Simon

I am a Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

payless

Perspective wrote: »

It sounds excessive, however these fees probably offset the cost of offering 10 other people sound mortgage advice that they didnt take up with the same advisor and then went to the lender directly. It happens all the time......Simon

I doubt it in the case of "sub prime"

2 if brokers charge these types of fees, then no wonder they lose 90% of their enquries !!

HelpWhereIcan

I have had conversations with some 'Compliance People' who have told me that they believe that the 'Treating customers fairly' initiative from the FSA will mean that complaints about fees being excessive for the work required will soon be entertained.

Indeed, I have been told by my network (and Dunstonh's) that they would investigate a complaint where they felt the fee charged was not in line with 'Market Trends' meaning that they will expect their member firms to have a clearly defined charging structure that can be justified (tying in with Customer agreed remuneration).

Do not take this as gospel, but it could be worth a complaint on the basis that the fee was excessive and not in the spirit of Trating Customers Fairly. Depending on the firm and the network they belong to (if any) your friend may get a result. He may even get a result from the Financial Ombudsman. No guarantee at all, but what will it cost him - nothing.

Dan_Collins_2

I think the TCF initiative is a pain in the bum and some nobody has come up with a new idea to make our lives harder! I mean... if you do your job correctly and run your bunsiness correctly you will be treating your client fairly! I dont need a pen pusher who has never seen joe public let alone spoke to them tell me if I am looking after my client or not!

Rant over!