Is this Court of Appeal ruling going to change or review the way mortgage commissions are done?

WhistleBlow

Is this Court of Appeal ruling going to change or review the way mortgage commissions are done?

2. Update. Landmark Court of Appeal ruling has the potential to shake up more than just car finance. A shock exploded through the car finance world on Friday, as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms. That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it. Simplifying somewhat.

DullGreyGuy

WhistleBlow said:

Is this Court of Appeal ruling going to change or review the way mortgage commissions are done?

2. Update. Landmark Court of Appeal ruling has the potential to shake up more than just car finance. A shock exploded through the car finance world on Friday, as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms. That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it. Simplifying somewhat.

It will go to the Supreme Court so anything in the judgement is going to be challenged again. 

Commission in itself isn't an issue as long as the customer knows there is commission involved, oddly the court has decided that in Wrench v FirstRand Bank Limited simply having under "general conditions" in a document that Wrench signed was insufficient.

There is also the issue of a fiduciary duty, in principle had the dealerships informed their customers that they were biased and couldn't fulfil a fiduciary duty that choosing the lender giving the highest commission wouldn't have been a problem but they didnt. Mortgage brokers are typically advisory and so would already have a duty to ignore commissions when making recommendations, from my understanding.

As it stands it still comes down to the individual contract details and not a blanket ruling. That said, realistically the majority will fall foul of the ruling for car finance and some other finance types but probably not mortgages.  

Ergates

DullGreyGuy said:

WhistleBlow said:

Is this Court of Appeal ruling going to change or review the way mortgage commissions are done?

2. Update. Landmark Court of Appeal ruling has the potential to shake up more than just car finance. A shock exploded through the car finance world on Friday, as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms. That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it. Simplifying somewhat.

It will go to the Supreme Court so anything in the judgement is going to be challenged again. 

Commission in itself isn't an issue as long as the customer knows there is commission involved, oddly the court has decided that in Wrench v FirstRand Bank Limited simply having under "general conditions" in a document that Wrench signed was insufficient.

There is also the issue of a fiduciary duty, in principle had the dealerships informed their customers that they were biased and couldn't fulfil a fiduciary duty that choosing the lender giving the highest commission wouldn't have been a problem but they didnt. Mortgage brokers are typically advisory and so would already have a duty to ignore commissions when making recommendations, from my understanding.

As it stands it still comes down to the individual contract details and not a blanket ruling. That said, realistically the majority will fall foul of the ruling for car finance and some other finance types but probably not mortgages.  

If commission is universally blocked for mortgage brokers, then customers will need to pay them directly - which many people won't like.   No such thing as a free lunch.

We use a broker who works off fees rather than commission - but that's a choice that not everyone will be happy with.

DullGreyGuy

Ergates said:

DullGreyGuy said:

WhistleBlow said:

Is this Court of Appeal ruling going to change or review the way mortgage commissions are done?

2. Update. Landmark Court of Appeal ruling has the potential to shake up more than just car finance. A shock exploded through the car finance world on Friday, as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms. That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it. Simplifying somewhat.

It will go to the Supreme Court so anything in the judgement is going to be challenged again. 

Commission in itself isn't an issue as long as the customer knows there is commission involved, oddly the court has decided that in Wrench v FirstRand Bank Limited simply having under "general conditions" in a document that Wrench signed was insufficient.

There is also the issue of a fiduciary duty, in principle had the dealerships informed their customers that they were biased and couldn't fulfil a fiduciary duty that choosing the lender giving the highest commission wouldn't have been a problem but they didnt. Mortgage brokers are typically advisory and so would already have a duty to ignore commissions when making recommendations, from my understanding.

As it stands it still comes down to the individual contract details and not a blanket ruling. That said, realistically the majority will fall foul of the ruling for car finance and some other finance types but probably not mortgages.  

If commission is universally blocked for mortgage brokers, then customers will need to pay them directly - which many people won't like.

It won't be, the CoA judgement states that commissions fundamentally aren't a problem. It is the openness of their existence and conflicts of interest that are the problems. 

Years back we had to start telling customers about the commissions and fees involved in Insurance with some detail on request. The problem in the insurance world is when there are close relatoinships or delegated authorities there can often be profit shares etc and so how much I get for selling you a policy may start as 15% of the paid premium but may also be a 30% profit share of profits over X if the overall book of business I sell is profit making in 3 years time. Thankfully no one tends to ask for the details. 

born_again

Well when taking out last mortgage 7 years ago. Broker was very clear on commission they received. Not only from Mortgage co but also one ins policy sold.
What they make on mortgage is nothing compared to some ins policies. No wonder he kept chasing me for months when change of circumstances meant I cancelled it. Nice little earner that was 😶‍🌫️