Brokers and lenders urged to cap second charge fees

Ryan Bembridge

September 13, 2017

London Money director Scott Thorpe has urged for second charge broker fees to be capped with an agreement signed by lenders and brokers.

Thorpe has been vocal about packagers charging fees of up to 15% which he feels is tarring the image of the market.

Speaking at the Loan Introducer round-table for September, he said: “Let’s have a code of conduct where the maximum packager fee is £2,000.

“The argument for high fees is high valuations so why don’t you have the max packager fee that you can charge and a valuation fee?”

He added: “Both sides have a responsibility to the client to make sure they are not being charged unfairly, and the easiest way to make sure that doesn’t happen is having the broker and lender agree a cap.

“Surely the lender has a duty of care to the client and allowing the packager to charge the client a £10,000 broker fee on an £80,000 loan isn’t acceptable.”

Thorpe thinks there needs to be a widespread agreement on a cap rather than a reliance on individual firms to take a stand – that way packagers won’t end up snubbing lenders who pay less.

He added he’d welcome a regulator taking a look at the issue.

Some within the industry seem to agree with a cap, as Steve Walker, managing director of master broker Promise Solutions, already employs a £1,995 packaging fee limit.

Darren Perry, head of second charge mortgages at Brightstar Financial, reckons those charging excessive packaging fees will be weeded out organically.

He said: “I think those types of brokers who are tainting the industry’s reputation by charging excessive fees are very few and far between and I do think they will quickly disappear because people will not use them.”

Robert Owen, managing director of mortgages and bridging at United Trust Bank, is uncomfortable with the high level of fees being discussed – because it’s a minority element of the industry which has the potential to tarnish the prime element.

He said: “I am perfectly happy with my less than 5% fee [on average] I’m paying brokers. I don’t need people broadcasting for their own financial good a different picture of the marketplace. It’s not helpful.

“In fact it’s more than not helpful – it’s having the opposite effect. It’s making brokers feel ‘that’s what I thought about that market’ and it’s making the regulator say ‘what’s going on here then?’

“You don’t have to shout fire on the Clapham omnibus; that’s not a news story, it’s an untruth.”

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