Liberal Democrat MP for Eastleigh Mike Thornton is calling for banks to disclose to customers how they charge for mortgage advice services in order to level the playing field with brokers.
Thornton, who is a former broker and was elected at a by-election in March, says intermediaries have to disclose more information about charges than banks, which can falsely lead borrowers to believe they are being “ripped off” by brokers.
Brokers must disclose their advice fee as well as the amount they are being paid through the lender procuration fee. For bank advisers, staff are usually paid either a salary or bonuses for each sale as part of a firm incentive structure and Thornton says the cost of the advice service is often factored into the product.
From next April, all mortgage sales must be conducted on an advised basis under MMR rules. Thornton says the new rules make it more important customers realise they are paying for bank mortgage advice too.
Thornton says: “The trouble is most people think mortgage advisers are trying to stiff them or get extra money so it has to be absolutely clear.
“If someone goes into a bank branch for advice it is important they realise they are paying for advice as well.
“The trouble is that mortgage brokers have to declare their earnings whereas when borrowers go into a branch their advisers don’t have to declare anything so it looks like it is better value to go into a branch.”
Association of Mortgage Intermediaries chief executive Robert Sinclair says: “I agree it is not fair on brokers and banks should have to disclose full and fair costs.”