Mortgage intermediaries' contributions to the Financial Services Compensation Scheme will be almost half the amount originally proposed.
When statutory mortgage regulation starts next week, mortgage intermediaries will be subject to FSA, Financial Ombudsman Service and FSCS fees, just as IFAs currently are.
The FSA says the levy that the FSCS will take from mortgage intermediaries has been cut from 1.5 per cent to 0.8 per cent of a firm's annual income. The same 0.8 per cent levy will also apply to general insurance business.
IFAs – which do not have a percentage rate cap – have been struggling to meet the FSCS levy, which in some cases has increased by over 1,000 per cent in the last year.
The FSA calculates that the levy will raise £80m from the general insurance sector and £16.5m from mortgage firms but if compensation claims are higher than expected, this will trigger a fundamental review of the financial safeguards in place for mortgage and general insurance mediation.
IFAs – whose levy is calculated in relation to the number or approved persons working at the firm and not as a percentage of annual income – will face an extra levy for any mortgage business they do. This component of their levy will be calculated as a percentage of their annual income from mortgage business.
Association of Mortgage Intermediaries policy officer Ben Stafford says: “The reduction is a very welcome move which we recommended to the FSA during consultation. The vast majority of mortgage intermediaries sell general insurance products and any moves to reduce the contribution costs should be welcomed.”