In February 2024, I wrote about how mortgage brokers are being squeezed from every angle.
With costs rising, taxes rising and lenders scrutinizing broker fees as 'fair value' on behalf of the Financial Conduct Authority, we are expected to deliver more value to our customers than ever before. I did.
Months later, the underlying pressures remain, raising fundamental questions about what “fairness” means for brokers. 
Equivalence issues
I was recently speaking with a director of a brokerage at a top 10 lender. We were discussing why mortgage brokers aren't viewed in the same light as other professions, and why it's so difficult to recruit new talent.
In 2024, brokers deserve to be treated as experts.
To me, our company occupies a unique position in the professional services space. Unlike other professionals such as lawyers and accountants, brokers receive most of their compensation based on their success. Lawyers and accountants charge a fee for their time and expertise, regardless of the outcome. Clients pay whether or not they win their case or receive a refund on their tax return.
Mortgage brokers, on the other hand, often pour hours of expertise, advice, and paperwork into cases that never materialize.
Imagine a lawyer preparing an extensive lawsuit and then being told that they will not be paid unless a judge rules in their favor. Or an accountant prepares detailed financial statements but receives no fees because the client chooses not to file them. This is the reality that brokers face every day.
The cost of “no”
Abortion work places a heavy burden on brokers. This is more than just numbers on a spreadsheet. This represents the actual time spent on application forms, lender inquiries, and customer interactions.
But there is no safety net. Brokers can work around the clock until a customer decides to stay with their current lender or halt the purchase indefinitely.
It is time for brokers themselves to ask whether they are receiving fair value for their services.
Other professions have established models to alleviate this. Attorneys may charge hourly rates or offer menu-based fees. Your accountant's invoice will arrive regardless of the results of your calculations. Even in industries where success fees are common, such as recruitment, clients often pay upfront.
So why does the mortgage sector cling to a model that expects brokers to bear the financial risk?
compensation dilemma
The solution isn't easy. The industry's reliance on commission-based pay structures is deeply ingrained. Procurement fees and brokerage fees form the backbone of intermediaries' revenues, but as we have previously emphasized, these are increasingly disconnected from related operations.
Abortion work places a heavy burden on brokers. Represents the actual time spent on application forms, lender inquiries, and customer interactions.
Processing fees have not increased significantly in recent years, despite the increased complexity of applications and increased regulatory scrutiny that brokers now face.
Lenders often point out the importance of brokers in their distribution strategy. However, their remuneration structure does not reflect this. For example, product transfers often require the same level of diligence as new applications, yet remain less rewarding.
Collaboration with other professions
If the mortgage industry wants to improve its standing on par with other professional services, it is time to rethink its approach to remuneration. Lenders and brokers alike should explore models that recognize and compensate brokers for the expertise and effort they provide, even if the outcome is not successful.
This could include the introduction of upfront deposits or partial fees for customers seeking mortgage advice. Administrative fees may be charged for rate tracking, rewrites, property exchanges, and ID checks. I believe other brokers have considered these as well, but avoided them for fear of losing market share.
Mortgage brokers are not viewed in the same light as other professions for some reason
Alternatively, lenders could consider a tiered processing fee structure, rewarding brokers for the quality and completeness of applications rather than just volume.
Conversation about “fair value”
Regulators' focus on 'fair value' should extend beyond brokerage fees charged to consumers. It is time for brokers themselves to ask whether they are receiving fair value for their services.
Let's start a conversation. In 2024, brokers deserve to be treated as experts.
Malcolm Davidson is Managing Director of Moneyman UK.
This article was published in the December 2024/January 2025 edition of Mortgage Strategy.
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