Two-thirds of homebuyers say they do not understand how intermediaries are paid their fees, according to data from Boon Brokers.
Its poll finds that 67% of buyers who applied for a mortgage over the last two years through a broker “felt they did not receive a clear, understandable breakdown of fees and commission”.
Despite Financial Conduct Authority rules, which state that brokers should provide clients with written disclosure of their payments, the survey says that “many borrowers still struggle to understand exactly what they are paying and why”.
It adds that this “lack of clarity in the industry is disconcerting and has clearly brought about tangible consequences surrounding trust,” which leads to widespread misconceptions.
The poll finds that 85% of borrowers said that the practice of brokers earning a direct fee and a lender commission on a single deal should be clearly explained “to ensure complete fairness and trust”.
It adds that just 31% of homebuyers understood that lender commission varies by case, leaving 69% uncertain about how broker income is structured.
The survey reports that 96% of borrowers want brokers to provide both written and verbal explanations of commission and fees before an application.
While 85% of homebuyers do not believe brokers should charge both a client fee and receive commission.
The study says: “The persistence of asymmetric information around broker fees – where disclosure exists in principle but not always in clear, jargon-free terms – leaves borrowers at a disadvantage.
“Without easy access to clear information, trust falters, and the sense of fairness and confidence in decision-making is consequently undermined.”
Boon Brokers managing director Gerald Boon adds: “Mortgage brokers are required by FCA regulations to provide clients with clear breakdowns of their commission.
“However, what is often missing is a jargon-free explanation that helps borrowers fully understand both the broker fees and commission that they earn.
“Providing transparent, easy-to-understand information is essential to ensure clients can make informed decisions and maintain trust in their broker.”
The Boon Brokers poll was conducted by data group TLF Research between 19 and 26 August, interviewing 1,000 people who applied for a home loan within the last two years.
