National broker Loan.co.uk has hit out after new figures released today show the second charge mortgage market has returned to pre-pandemic levels, bringing with it a peak of excessive fee charging.
Today’s FLA figures show £1.087bn was lent during 2021 and Loan.co.uk has calculated customers have likely paid out around £50m in unfair and unnecessary fees.
Paul McGerrigan (pictured), CEO of Loan.co.uk, said: “Demand for secured lending has increased by more than 44% compared with 2020 as the world recovers after lockdowns and learns to deal with Covid.
“It’s encouraging to see such a bounce back (GDP figures show an increase of 7.5% for the year). There is, however, a worrying trend of high fees which is damaging the public’s faith in the broker industry. Examination of industry websites reveals that average fees from the majority of the biggest players are still between 10% and 12.5%. This is unfair to the customer.
“This poses the obvious question: are you treating your customers fairly, if you knowingly refer them to a broker that charges 10% or more for access to the same products that are available from other brokers for a lot less?
“A brokerage has overheads to cover and needs to make a profit. However, anything over six, maybe 7% for an average loan, is straying into the territory of overcharging unless there are extenuating circumstances.”
McGerrigan explained that Loan.co.uk’s estimates indicate that second charge borrowers paid out almost £115m in broker fees during 2021. Whereas, if fees had been limited to the level it recommends – 6% or lower, they would have paid around £65m.
He said: “As an industry, we are obliged to give best advice and treat customers fairly. Using any kind of FCA regulated adviser or price comparison website is perceived by borrowers to be the best way to search the market and obtain the best deal. This trust is sometimes betrayed by those who play a role in charging unnecessarily high fees.
“The market is different from first mortgages. Brokers incur overheads such as legal searches, valuations, consents and other costs not picked up by the broker in the first mortgage industry. On top of this are marketing, personnel, technology and business costs, so it is completely reasonable to charge a fee.
“Those introducers who use brokers charging anything over six or seven per cent should look again at their business model and question their reasoning. Does their broker need to charge that much or is it because their customers aren’t questioning it, either way are they treating their customers fairly?”
Loan.co.uk, an online mortgage and loan brokerage, launched its ‘Fair Fees’ campaign in a bid to reduce borrowing costs and increase competition so the public can get better deals without strings attached and more people can access what is an increasingly useful and competitively priced product.
The company uses a highly advanced AI (Artificial Intelligence) platform to deliver the best deals to customers more efficiently.
McGerrigan added: “The second charge market has almost doubled in size this year, making this issue ever-more urgent.
“Second mortgages can be the best way for customers to obtain larger sums such as those needed to carry out major home renovation.
“On average, according to FLA figures, the size of these loans in the UK during 2021 was just over £43,000 at 10% that’s a fee of £4,300.
“This campaign is about challenging FCA regulated businesses who are partnering with brokers charging fees of 10% and above to have a look in the mirror and ask are they doing the right thing by their client?”
