Study finds younger borrowers more likely to pay percentage-based advice charges
Younger mortgage customers are more likely to be charged advice fees, and to pay them as a percentage of the loan, according to new analysis from L&C Mortgages.
The study found that 91% of borrowers aged 18 to 34 paid a broker fee when taking advice. This compares with 64% of those aged 45 to 54, and 42% of borrowers aged over 55.
Younger clients were also more likely to face percentage-based charging structures. Almost half (49%) of 18- to 34-year-olds reported paying a fee calculated as a proportion of the mortgage amount, more than double the 21% share among 45- to 54-year-olds. Only 9% of borrowers over 55 said they paid a percentage-based fee.
Among younger borrowers who were charged a percentage, two thirds (66%) paid between 0.5% and 1% of the loan. Where a flat fee was levied, more than 90% (96%) of 18 to 34-year-olds paid between £250 and £999.
Given that most first-time buyers fall within this age band, the figures indicate that less experienced borrowers may be more exposed to higher advice costs at a point when affordability is often tight.
Estate agency influence also appeared stronger for younger purchasers. Just over half (53%) of 18- to 34-year-olds said they felt under pressure from an estate agent to use a recommended or linked broker. This compared with 22% of 45- to 54-year-olds and 12% of over-55s.
“Younger borrowers are far more likely to be hit with broker fees, and often the more expensive types of fees,” said David Hollingworth (pictured right), associate director at L&C Mortgages. “Mortgage advice is crucial for those with less experience, but that advice doesn’t need to come with an unnecessary, additional cost.
“Many younger buyers are already struggling with deposits, moving costs and rising living expenses. Adding hundreds or even thousands of pounds in advice fees only eats into deposit savings and increases the long-term cost.
“The key message is that borrowers do have a choice. Just as good advice can help save money on your mortgage, using a fee-free broker can make a real difference at one of the most financially pressured moments of someone’s life.”
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