Fee-free versus fee-charging: Misconceptions and misinformation cloud how borrowers view broker fees and commission
Confusion over how mortgage brokers are paid remains widespread among UK borrowers, despite regulatory requirements for disclosure. Brokers interviewed by Mortgage Introducer reveal that, while transparency is a priority for many advisers, persistent misconceptions and industry complexity continue to challenge client understanding.
“Transparency is key,” said Tom Collier (pictured top left) of Bristol-based brokerage Advantage FS. “We explain that we receive a payment from the lender and charge a fee based on the complexity of the scenario, our fee is confirmed at an early stage and is not subject to change.”
Collier clarified that the fee is for processing the application and is only paid upon formal mortgage offer. “No offer, no fee,” he said. “Charging a fee allows us to work fewer cases and deliver a higher level of service than a typical fee-free brokerage.”
Serena Smith (pictured top right), adviser at Mortgages with Serena, echoed the need for transparency, making her fee structure visible across all client touchpoints. “Because I make it clear upfront, I rarely face confusion or pushback,” she shared.
For Smith, a lot of the confusion comes from within the industry itself. “There’s often unnecessary noise about brokers who charge fees versus those who don’t, which muddies the waters for clients,” she said. “On top of that, many borrowers remember a time when broker practices were less transparent, so it naturally takes time to rebuild trust.”
Read more: Mortgage borrowers unclear on broker fees and commission: study
Collier, meanwhile, noted the impact of online misinformation on borrower perceptions. “A little information can be confusing; in today’s fast paced social media environment, it’s easy to watch a few reels from so called ‘finfluencers’ and develop a polarised view as a result,” he said.
The broker recalled the case of one of his clients who had tried a fee-free service. “The reason they chose the fee-free service was because they had seen something online about fee-charging brokers ‘ripping you off’,” he said. “Within a few minutes, it was clear that this particular individual was not suited to the typical fee-free advice model and had wasted months.
“This town is big enough for the both of us, there’s a place for the fee-free services and a place for the fee-charging brokers.”
Both Collier and Smith identified misconceptions among clients, particularly regarding the interplay between lender commissions and direct fees. “The biggest one is that brokers who receive payment from the lender don’t charge a fee – when in reality, we all get paid by lenders however some businesses charge a fee in addition to suceed financially,” Smith said.
“There’s also little awareness around how protection is paid, especially the difference between indemnity and non-indemnity, and very few realise how much is deducted by networks before it even reaches us.”
On the subject of industry regulation, Collier questioned the terminology used in disclosures. “Why must we call it a ‘procuration fee’?” he asked. “All we do as brokers is follow the statement up by explaining that it’s a commission. Can’t we just call it commission?”
Smith, meanwhile, advocated for standardisation and fairer remuneration. “Anything that makes information clearer for clients is a step forward,” she said.
“In fact, I think the whole industry would benefit from more standardisation – whether that’s disclosure documents or even the way lender systems operate. I’d like to see broker remuneration better reflect the reality of the work involved.
“Procuration fees have barely shifted in years, yet cases are increasingly complex and time-consuming. When lenders suggest that financial services ‘shouldn’t be expensive,’ it overlooks the fact that they rely on brokers to deliver results. Fairer remuneration would recognise the true value of the work we do.”
Collier also highlighted the professional value of mortgage advisers. “We are professionals that work for the benefit of our clients, we’re not the ‘bottom run’ of financial advice,” he stressed.
“In many cases, we may deliver the only form of financial advice that a person ever receives. Mortgage advisers should value themselves and the service they deliver, if this involves charging a fee, the adviser should clearly explain what and why at an early stage. If an adviser does this well, the service will sell itself. ‘Objection handling’ is for those who have not explained their service correctly in a balanced way the first time around.”
As the industry continues to grapple with public confusion regarding commissions and fees, brokers agree that greater clarity, standardisation, and recognition of the adviser’s role are essential to building trust and ensuring clients are fully informed.
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