Mortgage broker commission income plunges

About 70% of brokers say the average amount of commission they earn per product has fallen in the past year, research suggests.

According to the latest Mortgage Intermediary Distribution report from Datamonitor, the number of respondents earning less than a year ago rose to 70% in 2010, up from 60% the previous year.

Industry experts say for brokers just to live on procuration fees alone is now "almost impossible".

Providers have been shunning the intermediary channel mainly due to the higher costs of increased regulation, the Datamonitor research suggests. 

Lenders have had no incentive to maintain procuration fees at pre-banking crisis levels, its says, and suggests fees are likely to remain stagnant for the next 12 months.

The report suggests the proportion of brokers which believe they will do more lending in the coming year has fallen.

Just over four in ten (42%) believe intermediary lending will grow in the next twelve months. About a fifth (22%) say it will continue to fall.

Industry professionals say brokers are increasingly charging upfront fees for services offered, rather than relying solely on commission-based income.

Between 2009 and 2010 the number of brokers which earned over 80% of their income from commission fell from 51% to 44%, according to the research.

On average, the proportion of intermediaries' incomes derived from commission rather than fees fell from 70% to 68%.

Dominic Lipnicki, director of mortgage consultancy firm Your Mortgage Decisions, said: “Just to live on procuration fees alone is almost impossible.

"I think brokers are beginning to understand that if they don’t start charging for their advice then they won’t be in business for very long.

TenetLime has revealed its interest in looking to move its members towards a fee-charging model.

Gemma Harle, managing director of the network said: “Not only are procuration fees not sufficient to provide an adequate income for most brokers, but also such a move will help to boost their professional reputations."