A higher mortgage levy will hit the best-qualified brokers the hardest, according to the National Association of Commercial Finance Brokers (NACFB).
The trade body responded yesterday, February 8, to the Financial Services Compensation Scheme’s (FSCS) raised levy of £15m on the home finance intermediation sector.
The FSCS said the levy for 2016/17 has been increased to meet “unforeseen compensation costs”.
Rob Lankey, chief executive of the NACFB, said its members have invested their own money into compliance which means they have less to spend on the levy.
Mortgage brokers will incur the supplementary levy due to the failure of one particular firm.
Mark Neale, chief executive of FSCS, said: “We currently expect a deficit of £15m on our home finance intermediation account due largely to the failure of one particular firm that gave bad advice to engage in risky property investments alongside mortgage advice.”
FSCS said the levy has been raised because of the risk that, if carried over into 2017/2018, the £15m shortfall might result in the £40m annual limit for these firms being exceeded.
Lankey said: “Given that one unspecified firm is reportedly responsible for the majority of the claims that led to the £15m levy, it seems unreasonable to target the good guys to cover the costs incurred by their less reputable rivals.”
Lankey said measures of this sort do not send out the right message, whether or not each payment taken is large enough to do financial damage to the broker.
NACFB said one fifth of its members, 170 firms, carry out residential mortgage business, but only a small proportion of those offer any investment advice and far fewer offer any kind of unregulated investment scheme of the sort that has led to the imposition of the levy.
Other sectors with increased levies include general insurance provision at £63m, and life and pensions intermediation at £36m.