YOUR MONEY: Brokers' perks scheme is axed

MORTGAGE company Private Label has withdrawn a controversial incentive scheme which offered cars worth pounds 13,000 and luxury holidays to mortgage advisers in exchange for large business volumes. The move follows an article in the Independent on Sunday's Your Money pages (24 September) looking at such schemes, which have sprouted as a result of increased competition in mortgages.

Unusually high rewards for selling particular mortgages question the impartiality of advice of supposedly independent brokers. Mortgage advice is not regulated to the same degree asother sectors and brokers do not have to to reveal commissions.

"I fully accept the criticism that the structure of the incentive scheme may have drawn greater attention to the prizes rather than the products," said Stephen Knight, chairman of Private Label.

The scheme offered mortgage brokers and advisers prizes according to the points they built up. The more points, the better the prizes. Typically, mortgages on offer through the scheme earned an adviser 50-100 points.

However, Private Label was offering a whopping 500 points on one Britannia Building Society mortgage it was marketing on behalf of the society, suggesting the company was attempting to get brokers to steer borrowers in its direction. Selling 30 Britannia mortgages would earn the broker a pounds 13,000 Fiat Punto Cabriolet as well as more standard pounds 100 cash commissions per mortgage. Twenty sales meant a Ford Fiesta. The scheme carried the words: "Must not be shown to members of the public."

Other companies offer, if not prizes, then attractive commission payments to brokers. A scheme available to all intermediaries launched by a company called the Mortgage Operation offers commission payments or "marketing allowances" of up to pounds 1,000 on some mortgages, compared with the industry average of pounds 100-pounds 200. One called the TMB Special is a 6.49 per cent fixed- rate mortgage. On this deal a marketing allowance of pounds 500 is paid.

The size and variety of incentives on offer to brokers, and the lack of a requirement to disclose these different payments, is likely to increase calls for greater regulation. In the meantime, borrowers should insist on knowing what advisers will earn and question whether they're getting the best advice.

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