You have every right to ask this before you share payslips and bank statements with anyone: if a mortgage broker is recommending a lender, are they recommending what’s best for you – or what pays them best?
That suspicion is healthy. The mortgage industry can feel like a black box, and some people rely on that confusion. This article makes it plain. You’ll understand how mortgage brokers are paid in the UK, what you might pay (and when), what “free” really means, and the questions that instantly reveal whether a broker is acting like your advocate or a sales channel.
How mortgage brokers are paid UK: the two main routes
In the UK, most mortgage brokers are paid in one or both of these ways: they receive a commission from the lender after your mortgage completes, and/or they charge you a broker fee.
The lender payment is commonly called a procuration fee (often shortened to “proc fee”). It’s the lender’s way of paying a broker for introducing business and packaging the application properly. That doesn’t mean the lender is your client. You are. But it does explain why plenty of brokers can advertise themselves as “fee-free” and still run a viable business.
A broker fee, on the other hand, is money you pay directly to the broker for advice and arranging your mortgage. Some charge nothing at all, some charge a fixed fee, and others charge a percentage of the loan – sometimes with minimums.
The important nuance: how a broker is paid is not automatically the problem. The problem is when you don’t understand it up front, or when the payment structure nudges the advice in a direction you wouldn’t choose if you could see the full picture.
Procuration fees: what they are and who pays them
A procuration fee is paid by the lender to the broker, usually when the mortgage completes (not when you get a Decision in Principle). It’s typically calculated as a percentage of the mortgage amount, although some lenders use fixed amounts in certain cases.
For you as the borrower, this usually feels “free” because you don’t write a separate cheque for it. But don’t confuse “you don’t pay it directly” with “it doesn’t matter”. Any cost in lending exists somewhere in the system – pricing, product margins, or how lenders choose to compete.
Here’s what matters for you:
If your broker is being paid by the lender, you should still expect the broker to recommend based on suitability, not commission. UK mortgage advice is regulated and brokers have duties around recommending appropriate products. That said, regulation doesn’t stop human behaviour. Transparency and good process do.
A good broker will be comfortable telling you, in plain English, whether they receive a proc fee and roughly how it’s calculated for your case. A broker who goes vague, defensive, or tries to make you feel awkward for asking is waving a red flag.
Broker fees: when you might pay and what’s fair
Broker fees in the UK vary because service levels vary. Some brokers do little more than submit an application. Others build a strategy, manage lender criteria, handle complex income, chase underwriters, coordinate with solicitors and estate agents, and protect you from common mistakes that cost real money.
Fees are commonly structured in a few ways:
Some are fixed (for example, a set amount for a purchase or remortgage). Others scale with complexity (a simple remortgage versus self-employed income or adverse credit). Some charge a percentage of the loan, which can get expensive fast on larger mortgages.
When do you pay? It depends. Some brokers charge on application submission, some on offer, and some only on completion. Each has trade-offs. Pay early and you’re funding work upfront, but you’re taking more risk if the case falls through. Pay on completion and you’re protected, but the broker is carrying more risk and may charge more.
The only “unfair” fee is the one you weren’t clearly told about, or the one that doesn’t match the value you receive.
“Fee-free brokers” – the part people don’t tell you
A fee-free broker is typically one who relies solely on procuration fees from lenders. That can be fine. For straightforward cases, this can be a sensible, low-friction option.
But ask yourself a blunt question: if two borrowers need very different levels of work, and the broker gets paid roughly in proportion to loan size, who subsidises who? Often, complex cases become less attractive because they’re harder to place and take longer – and the broker doesn’t get paid more for the extra hours.
That’s why some fee-free brokers can be great for vanilla applications, and frustrating for anything that needs persistence or creativity. It’s not about ethics. It’s about incentives and capacity.
If your case is even slightly non-standard – variable income, multiple jobs, probation period, gifted deposit, credit blips, flats above shops, unusual construction – you want a broker who is paid in a way that supports doing the job properly.
Does commission change the rate you get?
Usually, the procuration fee does not change the interest rate you are offered in a simple, direct way. Lenders publish products and pricing and brokers select from what’s available.
However, there is a more subtle reality: some lenders are easier to deal with, some lend more flexibly, and some pay different proc fees. So the risk isn’t “your broker secretly added 0.5%”. The risk is selection bias. If your broker only uses a narrow panel, or they steer away from lenders that are awkward or slow, you may never see options that could have suited you better.
That’s why the broker’s process matters more than the headline claim of “free”. You want a broker who searches widely, explains why a lender fits your situation, and documents the reasoning.
What UK rules require brokers to tell you
Mortgage advice and arranging is regulated in the UK. That regulation exists for a reason: this is one of the biggest financial commitments most people will ever take on.
You should expect clear disclosure of how the broker is paid. This is often presented in an Initial Disclosure Document or similar terms of business, and then repeated in a suitability letter or recommendation.
If you don’t understand what you’re being shown, say so. “I don’t know what that means – explain it like I’m busy and tired” is a perfectly reasonable request. A serious adviser won’t talk down to you. They’ll make it simple.
The questions that expose whether a broker is on your side
You don’t need to interrogate your broker like a detective. You just need a few direct questions that force clarity.
Ask: Do you charge me a fee, and if so, exactly how much and when do I pay it? Then ask: If my application fails or the purchase falls through, what happens to that fee?
Next: Do you receive a procuration fee from the lender, and is it broadly similar across lenders for my mortgage size? You’re listening for confidence and transparency, not a perfect number.
Then: How many lenders can you access, and are there any you cannot use? If the answer is vague, that’s a clue you’re not seeing the whole market they imply.
Finally: Why is this specific deal right for me, beyond the interest rate? A proper answer will mention term, fees, early repayment charges, overpayment flexibility, lender criteria fit, and your plan (move again, remortgage later, pay down faster). A weak answer will just repeat the rate.
Paying a fee can save you money (if it’s the right broker)
People get emotional about fees because it’s a visible cost. But the bigger cost is picking the wrong mortgage structure and living with it for years.
A broker who helps you choose a product with the right incentives and flexibility can save you more than their fee through lower overall cost, fewer nasty surprises, and a strategy that fits how you actually live. This is especially true when you’re trying to maximise borrowing power, manage affordability, or avoid getting boxed into a lender that won’t play nicely later.
The trade-off is simple: a broker fee only makes sense when it buys you better outcomes – not fancy words.
The real goal: clarity before commitment
By the time you submit a mortgage application, you should be clear on three things: what you’re paying the broker (if anything), what the lender is paying the broker, and why the recommended deal fits your plan.
If you want an adviser who spells it out in plain English, shows you the reasoning, and sources from a wide lender panel, speak to Mortgage Genius and get the numbers clear before you commit to anything.
You’re not being difficult by asking how a broker gets paid. You’re being the kind of borrower lenders can’t take advantage of – and that mindset will pay you back for the entire life of your mortgage.
