Commission claw-back

When does a claw-back arise?

When the loan ends sooner than the bank expected. Typically through early repayment or a move to another bank.

The logic behind it isn't punitive. The bank is buying a client who will keep repaying for years, and a loan ended after a year doesn't even cover what it cost the bank to win that client. That's why it writes commission repayment into its contracts with intermediaries.

The scope varies. Sometimes it's the full amount for the whole set period, elsewhere the amount is reduced month by month for however long the loan lasted. These are commercial terms between the bank and the network, so they aren't public and they change over time.

What doesn't trigger a claw-back?

Regular repayment and agreeing a new rate with your existing bank. The loan carries on, so the bank has nothing to claw back.

The difference between refixing and refinancing is therefore crucial for the intermediary, even though from your point of view both are simply a new rate. Refixing leaves the loan in place; refinancing ends it with the original bank.

A chapter of its own is selling the property. This repays the loan, so it can trigger a claw-back. It has no effect on your own right, though: once at least two years have passed since the contract was signed, repayment on a sale carries no cost penalty.

Is the claw-back set out in law?

No. The Consumer Credit Act does not regulate repayment of an intermediary's commission; it's a contractual arrangement between the bank and the intermediary, and further between the network and the individual.

The law addresses the other side of the relationship, that is, you. It sets out when you may repay without a cost penalty and how much the bank may charge you when you don't fall into those cases. The claw-back changes none of that: it's money between the bank and the intermediary, not your payment. We cover the conditions for repayment under the fixed-rate period entry.

Which way does a claw-back flow?

From the bank to the network, and from the network to the individual. The bank pays the commission to whoever it has a contract with, and it travels back the same route.

For a particular appointed representative this tends to be felt, because they received the money years ago and repay it out of today's income. How the commission is split when it flows the other way is covered in the intermediary's commission entry.

What does this mean for me?

Two things, pulling in opposite directions.

The first is good news. It pays for the adviser if your mortgage keeps running, because if it ends early, they lose the commission too. Your interest and theirs point the same way here, which doesn't happen often in the sale of financial products.

The second is worth noting. Moving to another bank doesn't pay off for them in the first years. So when someone talks you out of refinancing, it's worth asking whose numbers are behind that. A decent answer will show those numbers and name specifically what would get worse on your side.

Your rights don't change because of the claw-back. At the end of the fixed-rate period you can repay without a cost penalty, and the same applies in the other situations the law provides for. We cover what pays off and when under refixing and refinancing.

Do I pay the claw-back?

No. The claw-back happens between the bank and the intermediary, and you don't enter into that relationship.

Something else may concern you, though: an agreement you yourself would sign. Before the credit agreement is concluded, the intermediary has no right to remuneration or any other payment, except for taxes, administrative fees and reasonably incurred costs of valuing the property. If someone asks you for a deposit "for processing", or a penalty for dropping your plan, that's a reason to read that document again.

Has this changed in recent years?

Yes, towards stricter terms. Since 2024 banks have been tightening the conditions, and this has affected most of all taking over a loan from a competitor during the fixed-rate period.

For you, this gives a practical note on timing. It makes sense to plan a move to another bank for the end of the fixed-rate period: there you have the right to repay without a cost penalty, and it doesn't set the intermediary against you either. In the middle of a fixed-rate period, both you and they pay extra.

Anyone who wants to go through the whole structure can find it in the mortgage adviser market overview and on the mortgage adviser page.