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'Are banks killing the mortgage broker market forever?' blog discussion

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  • jamesd
    jamesd Posts: 26,103 Forumite
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    Conrad, brokers are useful for straightforward cases. Many people just haven't done enough research to know how best to proceed and a good broker can do a lot of good compared to say just going to your own bank. There was a time when I'd very much have welcomed the help of a broker and even today I did discuss it with one. He probably correctly decided that the commission attempt wasn't worth his time given the products I already knew about and the size of the loan and didn't contact me further.
  • payless
    payless Posts: 6,957 Forumite
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    edited 10 July 2010 at 8:09AM
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    So, banks offer you a cheaper deal than a broker does - and that's a bad thing? Did I miss something here?

    In my experience, mortgage brokers just type your details into their computer & tell you what's at the top of their list... Last time I wanted a mortgage I spent some time looking myself, then rang a broker & told them what I'd found and could they beat it (they couldn't). Nothing very complex about it...

    I don't hear anyone mourning the death of the insurance broker, so how is it different?



    Problem with lenders cutting out brokers is they can
    1. Move the market to non-advice route
    2 Sell expensive extras
    3. Bring out products with conditions that may not seem as detreminal at first glance to consumers ( extended ties, high SVR...)

    FSA Data from 2008,
    product sales data

    91% of all mortgages sold by intermediaries were advised sales.
    37% of all mortgages sold by banks and other lenders were advised sales.


    Did 63% of people buying from a bank really go in, look at deals and say "I want that one please" ?

    ----
    As brokers who pay FSA fees we should have access to them all products, NOTE I say access not commission.
    Any posts on here are for information and discussion purposes only and shouldn't be seen as (financial) advice.
  • Wh05apk
    Wh05apk Posts: 2,938 Forumite
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    As a broker myself, unusually I have to agree with Martin!

    The direct deals are normally sold "non-advised" meaning clients have no comeback, surely for what is the biggest financial transaction in most peoples lives this cannot be correct?

    Yes it is true there are systems in place for brokers to see direct deals, but if we "recommend" one then we are liable, if I said "the post office have a better deal go to them direct" and after 3 weeks the postoffice turned around and declined the case on criteria which I was not aware of resulting in the clients losing a sale/purchase then I could be liable for losses.

    To make a recommendation I have to complete a full fact find, source, and produce a suitability letter, all in with travelling time could be looking at the best part of a days work, so as someone said to offer this service for £50 does not make sense.

    Lenders are currently offering direct deals because funds are still tight, business levels are low, and they want to control the market, drawing people into branches to keep their staff busy and sell over priced add-ons. Lenders margins at the moment are at record highs, and this is how they can afford to reduce their margins for direct deals.

    On straight forward cases, yes most people could get the same deal, but may spend hours/days searching the market, then submitting the case, running around getting copies of ID etc, or have meeting with the broker, who can then do all this for you, liasing with agents/solictors etc. Sadly very few cases seem straightforward anymore, with lenders having changed criteria, making it harded to place a case.

    As a final thought, First direct are normally very competitive, but if I speak to a potential client who is thinking of using them, if they do then 7 out of 10 times, 2 weeks later they are back on the phone, as FD can't won't do, they are typical of lenders like this, only cherry picking the cases they want.
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Wakey2008
    Wakey2008 Posts: 149 Forumite
    edited 12 July 2010 at 2:00PM
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    Wh05apk wrote: »
    The direct deals are normally sold "non-advised" meaning clients have no comeback, surely for what is the biggest financial transaction in most peoples lives this cannot be correct?

    Absolute hogwash. All lenders have advisers qualified to the same level as brokers who offer an advised level of service. Yes there are non-advised channels (non of which I endorse) such as Barclays absolutely terrible BDM (Barclays Direct Mortgages) but if a customer finds a rate online decides to proceed on that basis, that is their choice. In the past three years I have done over 300 cases of some type (Purchase, additional borrowing, TofE etc) and only four were non-advised.

    The reasons lenders don't want to use brokers anymore is simple. Brokered cases are often of poor quality and the lender has less control over the process of giving correct advice and obtaining business of a decent standard.

    Brokered cases are more likely to cost the lender money in the future as the cases that go through have often been doctored by the broker and are not as good in reality as they first appear on paper. The level of cases going to arrears from broker cases compared to direct is staggering.

    Brokers also suck all the goodness out of a case by creaming the clients for their other products and just giving the lender the mortgage. At a time when lenders are pushed for margins this is problematic as they don't get the opportunity to build further relationships with the clients and are often left with lending that is losing money. Margins are not great despite what you say as lenders do not raise funds at base rate and with many of them being downgraded they are raising raising funds are a considerable level above the LIBOR rate.

    Brokers say lenders sell over expensive products. This works both ways as a lot of brokers over sell for the sheer purpose of making commission. I've lost count of the number of people I have done further loans and subsequent mortgages for who have been ripped off by a broker previously and ended up paying through the nose for policies they never needed or wanted.

    If brokers want someone to blame they need to look in the mirror. Years of throwing sub-standard cases at lenders that have gone on to cost the bank or building society money has led to them looking to take on business they have more control over. Times are hard so lenders don't want naff mortgage applications that carry no opportunity to do further business.
    I am a Mortgage Adviser and Freelance Journalist
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • payless
    payless Posts: 6,957 Forumite
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    Wakey2008 wrote: »
    Absolute hogwash. All lenders have advisers qualified to the same level as brokers who offer an advised level of service. .


    did you read the figures about 3 posts up from FSA PSD data ?
    Any posts on here are for information and discussion purposes only and shouldn't be seen as (financial) advice.
  • Salinger
    Salinger Posts: 9 Forumite
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    I ceased trading as an Independent Mortgage advisor in July 2010 due to lack of business and changes in the mortgage market, however I would love to return to the industry as it is one I enjoyed.
    Part of the reason was the dual pricing and as an honest broker who genuinely wanted to help clients get the best deal I didn't see a way of doing the job properly without including direct only deals. I now believe if people want advice they will have to pay for it one way or another. Therefore if a direct deal is recommended a fee would be charged, if a deal was recommended where commission was received no fee would be charged, possible even a refund of some commission !
    I have had interviews with a few banks and an estate agent and this has confirmed to me the need for independent brokers. All they are interested in is selling expensive add-ons. The banks will obviously only sell their own products and will push for sales of expensive insurances. They are usually tied to one company. One estate agency where I was interviewed for a job advertised "fees free" advice but there was enormous pressure to sell a tied life and critical illness policy. The interviewer admitted " it is not the cheapest but does allow you to earn decent commission" !!
    Two further points: a previous contributor says mortgage brokers produce bad mortgage cases because they bend the rules. If so they should be prosecuted, the banks should check the deals they accept. I never bend the rules and have a clear conscience concerning the additional products I have sold, life cover and PPI. As in all walks of life you do get honest and dis-honest people.
    Secondly, there are a lot of people who need advice because they are time poor and because they do not look into the finer details of a deal and look only at the initial rate. You need to take into account all fees etc.
    May I suggest MSE starts its own Mortgage Advice facility along the lines of genuine independent advice on all available products connected with a mortgage: ie: the best mortgage deal, the best life cover and the best PPI cover from all available sources. I for one would love to be part of it.
  • Wh05apk
    Wh05apk Posts: 2,938 Forumite
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    Wakey2008 wrote: »
    Absolute hogwash. All lenders have advisers qualified to the same level as brokers who offer an advised level of service. Yes there are non-advised channels (non of which I endorse) such as Barclays absolutely terrible BDM (Barclays Direct Mortgages) but if a customer finds a rate online decides to proceed on that basis, that is their choice. In the past three years I have done over 300 cases of some type (Purchase, additional borrowing, TofE etc) and only four were non-advised.

    The reasons lenders don't want to use brokers anymore is simple. Brokered cases are often of poor quality and the lender has less control over the process of giving correct advice and obtaining business of a decent standard.

    Brokered cases are more likely to cost the lender money in the future as the cases that go through have often been doctored by the broker and are not as good in reality as they first appear on paper. The level of cases going to arrears from broker cases compared to direct is staggering.

    Brokers also suck all the goodness out of a case by creaming the clients for their other products and just giving the lender the mortgage. At a time when lenders are pushed for margins this problematic as they don't get the opportunity to build further relationships with the clients and often left with lending that is losing money. Margins are not great despite what you say as lenders do not raise funds at base rate and with many of them being downgraded they are raising raising funds are a considerable level above the LIBOR rate.

    Brokers say lenders sell over expensive products. This works both ways as a lot of brokers over sell for the sheer purpose of making commission. I've lost count of the number of people I have done further loans and subsequent mortgages for who have been ripped off by a broker previously and ended up paying through the nose for policies they never needed or wanted.

    If brokers want someone to blame they need to look in the mirror. Years of throwing sub-standard cases at lenders that have gone on to cost the bank or building society money has led to them looking to take on business they have more control over. Times are hard so lenders don't want naff mortgage applications that carry no opportunity to do further business.


    I did not say all lending is non advised, I know lenders have "advisers" but a lot of direct deals are done as non-advised, with fewer qualfied advisors in branches.

    You come across as someone who has been "institutionalised" by working for a lenders for too long, believing everything you are told, like you, I have worked for a lender, underwriting cases, then selling to HNW individuals, and after going independent, I am almost ashamed of some of the deals I did, being tied to one lender/provider will rarely give your clients the best deal. Seems to be whatever channel you work for you are always told the other channel has worse deafult rates.

    We all have experience of clients being "ripped" off by brokers/lenders advisers, and it is something we should be ashamed of, having worked for banks, where advisers have product targets to meet, I have seen product bias you would not believe.

    Having left the safety net of a large bank and now working for myself, TCF (treating customers fairly) and documentation to justify everything is horrendous, and I feel in todays environment most advisers are far more cautious over advice.

    With regards to throwing sub-standard cases at lenders, when I first started as independent, lenders were "asking" for these, bdm's encouraging you to submit anything and dress it up! fortunately I never went down this route, as generally lenders have criteria for a reason- affordability, "fudging" an app to get through, will likely end up with the client struggling.
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • BethanyD
    BethanyD Posts: 111 Forumite
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    Salinger wrote: »
    I ceased trading as an Independent Mortgage advisor in July 2010 due to lack of business and changes in the mortgage market, however I would love to return to the industry as it is one I enjoyed.
    Part of the reason was the dual pricing and as an honest broker who genuinely wanted to help clients get the best deal I didn't see a way of doing the job properly without including direct only deals. I now believe if people want advice they will have to pay for it one way or another. Therefore if a direct deal is recommended a fee would be charged, if a deal was recommended where commission was received no fee would be charged, possible even a refund of some commission !
    I have had interviews with a few banks and an estate agent and this has confirmed to me the need for independent brokers. All they are interested in is selling expensive add-ons. The banks will obviously only sell their own products and will push for sales of expensive insurances. They are usually tied to one company. One estate agency where I was interviewed for a job advertised "fees free" advice but there was enormous pressure to sell a tied life and critical illness policy. The interviewer admitted " it is not the cheapest but does allow you to earn decent commission" !!
    Two further points: a previous contributor says mortgage brokers produce bad mortgage cases because they bend the rules. If so they should be prosecuted, the banks should check the deals they accept. I never bend the rules and have a clear conscience concerning the additional products I have sold, life cover and PPI. As in all walks of life you do get honest and dis-honest people.
    Secondly, there are a lot of people who need advice because they are time poor and because they do not look into the finer details of a deal and look only at the initial rate. You need to take into account all fees etc.
    May I suggest MSE starts its own Mortgage Advice facility along the lines of genuine independent advice on all available products connected with a mortgage: ie: the best mortgage deal, the best life cover and the best PPI cover from all available sources. I for one would love to be part of it.

    I know lots of Mortgage Brokers who have had to give up.

    Some of them are now assisting clients reclaim PPI that they originally sold to them, some have moved on to pastures new.

    Either way, it's highly unlikely that their advice will be available again.
  • MiserlyMartin
    MiserlyMartin Posts: 2,241 Forumite
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    edited 11 July 2010 at 5:45PM
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    I never forget, back in 1996, my first mortgage. I went to a broker who was based in the estate agency. He found us a deal with Nationwide. Me being money savvy, even at that age, walked straight into Nationwide and saw the same deal but with £500 cashback. It was obvious to me if I had gone with the broker where £500 was going to. So I went with Nationwide direct.

    Don't get me wrong brokers can be useful to save time, but these days with the internet its far easier now to find your own good deal.

    I also remember BBC watchdog exposing mortgage brokers who were bribed by banks to plug their products by offering commission and free holidays etc. So maybe its time for brokers to disappear.

    Lets face it the UK economy is full of jobs that are pointless. The amount of office workers who sit around chatting and doing pretty much nothing apart from chatting all day must be horrendous. We as a country don't make or service many things anymore, its about time this changed. The UK economy is built around the housing market, this cannot go on forever. Eventually a lot more of these non productive jobs will go and so will public sector non jobs as we reduce the deficit.
  • Wh05apk
    Wh05apk Posts: 2,938 Forumite
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    edited 12 July 2010 at 8:58AM
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    I never forget, back in 1996,

    The market has been completely transformed since 1996!

    my first mortgage. I went to a broker who was based in the estate agency. He found us a deal with Nationwide. Me being money savvy, even at that age, walked straight into Nationwide and saw the same deal but with £500 cashback. It was obvious to me if I had gone with the broker where £500 was going to. So I went with Nationwide direct.

    Yes the £500 would have been kept by Nationwide.



    Don't get me wrong brokers can be useful to save time, but these days with the internet its far easier now to find your own good deal.

    I also remember BBC watchdog exposing mortgage brokers who were bribed by banks to plug their products by offering commission and free holidays etc. So maybe its time for brokers to disappear.

    I must be doing something wrong, the best I have ever got is a feee 10p bic biro! maybe before regulation this happended, but certainly this would not be allowed nowadays.

    Lets face it the UK economy is full of jobs that are pointless. The amount of office workers who sit around chatting and doing pretty much nothing apart from chatting all day must be horrendous. We as a country don't make or service many things anymore, its about time this changed. The UK economy is built around the housing market, this cannot go on forever. Eventually a lot more of these non productive jobs will go and so will public sector non jobs as we reduce the deficit.

    So when you got your first mortgage, you went to a "pointless" broker who spent a lot of time for nothing finding a deal, you then went direct who just happened to have a slightly better deal, I think the fact that the broker pointed you in the right direction saved you quite a bit without you realising. As brokers - most of us self employed, we waste a lot of time with people who never proceed with us, I am resisting, but many brokers are now charging fees to at least make some money from these clients.
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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