What do you look for in a broker?

herbiesjp

EdInvestor wrote:

If the potential for making a significant loss is very small and the protection from misselling is pretty meaningless,it rather begs the question of why bother with a broker at all.

Well that does depend on what kind of mistake an applicant could potentially make, and what the consequences for the applicant would be.

HelpWhereIcan

EdInvestor wrote:

If the potential for making a significant loss is very small and the protection from misselling is pretty meaningless,it rather begs the question of why bother with a broker at all.

Ignoring access to lenders, access to exclusive deals, time saved, service etc:

Because the difference between (as I said above) the 'top two' will be quite small. The difference between a deal that looks attractive on first sight, but appears in the middle of the pack in terms of total cost (low rate, high charges, annual interest etc etc) and the one at the top can be £000s. Multiply this over the term of a mortgage, and that can be huge. Even if you just look at the one mortgage in isolation, surely getting a broker to save you £000s over a period of 2 years is worth while.

One of the customers I sourced a 2 year fixed for this morning is better off with the C&G @ 5.09 with £19260 total payable (TAP) over 2 years, best 'non broker' lender was ING direct @ 4.95, TAP £19591 - deal that he had found for himself he was asking me to compare with is Skipton @ 4.95with TAP of £19,815.

If he follows my advice, he will save (because of difference in fees etc) £555 over the 2 years - it will have cost him nothing in terms of a fee, I will chase the application etc for him, meaning he has to spend less time on getting the mortgage in place, I will provide his estate agent with confirmation that the mortgage is in place and field their enquiries about how long it will take.

The cost could have been bigger if he had been attracted by the headline rate of the likes of the Northern Rock @ 4.99 with a total to pay of £20,421.

dunstonh

Will he have a case against the broker for misselling redress?

Nope. As long as the research covers a number of providers then that is fine. IFAs only have to compare 3 providers as a minumum and show that they place no more than 20% of their business with one provider over a rolling 12 months.

Arch-Angel

EdInvestor wrote:

If the potential for making a significant loss is very small and the protection from misselling is pretty meaningless,it rather begs the question of why bother with a broker at all.

In one sence a very valid point! There are mortgage wizards on the internet (i mentioned them in my ramble earlier in this thread) that can find a good deal, if not the best deal for the searcher.

However, I also mentioned in the same ramble - whoops post! - that the cost for going DIY to get a mortgage was £0, whereas the cost for going to a broker can be £0.

So I don't see the gain in setting up a DIY mortgage. You don't save anything - unless the mortgage provider doesn't pay the broker any commission and said broker wants to charge you - and, more importantly, if the mortgage deal is not the best, it's not your fault - it's the brokers!

kenshaz

Arch-Angel wrote:

In one sense a very valid point! There are mortgage wizards on the internet (i mentioned them in my ramble earlier in this thread) that can find a good deal, if not the best deal for the searcher.

However, I also mentioned in the same ramble - whoops post! - that the cost for going DIY to get a mortgage was £0, whereas the cost for going to a broker can be £0.

So I don't see the gain in setting up a DIY mortgage. You don't save anything - unless the mortgage provider doesn't pay the broker any commission and said broker wants to charge you - and, more importantly, if the mortgage deal is not the best, it's not your fault - it's the brokers!

unless you benefit by receiving some of the commission,in the form of cashback

Arch-Angel

kenshaz wrote:

unless you benefit by receiving some of the commission,in the form of cashback

True - and I had forgotton that this was possible so thank you for the reminder. I don't know how much they pay - £200-£300 on a £150K mortgage? - but if the mortgage that you find via such sites is just 0.1% higher on a £150K repayment mortage than what a broker could have found then virtually all of this saving is wiped out over 2 years (it's around £9 to £10 per month extra).

Granted, if you don't know there was a lower rate out there then this won't bother you. Also this is not a "broker's are best" - for people with fine credit backgrounds a simple web search to find the best rate may well be the better approach. However, the savings from the cashback may be minimal.

whiteflag_3

HelpWhereIcan wrote:

.

The cost could have been bigger if he had been attracted by the headline rate of the likes of the Northern Rock @ 4.99 with a total to pay of £20,421.

:eek:

To right , avoid like the plague!

The amount of people I come across who DIYed 2/3 years back, taken in by the headline rate and" help with costs" and are now faced with a mortgage review fee on top of any new fee for the pleasure of staying with Northern Rock.

MortgageMamma

So how do you guys feel about brokers who gain the competitive edge by rebating commission on some of their larger mortgages? There is at least one I know of that does this. Surely you must see the value in using someone who does this on a full advised basis as you would be getting the best mortgage to suit your needs, all servicing and paperwork dealt with, someone to lean on, plus a bit of cash in your back pocket.

I doubt there are many of these brokers about but, assuming it became commonplace for brokers to do this, do you think this would lead to a significant increase in clients? Do you think the lenders would catch on, realise they are losing direct business and reduce proc fee's further? or do you think they would embrace the idea and move further away from the direct branch sales model to making the intermediary channels more attractive?

I'm in a very thoughtful mood of late!

silvercar

MortgageMamma wrote:

So how do you guys feel about brokers who gain the competitive edge by rebating commission on some of their larger mortgages? There is at least one I know of that does this. Surely you must see the value in using someone who does this on a full advised basis as you would be getting the best mortgage to suit your needs, all servicing and paperwork dealt with, someone to lean on, plus a bit of cash in your back pocket.

So not only do we search for fee-free brokers, we now need to search out rebating brokers!

It actually makes sense, if broker's commission is on a percentage basis then you are getting twice as much for a straightforward £400k mortgage as for a straightforward £200k mortgage. If you give some of this commission back to your client, he/ she is going to recommend you to his/her mates, giving you more (big) business.

jamesd

The consequences for a mistake can be higher, so some price premium for risk is justified on the bigger mortgages. They also cross-subsidise the smaller ones and that's a valid part of the product mix. For competitive reasons, it seems to make sense to offer a rebate. After all, the mortgage lenders often do in their mortgage interest rates.

Other things being equal, I see no reason not to favor a broker who offers the full service and also discounts.

If discounting by brokers did become popular I expect that lenders would offer stepped fee levels.