Mortgage adviser help

rabster

Hi,

Would appreciate any comment on the following from mortgage advisers (to restore my faith in the profession!).

Having done my research on moneysupermarket I went to see an adviser with a list of the best fix rates available for my circumstances. I was told that I definitely shouldn't apply for any of the rates that I had identified as there was only a very small chance I would be accepted and I would risk losing my house purchase. He specifically listed a number of companies which he said were not to be trusted as they would reject the majority of applicants as well as charging an upfront fee and delaying the process. Instead the broker recommended mortgages through other providers which had higher rates (up to 1% higher), but which he said stood a much better chance of being accepted. He assured me his advice was "whole of market" and the reason that certain rates didn't appear on his system was because he had blocked them from the computer as the companies were not to be recommended.

I was a little sceptical so have just been doing some research - and lo and behold, the lenders he advised against using for the above reasons were HSBC, First Direct, ING, Post Office - the first three of which are specifically mentioned on MSE as not paying any commission to brokers. Strangely when advising against using these lenders he made no mention at all of the fact that they were the ones that wouldn't pay commission.

Can any mortgage advisers comment on this? Is there any truth at all in what I have been told, or should I just be heading straight to the Post Office (who seem to have the best rates) and steering well clear of mortgage advisers in future?

thanks

dunstonh

and steering well clear of mortgage advisers in future?

Dont rule out all mortgage advisers. If you see a commission based whole of market provider they will usually only tell you about commission paying deals. If you want full whole of market and include non commission paying deals then you need to employ an independent mortgage adviser.

GMS

Would you be happy to pay a fee in order to be told of a direct only deal?

rabster

Thanks for the replies. What bothers me is that I wasn't aware they were commission-based. They are intending to charge me a fee as well, and at no time have they even mentioned commission - even when I specifically questioned them on why they were not recommending what appeared to be the cheapest deals!

GMS

The adviser should have provided you with an Initial Disclosure Document detailing fees. If they did not provide this I would be concerned.

They are correct to a point regarding Post Office, HSBC etc. BEcause these providers have good rates they get a lot of applications, and as a result 'cherry pick' the best ones. There are lots of declines from these lenders.

To say he has blocked them for this reason is possibly an exaggeration. My own sourcing system requires me to allow direct deals or not.

If a broker were to charge you a small fee to search the direct deals for you it would not be unreasonable. Rate should not be the only reason to recommend a product. Each one needs to be researched thoroughly to ensure if meets client needs. A broker needs to earn a living and can not go researching products for free.

If you are not happy with the broker then move to another one, who will hopefully give you a better experience.

Without knowing your circumstances it is impossible to say whether or not the direct deals would be best. Some lenders charge up front valuation fees etc, and large arrangement fees. Some do free valuations and legals for instance. It can be better overall to pay a 1% higher rate, as strange as it may sound. Could be free val and legals, low arrangement fee, and/or cashback. Could be that a lender charges a percentage arrangement fee rather than fixed. Often better with lower loans, whilst punitive with larger loans.

Lowest rate is not necessarily the best overall deal. This is one of the many reasons brokers exist.

I am sorry you feel you have been misled by your broker but speak to them regarding your concerns. They may well be able to tell you why.

dunstonh

Thanks for the replies. What bothers me is that I wasn't aware they were commission-based. They are intending to charge me a fee as well, and at no time have they even mentioned commission - even when I specifically questioned them on why they were not recommending what appeared to be the cheapest deals!

As GMS says, their initial disclosure document tells you their status.

The FSA made a mess of mortgage classifications.

Independent has to offer fee option (and rebate commission, if any, in that case or use it to offset the fee). As the independent isnt reliant on commission they can make you aware of all deals. Including the non commission payers. Some lenders wont deal with them but an independent can still recommend them and help you get the forms to return directly.

Whole of market isnt what it sounds. It can range from quite a limited panel to a larger spread. Typically, its all the commission paying lenders. Most whole of market brokers wont charge a fee or will charge a very small amount (more typical in low value areas where commission is too low to be profitable).

An independent can offer whole of market method as well as fee method.

Many mortgage brokers are relatively new to the role as there was a massive influx during the latter years of the credit boom. Although many of those are now leaving. The more experienced ones often are not used to offering fees as historically there wasnt this difference between commission paying and direct. To ask a mortgage adviser to move to independent basis and go true whole of market is quite a shock to the system and it is a big step for them to take. That said, most that take it find it much easier than they realise.

rabster

Thanks again to you both for replying, it's much appreciated. I've not been given any initial disclosure document so sounds like i should steer clear. I'm tempted to give Post Office a go directly and see what happens (have checked out arrangement, valuation and termination fees and they all seem ok), then if i have any problems i can identify an Independent broker to help me out at that stage. Do you know roughly what sort of fee an Independent broker would charge (just a ballpark figure - loan amount is roughly 300k in case thats relevant)?