Is my Mum right to be cynical about a Mortgage Broker

We went into town for an appointment with a Fees Free Indepenant Whole of Market Mortgage Advisor.

As our situation is very complicated, and despite having no obvious credit problems the Post Office turned us down. We decided we needed professional help!

At the end of the Meeting the Advisor said she can definately get us a mortgage, but further, she should be able to use some of the 200k equity tied up in another property.

Mum works in a solicitors practice and has a very jaded view of the world, often she is right to be cautious, but sometimes i feel she goes overboard on not trusting people.

So....to the actual question:
she thinks that someone that gets paid a fee for organising a mortgage may go for one that pays them best - or worse will get anybody a mortgage irrespective of whether they should have one (i.e. unaffordability)

Does Mum know best:eek:
Was a 40 a day smoker for 20 years.
Decided to give up, and haven't had a fag for 12 years.
Halfway through losing six stone.

Looking forward to early retirement.
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Replies

  • heretolearn_2heretolearn_2 Forumite
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    Well, no-one works for nothing. She is not concerned about fee-paid mortgage broker but the commission-based ones. If it is fee based, you pay them a set fee directly. (although many will also receive some commission too). Commission-based, they get a cut from the mortgage lender. People believe that fee-based is more likely to give you an honest view as they aren't influenced by the amount of commission earned. But commission ones SHOULD treat you fairly too.

    I'd be more concerned about making sure it is really is whole of market.
    Cash not ash from January 2nd 2011: £2565.:j

    OU student: A103 , A215 , A316 all done. Currently A230 all leading to an English Literature degree.

    Any advice given is as an individual, not as a representative of my firm.
  • GMSGMS Forumite
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    Your mother works for a solicitors. Does she feel professional advice from them should be free? Even a no win no fee service involves the solicitor being paid by somebody.

    Funny that nobody ever questions the motives of a solicitor's charging structure.

    You feel that for no reason you have been turned down by the Post Office. This puts you in a position where you need to seek professional advice in order to prevent any harm to your credit rating.

    A broker is obliged to provide reasons for recommendation so it cannot be for a better commission payment. If there is a direct deal available which pays the broker no commission then a fee charged would be reasonable.

    Good advice is better than free advice. Good advice can save money in the long term.
    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.
  • blueberrypieblueberrypie Forumite
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    So....to the actual question:
    she thinks that someone that gets paid a fee for organising a mortgage may go for one that pays them best - or worse will get anybody a mortgage irrespective of whether they should have one (i.e. unaffordability)

    Does Mum know best:eek:

    By that reasoning, the solicitor your mother works for would give the advice that would benefit himself/herself the most - dragging out conveyancing and doing unnecessary searches so that he/she can charge more, for example.

    A good broker will benefit far more from positive word-of-mouth advertising than from a small difference in his/her commission on any single mortgage.
  • GMS wrote: »
    Your mother works for a solicitors. Does she feel professional advice from them should be free? Even a no win no fee service involves the solicitor being paid by somebody.

    Funny that nobody ever questions the motives of a solicitor's charging structure.

    You feel that for no reason you have been turned down by the Post Office. This puts you in a position where you need to seek professional advice in order to prevent any harm to your credit rating.

    A broker is obliged to provide reasons for recommendation so it cannot be for a better commission payment. If there is a direct deal available which pays the broker no commission then a fee charged would be reasonable.

    Good advice is better than free advice. Good advice can save money in the long term.



    I'm not an expert on this, but i think some solitors fee's are set by the legal society.

    Mum has worked in the practice for 26 years as support staff.

    I do agree that Free isn't always best, but after the meeting i felt the Broker listened to, and understood our situation.
    And a lot of experts on here have said having a good rapport with your broker/solicitor etc is very important.

    With hindsight we should have gone to a broker first with all our paperwork and got the right product from the start!
    Was a 40 a day smoker for 20 years.
    Decided to give up, and haven't had a fag for 12 years.
    Halfway through losing six stone.

    Looking forward to early retirement.
  • edited 31 December 2010 at 3:25PM
    dunstonhdunstonh Forumite
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    edited 31 December 2010 at 3:25PM
    We went into town for an appointment with a Fees Free Indepenant Whole of Market Mortgage Advisor.

    That type of adviser doesnt exist. Technically they could but independent means fee option and if its fees free then it means the person is working for nothing. I cant see anyone doing it for free.
    Mum works in a solicitors practice and has a very jaded view of the world, often she is right to be cautious, but sometimes i feel she goes overboard on not trusting people.

    You have to remember that solicitors generally deal with things that have gone wrong. So, it would be very easy for someone working in a solicitors office to lose a balanced view and think that what they see is the norm.
    she thinks that someone that gets paid a fee for organising a mortgage may go for one that pays them best - or worse will get anybody a mortgage irrespective of whether they should have one (i.e. unaffordability)

    Does Mum know best

    In my opinion she is right but not necessarily for the right reason. An independent can use non commission paying mortgages whereas a fees free whole of market adviser is not likely to (as they wont get paid). An independent can also be cheaper than a fees free as well. Not only if a commission deal is recommended and the commission is higher than the fee (and therefore you get a rebate) but also if the deal recommended is cheaper. (e.g. a 5 year deal which is non commission paying but £20pm cheaper than the best commission deal would save £1200 over the term. So any fee less than £1200 would see you in pocket).

    The problem is that there are not too many independent mortgage brokers. Fee options for mortgage advice are relatively a new thing and many mortgage advisers are scared to make the move to fee only basis as the average consumer doesnt understand fees and commission very well. Technically an IFA should have mortgage advisers that are independent but whether their fee option is cost effective is a different matter. If you can get an independent mortgage adviser for around £500-£750 with commission rebated (where commission is payable) then you will probably find you end up cheaper that method than a fees free whole of market adviser and you know the adviser will not be recommending with a commission bias (although past investigations into allegations of commission bias have never found any widespread abuse)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • GMSGMS Forumite
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    I'm not an expert on this, but i think some solitors fee's are set by the legal society.

    Mum has worked in the practice for 26 years as support staff.

    I do agree that Free isn't always best, but after the meeting i felt the Broker listened to, and understood our situation.
    And a lot of experts on here have said having a good rapport with your broker/solicitor etc is very important.

    With hindsight we should have gone to a broker first with all our paperwork and got the right product from the start!

    Broker fees commission wise are set by the lender. Nowadays there is not a great deal of difference between the lenders. In years gone by there were sub prime lenders paying 2 or 3 times the commission of high street which could have been open to abuse.

    If you feel the broker listened and understood then they are 95% on the way to doing a good job. Sourcing the appropriate mortgage should come natural to them, and a good service deserves an adequate reward.

    Trust your broker and you will not be dissapointed
    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.
  • dunstonh wrote: »
    That type of adviser doesnt exist. Technically they could but independent means fee option and if its fees free then it means the person is working for nothing. I cant see anyone doing it for free.



    You have to remember that solicitors generally deal with things that have gone wrong. So, it would be very easy for someone working in a solicitors office to lose a balanced view and think that what they see is the norm.



    In my opinion she is right but not necessarily for the right reason. An independent can use non commission paying mortgages whereas a fees free whole of market adviser is not likely to (as they wont get paid). An independent can also be cheaper than a fees free as well. Not only if a commission deal is recommended and the commission is higher than the fee (and therefore you get a rebate) but also if the deal recommended is cheaper. (e.g. a 5 year deal which is non commission paying but £20pm cheaper than the best commission deal would save £1200 over the term. So any fee less than £1200 would see you in pocket).

    The problem is that there are not too many independent mortgage brokers. Fee options for mortgage advice are relatively a new thing and many mortgage advisers are scared to make the move to fee only basis as the average consumer doesnt understand fees and commission very well. Technically an IFA should have mortgage advisers that are independent but whether their fee option is cost effective is a different matter. If you can get an independent mortgage adviser for around £500-£750 with commission rebated (where commission is payable) then you will probably find you end up cheaper that method than a fees free whole of market adviser and you know the adviser will not be recommending with a commission bias (although past investigations into allegations of commission bias have never found any widespread abuse)

    I've sent you a pm about the company. just for reference
    Was a 40 a day smoker for 20 years.
    Decided to give up, and haven't had a fag for 12 years.
    Halfway through losing six stone.

    Looking forward to early retirement.
  • dunstonhdunstonh Forumite
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    I've sent you a pm about the company. just for reference

    I have looked at the company and I believe they are slightly misrepresenting the fee option and abusing the rules to allow them to call themselves independent whilst not actually offering a proper fee option.

    Their site says:
    Our mortgage service is completely independent and there is no need to pay us a fee as we are paid commission by the lender. (If you prefer, you can choose to pay us a fee, usually 0.4% of the loan and we will pass on the lender's commission to you).

    So, they have one fee option and its is priced higher than the typical commission. This is a total disincentive to go fee based. It could easily breach FSA rules as well which state that fee options should not be used as a way to deter people from using them and should not match the commission option.

    Percentage fee options are allowed but they should have a cap on them and not be open ended. The fee option shouldn't be more than the commission option (unless for small cases).

    All in all, I think this company are an example of a bad fee option. Also, there is no comment on whether they consider non commission paying lenders. I reckon they do not because their fee description above would suggest they would not get paid if they did (unless you went down the 0.4% route)

    Its also interesting that the company are directly authorised but display a banner that shows Sesame mortgage award winner 2008-9. They are not a Sesame member but if they were, then they would be in breach of Sesame guidelines on fee charging. I saw that as a bit ironic.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    I have looked at the company and I believe they are slightly misrepresenting the fee option and abusing the rules to allow them to call themselves independent whilst not actually offering a proper fee option.

    Their site says:
    Our mortgage service is completely independent and there is no need to pay us a fee as we are paid commission by the lender. (If you prefer, you can choose to pay us a fee, usually 0.4% of the loan and we will pass on the lender's commission to you).

    So, they have one fee option and its is priced higher than the typical commission. This is a total disincentive to go fee based. It could easily breach FSA rules as well which state that fee options should not be used as a way to deter people from using them and should not match the commission option.

    Percentage fee options are allowed but they should have a cap on them and not be open ended. The fee option shouldn't be more than the commission option (unless for small cases).

    All in all, I think this company are an example of a bad fee option. Also, there is no comment on whether they consider non commission paying lenders. I reckon they do not because their fee description above would suggest they would not get paid if they did (unless you went down the 0.4% route)

    Its also interesting that the company are directly authorised but display a banner that shows Sesame mortgage award winner 2008-9. They are not a Sesame member but if they were, then they would be in breach of Sesame guidelines on fee charging. I saw that as a bit ironic.

    Thanks very much for that reply.

    I had thought about the 0.04% Fee, but felt that if someone was doing all the research and hard work, then why not let them get paid for it.
    I got my fingers burnt trying to go it alone via the Post Office!

    I hadn't thought about the non-commision based mortgages?
    I'll ask next week.

    Also i don't understand the Sesame part
    Was a 40 a day smoker for 20 years.
    Decided to give up, and haven't had a fag for 12 years.
    Halfway through losing six stone.

    Looking forward to early retirement.
  • dunstonhdunstonh Forumite
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    Also i don't understand the Sesame part

    Sesame are a compliance company. They are the UKs largest one. IFAs either become member of Sesame or pay Sesame to do many of the compliance roles that are required. It can be cheaper for smaller IFA firms to use the services of compliance companies than employ their own compliance officer and do all the compliance in house. Members of Sesame agree to abide to all Sesame compliance requirements whereas non-members using their services can pick and choose which options they want to use and follow those individual standards.

    Sesame would not allow its members to use a fee option of 0.4% on mortgages unless it had a cap on it. Their compliance states:

    To keep your independent status you have to offer the client a choice – to pay by fee
    or commission. This has to be a genuine choice, so you can’t show overly inflated
    fees to steer the client towards paying commission, as this effectively removes any
    real element of choice.


    So, a 0.4% uncapped fee when the commission option is typically 0.3% would fall foul of that.

    So, the irony was that they received an award from Sesame back in 2008 despite them operating a fee basis that would not be allowed to be used by Sesame members (they may not have had this fee back then which may account for why they havent won it again! - not that awards are anything special as they always seem to be handed out on a "who you know" basis).

    The FSA does what it normally does in that it doesn't state what sort of fees are acceptable. It issues guidelines that have to be interpreted and its only when companies get fined that you find out what is or isnt acceptable. However, in this case a fee that mimics commission but charges more than the typical commission would fall foul of its guidelines.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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