Brokers' High APRs

Dave_Ham

droiderm wrote: »

I suspect at least one of the brokers involved was pushed by the builder. I know from past, previous experience that at least one of these companies are pretty hopeless.

That kind of takes out the retaining customers angle some what.

Now I am confused, are we talking about the garages?

droiderm

I suspect at least one of these garages was recommended/forced by the car manufacturer. I know from previous experience that some of these dealers take your eye balls out and the service of a smaller more knowledgeable garage is much better/cost effective.

There are less inclined to do a good value for money job, when they have a queue of new car purchasers queuing up.

JimmyTheWig

Dave_Ham wrote: »

Hated the car analogy, but used because Jimmy did.

Oi, now _I'm_ offended!

I think it was always going to be an inflamatory assumption that a professionally qualifed broker, would formally advise Halifax based upon commission - which is what I took issue with.

Fair enough for you to defend your profession.
But I still say that if more people questioned what they are told by professionals and those who appear to be professionals as the OP is doing then there would be an awful lot less people getting mortgages based on what they are told by their bank's mortgage advisor. Which would have to be a good thing.
It sounds like (particularly according to mortgage brokers) that mortgage brokers are honest. Lets hope that's the case. I've certainly got no reason to think otherwise, particularly after all the good work that you guys do on here all the time.

But I do think that it is fair for the OP to question because while

Thrugelmir wrote: »

A good business will look to try and develop a relationship with the customer so that they return in the future. A one off sale for a few hundred pounds commission does not make a sustainable business model in any line of work. Retaining customers is the key.

is true, it is also true that a "bad" business will look to maximise profit from every customer interaction.
Which is why I think the garage analogy works. It works in as much that it shows what the OP may have been thinking, and if nothing else it works to demonstrate a business model that differs from that of regulated mortgage brokers.


If this was the OP's first time of using a mortgage broker and, as far as he could see, the brokers were offering deals much higher than those he could see advertised elsewhere I am not surprised that he felt they were more like some garages which are known to grab as much money from a job as they can.
[It may be that the brokers didn't explain to the OP that their circumstances mean they wouldn't be able to get the best deals out there. If they had explained this then what followed may have done so differently. Or it may be that they did explain this and the OP didn't understand - in much the same way (I'm afraid) as would happen if a mechanic tried to explain to me why I needed such-and-such expensive part rather than a cheaper generic alternative.]

matheo44

droiderm wrote: »

To use your analogy, I think he knows he needed new brakes.
That was never in question. However, both garages wanted to sell him these fancy Dan brakes which the OP knew the garages would get a kick back on. He also thinks the garages might get a kick back on selling you other brakes, but he just wasn't sure if the kick back on these fancy dan brakes (more expensive) was in a factor in them recommending them.

I guess what he didn't know, was these fancy dan brakes were the only ones that would fit his car, and therefore the rest is moot.

I personally think it's reasonable to question things when there is commision involved.

Exactly! I need a mortgage but wasn't sure if Halifax was actually my only option because of my situation or because of all the money they spend in advertising/referral fees.
Or if I could have had not as 'fancy' and cheaper mortgage from a smaller lender.

droiderm wrote: »

I suspect at least one of the brokers involved was pushed by the builder. I know from past, previous experience that at least one of these companies are pretty hopeless.

That kind of takes out the retaining customers angle some what.

You are spot on!

I wanted to get some advice from an external broker too, hence why I got two quotes (one from builder's broker, one from external broker).

JimmyTheWig

matheo44 wrote: »

You're absolutely right.


My previous message was a bit confusing.

• initial rate until 2015 (2 years fix) is 4.29%;
• reverts to 3.99% (which is today's rate, so God know what it will revert to then!)

Admin fees are £770.99

APR = 4.20% in total

I know there has been a lot of water under the bridge since this, but I wanted to reply to it.
I still maintain that the APR is not what you should use when comparing mortgages. The 4.2% APR says more about the 3.99% revert rate than it does about the initial rate and the fees.
Though in this instance it is similar and not so relevant.

JimmyTheWig

matheo44 wrote: »

one from builder's broker, one from external broker.

Ok, I now understand droiderm's post!

Dave Ham, would you agree that the OP was right to get an opinion other than the builder's broker? Or, from your experience, are these guys generally as honest as independent brokers?

matheo44

JimmyTheWig wrote: »

I know there has been a lot of water under the bridge since this, but I wanted to reply to it.
I still maintain that the APR is not what you should use when comparing mortgages. The 4.2% APR says more about the 3.99% revert rate than it does about the initial rate and the fees.
Though in this instance it is similar and not so relevant.

Yes, thank you! I actually took your advice on this and use the initial rate instead of the APR, when comparing.
It makes much more sense to do this as no one knows what the SVR will be in the future.

Thrugelmir

JimmyTheWig wrote: »

is true, it is also true that a "bad" business will look to maximise profit from every customer interaction.

Don't "good" businesses maximise profit ?

droiderm

Thrugelmir wrote: »

Don't "good" businesses maximise profit ?

Yes, but at the cost and detriment of who is the question.

JimmyTheWig

matheo44 wrote: »

Yes, thank you! I actually took your advice on this and use the initial rate instead of the APR, when comparing.
It makes much more sense to do this as no one knows what the SVR will be in the future.

Just to be pedantic, remember to factor in the fees, not just the rate.
E.g. 3.9% with £1500 fees is likely to be worse than 4.0% fee-free.