Mortgage Broker Fees

gstaader2000

As I whole-of-market broker, I take issue with some of the advice given. You are effectively advising everyone to go to one of a few large brokers who have enough volume to waive brokerage fees. This ultimately reduces competition and increases consumer costs. Secondly, you seem to be advising everyone to use a broker, but to use whatever means necessary to avoid paying for the service they get. Brokers have to maintain systems, qualifications, offices, etc like any other business. If they can't charge a fee, and you object to the lenders paying them a procuration fee because the cost is passed on, how can any of us stay in business? Finally, there are over 35,000 mortgage products currently available in the market including exclusives, variations on basic porducts, etc. There are no currently available internet or other systems for the consumer to use to access all of these. Only brokers can do this. While I am all in favor of saving money, it seems a bit churlish to say that consumers need to use a broker because of the complexity of the market, but should do everything possible to avoid paying anything for the professional advice and service they receive. Its like say a car is a very expensive purchase, so you should try to steal one if you can get away with it.

Jon_Davies

As a long time lurker, this post has forced me to register to show my support for this post. I am also a whole of market broker who charges fees. In my eyes, this is the only possible way that my customers can get the service and impartiality they deserve.

As far as I am concerned, fee-free whole of market brokers fall into the following categories:-

1) Procuration chasers. Before everyone starts getting "oh but, TCF prevents this" it is absolute nonsense. I see it every day from my new customers previous deals. I regularly recommend to customers that they revisit their existing lender for a deal, even if there is no retention payment (BTW I don't charge a fee either in that instance) or take a 0% commission product (eg ING etc) if that is what is best for them. Would I be able to do this if I didn't charge a fee? I think not.

2) Insurance salesmen/women. L&C are one of the prime examples. No fee charged but an inordinate amount of time being dedicated to maximising insurance commissions. I even had a customer recently who was told he "had" to have life assurance to get the deal - if I could get him to give me details (it was one of the banks) I would be straight onto the FSA, but he wouldn't.

3) Advice only. Recommend the product and let the customer do all the work as sufficient back-room staff cannot be afforded. All brokers on this site know that deals often fall apart if the cases are not "massaged" into a form the lender likes - if this is not effectively done, the case falls through and time and money (non-refundable booking or valuation fees) are wasted. In the case of purchases, we often negotiate for the customer and on average obtain a discount of 5-8 times our fee from the vendor.

4) Loss-making. With all the costs of regulation, staff, licences, premises, travel, advertising, telephones etc etc etc. and no other income stream, the company will not make money. Dozens of companies going to the wall each month is testament to that.

I'm fee charging (payable on completion only) and give my customers what I feel is excellent value for money. So please stop harping on about "fee-free whole of market brokers only." Meet the broker, see what he/she can do for you and then decide whether to use them or not.

Fairdo_2

I see the point for both initial posts, but it is down to drwing a line. I am a Whole of Market Mortgage Broker and I do not work for one of the large firms that tend to be mentioned, but it is not as if MSE can put out a list of loads of mortgage brokers as it would be effectively an endorsement of these brokers and there is no way that they will be able to do quality control checks in this instance.

I feel that there are people who will take advice from both camps and I don't think it will have profound impact on those who charge reasonable fees and provide a good service within this. Lets face it, when we are any good and we have been in the trade for a while, we should get word of mouth recommendations and repeat business from existing clients!

My concern about not recommending that people visit fee free Whole of Market Mortgage Brokers is that there are a few well known companies that charge fees that I would consider wholly unreasonable (and often don't even pass on the procuration fee) and do very little in providing a proper level of service. However, they still seem to get people prepared to pay, which I personally find disgusting. I would prefer that there is more and more education handed out to the consumer so that they can make a rational informed decision. I think this forum is the best out there for giving this education in an independent and logical manner and I would not want to discourage them from putting out the good word.

It's that old addage I'm afraid that you can't please all the people all the time.
I'd rather the forum err on the side of caution to the consumer as I don't think we get affected too badly if we feel we have to charge a fee and we a comfortable justifying why.

toonfish

Everyone has their own business model - we are a 2 adviser practice, work bloody hard and don't charge any fees. 90% or more of our business is prime too, so average proc fees probably £350-500 per case plus any commission from asociated business and we manage to make a decent living.

homer_j_3

There has been many posts around this subject and I understand that from a self employed persons view or small firm it is a lot of hard work for the return that you get.

It becomes even harder when you have to factor in deals that don't proceed due to sales falling through, clients not being fully honest with you.

This website talks about money saving and its not always money saving to go and find the cheapest because cheapest isn't always best.

Charging a fee as a broker isnt bad IF you refund any commission by return but when you see brokers and firms charging extortionate fees and keeping the commission on top and then adding lump sum insurance premiums on top of this it really is disappointing that people pay this and unfortunately in my opinion makes it even more confusing for consumers because of this.

Yes, sometimes lump sum insurances can have its place but unfortunatley they are pressure sold because often the adviser is self employed and has to sell this to make up for the fact that they only write a handful of mortgages a month.

Anyway I digress a little - people should pay a fee to avoid commission bias however, the amount of fee should be relevant and justified to the fees that would have been likely to be paid by the lenders that met the clients risk profile.

If I was to be self employed, I would probably charge a fee in lieu of commission but would also make sure a small portion of this fee was payable before any indepth research or work took place to make sure that my time was not completely wasted by general shoppers. Working for a large organisation, I don't have to do that because I get paid a basic wage regardless of what I sign up and the view of the company is that see enough people and enough will sign up. Not something easy to replicate when you have to pay for leads or self generate through often expensive and fruitless marketing exercises.

gstaader2000

Thanks to all who responded to my initial posting with their useful and thoughtful comments. I would beg leave to raise one other point which to seems to be outside current regulatory control. Lenders currently attempt to cajole brokers into recommending their products by offering incentives such as higher proc fees, faster service, cases of champers for most cases submitted, etc. We are supposed to be offering our clients unbiased, tailored advice and recommendations. How can lenders or any other regulated firm be offering such incentives within the scope of TCF and the rules? Comments welcome.