Apply for mortgage myself or use a broker

ACG

haras_nosirrah wrote: »

I have had a case today where the client went direct to lender and was declined

We have placed with the same lender and got an accept

I have had another case where the lender max borrowing was 9k short than we needed. Through speaking to the underwriter we have managed to increase the max lend to within 1400 of what we needed and the client can cover the shortfall

Having a broker onside can be worth the fee that we charge

I have a case where the customer went to a broker who had the case declined on the high street with "lender A" they then went to an adverse lender and also had it declined.

We picked the case up and went back to "Lender A" less than 2 weeks later and had the case accepted.

It is not just a broker people want but a broker who is not useless as Somerset La La La says.

haras_nosirrah

SouthLondonUser wrote: »

Incidentally, many banks could save a fortune on broker fees if only their process was a little more reasonable and efficient. Eg HSBC would have saved those fees if it had allowed my wife and me to show up separately, at branches near our respective places of work.

brokers save lenders money
If brokers weren't processing the application they would have to have tons more permanent staff doing it with offices for them to sit in, salaries and pensions, tax and ni to pay

By having an army of brokers doing the donkey work they can have 1 advisor in a town mopping up the clients who go direct and they don't have to pay us a salary

SouthLondonUser

It depends. The debate of how much to outsource vs how much to internalise is an old problem which applies to all businesses. There is no universal, one-size-fits-all kind of right answer.

For a small lender like Atom it makes perfect sense, at least initially, to use brokers and not to spend tons of money building up its own army of people.

For bigger lenders, it depends. You could make a case for both kinds of strategies. Don't forget that there are also countries where brokers are almost unheard of.

Also don't forget that brokers' incentives tend to be NOT aligned to those of the lenders; the subprime crisis is a perfect example of the excesses this misalignment can lead to (of course, that wasn't the only cause, but, still...)

In my case, again, I'd argue that HSBC's decision to force me and my partner to show up in person at the same time in the same branch was quite stupid and cost it quite a bit.

Also, the fact that there are so many cases of borrowers rejected when they applied directly, but accepted through a broker, does cast some doubts on the efficiency of the banks' underwriting.

kingstreet

About 20 years ago a C&G manager told me they had calculated it cost them £4k to attract, process and complete a direct mortgage. At that time, they started offering customers they didn't want to lose £1,000 cashback to keep them at retention time as it was worth it. They figured out keeping profitable customers made more sense than the mad rush for new business market share.

This was in the days when we sent over a paper application and lenders obtained references etc.

Now, we enter the data for them and upload documents to enable them to accept applications more or less immediately, subject to valuation.

That costs them 0.35% of the mortgage amount, on average.

SouthLondonUser

kingstreet wrote: »

That costs them 0.35% of the mortgage amount, on average.

I am not sure that's a particularly relevant metric. I'd compare it against the cost of doing it in house and against the interest received on that loan.

Bear in mind that, unlike in other countries, many (most?) borrowers refinance every 2 or 3 years.
In the last mortgage quote I got, the fees the bank would have paid to the broker were in that range (ca. 0.4% of the amount lent), but they also were about 12% of the interest the lender would have received over 2 years (it was a 2-year fix, so I'd have wanted to refinance after that).

The amount wasn't small - I am not sure how much bank staff gets paid but I suppose that figure could have paid the salary of a mid-ranking mortgage-processing employee for at least a month. Of course the bank has other costs, but, still...

Again, I am not saying it's wrong for the banks to use brokers - I am saying the answer is complex and depends on a gazillion factors.

JamesN

ACG wrote: »

I have a case where the customer went to a broker who had the case declined on the high street with "lender A" they then went to an adverse lender and also had it declined.

We picked the case up and went back to "Lender A" less than 2 weeks later and had the case accepted.

It is not just a broker people want but a broker who is not useless as Somerset La La La says.

What did you do differently vs the original application that got declined?

haras_nosirrah

Generally with those it isn't what you say but how you say it.

For example I have had this twice in that last 12 months where lender direct has said no but we have got it sorted with the same lender.

First one was self employed 1 Yr books. Lender direct after 3 months of dithering declined. I don't know why. Client didn't know why. when we approached the same lender I spoke to the underwriter before submitting, explained his work history (hair dresser who had been in the industry for years but had gone self employed 1 Yr prior) showed a p60 to evidence he had form in the industry. Sailed through no issues and offer in 4 days.

Second one was this week with a client who contacted me from here. Declined direct he said due to credit score. We got the mortgage accepted subject to valuation within 24 hours of him first contacting me.

ACG

JamesN wrote: »

What did you do differently vs the original application that got declined?

I did not see the original application so I am not 100% but there are a couple of lenders where you can pull a few little tricks to boost the score of an application. Obviously if your application scores terribly then it is not going to boost it that much, but if it is a borderline case, it can make the difference.