Do mortgage brokers "load" the interest rate compared to direct?

lonibra

As per the title.

Do mortgages arranged through MBs (free or fee charging) cost more in interest-rate, lender fees, etc compared to going direct?

I would be grateful if any MBs could answer this. 

How can the lender afford to pay a commission to the MB without making the borrower pay for it?

[Deleted User]

no, we sometimes get cheaper rates than direct and they sometimes get cheaper rates than us.    Most of the time its the same though

They can afford to pay us as a lender only pays a mortgage broker when they give them business.   If a lender wanted to save that commission payment the alternative would be to do everything in house and that involves a staff that needs to get paid all the time.   

If a lender decides they have enough mortgages on the books then they increase rates or change criteria and make themselves less attractive.  Less business comes to them so they pay less commission out.   If they did it all direct they increase rates as they dont want any more mortgages, less business comes in but they have to keep paying their staff as they are on payroll. 

This flexibility has a value to lenders.  So much so that around 70%+ of all ftb purchase mortgages are done through brokers now.   When i started in this industry in 2003 it was about 15%.

Also they dont have to deal with advice complaints if we do it. If i set up a mortgage, the lender gets to take all the profits in interest payments but takes none of the liability.  If the client is unhappy that i set that mortgage up 10 years down the line then i deal with the complaint and the lender still happily collects their interest. 

K_S

What JMA said. Occasionally, we can access marginally better rates. More rarely, some lenders may offer slightly better rates direct.

Most of the time, it's the same rates and products.

When the business is through the broker, a lot of the lender's costs and risks are offloaded to us, which is what the "commission" is for. 

The above is the same, whether the broker is one that charges a fee to the applicant or not.

getmore4less

As the brokers say the lenders don't need the hassles of dealing with clueless people

Easier to off load the work and importantly the liabilities.


Some lenders even give better rates to brokers for simple retention deals.

dwsjarcmcd

In addition to the points above, Brokers are a distribution channel for lenders and the commission paid to them replaces other distribution channels costs very effectively.  By that, I mean that brokers are only paid on completion, whereas search (such as google) are paid on 'clicks' and other advertising such as adverts on TV may not drive sufficient enquiries that convert to completed cases to justify the high costs, so these types of channels will be higher risk for lenders than brokers.

lonibra

dwsjarcmcd said:

In addition to the points above, Brokers are a distribution channel for lenders and the commission paid to them replaces other distribution channels costs very effectively.  By that, I mean that brokers are only paid on completion, whereas search (such as google) are paid on 'clicks' and other advertising such as adverts on TV may not drive sufficient enquiries that convert to completed cases to justify the high costs, so these types of channels will be higher risk for lenders than brokers.

That's an interesting way to look at it, never thought of that aspect.