Base Rate Decision 8th May 2008 - BoE HOLDS base rate at 5.00%

ixwood

I don't really understand your gripe TBH. You want independent lenders to be legally forced to offer better deals to brokers than customers, so either the customer pays more, or the bank makes less and piggie in the middle broker gets paid?

Does that really sound fair to you?

You pay your money and make your choice, and if that's pay (one way or another) for a brokers advice/"recourse", so be it. It should be a choice.

Why should lenders do better deals via brokers? It's common sense, if you're paying someone else a cut, you either charge more or make less.

ixwood

Don't get me wrong, I'm not broker bashing. I think you guys are generally very helpful and a great resource on this site, but don't agree here.

The times of anybody and their dogs getting mortgages are over for now, lenders generally don't want lots of risky new business for now, they want cash. They have no need/reason to compete for business, so why pay someone to find them some?

Considering that, the commission based model is on it's last legs.

MortgageMamma

Ixwood I do agree with you in some respects, and like you say taking professional advice is a personal thing to most people. I also agree that the commission based model is slowly being made extinct - and for some parts of society that could be good, but for other less wealthy people its BAD. Now, please don't take this as touting but, out of interest

Imagine there were no commission paying deals and if I offered you my services for say £40 an hour and I told you that including interviewing you, researching, putting your application together, certifynig your id, checking your valuation, mortgage offer etc, writing you a nice report to tell you why i've done what, and basically ensuring things went smoothly for you - if I told you that would take £8-10 hours would you be happy to pay me £320?

Now, your answer will interest me but people will take different views on this. Someone earning £30k + may be able to afford me, but someone earning say £16k may not. Why shouldnt they get free professional advice? Are they not the consumers MOST in need of professional advice as costly mistakes could be catastrophic for them?

Added to this, my cynical side believes that even if banks didnt have to pay brokers commission, they still wouldnt pass the savings onto consumers just as they are not now despite billions being injected into the markets.

The average commission pay out on a standard full status mortgage is about 0.35% of the loan balance.

On a self cert its 0.40% to say, 0.60% of the loan advance (commissions are being cut quite drastically at present)

On a BTL its about 0.40% - 0.55%

Some of the offsets pay about 0.55%

Adverse goes from about 0.50% - 2.00% of the loan amount

(not creaming off the consumer as such, but there is a lot more work involved with adverse and offset of business)
this is what worries me. You have to appreciate there is a little of my own agenda mixed with genuine concern that people will be shoaled into the banks and not ADVISED properly.

As you can see the intermediary market costs the lenders very little. Obviously they have marketing costs and intermediary support and "helplines" to man, and that costs money, but they are all 0870 numbers and believe me when I say we are on hold at least 20-30 minutes with the major lenders before some nitwit who knows nothing answers the phone. Most marketing to IFA's/Brokers by lenders is done by email/ business development managers.

So the lenders wouldnt pass on any savings if intermediary business was not paid for, the only people who would benefit would be the lenders shareholders as they would have less expenditure, less informed customers, meaning less hassle and more profit.

Who knows whats around the corner and whats best, but I don't want to see the most vunerable people in society have to walk through a banks doors and get sold to without advice, and have to buy expensive insurances etc just back they can't afford a broker. And with high inflation (the real inflation, not the imaginary inflation labour keeping harping on about) there are going to be less people willing to pay a fee than ever.

Sorry if that was a really long rant, I almost didnt breathe through a lot of that, but I hope you can see my points

ixwood

MortgageMamma wrote: »

if I told you that would take £8-10 hours would you be happy to pay me £320?

Of course I wouldn't. That would be crazy. I could stick £320 in my offset/overpay account and turn it in to £1k instead.

MortgageMamma wrote: »

I also agree that the commission based model is slowly being made extinct - and for some parts of society that could be good, but for other less wealthy people its BAD

You want advice, you pay for it. Or just ask on here for free. lol. It's not necessarily poor people that would suffer, it'd be financially uneducated, or the naive( which may be related indirectly). I don't see why you think I should have to pay more for advice I don't want/need (I'd just ask on here! Thanks. ) to subsidise other peoples protection from themselves. Most people can read just like me!

MortgageMamma wrote: »

Imagine there were no commission paying deals and if I offered you my services for say £40 an hour and I told you that including interviewing you, researching, putting your application together, certifynig your id, checking your valuation, mortgage offer etc, writing you a nice report to tell you why i've done what, and basically ensuring things went smoothly for you

£40 a hour?!?!? I assume you're a hottie and extras are included?

MortgageMamma wrote: »

Added to this, my cynical side believes that even if banks didnt have to pay brokers commission, they still wouldnt pass the savings onto consumers just as they are not now despite billions being injected into the markets.

They are passing on the saving to customers. I thought that's what you're complaining about?

MortgageMamma wrote: »

Adverse goes from about 0.50% - 2.00% of the loan amount

(not creaming off the consumer as such, but there is a lot more work involved with adverse and offset of business)
this is what worries me. You have to appreciate there is a little of my own agenda mixed with genuine concern that people will be shoaled into the banks and not ADVISED properly.

Politicians always do that, whenever they lead with something like "It's not about..", "It's got nothing to do with.." etc. Normally it means "this is blatantly about..". Subprime gets milked by brokers (and lenders) for all they're worth. A good ripe desperate subprimer makes a brokers day, if not week/month.

They get ridiculous £5k+ fees for lousy deals they'll probably end up defaulting on, or failing to refinance in 2 years time (Don't get me started on that little money spinner).

The best advice most of the time IMO would be "you can't afford it. Pay off your debts, improve your credit rating and save a big deposit. ".

MortgageMamma

If only life was that simple. well I think we shall have to agree to differ - I'm not getting drawn into a heated debate about what lenders are/are not doing, if brokers are valuable or not and if people should take advice or not.

I have made my feelings clear. Yes, I have a vested interest in the outcome of whats going on now, I don't apologise for that, but you clearly dont understand the complexities of some of the cases a broker would deal with - its not an easy living, we are not overpaid, it does have a low profile thanks to the media - but at the end of the day, people will always have complex requirements and will always need the service.

Two points I'd like you to take on board before I go to bed.

1. The brokers on this site will never make specific recommendations - it just doesnt happen

2. £40 an hour. If you think thats steep you would probably faint at the amount per hour some brokers charge - £100+ - I've done the same myself for auction cases and professional opinion reports for divorces etc. £40 an hour is a bargain! LOL

MM

Dan_Collins_2

This thread went off subject a bit then!! LOL

Going back the bank rate thing. It cant go down anymore because of inflation, well you would think.

However I have noticed a trend! The BOE BR means nothing! The price of oil is driving up costs of everything, the BR going up or down will not make a difference to that!

Lenders cannot sell or deal i n securitized lending, for now anyway, as nobody trusts anybody in the banking world. The BR will not and the government cannot control that.

Lets put the 50bn in to perspective, a large lender would lend more than this on its own, so how can it be on offer to so many banks. The rates are poor, the t&c's mean the lending they want to swap for the wedge is the type of lending the banks want to keep and they dont have to lend the money they get from swapping! Pointless if you ask me!

The banks need to stock up on cash, they cant sell books on so they need to slow down on lending but make more money on that lending.

I think oil prices and cost of living costs will screw this country, the banks have been screwing us for years, it only now people are seeing it!

I am moving to alaska!

ixwood

I'm remortgaging now. I looked on here,checked lenders websites, checked moneyfacts etc, found a good deal that suited what I was after, made phone call, Agreed in prinical over the phone, forms arrived a day later (mostly prepopulated), completed/checked in less than an hour and posted. Voila.

Probably 3 hours of my spare time. You want £40 per hour for a day to do it instead (and probably get me a worse rate/fee)?

Although Admittedly the deal just happened to be with my current bank, which obviously made it easier, but I'm not seeing the value.

I think it boils down to the "recourse" then. What protection do you offer? I genuinely don't know.

If taking a 2 year deal ends up costing more in fees (added to the mortgage of course. No broker has ever said to me "that'll cost you a fortune and effectively turn your interest only mortgage into an expensive interest only one") than the repayments I make in that time, can I sue for bad advice?

If I get a not market leading deal, when I could of, can I sue you?

If I get a tracker and the inflation/IR crunch gets here and rates return to their normal 8% or higher can I sue you?

When the now blindingly obvious crash finally gets going, can I sue you for not telling me now's a bad time to buy?

Anyone with a financial interest in the outcome is influenced by it. What constitutes good advice is very subjective and not something most most brokers would truely give. Not getting a mortgage isn't on the agenda 99% of the time.

ixwood

Dan_Collins wrote: »

This thread went off subject a bit then!! LOL

Going back the bank rate thing. It cant go down anymore because of inflation, well you would think.

However I have noticed a trend! The BOE BR means nothing! The price of oil is driving up costs of everything, the BR going up or down will not make a difference to that!

Interest rates mean everything. Low rates = (even) low(er) pound. Low pound = expensive oil. And everything else that we import (i.e. everythng).

We REALLY need a strong pound now. Rates up!

jediknightwarrior

IMHO brokers commissions based business model is fatally floored and has been for some years. Only fee based will survive in the long term.

As far as inflation is concerned, if property prices continue to fall, credit will continue to contract which will keep inflation under control. If it doesn't house prices will be included within CPI to allow room for further cuts. (BOE has already done the ground work to allow this to happen). Do you thing labour will say no?

ManAtHome

Dan_Collins wrote: »

The price of oil is driving up costs of everything, the BR going up or down will not make a difference to that!

I think oil prices and cost of living costs will screw this country

Sort-of linked - dropping the rate (and forecasting many more drops to come) devalues the quid. Fortunately (?) the dollar has been dropping as fast so the US and UK get the same hit (oil has gone up by 20% less than quidland in euro-land over the last year). Same with lots of other stuff we import, and exports don;t seem to be "rebalancing the economy" (lol - never likely to, but worth trotting out if you're an eCONomy...).

Think you're right about the cost of living - the forever ratcheting up of monthly outgoings, only one of which is the mortgage - and that's the one least likely to be affected by el Banko rates.