why you should REALLY support brokers

BrokeRage

Graeme7777 wrote: »

I've got no evidence beyond the anecdotal to back up this assertion but my own experience chatting to friends and acquaintances suggests that people are well aware of mortgage brokers but don't have much faith in them. I think that as consumers many of us have been burned - often more than once - by intermediaries in the financial services and real estate industries.

I would go as far as to say that using such intermediaries is often viewed as a necessary evil when buying financial products or property. So if people can avoid dealing with brokers and agents - for example, with DIY real estate packs or choosing a mortgage from a best-buy list on a website - they may be inclined to do so. And this disintermediation is only getting easier.

My own suggestion, for what it's worth, is that brokers need to offer clear and desirable value to the borrower. These days we have far less need of someone to compare offerings in the market for us or to complete an application form. When sitting opposite a broker who can't calculate an accurate monthly repayment using a calculator it's easy to wonder what he adds to the transaction other than another layer of costs.

As a consumer I think that mortgage brokers - though perhaps not as many as in the past - have an important role to play but you may need to work harder to convince both us and the lenders.

That said, I have little doubt that yourself and the other regular advisors who post on this site will continue and thrive. You guys clearly know what you're talking about and are eager to help. As a borrower I can't ask for more than that.

Lol - it is impossible to work out a repayment mortgage on a calculator and our regulator won't allow us to do it anyway - it has to be printed out on half a tree!

I agree with your first paragraph, but not with the second, Graeme. The FSA comparison site is a mess and many of the others say you can get a mortgage even when you can't. I use a site called emoneyfacts and it is great, but it is frequently wrong.

There are scores of factors that go into what makes a good mortgage and, believe it or not, borrowers do need protection from lenders. There was a situation a few months ago when lenders were getting their rates to the top of the lists on sourcing systems and comparison sites by charging fees of maybe 2.5%. Some people and, incredibly, some inexperienced brokers fell for it, but that is an obvious con; some of the other factors are more insidious and obscure; some factors do not even appear on the comparison sites.

I have heard of borrowers getting halfway through a credit-check before they realise that they are dealing with an Ulster-only lender and others applying for a buy-to-let re-mortgage on their main residence, by mistake. You might think that sounds daft, but it happens.

I have also had a client apply online for mortgage life cover on an interest-only mortgage (i.e a policy that decreases for a mortgage that doesn't).

Amazingly, the Head of the FSA made a comment that there are special "Interest-only deals", as if these were a precious commodity! It is a specialist area. I don't do my own plumbing, nor my own electrics, as these are areas where I have knowledge, but not expertise.

Graeme7777

BrokeRage wrote: »

Lol - it is impossible to work out a repayment mortgage on a calculator and our regulator won't allow us to do it anyway - it has to be printed out on half a tree!

Hi BrokeRage,

Just a quick point - you can work out the monthly repayment on a calculator, even one without built-in financial functions. You just need to re-arrange the standard annuity formula and then plug the variables into a calculator. But I take your point about the regulator!

Cheers

BrokeRage

A couple of other points:
There is a huge difference between "Corporate" estate agents and good independent agents. No-one should confuse a Mortgage Broker with a "Panel-pushing" corporate agent's mortgage consultant. There is a massive difference.

Lenders are convinced already. We have been too good at our jobs and lenders with truly market-leading deals have been swamped with broker applications. That was fine before the credit-crunch started, but they now want to restrict their market share and make more dosh per deal. Hence dual-pricing.

BrokeRage

Is that daily, monthly or annual rest Graeme? (I know you can, but a broker should be good at arithmetic, not mathematics).

neas

Being a FTB im interested in what part of process and cost the advisors play.

Say im a 25% deposit FTB borring on 3x multiple... how would you get me a better deal than any comparison website? and a quick wikipedia to find out the mortgage process or calls to your local bank?

In all things self learning can achieve almost anything.. it just takes motivation and a desire.

But im willing to be showed otherwise.

What is the fee though? I mean on a 5% mortgage fixed for 5 years the mortgage advisor fee prob pumps the % up over the term i'd think.

You've had it good for 12 years or so... so dont complain nobody 'works for life' in the same job these days or its very rare... so take the opportunity to 'crash' proof yourself by retraining your skills to do a different job if the need arises... survival of fittest after all.

Not alot the public can do imo.

BrokeRage

That is a huge question. Look at the first page of this thread. Until recently, a good broker could provide free advice on the best deals in the market, because lenders paid them to do this (through commissions aka procuration fees). Lenders, now that the credit crunch has appeared, don't want brokers to have access to the best deals and have stopped paying commissions for these. If you want independent advice now, you will have to pay a fee for this, as decent brokers won't pretend that they can give you the best on the market if they only recommend deals that pay them commission. This situation has only occurred in the last month or so, the result being that you can only get genuine "Best advice" if you pay a fee. Most brokers will refund or offset any mortgage commission against this fee, but it is a bad development. in my opinion. In the past, a broker could use just about any deal, give you free advice and get paid by the lender for helping you to apply for the mortgage. That is a simplistic summary, but adequate for the purpose.

If you were to ask me to summarise the value of a good broker in a sentence, I would say: "To answer the questions that you wouldn't know enough to ask". Patronising but true.

BrokeRage

...and the whole point is that the advisor added nothing to the cost......they do much of the initial administration and processing for the lender and the commission paid for that....the advice was free if it was a fee-free broker. Genuinely free.

Read this: http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=796212

neas

Im just confused though. So you are saying a price comparison website in terms of a good credit high deposit customer cant find as good a deal as a broker?

Im confused at what magic you guys work.. because the best rates shouldnt be allocated just for brokers that in essence is wrong in itself. Cut the middle man out for ideal customers... thats what i'd do. That was my question... how can a broker find a better deal than someone investigating it themselves? in terms of someone with a good credit score, high deposit low risk etc.

AndrewSmith

BrokeRage wrote: »

Lol - it is impossible to work out a repayment mortgage on a calculator and our regulator won't allow us to do it anyway - it has to be printed out on half a tree!

Not quote accurate, I use a Casio FC100 financial consultant calculator which will work out repayment mortgages and ammortisation, compound interest, investment growth etc:

It's ok to do this in front of a customer as long as you point out that the figures are for guideline use only.

MortgageMamma

OMG Andy, what are you doing up at this ridiculous hour?!