Martins View On Using Mortgage Brokers...

stanmoresaver · 15 April 2006 at 8:13PM

stanmoresaver wrote:

I am whole of market and nearly always charge a fee in addition to the proc fee paid by the lender- It's a business decision! And, suprisingly, i disagree with Martin on this!

EdInvestor wrote:

Stanmore says:

This fee is in addition to the commission.However this fee is not the same fee that I was referring to, and which dunstonh refers to here:

Sorry, isn't that what i said!?!

The trouble with the way this thread has gone is it is confusing the issue- especially for the the poster who asked the question that both DH and myself were trying to help.

BTW- the Mortgage genie reference- (ed investor)- is so wrong in this case- i can just about understand someone who really knows the score using it- Just! But you have to understand mortgages and they are complex!

For Beena- can i suggest that you ask your existing broker(s) to explain the difference to you and, as long as you are happy, go with the one who explains it to your satisfaction- because, with respect to you- the point of the exercise is that you get the right mortgage- and this is distracting you-

I know the cynics will have a field day to this statement, but you will need to trust the person who you engage to give you advice! And i would say that regarding any profession- not just mortgage brokers!

Best of Luck

SS

EdInvestor · 15 April 2006 at 8:34PM

IMHO the confusion has arisen because of what Beena's second advisor told her:

He said that if he wanted to be an "independent" he could be, but he would have to charge a fee, and he doesn't want to do that.He says that it is in the new mortgage regulations that if he wants to call himself "independent" he has to charge fees.

This is wrong.An independent must offer the client the option of paying a fee (instead of commission) but he's allowed to offer other options as well, such as commission only, combination of fee and commission and even (expensive!) fee plus commission.

A non independent cannot offer the client the option of paying a fee instead of commission.

notiesmortgagegirl · 15 April 2006 at 9:03PM

With all due respect to the previous poster, I am a whole of market mortgage advisor (and non independent) and can choose to offer my client the option of paying a fee and refunding all the procuration fee payment if I choose.

There is absolutely nothing in the regulations that says that a non independent cant offer this choice.

The only reference in the regulations is that if a mortgage advisor is going to put themselves up as an "independnet" then they must give the client the option of paying a fee.

A non independent can do exactly the same if they want too.

It is only an independent that has to offer the option (it's the price the independent pays for using the word independent in its Initial Disclosure Document)

Let me make that point again, so that there is no confusion:

A non independent mortgage advisor can offer the client the option of paying a fee and having any procuration fee paid by the lender passed on to the client, or they can offer the option of working on the procuration fee (commission) alone.
This is a fact.

notiesmortgagegirl · 15 April 2006 at 9:17PM

Message to Beena:

dont let all this confusion cloud the issue, Stanmoresaver ir right (in my opinion).
Go with the advisor you feel is worthy of your business.

And Martins advice is very, very sound:

Whole of market and no fees is best.
The issue about being an independent or not is a red herring.

Mortgage advisors have adopted this independence tag because of the inference it has from the world of Independent Financial Advisors, where to be able to offer their clients all the insurance and investment companies products they had to be an independent financial advisor and not a tied financial advisor, who could only offer one companies products.

The regulations that were introduced not too long ago (forget the exact date actually) set up a system wherby a person that advised on mortgages could be independent or not - their choice - but it made no difference to which lenders products they offered.
The only difference was that if the advisor wanted to call themselves an independent mortgage advisor, they had to have a fee paying option.
If amortgage advisor chose not to call themselves independent they didn't have to offer this option - could could if they wanted too.

Hence Martin says it's "bunkum"

I think he means it is irrelevent and simply a marketing/advertising tactic.

Just stick with his very sound advice - "NO FEES -WHOLE OF MARKET" PLEASE

notiesmortgagegirl · 15 April 2006 at 9:28PM

P.S.

You said:
"My second broker is suggesting a Nationwide BUilding Society 5 yr fixed rate at a rate of 4.78% (as I am borrwing less than 90% of the price of the house I am buying). Any opinions on this would be appreciated."

Thats a good product and a good lender (if it's a 5 year fixed rate you are looking for.
Nationwide always have good rates, and their is a branch in most high streets if you need to get face to face.
Their procuration fee payments to the broker are not that high, though, so I would go so far as to say that your broker has not got a bias towards feathering his own nest.

He must give you a KEY FACTS ILLUSTRATION, which will disclose the fee he is going to be paid, so if you have any doubts, ask for the next best alternatives and compare the procuration fees in these other examples.
That way absolutely nothing is being hidden from you.
As a final resort, you could always ask for a second opinion on here, as you have done (it's just that it seems I am the only one who is responding to you on this - come on guys and gals, what do you all reckon to the Nationwide 5 year fix her advisor is suggesting- it seems like a good rate to me, and no overhanging redemption penalties)

MortgageMamma · 15 April 2006 at 10:51PM

Good product, good lender, I actually think the nationwide are brill. But, five years is a long time to fix in my opinion, and much of your decision should be dependent upon why you want to fix for so long? There are some good 3 year fixed at the moment, watch out for the new one from royal bank of scotland on tues, the rates low from what i recall and the arrangement fee will be only £399.

MortgageMamma · 15 April 2006 at 10:55PM

OH, and Martin, thanks for this post. As Andy says there's been some very negative broker bashing going on in the forum the last few weeks, bordering on the downright aggressive from some. It's reassuring to know you support what we try to do to assist the MSE'rs.

dunstonh · 16 April 2006 at 12:43AM

As I mentioned higher up and Ed has also commented on, there appears to be some confusion, started by her 2nd advisor but carried on throughout this thread.

The 2nd mortgage advisor said that the first "independent" had to charge a fee. This is incorrect.

The rules for IFAs and mortgage advisors are different and an IFA must offer a fee only option to use the term independent. This is not the case with mortgage advisors. However, some mortgage advisors will do that.

notiesmortgagegirl · 16 April 2006 at 9:27AM

Dunstobh says:
"an IFA must offer a fee only option to use the term independent. This is not the case with mortgage advisors."

With all due respect this is wrong.
Here is what the Financial Services Authority handbook for mortgage intermediaries says:
http://127.0.0.1:49152/NXT/gateway.dll?f=templates&fn=default.htm

What must I do if I want to describe myself as 'independent'?

MOGI 2.2.4
If you wish to describe yourself as 'independent' you must intend to:(1) offer a whole of market service; and
(2) give the consumer the option of paying a fee that will be the only remuneration you receive for the service (MCOB 4.3.7 R). If the consumer exercises this option, you will have to pay them any commission you receive on the mortgage sale.

So to describe himeself as "independent" a mortgage intermediary must offer a "fee only" paying option, and must pay the comsumer all the lenders commisssion.
Which means the answer to your earlier question regarding what happens when the fee is less than the commission, and would this mean the advisor ends up paying you for the privilege of doing your mortgage, the answer is YES.
If the fee is £600 and the commissionis £1000 then you make a £400 profit.
NO doubt this will put a cat among the pigeons, but rules are rules and to break them, or try and find a way around them, is serious when dealing with the FSA.

Message to Beena - best ignore all this "white noise" about the term "independent " and fees. It just emphasises what Martins says in his guide, it is bunkum, and quite a lot of advisors put their own interpretation on it rather then read the handbook.
Most advisors will be on Easter break, so you may get a few more opinions on your lender and interest rate enquiry on Tuesday.

Beena_Rashid · 16 April 2006 at 10:42AM

Thank you, notiesmortgagegirl.

I'ts interesting that all the commission is paid to me, if I agree a "fee paying option" only.
I am sceptical though, I have looked at one of the Initial Disclosure Documents for one of the advisors that have posted on here, and they want to charge a fee of 1% of the mortgage amount, so on my almost £200,000 mortgage that would be £2000.
Surely the commission is not going to greater than this, is it ?
So in reality, if it isn't, I will still end up paying for the same mortgage that a non fees adviser could do, but at no charge to me?

The more I read about this on theses boards, the more Martins simple advice about using an adviser that doesn't charge a fee seems sensible.
Luckily my second adviser is one of those.

Martins View On Using Mortgage Brokers...

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