Broker says, don’t buy one property, aim for two!

[Gordon Gekko]

Interesting, can you expand on this please?

I guess it’s good to be able to have multiple options/applications sent in on your behalf?

Saving some of the legwork etc

But I’d love to know more!

Thanks

The broker can help you to prep your application and can advise you on the do’s and don’ts.

The application process should be quicker.

Any nuance is more easily explained as brokers tend to have a more direct pathway into the banks’ decision makers.

I’m open to correction on this, but some of the cheapest providers only deal with brokers (e.g. Avant).

The broker does the legwork.

The bank pays the broker and it’s not like going direct is cheaper.

So I’d flip it on its head…why go direct?

 

[NoRegretsCoyote]

The broker can help you to prep your application and can advise you on the do’s and don’ts.

The application process should be quicker.

Any nuance is more easily explained as brokers tend to have a more direct pathway into the banks’ decision makers.

I’m open to correction on this, but some of the cheapest providers only deal with brokers (e.g. Avant).

The broker does the legwork.

The bank pays the broker and it’s not like going direct is cheaper.

So I’d flip it on its head…why go direct?

I've had two mortgages. One direct and one with a broker.

I'd go with the broker any time. I got a much better steer early on about what was feasible financially and what wasn't, how to package things, whether a delay from a bank was typical or unusual, etc.

We dealt with estate agents, bank, broker, solicitor. The broker was by far the most knowledgeable and helpful person about the whole process of buying and selling a house with mortgage finance.

 

[Gordon Gekko]

I've had two mortgages. One direct and one with a broker.

I'd go with the broker any time. I got a much better steer early on about what was feasible financially and what wasn't, how to package things, whether a delay from a bank was typical or unusual, etc.

We dealt with estate agents, bank, broker, solicitor. The broker was by far the most knowledgeable and helpful person about the whole process of buying and selling a house with mortgage finance.

I genuinely don’t see the catch.

It’s not as if the likes of Avant say “come direct and we’ll give you the broker’s commission”.

It’s literally someone else paying for you to get a service.

 

[Monbretia]

I suppose it is different from years ago when not every broker dealt with every lender and lenders didn't all pay the same commission rates so hard to know if you really were getting the best deal, all things being equal then why wouldn't you let someone do the paperwork for you but things were not always equal! Don't know what the scenario is now and if every lender is available through a broker.

 

[icb]

I genuinely don’t see the catch.

It’s not as if the likes of Avant say “come direct and we’ll give you the broker’s commission”.

It’s literally someone else paying for you to get a service.

I suppose it is different from years ago when not every broker dealt with every lender and lenders didn't all pay the same commission rates so hard to know if you really were getting the best deal, all things being equal then why wouldn't you let someone do the paperwork for you but things were not always equal! Don't know what the scenario is now and if every lender is available through a broker.

I felt my broker was massively pushing ICS, so I assume they still get a different % depending on lender? That was my one concern, that naturally a broker will aim for highest commission lender.

But it’s my first time at the rodeo, so I’m happy to hear any/all advice from those here that have more experience!

 

[Dave Vanian]

I felt my broker was massively pushing ICS, so I assume they still get a different % depending on lender? That was my one concern, that naturally a broker will aim for highest commission lender.

As far as I know all lenders pay 1% commission these days.

 

[RetirementPlan]

As far as I know all lenders pay 1% commission these days.

Sounds uncompetitive at best and cartel-ish at worst

 

[Dave Vanian]

Sounds uncompetitive at best and cartel-ish at worst

This is the commission that gets paid to brokers, not the rates that are charged to customers. Do you think it would be preferable from a consumer perspective if one bank paid twice as much commission to brokers as all the rest?

 

[RetirementPlan]

This is the commission that gets paid to brokers, not the rates that are charged to customers. Do you think it would be preferable from a consumer perspective if one bank paid twice as much commission to brokers as all the rest?

Any industry where the rates paid for anything are the same across the board is a cartel. Ultimately, this money comes out of the consumer's pocket, one way or other. So what's going on here is basically the fooling of consumers that they're getting a free service from the broker, when they are actually paying for the service along the line.

Isn't that the anathema of how the free market economy works? Do you think it would preferable from a consumer perspective for carrots to be the same price in every shop?

 

[Dave Vanian]

So what's going on here is basically the fooling of consumers that they're getting a free service from the broker, when they are actually paying for the service along the line.

Consumers don't think that brokers work for free. Where did you get that impression?

Aside from the fact that consumers are not so deluded as to think that their local broker is a charity, there's mandatory commission disclosure.

Do you think it would preferable from a consumer perspective for carrots to be the same price in every shop?

You're misunderstanding the point. If I have a choice of shops to buy carrots from - some cheaper than others, some better quality carrots than others and I can shop around for my carrots, then I don't care if the profit margins are the same for each shopkeeper.

But we're not taking about carrots. We're talking about much larger financial transactions - mortgages. If Lender A was paying 2% commission to brokers and Lender B was only paying 1% commission, that would not be in the best interests of consumers. It's far preferable that all lenders pay the same 1% so that consumers can know that a broker has no incentive to recommend a lender unless that lender has the most suitable mortgage product for the consumer's requirements.

 

[RetirementPlan]

Consumers don't think that brokers work for free. Where did you get that impression?

Aside from the fact that consumers are not so deluded as to think that their local broker is a charity, there's mandatory commission disclosure.

So why aren't the brokers charging consumers directly for the advisory service provided? Presumably there are great brokers and bad brokers - they should be charging their fee based on the value they provided to the consumer, not hiding behind the lender to get their income.

Hence the 'cartel' reference in my earlier post.

You're misunderstanding the point. If I have a choice of shops to buy carrots from - some cheaper than others, some better quality carrots than others and I can shop around for my carrots, then I don't care if the profit margins are the same for each shopkeeper.

But we're not taking about carrots. We're talking about much larger financial transactions - mortgages. If Lender A was paying 2% commission to brokers and Lender B was only paying 1% commission, that would not be in the best interests of consumers. It's far preferable that all lenders pay the same 1% so that consumers can know that a broker has no incentive to recommend a lender unless that lender has the most suitable mortgage product for the consumer's requirements.

It could well benefit the consumer to pay (via the lender) the 2% commission if they are going to save that money back in the long run by getting a better mortgage. I'd have thought that the reason to use a broker is to get the best value mortgage in the long term. If the best lender can afford to pay higher commissions, so be it - provided the consumer ends up better off in the long run.

The 'same fee for all' raises a huge question as to what actual value the broker is adding.

 

[Leo]

Presumably there are great brokers and bad brokers - they should be charging their fee based on the value they provided to the consumer, not hiding behind the lender to get their income.

Have you used a broker? They are very open about the commission model, there's no hiding.

Do you honestly think anyone believes they offer this service for free?

 

[Dave Vanian]

The 'same fee for all' raises a huge question as to what actual value the broker is adding.

In Post #21 above, @Gordon Gekko gave a list of ways a broker adds value. In case you missed it, here's a link.

Or you can do all that work yourself, place your mortgage business with a bank directly, get the exact same rates and the bank will happily keep the 1% commission for themselves.

 

[RetirementPlan]

Have you used a broker? They are very open about the commission model, there's no hiding.

Do you honestly think anyone believes they offer this service for free?

I've never used a mortgage broker, but I have used other brokers. There just seemed to be something icky about the set up of them working for the customer being paid by the provider, a lack of transparency - even when fees are declared, what else is going on with their relationship behind the scenes.

In Post #21 above, @Gordon Gekko gave a list of ways a broker adds value. In case you missed it, here's a link.

Or you can do all that work yourself, place your mortgage business with a bank directly, get the exact same rates and the bank will happily keep the 1% commission for themselves.

Thanks, from that list, the one that stands out for me is dealing with nuance or a non-standard application, and I can see how a broker could be a good advocate for that scenario. For the rest, is it really any easier to fill in the same information on a broker's form or the provider's form?

 

[Leo]

There just seemed to be something icky about the set up of them working for the customer being paid by the provider, a lack of transparency - even when fees are declared, what else is going on with their relationship behind the scenes.

There is nothing in the process that isn't transparent unless you failed to listen to them and also failed to even peruse the contract.

For the rest, is it really any easier to fill in the same information on a broker's form or the provider's form?

Supply the information once, a broker can apply to multiple providers. Do it yourself, you multiply your effort with each provider you consider.

 

[Dave Vanian]

This debate has been had on Askaboutmoney before. Pretty much any information you want about mortgages is available online on the providers' websites or by ringing the providers. So you can spend your time doing your own research and will probably come up with the most suitable mortgage for your requirement. And then apply directly to the provider. You won't save yourself the 1% commission - the provider will just keep it. How long will it take you to do the research? I don't know. Or you could go to a broker who already knows the differences between the various mortgage products. And I'm not just talking about the difference between interest rates. There are plenty of comparison tables out there for that. Let's say you have queries like this - these are just samples off the top of my head...

• I'm a civil servant. Will some lenders offer me a greater multiple of salary than others?
• I want a fixed rate, but I hope to be able to overpay. How much will each lender allow me to overpay while in a fixed rate without penalty?
• Which is cheaper - Lender A is offering a fixed rate without cash-back but Lender B has a higher fixed rate with cash-back?
• I'm 55 years old. I'd like a mortgage over as long a term as I can get. Which lender will give me that?

You can find out all the answers to the above queries by spending time doing your own research. Or you can go to a broker.