One of today’s buzzwords is ‘choice’ – and we are led to believe that the more we have of it, the better. But first-time buyers and remortgagors now faced with over 4,000 different home loans might disagree. Getting the right mortgage can be like finding a needle in a haystack.
Why use a broker?
However, help is at hand. A mortgage broker or independent financial adviser (IFA) is paid to do all the legwork for you. A good broker will do everything from liaising with your solicitor to chasing up the paperwork you need to produce for your application. All you have to do is tell them your circumstances, requirements and preferences, and their expertise and market contacts should lead you in the right direction.
Brokers also hold an exclusive key to the door of some deals and even to some specialist lenders. There are a number of lenders – often owned by some of the biggest high street banks or building societies – that accept business only from intermediaries. Examples include: Mortgage Express, owned by Bradford & Bingley; Accord Mortgages, owned by Yorkshire Building Society; and Platform, a subsidiary of Britannia Building Society. But even mainstream lenders carry certain deals with better criteria or rates that are exclusive to certain brokers.
The fact is that mortgage advisers save mortgage lenders money – so those savings can be ploughed into a better mortgage deal.
Vicky Luttig at Bradford & Bingley says: “Exclusives are market-leading – that’s the reason they appeal to consumers. There will always be some benefit that will appeal to some or all of our customers.”
Lenders are obviously not providing these extra ‘bells and whistles’ for nothing. In return, the deals they make with large brokers mean they can guarantee large amounts of business from these loans in return.
“It’s a quid pro quo situation,” says Linda Will, managing director, Accord Mortgages. “The big brokers who offer these deals can negotiate the lower fees, bigger cash-back sums or simply lower pay rates on these loans. But to ensure consumers get value, they must still compare these loans against the rest of the market and, if there is a better deal out there, either negotiate with the broker on the fee or go with the better deal elsewhere.”
What about the cost?
You could use a broker that doesnÂ’t charge the customer at all. These are paid a fee by the lender to whom they are introducing your business. They may not always offer the best deals, but it is worth doing some number-crunching to ensure the saving you make by sourcing a great deal through a fee-charging broker is not eaten up by the cost of securing the deal.
Can you trust brokers?
Can a broker really be on your side if the lender is paying them? Brokers rely on a mixture of repeat business and personal recommendations for much of their business, so offering poor service would not be in their interest. Mortgage regulation also demands that brokers offer ‘best advice’ and can show they have offered borrowers the best mortgage loan for their needs. But whatever your needs may be, always keep in mind the fact that you might receive worse advice from a bank or building society whose advisers will only tell you about their own product range.
