A recent survey of 2,000 homeowners revealed that 39 per cent have never used a mortgage broker.
That figure actually rose for the over 55s, with 49 per cent admitting they had never sought the assistance of a broker.
Given a house is likely to be the biggest purchase you ever make – and for most people it’s done with the help of a sizeable loan – this means that many homeowners may have run the full term of their mortgage without ever having had any expert advice. Those homeowners at the younger end of the spectrum (25 to 34) are more likely to consult an expert, with three out of four (74 per cent) having used a mortgage broker.
But do you need to use a mortgage broker – or can you get just as good a deal by doing your homework and going direct?
Many people don’t understand what a mortgage broker does. Put simply, a good broker with whole of market access would aim to find the very best mortgage product out there for a client, saving them a money.
It’s worth noting that there are different types of brokers, however:
- A tied broker works with just one specific mortgage lender
- A multi-tied broker will work with a limited panel of mortgage lenders
- An independent/whole-of-market broker can typically access every mortgage lender on the market – therefore finding you the best deal to suit your needs.
Research shows that one in seven of those who have used a mortgage broker didn’t know if they had whole of market access, so it’s worth making sure you understand what type of broker you’re speaking to before you progress.
You can, of course, go directly to any mortgage lender to apply for a mortgage yourself. Often people choose to go with a financial organisation they already have a link with. They may offer discounts or incentives to existing customers. However, often there will not be any preferential treatment given to a borrower because they have an existing relationship with the company.
Mortgage broker fees can be an area of confusion for homeowners. One common misconception is that homeowners have to pay broker fees when using them to apply for a home loan or remortgage. This doesn’t have to be the case. Research shows that the majority (around 60 per cent) do charge clients a fee. The average amount is between £500 and £600, but some can charge more than £1,000. Make sure you are clear from the start regarding the fee you will be paying and on what basis it’s payable (i.e. is it only after your application is completed or at application stage?).
But all mortgage brokers actually receive a procuration fee from the lender. So, if you agree to take out a mortgage, the lender pays the broker a fee. Some brokers see that as their payment and have a no fee service for customers. It should make no difference to the level of service you get whether you pay a fee or not.
Some of the reasons you might choose to use a mortgage broker are:
- To save money. Even if you choose a broker which charges fees (although plenty are out there which don’t) they may be able to save you a significant sum by getting you a better mortgage deal. Even a small change in interest rates can save you thousands of pounds.
- It is harder than ever to get a mortgage. The industry has quite rightly gone through numerous legislative changes to tighten up lending criteria. A lender must be sure that you are capable of paying back the money before it will agree to lend and will look at your income and outgoings. A mortgage broker, doing this day in and day out, is more likely to know the lenders who will be happy to lend to you. This is particularly important if you may struggle otherwise – perhaps you’re self-employed or have an adverse credit rating. This can also save lots of time – which is important if you’re dependent on a mortgage offer to get the house of your dreams.
- You get access to exclusive deals. Working with a broker is a good way to access mortgage deals that might not otherwise be available to you, as some are exclusive to the broker market.
- Advice is unbiased. This applies only if you choose a broker who genuinely has whole of market access. They are not tied to any particular lender so are free to find you the best deals.
- It saves you administration. A broker will work with you to get all the necessary information and then can use that to find the best deal. It saves you completing multiple lots of paperwork and is an expert pair of eyes to ensure all the information is correct.
- For additional safety. Due to the stricter processes now involved in arranging mortgages, brokers complete very thorough checks. You should choose a broker that is regulated by the FCA, as you get the additional protection that falls under the regulator.
If you’re choosing a mortgage broker, we would always recommend checking independent review sites such as TrustPilot or Feefo or asking family and friends for their recommendations.
However, if you do choose to go direct to a lender, don’t just go with the first one you find. Look around for the best deals and do your research. It is also worth noting that making multiple mortgage applications can adversely affect your credit rating – so you want to limit your application to the product you want and you feel confident you will get.
