Mortgage Finance

[walkerm1]

I would like to know what the opinion of the forum is regarding using a mortgage broker to obtain mortgage finance, rather than researching yourself. Would you or not use a mortgage broker? And Why?

[Robin Ferrier]

Hi there,

I think it depends on what kind of person you are, If you have a lot of experience in the mortgage market ie you buy and sell houses regularly then you may have established some great ongoing deals with certain lenders.

If however you are like most people ie do not buy and sell property regularly then I heartily encourage you to spend a few quid and use a professional intermediary. You can look at it as a middle man spongeing off you or - they can provide you with options ideas and advice that might easily have passed you by had you not involved them. It may even be the difference between getting ANY mortgtage and NOT being able to buy any property.

Make sure you talk to a broker who covers the whold of the market. Some IFAs / brokers have tie ups with specific lenders. Ask them up front - don't be shy.

Yes could be a few hundred quid you pay them but could be the bets money you ever spent.

Robin

[inspectorbudget]

A mortgage broker is your next best option in case you don't qualify for a bank's strict guidelines. But even if you'd qualify for a bank loan, a broker may also have competitive rates/fees. To get the best of both worlds, it is best to shop around and compare rates and terms. However, not everyone is a potential shopper. Some borrowers will do a lot better having a professional assist them with mortgage financing.

[Kaz]

I use a 'whole of market' mortgage broker and it's great. He does all the work and it doesn't cost me anything. He gets commission from the lender.

[Estate Agents Aberdeen]

A mortgage broker does the leg work for you for your particular circumstances.The good ones have good contacts as well which can help immensely.

[UK Mortgage Broker]

Consult with both and draw your own conclusions as it is a very large commitment. Get your own quote, then see what a mortgage broker can do for you.

[Dan S]

Hi Walkerm1

Brokers used to be an absolute must for sourcing a decent mortgage. You paid a premium but this cost was cancelled out by the monthly saving on the competitive mortgage deals they source.

They're still an excellent resource but no longer really have access to the exclusive non-highstreet deals. You'll be able to source all the mortgage deals they can. So you can think of them like a price comparison website!

They're of great use if you have very specific circumstances, such as peculiar pay structures for your job, or mitigating credit issues perhaps, but on the whole you can find the same deals they can source.

So to sum up, they're great if you can afford it! Beware 'Free' brokers, since they'll be covering their costs by getting commission and so they'll have vested interests. It's definitely worth paying for a broker if you're going to go down that road.

Best of Luck

Dan

[IFA]

Hey Dan,

As is often a case with any industry that has a dubious past history of unscrupulous tradespeople and is still marred by a few bad apples you have fallen into the trap of tarring all mortgage advisers with the same brush.

I absolutely agree that brokers are rarely able to source better rates than can be obtained direct, but I disagree that the value of their services has no more merit than that of a price comparison service.

I do not charge my clients a fee, because I'm appreciative of the fact that if I recommend a High Street lender to a client and want to charge them a fee for my services then they can simply walk out of my door, drive to the High Street, and get the same mortgage free of charge. Therefore, I am uncomfortable charging fees and do not feel I can justify doing so.

Yes, this means I work on a commission only basis, but that has never led me to recommend a product to any client based on any criteria other than their needs and circumstances. Commission is never, and can never be, a deciding factor in the advice process.

I would advise asking friends and family for recommendations of a good local mortgage adviser. If you pick a name out of the phone book there is a chance you may hit upon one of those bad apples, but a recommendation from a trusted acquaintance should hopefully steer you in the right direction.

[Dan S]

Hi IFA

Firstly let me apologise if you took offence by a comparison of your services to a price comparison website. It was meant in the spirit of sourcing the best deal for people's circumstances.

I apologise if my post gave a rather unscrupulous image of commission-based IFA's. You're absolutely right that a few bad apples have tarred the industry. However, the fact remains that it's still enough of a problem that the FSA feels it necessary to make large overhauls by 2012.

I don't mean this in an inflammatory way but would be interested to get your feedback on this extract from a 'Telegraph' article so I can be sure my view is not being unfairly skewed. I would never take a newspaper's content as gospel, but the quotes from the FSA don't seem consistent with your view that only 'a few bad apples' are causing this reaction from a government body.

"The Financial Services Authority (FSA) has outlined new guidelines that effectively outlaw commission payments, which have been seen by many consumers as a way of getting "free" advice

The FSA has made it clear that it is concerned that these payments are used to disguise the cost of financial products, and may create bias in an adviser's recommendations.

A spokesman for the FSA said it hoped its proposals would restore consumers' trust in the financial services industry at a time when many "need real help and advice with their retirement and savings planning". The changes are due to come into force in 2012"

With respect,

Dan

[IFA]

Hi Dan,

No need to apologise, I just wanted to put an alternative point of view to the comments you had made.

I can only speak from my own personal experience and knowledge of other advisers I know in the industry and from that I would say that the significant majority are honest and trustworthy. Maybe there are more problems of this nature in inner-city areas and other parts of the country than I am aware of in the South West but given that the FSA have imposed bans on a very small number of advisers around the UK over the last couple of years either the problems are less significant than you think, or the FSA themselves are failing in their quest to remove the unscrupulous traders from our midst.

If there really was a significant issue with corrupt financial advisers around the UK don't you think a better solution would be for the FSA to identify those at fault and remove them from the industry, rather than simply changing the rules but then allowing known corrupt individuals to continue to trade? I don’t believe that this is about cutting out corruption; there are other more effective methods to do that if it was the FSA’s primary purpose.

I haven't read the article that you have quoted, but the key phrase for me is "A spokesman for the FSA said it hoped its proposals would restore consumers' trust in the financial services industry". One of the four key tasks that the FSA is charged with is to maintain market confidence, so maybe this process is more about the improving the UK consumer's perception of the industry and overcoming the general consensus, as shown in your own post above, that the industry is rife with corrupt and unscrupulous individuals.

However, I'm not best qualified to comment on the story from The Telegraph as I believe it relates to the FSA's Retail Distribution Review (RDR) which relates to the selling of long term investment products and which I do not advise on. There is also a similar review under way which will encompass sales of mortgage and insurance products - Mortgage Market Review (MMR).

There are long-running debates throughout the industry relating to the pros & cons of the outcomes of these FSA reviews and proposals and you can find plenty of arguments from both sides by searching online and the debates are much too complicated to get involved in here, but from my perspective I believe that the availability of free advice is very important for a large proportion of the population who would not take advice if they were faced with a bill of several hundred pounds for the privilege.

This will no doubt lead many consumers to shy away from proper independent advice and into the arms of the banks and building societies who will continue to provide a free service but only offer their own limited range of products.

I’m not so sure that this is good for our industry, even if it does improve consumer confidence in independent advisers as the FSA hopes.

With respect also,

Thomas