Should I bother with a mortgage broker?
Mortgage lenders are increasingly cutting out mortgage brokers with just three of the top 20 two-year fixed rate deals available through an adviser.
Figures from data provider Moneyfacts reveal that the top 13 two-year fixed rates for a £150,000 mortgage are only available through branches, with borrowers only able to apply for three of the top 20 through a broker.
This time last year as many as 70% of all mortgages were sold through mortgage brokers. In recognition of that, many lenders courted brokers with exclusive deals for their customers.
But today just 49% of deals are exclusive to brokers, while 23% are available through both brokers and direct business, according to Moneyfacts.
As well as restricting exclusive deals, mortgage lenders are also offering more competitive deals to customers that walk into their branches or contact them directly. Brokers have complained that this “dual pricing” is unfair to customers who often turn to them for help finding the best deal.
But Darren Cook, mortgage expert at Moneyfacts, says that if lenders were to continue to offer competitive deals through brokers then all borrowers could suffer.
“The majority of lenders are now receiving more business than they can actually process,” he explains. “If the products that are currently only available direct were also made available to brokers, then the lenders would no doubt find other ways to restrict their business volumes, such as further tightening their lending criteria.”
David Hollingsworth, from mortgage broker London & Country, agrees that some lenders are pricing their direct mortgages more favourably than broker deals as they try to push business through their branch networks.
But he says this “retrograde” move is bad news for borrowers as well as brokers.
“This means people have to become DIY brokers to find the best deal for them,” he says. “It is not as simple as using search comparison to compare rates as this doesn’t take criteria, fees or flexibility into account. Plus, different search engines have different definitions of best buy depending on their commercial arrangements.
“With a broker you get the advice aspect – it is easy to label something best buy but it really depends on the customer’s circumstances. For example, a broker can advise whether a borrower is better opting for a lower interest rate and a bigger fee or vice versa.”
In addition, Hollingsworth warns that many of the deals lenders are offering to tempt customers through the doors of their branches have strings attached.
For example, HSBC will offer better rates for current account holders, and those with ‘plus’ and ‘premium’ accounts. Others may sell you life insurance alongside the mortgage, which may not be the most competitive product on the market.
Hollingsworth adds: “It’s a confusing time for borrowers as there is a lot of different and conflicting information out there. Where is the economy heading, is a house price crash on the cards, should they go for tracker rates or fixed rates?
"A broker can talk you through all the options and offer ease of shopping across the market.”
Ray Boulger, from John Charcol mortgage brokerage, says borrowers should ask their brokers if they are taking direct-only deals into account during their consultations.
"Regulation means brokers can't really advise customers on deals that are only available direct but they should be able to tell you if there are other deals out there that might are significantly cheaper," he adds. "It's then up to you whether you are prepared to spend your own time conducting research about direct-only deals and make a decision on your own."
However, Boulger says in most cases there is little difference between direct-only deals and those available to brokers.
And he adds: "The situation is now improving, with lenders like Halifax and Abbey reducing the price gap between their direct and broker deals."
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.