Mortgage brokers - should I expect to get a better deal than I can find myself?

Question

Since I am currently looking into potentially buying my first house, when asked by an estate agent (with whom I had just viewed a house) whether I would be interested in talking to their mortgage advisor about mortgages, I thought it would probably be a good idea, just to get an idea of what's involved, how much I can afford to borrow, etc.

He asked me to email him some information, such as: address history, job history, sick pay, and to complete a budget planner that he emailed me.

After getting back to him with this information, he then replied with the maximum figure he had found that anyone was willing to lend me, the term (30 year mortgage, 5 years fixed), rate, and the monthly repayment amount (which included the set up fees for the mortgage). This mortgage was with Natwest.

I had a quick look at an online mortgage calculator tool (from a reputable comparisson site), and based on the same variable values he had quoted (mortgage value, 30 year term, fixed for 5 years), the best rate I found was actually better than what he had quoted: about 0.05% lower interest rate, setup fees just under 50% less, and monthly repayment amount a hundred pound or so (can't remember the exact amount) cheaper. This mortgage was with HSBC.

Obviously the difference in rate isn't huge, but given that I will be borrowing a significant amount, it will make a significant impact on the amount I repay over the 30 years

But given this is my first experience of dealing with a mortgage broker, I was kind of surprised that I had found a cheaper rate online myself, given I have no previous experience of looking for mortgages, and had not looked hard...

When I queried him about this, the guy said that it was an exclusive rate he had with one of the high street banks... I assumed that meant that this rate was only available if I go through him, and that a rate I got myself, he would expect to be worse than this one... but maybe he meant he only deals exclusively with this bank- in which case, it would be stupid to get a mortgage through him without looking elsewhere first... Although he did mention that I could borrow slightly more with one of the other high street banks- though he didn't give any more information than the amount I could borrow with them.

It made me question why anyone would use a mortgage advisor, if they can find a better rate online themselves...?

Am I missing something here? Or do I just happen to have spoken to a bad mortgage advisor?

Answer 1

You have not necessarily spoken to a bad mortgage adviser.

Lenders have two main channels to the market – direct, and intermediary (through a range of different kinds of advisers).

Some lenders specialise in the intermediary channel. They offer their best deals through advisers. If they offer direct deals at all, they may not be particularly competitive.

Other lenders only deal direct. (Firstdirect is one example of this. Whereas their parent, HSBC, provides mortgages through both channels, Firstdirect often has slightly better deals only available through their website / call centre.)

Most lenders, including many of the banks, trade via both channels. Nevertheless they may still offer exclusives – either special deals only available via their advisers, or special deals only available directly / to their existing banking customers etc.

So your best option in terms of finding the best rate / fees package is to use both channels at once, and compare deals – exactly as you have been doing.

However…

One thing you might wish to take into account.

The service of an intermediary, such as an adviser, is not only to help you compare or find deals. They are also (if they're worth their salt) able to offer crucial help through the application process. Quite often this speeds things up considerably. One meeting to sort out the paperwork / proof of earnings / ID, moneylaundering info etc., and they can often fast-track the whole process for you, if they're any good.

They can also respond to a bit of give and take and may even be able to negotiate a bit on your behalf.

Caveat emptor, of course – if the individual you're dealing with is a low-calibre mortgage broker who is disorganised, not up to speed on product details, or doesn't answer phone calls or emails because he/she is on the golf course or out networking or shopping for a new car, you may be disappointed.

But according to my own experiences, using an adviser usually beats dealing directly with a lender, chiefly for the hassle factor – particularly if the lender is a bigger organisation like a bank, where the inscrutable bureaucracy of their processes can be liable to drive one mad. They are often phobic of actually selling you a mortgage if you have not received advice, you can go around in circles trying to actually obtain one, and you will almost certainly spend hours on the phone. In short, if you value your time and sanity, you may regret going direct unless the saving is truly significant.