UK Mortgage Brokers - Independent My A**
There are some funny goings-on in the mortgage lending and marketing fraternity that you should be aware of.
You'll have observed - or should have assuming you are shopping around from scratch for the best home mortgage deal - the words 'Independent home mortgage broker' talked about quite a bit.
Well 'caveat emptor' pal - which is Gladiator-speak for 'buyer beware' - because these individuals and firms are not quite so 'independent' - or impartial - as you and I might believe.
According to the Financial Services Authority (the mild mannered arbiter for mortgage brokers not prone to dishing out red cards) it's o.k. for a broker to call himself/herself 'independent' provided:
1 He/she provides a 'fee-only' service; because this steers clear of any impulse of back-handers by commissions and
2 He/she claim to stand for the whole of the market.
Actually neither of these safety nets actually protect the consumer.
First off most consumers are not really concerned whether the broker is fee - or commissioned - based provided they procure a mortgage and they don't have to put out any money upfront.
If you can't steer clear of a fee-based scenario be careful: staggering figures of up to 1.5% of the total mortgage have been quoted (albeit for finding 'difficult' or pitiable credit sources).
So aim well below that and steer clear of any broker desiring to charge you before completion.
Second the 'whole of the market' according to the FSA can be a selection or board of lenders as long as this 'bundle' embodies the open market and the broker checks out the top deals every 8 weeks. (That's a long time in the UK home mortgage business.) This means your theoretically independent UK mortgage broker is probably randomly selecting from a limited - you might say 'cosy' - number of home mortgage lenders, say 20, rather than checking the whole marketplace - where there are in theory 4,000 types of UK home mortgage deals from over 100 UK mortgage lenders.
Now that's not to say they ain't getting you a good deal... and OK, maybe checking out the whole market is too time-consuming, [not cost-effective for them...].
But let's be clear that it's just not as 'independent' as you or I might think.
Does it matter?
Well yes it does. As consumers we want to believe we are getting access to the widest choices and options available for our greatest financial commitment ever.
Moreover the other real advantage of an 'independent' home mortgage broker is that they should be able to tap into the secondary mortgage lenders (rather than the high street lenders) who will give home mortgages if you have a poor or weak credit rating.
These days it's easy to clock up a poor credit rating in the UK (like a speed camera fine) but harder to clean the slate (6 years, longer than the 3-year speeding fine).
So secondary sources of mortgage for people with flawed credit are becoming more and more important.
Anyway an 'independent' home mortgage can sort this out for you - it's been known for registered bankrupts to get mortgages. So there's hope for us all.
So let's be clear...
You can call yourself an 'independent' while not covering the 'total market'.
But you can also offer the whole of the market, AND NOT be characterized as 'independent'.
Isn't that great! Tony Blair must be so proud of his new law.
This weird double think is because there are mortgage brokers out there who don't want to bother with the pretence of fees but are quite open about commissions (which is what the consumer generally likes better) because in effect brokers are paid on results and wouldn’t dream of charging for a search.
Commission-based is also cheaper and such brokers may represent a greater portion of the market than those labeling themselves 'independent'.
L&C is a decent example, a UK-wide firm of home mortgage brokers which operates with an excess of three times the number of lenders used by so-called 'independent' brokers.
Asking the Proper Questions
So as a consumer just ignore the term 'independent' - until the FSA decides to get its act together.
Instead, whether you choose a one-man/woman show (perhaps an ex-Building society branch manager) or plum for a bigger UK mortgage brokers firm, with all the slick presentation you'd expect, ask these basic questions before committing:
'Are you a part of a network...?' If yes they're probably only able to access a limited number of mortgage lenders.
Clarify it with: 'Do you offer home mortgages from a group of lenders?'
Or if you like put it this way: 'Are you going to select a mortgage for me as we speak across all available UK home mortgage lenders?'
If you're not sure of their answer, here's a simple answer: Get another quote!
And while you’re at it…
Don't go along with any old mortgage just 'cos you're desperate.
Not all lenders are actually 'acceptable' to you.
They may wear suits and have straight faces, but there are some dodgy people out there.
It would be very reassuring to know that your independent mortgage broker is prepared to say 'not acceptable' about a particular mortgage lender even if the home mortgage lender is prepared to give you a mortgage.
Who are we talking about? Well for example mortgage lenders who regularly 'sell on' their mortgage books so you are eventually perhaps left with a mortgage lender you haven't heard of, or worse still, mortgage lenders who are not interested in after sales but merely in getting their interest repayments.
'Independent home mortgage brokers' are NOT 'Independent Financial Advisors'.
Remember also that we're talking about 'Independent home mortgage brokers' NOT 'Independent Financial Advisors'. The latter not only source from 'the market' but will or should contribute other advice simultaneously to setting up your mortgage.
For example they should advise you on the rightness of either existing or new insurance covers, possible pension linking and the fact that some home mortgage lenders will only lend via intermediaries, so their offers would never be available via High Street, newspapers or, online.
IFAs have been well policed by the FSA and its forerunners since 1988.
Finally, be careful out there my friend. This is your mortgage, not your broker's.
About the Author: This article is written by MortgageSorter, a UK mortgages website that has been helping normal people understand UK mortgages for over 5 years.