Looking at the four most popular mortgage types, the two and five years fixed rates and the two year and lifetime tracker deals, a recent study shows that over the last two years 93% of the best deals were offered direct from the lender.
According to the Telegraph reporting on an HSBC study the direct deals were on average 0.31% lower than you could get through a broker.
Brokers traditionally were able to find clients the best deal on the market until lenders started to ‘dual price’ deals into direct and broker so that they could control the market better.
When you opt to use a broker the lender will pay the broker a ‘procuration fee’ for using them. So the broker gets paid by the lender, although some do charge fees to the client on top. Also, the lender and broker usually have an agreement that the lender will not try and poach the broker’s insurance deals with the client. However, it is with the insurance deals that both broker and lender potentially make the most money. So it would be in the lenders’ interests to take a slight hit on the mortgage as long as they have a tied audience for the insurances that can be hideously more expensive. They got you through the door for the mortgage and in the seat with pen in hand ready to sign so they use it to their advantage.
This ‘dual pricing’ has effectively ended the position of the mortgage broker as the person who can get you the best deal. This now means that people will either have to take what their banks give them or do the onerous legwork and trawl the internet themselves. Even then they don’t know if they have missed something.
Many brokers now have computer systems that not only give them the broker deals available to them but also details of the deals available direct from a lender only. The problem for the broker is they won’t get paid on advising you to take that deal unless they charge you a flat fee up front for finding it for you.
Maybe what brokers need to do is charge a small fee for finding the right deal and filling in the forms for you to sign and send whilst also arranging the cheapest insurance cover for you.
one tip to potentially save you a lot of money. If you arranged your mortgage direct and still have insurance that was put in place for you by the lender, call an IFA and they will be more than happy to review it for you to see if the same cover can be found cheaper. Or indeed if more and better cover can be found for the same price.