Re-mortgage now or wait?

[Caddyshack]

I really, really doubt a broker would make a recommendation swayed by £250. Most brokers shy away from cases that pay just £250 as the work that goes in to them is huge.

I think the broker genuinely believed that rates had peaked and was trying to stop you making what they thought was a poor choice. Their instinct was wrong but it was very strange events that happened all of a sudden and caught many people out - there was panic in the market and with customers.

Based on the last 15+ years I think their instincts were correct, they just got it wrong.


The broker is supposed to suggest the product that suits your needs and wants, they cannot and should not try to predict the future of rates. The customer should ultimately decide what they think rates will do after the broker has presented what they think are the best products that the customer can obtain.

[DonkeyApple]

mjb1 said:

Not March 2021 (that's when I would've been refixing if I'd had 5 years initially, rather than 2), 2022, actually it was May, just checked my old emails. I saw BOE increasing base rates, and mortgage rates going up. I noted some decent looking deals that were pretty close to my current 2.5% rate - Lloyds were offering 2.31% for 10 years(how I'm kicking myself now!), and Natwest 2.59% for 5 years. ERC would have cost me about £2k.

The broker replied that he didn't see rates going up any further, they just couldn't because borrowers wouldn't be able to afford the repayments! He 100% said that to me! And overall advice was to stick.

Back in 2016 when I first took out the mortgage, I was offered 2 yr fix at 1.38% or 5 yr fix at about 1.9%. I was leaning towards the 5 year (my thinking was that rates, particularly base rate, couldn't really go any lower, they could go up from there). But broker steered me towards 2 yr, citing the lower rate, and him feeling confident that rates wouldn't rise in the next two years. He didn't seem to have factored in the extra 1k product fees incurred by taking shorter fixes repeatedly. I was a bit naïve and didn't pick up on that properly myself. Later when I came to refix I did ask him about the extra product fees over taking a fee free, but higher rate deal, and he admitted that he hadn't ran the figures to see which would be best in my circumstances.

Looking back I think he was probably more favourable towards the shorter fixes because he pockets an extra £250 each time. He was very eager to contact me when the initial fix was coming to an end to ask that I did a product transfer/refix through him rather than going direct through my lender "it won't cost you anything different, but I'll earn a small commission". Fair enough, but I do feel that he was eyeing the extra commission over my stated preferences when he recommended the 2yr fix.

Maybe I put too much faith in the experts - if my boiler tech tells me my boiler could do with replacing, I'll likely get that done. If my main dealer mechanic says my car could do with new brake pads, I'll instruct them to do it. I wouldn't tend to argue the toss with them, even if we both suspect they've got another 5-10k left. Likewise if a mortgage broker suggests one product/deal over another, I put my faith in their judgement rather than tell them I disagree and ask for something else.

What's important to always remember about experts is that as a group they are never any different to say a group of mechanics. Some will be good, some will also be honest but some will always be dishonest and some will always be incompetent etc.

Just because someone has a professional qualification this does not absolve them from the laws of nature, merely shifts the parameters. And the existence of regulation should always remind the end consumer of the risks as opposed to blindly reassuring them in my book.

Some things are also just simple human nature such as how we respond to commission on deals.

The term 'advisor' doesn't change the reality that the individual in that role is a salesman. They are selling a service or product and competing against the next 'advisor' in order to earn an income. Companies that employ these salesmen will offer incentives to get the best results from their front line sales people.

We understand fully how commissions and financial rewards can distort away from what may be in the best interests of the end client. This is exactly why so many FCA regulated, retail facing industries have had much of this ability curtailed. In a group of 100 front line salesmen not everyone of them will be naturally honest or competent, despite having had to sit exams (which aren't exactly onerous let's say) and the number of dishonest individuals can be instantly increased or decreased by changing the financial reward on offer, either it's size, it's variability or it's opacity.

The best system is not one that bans performance related remuneration as that just incentivises back door activity but one that fixes an industry standard rate across all products. If every product pays the same then the salesman has no overt financial reward or incentive to favour one over the other and in theory focuses more on serving the customer best so as to earn more via repeat business and referrals. Further transparency such as having to show the end client what one will earn from each product is another prudent tool.

But what consumers should never forget is that all retail facing financial product advisors are salesmen and not all of those salesmen are actually advisors, if that makes sense.

What's useful about an environment such as PH is that an advisor who has been sitting on the forums for years talking about their industry but also directly receiving clients from the community and where to date no one has returned to say anything negative is probably a good place to start when looking for an advisor who will value advice over immediate revenue.

Re your paras above, a broker saying he couldn't see rates going up further because people wouldn't be able to pay just rings alarm bells for me personally. Post 2017 lenders have been stress testing at 3% over. While the tests aren't exactly bulletproof they would have been fully known to an advisor and form part of their thought process.

With regards to being steered to a lower rate product but where the fee made it the higher rate product? That would need specific numbers to confirm.

The fee the advisor made, you don't want to leap to any guesses re their remuneration so did the company reveal in advance their product commissions and fee structure? I don't know how mortgage advisors are regulated in this regard, where the job fits on the ladder when it comes to declaring this data? One of the resident gurus will know and be able to give clarity on what has to be revealed at inception, what during any deal and what has to only be revealed when asked directly etc.

Experts are just salesmen with elaborate titles. At the end of the day I am just a salesman. I sit in front of potential clients and I sell them a financial service and product that will earn me money. I happen to prefer the easy life and enjoy helping clients while keeping them for as long as possible so my view is that I'd prefer to earn £10k from a person I enjoy speaking with over 10 years and work on the gamble that they'll prefer that service and hang around for those ten years but others will want that £10k now and move on to the next potential customer as quickly as possible and that's when the so called 'expert' starts working for themselves not the customer. The amount of comm and fee share on the table directly influences the number of those people in an industry, whether through attracting them directly or converting normal people by the sums involved etc. I lose a lot of potential business because the nature of my industry is that many clients just want to get rich quick so they go to the salesmen who will tell them what they want to hear. I've always told them what they don't want to hear so they leave but that benefits me as it filters them out and keeps them off my book and tends to leave me with a base I enjoy answering the phone to.

[Sarnie]

DonkeyApple said:

mjb1 said:

Not March 2021 (that's when I would've been refixing if I'd had 5 years initially, rather than 2), 2022, actually it was May, just checked my old emails. I saw BOE increasing base rates, and mortgage rates going up. I noted some decent looking deals that were pretty close to my current 2.5% rate - Lloyds were offering 2.31% for 10 years(how I'm kicking myself now!), and Natwest 2.59% for 5 years. ERC would have cost me about £2k.

The broker replied that he didn't see rates going up any further, they just couldn't because borrowers wouldn't be able to afford the repayments! He 100% said that to me! And overall advice was to stick.

Back in 2016 when I first took out the mortgage, I was offered 2 yr fix at 1.38% or 5 yr fix at about 1.9%. I was leaning towards the 5 year (my thinking was that rates, particularly base rate, couldn't really go any lower, they could go up from there). But broker steered me towards 2 yr, citing the lower rate, and him feeling confident that rates wouldn't rise in the next two years. He didn't seem to have factored in the extra 1k product fees incurred by taking shorter fixes repeatedly. I was a bit naïve and didn't pick up on that properly myself. Later when I came to refix I did ask him about the extra product fees over taking a fee free, but higher rate deal, and he admitted that he hadn't ran the figures to see which would be best in my circumstances.

Looking back I think he was probably more favourable towards the shorter fixes because he pockets an extra £250 each time. He was very eager to contact me when the initial fix was coming to an end to ask that I did a product transfer/refix through him rather than going direct through my lender "it won't cost you anything different, but I'll earn a small commission". Fair enough, but I do feel that he was eyeing the extra commission over my stated preferences when he recommended the 2yr fix.

Maybe I put too much faith in the experts - if my boiler tech tells me my boiler could do with replacing, I'll likely get that done. If my main dealer mechanic says my car could do with new brake pads, I'll instruct them to do it. I wouldn't tend to argue the toss with them, even if we both suspect they've got another 5-10k left. Likewise if a mortgage broker suggests one product/deal over another, I put my faith in their judgement rather than tell them I disagree and ask for something else.

What's important to always remember about experts is that as a group they are never any different to say a group of mechanics. Some will be good, some will also be honest but some will always be dishonest and some will always be incompetent etc.

Just because someone has a professional qualification this does not absolve them from the laws of nature, merely shifts the parameters. And the existence of regulation should always remind the end consumer of the risks as opposed to blindly reassuring them in my book.

Some things are also just simple human nature such as how we respond to commission on deals.

The term 'advisor' doesn't change the reality that the individual in that role is a salesman. They are selling a service or product and competing against the next 'advisor' in order to earn an income. Companies that employ these salesmen will offer incentives to get the best results from their front line sales people.

We understand fully how commissions and financial rewards can distort away from what may be in the best interests of the end client. This is exactly why so many FCA regulated, retail facing industries have had much of this ability curtailed. In a group of 100 front line salesmen not everyone of them will be naturally honest or competent, despite having had to sit exams (which aren't exactly onerous let's say) and the number of dishonest individuals can be instantly increased or decreased by changing the financial reward on offer, either it's size, it's variability or it's opacity.

The best system is not one that bans performance related remuneration as that just incentivises back door activity but one that fixes an industry standard rate across all products. If every product pays the same then the salesman has no overt financial reward or incentive to favour one over the other and in theory focuses more on serving the customer best so as to earn more via repeat business and referrals. Further transparency such as having to show the end client what one will earn from each product is another prudent tool.

But what consumers should never forget is that all retail facing financial product advisors are salesmen and not all of those salesmen are actually advisors, if that makes sense.

What's useful about an environment such as PH is that an advisor who has been sitting on the forums for years talking about their industry but also directly receiving clients from the community and where to date no one has returned to say anything negative is probably a good place to start when looking for an advisor who will value advice over immediate revenue.

Re your paras above, a broker saying he couldn't see rates going up further because people wouldn't be able to pay just rings alarm bells for me personally. Post 2017 lenders have been stress testing at 3% over. While the tests aren't exactly bulletproof they would have been fully known to an advisor and form part of their thought process.

With regards to being steered to a lower rate product but where the fee made it the higher rate product? That would need specific numbers to confirm.

The fee the advisor made, you don't want to leap to any guesses re their remuneration so did the company reveal in advance their product commissions and fee structure? I don't know how mortgage advisors are regulated in this regard, where the job fits on the ladder when it comes to declaring this data? One of the resident gurus will know and be able to give clarity on what has to be revealed at inception, what during any deal and what has to only be revealed when asked directly etc.

Experts are just salesmen with elaborate titles. At the end of the day I am just a salesman. I sit in front of potential clients and I sell them a financial service and product that will earn me money. I happen to prefer the easy life and enjoy helping clients while keeping them for as long as possible so my view is that I'd prefer to earn £10k from a person I enjoy speaking with over 10 years and work on the gamble that they'll prefer that service and hang around for those ten years but others will want that £10k now and move on to the next potential customer as quickly as possible and that's when the so called 'expert' starts working for themselves not the customer. The amount of comm and fee share on the table directly influences the number of those people in an industry, whether through attracting them directly or converting normal people by the sums involved etc. I lose a lot of potential business because the nature of my industry is that many clients just want to get rich quick so they go to the salesmen who will tell them what they want to hear. I've always told them what they don't want to hear so they leave but that benefits me as it filters them out and keeps them off my book and tends to leave me with a base I enjoy answering the phone to.

As in all industries, you will always have the good, the bad, the ugly.

I would be highly surprised if a broker was deliberately advising a client towards 2 year deals, just to earn £250 again in 2 years time. Once your network has deducted their percentage (The £250 is gross and not what we actually receive) and you have paid PI, corp tax, income tax, staffing costs, there is very little of that £250 left, in fact it's likely that it would be costing him money to do that deal.

The thing with other industry's is that none of them are as highly regulated as the mortgage industry. Back in the 80's & 90's it was the wild west, advisors didn't need CeMAP, they didn't need any training, you just put on a suit and went out and sold endowments that you knew nothing about and sold them a dream of being able to pay off their mortgage at the end and have a lump sum left over. We all know how that played out. Then in the mid 00's we had the PPI issue where brokers made clients pay in advance for monthly premiums for an insurance product, add that money to their loan, usually knowing it was an awful product and probably not appropriate for their needs. Those really were the days when there were sharks out there, looking to rip people off. Obviously confidence in the industry was rock bottom so in came regulation for the very first time, now meaning that regulation is currently so tight, it surprises me these days to hear people think that brokers would deliberately give poor advice to earn another £250.......it's really unlikely to be in their interests and if they were, it would be easy to spot by the regulator, as their figures would look like the opposite of the ones I posted yesterday, all 2 year rates and very few long term products. If a broker says that he doesn't think rates would go up anymore as people wouldn't be able to afford their mortgages, thats he opinion, it doesn't mean he'll be right, st happens in the world that we don't see coming (Covid/Truss & Kwasi)........

I truely think people would be shocked at the level of compliance that goes into every single application. Every single detail has to be documented and fully justified. The commission paid by the lender is detailed in plain view for the client from the very start. The IDD given to a client at the very outset will tell the client whether the broker is charging a fee and if they are receiving commission form the lender. Then when the broker makes a recommendation to the client and send them an illustration, it's right there on page one of the illustration;



It used to be on the last page of illustrations years ago but the FCA decided that wanted there on the very first page. The number one source of complaints is around fees/commissions so it's now one of the first things a client sees. Personally, I think there is a lot more pertinent information in the illustration that directly affects the client and their decision on whether to take the product such as the rate, the product fees, monthly payments.

When the formal mortgage offer is issued, the same information is on there too so the client should be aware of the comms being paid at the start, middle and end of the process. Thats how it should be done but I've heard stories of brokers not providing clients with these documents, hiding info from clients etc etc.......but they don't last in the industry very long at all.

[DonkeyApple]

Yup. The change in the market re regs and compliance has been immense and as you point out, from a startlingly dismal base. I would also be of the view that it seems hard to believe that someone would obtain their qualification, work under the new compliance regime and be remotely incentivised to bend due to just a few additional £250 payments but over the years in my industry I have been repeatedly surprised as to what some blokes will try and do just for £1.

That said, I'd wager that the mortgage broking sector is no different from any retail facing financial sector or in fact, any retail facing market place in that it will still contain a fair number of incompetents as well as naturally dishonest people and people who will trip into dishonesty when their price is met.

But I suspect your part of the industry is also no different to the others in that the literacy of the clients can also be quite difficult to compensate for?

[Sarnie]

DonkeyApple said:

Yup. The change in the market re regs and compliance has been immense and as you point out, from a startlingly dismal base. I would also be of the view that it seems hard to believe that someone would obtain their qualification, work under the new compliance regime and be remotely incentivised to bend due to just a few additional £250 payments but over the years in my industry I have been repeatedly surprised as to what some blokes will try and do just for £1.

That said, I'd wager that the mortgage broking sector is no different from any retail facing financial sector or in fact, any retail facing market place in that it will still contain a fair number of incompetents as well as naturally dishonest people and people who will trip into dishonesty when their price is met.

But I suspect your part of the industry is also no different to the others in that the literacy of the clients can also be quite difficult to compensate for?

Yes, as I said, there will always be brokers that come into the industry, try their arm and get found out. They are stupid to do so because it's so easily unearthed.

You are correct around the literacy of clients, there is a big push currently to ensure that vulnerable clients are treated differently to ensure they not only receive correct advice but receive it a medium that works for them. Eg you might have a client who may not be able to read very well and may prefer a call to go through documents rather than receiving them by email and then agreeing to something that they don't really understand. It's a difficult area though as not many people like to class themselves as vulnerable.

You can do as much as possible with a client and provide all information and documents as exactly as you should, give them exactly what they want and still run into issues down the line. I was speaking to a compliance person last week and he was saying that a large number of complaints being received were two fold;

- clients coming off low two year fixed rates in recent months and having to choose significantly higher rates from whats available now. The complaint being that they were not offered a five year fixed which would have been very close to what their two year rate was and now they can't afford their mortgage.

- clients who did take five year fixed rates but now due to the cost of living crisis can't afford their house and want to sell up and move into rented but now have to pay a huge ERC and would have taken a two year rate if they'd known!

Few are upheld but this is why the compliance is so onerous.............

[Caddyshack]

Sarnie said:

DonkeyApple said:

Yup. The change in the market re regs and compliance has been immense and as you point out, from a startlingly dismal base. I would also be of the view that it seems hard to believe that someone would obtain their qualification, work under the new compliance regime and be remotely incentivised to bend due to just a few additional £250 payments but over the years in my industry I have been repeatedly surprised as to what some blokes will try and do just for £1.

That said, I'd wager that the mortgage broking sector is no different from any retail facing financial sector or in fact, any retail facing market place in that it will still contain a fair number of incompetents as well as naturally dishonest people and people who will trip into dishonesty when their price is met.

But I suspect your part of the industry is also no different to the others in that the literacy of the clients can also be quite difficult to compensate for?

Yes, as I said, there will always be brokers that come into the industry, try their arm and get found out. They are stupid to do so because it's so easily unearthed.

You are correct around the literacy of clients, there is a big push currently to ensure that vulnerable clients are treated differently to ensure they not only receive correct advice but receive it a medium that works for them. Eg you might have a client who may not be able to read very well and may prefer a call to go through documents rather than receiving them by email and then agreeing to something that they don't really understand. It's a difficult area though as not many people like to class themselves as vulnerable.

You can do as much as possible with a client and provide all information and documents as exactly as you should, give them exactly what they want and still run into issues down the line. I was speaking to a compliance person last week and he was saying that a large number of complaints being received were two fold;

- clients coming off low two year fixed rates in recent months and having to choose significantly higher rates from whats available now. The complaint being that they were not offered a five year fixed which would have been very close to what their two year rate was and now they can't afford their mortgage.

- clients who did take five year fixed rates but now due to the cost of living crisis can't afford their house and want to sell up and move into rented but now have to pay a huge ERC and would have taken a two year rate if they'd known!

Few are upheld but this is why the compliance is so onerous.............

I had the exact same conversation, they have seen a lot of these too. MAB do our compliance.

[JP__FOX]

Mortgage renewal is due in the next month, we're in the fortunate position to be able to pay off the existing mortgage but we'd like to move again in the near future and we'd need a mortgage to do that. Having a mortgage on the current house would help the credit score situation so wondering whether it's worth keeping a small mortgage to continue to build / maintain the credit score etc. I suppose the question is whether that's worth the additional fees and the interest we'd be paying back now that the rates have gone up plus any additional early repayment or settlement fees if we decide to go with a different lender when moving house? Would you pay it off or keep a small mortgage?

[Sarnie]

JP__FOX said:

Mortgage renewal is due in the next month, we're in the fortunate position to be able to pay off the existing mortgage but we'd like to move again in the near future and we'd need a mortgage to do that. Having a mortgage on the current house would help the credit score situation so wondering whether it's worth keeping a small mortgage to continue to build / maintain the credit score etc. I suppose the question is whether that's worth the additional fees and the interest we'd be paying back now that the rates have gone up plus any additional early repayment or settlement fees if we decide to go with a different lender when moving house? Would you pay it off or keep a small mortgage?

As per my email to you, maintain a small mortgage

[The G Kid]

JP__FOX said:

Mortgage renewal is due in the next month, we're in the fortunate position to be able to pay off the existing mortgage but we'd like to move again in the near future and we'd need a mortgage to do that. Having a mortgage on the current house would help the credit score situation so wondering whether it's worth keeping a small mortgage to continue to build / maintain the credit score etc. I suppose the question is whether that's worth the additional fees and the interest we'd be paying back now that the rates have gone up plus any additional early repayment or settlement fees if we decide to go with a different lender when moving house? Would you pay it off or keep a small mortgage?

I was in a similar position to you earlier this week, and decided to leave a small balance on the mortgage rather than clear it all. It doesn't make sense in one way, as the rate on the mortgage is higher than what I am receiving on the cash I have kept back but it's quite a small amount and worth the extra interest cost for the flexibility (IMO).

[lizardbrain]

Am I right in thinking of you keep a small mortgage and you need emergency funds it’s relatively quick and easy to remortgage (eg going from 1% ltv to 40%ltv) without much faff? Vs starting from scratch?

[z4RRSchris]

Sarnie said:

The_Doc said:

How much of a cut of the £1k does an Estate Agent introducer take?

Thanks for the impromptu AMA.

No idea, we've never needed to have an introducer arrangement, as Caddyshack posted about his business, all our business comes from repeat clients and referrals.

Edited by Sarnie on Tuesday 28th February 18:43

about 20% of that grand.

and in general they will take 10% of the agency fee, so the mortgage kick back makes a nice difference.

[z4RRSchris]

lizardbrain said:

Am I right in thinking of you keep a small mortgage and you need emergency funds it’s relatively quick and easy to remortgage (eg going from 1% ltv to 40%ltv) without much faff? Vs starting from scratch?

correct

[alscar]

lizardbrain said:

Am I right in thinking of you keep a small mortgage and you need emergency funds it’s relatively quick and easy to remortgage (eg going from 1% ltv to 40%ltv) without much faff? Vs starting from scratch?

After I had paid off the vast majority of mine ,for a few years kept a few thousand in place as just this after the BS suggested it.

[Sarnie]

z4RRSchris said:

about 20% of that grand.

and in general they will take 10% of the agency fee, so the mortgage kick back makes a nice difference.

Who takes 10% of the agency fee?

[z4RRSchris]

the agent who did the deal, who then gave your details to

[Sarnie]

z4RRSchris said:

the agent who did the deal, who then gave your details to

You mean the individual in the estate agent?

[Sarnie]

z4RRSchris said:

the agent who did the deal, who then gave your details to

You mean the individual in the estate agent?

[z4RRSchris]

yeh. the bung to the agent to give your details to a mortgage broker. the mortgage brokers pay about 20% of the fee.

[Caddyshack]

z4RRSchris said:

yeh. the bung to the agent to give your details to a mortgage broker. the mortgage brokers pay about 20% of the fee.

I think you have this confused.

The mortgage broker would only be able to pay a split of the fee to the estate agent business. How much of that the business pays to the estate agent employee would vary but I doubt it is huge. An agency that pays 10% of the house sale fee to the employee would not pass on 100% of the procuration fee.

It sounds very bad when you call it a bung for giving your details to the broker.

GDPR and business etiquette dictates that the agent would only pass on the details if the customer wanted that to happen and the broker would not want to waste their time talking to people who did not want their help.

[z4RRSchris]

i know for a fact that some brokers pass on the “commission” directly to the agent. not the agency.