Incentives for Mortgage Intermediaries

[Tommie38]

I am working with a mortgage intermediary that I understand to be whole of market. This is for a BTL.

I'm using them on the grounds that they can help with getting the paperwork in shape and ready for the submission. I'm not really using them to find the best deal (clearly, I could do that on MoneySupermarket), but my assumption is that they are giving me the best deal.

However, comparing what the intermediary is suggesting to what is listed on websites (specifically the intermediary pages of the lender sites) shows a bit of a disconnect. The upshot is that they are strongly driving me towards a product that does not appear to be the most competitive. The rates being quoted to me by the intermediary for other lenders are higher than what I can see showing on the intermediary sections of those lender websites. Thus it does feel like I am being encouraged to take a product that would leave me worse off.

For those that know... does the commission that an intermediary gets vary from lender to lender? Are the incentives different in any way?

Of course it could be that lenders are unprepared to give me the rates listed on their websites, but that seems a bit odd to me.

[Sarnie]

So, are you saying that the broker is offering you x,y,z rate from ABC bank.....and then you've said there are cheaper rates with other lenders and they are saying the rates with other lenders are higher than what is being displayed on those lenders websites?

Have they given you any reason why they are using the lower rates from the other lenders?

There could be lots of reasons they aren't placing your business with the other lenders......rental stress rate, minimum income requirements etc etc.

With regards to payment, I wouldn't expect it to be this, mortgage commissions to brokers are broadly the same across the industry.

So, you need to find out exactly why they aren't placing your business with the other lenders...........it could be that they can't use that lender perhaps? Not all mortgage brokers are actually truely "whole of market".....there are lots of Directly Authorised brokers who can't use lenders like HSBC, TSB, West Brom BS etc etc....

[aka_kerrly]

Perhaps things have changed but it's unlikely, when I was working as a mortgage advisor all lenders give the same 0.3% of the loan amount as a "introducer commission" so that advisors are not swayed as you are suggesting.

When you say you have seen lower rates than what the advisor is quoting you on the lenders websites have you checked the eligibility. It may well be your advisor has already discounted products you won't be eligible for. Also consider the trade off of higher application fees versus higher/lower interest rates. Sometimes lenders direct products have lower fees and higher rates than those offered to intermediaries.

Sadly even when you are a whole of market advisor there are still some products which are only available to customers who go direct to the lender which also makes an advisors job harder as strictly speaking if the most suitable product is one only available if you walk into the branch/apply online the advisor should recommend you do that and perhaps charge an hourly rate instead of a commission.

[Tommie38]

Sarnie said:

So, are you saying that the broker is offering you x,y,z rate from ABC bank.....and then you've said there are cheaper rates with other lenders and they are saying the rates with other lenders are higher than what is being displayed on those lenders websites?

Have they given you any reason why they are using the lower rates from the other lenders?

There could be lots of reasons they aren't placing your business with the other lenders......rental stress rate, minimum income requirements etc etc.

With regards to payment, I wouldn't expect it to be this, mortgage commissions to brokers are broadly the same across the industry.

So, you need to find out exactly why they aren't placing your business with the other lenders...........it could be that they can't use that lender perhaps? Not all mortgage brokers are actually truely "whole of market".....there are lots of Directly Authorised brokers who can't use lenders like HSBC, TSB, West Brom BS etc etc....

Thanks for this. I have asked directly. I do see that things like the stress tests could be different.

It may be that a mistake was made when giving me the figures or the rates have changed. A bit useless if either of those are true!

[Tommie38]

Good to know that the incentives are broadly consistent. Although it does look like the perks are different (Virgin appears to have some fairly low level things like points/discounts across the group).

I’m expecting a mistake. I’d totally understand different stress tests, it’s more that I would expect the products that have been quoted to actually be listed!

[Sarnie]

Tommie38 said:

Good to know that the incentives are broadly consistent. Although it does look like the perks are different (Virgin appears to have some fairly low level things like points/discounts across the group).

I’m expecting a mistake. I’d totally understand different stress tests, it’s more that I would expect the products that have been quoted to actually be listed!

I'm not sure what perks you are referring to? Do you mean perks for you as the customer because brokers don't receive any perks whatsoever from any lender.

Rates have changed a LOT in recent weeks and months, I've had clients quote me rates that "they saw on the internet" that were withdrawn weeks before.

My assumption would be that there is an underwriting reason why they have placed your business elsewhere and they've not explained that to you.

I'm sure this can be all be cleared up in a 5 minute phonecall........one way or another!

[anonymous-user]

Just be careful- I paid a broker and the next second I received a different quote to what we had discussed.
So be sure you know what you’re paying for.