Key Post The pros and cons of using a mortgage broker

Brendan Burgess said:

By your logic, you would need a personal shopper, a cleaner and a chauffeur.

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No Brendan, none of those tasks involves substantive engagement with a largely faceless and often very awkward bureaucracy, and in each respect the consumer is already well-equipped to make choices to maximise their personal utility.

Rory Sutherland puts it well in this week's Spectator.

Faced with an unexpected combination of events, even good systems can produce an outcome far sillier than any sane individual would choose when acting alone.

I have spent the past 15 years studying behavioural economics, which seeks to uncover the origins and consequences of human ‘irrationality’. Yes, there are many cases in which better-informed individuals might make better decisions, but on the whole most people make a pretty good fist of their personal choices.

One reason why our personal judgment may be rather good is that it is just that – personal: people are not forced to justify their choice of shampoo to a procurement officer, or reverse-engineer a pseudo-scientific optimisation model to pretend that their chosen sofa offers the highest possible ROI. They can hence quickly and intuitively make a decision which might seem irrational or suboptimal to an economist, but which is nonetheless well suited to real-world choices

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There is nothing especially complicated about taking out a mortgage which cannot be explained on Askaboutmoney.

The lenders are anxious to do business.

It is in no way comparable to dealing with tax issues. Well maybe it's similar to Local Property Tax. You would not go to an accountant for advice on paying it each year. But you would go to an accountant if you were setting up a business.

If you have a complex mortgage need e.g. a poor credit record or you need a lending exception, I recommend going to a mortgage broker.

But for most people, they simply do not need them and there are considerable risks involved if they go to a poor broker.

Brendan Burgess said:

There is nothing especially complicated about taking out a mortgage which cannot be explained on Askaboutmoney.

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I think you're a mile off there Brendan.

About 20 years ago we obtained a mortgage with a broker who has a high profile on AAM. The broker made sure we got a tracker mortgage, advising us that it seemed advantageous to us and that there appeared to be no downsides to having one. I frankly didn't care at the time once we got the money.

I don't know how much they were paid for their services but in retrospect their service was worth an absolute fortune to us.

Had we instead blundered into the bank, we could just as easily have ended up with a variable rate mortgage that would have screwed us when rates went crazy after the crash.

Everything is complicated when the consumer has a lot to lose. And when they're shopping for a mortgage, most people have a lot to lose. When they're shopping for a coat, most people have comparatively little if anything to lose.

That's why brokers are prospering.

Great, you got good advice.

But lots of other people were told by brokers to fix. Brokers generally did not appreciate the value of trackers.

They were strongly advocated on Askaboutmoney at the time.

Brendan

Brendan Burgess said:

Great, you got good advice.

But lots of other people were told by brokers to fix. Brokers generally did not appreciate the value of trackers.

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It's not even a broker's primary role to give advice.

Their job is to assist with a mortgage application, just as an accountant's job is to assist with accounts compilation and tax submissions. Any associated advice or guidance is purely incidental to that. (The official in the bank who would otherwise have obtained us a mortgage couldn't have been retrospectively accused of negligence had they saddled us with a variable rate mortgage.)

Many people find that there is value for them in hiring a broker or an accountant. There is no mystery why this is the case.

Brendan Burgess said:

So does the broker speed up the process or slow it down? I would imagine that they are more likely to slow it down. They are another step. You send the stuff to the broker. They send it to the bank. The bank has a query and asks the broker. The broker asks you. The broker tells the bank. The bank says, "yes, but...". The broker has to call you back "the banks has said yes, but..."

And the broker goes on holidays, has a higher priority client, drops the ball...

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I would say it should generally be the same or quicker. It depends on the quality of the broker and what their relationship is with the bank, in terms of having some sway over getting your case prioritised.

The broker will review your submission quicker and should spot any gaps before it goes into the bank. This should reduce timelines as the bank will take longer to review your info and re-review of your subsequent submissions where there were gaps.

A good broker should also have a sense of when to push back on the bank, where they are going above and beyond on what are reasonable requests for information.

A good broker won't make it slower, there will be more tailored info submitted in the first place so hopefully less queries and a broker may even be able to head off and answer the queries without having to go back to customer. It's practically the same as whether or not you have a good mortgage advisor in a branch or not. I spent time training some over the years and some 'get' it and can process a mortgage well, others follow the rules religiously and can't really put a case together to give the person in HO the proper picture which is what causes a lot of queries and issues.

As for anybody being able to diy by reading AAM true in theory if you are good at that stuff, I have a daughter who is extremely smart and intelligent but her eyes would glaze over trying to read a few posts about applying for a mortgage, she's just not that way inclined! But as my Dad would have said 'she'd mind mice at crossroads' when it comes to managing her day to day money, absolutely excellent. Everyone has their own strong points and skills and if financial is not yours then no reason not to go with paying an expert and in most cases you're not even paying a broker up front!

As for the tax comparison I agree too that most people could do their own taxes but why are those taxback companies popular so? Same story.

I did voluntary work for Citizens Info for a couple of years good while back and a large part of it was filling forms for people and not just people you might be thinking of! Many many quite literate intelligent people just could not deal with a big long form, a sort of form blindness took over and we provided a service to help them complete them. As it happens I love filling forms, odd or what!