Would you be willing to pay a broker fee?

[Camry]

It toook me two hours on the phone one morning to source what still appears the best deal on the market for my needs.

 

[Libby001]

I can say that here and now there is no way on this wide earthly world will I be paying any broker fee if it comes into affect. I have no problem in doing the research and application forms. At the end of the day, if you are not willing to get out there and find the best deal for yourself then you are just cutting off your nose to spite your face. In this day and age with emails etc there is no reason why people can't do it for themselves. And if it means saving a few bob I have no problem in doing so. I cant believe people are actually considering this. Do we pay fees to brokers for Car insurance? life assurance ?? If we start paying fees to mortgage brokers, the other lot will soon jump on the band wagon. Mortgage brokers have had the high life for way too long in this country, and have been making a fortune on commission from banks and now when things are getting a bit tight, they haven't a clue how to run their business during bad times so will come up with some other way of doing people out of money.

Next thing I will hear is that estate agents are going to start charging us to view a house!!!!!

 

[roland]

I can say that here and now there is no way on this wide earthly world will I be paying any broker fee if it comes into affect.

The question 'would you be willing to pay a broker fee' is stunning in its naivety. This naivety is only reinforced by all the respondents arguing whether they would pay a fee or not. Der Kaiser hit it on the head. The pure fact is that the consumer HAS ALWAYS paid a fee to the broker. It's just that up to now it has been hidden in the interest rate they are paying. How on earth else did you think the broker got paid? The fairies? The banks out of charity? The pure fact is that the bank has a fixed pie to share out between the seller and the consumer. Up to now the bank has paid 1% to the broker and then after that worked out what interest rate they could give to the consumer. So now that the cost of funding for the bank has gone up about 1% they have a dilemma. They have 1% less to play around with. So, what would you do? Well 1% is a load to make up quickly so a bank isn't going to put that straight away on either the customer or the broker. If they did, then they would probably get no business 'cos neither joe soap nor mortgage broker could adjust that quickly. For example, if they covered it by reducing broker commission by 1% that would mean they end up paying nothing to the broker. Err that's not very clever 'cos now why would a broker pass business to a bank for nothing at all? Charity? If instead the banks pass it all on to the consumer, then the consumer is scratching their head at the massive increase 'cos ECB rates haven't moved at all!! Not so clever either. So, what is a bank to do? After much scientific calculations ..... split the difference. They pass on 0.5% of the problem to the broker (i.e. reduce broker commission by 0.5%) and the rest to the consumer.

Let's get one thing straight. The fact that a bank has to pay a broker (whether it's 1% or 0.5%) means that the interest rate they give you on your mortgage is higher than it otherwise would be. The only person paying for that is you. It's a nonsense to believe or think otherwise. If banks did not have to pay 1% to brokers would competition not ensure that the interest rates consumers paid were a lot lower? The fee or no fee debate is a nonsense. The only thing that's happening now is that the cost of advice from your broker is now being made more transparent. The fact that people are 'shocked' by a 0.5% fee is very telling. I'd say they would be even more shocked if they knew that up to now they paid the 1% to their broker through inflated interest rates on their mortgage - how on earth else did they think the broker was paid?

 

[Sarah W]

Nice theory Roland but incorrect. Sourcing a mortgage (advertising, interviewing, advising) and processing it (collecting, chasing and checking paperwork) takes man hours, technology, office space, phone and postage costs, etc, etc. All these incur a cost which is paid by the bank to the broker as a commission. Given that brokers produce 50% of Ireland's mortgage applications how much extra in terms of staff (recruitment, salaries, training), premises and ancillary costs would the banks have to pay to bridge the gap if that source disappeared? And at what cost to the consumer in terms of independent advice?

Sarah W

 

[irishlinks]

But ... up to now the only lender not going through brokers was NIB - and they have the lowest rates (under 80% LTV anyway). So maybe cutting out brokers does result in lower rates? It doesn't take much advice to tell me that 4.8% is lower than 5% ?

 

[LDFerguson]

I have no problem in doing the research and application forms. At the end of the day, if you are not willing to get out there and find the best deal for yourself then you are just cutting off your nose to spite your face. In this day and age with emails etc there is no reason why people can't do it for themselves.

If you want to, you can also save money by avoiding trips to the G.P., by sourcing all the medical information that's out there on the internet and diagnosing yourself. Some people would prefer to have an experienced professional explain the finer points to them that an amateur wouldn't be aware of.

Do we pay fees to brokers for Car insurance? life assurance ??

Do you think that you get them for free?

...so will come up with some other way of doing people out of money.

Being a broker, though not exclusively a mortgage broker, I take exception to this. Nobody ever dragged a customer into a broker's office. There has always been the option for people to bypass brokers and deal directly with lenders. So if brokers have been "doing people out of money", why did more people take out mortgages through brokers than directly with lenders?

 

[Jimbobp]

Here here Liam. I'm a broker so don't want to be seen to be starting the broker persecution society,but I'm not sure why brokers attract these types of comments.For instance I've compared our motor quotes to those that the regulator post on their website, in almost every scenario we are cheaper than the direct companies even with our admin charge & commission included, because we have access to companies/schemes that the public don't. I've also lost count over the years of the amount of claims we've gotten through that the client would have had 0 chance of getting if they were insured direct with a company.Maybe I'm been a bit sensitive - sniff

 

[irishpancake]

But ... up to now the only lender not going through brokers was NIB - and they have the lowest rates (under 80% LTV anyway). So maybe cutting out brokers does result in lower rates? It doesn't take much advice to tell me that 4.8% is lower than 5% ?

How come some of the brokers and ex-brokers on the board will not address irishlinks point regarding NIB.

One broker has actually argued that Halifax rates are lower than NIB rates for people with LTV's 50%-80%.

see here

 

[Rightly dun]

I don’t want to bring my own problems with my Broker onto this thread but this is what happened to me.
My Broker arranged my loan and didn’t tell me about that the bank were going to charge me an arrangement fee of 5,000 euro, which I only found out after I had drawn down the money. If that was not bad enough because of my problems I changed banks as I thought that broker was still getting commission. I just walked into my bank and asked if they would take on this loan interest only ,No problem. What shocked me then is that even after two interest rate hikes the new loan was costing me 500 euro a month less.
So without saying to much Brokers you can xxxx xxx from me.

 

[LDFerguson]

But ... up to now the only lender not going through brokers was NIB - and they have the lowest rates (under 80% LTV anyway). So maybe cutting out brokers does result in lower rates? It doesn't take much advice to tell me that 4.8% is lower than 5% ?

How come some of the brokers and ex-brokers on the board will not address irishlinks point regarding NIB.

Despite the question marks, I can't see a question to be answered in irishlinks post. It appears rhetorical to me.

I fully agree that National Irish Bank's LTV tracker variable mortgages are cheaper than any other trackers on the market at present, for those who qualify for them. I don't know if this is solely because they don't pay commission to brokers. I'd imagine it also has something to do with their source of funding - presumably via Danske Bank. It probably also has something to do with their very selective lending policy - these rates are only available to those seeking <80%, no re-financing of other loans, no self-builds, no investment property etc.

One broker has actually argued that Halifax rates are lower than NIB rates for people with LTV's 50%-80%.

see here

One broker was wrong and you corrected him. What's your point here?

 

[clubsandwich]

I don’t want to bring my own problems with my Broker onto this thread but this is what happened to me.
My Broker arranged my loan and didn’t tell me about that the bank were going to charge me an arrangement fee of 5,000 euro, which I only found out after I had drawn down the money. If that was not bad enough because of my problems I changed banks as I thought that broker was still getting commission. I just walked into my bank and asked if they would take on this loan interest only ,No problem. What shocked me then is that even after two interest rate hikes the new loan was costing me 500 euro a month less.
So without saying to much Brokers you can xxxx xxx from me.

I find this post quite unbelievable to be honest. You say a bank charged you an arrangement fee of €5,000 and you allege that the broker did not make you aware of this. You then say that you only found out after you drew down the funds! First off, unless it was a small commercial deal I don't know of any lender who would charge an arrangement fee of this size. The subprime lenders charge a max of €1,800 except for GE. An arrangement fee would have been highlighted on the loan offer you signed and should have been noticed by your solicitor and also by yourself (simply not good enough to blame the broker while not mentioning the solicitor or your own negligence in not being aware of what you were signing!)

Was your's a sub prime mortgage?

 

[Rightly dun]

Clubsandwich sorry you are somewhat right it was in the loan offer and it was a commercial loan, but I trusted this Broker and if you have seen my thread you will already know that this guy fxxxed off with 442,000 euro of that loan and I’ve been paying over 2,000 euro a month ever since (July 2004). So I still owe the 490,000 that I first got and I have already paid over 100,000 in interest. Again sorry I don’t want to paint every Broker with the same brush, but I do use Brokers to save time but they don’t really save me money. I don’t know how times I’ve got that standard letter, you know the one that says We have looked around for you and this is the best quote we can find, only to make one phone call and get it 15-20% cheaper somewhere else.

 

[irishpancake]

Despite the question marks, I can't see a question to be answered in irishlinks post. It appears rhetorical to me.

I fully agree that National Irish Bank's LTV tracker variable mortgages are cheaper than any other trackers on the market at present, for those who qualify for them. I don't know if this is solely because they don't pay commission to brokers. I'd imagine it also has something to do with their source of funding - presumably via Danske Bank. It probably also has something to do with their very selective lending policy - these rates are only available to those seeking <80%, no re-financing of other loans, no self-builds, no investment property etc.



One broker was wrong and you corrected him. What's your point here?

My point is that this broker, who provides a good web-site, and blog, was prepared to admit he was wrong only when challenged by someone who had the figures and facts to prove hom wrong.

The point I was making was that you were comparing one bank’s(NIB) APR rates with the nominal rates quoted by another Bank (Halifax).

This will obviously have the effect of making the NIB rates look higher than those for Halifax. This I still believe is misleading to make an unfair point, i.e. “there are rates out there which are cheaper than NIB’s LTV rates”

How many qualifying customers going to a broker would just accept the brokers word and go with his recommendation, even though there is now and has been for some time a better alternative for qualifying customers, i.e. NIB's LTV Tracker Mortgage?

I think the source of NIB's funds is irrelevent to the qualifying customer.

 

[irishlinks]

If you want to, you can also save money by avoiding trips to the G.P., by sourcing all the medical information that's out there on the internet and diagnosing yourself. Some people would prefer to have an experienced professional explain the finer points to them that an amateur wouldn't be aware of.

I think comparing mortgage brokers with GP's is going a bit far.
Comparing mortgage rates from about 15 sources to find the best for a borrower is a good bit different to the skills and knowledge required by a doctor - skills that will have taken at least 6 years of training.

 

[LDFerguson]

My point is that this broker, who provides a good web-site, and blog, was prepared to admit he was wrong only when challenged by someone who had the figures and facts to prove hom wrong.

Not disputing this. You corrected one broker. That's between you and him as far as I'm concerned. I don't even know him.

How many qualifying customers going to a broker would just accept the brokers word and go with his recommendation, even though there is now and has been for some time a better alternative for qualifying customers, i.e. NIB's LTV Tracker Mortgage?

If a customer goes to a broker they must be advised pre-sale which lenders the broker deals with.

I think the source of NIB's funds is irrelevent to the qualifying customer.

Not disputing this either. The post by irishlinks asked a rhetorical question about whether or not NIB's LTV mortgage rates were a result of their decision to pay no commission to brokers. When you were looking for a response, I noted that it might be this, or several other factors.

 

[LDFerguson]

I think comparing mortgage brokers with GP's is going a bit far.
Comparing mortgage rates from about 15 sources to find the best for a borrower is a good bit different to the skills and knowledge required by a doctor - skills that will have taken at least 6 years of training.

The skills and knowledge may be different but my point is that a good broker will do an awful lot more than simply compare rates for a customer. If a customer wants a tracker variable rate and has an LTV of less than 80% and qualifies under NIB's criteria, the choice is simple. NIB.

But if not, how does a "non-financial" person evaluate the long-term differences between, say two 2-year fixed rates where the rate for two years is the same?

Or how does a "marginal" client who doesn't qualify for the requested amount with all lenders know which lenders to approach and how to present their information?

 

[irishlinks]

Or how does a "marginal" client who doesn't qualify for the requested amount with all lenders know which lenders to approach and how to present their information?

How can someone "present" their information" differently? Are you saying that maybe brokers get clients to provide false information?

We could spend ages discussing the pros and cons of brokers. The original question was would we be willing to pay a fee. Personally no - but my view is that they are needed by some people and in the ideal world - lenders would give no commission and brokers would charge a flat fee for finding the best mortgage for a client.

 

[John Rambo]

Liam, nobody is questioning your integrity...you are a valuable contributor to AAM. However, there is no doubt whatsoever in my mind that there are brokers selecting the mortgage which will yield the most commission for clients. Equally, there are brokers organising fake P60's and the like to help clients get bigger mortgages (and I'm not necessarily saying this is a bad thing) I think mortgage brokers are similar to travel agents in that they are becoming obsolete. Yes, there is still a niche for very specific business where advice is required but in any market the middle man's position is always pretty tenuous.

 

[LDFerguson]

How can someone "present" their information" differently? Are you saying that maybe brokers get clients to provide false information?

No, but a broker may have the experience to know what additional information to provide to the lender in order to help the application.

Example - currently dealing with a mortgage application for a self-employed professional. Standard documentary requirement is two years audited accounts. One of the most recent years had a major dip in net profit due to extraordinary circumstances. If she simply sent in the bog-standard two years, the lender would in all likelihood take an average of the two years and conclude that she couldn't afford the requested mortgage. We sent in four years audited accounts and an explanation of the extraordinary once-off charges in her accounts with evidence that they were once-off in nature. Mortgage approved.

We could spend ages discussing the pros and cons of brokers. The original question was would we be willing to pay a fee. Personally no - but my view is that they are needed by some people and in the ideal world - lenders would give no commission and brokers would charge a flat fee for finding the best mortgage for a client.

I'd agree that if you're happy with your own abilities to choose and arrange your own mortgage, there's certainly little or no incentive for you to pay a fee to a broker to do it.

I've already made up my own mind as to whether or not we'll be charging a fee going forward, but I'm not posting my decision here or on my own website until after a couple of meetings with representative bodies etc.

 

[LDFerguson]

Liam, nobody is questioning your integrity...you are a valuable contributor to AAM. However, there is no doubt whatsoever in my mind that there are brokers selecting the mortgage which will yield the most commission for clients. Equally, there are brokers organising fake P60's and the like to help clients get bigger mortgages (and I'm not necessarily saying this is a bad thing) I think mortgage brokers are similar to travel agents in that they are becoming obsolete. Yes, there is still a niche for very specific business where advice is required but in any market the middle man's position is always pretty tenuous.

Thanks John,

I genuinely wasn't fishing for compliments. While I agree that, like in any industry, there are undoubtedly rogue brokers out there who will falsify documentation, place business with lenders offering maximum commission etc., I believe that they are in the minority. I hope I'm not being naive.

I suppose in any thread like this, there will always be posts along the lines of "I had a bad experience with a broker therefore all brokers are dodgy charlatans or worse and best avoided." I'll generally wade in to defend my own industry against such generalisations as I know that there are plenty of honest professionals out there, who add value.