Do Mortgage Brokers Get Better Rates?

If you are looking for a mortgage, you might be wondering whether to approach your bank or building society, or to use a mortgage broker. There are many reasons to use a mortgage broker, one of which is that brokers may be able to access better mortgage rates.

However, this is not true for all lenders. For example, in recent years, mortgage brokers have been able to access lower interest rates with NatWest compared to borrowers going directly to NatWest. Conversely, Santander has never offered preferential rates to brokers.

Let’s explore the role of mortgage brokers in the market and how they can assist you.

What Does a Mortgage Broker Do?

A mortgage broker is a financially qualified professional (with a CeMAP qualification or equivalent) who has access to mortgage products. There are two types of mortgage brokers in the UK:

• Restricted Mortgage Brokers
• Whole of Market Mortgage Brokers

Restricted mortgage brokers have a limited selection of products and do not cover the entire mortgage market. Some are so restricted that they only offer products from one bank or building society.

Whole of Market mortgage brokers may also have a limited panel of lenders, but their products cover the full breadth of the mortgage market. For example, they can offer residential, buy-to-let, commercial, and specialist mortgage products. If you use a mortgage broker, always ask how many lenders they can access.

How Do I Know How Limited My Mortgage Broker Is?

Even whole-of-market brokers can have limited access to lenders. To be classified as whole-of-market, a broker may only need access to a handful of lenders, as long as they cover a broad enough range of mortgage products.

To discover a mortgage broker’s lender access, simply ask them. In order for them to be compliant with the FCA, their product access must also be stated in their Terms of Business Document, which they will give you at the beginning of your dealings with them. Typically, a broker’s market access is also stated on their website – often in the footer.

Why Use a Mortgage Broker Instead of a Bank?

Banks and building societies can only offer their own mortgage products. Walking into your bank may result in an uncompetitive rate, and visiting a different bank could provide a better mortgage product.

Meeting with every bank and building society in the U.K. would be very time-consuming. This can be avoided by having a single conversation with a reputable whole-of-market mortgage broker, such as Boon Brokers.

Truly whole-of-market brokers, with access to over 90 regulated lenders, can input your exact circumstances into sophisticated sourcing software and review hundreds of mortgage products to find the most suitable option for you.

A mortgage broker can assist not only with your initial mortgage application but also with future applications. Brokers that invest in remortgage technology, like Boon Brokers, can determine the best time to contact you to secure the most suitable deal once your current mortgage product expires. For example, Boon Brokers will send automated reminders via text, email, and post, ensuring your broker follows up for your remortgage.

Are You More Likely to Get a Mortgage with a Broker?

It depends. If you have good financial standing and straightforward employment, you can often source a mortgage directly with your bank as easily as using a mortgage broker. However, going to a bank directly usually requires more effort, as you will need to research which lender is most suitable for you.

If you have any of the following, your chances of obtaining a mortgage increase significantly by using a mortgage broker:

• Self-Employment
• Director of a Company
• Bad Credit
• Additional Sources of Income
• Unusual Property Types such as Listed Buildings

A mortgage broker’s value is most noticeable in complex cases. If your application is rejected by a mainstream lender, there may still be many other lenders, especially smaller building societies, that you had not considered. A broker can identify those options and find the best deal for you, regardless of the lender’s prestige.

Overall, regardless of your financial situation, using a mortgage broker is a good idea. They can source the best mortgage, whereas approaching your bank directly may result in being placed on an uncompetitive product.

Cost of Using a Mortgage Broker

Mortgage brokers have two potential sources of income:

• Commissions from lenders for arranging products
• Mortgage broker fees

The commissions paid by lenders for mortgages can be small, especially considering the value of the product you are taking out. For example, an estate agent typically charges a 1% fee, whereas a mortgage broker’s commission is often 0.35% to 0.4% of the loan sum.

This means most mortgage brokers charge fees to ensure their business remains profitable. Unfortunately, many fee-charging brokers can be expensive, with fees exceeding £2,000 in some cases. In London, it is common to see mortgage broker fees of 1% of the loan sum or more.

There are fee-free mortgage brokers like Boon Brokers. A fee-free broker usually has an established business with a high volume of clients, meaning commissions are sufficient to sustain the business. There is a misconception that brokers who charge higher fees provide better service; this is incorrect. To assess a broker’s quality, review their client feedback. If a broker has whole of market access, excellent reviews, and is fee-free, you are likely to be highly satisfied with their service.

High-volume mortgage brokers also tend to have more experience, including handling complex cases. Using Boon Brokers provides both a free service and extensive experience in dealing with challenging situations.

Where Mortgage Brokers Get Better Rates

Mortgage brokers may be able to access ‘exclusive products’ through their mortgage club or network. However, in today’s market, those products are few and far between due to the volatility of rate changes.

If mortgage brokers access better interest rates, it is often through mainstream mortgage lenders. For example, over recent years, NatWest has been known to offer mortgage brokers lower interest rates than consumers who approach them directly.

Even if a mortgage broker cannot access a better interest rate than is available to you directly, they may be able to highlight an exclusive rate available to you due to your circumstances. For example, Barclays offers exclusive mortgage products to clients who have a Premier Account with them.

Speak to a Specialist Today

Using a Whole of Market mortgage broker with a large panel of lenders has several advantages:

• Tailored mortgage advice
• Perfect for bad credit borrowers
• Mortgages on unusual property types
• Ability to compare rates and mortgage products across the industry
• Ongoing assistance with future remortgage requirements

Boon Brokers is a whole of market mortgage, insurance and equity release brokerage. Boon Brokers provides fee-free mortgage advice.

Contact Boon Brokers to discuss your mortgage goals today.