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First-time Buyer

How to find the right mortgage broker for your needs

Emma Lunn
Written By:
Emma Lunn

Using a mortgage broker can not only take the legwork out of the mortgage application process, but it can save you money too.

The past few months have been hectic in the mortgage market. Kwasi Kwarteng’s mini Budget in September prompted a raft of rates rises in the mortgage market after the then-chancellor announced unexpected tax cuts for the rich.

The Bank of England base rate now stands at 3% – this time last year it was 0.25%. The increase in the base rate means mortgage rates are higher than they have been for many years (despite falling somewhat in the last few weeks), increasing costs for both homeowners remortgaging or moving house and people buying their first home.

The fallout from the mini Budget, and general unsettled state of the UK, means mortgage lenders have become more cautious about who they lend to with many lenders tightening their criteria.

At any one time there are around 3,000 to 4,000 mortgage products available in the UK and these change daily. A broker can help you find the right one to meet your needs. Indeed, at the moment, given the uncertain state of the market, it’s imperative that borrowers seek the best advice they can to get the right deal for them.

Earlier today, our sister publication Mortgage Solutions that online estate agent was opening its own mortgage advisory services and its CEO Helena Marston was very clear on the importance of brokers.

She said: “Mortgages are the biggest financial decisions most people ever make and now more than ever, it is crucial that homebuyers or those looking to re-mortgage use the services of a broker, not just for advice, but also to ensure they can access the largest number of lenders, providing a wide range of choice for customers.”

Which kind of broker do you need?

If you walk into a high street bank most will have in-house mortgage advisors. However, these are likely to be “tied” advisors who can only advise on products sold by that particular bank.

With so many mortgages available, it’s unlikely their product range will include the very best product for you.

Other brokers may work from a ‘panel’, which might just be a handful of lenders. Most advisers based in estate agents’ firms work in this way. Some estate agents will try to insist you use their mortgage broker – but, legally, they can’t force you to use a particular adviser and you’ll usually be better off finding your own mortgage broker.

Your best bet is to go to an independent or “whole of market” broker who will look at all the available mortgage products on the market.

Comparing mortgage products

If you are not an expert, comparing mortgage products can be a minefield. You shouldn’t just look at interest rates; you also need to compare arrangement fees, valuation fees and early redemption penalties.

Some mortgages come with upfront fees while others are fee-free – but they might have higher rates. A good broker can help you find the best combination of interest rate and fees.

A mortgage broker will also be able to advise on whether a fixed or variable rate will be best for you, and the implications of each option. They’ll also be able to help if you are self-employed, are buying a property to let out, or if you have concerns about how your credit history will affect your mortgage application.

Mortgage lenders often offer ‘exclusive’ best buy mortgage deals through a select group of brokers rather than through branches or other sales channels.

If your broker recommends an exclusive deal from Barclays, for example, you won’t be able to get the same terms by going direct to the bank.

Most exclusives focus on low rates, but some offer low or no fees compared with similar deals available elsewhere.

Personal service

When you approach a mortgage broking firm, it will normally allocate a named broker to deal with your case.

The added advantage of the broker is that he or she will help you fill in your mortgage application and guide you through the lender’s affordability assessment. You’ll normally need to show three to six months of payslips and bank statements showing what you spend your money on.

A broker will also chase the application to ensure the lender, solicitor and estate agent are all keeping things moving.

How to choose a mortgage broker

Before you sign up with a mortgage broker, find out how they get paid.

Some brokers charge the client (you) a fee while others earn money instead solely from commission (or a ‘procuration fee’), from the mortgage lender they hook you up with.

Any mortgage broker you use should be properly qualified and the firm they work for regulated by the Financial Conduct Authority (FCA). Since October 2004, all mortgage advisers are required to be regulated and must give customers certain documentation about their business and the products they recommend.

These include the Key Facts Illustration (KFI) which will include the monthly cost, interest rate, annual percentage rate (APR), booking or set-up fees, survey costs, commission paid to the broker, maximum redemption penalties and any additional features of the product.