Am I likely to need/gain anything from using a mortgage broker?

[Mark McBurney@CMME]

I'd add to what Ben at Power Mortgages said really, that as companies like First Direct do not offer their business to the intermediary (broker) market, they do tend to be a little more choosy.

The plus side of that of course is that in a lot of instances they can take into account your previous banking history when assessing your credit worthiness, something that no other lender will see (beyond a look at your credit history of course).

You can often negotiate incentives with your own bank, such as a lower fee or a free valuation, but I'd also agree with Ben that these are not always the best deals available, particularly if basing the lending on your accounts rather than contract.

There is a contractor-friendly lender out there with a 5yr fixed rate of 3.19% though, so it's at least worth a conversation with a broker in my opinion, just to make sure that you're getting the best deal.

I see your point regarding a broker fee however, but one thing I would say is that most reputable/responsible brokers, when informed of the deal that you have 'on the table', would look at the cost of what they could potentially arrange, including any fee to them, over the fixed rate period, before recommending that you proceed with what they have put to you.

I have done this in the past myself - while it may raise an eyebrow or two at the time to be effectively turning away business, our role is always to look at your best options, and if that happens to be through a lender that we can't approach on your behalf, then that should be best advice.

Best wishes with your mortgage, I hope everything goes smoothly for you.

Regards,

Mark

[d000hg]

Personally, I wouldn't feel inclined gamble on rates not going up. There is only one way they can go atm.

Clearing out the other day, I found my first mortgage offer (from 1990). 14.5% interest - we were paying >£750 a month on a £63K mortgage interest only!

This is my worry, however the interest rate on mortgages has risen relative to the base rate. When rates were 4.5% we got a mortgage base rate + .5% or similar, these days you're more likely to get base rate + 3%. One would hope that when rates rise again, this gap will contract again since it's artificially low right now. If you're currently paying 4%, the bank could keep charging you 4% even if the base rate rose from 0.5% to 3%. I doubt they would but to some extent, lending rates should get closer to base rates shouldn't they?

[Mark McBurney@CMME]

This is my worry, however the interest rate on mortgages has risen relative to the base rate. When rates were 4.5% we got a mortgage base rate + .5% or similar, these days you're more likely to get base rate + 3%. One would hope that when rates rise again, this gap will contract again since it's artificially low right now. If you're currently paying 4%, the bank could keep charging you 4% even if the base rate rose from 0.5% to 3%. I doubt they would but to some extent, lending rates should get closer to base rates shouldn't they?

To a degree they should - even if you look back to 2006, prior to the 'big mess', the BofE base rate was 4.25% and tracker rates were usually somewhere between BBR - 1% to about BBR + 2%, depending on LTV and credit status.

You're definitely right to err on the side of caution though, as there is of course no guarantee that these margins will remain - although on the flip side there hasn't ever been a better time to look at fixing rates than now...

Best wishes,

Mark

[d000hg]

Indeed - we went fixed so that we could try to overpay a fair chunk in those two years, in case rates increase by then.

[Epiphone]

I'm sure one of the regular mortgage brokers who post on here will give their opinion shortly as to whether or not you could get a better deal than the above.

My personal experience of this is that First Direct are excellent to deal with directly (I use them for both personal banking and my current mortgage) and having gone through a couple of deal changes with them they have been excellent on all occasions. So much so that I stayed with them last change even though I could have got a slightly better rate elsewhere!

Martin
Contratax Ltd

Out of interest, what did FD do that was so good to make you turn away a better rate?

[TheCyclingProgrammer]

Personally, I wouldn't feel inclined gamble on rates not going up. There is only one way they can go atm.

I would more be gambling that they don't go up by more than about 1% over two years. Current predictions seem to indicate that's a reasonably safe bet.

Yes, I know anything could happen.

[TheCyclingProgrammer]

Indeed - we went fixed so that we could try to overpay a fair chunk in those two years, in case rates increase by then.

This is exactly my plan. Increasing our equity from 17 to 25% over 2 years through affordable overpayments puts us in a much better position when negotiating a new deal, even if there has been a small increase in the base rate.

[d000hg]

Yes that too. It also puts us in a position (we aim) that not only is our our mortgage LTV below 75%, but the total amount borrowed is within 5X the wife's permanent teacher salary, meaning we have the whole market open to us rather than needing to muck about with contractor mortgages.

[DirtyDog]

Personally, I wouldn't feel inclined gamble on rates not going up. There is only one way they can go atm.

That could be painful and leave you with a nasty taste in the mouth.

[Power Mortgages Ltd]

I would more be gambling that they don't go up by more than about 1% over two years. Current predictions seem to indicate that's a reasonably safe bet.

Yes, I know anything could happen.

Playing devils advocate a little here but you shouldn't just go on the Bank of England Base Rate predictions for what lenders will do with the rates (like fixed rates) that they offer.

Tracker rates that directly correspond to the Bank of England are the only rates guaranteed to change if base rate does. Nearly 100% of the time, lenders will shift their fixed rates up/down accordingly when this happens anyway but there are so many other considerations which can effect the rates lenders offer, especially fixed rates.

'Funding for mortgages' which is a scheme the government brought in a while ago to help boost the mortgage market and get lenders lending again finishes shortly. This scheme was basically the government giving banks and building societies large loans at a low interest rate with the provision of going forward and lending it on at cheap rates in the form of mortgages. This means banks and building societies didn't have to rely on the 'wholesale rates' which they had been using previously to borrow funds to then lend on. This is why rates have been driven down over the last couple of years but as mentioned, this is due to stop shortly.

Now whilst predicting when rates will rise and by how much is very crystal ball stuff, my personal opinion is that when funding for mortgages ceases, lenders (who have targets of how much they need/want to lend still) will have to go back to wholesale rates and this will cause interest rate increases - not in the Bank of England base rate but the rates which lenders offer. I have already seen an email recently from Natwest advising they are pulling their most competitive 5 year fixed rates due to a rise in the wholesale rates.

Interest rates have moved significantly over the last couple of years and it is possible to get rates at the same loan to value over 1% cheaper now than they were back then, meanwhile the BoE base rate hasn't changed.

So I would just be a little careful in basing your predictions of rate increases exclusively on the Bank of England Base rate predictions as the two are not linked as closely as most people are led to believe.

Hope that helps?