Reply to: Mortgage brokers & is now a good time?

[TheMortgageSquad]

The broker is telling you to wait because their fees make already bad deals (market) look terrible.

You really have it in for us brokers don't you? We're not all bad!

I cannot agree with your statement there though. There is a multiple of reasons why using a broker would be beneficial and just because you may think it would not benefit you, it does not mean it may not benefit others.

I like to think that the advice I provide is honest, open advice. If a client has found a better rate (taking into consideration the fees involved) than anything I am able to get for them then I will tell them and if they wish to handle the process themselves then that's fine with me. I believe that honesty is appreciated by clients. I don't mind spending time chatting through options with clients even if it means come the end of the conversation, I gain no business from it. I am all about providing the client with the best advice, regardless of whether my company benefits or not. Clients are a lot more likely to recommend your services if they feel you were still helpful, even if you didn't end up transacting the business for them.

Some people just don't have the confidence or time to sort this themselves and would rather pay someone to handle it. It's not a quick process sorting a mortgage, especially if you go direct. I know this from personal experience of having to deal with my own mortgage direct with lenders, you normally have to go through two or three lengthy telephone or face to face appointments with an advisor, sometimes having to wait days or weeks just to get the first appointment (I appreciate it is a little different if you are just renewing a rate with your current lender directly but I have explained the trade off with this approach in the fact that you are doing so on a non-advised basis and effectively taking the risk yourself rather than having FCA protection under an advised level of service). Time being money, some people would rather have a more convenient streamlined process and invest the time they have saved into working and therefore earning for themselves.

You also have people who have complex situations and they do not wish to approach multiple lenders whom may carry out credit checks each time if they do not know if they can get a mortgage as this could end up damaging their credit files. This is again where brokers can be of benefit. Also contrary to what you may feel, brokers do have access to exclusive deals which are better than those a client may be able to obtain directly. Not in every instance but in a number of instances and depending upon the size mortgage, term, rates and requirements, this can save the client money (as well as time) even factoring in the fees.

People's circumstances when it comes to a mortgage are like fingerprints, no two are ever identically the same so what may be good for the Goose, may not be good for the Gander so to speak.

There is also the fact that a lot of people do not understand mortgages in depth. It is a means to an end. They know they need one if they are buying and know that typically keeping the rate as low as possible is the best course of action but given it is something that most people would only look into at maximum, once every couple of years, it is not something that a lot of people are well versed in. I always pride myself on trying to help people understand their mortgage and the options available to them. It sounds a little corny but I take pride in educating those who may not be so aware of all things mortgages when I assist them so they aren't so scared or confused about them. I appreciate there are people out there who are confident in their understanding of mortgages which is great but from my nigh on 20 years experience in the industry, it has shown me that a lot of people do not, and the support of a broker to traverse through the whole process a little more easily is something they find helpful.

[PerfectStorm]

You know it's bad out there if a broker is telling you to wait.

The broker is telling you to wait because their fees make already bad deals (market) look terrible.

[TheMortgageSquad]

You know it's bad out there if a broker is telling you to wait.

haha, don't get me wrong, there will always be people who want and/or need to buy but my view at the moment is that we could bein for a period of time where property prices don't continue to increase as much as they have done these past years and potentially even come down. Rates won't continue to go up forever and in fact have been on the decrease (in terms of the rates lenders offer rather than Base Rate) since around November time. Therefore for those in a position to hold off from buying then I feel they could potentially benefit by doing so and perhaps monitoring the market in closely for the time being.

I don't have a crystal ball and could be entirely wrong of course, but from what I can see with what is happening with the economy couple with what economists are forecasting with rates currently and what's happening with the buy to let mortgage market (higher stress test rates making it even harder to pass affordability for buy to lets) my personal view is as above. I'd rather share that view with clients for them to make their own informed decision than have a client purchase a property and 6 months or a year down the line wonder why they didn't consider what potentially could happen to the market and value of the property they purchased.

I'm not here to dissuade people from buying but would like to think having these conversations as part of my service will garner trust with clients for later on down the line.

[jamesbrown]

You know it's bad out there if a broker is telling you to wait.

[TheMortgageSquad]

Ignore anyone who says they get 'exclusive rates' from the lenders.

They do - they're exclusively crap or offset by their other fees.

E.g. you'll see 5.99% online then broker will offer you 5.97% and a £1000 fee...

There are no real bargains to be had, just make sure you switch out before your terms over, and go direct to Halifax, Nationwide or Yorkshire/Clydesdale (same company). They all get contractors and can work with day rate contracts as income.

Oh, and "time in the market" is always better than "timing the market" - don't burn rent waiting for house prices and mortgages to become somehow more reasonable.

Brokers do have access to exclusive options which in a lot of instances, are actually beneficial.

Take Clydesdale Bank for example. If you are an existing borrower with Clydesdale they will offer you one set of rates directly. As brokers, we have access to an entirely different range at lower rates and comparable (often the same, if not lower) fees for existing clients mortgaged to Clydesdale.

Halifax also offer additional 'broker only' products which are at a lower rate than the rates you would see if you are a Halifax client and log on directly to see what options are available to you. However with Halifax (which may be the point you are alluding to), the broker only rates do have a £999 fee whereas the options offered direct, at a higher rate have no product fee. It is completely based upon individual circumstances as to whether it works out better to go direct or go through a broker. If you have a relatively small mortgage balance then a slightly higher rate with no fee would normally be more beneficial compared to a lower rate with a £999 fee, but if you have a larger mortgage then in a number of cases, it does actually work out more cost effective over the product duration (e.g. a 5 year fixed rate) to pay a £999 fee as you would save more than that over the course of the 5 year fixed rate with the lower monthly payments the lower rates provide.

There is also the fact that by sorting the mortgage out directly yourself online is doing so on a non advised basis which does not afford you as much protection under the Financial Conduct Authority's regulation when compared with going through a mortgage broker who recommends that mortgage on an advised level of service basis.

The difference is quite often more than the 0.02% you mention above too, significantly more in the case of Clydesdale bank in some instances.

I get your point about there being no bargains available at the moment. Over the last decade or so we have all been spoilt with incredibly low rates but there certainly is a benefit having a broker with whole of market access to look at all the options, even if that is to just validate whether any options you may have been offered yourself can be beat or if you have indeed got the best option. It is not just Halifax, Nationwide, Accord (Yorkshire) or Clydesdale Bank who have contractor mortgage options, there are plenty more out there and also possibly ways you can evidence your income in the conventional way which could enable you to borrow what you need and give you access to even more options.

On the point of "time in the market" versus "timing the market", I'd agree with that statement at pretty much any point over the last decade (save but the last 6 months or so) but I am not so sure if it would apply right now. I appreciate that may seem strange coming from someone who derives a living working in the industry but given the news about the UK being the only economy in Europe which is forecasted to shrink in 2023 with an increase in job losses, increase in repossessions and the general condition of the buy to let mortgage market at the moment which unless something changes, I can only see it lending itself to more landlords deciding to sell up increasing the supply of property to the market, I cannot help but think that we may actually see house prices stagnate or dare I say, possibly come down over the next 12 months. Couple that with rate increases (hopefully) tailing off, waiting right now could actually be not a bad play. Time will only tell and the whole economy is in a bit of a delicate state at the moment that any changes (Russia/Ukraine situation, Government intervention etc) could dramatically change the outlook.

[Guy Incognito]

My experience with Halifax has been exceptional. Only ever showed them one contract which (at least at that time) just had to be 6 months or longer and not have ended (even it only had one day to run). Since then I have just changed deals three or four times and they have never asked for another contract.

[PerfectStorm]

Ignore anyone who says they get 'exclusive rates' from the lenders.

They do - they're exclusively crap or offset by their other fees.

E.g. you'll see 5.99% online then broker will offer you 5.97% and a £1000 fee...

There are no real bargains to be had, just make sure you switch out before your terms over, and go direct to Halifax, Nationwide or Yorkshire/Clydesdale (same company). They all get contractors and can work with day rate contracts as income.

Oh, and "time in the market" is always better than "timing the market" - don't burn rent waiting for house prices and mortgages to become somehow more reasonable.

[ladymuck]

That's likely to be because they aren't around or worth it anymore... Need to do some digging

I haven't looked but I'm sure I saw them still about a few months ago. The landscape seems to be changing again so they're quite possibly no longer widely available.



This may be useful to get an idea of the benefit of an offset:

Offset: mortgage calculator - MoneySavingExpert

[northernladuk]

OK offset sounds an option, I knew nothing about it
What other things are you referring to? Doing my best to make full use of your feedback, thanks!

That's likely to be because they aren't around or worth it anymore... Need to do some digging

[Ariosa]

Our mortgage was with Santander. Put every spare penny into the offset, and when needed took the money out of there.
20 year mortgage paid off in 10.

wow

[Ariosa]

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

OK offset sounds an option, I knew nothing about it
What other things are you referring to? Doing my best to make full use of your feedback, thanks!

[Ariosa]

It's not what you think - it's what your accountant thinks.
Have you spoken to them?

Yes that'll happen soon. Corona has made that difficult lately.

If you increased your deposit from £40k to £80k, how many mortgage offers would you get?
What reduction in interest rate would you get on the mortgage?
What reduction in monthly repayments would it be?

Factor that in compared with leaving the money in your business, not getting a mortgage and not getting a house - or having to borrow money and stretch yourself riskily just to save a few pounds in tax.

Since you won't get a 90% mortgage, I've just run a few best buy examples based on a £400k property repayment mortgage:
85% LTV will be £1350 a month
80% works out at £1263
75% is £1154

So, by putting in an extra £40k up front, you reduce your monthly outgoings by almost £200. Over 25 years that's £60k.
Play it smart and get an offset mortgage and you put that £200 into the offset account. That reduces your mortgage repayment time down by about 5 years.

Agreed, this all makes sense. Better spend 10K more now than 60K in the long run.

...but no, to save yourself paying tax on money that is sitting in your company earning you nothing, you're happy to pay a mortgage for an extra 5 years.

Don't be so harsh
I'm not used to the idea of giving 1/3 of what I draw from my business money to the taxman but I totally appreciate your feedback and it does make sense

[Maslins]

I got mine in 2008, just before you know-what-happened, and the timing was bloomin' perfect. Mainly because of the base-rate tracking element.

Ditto for me as FTB. Base rate was something like 5.5%. Just pre credit crunch when lenders were handing out mortgages like sweeties.

We had cash for just a 5% deposit. Opted for a lifetime tracker, and did a credit card balance transfer to get up to 10% deposit. Worked out well, as base rate plummeted, so did our mortgage interest, making it easier to clear off c/c debt quickly. Was slightly annoying that there was a "collar" on the tracker, so it didn't follow base rate right down to 0.5%+, only to 2%+...but still, was great. The flipside was of course property prices stagnated, we were too late to get the chunky annual capital increases of the years before.

Tracker unlikely to make sense now, as base rate can't realistically go down any further...can it?!

[ladymuck]

I used to swear by them. Got hooked back in the day when it IF came out from the Halifax (if that was the right name and bank) but recently I've fallen out of favour of offsets. The last one I had was with RBS at 4% which was quit a bit more than the standard rates. Rates kept dropping and they didn't budge. Figured with rates as they were then, and even more so now, id be better of investing it. Offsetting a 2% mortgage is borderline pointless at the moment.

Obviously I'd you don't want to invest it is still an option though...

I got mine in 2008, just before you know-what-happened, and the timing was bloomin' perfect. Mainly because of the base-rate tracking element.

[northernladuk]

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

I used to swear by them. Got hooked back in the day when it IF came out from the Halifax (if that was the right name and bank) but recently I've fallen out of favour of offsets. The last one I had was with RBS at 4% which was quit a bit more than the standard rates. Rates kept dropping and they didn't budge. Figured with rates as they were then, and even more so now, id be better of investing it. Offsetting a 2% mortgage is borderline pointless at the moment.

Obviously I'd you don't want to invest it is still an option though...