When it comes to securing a mortgage, many people may wonder if it’s cheaper to go through a mortgage broker or to deal directly with a lender. The correct answer is – it depends on your individual circumstances. While both options have their pros and cons, it’s important to consider all the factors before making a decision.
One of the main advantages of working with a mortgage broker, is that they can shop around on your behalf to find the best rates and terms available. Brokers have access to a wide range of lenders and can help you compare offers from different sources. This can be particularly useful if you have less-than-perfect credit or are self-employed, as brokers will know which lenders are more likely to accept your application.
A mortgage broker also saves you a lot of time compared to contacting each lender individually to find out whether you fit their criteria, can borrow the loan amount you require and determine which rates are available to you. The systems mortgage brokers use allow them to quickly make these comparisons for you.
Another advantage of using a broker is that they can help you navigate the complex mortgage process. Applying for a mortgage can be overwhelming, especially for first-time buyers. Brokers can help you understand the different types of mortgages available and guide you through the application process. They can also help you understand the fees and costs associated with a mortgage.
One important point to note is that mortgage brokers in the UK are required to be authorised and regulated by the Financial Conduct Authority (FCA). This means that they must adhere to certain standards and practices and are required to provide you with a disclosure document outlining their fees and services. This can provide added peace of mind and protection for consumers.
On the other hand, going directly to a lender has some benefits as well. For one, you may be able to get a better rate if you have excellent credit and a solid financial history. Lenders may also be more willing to work with you if you have a long-standing relationship with them, and may offer better rates for existing customers. Obviously they’ll only be able to advise you on their own products though, meaning that another lender may have a more favourable deal that they won’t tell you about.
The term “dual-pricing” refers to lenders offering different rates to customers direct than they do through brokers. Not all lenders dual-price, but there are many that do. It’s important to point out that dual-pricing can work both ways though, depending on whether the lender is trying to increase applications through their direct channel or through their intermediary (broker) channel. Sometimes the rates can be better direct and other times they can be better through a broker.
It’s also worth noting that some lenders in the UK offer mortgage products that are only available through brokers. There will be times when these products are the best in the market, so it’s worth considering working with a broker even if you’re able to get a mortgage directly from a lender.
So, are mortgages cheaper through a broker in the UK?
The answer is not always clear-cut. While brokers can often help you find competitive, or even exclusive rates, some may also charge a fee for their services.
This fee can vary depending on the broker and the type of mortgage you’re seeking. For example, a broker could charge a flat fee of £399, or they may charge a fee of 1% of the loan amount. Your broker is required by the FCA to disclose this fee up-front, so it won’t come as a shock to you later. But it is important to consider this fee when determining if a mortgage is cheaper through a broker.
Of course, a broker can usually justify their fee, not only with the rate they’re able to find you, but also with the additional services they may complete to help your transaction go smoothly.
Ultimately, the decision of whether to use a broker or go directly to a lender will depend on your individual circumstances.