When you’re looking to buy or remortgage a home and need to secure a mortgage, you have a few avenues to explore. You can compare options and apply directly to a specific lender, such as a bank or building society. Alternatively, you can engage a mortgage broker, who will work on your behalf to find a suitable lender and assist with the application process. You can search for mortgage brokers online or seek recommendations from your estate agent, family, or friends.
Key Takeaways
- Mortgage brokers are regulated professionals who collaborate with various lenders to find a mortgage product for their clients.
- Mortgage brokers in the UK can be paid by either the lender (via a ‘procuration fee’) or the client, but not both for the same transaction. If paid by the client, fees commonly range from a flat fee (e.g., £300-£600) to a percentage (0.3% to 1%) of the mortgage amount.
- When seeking a mortgage broker, ask your estate agent or acquaintances for recommendations, or conduct an online search.
What Is a Mortgage Broker?
A mortgage broker (often called a mortgage adviser in the UK) is a regulated professional who can work with multiple lenders to identify, in theory, the most suitable mortgage for their client’s specific circumstances. In contrast, a mortgage loan officer (a term more common in the US) typically works directly for a particular lender, such as a bank, and can only recommend that lender’s specific mortgage products. A mortgage broker in the UK should not be confused with a “mortgage banker” (also a US term), who directly funds mortgages with their own capital.
Why Use a Mortgage Broker?
The principal advantage of using a mortgage broker is their access to and relationships with a wide array of lenders. They should be able to match you with the most appropriate and/or cost-effective lender for your needs. A broker can be particularly beneficial if, for example, you have a complex financial situation, such as a less-than-perfect credit history, self-employment, or unique property requirements, as they can identify lenders more amenable to such circumstances. Mortgage brokers also offer considerable assistance with collecting necessary documentation and completing the mortgage application, which can often be a daunting task, especially for first-time buyers.
How to Find a Good Mortgage Broker
You’ll likely have several mortgage brokers to choose from in your local area or online. Here’s how to narrow your search:
- Ask Locally: Your estate agent should be able to recommend one or more reputable mortgage brokers in your area. Friends and neighbours who have recently secured a mortgage can also be excellent sources of referrals.
- Search Online: If you’re new to an area or don’t have local contacts, you can search for a mortgage broker online. Many websites list local brokers, though their selection criteria may not always be transparent. Online review sites like Trustpilot or Google Reviews can also provide useful insights from past customers.
- Average Mortgage Size (UK Context): While the article mentions an average mortgage size for the US, in the UK, the average mortgage size can fluctuate significantly based on region and property type. It’s best to consult recent data from sources like UK Finance or the Office for National Statistics for the most current figures.
Checking Out a Mortgage Broker (UK Regulation)
In the UK, mortgage brokers (or mortgage advisers) are regulated by the Financial Conduct Authority (FCA). This provides consumers with significant protection. Among other requirements, mortgage advisers must hold relevant qualifications, such as the Certificate in Mortgage Advice and Practice (CeMAP), and adhere to strict conduct rules.
To verify if a mortgage broker is authorised to conduct business in the UK, you can use the FCA Register (register.fca.org.uk). This online tool allows you to check a firm or individual’s authorisation status and any disciplinary actions taken against them.
Shop Around
It’s wise to “shop around” for a mortgage broker, just as you would for a mortgage itself. If you’re not comfortable with the first one you interview, consider speaking to others.
Questions you might want to ask include:
- “How many lenders do you work with, and are you ‘whole of market’?” (This is crucial in the UK, as some brokers are ‘tied’ to specific lenders or only work with a limited panel).
- “Have you assisted clients with similar mortgage needs to mine?”
- “What do you charge, and how are you paid?” (Ensure clear understanding of any fees vs. lender commission).
- “What is your usual process, and what is the typical timeline?”
Even if you decide to proceed with a specific mortgage broker, it’s beneficial to visit a few mortgage comparison websites (like MoneySavingExpert, MoneySuperMarket, or ComparetheMarket) to ensure that the interest rates and deals your broker finds are competitive in the current market.
What Do Mortgage Brokers Charge? (UK Specifics)
In the UK, mortgage brokers can be paid in one of two ways, but not both for the same transaction:
- By the Lender (Procuration Fee): Most independent mortgage brokers receive a commission, known as a ‘procuration fee’, from the lender once the mortgage completes. This is typically a small percentage of the loan amount, often around 0.35% to 0.4% of the total mortgage. For example, on a £200,000 mortgage, the broker might receive £700-£800 from the lender. This payment does not directly affect your mortgage costs.
- By the Borrower (Client Fee): Some brokers also charge a direct fee to the client. This can be a flat fee, often in the region of £300 to £600, or a percentage of the mortgage value, typically 0.3% to 1%. For more complex cases, such as those involving adverse credit or specialist mortgages, the fee might be higher. They are legally required by the FCA to disclose all fees upfront. If a broker charges a fee, they might (but are not always obliged to) refund the procuration fee they receive from the lender.
The Dodd-Frank Act mentioned in the original text is a US federal law and does not apply in the UK. Mortgage broker compensation in the UK is governed by FCA regulations, which similarly aim to ensure fair treatment of customers and prevent brokers from steering clients towards unsuitable products based on commission.
Do I Need a Mortgage Broker?
Whether using a mortgage broker will be beneficial largely depends on your individual circumstances. If you are familiar with different mortgage types, comfortable comparing lenders, and have the time to dedicate to the process yourself, then a mortgage broker may offer less value.
Are Mortgage Brokers Worth It?
Mortgage brokers in the UK may charge a fee or receive commission from the lender. If they perform their role effectively, they can often save you enough money (through better rates or avoiding unsuitable deals) and time to more than justify their service. They can be particularly valuable for complex situations or for those who appreciate expert guidance and a streamlined process.
Where to File a Complaint About a Mortgage Broker (UK Specifics)
In the UK, if you have a problem with a mortgage broker and wish to make a complaint, the first step is to complain directly to the firm itself. They have a complaints procedure they must follow.
If you are not satisfied with their response, or if they do not respond within eight weeks, you can escalate your complaint to the Financial Ombudsman Service (FOS). The FOS is an independent body set up to resolve disputes between consumers and financial firms. Their service is free to consumers. You can find more information on their website: financial-ombudsman.org.uk.
The Bottom Line
If you’re seeking a new mortgage, a mortgage broker can potentially save you time and money by navigating the complex market on your behalf. The most effective way to find a suitable broker is to ask for local recommendations. You can also search online and, crucially, verify their regulatory status and check for any disciplinary actions via the FCA Register before engaging their services.