Applying for a mortgage is not the most straightforward of tasks, which is perhaps partly why a whopping 97 per cent of us used the services of a mortgage broker last year.
There are countless ways of finding one – estate agents will usually fall over themselves to get you in front of their in-house broker, friends and family are nearly always able to offer a recommendation and failing that, Google is your friend.
As with all professions though, there are good brokers who will bend over backwards to provide you with outstanding service.
A screen grab of the page on Which?’s website linked to by the Government
And there are jobsworths who will do little more than search for the cheapest two-year fixed rate and tell you that it offers the most flexibility so go for it.
But choosing the right mortgage can make a massive difference to your day-to-day finances – and can save or cost you thousands of pounds in the longer term.
Finding a broker you can trust is therefore important. But understanding whether the broker you have chosen is any good can be a big ask – particularly because buying a house isn’t something most of us do more than two or three times in our lives.
Some of these issues have come to the fore recently, as the Government was accused of ‘implicitly endorsing’ Which?’s mortgage advice business after directing the public to web pages offering access to the service.
Earlier this week the Ministry of Housing, Communities and Local Government published two seemingly innocuous guides on buying and selling a property that included further information links to consumer body Which?’s website.
But rather than providing only independent guidance for homeowners, the Which? information pages also contain links directing readers to Which? mortgage advisers.
Which? is a charity but also a financial services business and its mortgage-broking service is a money-making endeavour, with a charge of £499 for customers on top of commission earned, and the Gov.uk move has caused a storm of controversy among mortgage brokers.
The mortgage adviser trade body has accused the Government of effectively promoting one mortgage broker firm above all others, without telling consumers that they could end up paying higher fees than they need to.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries called the decision to retain the links to Which? ‘extremely disappointing’ and urged the Government department to ‘move to a more balanced position’.
While the Financial Conduct Authority declined to comment on the spat, it recently published a paper reviewing the mortgage market in which it stated: ‘A consumer’s choice of intermediary matters.
‘We found that for consumers in very similar circumstances the choice of intermediary can affect the cost of borrowing by up to £400 per year during the introductory period of a mortgage.’
Indeed, Which? Mortgage Advisers charges borrowers £499 to advise and arrange their mortgage for them.
Many other broker firms, such as This is Money’s mortgage partner London & Country, charge customers nothing upfront and are paid a commission fee by the lender – something that Which? Mortgage Advisers also receives.
Of course, other mortgage brokers are also more expensive – and price isn’t everything, service also counts.
However, with all these things to consider, it’s hardly surprising that a government guide linking direct to Which? has got rival players in a competitive market hot under the collar.
A spokesman from MHCLG denied that the inclusion of links to Which?’s website was an active endorsement of the consumer group’s mortgage advice business, which makes money and is separate from the charity.
He said: ‘Buying a home can be a difficult and complex process so these pages are currently the best source of consumer advice and guidance on choosing the right estate agent or buying a new-build home.
‘The Government does not endorse individual mortgage providers or advisers.’
A Which? spokesman said: ‘The independent and impartial advice from Which? that is included in these guides is available for anyone to use for free.’
Which? Mortgage Advisers charges borrowers £499 to advise and arrange their mortgage for them while some other mortgage brokers charge less or nothing
Why you should choose a broker carefully
The disagreement follows a number of warnings to customers to be careful about when and how they choose a mortgage broker.
Estate agents have been accused of bullying tactics for many years, with some wrongly telling homebuyers they will lose the property unless they use the in-house mortgage broker.
Indeed, last year an investigation by Which? itself uncovered evidence showing that three out of ten high street estate agents told undercover researchers posing as first-time buyers that using their in-house mortgage broker would make a difference to the property purchase.
One agent even told the undercover researchers that it could secure them a lower price for a property.
Estate agency firms will usually earn commission if they sell mortgages, and while they are allowed to recommend their brokers they must not penalise buyers for not doing so.
How to choose a mortgage broker?
It can feel as if there are as many mortgage brokers out there as there are mortgage deals, so it can be tricky to know how to pick a good one.
Research carried out by the financial watchdog found that choosing the right mortgage adviser can have a significant impact on the cost of a mortgage – around £400 in your first year in fact.
This is typically down to the number of lenders that brokers work with. According to the regulator’s investigations, some use few lenders, while others place their business with more than 60 lenders.
It found that broker firms that use a small number of lenders recommend more expensive products on average compared to intermediary firms who use a greater number.
All mortgage brokers earn commission paid by the lender when they arrange a mortgage, known as a procuration fee, which is typically a few hundred pounds per mortgage.
Some advisers also charge the customer a fee for their advice, often around £400.
Other advisers just take the procuration fee and give their advice to the customer for ‘free’.
The advice should be the same, regardless of whether or not you pay a fee, however, it isn’t always – as the research above shows.
How to find a mortgage broker
So how do you find a broker? Look out for recommendations from those you trust or brokers that have high satisfaction scores.
It is certainly the case that Which?’s service falls into this bracket, as does major rival John Charcol. Smaller players such as Coreco, Capital Fortune and Capricorn are also well-known for providing a good service.
Like most financial publications, This is Money also has a mortgage partner and we use London & Country.
At This is Money, we are transparent about the fact that we have a number of commercial relationships and if someone takes a mortgage out through London & Country we will earn a commission that helps to pay for the award-winning independent journalism This is Money is known for, which is free to read.
Before we choose the firms to partner with, we have to be confident that we think they offer a good service at a good price. So, why did we choose L&C? It is one of the country’s biggest mortgage broker firms and offers good quality advice at no upfront charge over the phone and we have worked with them for many years.
You can check out the mortgage finder service here and use the calculator to see what sorts of deals you could be offered.
The difficulty of choosing in such a crowded market has prompted the FCA to start work to develop a search tool that would let borrowers find an adviser that specialises in their needs and allow them to compare costs.
While this is incomplete, there are a number of adviser search tools available already including Vouched For and Unbiased although both of these cover financial advisers more generally.
The Chartered Institute for Securities and Investments also allows you to search for an adviser near you as does the Personal Finance Society.
The Government-backed Money Advice Service has a directory of retirement advice specialists here.