WEBVTT - Why Hiring a UK Mortgage Broker Is Probably a Good Idea 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News. John.

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<v Speaker 2>As you know, we are doing more and more on housing.

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<v Speaker 2>We've got a full series underway, and we've got another

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<v Speaker 2>very special guest today. Today we are speaking again, by

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<v Speaker 2>the way, with Ray Bulgium. Ray is the senior mortgage

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<v Speaker 2>technical manager at independent mortgage broker John Charcoal and is

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<v Speaker 2>something of an authority within the mortgage industry. Ray, welcome,

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<v Speaker 2>Thank you for joining us.

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<v Speaker 3>Pleasure now.

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<v Speaker 2>Ray, when you've been on podcasts with us before, we've

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<v Speaker 2>talked about conflict of interest, and people may say there's

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<v Speaker 2>a conflict here because the question that I'm going to

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<v Speaker 2>ask you is why do we need an independent mortgage broker?

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<v Speaker 2>And you are, of course an independent mortgage broker, or

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<v Speaker 2>listeners may say while he would say that, wouldn't he?

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<v Speaker 1>So let's just put that to one side.

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<v Speaker 2>I know that you're going to tell us the things

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<v Speaker 2>that you would tell us if you didn't have a

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<v Speaker 2>conflict of interest.

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<v Speaker 1>Am I right?

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<v Speaker 3>Well, where there can be a conflict of interest is

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<v Speaker 3>if you use a broker that is employed by the

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<v Speaker 3>estate agent you're buying from. Now, what people, particularly first

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<v Speaker 3>time biased by definition and novices of the game don't

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<v Speaker 3>always think about is the fact that this staye agent

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<v Speaker 3>is acting for the vendor. Therefore they don't have the

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<v Speaker 3>same responsibility to the purchaser. They're not regulated or whether

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<v Speaker 3>the mortgage broken himself would be or their self would be. So,

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<v Speaker 3>if you're negotiishing the estate agent, what you don't necessarily

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<v Speaker 3>want to do is disclosed all your cards, and you

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<v Speaker 3>will be doing that if you actually are dealing with

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<v Speaker 3>the mortgage broken employed by the state agent, you may

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<v Speaker 3>stay well, my maps, one price is X, and the

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<v Speaker 3>broken may know. Actually, it's why always find a professional advisor,

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<v Speaker 3>and by that I mean sisters as well as brokers

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<v Speaker 3>who are not employed by this staiztagent that you are

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<v Speaker 3>buying a property from.

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<v Speaker 2>But why would you not use For example, I mean,

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<v Speaker 2>let's say you bank with a perfectly respectable high struit bank,

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<v Speaker 2>perhaps you're a first direct or whatever, and they offer

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<v Speaker 2>a nice range of mortgages.

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<v Speaker 1>They already know you have some overside of your finances.

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<v Speaker 1>Why would you not just go to your bank and

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<v Speaker 1>get an offer from them on the basis that, yeah,

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<v Speaker 1>mortgages are much for muchness.

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<v Speaker 3>Well, finding a mortgage is not just about getting the

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<v Speaker 3>best rate. The starting point, frankly, is to understand which

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<v Speaker 3>lenders have criteria that you can meet. No point in

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<v Speaker 3>going for a lender that's gotten cheapest, right if you're

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<v Speaker 3>going to get rejected. A broken like John Charcot will

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<v Speaker 3>deal with a vast number of lenders. I mean, anyone

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<v Speaker 3>year will deal with about one hundred lenders, whist some

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<v Speaker 3>of those lenders may only get one or two connections

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<v Speaker 3>a year. The few points a broker will have access

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<v Speaker 3>to all the different schemes available, and so for some

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<v Speaker 3>clients the question will primarily be what's the best rate,

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<v Speaker 3>because that criteria means that they can satisfy most lenders,

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<v Speaker 3>But for lots of particularly for first style buyers and

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<v Speaker 3>self employed people, there will be various nuances and it

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<v Speaker 3>can make all the difference as to whether you get

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<v Speaker 3>accepted by how your broker presents the case to the lender.

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<v Speaker 3>So clearly you've got to be upfront, but there are

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<v Speaker 3>different ways of presenting your case. If you actually don't

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<v Speaker 3>present all the positives, the lender may simply look at

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<v Speaker 3>your situation and think, oh, I'll lend to that person.

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<v Speaker 3>So what a broke will do is go through all

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<v Speaker 3>your details, do a fact find to get all the

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<v Speaker 3>other information about your personal status, understand what your priorities are,

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<v Speaker 3>be able to advise you on the clothes and columns

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<v Speaker 3>of taking a voting rate such as a tracker rate

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<v Speaker 3>or a fixed rate, whether it's for two years longer.

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<v Speaker 3>Then having identified what your requirements are, and understanding what

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<v Speaker 3>the property is because again sometimes there'll be the aspect

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<v Speaker 3>about a property which may not be acceptable to some lenders.

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<v Speaker 3>Now a good example is if you're buying that above

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<v Speaker 3>commercial practices, for example, some lens will have restrictions on

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<v Speaker 3>what we'll do with that sort of property. So what

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<v Speaker 3>you don't want to do is waste time applying to

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<v Speaker 3>a lender that is never going to lend to you.

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<v Speaker 3>By that stage, particularly if there's competitions to property, you

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<v Speaker 3>may actually have lost the property. So a good independent

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<v Speaker 3>mortgage broker can provide a real benefit to you, not

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<v Speaker 3>just in terms of getting the best deal, the best rate,

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<v Speaker 3>but actually in knowing which lenders talked to, and also

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<v Speaker 3>when there is an issue with the application, discussing it

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<v Speaker 3>with the lender to try and resolve that. Once you've

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<v Speaker 3>got your mortgage offer, a good broker will keeck on

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<v Speaker 3>top of the situation in a market where interest rates

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<v Speaker 3>are falling and where it may well be a few

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<v Speaker 3>months from the time you get your offer to when

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<v Speaker 3>you complete, if the infrast rate drops, the broker can

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<v Speaker 3>actually rearrange the mortgage and get you a cheaper rate,

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<v Speaker 3>usually the same lender. That's all part of the service

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<v Speaker 3>that most broken offer. And then the broker should be

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<v Speaker 3>the aging with your stage gen the state den and

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<v Speaker 3>are the easy with this list just to make sure

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<v Speaker 3>things goes things one's actually very smoothly. So what I

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<v Speaker 3>would recommend you we do is first of all, talk

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<v Speaker 3>to their friends, business, colleaged relatives, see if they can

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<v Speaker 3>recommend a good broker. And equally, if there's a broken

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<v Speaker 3>they recommend you you don't touch with the barge pot.

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<v Speaker 3>If you got a recommendation that way, then you talk

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<v Speaker 3>to a few brokers, talk to two or three seeng

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<v Speaker 3>which because it's very very important in both the personal

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<v Speaker 3>relationship with that broker. So you know, first impression, dur important.

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<v Speaker 1>Ray, how did your mortgage broker get paid?

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<v Speaker 3>The vast majority of lenders, certainly your mainstream lenders will

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<v Speaker 3>pay the broker a commission. Knowing the trade of the

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<v Speaker 3>properation fee, and that varies a bit, but typically on

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<v Speaker 3>a mainstream mortgage in the region of zero point four

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<v Speaker 3>point four to five percent, slightly more on by tonet mortgages,

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<v Speaker 3>many brokers will charge you three. There are some brokerage

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<v Speaker 3>who don't charge with three. Typically they want to be

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<v Speaker 3>broken to only deal over the tudle phone. If you

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<v Speaker 3>want a more personal service, particularly if you want face

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<v Speaker 3>to face advice, then you will probably have to pay

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<v Speaker 3>a fee, and nobody might pay out more money than necessary.

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<v Speaker 3>But equally, if you compromise too much, you sometimes find

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<v Speaker 3>you actually don't get the service.

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<v Speaker 1>Hang on. So the pasent digging out the mortgage will

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<v Speaker 1>pay the broker a fee, but the lender will also

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<v Speaker 1>pay the broker a commission, so they get a broker

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<v Speaker 1>gets paid from both sides.

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<v Speaker 3>Yes, that's right. Basically, the commission paid by the lender

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<v Speaker 3>will not be enough to cover all the broker's costs.

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<v Speaker 3>So if the lender didn't pay the broker and the commission,

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<v Speaker 3>then broke it after charge.

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<v Speaker 2>A higher fee, and so would you expect see the

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<v Speaker 2>commission on your mortgage rate.

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<v Speaker 3>It makes actually no difference because if the lender was

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<v Speaker 3>processing the application themselves they would incur the sort of

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<v Speaker 3>cost that the broker they have to do all the tips,

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<v Speaker 3>et ceterapt. So effectually the broker is saving the lender

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<v Speaker 3>time by providing the information that lender needs and also

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<v Speaker 3>of course importantly not submitting cases to for lento, which

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<v Speaker 3>they're never going to be able to do and therefore

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<v Speaker 3>and then does not waste time assessing cases. So lend

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<v Speaker 3>us say a good value paying brokes to fe because

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<v Speaker 3>actually it generates business for them, saves the money, and

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<v Speaker 3>the mere fact that nearly nice percent of mortgages go

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<v Speaker 3>through broken is well it demonstrates such the system works. Well.

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<v Speaker 2>Interesting, thank you done so.

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<v Speaker 4>Obviously, rate know there a lot of people who are

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<v Speaker 4>coming off to our favior effectses, particularly the faviors and

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<v Speaker 4>that's the east with quite a big jump, and want

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<v Speaker 4>to presumably avoid that as much as possible. So what

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<v Speaker 4>are the benefits of using broker for the remotge and

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<v Speaker 4>say the things.

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<v Speaker 3>Well, the principles frankly are exactly the same. When you're

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<v Speaker 3>coming off a deal, you need to reassess your financial

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<v Speaker 3>circumstances and decide whether you simply want to keep your

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<v Speaker 3>mortgage at the same size and then you know what

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<v Speaker 3>sort of deal to have. You may have had a

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<v Speaker 3>two year deal initially, and it now might be right,

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<v Speaker 3>perhaps because you feel for interest rates have falling somewhere

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<v Speaker 3>close to the floor to take a five year fix

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<v Speaker 3>or even a longer term fix vice versa. You may

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<v Speaker 3>be coming off a five year fix, in which case

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<v Speaker 3>you'll have been paying a very low rate, and you

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<v Speaker 3>now need to reassess how long you want to fix for.

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<v Speaker 3>One of the considerations is how much longer you're going

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<v Speaker 3>to stay in the property. If you're not confident you're

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<v Speaker 3>going to stay in the property for at least five years,

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<v Speaker 3>probably better to go for a shorter term deal, because

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<v Speaker 3>although most most mortgages are portable, there's no guarantee you

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<v Speaker 3>will be able to port the mortgage, so that's a consideration.

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<v Speaker 3>The question of whether you should go on to a

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<v Speaker 3>tracker deal or a fixed rate is an important consideration.

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<v Speaker 3>It may have been right when you took your mortgage

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<v Speaker 3>out a few years ago to go for a fixed rate.

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<v Speaker 3>Now rates are coming down and tracker rates are not

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<v Speaker 3>much more expensive than fix rates, maybe you would prefer

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<v Speaker 3>a tracker rate, so we've benefit them. Rates coming down

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<v Speaker 3>have accept that. You know, a lot of people really

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<v Speaker 3>value the fat that with a fixed rate, they know

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<v Speaker 3>exactly what their monthly payments are, which makes it much

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<v Speaker 3>easier to budget. Some people are got more flexibility clearly

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<v Speaker 3>on that than others. So there's all sorts of things

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<v Speaker 3>to consider, and a good broker is going to be

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<v Speaker 3>able to talk through the pros and cons of the

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<v Speaker 3>different mortgage options. Where you come to remortgage, you also

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<v Speaker 3>need to consider whether you're remortgaging or doing the product transfer,

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<v Speaker 3>So there tends to be quite a bit of confused

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<v Speaker 3>and sometimes on this a product transfer means you stay

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<v Speaker 3>with your existing lender, but you take another deal with

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<v Speaker 3>that same lender. Remortgage is where you change lenders, and

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<v Speaker 3>if you simply want to keep your mortgage the same size,

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<v Speaker 3>a product runs through is a very simple process in

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<v Speaker 3>most cases, no PaperWorks required. If you want to borrow

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<v Speaker 3>any more money, then you will have to go through

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<v Speaker 3>exactly the same process if you stay with your existing

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<v Speaker 3>lenders if you remortgage, So all of these things need

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<v Speaker 3>to be taken into consideration, and those sort of things

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<v Speaker 3>that are broken can advise on.

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<v Speaker 4>You mentioned a boot mortgage broad because that you have avoid.

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<v Speaker 4>Are there any red flags that you would say would

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<v Speaker 4>make somebody think, actually, I shouldn't be dealing with these people?

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<v Speaker 4>Is there anything obvious? I mean, one thing I remember

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<v Speaker 4>is that a lot of mortgage brokers during the zero

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<v Speaker 4>interest rate period we're kind of giving people implicit advice

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<v Speaker 4>on where interest rates we're going to go next. Anytime

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<v Speaker 4>I heard that, I thought, that's a little bit, you know,

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<v Speaker 4>pushing the envelope of what you should be doing. But

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<v Speaker 4>is there anything that would make you be concerned and

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<v Speaker 4>make you say not, you shouldn't use this broker.

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<v Speaker 3>You can check with the Finatural Conduct Authology website that

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<v Speaker 3>ACERS regulates it, but the vast majority are so it's

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<v Speaker 3>unlikely that you're going to come across the worker that's

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<v Speaker 3>not regulated. But that's a check that you know you

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<v Speaker 3>can always do. I think, frankly, if you're not getting

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<v Speaker 3>a recommendation, then looking at broker reviews is a good

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<v Speaker 3>way of actually seeing you know which bokers generally get

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<v Speaker 3>positive reviews and which bogus to avoid. Also, when you

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<v Speaker 3>seek to make that first phone call, you may get

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<v Speaker 3>good or bad vibes, but it is quite difficult sometimes

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<v Speaker 3>to spot the relatively few bad guys straight away. When

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<v Speaker 3>it comes to advice on interest rates, some brokers are

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<v Speaker 3>all prepared to talk about that than other's. Some brokers

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<v Speaker 3>frankly have more knowledge on that. I'm therefore more capable

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<v Speaker 3>of talking about that, But at the end of the day,

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<v Speaker 3>none of us knows what's going to happen. I think

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<v Speaker 3>this is one reason why a lot of people do

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<v Speaker 3>favor of fixed rate, because even if they end up

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<v Speaker 3>paying a little bit more than they might have done

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<v Speaker 3>with the track rate, they at least know what their

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<v Speaker 3>budget is and that makes nice a lot easier. When

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<v Speaker 3>the mortgage is probably their biggest not the payment.

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<v Speaker 2>I think the probably covers pretty much everything, unless you

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<v Speaker 2>think there's anything we've really miss ray No.

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<v Speaker 3>I just say in terms of product transfers and remortgaging,

0:11:45.480 --> 0:11:47.520
<v Speaker 3>I mean our Polichip John Charcoal is that we don't

0:11:47.559 --> 0:11:49.599
<v Speaker 3>charge with fee on our product answer because there is

0:11:49.720 --> 0:11:53.000
<v Speaker 3>less work involved and therefore that get lender is adequate

0:11:53.360 --> 0:11:57.600
<v Speaker 3>or to be good charge mortgage. So the total cost

0:11:57.640 --> 0:12:01.320
<v Speaker 3>of the deal is clearly important, and when people look

0:12:01.320 --> 0:12:03.080
<v Speaker 3>at whether it's to go for a two or five

0:12:03.200 --> 0:12:06.400
<v Speaker 3>year deal or perhaps a longer term deal, they'll sometimes

0:12:06.440 --> 0:12:09.839
<v Speaker 3>simply look at the interest rate and not factor in

0:12:10.040 --> 0:12:11.760
<v Speaker 3>the other promotion and cons So if you take a

0:12:11.800 --> 0:12:14.800
<v Speaker 3>two year deal, for example, in two years time, you're

0:12:14.800 --> 0:12:16.840
<v Speaker 3>going to have another set of arrangement fees to pay.

0:12:17.000 --> 0:12:19.719
<v Speaker 3>A typical walk ise arrangement fee from a lender is

0:12:19.760 --> 0:12:23.120
<v Speaker 3>one thousand pounds, for example, so it is a bit

0:12:23.200 --> 0:12:25.520
<v Speaker 3>marginous whether you go for a two or five year deal.

0:12:26.000 --> 0:12:30.080
<v Speaker 3>The particularly workage is quite small. Where the cost of

0:12:30.160 --> 0:12:33.000
<v Speaker 3>the walk has become much more relevant as a percentage,

0:12:33.080 --> 0:12:34.920
<v Speaker 3>then that there's a stronger argument to go and you

0:12:35.000 --> 0:12:39.000
<v Speaker 3>fight for a five year deal. Likewise, there are many

0:12:39.040 --> 0:12:41.959
<v Speaker 3>tracker deals that have no earlier repayment charges. So if

0:12:41.960 --> 0:12:44.080
<v Speaker 3>you're coming to the end of a deal now and

0:12:44.120 --> 0:12:46.480
<v Speaker 3>you're thinking of moving in the next couple of years,

0:12:46.760 --> 0:12:49.760
<v Speaker 3>then actually a tracker deal properly makes sense, even if

0:12:49.760 --> 0:12:51.600
<v Speaker 3>it's not the cheapest, because you will have no anther

0:12:51.679 --> 0:12:55.079
<v Speaker 3>repayment charges and therefore complete flexibilities to when you want

0:12:55.080 --> 0:12:57.120
<v Speaker 3>to sell the property. So these are the sort of

0:12:57.120 --> 0:12:59.240
<v Speaker 3>consideration that you know a good broke is going to

0:12:59.240 --> 0:13:02.080
<v Speaker 3>discuss for the client, which in many cases the actual

0:13:02.120 --> 0:13:04.520
<v Speaker 3>borrower may not think about because you know it's not

0:13:04.600 --> 0:13:05.560
<v Speaker 3>something they're doing day.

0:13:05.440 --> 0:13:08.560
<v Speaker 1>To day Okay, so that's a very good reason to

0:13:08.559 --> 0:13:10.280
<v Speaker 1>have a broker to talk about all the things that

0:13:10.320 --> 0:13:12.200
<v Speaker 1>you might not think of if you're if you're just

0:13:12.240 --> 0:13:13.640
<v Speaker 1>going for a single provider.

0:13:13.960 --> 0:13:14.600
<v Speaker 2>Ray, amazing.

0:13:14.679 --> 0:13:15.640
<v Speaker 1>Thank you so much.

0:13:15.640 --> 0:13:17.720
<v Speaker 2>We really really appreciate you coming on and talking about

0:13:17.720 --> 0:13:19.439
<v Speaker 2>all these things, and I hope that our listeners are

0:13:19.640 --> 0:13:27.880
<v Speaker 2>finding them helpful. Thanks for listening to this week's Maren

0:13:27.920 --> 0:13:29.840
<v Speaker 2>Talk to Your Money. If you like our show, rate.

0:13:29.720 --> 0:13:31.640
<v Speaker 1>Review, and subscribe wherever you listen to podcasts.

0:13:31.640 --> 0:13:33.120
<v Speaker 2>Also, if you shure to follow me and John on

0:13:33.400 --> 0:13:36.920
<v Speaker 2>x or Twitter at marinas w and John Underscore Stepic.

0:13:37.120 --> 0:13:40.400
<v Speaker 2>This episode was produced by Samasadi and Moses and Best

0:13:40.480 --> 0:13:42.920
<v Speaker 2>thanks to Ray Bulger and questions and comments on this

0:13:43.000 --> 0:13:46.160
<v Speaker 2>show and all our shows is always welcome. Our show

0:13:46.160 --> 0:13:48.880
<v Speaker 2>email is Meren Money at Bloomberg dot Next.