Is it still worth talking to the middle men?

As lenders bypass mortgage brokers and deal directly, Chiara Cavaglieri looks at the best routes for those seeking a home loan

Unearthing the best mortgage deals is tougher than ever with the Council of Mortgage Lenders revealing last week that levels of home loans are at a 10-year low.

Meanwhile, some of those banks and building societies still actively courting mortgage business are keeping their deals to themselves, looking to cut out the middle man – the mortgage broker – to keep as much profit as they can. All this leaves borrowers in a quandary, whether or not to go for advice from a broker or merely look at the best-buy tables and apply direct to the lender.

"The proportion of business done through brokers has dropped significantly in the last few years and this shows no sign of abating. In fact, many of the best mortgage deals are available direct from lenders rather than through a broker," says Michelle Slade, from financial information service Moneyfacts.co.uk.

More often than not, experts advise using an intermediary who may have access to special deals and who can offer advice, but with more lenders bypassing the brokers is this still the best avenue to take?

Mortgage brokers are only able to compare mortgages made available to them. In the past this was an advantage. In September 2007, for instance, 31.1 per cent of mortgages were available exclusively through intermediaries, but three years on and that has fallen to just 28 per cent, according to analysts Defaqto. A number of big lenders such as HSBC, the Co-operative Bank and First Direct sidestep the intermediary market and choose to sell all their products directly online or in their branches, whilst others, such as Nationwide, reserve a section of their deals for direct sales.

This means that some of the most competitive deals around at the moment cannot be accessed through brokers, giving rise to the argument that by using an intermediary some people will miss out on a better deal.

For example, homeowners with a £100,000 repayment mortgage looking for a two-year fixed rate, can go directly to HSBC and secure a rate of 2.89 per cent on purchases up to 60 per cent loan-to-value (LTV), with a £99 fee. The lowest equivalent rate from brokers, according to Moneyfacts.co.uk, is from Skipton Building Society at 2.99 per cent on purchases up to 65 per cent LTV with a much bigger fee of £995. Similarly, NatWest offers a direct-only deal at 2.39 per cent, with no fee and available at 60 per cent LTV. Through brokers the best buy for those with a 40 per cent deposit is 3.19 per cent from Cheltenham & Gloucester, again with no fee.

Despite the danger of missing out on the best buys, the brokers themselves argue that they can offer many other benefits aside from the headline rates, particularly when it comes to calculating the true cost of any loan.

"Advice remains crucial," says David Hollingworth, of mortgage broker London & Country. "A broker will not only factor in fees in establishing the best deal but also tailor the recommendation to fit the client's circumstances."

Working out which loan is cheapest is far more complicated than just looking for the lowest interest rate – the difference in any associated fees can vary hugely and depends heavily on how much a buyer is looking to borrow. Coventry BS, say, offers a two-year fixed deal at 2.49 per cent with a £199 booking fee but this comes with an arrangement fee of 1.5 per cent of the amount borrowed. This means that for someone borrowing £200,000 it would cost an extra £3,000, whilst for someone looking to borrow £50,000 it would only add on £750, making a huge difference to the overall cost.

As well as a helping hand with the maths, a reputable mortgage broker should still point out the best direct-only products despite the prospect of losing business by doing so. "If a customer walks into a bank branch to see a mortgage adviser they will not be told about cheaper deals that may be available from a competitor," says Andrew Hagger from Moneynet.co.uk.

Many brokers also offer their own exclusive deals which are not available on the high street and may work out cheaper for some buyers. Those looking to borrow at 75 per cent LTV, for example, can get a two-year fixed-rate mortgage funded by Accord Mortgages through London & Country at 3.99 per cent, with a £995 fee.

Borrowers with less straightforward mortgages to arrange can use brokers to fight their corner for them, and for anyone who may otherwise struggle to be accepted, a broker can be a lifeline. "Mainstream mortgage lenders tend to be more rigid in sticking to their underwriting criteria and if you fall even marginally outside those criteria it's very much a 'computer says no' mentality," says David Black, banking expert at Defaqto.

So, to be confident of getting the best deal, borrowers need to do some legwork. A broker will always be a great starting point, covering an enormous part of the market quickly, offering advice and helping to calculate the real cost of any deal. Then, they should also shop around for themselves to access the best of the best from lenders and brokers. Thankfully, with best-buy tables and comparison sites, this is now an easier task, and online tools like mortgage calculators on sites such as Moneymadeclear (www.moneymadeclear.org.uk/tools/mortgage_calculator.html) can be an invaluable part of the research.

Expert View

Michelle Slade, Moneyfacts.co.uk

"Going direct is usually better for borrowers with straightforward mortgages, such as those looking to remortgage, but brokers come into their own for non-standard mortgages, such as the self-employed, or those looking for their first home loan. If a borrower wants to ensure they have the best deal, then visiting a broker as well as researching direct deals is the best option."

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

    Reach Volunteering: Trustees with Finance, Fundraising and IT skills

    Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

    Day In a Page

    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
    Markus Persson: If being that rich is so bad, why not just give it all away?

    That's a bit rich

    The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
    Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

    Coleman on course to end half a century of hurt for Wales

    Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
    Rugby World Cup 2015: The tournament's forgotten XV

    Forgotten XV of the rugby World Cup

    Now the squads are out, Chris Hewett picks a side of stars who missed the cut
    A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

    Britain's Atlantis

    Scientific study beneath North Sea could revolutionise how we see the past
    The Queen has 'done and said nothing that anybody will remember,' says Starkey

    The Queen has 'done and said nothing that anybody will remember'

    David Starkey's assessment
    Oliver Sacks said his life has been 'an enormous privilege and adventure'

    'An enormous privilege and adventure'

    Oliver Sacks writing about his life
    'Gibraltar is British, and it is going to stay British forever'

    'Gibraltar is British, and it is going to stay British forever'

    The Rock's Chief Minister hits back at Spanish government's 'lies'
    Britain is still addicted to 'dirty coal'

    Britain still addicted to 'dirty' coal

    Biggest energy suppliers are more dependent on fossil fuel than a decade ago
    Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

    Orthorexia nervosa

    How becoming obsessed with healthy eating can lead to malnutrition
    Lady Chatterley is not obscene, says TV director

    Lady Chatterley’s Lover

    Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
    Farmers in tropical forests are training ants to kill off bigger pests

    Set a pest to catch a pest

    Farmers in tropical forests are training ants to kill off bigger pests