A mortgage broker is a specialist financial advisor, trained to offer you advice about mortgages. They can be a person or a company.
To act as a mortgage broker in the UK, you have to be regulated by the Financial Conduct Authority (FCA). You can check your broker (or the firm that employs them) is regulated on the Financial Services register.
In the simplest terms, a broker is a middleman. They link borrowers to lenders: people borrowing money to buy a property, to the banks and building societies lending that money.
There are more than 20,000 mortgages to choose from in the UK. It can be time-consuming and a lot of hassle to track down the right mortgage for you – one with a good interest rate, terms that work for your circumstances, and a deal you’re actually eligible for.
A broker uses their expertise and in-depth knowledge of lenders to find the best mortgage for you, and make sure you don’t waste time and energy applying to lenders who may reject you.
As well as finding you the best deal, a broker can guide you swiftly through the application from beginning to end – taking on a lot of the form filling and chasing lenders.
Are all mortgage brokers the same?
Different brokers can give you vastly different levels of service, and charge you different fees.
A key difference is whether your broker is limited or whole of market:
Whole of market mortgage brokers have access to a far wider range of lenders and can offer impartial recommendations based solely on what’s best for you.
Limited choice of lenders: some brokers can search a range of mortgage deals for you – but not every deal on the market. Look for the phrase ‘whole of market’ if you want to cover all your bases.
What about online brokers?
An online broker can use technology to analyse thousands of mortgages in seconds, rather than the days a traditional broker might take. They can also usually arrange a mortgage for you using online chat, and without you needing to come in for face to face meetings.
How much do mortgage brokers charge?
It ranges from nothing, to hundreds of pounds. Some brokers bill you a lump sum (typically £500 or so), while others charge an hourly rate or a commission based on the value of your mortgage. Some brokers won’t charge you a penny, but cover their costs with a procurement fee from the lender instead. Always make sure you check your broker’s fees upfront!
What if I DON’T use a broker?
It’s not compulsory to use a broker, but because residential mortgages are regulated, you need to get advice to get a mortgage. That means you’ll almost always have to speak to a mortgage adviser.
If you use a broker, they’re also your adviser, and can generally advise on a wide range of mortgages – every mortgage if they’re ‘whole of market’. But if you don’t use a broker and go direct to a lender, then the mortgage adviser you talk to can only advise you on that particular lender’s mortgages.
Your adviser has to take responsibility for recommending a mortgage to you. You can always reject their advice, but if you do they’ll ask you to sign something saying you’re happy to make the choice yourself.
In terms of finding a mortgage yourself, there are a couple of starting points – though be wary of the pitfalls:
Mortgage comparison sites
Mortgage tables can give you a good idea of the kinds of rates out there. But be aware: just because you find a tempting deal doesn’t mean you’re eligible for it. The headline interest rate you see in a comparison table won’t tell you much on its own – there might be hefty fees on top, or lender requirements that take that mortgage off the table. Using only a table also means you’ll miss out on the start-to-finish guidance and back-up of a qualified broker, or the added protection of the Financial Ombudsman if things go wrong.
Approaching your own bank or building society
This might be a good starting point – your bank should hopefully have a good idea about you and your financial situation. But remember, your bank will only tell you about their own mortgages – not the tens of thousands of others across the market. And each time you approach a new bank, you’ll need to dig out all your financial information each time, where an independent broker will only need your details once to search the whole market for the best deal.