Mortgage blog: Why you’re increasingly likely to use a broker

Posted 28 November 2014 by Keith Osborne

Changes to lending rules and a shift in the need for advice has resulted in more borrowers turning to a broker for their new mortgage. New figures from the Council of Mortgage Lenders have revealed that almost two thirds of mortgages were arranged by brokers in the three months from September, up from just over half in 2013.

More and more lenders are offering mortgages through independent brokers meaning that you have more choice when arranging your home loan.

CML figures show that intermediaries took 62% of the mortgage lending market in the quarter to September, up from 58% in the first three months of this year and 54% in 2013.

Rules that came into force this year state that only fully qualified advisers can agree a mortgage for customers. However, banks and building societies have been reluctant to employ more qualified advisors to help consumers, preferring to lend through brokers instead.

Jeremy Duncombe, director of broker L&G Mortgage Club, says lenders were turning to intermediaries because they offered lower costs of distribution: “A lot of the shift to intermediaries has been driven by MMR [the Mortgage Market Review]. Lenders have recognised that... customers are benefiting by having more choice and more flexibility in terms of when they can see an adviser as opposed to the restrictions of branch hours.”

Changes to the rules mean that there are other reasons that lenders are keen to offer more deals through brokers. Keith Osborne, editor, says: “Lenders know that the fee they pay to brokers is only due when the mortgage completes. In contrast, direct mortgage business may involve a lender doing lots of costly admin work for a loan that falls through. In addition, the compliance risk for a mortgage sale through a broker lies with the intermediary, not the lender. This can save money if there are issues later on.”

Peter Williams, executive director at Intermediary Mortgage Lenders Association, adds: “[Under MMR] lenders are keen to balance sensible affordability checks with the desire to find an answer to borrowers’ needs. A key rule is the requirement that most borrowers must now get advice and most of this will be done by brokers.”

With more mortgages being arranged via intermediaries, the number of lenders dealing with brokers is also increasing. Banking giant HSBC announced that it would lend through a broker network this year for the first time while the TSB has announced that it will open an intermediary channel this year.

As relations with brokers change, Duncombe said that lenders were increasingly making many of their best deals available to both direct and third-party borrowers. “Dual pricing has almost disappeared and in fact brokers are often able to source exclusive products that are not available in branches,” he remarks.

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