Bloomberg Audio Studios, podcasts, radio News. John.
As you know, we are doing more and more on housing. We've got a full series underway, and we've got another very special guest today. Today we are speaking again, by the way, with Ray Bulgium. Ray is the senior mortgage technical manager at independent mortgage broker John Charcoal and is something of an authority within the mortgage industry. Ray, welcome, Thank you for joining us.
Pleasure now.
Ray, when you've been on podcasts with us before, we've talked about conflict of interest, and people may say there's a conflict here because the question that I'm going to ask you is why do we need an independent mortgage broker? And you are, of course an independent mortgage broker, or listeners may say while he would say that, wouldn't he?
So let's just put that to one side.
I know that you're going to tell us the things that you would tell us if you didn't have a conflict of interest.
Am I right?
Well, where there can be a conflict of interest is if you use a broker that is employed by the estate agent you're buying from. Now, what people, particularly first time biased by definition and novices of the game don't always think about is the fact that this staye agent is acting for the vendor. Therefore they don't have the same responsibility to the purchaser. They're not regulated or whether
the mortgage broken himself would be or their self would be. So, if you're negotiishing the estate agent, what you don't necessarily want to do is disclosed all your cards, and you will be doing that if you actually are dealing with the mortgage broken employed by the state agent, you may stay well, my maps, one price is X, and the
broken may know. Actually, it's why always find a professional advisor, and by that I mean sisters as well as brokers who are not employed by this staiztagent that you are buying a property from.
But why would you not use For example, I mean, let's say you bank with a perfectly respectable high struit bank, perhaps you're a first direct or whatever, and they offer a nice range of mortgages.
They already know you have some overside of your finances. Why would you not just go to your bank and get an offer from them on the basis that, yeah, mortgages are much for muchness.
Well, finding a mortgage is not just about getting the best rate. The starting point, frankly, is to understand which lenders have criteria that you can meet. No point in going for a lender that's gotten cheapest, right if you're going to get rejected. A broken like John Charcot will deal with a vast number of lenders. I mean, anyone year will deal with about one hundred lenders, whist some of those lenders may only get one or two connections
a year. The few points a broker will have access to all the different schemes available, and so for some clients the question will primarily be what's the best rate, because that criteria means that they can satisfy most lenders, But for lots of particularly for first style buyers and self employed people, there will be various nuances and it can make all the difference as to whether you get accepted by how your broker presents the case to the lender.
So clearly you've got to be upfront, but there are different ways of presenting your case. If you actually don't present all the positives, the lender may simply look at your situation and think, oh, I'll lend to that person.
So what a broke will do is go through all your details, do a fact find to get all the other information about your personal status, understand what your priorities are, be able to advise you on the clothes and columns of taking a voting rate such as a tracker rate or a fixed rate, whether it's for two years longer.
Then having identified what your requirements are, and understanding what the property is because again sometimes there'll be the aspect about a property which may not be acceptable to some lenders. Now a good example is if you're buying that above commercial practices, for example, some lens will have restrictions on what we'll do with that sort of property. So what you don't want to do is waste time applying to a lender that is never going to lend to you.
By that stage, particularly if there's competitions to property, you may actually have lost the property. So a good independent mortgage broker can provide a real benefit to you, not just in terms of getting the best deal, the best rate, but actually in knowing which lenders talked to, and also when there is an issue with the application, discussing it
with the lender to try and resolve that. Once you've got your mortgage offer, a good broker will keeck on top of the situation in a market where interest rates are falling and where it may well be a few months from the time you get your offer to when you complete, if the infrast rate drops, the broker can actually rearrange the mortgage and get you a cheaper rate, usually the same lender. That's all part of the service
that most broken offer. And then the broker should be the aging with your stage gen the state den and are the easy with this list just to make sure things goes things one's actually very smoothly. So what I would recommend you we do is first of all, talk to their friends, business, colleaged relatives, see if they can recommend a good broker. And equally, if there's a broken they recommend you you don't touch with the barge pot.
If you got a recommendation that way, then you talk to a few brokers, talk to two or three seeng which because it's very very important in both the personal relationship with that broker. So you know, first impression, dur important.
Ray, how did your mortgage broker get paid?
The vast majority of lenders, certainly your mainstream lenders will pay the broker a commission. Knowing the trade of the properation fee, and that varies a bit, but typically on a mainstream mortgage in the region of zero point four point four to five percent, slightly more on by tonet mortgages, many brokers will charge you three. There are some brokerage who don't charge with three. Typically they want to be
broken to only deal over the tudle phone. If you want a more personal service, particularly if you want face to face advice, then you will probably have to pay a fee, and nobody might pay out more money than necessary. But equally, if you compromise too much, you sometimes find you actually don't get the service.
Hang on. So the pasent digging out the mortgage will pay the broker a fee, but the lender will also pay the broker a commission, so they get a broker gets paid from both sides.
Yes, that's right. Basically, the commission paid by the lender will not be enough to cover all the broker's costs. So if the lender didn't pay the broker and the commission, then broke it after charge.
A higher fee, and so would you expect see the commission on your mortgage rate.
It makes actually no difference because if the lender was processing the application themselves they would incur the sort of cost that the broker they have to do all the tips, et ceterapt. So effectually the broker is saving the lender time by providing the information that lender needs and also of course importantly not submitting cases to for lento, which they're never going to be able to do and therefore
and then does not waste time assessing cases. So lend us say a good value paying brokes to fe because actually it generates business for them, saves the money, and the mere fact that nearly nice percent of mortgages go through broken is well it demonstrates such the system works. Well.
Interesting, thank you done so.
Obviously, rate know there a lot of people who are coming off to our favior effectses, particularly the faviors and that's the east with quite a big jump, and want to presumably avoid that as much as possible. So what are the benefits of using broker for the remotge and say the things.
Well, the principles frankly are exactly the same. When you're coming off a deal, you need to reassess your financial circumstances and decide whether you simply want to keep your mortgage at the same size and then you know what sort of deal to have. You may have had a two year deal initially, and it now might be right, perhaps because you feel for interest rates have falling somewhere close to the floor to take a five year fix
or even a longer term fix vice versa. You may be coming off a five year fix, in which case you'll have been paying a very low rate, and you now need to reassess how long you want to fix for. One of the considerations is how much longer you're going
to stay in the property. If you're not confident you're going to stay in the property for at least five years, probably better to go for a shorter term deal, because although most most mortgages are portable, there's no guarantee you will be able to port the mortgage, so that's a consideration. The question of whether you should go on to a tracker deal or a fixed rate is an important consideration. It may have been right when you took your mortgage out a few years ago to go for a fixed rate.
Now rates are coming down and tracker rates are not much more expensive than fix rates, maybe you would prefer a tracker rate, so we've benefit them. Rates coming down have accept that. You know, a lot of people really value the fat that with a fixed rate, they know exactly what their monthly payments are, which makes it much easier to budget. Some people are got more flexibility clearly
on that than others. So there's all sorts of things to consider, and a good broker is going to be able to talk through the pros and cons of the different mortgage options. Where you come to remortgage, you also need to consider whether you're remortgaging or doing the product transfer, So there tends to be quite a bit of confused and sometimes on this a product transfer means you stay with your existing lender, but you take another deal with
that same lender. Remortgage is where you change lenders, and if you simply want to keep your mortgage the same size, a product runs through is a very simple process in most cases, no PaperWorks required. If you want to borrow any more money, then you will have to go through exactly the same process if you stay with your existing lenders if you remortgage, So all of these things need to be taken into consideration, and those sort of things that are broken can advise on.
You mentioned a boot mortgage broad because that you have avoid. Are there any red flags that you would say would make somebody think, actually, I shouldn't be dealing with these people? Is there anything obvious? I mean, one thing I remember is that a lot of mortgage brokers during the zero interest rate period we're kind of giving people implicit advice on where interest rates we're going to go next. Anytime I heard that, I thought, that's a little bit, you know,
pushing the envelope of what you should be doing. But is there anything that would make you be concerned and make you say not, you shouldn't use this broker.
You can check with the Finatural Conduct Authology website that ACERS regulates it, but the vast majority are so it's unlikely that you're going to come across the worker that's not regulated. But that's a check that you know you can always do. I think, frankly, if you're not getting a recommendation, then looking at broker reviews is a good way of actually seeing you know which bokers generally get
positive reviews and which bogus to avoid. Also, when you seek to make that first phone call, you may get good or bad vibes, but it is quite difficult sometimes to spot the relatively few bad guys straight away. When it comes to advice on interest rates, some brokers are all prepared to talk about that than other's. Some brokers frankly have more knowledge on that. I'm therefore more capable of talking about that, But at the end of the day,
none of us knows what's going to happen. I think this is one reason why a lot of people do favor of fixed rate, because even if they end up paying a little bit more than they might have done with the track rate, they at least know what their budget is and that makes nice a lot easier. When the mortgage is probably their biggest not the payment.
I think the probably covers pretty much everything, unless you think there's anything we've really miss ray No.
I just say in terms of product transfers and remortgaging, I mean our Polichip John Charcoal is that we don't charge with fee on our product answer because there is less work involved and therefore that get lender is adequate
or to be good charge mortgage. So the total cost of the deal is clearly important, and when people look at whether it's to go for a two or five year deal or perhaps a longer term deal, they'll sometimes simply look at the interest rate and not factor in the other promotion and cons So if you take a two year deal, for example, in two years time, you're going to have another set of arrangement fees to pay.
A typical walk ise arrangement fee from a lender is one thousand pounds, for example, so it is a bit marginous whether you go for a two or five year deal. The particularly workage is quite small. Where the cost of the walk has become much more relevant as a percentage, then that there's a stronger argument to go and you fight for a five year deal. Likewise, there are many
tracker deals that have no earlier repayment charges. So if you're coming to the end of a deal now and you're thinking of moving in the next couple of years, then actually a tracker deal properly makes sense, even if it's not the cheapest, because you will have no anther repayment charges and therefore complete flexibilities to when you want
to sell the property. So these are the sort of consideration that you know a good broke is going to discuss for the client, which in many cases the actual borrower may not think about because you know it's not something they're doing day.
To day Okay, so that's a very good reason to have a broker to talk about all the things that you might not think of if you're if you're just going for a single provider.
Ray, amazing.
Thank you so much.
We really really appreciate you coming on and talking about all these things, and I hope that our listeners are finding them helpful. Thanks for listening to this week's Maren Talk to Your Money. If you like our show, rate.
Review, and subscribe wherever you listen to podcasts.
Also, if you shure to follow me and John on x or Twitter at marinas w and John Underscore Stepic. This episode was produced by Samasadi and Moses and Best thanks to Ray Bulger and questions and comments on this show and all our shows is always welcome. Our show email is Meren Money at Bloomberg dot Next.