I do find it interesting that some people still think brokers should offer free advice and that we should only rely on the lender’s procuration fee/commission?
This is especially true since the 2007-2010 crash and the subsequent additional regulations & requirements that have been imposed and implemented into the mortgage market.
Having been in the industry for over 20+ years, I have seen the workload for brokers increased dramatically. There are now extra compliance checks, additional money laundering checks and lets not forget the additional lender’s checks and requirements. I used to be able to do everything myself, I now have 3 staff just doing paperwork. Yet some clients don’t appreciate or even know this part, the lenders still pay brokers roughly the same procuration fees as they have done for the last 20 odd years?
Have you ever stopped to think what is actually involved with a house purchase or remortgage?
It’s not a simple phone call to the broker or lender and the deal is done. Most of the work is done behind the scenes to successfully get a case through for a client. For the client, it may seem like an ‘easy’ case and granted some are slightly easier than others, mainly from the broking side, not necessarily from the processing side, but they all take a minimum amount of effort from the broker and their team to get it through.
Here is an example of time taken on a single case (the loan size is irrelevant at this point). Firstly between 30min-1h30 for the initial interview. Anything between 1hr – 3hrs+ to research and broke the case with lenders (especially if you are whole of market). The application is the easy part, so only about 30min-1hr. Then come’s the processing and tracking of the case, which is easily 3-6 hours. Lastly, any post-application compliance and checks, which could be anything between 1hr-3hrs.
So best-case scenario, a single application can take about 6 hours from start to finish, worst case anything from 14+hours upwards.
If we look at the commission the broker gets paid. Let’s say the client is applying for a £100,000 mortgage, a broker could be paid anything from £250 – £350 commission from the lender for the case. This is also ONLY paid providing the case actually completes.
This commission then needs to cover the broker’s network and compliance fees, the time spent above by them and their staff, their Pi cover, IT, phone, and all other business costs involved.
If you look at the time spent versus the reward, hopefully, people will now understand a bit more why most brokers started charging a fee post 2007-2010.
Personally, I try to keep my fees the same for all my clients. This is because I believe all clients should have access to professional advice regardless of whether they a first-time buyer or a multimillion-pound portfolio holder. Our fee also covers the full advice and full processing of a case, not just the initial advice.
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