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I'm currently dipping my toe into the murky waters of remortgaging.
We're looking at remortgaging to free up about £40k for home improvements, which would give us about a 65% LTV ratio. We're currently on a hodgepodge of old mortgages - one is ported as it's 0.1% over base for about 50%, the second is about 2% fixed and expires next year and is for about 45%, and the third is a small drawdown we used to buy a garage at the rear of the house.
I have spoken with a local mortgage broker, who has come up with two potential deals; one, a 2-year fixed at a rate of 1.24%, or a 5-year fixed at 1.91%. The monthly payment is a couple of hundred quid less than we pay currently on the 2-year deal, and is about what we pay now on the 5-year one.
However, plugging those details into a comparison site brings up fixed 5-year deals at least 0.25% less than the broker resulting in a monthly payment of nearly £500 a month less than we pay now.
Is there any reason why these deals are so much cheaper (at least in the short-term)?
Is it simply a case of it's a headline figure that, once you dig into it, is completely unattainable? (In the same way you get a rock-bottom car insurance quote but by the time you've filled in all the details, it's several hundred pounds more..)
The broker has to make some money, eh?.
Is it simply a case of it's a headline figure that, once you dig into it, is completely unattainable? (In the same way you get a rock-bottom car insurance quote but by the time you've filled in all the details, it's several hundred pounds more..)
Not IME, both with car insurance and mortgages.
Brokers need to be paid.
I had to use a broker last time as I had a complex part commercial, part residential situation. the first one I dealt with was useless and expensive, the 2nd lot were much better.
Previously I approached a broker for a mortgage quote and compared it with a comparison site results. I got a much better deal on line. I told him the deal I was offered and asked if he could match it, he couldn't. So I went with the online deal.
Broker is basically a middle man who understands the market better than many people but not better than all people. If you have a very good understanding of the market, you can save yourself the brokers fee. If you don't, the broker can save you some money.
Broker will have to take a commission, if you're doing it direct there's no need for the bank to add that cost.
If you're confident of what you're doing and have found a good enough deal for you then go for it. As gobuchul says, they're useful when you have a complex arrangement, or if you're trying to borrow a huge amount the right one can get access to special deals/rates. But for a vanilla mortgage you're ok just doing it online.
Nobeerinthefridge - Member
The broker has to make some money, eh?.
Hmm, if it's genuinely only that, I'm surprised. This particular broker gets paid by commission only, but from what I gather it's unlikely to be more than 0.3%, which, while a hefty chunk, doesn't explain the discrepancy entirely.
Who's the cheap deal with....
Mate of mine found a cheap deal with HSBC. I said not worth the hassle.
Apparently the maths said it was.
Bam house valued well below what he (and previous lender)thought -hsbc are notorious for that trick.
trail_rat - Member
Who's the cheap deal with....
Well, the cheapest are a couple of building societies. Barclays come in a little below them, and First Direct (which is HSBC IIRC?) are there or thereabouts. Worth knowing about that little foible, thanks T_R.
Mate of mine found a cheap deal with HSBC. I said not worth the hassle.Apparently the maths said it was.
Bam house valued well below what he (and previous lender)thought -hsbc are notorious for that trick.
I got a great deal of HSBC, no problem with the valuation. When it ended 2 years later, I wanted a new valuation to get a better LTV, phoned them up and they updated the valuation based current average prices in about 30 seconds. Got the LTV I wanted without any hassle at all. I found them totally painless to deal with.
It also depends on the broker - some are able to access the whole market, some are locked into schemes which only allows them access to certain parts of the market (particular some of the ones tidied to estate agent groups). We had this when buying our last place - I could get a better mortgage with a bank which the particular broker didn't have on her list - therefore I didnt use her...
London & Country - free, whole of market brokers. I used them to check on the figures of the broker I actually used.
It also depends on the broker - some are able to access the whole market, some are locked into schemes which only allows them access to certain parts of the market (particular some of the ones tidied to estate agent groups). We had this when buying our last place - I could get a better mortgage with a bank which the particular broker didn't have on her list - therefore I didnt use her...
Even the "whole market" ones aren't the whole market, HSBC won't deal with them. Equally our mortgage provider wouldn't deal with the public as new customers so it's swings and roundabouts, and you can't really know if the broker has a better or worse deal until you've seen them,
In the end he worked out marginally cheaper than HSBC offered even though he made a fat stack of commission on it!
When I remortgages 3 months ago the price comparisons sites didn't have the cheapest deal. I ended up doing my own research and re-mortgaging with Tescos.
Makes me think you still have to do legwork for the best deals. (However assuming no one off costs 1.24% looks amazing.)
Even the "whole market" ones aren't the whole market, HSBC won't deal with them. Equally our mortgage provider wouldn't deal with the public as new customers so it's swings and roundabouts.
That's not true.
HSBC will deal with brokers but only certain ones. I've just had a mortgage sorted out with them through a broker. He wasn't expensive at all and got the normal market rates rather than a poorer rate as suggested above.
I probably could have gone through the application and done it myself but for the price of the broker it was a no brainer using him to sort it all out for me.
That's not true.
Dunno about that, we just asked them for the statements to give to our broker and were told that their mortgages weren't available via brokers. Maybe it's some mortgages or some brokers. Either way theirs was only fractionally worse (1.97 Vs 1.92 or something).
Unless there is some specialist need I can’t see why you’d use a broker.
newrobdob - Member
Unless there is some specialist need I can’t see why you’d use a broker.
That was my initial inclination as well, as I've done our first mortgage and our subsequent purchase. I just assumed I was missing something! 😀
My broker doesn't charge me. He wouldn't dare else he wouldn't get a Xmas present from his favourite uncle.
Comparison sites are also taking a cut. Theoretically the same deal could be obtained cheaper direct, however mortgage companies may not offer them at all direct to customers as they get better business through brokers and comparison sites.
In some cases though some deals aren't available to comparison sites, or they offer slightly different deals than they'd offer direct or to a broker.
Can I just double-check what the OP said; A 0.25% reduction in the mortgage interest rate saves you approx £500 [b]per month[/b]? That seems to be a massive saving on a small change doesn't it? Or are you borrowing a mil or so?!