There’s something really safe and reassuring about the saying ‘same old, same old’. And while we may live in volatile times, there’s no end in sight for our love of buying, or, in the case of most young Londoners, attempting to buy, property.
A man’s home is quite clearly his castle, and mortgage brokers have long been a central part of our house-buying experience, with over 70% of all mortgages now sold through brokers. And although digital mortgage brokers like Habito and Mojo are shaking up the market, brokers are set to be a key part of the market for some time. But what really drives your mortgage broker? Is it whether you’re getting the best deal and quickest turnaround, or whether they’re getting the highest fees?
Mortgage brokers typically charge an upfront fee and also receive a fee directly from a lender for placing business with them. This fee, called a procuration fee, or ‘proc fee’, is typically between 0.3% and 0.6% of the value of a mortgage. Therefore, placing a half-a-million-pound mortgage with a mortgage lender offering a 0.4% proc fee could well mean a £2,000 bonus for the broker – a pretty tasty amount.
For equity release or lifetime mortgages, procuration fees tend to be just north of 2%. Little wonder, then, that lifetime lending is a particularly fast growing area.
As mortgage lenders offer varying procuration fees, there’s long been a question around what really motivates brokers. Are they genuinely looking to get the best deals for their clients? Or do they want to send everyone to the lenders who pay the biggest fees?
This was examined in the Mortgage Lender Benchmark, which found that, overall, there’s no correlation between a happy broker and the procuration fee on offer. In fact, those lenders offering the very highest fees are often average or below average performers when it comes to broker satisfaction.