Should I use a mortgage broker or go direct to a lender?

Key takeaways

• A mortgage broker is a financial adviser specialising in mortgages, acting as an intermediary between you and lenders

• A mortgage lender is a bank or building society offering mortgage loans

• Mortgage brokers can save time and money by finding the best mortgage deals, including special offers not available directly but some charge a fee (0.3% to 1% of the mortgage amount), while others earn commission from lenders

• By choosing a lender, it might save broker fees and could offer better rates if you have an existing relationship

Mortgage brokers can be useful as their job is to search the market for the best mortgage for the property you want to buy. However, some mortgage deals are only available directly from a bank or building society, not through a mortgage broker. So, which should you opt for?

What does a mortgage broker do?

A mortgage broker’s job is to find you a mortgage and make the application on your behalf. When you contact a mortgage broker, you’ll be asked about your financial situation, the property you want to buy (or remortgage), and the type of mortgage you want.

The mortgage broker will then use this information to find mortgage deals that suit your needs.

They act as an intermediary between you and potential lenders, aiming to find the best mortgage rates and terms that fit your financial scenario.

Why would I need a mortgage broker?

Using a mortgage broker can speed up and remove some of the stress involved in the house-buying process.

As mortgage brokers have access to special deals, they may also be able to get you a cheaper mortgage than you can find yourself. Some will even tell you about better mortgages you can only get direct.

Brokers can be particularly helpful for those with unique circumstances, such as self-employment or a less-than-perfect credit history, as they're skilled in finding lenders who are more likely to approve your application.

Broker vs lender: who should I opt for?

Choosing between a broker and a lender comes down to your individual needs and situation. The ultimate goal is to find the cheapest mortgage for your property, and one which suits your circumstances.

Brokers offer the advantage of access to a variety of lenders and deals, assistance in finding low-fee or low-rate mortgages, and the convenience of comparing multiple options.

Going directly to lender might be more straightforward, potentially saving you broker fees, and you might secure better rates if you have an existing relationship with the lender or if your needs are simple.

Do all mortgage brokers charge a fee?

No, not all mortgage brokers charge a fee. While some charge for their advice and arranging the loan, others, including those offered by MoneySuperMarket, operate on a fee-free basis.

How mortgage brokers get paid

Mortgage brokers make money by claiming a commission from mortgage lenders, through fees they charge customers, or a combination of the two.

How these payments are structured:

• Fee-free mortgage brokers usually receive commission, also known as a procuration fee. Generally, this is about 0.35% of the amount borrowed from the lender offering the mortgage. For example, on a £150,000 mortgage, the broker would receive £525 if the procuration fee was 0.35%. This is paid by the lender, not you.

• Brokers charging a direct fee earn their income through:

  • A flat rate of between £300 and £600.

  • A portion of the total mortgage - this is typically between 0.3% and 1%. If you were borrowing £150,000, the fee might range between £450 and £1,500.

  • An hourly rate. This is far less common.

If you’re paying a fee, you need to include this in the overall cost of the mortgage when comparing it with other deals. Check that it’s only payable if you choose to take out a mortgage and complete your home purchase (or remortgage) with the firm.

When is a paid-for mortgage broker worth the fee?

While fee-free mortgage brokers are widely available, if your needs are complex, it may be worth paying for the service in these scenarios:

• If you are self-employed, have a poor credit history, or are an expat, a specialist mortgage broker may have the expertise to navigate a lender's complex requirements and secure you the mortgage.

• Some fee-charging brokers may have access to exclusive products that aren't available to the wider market, which could save you more in interest than the cost of the fee itself.

Make sure the broker is properly qualified and regulated before going ahead. You can do this by checking the Financial Conduct Authority (FCA) register.

You want the broker to find the cheapest deal for you, regardless of the commission rate. If you are doing a simple home purchase or remortgage, go with a broker that has no fee, they will make their commission from the lender.

What if a mortgage broker gives me bad advice?

Mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA), which ensures they provide sound advice.

If you receive poor advice from a broker that leads to an unfavourable financial outcome, you may be entitled to compensation.

Brokers are responsible for their recommendations and must take into account your ability to repay the mortgage.

What does a mortgage lender do?

A mortgage lender is a bank or building society that offers mortgages.

It can only offer you a mortgage once it’s satisfied you can afford to repay the loan, which is why applying for a mortgage involves checks on your income and your credit score.

The mortgage lender also sets the terms of your mortgage, including the interest rate you pay and the size of your monthly repayments.

Why would I choose to go directly through mortgage lender?

There are benefits to going directly to a lender instead of using a mortgage broker. Many lenders have a range of mortgages designed to appeal to different borrowers. These could include fixed-rate mortgages, tracker mortgages, and offset mortgages.

Some deals are only available through brokers, while others are offered exclusively direct to customers. However, a lender will only ever recommend mortgages from its own range.

Some brokers search the whole market, while others only work with a limited panel of lenders, so it’s worth asking which type they are before you proceed.

Compare mortgages

It’s easy to find and compare mortgages from a range of lenders using MoneySuperMarket’s mortgage comparison tool.

Once you’ve got an idea of the deals available, you can then approach a mortgage broker to see if they can beat the rates you’ve found online.

Use our mortgage repayment calculator to see how much your mortgage repayments could cost.

Simon Gray
Mortgage Adviser, Fluent Money

"Crowded and confusing"

Many homeowners tell us that the mortgage world feels crowded and confusing. Going direct to a lender means you only ever see one set of products. Working with a broker gives you access to the entire market and makes it much easier to feel sure you are choosing the right deal.

Customers often come to us, or use a service like MoneySuperMarket because they want confidence that they have found the best rate without spending hours comparing offers online. Our advisers monitor the market for you and if a better rate appears during your application, we can move you to it, so you do not miss out.

Fluent Money aim to remove as much hassle as possible. We get it. Once you have chosen the right lender and product for you we assign a dedicated expert, your Client Relationship Manager, to provide clear updates in our dedicated app My Fluent and full support with any paperwork. You won’t get this proactive service better anywhere else.

Even customers who are planning to stay with their current lender are often surprised to learn how many ways there are to save money or reduce the overall length of their mortgage. A short conversation with one of our advisers can give complete peace of mind.

Don’t believe the hype! Rates aren’t the only thing we’ll review. Exploring the number of years you are willing to borrow for (“term”) and how much of the property value you need to borrow against (“loan to value”) can have a major bearing on what you may save per month. We call it ‘trusted advice’ because our job is to help you make decisions by exploring all your options, not tell you what to do.

Our team uses technology that compares real time deals from more than ninety lenders including providers who do not work directly with the public. We also receive regular training from lenders and sometimes have access to exclusive products.

If you stay with your existing lender, our advice is free. If you switch lender or buy a home, MoneySuperMarket customers can use our full service for a discounted fee of £195, which is only payable once your mortgage completes. We do not charge any advance fees.

Key points

• A broker opens up the whole market rather than showing you one lender.

• We keep an eye on rates and move you to a better deal if one appears.

• Fluent handles the paperwork and keeps you updated through the app.

• Many customers discover new ways to save money after speaking to an adviser.

• We compare deals from more than 90 lenders.

• You only pay once your mortgage completes and we never ask for money in advance.

Your home may be repossessed if you do not keep up repayments on your mortgage.