I used to think that if you want mortages, insurance, etc. you're better off asking the lender/insurer directly for quotes, cutting out the middleman and his glitzy office overhead. But I've also known that brokers sometimes get special deals by being able to buy in bulk and resell. So does that mean that if I'm looking for the best deals I should also try asking brokers for quotes as ewll (as many of the thousands of them as I can, anyway)?
Seb
Most people do think this but it's rubbish.
But I've also known that
Not quite like that. But some companies have better rates through IFAs. And some mortgage deals are only available through brokers.
So does that mean that if I'm looking for the best deals I
It's madness not to. You may well get some advice as well and save yourself doing the wrong thing.
Rob Graham
It varies between types of products, but usually the insurers / banks who create these products factor in the cost of 'distributing and marketing' the product. Therefore, they will pay a fee or commission to the broker, but if you go to them directly, they will just pocket this amount, or use it to incentivise their own salespeople.
When it comes to mortgages, a broker will also charge you a fee - say
1% of the loan raised, as well as taking the procuration fee from the lender. Therefore, I've often found that if you do your homework, you can save this additional fee by going directly to the lenders - although, please correct me if I am wrong.With regard to insurance, I suspect that the margins are so tight on these products, that you will probably save little going one route or the other.
In message , sylvian stone writes
Mortgages are now regulated by the FSA. To be a true 'independent' mortgage broker you must a) offer the products from the whole of the market, and B) give the clients the choice of the broker being remunerated either by 1) commission (or procuration fee) only, 2) Fee Only, or 3)a combination of both fee & commission. Many supposed 'independent' brokers such a charcol online and Bradford & Bingley Market place are not 'independent'; because they only offer a limited range of mortgages that they have pre-selected from the whole of market.
Mortgage lenders obtain most of the lending form brokers and they prefer obtaining mortgages through this route because a) the cost of regulation is born by the broker, b) the risk if regulation (and the blame if it is duff advice) is born by the broker and c) it is considerably cheaper for the lender if all customer contact is conducted by the broker, d) many lenders now get the broker to input the mortgage app directly to the lender's computer making it even cheaper for the lender. All this means that the lender will likely offer better deals to brokers than through their own branches. The branches, of course, can not give independent advice and some do not even give 'advice', i.e. they will let you come in a buy the wrong product and you have no recourse if the gave no advice.
Some mortgage brokers do charge exorbitant fees like the 1% quoted but many independent brokers will charge something like £250 which is only payable AFTER the mortgage has completed.
So, all in all, there should bemerit in going to a broker but pick with care. Be sure to get one who gives FULL ADVICE, and is truly INDEPENDENT (see definition as above)
Again it is the cost and risk of compliance that is the problem for the insurers now that all insurance products are regulated by the FSA. Many insurers will; not deal direct for this reason.
With most products you don't save anything by "cutting out the middleman" and buying directly, if the product you are buying is usually sold by middlemen (agents/brokers). This is because the product provider is not going to undercut their agents, as the agents then won't sell their products and they'd lose most of their business. People would quickly realise that the thing to do is go to an agent/broker and get them to find the best deal - then buy direct!
That's the main reason why going direct is rarely cheaper, nothing to do with buying in bulk. The exceptions are companies which make a point of selling directly, not via agents, eg Direct Line, Direct Holidays etc.
A way round this is to find an agent which refunds some/most of their commission to you - this works well with ISA's/unit trusts/pensions etc, not sure about mortgages/insurance as there's less commission.
FWIW my experience with "mortgage brokers" is they are more interested in selling you insurances you don't need than finding you the best mortgage, but that was 6 years ago, things have probably changed since then.
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