By Sarah Macklin 
Mortgages are the talk of the town at the moment, particularly with interest rates consistently rising. As homeowners come out of their fixed term, many are searching for better deals and lower interest rates to reduce their monthly mortgage cost, but right now, this is hard to find.
Even more worrying is new independent research conducted on behalf of Boon Brokers, which shows that almost half of borrowers (49.4%) aged 18 to 24 believe that they can get a better interest rate if they pay a fee to a mortgage broker. The research is based on a survey of 1,000 mortgage borrowers in the UK, and they were asked a series of questions about mortgage broker fees.
However, the older the borrower, the less they likely they are to have the same view. Just over a third of borrowers between 25 and 34 (33.5%) think this is the case, and this goes down to 6.7% in those over the age of 65. Perhaps this tells us that experience with mortgages over time increases awareness and education. Perhaps it also tells us that young people do need more education around mortgages and borrowing (how it works, what an interest rate is, etc.).
Gerard Boon, Managing Director of Boon Brokers, commented: “These statistics are worrying. Mortgage borrowers need to understand that there is no link between a brokerage’s fee structure and their product access. A fee-free, whole-of-market broker is likely to have the same product access as a whole-of-market broker that charges client fees”.
Does paying a broker fee result in a better interest rate?
Paying a broker fee will not result in a better interest rate. Interest rates may differ slightly from bank to bank, or service to service, but a broker doesn’t have access to different products than the rest of the population.
A homeowner will be able to visit their bank’s website and find the same products/rates available as a broker, meaning you can save money on any sort of fees.
Will paying a mortgage broker fee result in a better service?
Many of the survey respondents (18.2%) are aware that fee-free mortgage brokers exist, but they think they will receive a better service from brokers that you pay for. Young people (sometimes unfortunately) are of the mindset “you get what you pay for”. When it comes to a mortgage, this is certainly not the case.
The younger the borrower, the more likely they are to believe that paying a broker fee will result in a better service. At the extreme ends of the data, this view is shared by 28.6% of mortgage borrowers between ages 18 and 24 compared to just 3.3% of those over the age of 65.
Mr. Boon commented “It’s concerning that young people believe that paying a mortgage broker fee will result in a better-quality service. This is likely to be because they have less experience in the market compared to older borrowers.”
Do you have to pay a mortgage broker fee?
Not all brokers charge a fee for their services, but Boon Brokers’ survey found that over a tenth of people are unaware that some mortgage brokers don’t charge. Once again, the data shows that younger mortgage borrowers are more likely to make less informed decisions than older borrowers due to their lack of understanding of the industry. Considering the UK’s cost of living crisis, most mortgage borrowers will be seeking means to cut their expenses to maintain their living standards.
Due to the cost-of-living crisis, 8.6% of respondents confirmed that they would search for a reputable broker with lower broker fees than their current mortgage adviser when they require their service. This plan of action is especially prominent for younger borrowers between the age of 18 to 24 (15.6%) and 25 to 34 (13.5%) compared to older age groups.
Only 4.4% and 6.2% of respondents between the age of 35 and 44 and 45 to 54, respectively, confirmed that they will search for a cheaper mortgage broker due to the cost of living crisis. This indicates that older borrowers are more loyal to their existing mortgage broker than younger borrowers, even if they could switch to a cheaper alternative.
Mr. Boon commented: “With the cost-of-living crisis looming in the UK, mortgage borrowers need to understand that they do not need to pay mortgage broker fees to access broker services. There are many reputable fee-free, whole-of-market, authorised firms in the market that borrowers can access. Not to diminish the work of brokers that charge client fees, but mortgage borrowers need to understand their options in order to make an informed decision.”
Mr Boon added further: “Asymmetric information is a significant problem in the mortgage sector among young borrowers, as they are the least experienced in the market of any age category. These statistics indicate that intermediaries charging such large fees may be taking advantage of young borrowers’ lack of knowledge and experience of the mortgage process. The FCA’s new Consumer Duty regulation should ensure that all borrowers are treated fairly regarding fees. Hopefully these statistics become more evenly distributed among the age groups in the future.”
Jeremy Davidson