Fees and general outgoings are at the forefront of all our minds during a time when it feels like additional financial burdens are being placed on us left, right and centre from both a personal and business standpoint.
Value remains at the heart of many of these cost conversations but we all have our own ideas when it comes to how we quantify value. With this in mind, it was fascinating to see research conducted on behalf of Boon Brokers evaluate consumer attitudes to paying broker fees and the perception around how they might benefit from doing so.
The research outlined that 49.4% of borrowers aged between 18-24 believed they would have access to a better interest rate if they paid a broker fee. A third of respondents between the age of 25-44 also believed that paying a broker fee would get them a better mortgage interest rate. Older borrowers over the age of 45 were not immune to this misconception, with an average of 14.8% expecting better rates by paying a broker fee.
In addition, almost a fifth of respondents (18.2%) were aware that fee-free mortgage brokers exist but that they would receive a better service from mortgage brokers who charge a fee. The younger the borrower, the more likely they were to believe that paying a broker fee will result in a better service. At the extreme ends of the data, this view was shared by 28.6% of mortgage borrowers between ages 18 and 24 compared to just 3.3% of those over the age of 65.
The fact that younger mortgage borrowers are more likely to make less informed decisions than older borrowers due to their lack of understanding around the mortgage advice process comes as no huge surprise. But it certainly highlights the importance of educating potential borrowers as early in the homebuying process as possible, especially when it comes to the available advice and the costs involved.
Fee misconceptions are more of a concern and this also extends into the intermediary marketplace.
As a packager, we work with introducers who have a variety of ways in which they generate income. This remains an individual business decision which all firms need to make and we have certainly not experienced anything to suggest that the service attached to fee-charging firms surpasses that of a non-fee paying service, or vice versa.
However, within any fee charging structure, it’s vital to be as transparent as possible from the off when it comes to any existing or potential costs. This is also evident from a distribution perspective, be this as a network or a packager. For example, for all our packaged cases, we ensure our introducers understand that they get to keep any fee they decide to charge their clients..
Just as important is for us to be clear that while we can, and often do, work directly with clients – if instructed – the end borrower always remains the introducers client, not ours.
The old adage of ‘you get what you pay for’ might well be true in many cases. However, when it comes to the mortgage advice process and working with a trusted packaging partner who can help advisers and their clients to negotiate the complexities of today’s financial landscape and obtain the required funds to complete a variety of property-related transactions, this doesn’t always have to be the case.
Donna Wells, Managing Director at Envelop