Mortgage broker fees are a hot topic! The mortgage industry is changing rapidly. With the mortgage market being so competitive, mortgage brokers are now faced with a new challenge – keeping their fees low in an era of higher rates and an increasing demand for mortgages.
But there are some things you can do to keep your fees down and help your business stay insanely profitable!
In this blog post, I will share some tips on how you mortgage brokers can keep your fees low in 2021 but at the same time increase your profit.
How Much Does the Average Mortgage Broker Charge in 2021?
The average mortgage broker fee has increased by over 30% in the UK since 2012. This is a huge increase, and mortgage brokers are feeling the pressure of this increase on their bottom line margins.
The average mortgage broker charges between 0.4% and 1%. So if the mortgage costs £50,000 that’s a maximum of £500. The exact amount buyers pay brokers today varies, but it is rarer for brokers to not charge a fee if they are independent.
Fee Free Mortgage Broker Strategy: Pros and Cons
Fee-free mortgage brokers is hands down, the number one way to go if you want to keep buyers coming to you and a constant flow of leads…It’s attractive, right?
Giving the mortgage broker costs to the lenders to deal with rather than having your buyers deal with it themselves is a great way to go and very appealing to the buyer. A mortgage broker that doesn’t charge fees means more buyers, which should mean bigger profits for your mortgage brokerage!
However, there are some cons of this strategy – if you want to transfer the cost of doing business to the lender then great; but be aware that not all lenders will pay these costs and you won’t necessarily be more profitable. According to statistics, 59% of mortgage brokers in the UK charge a fee to the buyers.
How Finding the Right Mortgage Lenders Will Help You Reduce Your Fees
Finding the right mortgage lender is one of the best ways to reduce your mortgage broker fees. But again, it’s important for you to be aware first that not all lenders will pay you to be the middle man.
Some may pay less than others, you may still have to charge a small fee to the buyer, but it can be considerably reduced if you can be paid for your mortgage advice from both lender and buyer.
The number one way to find out which lenders are committed to paying mortgage broker fees is by contacting them all, usually, you will get a better rate by being direct and making an offer…you can then beat your competition and charge them fewer fees (if any at all!)
This will only work if you are a whole-of-market broker. This means that you should be registered with various lenders across the UK. If you aren’t, then it might mean one of your competitors is already working for them!
Why Can Some Mortgage Brokers Charge More Than Others?
When buyers are using a mortgage broker to get a mortgage, they expect to pay just one fee. However, lenders have different requirements for giving out mortgages which means that the mortgage broker has to do more work!
A good mortgage broker may charge a higher fee because their business model requires them to complete extensive tasks in order to give the best possible service and advice about mortgages.
Some may require more legal fees making the mortgage application process more complicated and lengthy. It will be good for your lead generation efforts to charge a fixed fee (if you aren’t a fee-free broker).
Finding Your Buyers the Best Mortgage Deal
Mortgage deals vary and you must be able to find the best deal for your clients to become a reputable broker and have people come back.
This is often dependent on how much research you as the mortgage advisor has put in, how qualified you are and whether you can find the best mortgage deal for your clients. Also whether you are a whole-of-market broker or not!
The Danger of Undercharging for Your Mortgage Advice
You want to provide the best deal for your mortgage brokerage, but if you charge too little for mortgage advice then it may be difficult to survive.
If lenders aren’t paying you enough fees and you aren’t charging the buyers enough, you might have an unsustainable business model which could put you out of business! (See what other mortgage advisors are charging in your local area.)
On the other hand, of course, overcharging for your mortgage advice isn’t a good idea because you won’t be competitive, and buyers will choose other brokers over you.
Undercharging vs Overcharging: Finding the Right Balance
That’s why it is so important for you to find the right balance between fees charged, services provided and time took on each case!
Again as mentioned above contact lenders direct to see what they can offer, this should help you to find your balance.
Always remember, a mortgage broker can charge a buyer for mortgage advice in any way you like; it really is down to you as the individual mortgage brokerage owner and your business model! You could choose not to charge buyers at all, but only take fees from lenders if that’s what will work best for your mortgage brokerage.
What a Mortgage Broker is Really Worth: The Value of a Mortgage Deal!
A qualified mortgage broker shouldn’t be undervalued. We work with mortgage brokers every day and feel it important to remind you of your value to the property industry.
8 Things You MUST Remember When Reducing Your Fees…
- Saving the buyers the headache of searching through mortgage providers to compare deals.
- Saving buyers paying more money than they need to (they’ve got valuation fees too to consider!).
- Stopping buyers credit score being damaged by failed searches.
- Keeping the estate agent industry going by matching buyers with lenders to make the purchases!
- Providing professional financial advice which involves you having to accept liability.
- Helping young people get on to the property ladder in taking care of the mortgage process for them.
- Finding exclusive deals that buyers won’t find on mortgage comparison websites.
- Doing a lot of the heavy lifting for your lenders and increasing the likelihood that the mortgage completes.
The value of a good mortgage deal with a trusted lender is massive and you should be paid accordingly for making that happen.
Why is the Mortgage Broker Fee on the Rise?
As you know, most brokerages are charging more since the recent economic crisis. This is because mortgage lenders are increasing their own mortgage fees and you all need to find a way of funding these increased costs.
There are a lot of reasons why the fixed rate fee has gone up over the last few years but one reason stands out as being more important than others: the rise in lender mortgage fees!
Lenders have been forced to increase their commission rates for lending as the economy has crashed. This has also forced the need to increase fees in order for brokerages to remain profitable.
Another reason why fees have increased is because of the Buyer Market Review (BMR) that was introduced by Bank of England Governor Mark Carney. Amongst other things, the BMR forced lenders to reduce the number of mortgage products on offer and this of course increased mortgage broker fees.
How Can You Keep Your Mortgage Broker Fees Low for Your Brokerage?
Fee-free brokers is a good way to go, as it is perceived that your financial services are free but in fact, your money is coming from the lender rather than an upfront fee….this will attract more leads and in turn result in more deals.
Seek out the best deals and don’t be afraid to give advice on direct-only deals when people ask for them, they will appreciate your transparency and you will beat your local brokers by being the friendliest and most helpful. This will bring you more business and when you get more deals going on you can reduce your fees and remain competitive.
Form good relationships with specific lenders and aim for buyers that are looking for a nice loan size, this is all going to help with your overall strategy to bring your fees down.
In conclusion, all fees are on the rise and you need to do what you can in order to keep your mortgage brokerage afloat as competition increases.
New brokerages are starting up all over the UK and a good way to attract more leads is to keep your fees low and have a high success rate, closing more deals and finding good quality candidates who are looking for a cheap mortgage loan.
Most mortgage brokers receive bad quality leads and are therefore being forced to lower their fees to get people in the door…this shouldn’t be the case.