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14 Jul 2018

Estate agents misleading buyers about in-house mortgage brokers

Some buyers told they have to use recommended brokers to go on viewings

An undercover investigation by Which? has found that some estate agents are misleading homebuyers about their in-house mortgage-broking services.

When we sent researchers posing as first-time buyers into high street estate agencies, 27% of agents said that using their in-house mortgage broker would make a difference to the property purchase.

One agent even claimed it could help the buyer secure a lower price for a property.

This follows a Which? survey revealing that 17% of those who'd used in-house brokers had done so as a condition of being allowed to view properties.

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In-house mortgage broking: what the agents claimed

Our researchers visited 29 estate agents' branches in Birmingham, Colchester, Maidenhead and Maidstone in April 2018.

Of the 22 estate agents who offered in-house mortgage-broking services, none said that the buyer had to use them.

However, three said that their in-house broker would get the buyer better deals than they'd find elsewhere, and one said it would make the homebuying process quicker.

Six estate agents told our researchers that using their in-house broker would make a difference to their purchase- and one even said that the seller might accept a lower offer.

Reasons given for an in-house broker making a difference to their purchase included:

  • The sale won't fall through so you're in a 'better position'
  • It will be quicker to get a mortgage or to complete the purchase
  • The agent can keep an eye on progress and keep clients updated
  • Clients are more likely to accept an offer from buyers getting their mortgage in-house
  • The process is smoother
  • Sellers may be more willing to accept a lower offer

Our undercover researchers also asked whether the agent would receive a referral fee or commission if they used the recommended broker.

Half of the agents said they would, six said they wouldn't, and seven were unclear.

Find out more:registering with estate agents

Using an estate agent-recommended broker

When we surveyed 1,720 recent homebuyers in December 2017, 26% said that they'd used the mortgage broker recommended by their estate agent.

While 55% said they'd done so because they trusted their agent's recommendation, more sinister reasons were also given.

Alarmingly, 17% claimed their agent had told them they wouldn't be allowed to go on viewings unless they used the in-house broker.

A quarter (25%) said the agent had told them it would make the buying process smoother, 14% were told it would give them a better choice of mortgage deals, and 13% that it would make them more desirable as buyers.

Find out more:how much deposit do you need for a mortgage?

The truth about mortgage broking

Many people use a mortgage broker when buying a house, and there's nothing to say that you shouldn't use one recommended by your estate agent.

But an estate agent should never refuse to take you on a viewing just because you're not using their in-house broker.

Before signing up with any mortgage broker, always ask the following questions:

1. Are you whole of market?

Many brokers only have relationships in place with a select panel of lenders, so you could miss out on better rates offered elsewhere.

A whole-of-market mortgage broker will be able to look at every deal available to brokers (or 'intermediaries') and recommend the best one for you.

2. Will you tell me about direct deals?

Some deals are only available to people applying directly (without a broker). The best brokers will tell you if there are any direct deals that would cost you less.

3. How are you paid?

When brokers set up a mortgage deal, the lender will pay them a commission. Some individual brokers will receive this as part of their pay packet, while others receive a set salary.

If the commission is paid to them directly, they may earn different amounts depending on which lender and deal they set you up with.

Also, if they set you up with a shorter-term deal, they could potentially earn a second commission when it comes to remortgaging.

If your broker earns commission as part of their income, make sure you trust that they're genuinely acting in your best interests before signing on the dotted line.

4. What are your fees?

Some brokers offer their services for free while others charge a fee. A good broker should be entirely transparent and upfront about this from the very start of the process.

5. What is included in the service?

A good broker will help you through the entire process, from getting your finances into order before applying, right through to the day your mortgage completes and you move in.

Find out more:how to choose a mortgage broker