Digital mortgage brokers: will you save money on your home loan by getting advice online?

The likes of Habito and Trussle promise to change the way we receive mortgage advice, but they aren't suitable for everyone.

Mortgage brokers play an incredibly important role in the mortgage market in the UK.

A study from mortgage technology firm IRESS last year suggested that brokers account for around 80% of all mortgage applications – in other words, four out of every five applications for a home loan go via an adviser (you can also compare deals with loveMONEY).

There are a number of different reasons why you might want to do that.

The first is simply that mortgages can be a complicated business, and having an expert handle working out which deals to go for and holding your hand through the application process can offer peace of mind.

It also means you have someone chasing things up on your behalf when they drag, rather than having to do it yourself.

Another big selling point is that brokers will have access to lenders that only offer their deals via intermediaries – there are plenty of lenders, particularly in the more specialist areas of the market, which don’t lend directly to borrowers.

In other words, by handling the search and application yourself, you may be ruling out lenders who offer the best deals specifically for your circumstances.

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The move to online brokers

For many advisers, the process is quite traditional.

You book in a face to face meeting with the broker, at which point they’ll go through your financial position and get an idea of your attitude to risk (which will inform them on whether you’re more likely to prefer a fixed rate deal or a tracker).

Next, they will go through the lenders to find which ones are most likely to approve you and which deals will match your circumstances.

But the last couple of years have seen a swathe of digital mortgage brokers, promising to handle the whole process online.

Take Trussle. If you’re remortgaging, for example, you just answer a few questions about your existing mortgage position and you can either go over to get some personalised advice from one of its in-house team of brokers, or sign up for its ‘mortgage monitor’, which will contact you whenever a deal is launched which the firm believes will save you money.

Another example is Habito, which allows you to speak with a ‘digital mortgage adviser’ – read a chatbot – which works out which deals best suit you.

You then have a chat with an adviser and, once you’re happy with what deal to go for, they’ll handle the application on your behalf.

Even well-established brokers are taking steps to offer more of an online service.

Coreco, a high-profile London brokerage, recently rebranded to essentially offer a hybrid service, combining both traditional face-to-face advice with the ability for borrowers to advance their application online.

The appeal of going online

I can definitely understand why moving online is so appealing. Rather than having to arrange a meeting in the evening and either go to the adviser or have them come to you, you can get things started from your own home, and at a time that suits you.

However, the fact remains that while technology is being used to help with the research at the start of the process, there is only so much that can be handled by the clever algorithms that these various advisers have come up with.

The actual advice and application still comes down to human advisers getting involved.

The experience may be a bit quicker and sleeker than the old-fashioned route, but fundamentally the advice process hasn’t really changed.

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What about costs?

An important consideration when choosing a mortgage broker, whether they are online only or offer face-to-face advice is what it is going to cost you.

Most mortgage brokers will charge you something for their advice, though generally this often only applies once a certain amount of progress has been made, for example, an application has been made.

Nonetheless, it’s worth checking precisely how the fees will work well in advance.

It’s notable that online brokers generally trumpet the fact that they don’t charge you a fee, so it can work out cheaper if you go with a digital broker.

That said, the fee for the advice should never be the driving reason in choosing which broker to go with – it’s more important that you are comfortable with how they offer that advice, and just how many lenders they include in their research.

Remember, lenders pay brokers a fee for placing business with them called a procuration fee. Brokers have to tell you what they will be getting for completing the case.

How many lenders do you work with?

Perhaps even more important from a borrower’s perspective is to establish just how many lenders the broker includes when comparing deals.

While many brokers are whole of market, some work with a limited panel of lenders.

This is potentially a problem – while they will find you the best deal on offer from that panel, there may be many lenders that they don’t even consider who may have even more competitive deals on offer.

The more lenders they work with, the better.

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