Mortgage questions: broker fees

Q: I am a first time buyer and am hoping to purchase a property this year with my partner who is also a first time buyer. I was just enquiring what are your fees for your service and what does the process involve?

A: Generally we don’t charge fees. We are paid commission by the Mortgage Lender and Insurance Company you choose to proceed with. We will advise you what each Lender and Insurer has to offer and try to secure the deal that suits your needs.

When you have chosen a suitable property we will take you through the process from putting down your booking deposit through to getting the keys to your new home.

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Brokers back on a level playing field, five floors down.

Recently brokers have been accused of having a financial incentive to place loans with certain banks, we cannot deny that he playing field was far from level, at one end some banks were paying 1% and others were paying 0.5%, the scene was set for commission based decisions, that isn’t to say they occurred – but having such income disparity certainly put the odds in favour of best advice being at risk.

So it is with depressed joy that we can say this situation no longer exists. Depressed because getting to this point has meant a 50% decrease in our gross income (while VAT has risen which hurts a zero VAT business like brokerage, and transactions as well as acquisition costs have risen, along with increased lead times and processing hours in order to get cases approved), but joy because the air has been officially cleared surrounding intermediaries, we are essentially back to a level playing field on the commissions front.

At or near the 50 basis point procurement fee is where all of the major lenders who deal with …

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The future of compensation in financial services (perhaps!)

I wrote before about the errors of compensation in financial services, in a nutshell people were earning money for short term performance in a long term game. However, what I had failed to do was provide potential solutions, this post is about alternative solutions, it will focus primarily on brokerage (because that is what I know best) but it can equally apply to banks or any financial company.

The basic tenets are

1. Long term reward for long term performance 2. Ensuring that bonus’s, while delivered in the short term, have some kind of long term implication. 3. Creating schemes that reward consistency and best advice, rather than one based on transactions.

I would state in advance, that enacting any of these plans will mean further economic pain for a group of workers who are already at the epicentre of the worldwide financial storm, it would also require considerable will to roll out, as well as the co-operation of the banks, the Financial Regulator, …

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Beware of Expert Opinion from Promoters.

Lately we have been witnessing a resurfacing of property promoters in the press after a long period of silence. We want to reassert our advice that people should do their own homework before embarking on a large asset purchase be it property or otherwise.

How can you tell if it makes sense to buy a property? Our suggestion, as a financial firm, is that you talk to a financial adviser, you determine your own circumstances, you look at your own unique situation, and that you don’t base your opinion on what you hear on the radio or TV from people in the property business. The people who are restarting to champion property now are doing so under the banner that ‘it is cheap to buy’, part of the ‘cheap’ is due to exceptionally low interest rates, which invariably will go up some day.

That is not to say ‘don’t buy property‘, far from it, what we are trying to tell people is ‘make prudent decisions’, don’t buy any asset you can’t afford …

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Understanding Deposit & Lending Margin relationships

Part of the way you can get a view of a lenders margins is by looking at the deposit margins they offer because deposit margins usually reflect – at least to some degree – lending margins. This is because there are two sides to a balance sheet with any bank, on one hand you have deposits which you attract in order to fund lending so if you have low deposit margins that is probably indicative of having low lending margins (although not always!), however, if you have higher deposit margins it is almost certain that you have high lending margins.

NIB released their results today so we’ll take them as an example as well as Anglo Irish Bank to demonstrate the way that you can read into certain elements of how a bank is run from the outside and also on the type of business they engage in.

For a start you’ll need to know that average margin on a mortgage with many banks is less than 1% and that is from …

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Understanding Deposit & Lending Margin relationships

Part of the way you can get a view of a lenders margins is by looking at the deposit margins they offer because deposit margins usually reflect – at least to some degree – lending margins. This is because there are two sides to a balance sheet with any bank, on one hand you have deposits which you attract in order to fund lending so if you have low deposit margins that is probably indicative of having low lending margins (although not always!), however, if you have higher deposit margins it is almost certain that you have high lending margins.

NIB released their results today so we’ll take them as an example as well as Anglo Irish Bank to demonstrate the way that you can read into certain elements of how a bank is run from the outside and also on the type of business they engage in.

For a start you’ll need to know that average margin on a mortgage with many banks is less than 1% and that is from …

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Why a rate cut is now inevitable

The ECB generally maintain that they are there to control inflation, normally we interpret this as ensuring that prices don’t get out of hand, or shoot up too quickly and indeed that is generally what rate changes are for, rates are raised to control price inflation. However, when the inverse happens (deflation or rapidly falling inflation) they will cut rates to stimulate the economy.

Today the treasury briefings put the flash estimate of inflation as being 1.6% while estimates were that it would be 1.8% which means that we are witnessing less inflation than expected and at a pace much faster than expected, if the ECB want to maintain inflation at ‘near but just below’ 2% then they have to reverse this trend and fast so there is strong likelihood that we will see a rate cut this week in order to achieve this (or at least work towards it!).

The Zero Interest Rate Policy (ZIRP) being pursued in the USA may come to our shores, the UK is already contemplating …

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Why Brokers will prosper and why one reporter is full of ‘Dan White’

Recently banks have been increasing the rates they charge clients and stating that they will (for the near future) concentrate on their existing clients in order to generate income for their shareholders. They have also (in tranches) cut brokers commissions, many opting to for a punishing 50% reduction (not so nice when you are on the receiving end may I add!). So now banks will make a higher margin on the money they lend, and juice the deal even more because now they don’t have to pay brokers as much, and brokers place over half of the residential homeloans in Ireland.

Some lenders have gone so far as to leave the mortgage intermediary market. The papers are touting that ‘Brokerage is an endangered species’, that we will face the same fate as travel agents. I would say that this couldn’t be farther from the truth and in today’s post we will look at the proposition of the direct model versus brokerage and why brokers will not only thrive but they will also increase market share whilst doing so.

Brokers for …

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Why Brokers will prosper and why one reporter is full of 'Dan White'

Recently banks have been increasing the rates they charge clients and stating that they will (for the near future) concentrate on their existing clients in order to generate income for their shareholders. They have also (in tranches) cut brokers commissions, many opting to for a punishing 50% reduction (not so nice when you are on the receiving end may I add!). So now banks will make a higher margin on the money they lend, and juice the deal even more because now they don’t have to pay brokers as much, and brokers place over half of the residential homeloans in Ireland.

Some lenders have gone so far as to leave the mortgage intermediary market. The papers are touting that ‘Brokerage is an endangered species’, that we will face the same fate as travel agents. I would say that this couldn’t be farther from the truth and in today’s post we will look at the proposition of the direct model versus brokerage and why brokers will not only thrive but they will also increase market share whilst doing so.

Brokers for …

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Questions to ask a Mortgage Broker

With the Irish Property Market entering a new phase it will be vital, if you are in the market already or planning to enter it, that you have a few key professionals on side. The people you will ideally work with are a Solicitor, a Broker, and an Estate Agent. In order to separate the wheat from the chaff you should be armed with a few questions. I have to warn you, some of the questions I’m posing here may be interpreted as being ‘rude’ but there are good reasons for asking them and you should mention the reasons you ask if any of the professionals you are speaking to seem to get offended. The best defence in the current market is a good team.

I’ll start with questions to ask a Mortgage Broker because this is the one I know the most about! Over half of the mortgages done in the Irish property market are placed by brokers, and while there are those who are extremely savvy in the area of finance and who don’t need a broker, there …

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