Using a broker can make a real difference when your case is anything other than simple, but it helps to understand how they are paid so you can judge value and avoid surprises. Most brokers earn in one of two ways, and often a mix of both.
This guide explains procuration fees and broker fees in plain terms, and the questions worth asking. It is information only, not financial advice. A good broker will be happy to explain their charges clearly before you commit to anything.
Procuration fees
When a broker arranges your mortgage, the lender pays them a commission called a procuration fee. It is typically a small percentage of the loan and is paid by the lender, not by you. This is how fee-free brokers can earn without charging you directly.
Broker fees
Some brokers also charge you a fee for their advice and work, which can be a fixed amount or a percentage of the loan. A fee can be fair, especially for a complex case that takes more work, but you should always know the amount, when it is payable, and whether any part is refundable if the mortgage does not go ahead.
Fee-free is not the same as free
A fee-free broker does not charge you, but they still earn a procuration fee from the lender. That is perfectly normal and does not make their advice worse. What matters is that they search a wide range of lenders and recommend the right deal for you rather than the one that pays them most.
What whole of market means
A whole of market broker can choose from most lenders rather than a limited panel, which usually means a better chance of finding a deal that fits an unusual case. Some brokers are tied to a small panel, so it is worth asking how many lenders they can access before you rely on their search.
Questions to ask a broker
A few direct questions will tell you a lot about whether a broker suits you.
- How are you paid, and will I be charged a fee?
- If there is a fee, how much is it and when is it due?
- Do you search the whole market or a panel of lenders?
- Have you placed cases like mine before?
- Are you authorised by the Financial Conduct Authority?
Common questions
Do I have to pay a mortgage broker?
Not always. Many brokers are fee-free and earn only the procuration fee from the lender. Others charge a fee, particularly for complex cases, so ask upfront what applies to you.
Is a fee-charging broker worth it?
It can be, if your case is complex and they can access lenders or deals you could not find alone. Judge it on the value and the outcome, and make sure the fee is clear before you agree.
Will a broker recommend the deal that pays them most?
A broker authorised by the Financial Conduct Authority must recommend a suitable deal for you. Procuration fees are broadly similar across lenders, and you can always ask why a particular product was chosen.
What does whole of market actually mean?
It means the broker can search across most lenders rather than a small panel. It does not always include every single lender, as a few deal only directly, but it gives a wide choice.
How do I check a broker is legitimate?
Look them up on the Financial Conduct Authority Register, which confirms they are authorised. Any genuine broker will give you their firm's details so you can check.