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The good, the bad and the ugly of mortgage brokers

One of the biggest stories post-Brexit is how the housing market has proven to be more resilient than anyone could have imagined. 

Even setting aside the doom and gloom reports of falls in house values and a struggling economy - neither of which came to fruition - house prices have continued to surprise many.

Nationwide has released figures that show house prices are still on the up. February saw an increase of 0.6% over the month before. This was three times the 0.2% prediction calculated by analysts prior to the release of the figures. Following a 0.8% increase in December and a further 0.2% increase in January, house prices are clearly still on the up.

It looks like low interest rates are continuing to drive the rise in house prices. With more people looking to secure mortgages to get onto the housing ladder or to move home, demand is steady. 

This gives estate agents a great opportunity to generate incremental income, if they can offer home buyers a quality mortgage service.

However, the bad news is that some estate agents are missing out on mortgage revenue because they are working with unprofessional brokers, who are lazy and only use lenders that they are familiar with, rather than searching for the best deal for the client.  

In the worst case scenario, bad brokers can be outright fraudulent – lying about income, or other aspects relating to the applicant.

Bad mortgage brokers are also prone to setting up buy-to-let mortgages, when it should be a residential mortgage. They do this to either bypass income requirements, bypass lenders tougher residential lending criteria, or to get a mortgage more affordable. Buy-to-let mortgages allow interest-only, whereas the majority of residential mortgages do not allow this.

We have also seen evidence of mortgage brokers securing mortgages for investment properties which are then inhabited by family members, or arranging a mortgage for an investment property that is either a multi-let, Airbnb or student accommodation, without informing the lender.

In order to maximise income and maintain solid business practice, estate agents need to ensure they are partnered with professional mortgage brokers that offer a high level of service.

*Darren Pescod is managing director of The Mortgage Broker Ltd