Brokers come second best to DIY research

Teri Harman needed to remortgage to finance an extension, so Jobs & Money sent her out to test the deals offered by banks and brokers. She wasn't very impressed - particularly with the service from smaller brokers. Here's what she found:

When I first applied for a mortgage 20 years ago the choice was between repayments and endowments. But when we decided to build an extension, and to remortgage our home to pay for it, we found it a whole new world, with a new vocabulary to match.

I set out to discover whether it was worth consulting a mortgage broker to cut through the complexity and find the best deal.

Top of my list was the much-advertised Charcol, whose representative Darren Wiltshire told me they had access to more than 4,000 products from more than 150 lenders. Some deals are exclusive to Charcol.

I told him we wanted to borrow £88,000. Mr Wiltshire sensibly suggested that first I should ask my existing lender what they would offer to avoid fees for switching.

But after 16 years Lloyds TSB did not want to know. They would increase my loan but only at the high rate I wanted to flee.

Mr Wiltshire said Charcol would charge up to 1% of the amount borrowed, payable on completion - in my case £880 - but he stressed this payment was for their advice, not for arranging the loan, which was free.

This may explain why advice from Charcol-online.com is free. You only get recommendations, although you can take advantage of exclusive deals, typically discounts of 2% to 3% for a limited period. If you buy these, there's a booking fee of £49.

Next I phoned Charcol's parent company, Bradford & Bingley, which also promises independent advice. Caroline Cooke from my nearest branch called back and suggested a meeting. She quoted a fee of £350 based on the amount I wanted to borrow and said there were "currently some fantastic deals where all legal and other fees would be included".

From Yellow Pages I tried a couple of smaller brokers. Andy Bradshaw of Bradshaw Associates in Ipswich took some details and quoted a flat £250 fee, payable on completion. What he did not explain on the phone - although it was in the small print of the advert - was that his company represented Legal & General for investment business. He called back within an hour and recommended the L&G base rate tracker mortgage.

Mandy Miller of E-zeemortgage, whom I contacted by email after failing to get a reply on the 0800 number, also failed to tell me that her company was a tied agent for Scottish Amicable (again, it was in the small print of the ad). But this applied only to investments; mortgage advice was unbiased.

The fee was £395, which could be added to the overall loan. I had to complete a questionnaire, and her response was the slowest. She came up with a couple of Abbey National loans - a discount mortgage (5% until April 2003, monthly repayment: £710.23, with an early redemption penalty only during the discount period) or 5.45% fixed rate until April 2003, monthly repayment: £733.95. There was a £195 booking fee on the latter, payable to Abbey.

In the end, we did our own research and came up with Woolwich Open Plan - an all-in-one scheme which offsets current account and savings cash against the loan.

There are a number of these plans - from Intelligent Finance, Britannic Money and Virgin among others - but none of the brokers I spoke to mentioned the idea. These plans are largely sold through the companies themselves.

Controversially, a mortgage is one of the few financial products where those offering advice still don't come under the control of a regulator. The Mortgage Code, which offers some degree of protection, is voluntary.

Brokers are also not allowed to charge a fee in connection with advice about mortgages conforming to the new Cat standards for investments, which means they are unlikely to recommend such loans.

There is a vast amount of information about mortgages, especially on the internet, which alerts you to deals offered by smaller building societies, such as Skipton, Loughborough, Scarborough, Hinckley & Rugby and West Bromwich - all of which are in the "best buy" lists.

You can find general information at moneyfacts.co.uk. If you don't have web access, Moneyfacts' faxback service on 0906 076 0701 offers a best mortgage selection which is updated daily.

Try kmc.co.uk if you have had problems getting a loan because you don't meet normal lending criteria. The Kensington Mortgage Company is a lender specialising in non-standard mortgages.