Mortgage brokers have no obligation to get their customers the best deal. Actually, mortgage brokers have an incentive to push customers toward a mortgage with an unnecessarily high rate. That’s because the bank’s payment to the mortgage broker, called a yield spread premium, compensates the broker for the spread between the lowest rate at which the lender will make the loan and the rate the borrower ends up with. In other words, the higher the rate, the more money the broker makes.

The same holds true when buying a car. The dealership finds our what rateis available to the buyer, and makes more money if the dealer can convince the buyer that a higher rate is the best they can do. Add in all the other up’s and extra’s and the dealer is the winner.