The mortgage market and the amount of business being written may only be a fraction of what it was back in the heady days before the banking crisis, but that doesn’t mean that the job of finding the right mortgage has got any easier.
There is still a vast array of home loans to choose from and even if borrowers have already worked out whether it’s a variable rate or fixed rate product that they’re going to plump for, they still need to fathom which is the cheapest mortgage.
Unlike savings accounts, personal loans or credit cards the answer isn’t as simple as referring to a best buy table on a comparison website or in the paper, although some lenders still launch attention grabbing interest rates, hoping that it will be sufficient to win custom from those who don’t take the time to shop around or use the services of an Independent Financial Adviser or mortgage broker.
Unfortunately a number of lenders continue to bypass the broker community and sell their products directly via branch networks or increasingly online, a situation which has hit the intermediary market hard.
The marketing departments of banks and building societies continue to develop products with profit margins based on various rate and fee combinations, and whilst it may work for them, for the man on the street it’s just a big headache.
One of the biggest problems for consumers is working out which is the most appropriate mortgage based on the total cost, i.e. not just the interest rate but also the associated fees which can vary enormously between lenders and individual products.
If we look at three of the two year fixed deals currently available, you’ll see what I’m getting at, so which do you think is the best of these? – Coventry Building Society 2.49% with a £199 booking fee and 1.5% arrangement fee, Lloyds TSB 2.94% and £1895 fee or Yorkshire Building Society 2.99% with £995 fee.
Having crunched the numbers, if the borrower was only looking to borrow £50,000 then the Coventry Building Society works out as the cheapest on a total cost basis, however if you’re looking to borrow £200,000 then due to the 1.5% arrangement fee setting the borrower back a hefty £3000, the same deal suddenly becomes the most expensive of the three.
If the client is looking to borrow £120,000 or £200,000 then it’s the Yorkshire Building Society deal that works out cheapest over the two year fixed term, but without access to a mortgage calculator it would be almost impossible to choose.
You can use some comparison websites to search for mortgages based on total cost, however many people still prefer to sit down face to face with an independent professional adviser to carry out the calculations on their behalf.
We need to see more lenders supporting the intermediary market as there’s the danger that without it we will see a depleted broker market suffer further.
Unfortunately for the consumer, it’s those very brokers that would be the first to point out the real cost of some of these attractive looking offers.