Recently, I found myself in a major high street clothes retailer, in the throes of their mid-season sale. I found a couple of bargains at significantly reduced prices so I happily queued. Due to the popularity of the sale, the shop was packed and it took me 25 minutes to pay for my items.
Now, imagine a different scenario. It is late in the afternoon and I am desperate to find a new shirt for the evening’s dinner party. Had I walked into the same store and seen the mayhem inside, I would have turned straight around and headed elsewhere. The retailer next door is empty, so I hastily choose a reasonable shirt, pay and have my item bagged up within minutes. It is perhaps not my first choice, and I pay slightly more than I would have liked, but it was simple and easy and I manage to get on with more important jobs in hand. In some situations, the speed of the transaction becomes a bigger concern than the cost of the item.
This is reflective of the current mortgage market in the UK. There are some exceptional deals available at present, and often such deals involve free legal and valuation fees. But the downside for such deals in the current climate lies in the back-end processing of applications.
Lenders breeze in and out of the market and rarely does one lender persistently top the best buy tables.
When they do, it follows that they are going to sell more of their product, so the queuing time is longer. Lenders do not have a transient workforce allowing them to take on and lay off processing staff as demand increases and wanes, so the same body of people is processing cases whether lenders take 10 or 10,000 applications per week. It is simple logic that an exceptional product is going to result in an increased number of applications, hence service standards will suffer.
If you are buying a property with a three-week completion deadline, you are not going to fulfil this by plumping for the best two-year discounted rate in the market. You will almost certainly lose out. Here, what is more important ‘ the deal or the lender’s ability to fulfil its processing work fast enough for you to complete your purchase? The answer is surely the latter, and it is often worth reminding clients of this when recommending mortgages.
Sometimes, you can get an exceptional deal quickly, and it is often through assistance from a good adviser or broker with important contacts within a lender. But if you want to secure a great deal, you will often have to join the queue with all the other bargain hunters.
Nick Parkhouse is a consultant at Savills Private Finance