One of the more worrying findings to emerge this week is that nine out of ten people planning on taking out a mortgage in the next 12 months don’t understand the difference between the type of deals on offer.
One hopes that by the time they sign on the dotted line they will have done their research and figured out the pros and cons of a fixed, tracker or discounted rate. Or better still, taken advice from someone who does know and who will recommend the right deal for their circumstances – a mortgage broker.
If ever proof were needed that a broker is invaluable, this survey from First Direct – ironically, a lender that doesn’t make its mortgages available through intermediaries – provides it. With thousands of mortgages to choose from, it’s a confusing process. Get it wrong, and borrowers could make an expensive mistake, or in a worst-case scenario, have their application rejected, leaving a footprint on their credit file which will make it harder to get a mortgage in future.
That’s because it isn’t simply a matter of knowing how a fixed or variable rate works, and which mortgage is the cheapest. It’s about lenders’ criteria and whether a borrower fits these. It’s about service levels; how would the average borrower applying direct to a lender know about service issues and a backlog that means it is taking six weeks just for staff to look at a mortgage application? Use a broker and you are matched to the right lender with your profile, timeframe and personal circumstances, all taken into account.
Borrowers who use a broker do so because they realise there is help out there when it comes to navigating the mortgage maze. It’s not just first-time buyers clueless about the home-buying process; many brokers find that much of their business comes from existing clients who return again and again, and recommend friends and family.
Many are busy, with full-time jobs and other stuff to get on with. They don’t have time to compare all the products on the market. And given that there are professionals out there, better qualified and willing and able to help, it seems madness to do it yourself.
First Direct has chosen not to sell its products through brokers and that’s its choice, however misguided given how vital advice is. But if a First Direct product happens to be the right one for a borrower, an independent mortgage broker will still recommend it.
That’s what independence is all about. We must dispel the myth that borrowers will be ‘disadvantaged’ in some way by using a broker and ensure that confusion becomes a thing of the past.
