A study this week by Stipendium found that two-thirds of those who bought a home in the last six months admitted to being unaware of how the homebuying process worked at the outset.
Arranging a solicitor or surveyor was picked out by one in five as the aspect of the process they were most in the dark about, followed by exchanging contracts at 19 per cent, and arranging a mortgage in principle with 16 per cent.
Intermediaries told Mortgage Solutions that educating clients about the process ‒ and clearing up misunderstandings ‒ is a core part of the advice process, though warned that the industry can do more to make things easier for borrowers.
Education should start at school
Ian Hewett, founder at The Bearded Mortgage Broker, argued this is a topic that needs to be covered in school.
He continued: “What a way to show them how to plan for when that time comes, look at all the options that are available and how to prepare for it. Whether it is the rental options, mortgages, living with parents, how to manage their credit and other financial choices has got to be more important than some of the nonsense on the current curriculum.”
Jamie Lennox, director of Dimora Mortgages, agreed, noting that the lack of coverage at school meant that big knowledge gaps among potential house buyers was no surprise.
“Our education system completely overlooks all aspects of finance and doesn’t prepare future generations for real-life events,” he continued.
The idea of learning about the house buying process at school was also raised by the Stipendium, with almost three quarters of respondents (72 per cent) stating that learning about the process of homeownership at school would be a good idea.
Walking through the complexities
Lewis Shaw, founder of Shaw Financial Services, said the homebuying process was far more complex than many give it credit for, which is why he walks clients through the process and asks them to put their faith in his experience.
He added: “For this reason, I charge a fee; being a broker isn’t simply picking a rate and sending someone on their merry way. It’s about coordinating all parts of the transaction, troubleshooting before problems arise and getting the ducks in a row from the start, so potential issues are nipped in the bud before they raise their head.”
Lennox noted that “so many areas” take clients by surprise, “such as the process, additional costs, timescales, and handling obstacles along the way.”
He continued: “Which if these aren’t accounted for early in the process can lead to additional stress, delays, and potentially a greater cost to the customer.”
Having someone to talk to makes all the difference
It’s vital for brokers to provide detail for first-time buyers in a way that’s easy to understand, according to Stuart Gregory, managing director of Lentune Mortgage Consultancy. He suggested that there was a “small proportion of brokers out there who do seem to undertake a little ego trip when dealing with first-time buyers”.
Gregory said that breaking down the process into small steps makes the process less daunting, adding that having someone to talk to “makes all the difference”.
“That’s something you may not get from a remote service designed to make you believe that everything is so straightforward – an algorithm won’t answer questions on a weekend,” he concluded.
Scott Taylor Barr, financial adviser at Carl Summers Financial Services, said that it was important to remember that it’s not just first-time buyers who can be flummoxed by the process.
“With people only moving house every decade or so, even someone with a few moves under their belt often finds the whole landscape has changed since they last went through the process,” he pointed out.
Taylor Barr said he emphasises that there are no silly questions, and that he is always available throughout the process.
He continued: “All of this is part of the service, being a mortgage broker is so much more than just finding people a great interest rate.”
We’ve forgotten what it’s like to be a borrower
Martin Stewart, director of London Money, said all too often the industry has forgotten what it’s like to be a consumer, and can turn into something of an echo chamber.
He continued: “We are often asked very basic questions by clients who possess qualifications way higher than Cemap. To many, a mortgage is simply a necessary evil with which to buy their dream home. Once they have the keys, the mortgage is metaphorically put in that kitchen drawer of phone cables and random light bulbs and never thought of again.”
This was echoed by Hewett, who added: “I walk my first-time buyers through the whole journey and do not use acronyms, abbreviations or other bullshit jargon that the industry uses.”
Improving client understanding
Stewart argued that the responsibility for education needs to fall on the industry and the regulators, rather than on the clients themselves.
“We focus on the wrong things, and our communication is poor,” he concluded.
However, Shaw suggested that the focus should be on raising the entry level for mortgage broking.
He continued: “As an industry, we ought to eliminate the sausage factories pumping out rate pickers and enforce the new consumer duty from the FCA when it comes into force shortly.”
