Average mortgage rates dominated market discussions following the mini Budget, then again as they started to fall along with swap rates. More recently, pricing has risen again in response to climbing swap rates, albeit at a less-frantic pace.
With the Financial Conduct Authority (FCA) estimating that one-and-a-half million mortgages are due a refinance this year, borrowers are seeking to avoid a significant payment jump.
Rhys Schofield, founder of Peak Mortgages and Protection, said his firm led with the cheapest overall deal, as it was its job to leave as many pounds as possible in clients’ back pockets after fees and set-up costs were accounted for.
“We’ll spend an element of time with Mortgage Brain just highlighting why a few of those lower rates are actually more expensive overall, but focus on the lowest price overall on the duration of the deal,” he added.
Schofield said it was “very unusual” for a client to be “blinkered by lower rates”, but said this was probably down to them choosing Peak Mortgages as advisers.
“We don’t need to dazzle them with shiny low rates that might not be suitable just to get a bum on a seat for an appointment,” he added.
Reframing expectations
Clive Read, founder of Goldmanread, said that when looking for a new mortgage, many clients were “fixated” on the rate and became disappointed when they found they were ineligible for a headline deal they saw on Google.
He said: “This can be for many reasons; their deposit is too low, their credit rating has suffered, or they may simply not meet the lender’s income multiples.”
Read’s firm also tries to make clients look beyond the best rate by telling them there are other factors, such as “any incentives on offer from the lender, whether a client would benefit from an offset mortgage or whether overpayment flexibility is of benefit”.
He added: “When recommending a mortgage, it’s important that brokers take a holistic approach that takes account of all of the client’s potential needs, rather than just basing everything on rate.
“Clients really benefit from and appreciate this approach, and though they may realise that they’re unable to access the ‘best’ rate on the market, they are often happy with the rate and overall mortgage package that can be offered.”
Perkins said some clients did not know that the best rate was often only available at lower loan to value (LTV) tiers, meaning anyone with a deposit of less than 40 per cent would not be able to secure this.
“Whilst it is not nice to burst clients’ bubbles, it is crucial to leave them fully informed on what is most suitable to them in their individual circumstances, lending criteria, affordability and looking at overall cost, so they can then make informed decisions on their maximum purchase price and appropriately set their house-buying goals,” he said.
In some cases, clients had enquired with the bank first and were given an affordable loan, only to be surprised to find they could get an even better deal through Yellow Brick Mortgages by considering alternative lenders.
He said: “Ultimately, it is good for clients to do research and gather information, but in such a volatile rates market and with such differing complex criteria, it has never been more important to receive professional mortgage advice from a broker around what the most suitable mortgages are available to them, and in so doing strengthen their position and avoid future potential disappointment.”
