Brokers must resist getting dazzled by low rates – Cleary

With the Bank of England base rate remaining at a near historic low, ferocious competition between lenders has resulted in ultra-low mortgage rates to try to tempt borrowers. 

And it appears to be working. After a torrid few years, it seems we’re seeing the green shoots of recovery in the market. According to the latest figures from UK Finance, there were 5,800 new buy to let home purchase mortgages completed in July 2019, 5.5 per cent more than at this time last year, as well as 15,100 buy to let remortgages, two per cent more than in the same month in 2018.

I’ve read that lenders are falling over themselves to lend money. With the base rate remaining low, lenders have little wriggle room when it comes to raising rates on mortgages. And with ring-fencing regulations forcing banks to separate their high street operations from their investment banking businesses, they’re left with a pool of cash from customer deposits.

Mortgage lending is one of the few ways they can put it to work.

However, while this is great news for a sector which has been battered from pillar to post recently, brokers still need to be careful when choosing the mortgage that’s right for their customers.

While a low rate is undeniably very attractive, it shouldn’t be the only thing brokers are thinking about when giving advice.

They also need to be thinking about what the most suitable product type is for their customers’ needs, what the reversion rate is once the initial term has finished, what the associated costs are and whether they’ll be penalised for overpaying or repaying their mortgage early.

It’s also worth remembering that there’s more than one kind of borrower. They’re not a homogenous group; each one of them has their own backstory. What if they’re self-employed with only one year’s worth of accounts or have a complex income? What if they’ve experienced a credit blip in the past? 

It all highlights the importance of a good broker who can find them the right deal for their customers, as well as a dependable lender who understands their needs.

With the mortgage market as competitive as ever, it’s never been more important that brokers look at the overall value of a product. While a low rate might dazzle in the short-term, it might not look quite as sparkling in the long-run once the initial lustre has faded.