First Time Buyer
Do you really need a mortgage broker?
Finding the right mortgage can be an anxious task.
One increasingly popular method is to use a mortgage adviser to help find the right product for you. These advisers, often called mortgage brokers or intermediaries, are professionally trained to offer advice. They can take into account your deposit, earnings, attitude to risk, future plans and prospective property you wish to buy and identify the mortgage products most suitable for your circumstances.
David Hollingworth of mortgage brokerage London & Country agrees, pointing out that even if a borrower is able to pinpoint a good mortgage deal they could still fall down during the application process if they don’t have professional advice.
Many banks have tight criteria around who they will lend to, considering the job, income and location of a borrower. A rejected application can even leave a negative footprint on your credit record, but a mortgage adviser will be able to offer guidance on which lenders are likely to accept an application before it reaches that stage.
“In the current market advice has become more important than ever, as lender criteria have tightened markedly and mortgage availability remains constrained,” Hollingworth says.
“Whereas the question for borrowers in the past was which lender would offer them the best rate it has now shifted to which lender will be able to lend to me at all. A borrower going it alone in today’s market may be able to identify an attractive mortgage deal but that is only part of the battle. What is harder to be sure of is whether they will meet the lender’s criteria and their application be accepted.
An adviser can also help smooth any wrinkles during the process due to their communication channel into lenders.
However, there are drawbacks to using a mortgage adviser. Some are unable to offer advice on all products in the market, with a number of lenders including high street banking giant and competitive mortgage provider HSBC only dealing with customers in branches or over the phone, not via intermediaries.
Peter Dockar, head of mortgages at HSBC, says that it prefers to work directly with the customer to help them make the best decision about their mortgage.
“A central plank to our responsible lending strategy is that we believe we are best placed to sell our own mortgages, and that lender and borrower need to deal with each during the saleÊprocess to make the best lending and borrowing decisions.
“The vast majority of our borrowers also haveÊtheir current account with us as well, whichÊmeans we can understand our customers a bit better and are in a good position to lend to them.”
He adds that lenders are now more eager to lend to existing customers, with many banks now offering preferential borrowing rates to current account holders.
“Many banks are following our lead in offering exclusive and preferential mortgage deals to existing bank customers. This practice is one of the few ways in which lenders can maintain competitive mortgage pricing sustainably over the long term.
“The more business customers do with us, the better we can understand their needs, and the better the offers or interest rates we can provide them.”
Off the high street
In their favour, mortgage advisers will also have knowledge of products from building societies based outside your local area and banks like Aldermore, which is not on the high street and conducts most of its business through brokers. Other lenders including Precise Mortgages, which specialises in offering products to people with a patchy credit history, will only accept mortgage applications via an intermediary.
Hollingworth adds that consumers often turn to a mortgage broker for help after being rejected by a high street bank.
“We have had incidences of borrowers coming to us for help having been declined weeks after making an application,” he admits.
“A good broker will not only be able to identify the right deal and factor in all lender fees to that equation but will also be able to target the lender according to criteria.”All in all the tight mortgage market has meant that brokers add crucial value and could save a borrower a lot of wasted time and money by avoiding applications to lenders that are doomed to fail.
Whether you choose to take out a mortgage using a broker or decide to go it alone, conducting thorough research is a must. Simply reading up on the subject before trying to track down your perfect mortgage can make a huge amount of difference.
“No one can argue that shopping around isn’t a sensible approach to take when looking for a new mortgage,” says HSBC’s Dockar.
“Going to a broker can be a useful part of this process, but it definitely shouldn’t be seen as the only route to guaranteeing you the best deal.
“Try and talk to friends and family about the type of mortgage deals they are on and consult online price comparison websites and best buy tables to get a good idea of the products that are currently on the market before engaging with a lender.”