Mortgage deals made easy
Torn between going to a broker and finding a direct mortgage deal yourself? Christina Jordan has the answer.
Mortgage products are slowly starting to return to the market, or so we are told by financial information provider Moneyfacts. On 1st April this year the total number of mortgages available bottomed out at 1,209, a 90% drop from the peak of almost 12,000 products available in July 2007.
Now the number of mortgages is back on the up, having risen to 1,392 -- but it's not all good news.
Firstly, the market is dominated by deals for borrowers with at least 25% upfront, and there still isn't much available for people who need to borrow 90% of a property's value. In fact, the best deal for a borrower with a 10% deposit is 2% higher than for those with a 40% deposit, adding £170 per month to the cost of a £150,000 mortgage.
That's not the only problem
Despite the number of mortgages having risen since April, the number of mortgages available through mortgage brokers has dropped to a seven-year low. This figure comes from a company called Trigold which is a major provider of technology to help brokers source products. It says the number of deals has dropped to 1,979 in August, the first time it has fallen under 2,000 products for seven years.
I know this figure is higher than Moneyfacts' overall number of mortgages but there are different ways to measure the number of products (such as whether one deal with two fee options is counted as one or two products). But it's the trends that are more interesting and a seven-year low is a seven-year low.
Brokers left powerless
Since the start of the credit crunch lenders have started to change how they get their products to the consumer. Some started to offer two product ranges -- one range to borrowers who go through a broker, and a better range to those who buy direct, leaving brokers high and dry.
Most brokers want to give their clients the best advice possible -- but the best mortgage is all too often one they are not able to access, or regulated to recommend. Instead, brokers have to tell potential borrowers to walk out of the door and into the nearest bank. And if brokers don't arrange a mortgage, they very often don't get paid.
So from the borrower's point of view, is there any point in going to a broker if their available product range is so limited and does not include the best buys?
In a word, yes.
5 reasons brokers beat branches
- A good broker can still search through all mortgage deals, even those they can't access, and will tell you if the best product for your specific needs is a direct one. They might charge you a small fee for advice or simply hope that you come back next time you need to change your homeloan, arrange your insurance through them, or tell your friends about the good job they have done.
- You'll get unbiased, regulated mortgage advice. Brokers are qualified professionals. When you go into a bank branch you often get mortgage 'information' - not advice - from an employee of the bank, not a mortgage adviser. And of course, a bank or building society won't tell you if there is a better deal elsewhere.
- Many brokers are 'open all hours'. You can visit them, or they will come to you in the evening or even at the weekend. Your bank will probably not be so flexible.
- They also know how to get a mortgage through the system quickly if time is of the essence.
- If you have any unusual circumstances, bad credit, would prefer not to have to prove your income, or you are looking for a buy-to-let deal, you may have to use a broker. They have access to products in these sectors that you simply can't get direct.
Indeed, mortgage advisers continue to dominate mortgage lending, despite the problems they have accessing the best products. Broker-introduced business accounted for 64% of total mortgage lending in the first quarter of 2009, according to the Intermediary Mortgage Lenders Association. Looking at first-time buyers alone, a massive 70% of loans by volume came through brokers.
What we're doing about it
Here are lovemoney.com, we have our own broker service and so we've recognised the dilemma that borrowers have been facing. You want to go to a broker to get advice, but you also want to know what the best direct deal is.
So we've launched now a new online mortgage service that allows you to do both.
Have your mortgage cake and eat it!
Perhaps you want to search the whole market for your mortgage, making sure that you see all the products available to you, including direct-only products and broker-only products. With lovemoney.com's clever new mortgage tool you can do just that.
It's a completely original way of sourcing your mortgage online, and our professional qualified brokers are at the end of phone if you would like to chat through your options at any stage.
How does it work?
Tell us your basic mortgage requirements and then enter some information about yourself. We filter out mortgages that are not available to you leaving only those that are.
You then enter the type of mortgage you are looking for -- fixed, tracker, offsets etc and the filter works its magic. At this stage you can also filter out direct-only products if you only want to look at products available from our partners. Or you can keep direct deals in.
You can choose up to four of the mortgages listed and they will be compared side by side in a clear and straightforward way. (This is my favourite part of the new tool. It makes it really easy to look at the features of a deal next to another product.)
Then you choose your favourite and the system generates that lender's Terms Of Business documents and a Key Facts Illustration. These are the legal documents that all lenders (and brokers) need to give to clients when they show interest in a mortgage, and they give you all the information you need to make a decision. If you still want to go ahead you can apply online or speak to one of our mortgage experts who will help you apply.
If your favourite mortgage is a direct-only deal we will let you know and tell you how to best access it yourself.
At any stage you can simply pick up the phone and ask for fully regulated independent mortgage advice.
No fuss, lots of choice and access to a broker -- mortgages made easy.
Use the new lovemoney.com mortgage tool and share your experiences using the comments box below!