This year's Mortgages Market Study conducted by the FCA found that 80% of mortgages in 2016 were advised and 50% were arranged by an intermediary. We look at why so many choose to gain advice during the mortgage process rather than going it alone.
For many of us, buying a home is the most expensive purchase we will ever make. Likewise, the only way in which most of us are able to afford such a purchase is by taking out a mortgage. The Financial Conduct Authority’s Mortgages Market Study has found that the majority of mortgages proceed on an advised basis or via an intermediary. There are many elements to consider when choosing the best mortgage for you. Here we break down those elements, and confirm why seeking advice can be highly beneficial to borrowers.
It’s not all about price
The first aspect that naturally comes to mind when choosing a mortgage is price. No-one wants unnecessarily high repayments coming out of their bank account each month. However, the Building Societies Association (BSA) suggest that price may not be the most important factor to look out for when observing mortgage comparisons. The BSA head of mortgage policy, Paul Broadhead, stated that ‘mortgage brokers play a key role in identifying a number of factors that are important to a borrower before making a recommendation.’ They believe that it’s important to also look out for other factors such as the speed and quality of service when it comes to mortgage providers. Further to this, the Intermediary Mortgages Lenders Association (IMLA) believes that most people are able to identify the cheapest deal themselves anyway. Therefore, speaking to a financial adviser can allow you to utilise their knowledge and expertise of the market in order to establish key factors that may not be obvious to the average consumer.
Switching can be troublesome
It’s not just establishing your first mortgage that can seem like a long process. The procedure of switching products is also a big issue for some. The FCA report estimated that 30% of borrowers in 2016 struggled to find a cheaper alternative mortgage. There are many consumers who, after their fixed term period, remain with the same lender despite significantly higher reversion rates.
Furthermore, the FCA has also estimated around 140,000 ‘mortgage prisoners’ who are unable to switch to a better deal due to inactive or unauthorised lenders. Although a firm could have been authorised when your mortgage was first established, over time they may stop lending to new or existing customers. This has meant that a small minority of borrowers have been trapped in their current deal. Although the FCA has said they will do more to assist these borrowers, it may be beneficial to take advice from a financial professional in order to gain assistance in choosing a reputable lender.
Evidently, there is more to choosing the right mortgage than meets the eye. Whether you’re a first-time buyer or looking to re-mortgage, gaining comprehensive, independent financial advice could put you in good stead for making the right decision for one of life’s biggest financial commitments.
Your home may be repossessed if you do not keep up with repayments on your mortgage.