These days, finding a good mortgage might feel a bit like trying to track down the Loch Ness monster; rumours abound but can you actually find it?
As you know, there are many ways to get a mortgage. You can get it by post, phone, through the internet, by interactive TV; the list is endless.
But the reality comes down to this; to find a good mortgage, should you use a mortgage lender or should you use an impartial adviser?
That's a good question. So, here are some pros and cons to using both.
Going direct
A lot of you like to do your own homework, pick the mortgage you want and then go straight to a mortgage lender to get it.
Well, you could be paying more to take out a mortgage through a broker as increasing numbers of mortgage lenders do offer better rates to those of you going direct to their branches.
According to analyst Moneyfacts, of the top 20 2 year fixed-rate mortgages, (based on a loan of £150,000), the 13 best deals are only available directly from the lender. Three of the top 20 deals are available through an adviser.
Looking at the Moneyfacts table, the best 2 year fixed rate mortgage comes from Welsh building society Principality, at 5.99% with no fee. You can get it if you have a deposit of 25% or more.
For those with a 10% deposit, the Loughborough building society offers you a 5.75% rate for 2 years but you do have to pay a £649 fee to pay.
Darren Cook of Moneyfacts said:
'With continuing uncertainty in the mortgage market and the total number of products continuing to decline, many more people will be considering approaching a broker to find them the best mortgage deal. However, many brokers are finding that their choice of products to recommend to clients has been increasingly restricted as more lenders move to offer their most competitive products just for direct-only business.'
Last week First Direct welcomed back new mortgage customers after a brief stint away from the market. It is offering a cheaper 2 year fixed rate mortgage than the Principality at 5.76% for those of you with a deposit of 20%; however, the bank has started charging two fees to this mortgage which comes to around £2,000!
Exclusive deals
Mortgage lenders are also giving you exclusive deals if you take out another product with them; here are a few examples:
- Halifax's range of first-time buyer mortgages are available with a deposit of as little as 3%. Rates start at 6.39% but if you want a LTV greater than 90%, you will need to open or already hold a salary funded Halifax/Bank of Scotland current account.
- HSBC offers you enhanced rates if you have either its Plus or Premier current accounts. To qualify for a Premier account, you need to have a mortgage of at least £250,000 and a salary of over £70,000 or stock market investments with HSBC. HSBC's normal rate for its fixed-rate mortgages is 5.98%. As a Plus customer, you would get the loan at 5.88% and Premier customers at 5.78%.
Using an adviser
Others of you prefer to use an impartial adviser or broker; this is because most of them can search all mortgage lenders, (including some you may never have heard of) to find the best deal for your situation.
David Hollingworth of fee-free mortgage broker London & Country says the lenders' practice of offering exclusive deals is 'muddying the waters' of the increasingly complicated mortgage market:
'It is a backward step when banks are cross-selling products to customers with their mortgage and that customer is buying without getting advice. In this uncertain environment advice is more important than ever.'
Melanie Bien of brokers SPF agrees:
'You will only be advised on the products that the lender has on offer by someone who is not a qualified financial adviser,' she says, adding that you will be very lucky if your lender can offer you products that are the most suitable for your needs.
Last week the Financial Services Authority (FSA) said when brokers recognised that there were more competitive products available direct from mortgage lenders they should tell you about them. But, he added, they could still charge you for such advice.
Mortgage adviser Mform has warned that if you are regarded as a high risk customer, then you might only be offered standard variable rate mortgages by your existing mortgage lender under new 'customer profiling' rules when your current mortgage runs out.
So, as you can see, there are both pros and cons to going direct to a mortgage lender or by using an impartial adviser.
But ultimately the decision is yours; happy mortgage hunting!
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