Should you go direct to lender or through an intermediary for your mortgage?
September 25, 2008
These days getting a mortgage can be really difficult, and the global credit crunch has impacted heavily on the mortgage sector heavily, leaving consumers with little choice when it comes to finding a mortgage and resulting in lenders really tightening up on their lending criteria. Whilst the base rate has come down three times over recent months many lenders have continued to hike up their mortgage interest rates, making it more expensive for consumers to borrow. Many lenders are also demanding higher deposit levels and charging huge arrangement fees, which has added to the problems that borrowers face.
This is why borrowers looking to take out a mortgage need to think carefully about whether to go direct to a lender for their mortgage or whether to go through a broker or other mortgage intermediary. Some lenders have stated that they will offer preferential rates to customers that go through them directly, which means that there is a chance that you could get a better deal by going direct, although you will probably need to have good credit and a sizeable deposit. On the other hand you may find that there is more choice available if you go through an intermediary, and this may be your best route if you are a first time buyer with little deposit or you have poor credit.
One industry official recently stated: “With continuing uncertainty in the mortgage market and the total number of products continuing to decline, many more people will be considering approaching an intermediary to find them the best mortgage deal for their circumstances. However, many intermediaries 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.”
He went on to state: “Just 49% of deals on the market today are exclusive to intermediaries, whilst 23% are available through both intermediaries and direct business. Although intermediaries have 72% of the market to advise on, it’s the deals that are available direct from lenders which are the most competitive. The top 13 deals for a two-year fixed rate mortgage are only available direct, and of the top 20 deals only three are available via intermediaries.
“This reduction in competitive deals has led Jonathan Fischel, head of mortgages and credit unions department at the Financial Services Authority to advise intermediaries to advise on direct only products, and charge a fee for the advice given.”
He added: “However at the moment, the majority of lenders are now receiving more business than they can actually process. If the products that are currently only available direct were also made available to intermediaries, then the lenders would no doubt find other ways to restrict their business volumes, such as further tightening their lending criteria.”
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