The financial crisis of 2008 was undoubtedly something of a wake-up call for the mortgage industry and the subsequent major review in 2014 rightly made the sector look at how it was operating.
A plus side of this has been a renewed appreciation for the value of advice. In 2009 nearly 70% of customers who completed mortgages had taken advice, according to the Financial Conduct Authority (FCA) – fast forward to 2014 and the figure was just over 91%.
By 2019 no less than 97% of completed applications were advised mortgages.
At Nottingham Mortgage Services we helped 44% more people complete their mortgage last year than in 2015.
Greater borrowing potential
But what other things make mortgages more accessible and appealing to people in 2020 than they were just over five years ago?
There is more broker access to lenders and Right To Buy is still an option for many (although it is not widely promoted).
Homeowners can now also borrow at higher ‘loan-to-values’ (LTVs), which means they can borrow money to pay for a greater proportion of the value of the property and therefore need less of a deposit. There has recently been a resurgence of 95% LTV products which require just a 5% deposit.
More retirement lending, longer mortgage terms and historically low rates encouraging remortgages are also key pointers.
Responsible lending and affordability remain a feature but parameters have relaxed somewhat. What this means, in real life terms, is rather than focus in on one unpaid phone bill from many years ago, it looks at a potential borrower’s track record of making mortgage payments. It certainly feels a little fairer – but just how many consumers out there know that is now the case?
Switching your mortgage
In March 2019, Britain’s financial watchdog, the Financial Conduct Authority (FCA) launched the Mortgage Market Study. It highlighted 800,000 people who would benefit from switching their mortgage.
On average, they could save £1,000 per year in the first two years (on a new two-year introductory deal) and around £100 per year for the rest of the term of their mortgage.
It goes without saying most people would rather pay less, however the stigma still exists for many that a mortgage provider is for life and there can be a reluctance to switch. People often fear product change costs, when in reality there often aren’t any.
And we’ve all heard the ‘advice isn’t cheap’ line from family or friends but whilst there can be a charge for mortgage advice, it is often worth considering what this equates to compared to the savings that could be had across the life of the mortgage.
Using the above calculations, the amount people could potentially save is more than three times the cost of using a broker.
Considering your future goals
But it isn’t just about rates and fees – we need to assess customers’ aims and ambitions short, medium and long-term.
The Nottingham Mortgage Services team hear many stories from people looking to remortgage who initially took out their product but feel it wasn’t properly explained what would happen – and just how much costs would rise – at the end of the fixed rate period.
A conversation should always happen on day one, ascertaining the plethora of other factors – such as retirement plans, potential for single mortgages to change to joint, overpayments, longer mortgage terms than the traditional 20 and 25 years, and much more besides – to ensure that the customer is armed with as much information as possible to help them decide next steps.
Each lender has a different risk appetite so it’s important for consumers to understand if they are turned down by one lender, it’s not the end of the road and there could be other options open to them if they cast their net wider with support and advice from a reputable broker.
Buying a property is most people’s biggest financial outlay so mortgage advisers have a duty to advise and support them throughout the process and help make sure they understand what they are signing up for.
Not just because the Mortgage Market Review of 2014 said we (and the sector) should do so – but because it is, and always has been, the right thing to do.
Ben Osgood is senior mortgage manager at Nottingham Mortgage Services – part of The Nottingham.
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