It was an extraordinary week of Press Coverage for Coreco last week, kicking off with the front page story of The Daily Mail with the headline proclaiming the Best Time Ever to get a mortgage.
Followed by stories in The Telegraph, Guardian, Independent and Sunday Times to name but a few, the theme is very much around the extraordinary products on offer for those who need mortgage finance.
We have seen lenders steadily cutting their rates almost on a weekly basis, which has given rise to some extraordinary products, with 2 year fixes edging towards 1%, 5 year fixes now available from 2.19% and even 10 year fixes available below 3%.
The good news is that all of this translates to more choice for consumers, but care should be taken to obtain proper independent advice as to which product is most suitable for the borrower. Headline rates do not necessarily mean that overall they will be the best, or even the cheapest, rate for an individual borrower.
Arrangement Fees also play an important role and many of the lowest product rates come with high fees attached, which have stayed high or even increased whilst the headline interest rates have decreased.
Whilst this may have little effect on those borrowing larger amounts, for example over £500,000, for those borrowers looking at smaller loans around the £100,000 to £200,000 level, they may be better off looking at a product with a slightly higher rate and a lower fee.
For example, HSBC’s 2 year fix at 1.29% has an arrangement fee of £1,495, whilst N&P have a 2 year fixed at 1.39% with just a £795 arrangement fee, a difference of £700. Over 2 years this means that borrowers would actually be better off on the more expensive rate as the monthly savings on a loan of £500,000 at the lower rate would only equate to £558 for a 25 year repayment mortgage over the initial 2 years.
There are also a plethora of other fees that need to be taken into account and differ widely between lenders such as Administration Fees and Valuation Fees.
Any decent independent mortgage broker will be able to do a real calculation as to which rate a borrower is better off on relatively easily.
It will be interesting to see if these fees start to reduce as lenders look for other ways of enticing borrowers to them rather than cutting headline rates ever lower.
Whilst in this low rate environment, where choice is growing by the week, it is also important to reflect on what a good independent broker does, ensuring our clients go in to the transaction with both eyes open and carefully explain the process.
For those that want to buy, we are keen to educate them that low, long term fixes that can help them manage their budgets accordingly are available. This is a good option versus even lower, short term trackers for example. Rate is not everything and for many security is key.
Independent brokers such as us dedicate our days and often late nights to doing our best for borrowers in a market that can be confusing, daunting and a little scary. We are the good guys and girls who want to educate and guide our clients through the mortgage maze to ensure that there are no issues or sudden surprises in the future. To ensure that they are so happy with our advice and service that they come back to us time and time again.
Our clients are our lifeblood and all our advisers take the time to get to know each and every one so that we can enjoy a long term relationship rather than a one off transaction.