Choosing the right lender is crucial in a tough market

HOUSES are selling like hotcakes thanks to fierce competition among buyers. The latest monthly survey from the Royal Institution of Chartered Surveyors (RICS) showed that houses are shifting quicker than new ones could come on to the market, despite the number of new sellers increasing. Even the dreaded gazumping is back.

In such a market, if you come across a property you really want, you can’t afford to be waiting for paperwork to be completed and your mortgage to be approved. The last thing you want is for your mortgage lender to leave you hanging when everything else is ready.

So if you do require a quick turnaround on your mortgage approval, what can you do to speed up the process? Lenders are requiring more evidence from prospective borrowers nowadays, which can slow down the approval process. Consequently, ensure you have all the necessary information to hand – ie, proof of income in the form of P60s.

If you are self-employed, the days of self-certification are long gone and you will have to provide accounts going back at least two years, says David Hollingworth at London & Country, a mortgage broker. This may also be the case if a large proportion of your annual salary is paid in bonuses. However, lenders do reserve the right to ask more questions and you can’t always pre-empt what they will ask.

Hollingworth points out that if you are not a run-of-the-mill customer, then you may have to settle for any mortgage provider that will lend to you. “The more difficult your scenario is to place, the chances are that you may not be getting the sharpest rate. The value we as a broker are adding now is cutting through the criteria to point people to the right lender rather than just to the best rate. It’s now much more about advising people which route they need to go down to get a mortgage,” he says.

If you need to get your mortgage approved within a matter of days, hiring the services of a broker can be a good move, even if it does cost you. The time it takes providers to turn an application around can vary dramatically. For example, those offering the best rates experience high volumes and therefore customer service and speed drop off.

While you can and should ask a lender what their current service levels are, a broker will have a much better idea of which lenders are quicker and more flexible. Ideally, you should expect your mortgage application to take no longer than two to three weeks from start to finish, says Mark Harris, managing director at Savills Private Finance, a City-based mortgage broker.

A recent survey by Which? Money found that state-owned mortgage providers are trailing behind smaller lenders and building societies for customer satisfaction. For the third year running, First Direct topped the survey, with an 89 per cent score, followed by the Co-operative with 78 per cent and the One Account scored 77 per cent. Bank of Scotland received the lowest overall score, with just 41 per cent of customers saying they were satisfied. Halifax, Northern Rock and Lloyds TSB fared not much better, scoring 44 per cent, 45 per cent and 48 per cent respectively. The smaller lenders such as Clydesdale, for example, pride themselves on a more personalised approach while still offering top rates. But be aware that the best rates are often only available directly from the lender so using a broker might not be advantageous if you want market-leading rates.

Whether you use a broker or not, finding out which lender can offer you the best product is the best way forward in this tough market.


THE recent surge in inflation has put increased pressure on the Bank of England to raise interest rates, giving borrowers a bit of a dilemma – to fix or not to fix.

Those on variable or tracker rates have benefited over the past 18 months after the central bank slashed rates to a historic low of 0.5 per cent. The Organisation for Economic Cooperation and Development (OECD) warned last week that rates would have to rise to 3.5 per cent by the end of next year to fight inflation. And Credit Suisse cautioned that lenders will increase profit margins on mortgages to 2.5 per cent above the cost of funding over the next two years. The era of cheap, if not easily available, mortgages may be coming to an end. So in such an environment, should you be trying to lock in a favourable fixed rate now?

Brokers are recommending that those borrowers who want to guard against rises in the Bank rate in the long-term take out five-year fixed products. But second-guessing what the central bank will do is a waste of time – you will only know in hindsight if you would have financially benefited from one product or another. Therefore, it is better to choose the product that suits you best rather than forever chasing competitive rates.

Regardless of the rate, fixed mortgage rates offer you certainty and peace of mind. You know exactly how much you will repay each month – ideal if you need to keep to a budget.

But if you are happy to take a risk with your monthly mortgage payments then there is still value to be had in a tracker product. Just make sure the penalty fees aren’t too high – no more than 1 to 2 per cent of the entire loan ideally – just in case interest rates do start to soar.