Uncover the "True Cost" of a Mortgage
Posted on 16th May 2019 at 15:19
Used correctly, Mortgage Sourcing Systems can help save so much money in ‘true’ mortgage costs: they have an incredibly important role in the modern-day mortgage market.
Later in this report, readers are invited to try-out a sophisticated Mortgage Sourcing System.
‘Mortgages Market Study’ (The Financial Conduct Authority: May 2019)
The FCA declared ‘Following extensive analysis of thousands of mortgage transactions made in 2015-2016, we found that about 30% of borrowers could have qualified for a cheaper, almost identical mortgage. On average, these consumers missed out on savings of around £550 per year over the introductory period. This takes into account both the cost of interest on the mortgage during the introductory period as well as any up-front fees. Our evidence indicated that one of the main reasons consumers choose a more expensive mortgage was lack of clarity on whether they meet certain eligibility criteria’.
What role do sourcing systems play?
It’s widely recognised that the ‘lowest interest rate product’ might not always be the best option. Sourcing systems are incredibly important when it comes to understanding what mortgage products are available in differing individual circumstances: an independent mortgage broker must be able to show ‘why’ a particular product is recommended.
A recent article published by ‘Moneyfacts’ stated that the number of residential mortgage products increased by almost 650 in the last 12 months and now the full list stands at over 5,200!
Sourcing mortgage products, based on interest rate alone, is one of the biggest risks. For example, it may not make sense to choose the lowest-rate product for a £25,000 mortgage, if it has a fee of, say, £1,995 - £1,995 represents almost 8% of £25,000! – and sourcing that same loan on a ‘true cost’ basis could reveal a fee-free deal, leading to significant potential savings.
It’s important to understand the differences and to be conscious of the impacts of what each filter does. In reality, doing multiple searches with different filters can help to make sure all eligible products are considered and discounted.
By providing an accurate picture of what mortgage products are available to individual clients, Mortgage Sourcing Systems should also play a key role in mitigating regulatory risk for independent mortgage brokers.
The future of sourcing systems
According to ‘Knowledge Bank’ the advent of criteria-searching is a real game changer.
We are going to see lenders’ mortgage criteria, mortgage affordability and mortgage products come together like never before, giving the mortgage broker access to ‘true’ sourcing, based on all of the factors that are currently navigated separately, before making a recommendation.
Sourcing systems only work effectively, however, when combined with the expert knowledge of independent mortgage brokers. Sourcing systems should support mortgage brokers in determining the ‘true cost’ of mortgage products and whether clients are eligible for particular deals.
In addition to offering an accurate and efficient service to brokers, criteria-searching will be used more and more by lenders to research and gain insight into the market, enabling them to design and fine-tune mortgage products to better meet the needs of customers.
Choosing the right mortgage is almost as important as selecting the right property. Mortgage repayments are likely to be most people’s largest monthly financial outgoing. There are now thousands of mortgage products available and choosing the right one can be a complicated process; a good independent mortgage broker will not just focus on the interest rate and the fees of each product.
As a preliminary step on the mortgage trial, you are invited to use and experiment with a highly sophisticated mortgage sourcing system (updated by lenders in real time) at:
Contact Nigel Osgood, Independent Mortgage Adviser
T: 01628 594433.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Thank you to Accord Mortgages, Mortgage Brain, Knowledge Bank, Moneyfacts and the FCA for information presented within this article
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