Now banks, insurance companies and even retailers lend to home buyers. This may cause confusion for first-time buyers but, thanks to the competition, the best deals are now better than ever.
New middlemen have emerged. Mortgage clubs or wholesalers sit between brokers and lenders, doing some of a broker's legwork. They provide information on deals offered by a panel of recommended lenders.
Because they can generate huge volumes of business for the lenders on their panel, mortgage clubs are able to negotiate and offer exclusive deals which offer good value to borrowers.
For example, Legal & General's mortgage club offers a three-year fixed rate at 6.85 per cent, while John Charcol offers fixed-rate deals only for periods of five or 10 years. Peter Timberlake of Legal & General, which runs the Legal & General Mortgage Club, says: "We're placing about pounds 5bn a year of business. If it was our own money, we would be bigger than some of the well known high-street lenders."
Many mortgage clubs grew out of the panels of recommended mortgage lenders that life insurance companies' own tied agents would use for their clients. Why do the life companies do it? Certainly not for the fees they receive. Ray Boulger, of brokers John Charcol, says: "It's really about generating additional business for the life company." The club gives the life insurer an additional product to sell, which could generate "leads" - names of potential clients for their insurance sales force to target.
But this is not always the case. Some companies are not insurers and simply earn their money as outsourcers working on behalf of lenders. They package their own mortgages but do not actually lend the money themselves. Private Label is a mortgage packager the products of which are available only through independent financial advisers. It was set up 11 years ago and brought in more than pounds 1 billion in new business last year.
Though the lender is often hidden, the borrower will always know who is lending them money. "People like the comfort of knowing who the lender is," says Mr Boulger.
Stephen Knight, director of Private Label, says the company's products tend to have an edge that borrowers will not find elsewhere. He cites a fixed-rate deal: clients can choose to be tied in beyond the five-year fixed-rate period, or to have the freedom to take their business elsewhere when the phase is up.
Deals generated by mortgage wholesalers have to be a plus for the borrower, says the Consumers' Association (CA). But Neil Walkling, principal researcher at the CA, adds a word of caution. "If mortgages are offered through life companies, there is a question whether there is pressure to buy certain products which might not be suitable."
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