Bricks and mortar stuck in bygone age

When will the brave new world of the web reach applications for home loans? asks Alex Hawkes
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The Independent Online

The worldwide web has worked its way into many areas of our lives, from booking holidays, to buying cinema tickets, to carrying out research, to seeking a weather forecast.

The worldwide web has worked its way into many areas of our lives, from booking holidays, to buying cinema tickets, to carrying out research, to seeking a weather forecast.

And the impact of the internet has been particularly marked in financial services, where huge quantities of electronic information are available, letting you run a fine-tooth comb through hundreds of credit cards, personal loans, and savings or current accounts - and then apply online.

The argument for buying any product over the internet has been well rehearsed: since the web lets companies spend less on branches and staff, consumers often end up with a better deal. As a result, some 15 per cent of us have online current accounts, according to figures from the British Bankers' Association, and more of us are turning to the internet to apply for low-cost personal loans and credit cards.

Yet the internet has still to do for online mortgages what it has for the other cornerstones of our daily financial life.

It is estimated that fewer than 1 in 20 people apply for a home loan online - a process that involves typing in your financial details, choosing a loan deal and then having it approved.

This is down to a number of reasons, not least that few lenders offer the service. None of the "big four" high-street banks lets you apply online. HSBC offers just a simple quote facility and Lloyds TSB a monthly mortgage repayment calculator.

Smaller lenders such as the Northern Rock and Britannia building societies allow online applications while Abbey bank has no facility to do so, although you can buy one of its flexible mortgages and manage it over the internet.

Ray Boulger, senior technical manager at mortgage broker Charcol, explains that online applications make up only around 3 per cent of the market.

This slow take-up could also be due to a lack of bargain deals. "There are a few lenders that have online specials which are slightly cheaper, but the rates are generally no better [than on mainstream mortgages]," says Mr Boulger.

He adds that the one internet-only deal he would recommend was launched by Yorkshire building society last week. Its fixed rate for three years is on offer at 4.64 per cent. Although Market Harborough - a small building society that has bucked the trend, with a quarter of its deals applied for and processed online - has an internet-only flexible tracker deal at 0.85 per cent above the Bank of England base rate (4.75 per cent), cheaper deals are available elsewhere on the market, he advises.

Complexity is also part of the problem: to be able to buy a loan online, you need to know exactly what kind of deal you're after, though there will be factsheets and key features documents to read, as well as other information should you require it.

"If borrowers know what deal they need and do not require advice, there is no reason why they should not apply online," says Mark Harris, managing director of mortgage broker Savills Private Finance.

"However, there will always be a place for independent face-to-face advice. If borrowers pay a fee, they can be re-assured that they are employing someone to act on their behalf, sort out any hassles, find the best rate and ensure there are no hold-ups in the application being processed."

A broker's fee will typically amount to 1 per cent of the total home loan.

Mortgage brokers have themselves failed to embrace the possibilities of the internet, with most preferring to use it as a way to gain new business through marketing rather than as a complete service.

Charcol Online is an exception to the rule. It lets you search for a cheap deal using its specialist knowledge but without the need to pay fees.

The website works on a tied basis instead of offering deals from across the whole market, and has a panel of around 30 to 40 lenders.

Not surprisingly, the most widespread application of the internet has been in helping home-loan hunters with their research. Responding to a recent survey by the Council of Mortgage Lenders, 20 per cent of borrowers who had taken out a mortgage in the past two years said they had used an internet search as a factor in their choice of deal. Customers were particularly keen on online mortgage calculators that let you assess how much you can borrow based on your salary - and how much the monthly repayments are likely to be.

There is one clear advantage to applying online, though: the process can be quicker.

Britannia says you can work your way through its documents and get a decision in 15 minutes; the society carries out credit checks on you while you are filling out the forms.

While we may be in the internet age, it's worth noting that once you've found your deal you will still have to print out the application, or ask the lender to do so for you, in order that you can sign it.


Peter and Julie Evans from Crowmarsh Gifford, near Wallingford, south Oxfordshire, organise a lot of their financial affairs over the internet.

These range from current account banking to credit card payments, share dealing - and now buying a home.

Last year, they applied online for a £150,000 loan from Yorkshire building society, split into two parts: half on a tracker 0.75 per cent above the Bank of England base rate (currently 4.75 per cent), and half on a fixed rate of 5.6 per cent.

Mr Evans says that knowing what kind of deal you want - and feeling comfortable in the mortgage market - are critical for online loan applications.

"Over the past 10 years I have switched my mortgage about five times. If you've had a lot of personal experience of home loans in that way, then the online option is good. Other people may need advice."

The internet is the way forward for personal finance management, he adds.

"I can pick the time of day when I want to fill in documents. You also get immediate access to information and it is all laid out for you."

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