Unearthing the best mortgage deals is tougher than ever with the Council of Mortgage Lenders revealing last week that levels of home loans are at a 10-year low.
Meanwhile, some of those banks and building societies still actively courting mortgage business are keeping their deals to themselves, looking to cut out the middle man – the mortgage broker – to keep as much profit as they can. All this leaves borrowers in a quandary, whether or not to go for advice from a broker or merely look at the best-buy tables and apply direct to the lender.
"The proportion of business done through brokers has dropped significantly in the last few years and this shows no sign of abating. In fact, many of the best mortgage deals are available direct from lenders rather than through a broker," says Michelle Slade, from financial information service Moneyfacts.co.uk.
More often than not, experts advise using an intermediary who may have access to special deals and who can offer advice, but with more lenders bypassing the brokers is this still the best avenue to take?
Mortgage brokers are only able to compare mortgages made available to them. In the past this was an advantage. In September 2007, for instance, 31.1 per cent of mortgages were available exclusively through intermediaries, but three years on and that has fallen to just 28 per cent, according to analysts Defaqto. A number of big lenders such as HSBC, the Co-operative Bank and First Direct sidestep the intermediary market and choose to sell all their products directly online or in their branches, whilst others, such as Nationwide, reserve a section of their deals for direct sales.
This means that some of the most competitive deals around at the moment cannot be accessed through brokers, giving rise to the argument that by using an intermediary some people will miss out on a better deal.
For example, homeowners with a £100,000 repayment mortgage looking for a two-year fixed rate, can go directly to HSBC and secure a rate of 2.89 per cent on purchases up to 60 per cent loan-to-value (LTV), with a £99 fee. The lowest equivalent rate from brokers, according to Moneyfacts.co.uk, is from Skipton Building Society at 2.99 per cent on purchases up to 65 per cent LTV with a much bigger fee of £995. Similarly, NatWest offers a direct-only deal at 2.39 per cent, with no fee and available at 60 per cent LTV. Through brokers the best buy for those with a 40 per cent deposit is 3.19 per cent from Cheltenham & Gloucester, again with no fee.
Despite the danger of missing out on the best buys, the brokers themselves argue that they can offer many other benefits aside from the headline rates, particularly when it comes to calculating the true cost of any loan.
"Advice remains crucial," says David Hollingworth, of mortgage broker London & Country. "A broker will not only factor in fees in establishing the best deal but also tailor the recommendation to fit the client's circumstances."
Working out which loan is cheapest is far more complicated than just looking for the lowest interest rate – the difference in any associated fees can vary hugely and depends heavily on how much a buyer is looking to borrow. Coventry BS, say, offers a two-year fixed deal at 2.49 per cent with a £199 booking fee but this comes with an arrangement fee of 1.5 per cent of the amount borrowed. This means that for someone borrowing £200,000 it would cost an extra £3,000, whilst for someone looking to borrow £50,000 it would only add on £750, making a huge difference to the overall cost.
As well as a helping hand with the maths, a reputable mortgage broker should still point out the best direct-only products despite the prospect of losing business by doing so. "If a customer walks into a bank branch to see a mortgage adviser they will not be told about cheaper deals that may be available from a competitor," says Andrew Hagger from Moneynet.co.uk.
Many brokers also offer their own exclusive deals which are not available on the high street and may work out cheaper for some buyers. Those looking to borrow at 75 per cent LTV, for example, can get a two-year fixed-rate mortgage funded by Accord Mortgages through London & Country at 3.99 per cent, with a £995 fee.
Borrowers with less straightforward mortgages to arrange can use brokers to fight their corner for them, and for anyone who may otherwise struggle to be accepted, a broker can be a lifeline. "Mainstream mortgage lenders tend to be more rigid in sticking to their underwriting criteria and if you fall even marginally outside those criteria it's very much a 'computer says no' mentality," says David Black, banking expert at Defaqto.
So, to be confident of getting the best deal, borrowers need to do some legwork. A broker will always be a great starting point, covering an enormous part of the market quickly, offering advice and helping to calculate the real cost of any deal. Then, they should also shop around for themselves to access the best of the best from lenders and brokers. Thankfully, with best-buy tables and comparison sites, this is now an easier task, and online tools like mortgage calculators on sites such as Moneymadeclear (www.moneymadeclear.org.uk/tools/mortgage_calculator.html) can be an invaluable part of the research.
Michelle Slade, Moneyfacts.co.uk
"Going direct is usually better for borrowers with straightforward mortgages, such as those looking to remortgage, but brokers come into their own for non-standard mortgages, such as the self-employed, or those looking for their first home loan. If a borrower wants to ensure they have the best deal, then visiting a broker as well as researching direct deals is the best option."