Did you know that 60% of mortgages are now brokered? This statistic is just one of many that reveals why you need to use a mortgage broker demonstrating that it is no longer just for those with “overly complex” circumstances. Instead, the mortgage broker has evolved into an integral part of the buying process. But are the reasons why you need to use a mortgage broker when buying a property compelling, or, is instructing an intermediary on your behalf a futile extravagance?
A couple of years ago – only in 2012 – the bulk of mortgages were taken out directly from a bank or building society. Yet, already the stats have been flipped on their head with the majority of people now favouring using the services of a broker. There are, in all likelihood, a few reasons for this – firstly, a growing loss of faith in “banks” overall post-financial crisis, exacerbated by the growingly complicated process of taking out a mortgage.
According to the newspapers over the last few months mortgage approvals are at a historic low. However, here at Enness Private Clients, we’ve never been so busy. This discrepancy has caused us to look into how the debt space has changed and to examine the changing lending landscape for 2015 from the purchaser’s point of view – impartially focusing on whether and why you need to use a mortgage broker when buying a property in today’s climate – as our rising statistics and growth would suggest. What are the reasons why you need to use a mortgage broker when buying a property? Is it just that our clients don’t have enough time to drive the process themselves or are there other, wider factors coming into play?
What strikes us as obvious is that you don’t have to be an American ex-pat investing in the UK to require financial assistance… You don’t need to be a banker using his bonus as leverage to make a second property purchase… Most of the time you are, quite simply, a professional trying to buy a family home who requires an unbiased intermediary to present your case in an FCA compliant manner on your behalf. You need access to the whole market of lenders so that you can choose the right solution as the options are overwhelming. And you are, of course, busy, so you need your finances to be sorted out quickly, in line with the fast-paced market.
Honing into the main factors at play about why you need to use a mortgage broker…
Mortgage Market Review
If you are familiar with the rigid nature of last April’s MMR (Mortgage Market Review) regulation you will know that even the most “vanilla” of applications and simple purchases could benefit from a little hand-holding throughout the house-buying process. For those of you that do not know MMR was when the city regulator decided to take a number of steps to ensure that people really could afford their level of borrowing, along with a number of cautionary lending checks on certain sorts of properties. These measures have resulted in many applicants being turned down.
The Mortgage Market review has been a real game-changer for people seeking mortgage advice. Now, not only does the process take longer but there are also several implications as a consequence of these changes for even the ordinary investor.
To learn more about people who now have to use a mortgage broker post the Mortgage Market Review read our “Mortgage Misfits” article, to be released later in the week, which hones in on providing constructive solutions for people who have been excluded from the conventional home buying process due to having more complex circumstances.
The Changing Lending Space
The way in which the intermediary market has evolved is also an important reason for this transition, which we will be more fully exploring in later articles. What is firstly important is the way that the mortgage market has changed. If you choose to work with Enness we will then stress the importance of selecting the “right broker” for you. You need to make sure you are pairing yourself to a broker that is positioned for you, with their skillset and connections in line with your aims.
Why you need to use a mortgage broker. And how exactly the Lending Landscape has changed.
The lending market of today is tricky for one to navigate if you are unfamiliar (and there’s no reason you should be well-acquainted) with the nuances of the ever-moving financial plains. Mortgages and their varying components, structures and offerings have become increasingly complex over time and gone are the days when your local bank manager is readily available to run you through your options over a cup of coffee.
There are also tighter regulations and enforced affordability calculations, alongside full transparency and disclosure to parley your way through. Many people believe that owning a prime real estate asset means that you are automatically entitled to unlock credit yet, sadly, your asset ownership is no longer the only factor that matters to lenders. The usual focuses – securitisation, debt vs equity, length of process and ultimate charges are still hugely important, but at the same time, there has been a shift within the banking world to increasingly focus on the “borrower”, because when you strip away location, loan to value (LTV), gross development value (GDV), rental income and the marketability of the asset, the core of what you are left with is the individual who holds the responsibility for taking out the loan.
There are also the differing banks’ interpretations of the importance of said constrictions to consider – it is that very inference which determines the direction of their “set criteria” and, more importantly, their decision hinges on how the borrower will conform to this understanding.
The key to unlocking credit in today’s marketplace is therefore having a mediating broker making those decisions. Why you need to use a mortgage broker is because an experienced adviser will, after being given an overview of your circumstances, almost instantly have a fair idea of which banks should be approached. This knowledge comes hand-in-hand with influence. A good broker will have direct access to underwriters, who naturally hold the cards as to the speed and even the ultimate outcome of your application.
This article only touches the tip of the iceberg about why you need to use a mortgage broker. There are a number of other benefits which we will be further exploring in articles this month, so keep posted.
If you would like to explore any of the content contained in this article please get in touch with someone at Enness. We would be more than happy to help.