30th November 2007
With the range of mortgages options available to first time buyers seemingly falling back somewhat in the light of the credit crunch, nowadays it's more important than ever to seek mortgage advice when looking for a first time buyer mortgage.
The fact is that there are a number of competitively priced deals still available, but these may not be immediately apparent to a less experienced buyer.
One crucial thing to look out for when seeking advice is the independence of those you're speaking to. An independent mortgage advisor, for example, will obviously be objective when it comes to mortgages but may not be for add-ons such as insurance and other extras.
Other sources of mortgage advice include tied and multi-tied advisors. The former group recommend products from just one lender, and the latter from a select group of lenders ˆ but independent advisors of course make their selection from the whole market.
But mortgage advice isn't just a vital component of getting onto the housing ladder ˆit can also be essential to staying there. Yet many buyers are still reticent if new research by mform.co.uk is anything to go by.
The online mortgage firm has revealed that two out of every five borrowers has never changed lenders, even when their existing deals expired.
"The mortgage industry complains bitterly about so-called "rate tarts" but the reality is that two out of five borrowers are far too loyal to their lender. Many may be deterred by the fear they will have to pay high fees to move but the reality is that they can make significant savings," advised mform chief executive Eamonn Rice.
The findings do suggest that if Britons really are so stuck in their ways when it comes to taking out a mortgage, then it's doubly important to make a good decision in the first place.
A study from Moneyfacts found that some 54 per cent of bad credit mortgages have been withdrawn from the market in recent months, but the Council of Mortgage Lenders (CML) responded by asserting that the demand from buyers would not be letting up in the future.
"The housing market continues to be underpinned by consumer demand for owner occupation, strong aspirations for owner occupation and there‚s a shortage of supply. Those fundamentals will continue to underpin the market to a much greater extent than any shortage of mortgage products to customers," said CML spokesperson Bernard Clarke.
So demand will remain strong ˆ but the global financial crisis has brought with it a new twist to the mortgage market, with the Financial Times recently asserting that lenders were now in the habit of keeping their best deals on the market for just a few weeks in order to minimise risk.
While a conscientious first time buyer could theoretically keep on top of such movements, this kind of trend does again show why mortgage advisors can be so valuable.
But it's not just mortgages that brokers can help with, according to Alexander Hall.
"Over the past five years, mortgage brokersΣ have become sort of the central piece in the [home buying] process for clients," said Andy Pratt, chief operating officer for the firm.
"Through their experience, they should be able to guide to client through the process of selecting a conveyancer, dealing with their questions and queries... liaising with the estate agent on comparable properties around to see if you should negotiate the price down; the list goes on.
"[A broker's] experience of the process should benefit the client ˆ particularly if they're a first time buyer," Mr Pratt added.
One last thing to remember with independent advice is that, despite the name, some advisors may be operating on commission from lenders ˆ so the tendency is to think that they would naturally recommend such products. The best way of avoiding this problem is to make sure that the adviser charges the client rather than receiving their income from a different source.