The crazy land of mortgages - explained
August 1st, 2008So what exactly has been happening Well we have had the credit crunch which has resulted in mortgage lenders not being able to lend money as freely as they have in the past. Why haven’t they been able to lend money?
1. They have not been able to borrow the money themselves at competitive rates to lend to the consumer.
2. Their lending criteria has become stricter to ensure that any mortgages that they do give out are likely to be repaid.
3. People with poor credit and high loan to values have found it harder to re mortgage because of this.
4. Because money to lend is costing more and criteria are becoming stricter, smaller lenders are going out of business or withdrawing their mortgage products from the market
5. The main banks are dominating the market and supposedly can’t keep up with the volume of sales and are therefore dual pricing. This means they are offering more competitive products direct to consumers than going through an intermediary. The reason for this was because now there are less lenders on the market they have increased volumes of business so they did not need the volumes of business that brokers provided. I am not sure if I believe this excuse from one of the main banks though.
The problems with this dual pricing issue have been that ;
1.The consumers are not getting advice, they are talking to sales staff of the banks, not advisor’s and often have to wait a week or so to be contacted by them. It hard to talk to somebody about your mortgage with a bank.
2. From the responses that I have heard banks have been cherry picking deals and a lot of applications are not been processed or are taking a long time to be processed.
3. Consumers are being sold to from internet mortgage sourcing sites where the consumer has to make their own decision about the mortgage without seeking professional advice.
4. Brokers had direct access to underwriters and could talk through cases with the lenders, push and chase cases through. We could harass solicitors to make sure mortgage were completed on time. This service is lost when talking to sales staff for a bank.
However things are starting to turn, dual pricing is now reducing. Mortgage brokers are starting to get better deals. In my opinion we have got through the worst times in the mortgage market. Rates are starting to decrease and dual pricing is reducing ensuring that the consumer is getting the right advice about their mortgage through a broker and getting the best deal.






