We now live in a world where we have access to vast amounts of information, more than at any time ever before.
And it is often said that, ‘Knowledge is Power’, true. Well at least it is potential power, knowledge needs to be used/acted upon for that power to be realised. I digress.
What is not often said about that power is that it is not always good. How do you know the knowledge you have gained or been given is; true, accurate or complete? How do you know if the entity providing that information has their own agenda? Why are they providing you with this information?
This preamble should be kept in mind when using price comparison sites, especially for mortgages.
Before reading on, please note the below is in no way an endorsement or recommendation of a particular type of mortgage product and does not constitute, in whole or in part, advice and/or a recommendation.
I just did the following search using one of the leading price comparison sites;
Mortgage purpose : Moving (Next Time Buyer)
Purchase price : £200,000
Mortgage required : £100,000
Term : 25 years
Repayment type : Repayment (Capital and Interest)
Mortgage type required : Discount for 2 years
For the purposes of this test I assumed there was no bad credit history and that the borrower earns £40,000 per year as an employee.
I hit ‘Submit’ and immediately am ‘hit’ back by a pop-up that tries to hide itself, no doubt so that when I eventually leave the site I am left looking at some adverts before moving on to wherever else I decide to go. Annoying, but nothing too misleading.
Then my results appear… Below some adverts for banks and building societies that have paid to appear at the top… So I scroll down and find two more adverts from lenders that have paid to appear at the top of the results… So I scroll down a little more and get to the ‘meat’.
Helpfully they’re sorted by rate, ascending from the lowest at the top. Only, being a broker myself, I know that the results tell me half a story at best, one important element left out from the initial results is the fees for each of the mortgage products I’m being shown. To get this information I have to click on a link and then on another link.
Now if I want to compare this mortgage with another one (or more) I’ll need to write down or print out the page with the full details on and go to the next. I could find several that look appealing and end up with a small stack of paper. Seems like a bit of a step back to me?
Ok so after doing the above task a couple of times it becomes clear that set-up costs are an important part of my decision making process and what I would rather do is sort the table by cost and work my way through until I find a lender with what I feel are reasonable set-up costs, a good interest rate and affordable monthly repayments.
So I go back to my table on the price comparison website, I open the drop-down menu box that allows me to sort the results by different preferences… Guess what. Sorting by set-up costs isn’t an option.
Searching through the 170 mortgage products that I’ve been shown suddenly seems rather daunting. What’s more is, assuming all the information I’ve been presented with is accurate and up to date, I still may not qualify for the mortgage that I decide to apply for so I could have to repeat this process more than once.
I repeated the same experiment using the professional tools at my disposal. I find I have 202 products to choose from, a whole 32 more than the price comparison site I was just using. Why? Broker exclusives, more up-to-date information and no biases are a few possible reasons why I seem to have access to more deals.
I’ve also decided that I don’t want to pay any more than £600 in set-up costs and I want a lender that will lend on newly built properties. Oh and just to be safe, instead of searching for a 2 year deal I would like to see deals that run from 22 to 26 months, just in case there is an even better one that falls slightly outside of my 2 year criteria.
*Click* *Click* … Done.
I wonder how many people encounter the first scenario above and just plump for the result with the lowest rate? Or without realising it click one of the advertisers links and apply with a lender that doesn’t even have any of the type of deals they were originally looking for? Or who just can’t be bothered with all the hassle and go to the bank they’ve been with for the last 20 years, believing that they’ll look after them.