Is applying for a mortgage online a mistake.
In a recent poll of Which? members, more than half of respondents said they had applied directly to their mortgage provider and dispensed with the services of a broker.
And while for some of us it makes sense – especially if you in a remote part of the UK, miles from your nearest broker – we shouldn’t be surprised. In this day and age, we book our holidays directly with airlines and hotels, do our banking online, and order taxis through an app on our phone. More and more of us seem prepared to put in the legwork if it means getting the cheapest deal.
And it’s not just that – Millennials are now of the age where they’re applying for their first mortgages, and one quirk of this generation is that they hate talking on the phone. Why phone up for a takeaway and have to deal with small talk or struggling to communicate what you want, when you can just do it through an app?
The problem with applying this same thinking to mortgages is that – far from getting the best deal – you could actually be missing out on them. Here’s why.
You may be declined
You’d be forgiven for logging straight onto your bank’s website when thinking of applying for a mortgage. That’s natural. After all – they’re probably the place we’d turn for a personal loan. You may have even arranged one online, signed the documents digitally, and so on.
The trouble is that mortgages are more complex than loans; and after the financial meltdown of 2008, some of the high street banks and building societies are more risk-averse. This means they offer some of the best interest rates, but only if you tick all the right boxes.
That’s, partly, because of how these decisions are made. When you’re interacting with their webpage or app, what you’re really dealing with is a flowchart of yes/no questions that decides whether they want to lend to you or not. There’s no wriggle room for exceptions or flexing the rules, which you can only get by dealing with a real person.
If your circumstances are a little out-of-the-ordinary, this can cause problems. Say, for instance, that you have multiple sources of income, or you’re in the process of rebuilding your credit after some unforeseen circumstances (and we all know about unforeseen circumstances after this year, right?); that can be an instant decline with some lenders.
That can cost you time and, in some cases, have a negative effect on your credit rating that will make borrowing even harder.
You may not be offered the most suitable mortgage for you
Even if your circumstances are relatively straightforward and you’re able to apply online without hassle, your bank can only offer you the mortgages that it sells. And it may be that the most suitable mortgage is with someone else.
A mortgage broker will have access to many more mortgages, including those offered by specialist lenders like Together that don’t have high street branches.
You may find your mortgage broker recommends a mortgage from a lender you’re less familiar with. In fact, some lenders can only be accessed through a broker and you can’t apply directly to them (but we’re not one of them, we should point out).
Brokers may have exclusive deals
Yes, you read that correctly. Mortgage providers with an appetite for a certain type of customer will sometimes create exclusive deals for brokers to offer. You may find that you can get a better rate or cheaper fees (for instance) than if you apply directly to the same lender for the same mortgage.
What’s more, many brokers offer their services free of charge to borrowers – because they receive a commission payment from the mortgage provider. So there’s really no disadvantage to using a broker, and they could be (figuratively) worth their weight in gold if they can find you the right mortgage with the right lender.
Using technology in the right way
That’s not to say we think everyone should use a broker every time. If you’re reading this and want to apply for a mortgage with us directly, you’re welcome to – and we’ve recently launched our first app to make that as easy as possible.
You see, we don’t think technology is bad – far from it. It’s absolutely a force for good; problems only happen when it becomes the whole solution, not just part of it (or as someone recently quipped in our office, ‘it’s like using steel to make a meal, instead of a fork – and about as satisfying’).
Take our new app: we use it to securely interact with customers throughout the application process, which saves time on phone calls and post. It’s encrypted, and you can use it to exchange messages, upload documents, electronically sign forms, and so on. The decision-making remains very much in the hands of a human, but technology has eased the communication: no more faffing around with scanners and email chains.
Even if you do go through a broker and they recommend one of our products, we’ve been thinking about how technology can help us to do more, with less.
Since lockdown, we’ve accelerated some of our plans to transform our business; among the first changes is that we’ve taken our underwriting department paperless. It saves ream upon ream of paper every month, while also enabling several people to work on one application at a time – all of which speeds up the process and means we can make a decision sooner.
Because we know that all you really want, one way or the other, is to know where you stand.
Lending decisions are subject to an affordability/creditworthiness assessment.
Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.