Borrowers baffled by changes to mortgage products

Continual changes to mortgage rates and products are baffling borrowers who risk making the wrong decision because of an information overload, says independent broker My Mortgage Direct.

“Since the credit crunch took hold the major lenders have made endless tweaks to their range of mortgage products – rates have gone up and down, whole ranges have been withdrawn and new ones launched,” said My Mortgage Direct director Cath Hearnden.

“It’s not surprising that borrowers are bewildered by this barrage of information and are worried that they might go for the wrong deal.”

The only way for borrowers to find the deal that is the very best for them personally is to seek independent advice that covers the whole of the market, not just selected lenders.

“The drubbing of mortgage advisers handed out by the recent Which? undercover survey is less than helpful in the current climate and could result in borrowers making their own decisions rather than seeking expert advice,” said Hearnden.

“Whilst it’s regrettable, it’s not a huge surprise to discover that some advisers tied to a particular lender aren’t as assiduous in their questioning of clients as they might be.

“As independent advisers, we have nothing to gain from promoting one product over another. The deal that is most appropriate for the borrower is the one we recommend.”

The Which? survey also threw an unhelpful negative slant on insurance products linked to mortgages, according to My Mortgage Direct.

“Far from the implication by Which? that insurance sold with a mortgage is akin to selling protector spray along with a pair of new shoes, life insurance is vitally important,” said Hearnden.

“No-one buys a home without buildings insurance but plenty of people will take on the biggest debt of their life without insuring the very thing that pays for it – their life.

My Mortgage Direct has already expressed concern that one in five mortgages are going ahead without life insurance.

“As family budgets feel the squeeze from rocketing prices for necessities such as fuel, energy and food, it’s understandable that borrowers are looking for ways the claw back cash on what they regard as non-essentials – and life cover, unfortunately, is an easy target,” she says.

“But it’s a false economy. Considering the huge financial commitment of a mortgage and what it represents to borrowers’ lives, trying to save a few pounds by going without life cover is a big mistake.

“Of course it’s hard to make ends meet in the current financial climate but it will be a great deal harder for one person to manage the mortgage repayments on their own should their partner die.”

“Life insurance is not an expensive commitment. In fact premiums have been revised recently and cover can cost considerably less than borrowers might think.”

And those who already have life cover in place that hasn’t been reviewed for several years could be eligible for a better value policy, either from their current provider or a new deal elsewhere.

For example, a joint policy for a non-smoking couple aged 30 with a £150,000 mortgage could cost as little as £10.72 per month from Royal Liver. Should one of them die, the policy would pay off the whole of the mortgage.

“People don’t think twice about insuring their buildings and contents or even pricey gadgets such as their ipod or Blackberry but will scrimp on insuring the very means of paying their mortgage – their lives!” she adds.

My Mortgage Direct, along with sister company IFA Hearnden Associates, is able to look at the whole of the life cover market and streamline clients’ financial arrangements to maximise potential savings whilst minimising exposure to risk.

For more information, visit mymortgagedirect.co.uk