Putting a value on advice

The report, from independent financial services research company NMG, examines the value of mortgage intermediaries to consumers in getting them the most suitable mortgage, at the best price, with the best service. NMG has estimated that intermediaries could save consumers up to £1,830 per year compared with going direct to lenders. This is the average difference between the cost of a Standard Variable Rate, most frequently offered by lenders, compared to a fixed rate, the most popular choice by advisers.

Chris Cummings, Director General of the AMI, said: “Intermediaries are able to identify the most suitable product for the consumer at a competitive price. Analysis of consumer attitudes shows they value this advice much higher than that provided by lenders. Independent research suggests that intermediaries could save consumers £1,830 per year compared with going direct to lenders. And in these difficult times it is more important than ever for consumers to access good financial advice.

“Consumers should not miss out on the benefits of using a mortgage adviser. We also call on the industry, regulator and the government to give their backing to the role of advice in the mortgage market at these difficult times for consumers.”

Statistics compiled by NMG show the value of advice to consumers:

• Research showed an average annual saving achieved from purchasing via an adviser to be £962 per annum. With just under 1.36m intermediary mortgage sales in the 2006/07 financial year, the savings achieved by intermediaries for their clients is estimated to be between £1bn and £1.2bn per annum

• The average cost of SVR mortgages being taken out by consumers via lenders equates to £1,830 per annum. This results in extra mortgage payments of £155 million over a 12 month period of which £135 million is attributable to the direct channel

• Among brokers over 73% were able to place over 95% of their clients with a lender first time, thus saving time and worry for the potential borrower

• Of all GB Adults who arranged their current mortgage via an adviser more than half (55%) felt that they were kept informed on the progress of the mortgage application yet among those who arranged it through a bank, building society or lender direct the figure drops to only a third (34%)

• For those who experienced financial difficulties, it is often only the intermediary sector that can help. During the period 1 April 2006 to 31 September 2007, 83% of borrowers who had suffered financial difficulties were assisted by mortgage intermediaries.