Cheapest isn’t always best, but how do you prove it?
Lewis Lenssen is managing director at Mortgage Broker Tools
You know that the cheapest deal available to your client isn’t necessarily always the most suitable for their circumstances or even the one that is likely to benefit them most financially the long-term. But how do you prove it?
In its recent Policy Statement on Mortgage advice and selling standards, the FCA said: “Advisers will need to explain why they have not recommended the cheapest of the suitable mortgages they have available.
“This should mean more consumers understand how price and other factors are considered in the recommendation they receive and give them an opportunity to challenge the recommendation.”
So how do you go about demonstrating that your recommendation is in the best interests of your client?
A primary consideration for many customers when it comes to their choice of mortgage is how much they are able to borrow, which usually comes ahead of how much this will cost them.
After all, a homebuyer with their heart set on a particular property will be much more motivated to borrow the funds they need to secure that property from a lender that is slightly more expensive, than to go for a cheaper rate that means they have to settle for second best when it comes to their new home.
This approach is not just an emotive one. If a customer is able to borrow enough at the outset to purchase a home in which they will live for many years, this will save them a lot of money over the alternative of moving two or three times over the same period as they trade up.
And so, by borrowing a little bit more, and perhaps paying a slightly higher rate in the short term, the client is actually in a stronger financial position in the long term.
Demonstrating that you selected a mortgage based on affordability used to be a laborious task, but the emergence of new platforms like MBT Affordability, means that brokers now have access to dozens of lender affordability calculators and a full and detailed audit trail of their research, by filling out one simple form.
This technology provides a quick, easy and effective way to research the most appropriate product for your client and also, to prove it.