Ian Ward is managing director at The Mortgage Partnership
There is a war being waged in the UK. Not over land, oil or even ideology. This war is the one being conducted from the head offices of some of the UK’s largest lenders as they seek to maintain or increase market share of the prime sector of the purchase and remortgage market.
There has been a plethora of recent announcements about new product ranges, cheaper rates, different criteria, which look spectacular at first glance. But with some headline rates below 1%, LTV’s at their maximum and other criteria equally exhausted, the question has to be asked as to where lenders go now to differentiate their offering from their peers?
As rates have come down, rate reductions have become almost meaningless in terms of making a difference to monthly payment costs. A 20bp drop on a rate which is already below 3 or 4%, really does not add up to a significant reduction in monthly outgoings for a client.
Of course, advisers must always seek the cheapest deal, but is it really as relevant now when there is so little to choose in real terms between monthly payments?
In terms of costs, ancillary charges now play a big role in deciding which deals are actually the cheapest. Admin fees/completion fees, whatever you call them, are now a significant ‘hidden’ cost as they have grown in proportion to the reduction in mortgage rates. However, thanks to modern sourcing systems properly comparing products, it is easier to see which products are not quite as attractive as they first seem.
Headline rates will always generate interest, but the reality is that the actual difference to the client in monthly payments becomes insignificant when compared with other products which might have higher rates.
I believe that as advisers and their clients have already begun to realise how little difference there is between competing lenders, the real differentiator for choice of lender is the level of sustainable service they offer and this will become an increasingly important consideration.
In 2017, lenders who can provide fast, efficient service from application to completion are going to be the winners. Easier said than done, I can hear many frustrated brokers saying! Yet, if we have really reached the point where there is nowhere else to go for rates and criteria, service is going to be critical and lenders will ignore it at their peril.