Six researchers from Which? called on fifty mortgage advisers across England and Scotland over a three month period. They posed undercover as first time buyers, who were totally ignorant about mortgages.
24 banks were contacted. (two or three branches from each of the main high street banks). 13 independent mortgage advisers and 13 estate agents were also contacted. Each company was asked for a mortgage recommendation and advice.
Each of the estate agents, mortgage advisers and banks was visited and the advice they gave was recorded. These recordings were analysed to determine how reliable the advice they had been given really was.
The criteria for the advice to be acceptable was as follows; they had to explain and provide all of the documentation laid down by the mortgage industry regulations; they had to check thoroughly to make sure the applicant could afford the mortgage; they had to explain in detail the various repayment methods and deals available; and they had to advise on which mortgage most suited the applicant.
So how do you choose an adviser? Mortgage advisers fall into three groups. An independent adviser, who has the freedom to advise on any mortgage available on the market. An adviser, who can only sell products from one lender. And an adviser who can only recommend a company from a particular panel of lenders.
The research revealed that only four out of the 50 advisers approached offered acceptable advice to the researchers from Which? No one group of advisers provided significantly better advice than any of the others, although three independent advisers gave acceptable advice with the fourth being employed by the Alliance and Leicester.
In line with the evidence collected during the research study, Which? Recommends, that, you should approach an independent adviser, who will be able to offer you the widest choice of mortgage products. However, the way the mortgage market operates has changed recently, which means independent advisers do not always have access to the best deals. It is worth doing your homework by checking the deals offered directly by lenders as well.
Did the advisers properly check whether the client could afford the mortgage? The researchers from Which? were shocked to discover that of the 50 advisers approached only 15 bothered to check properly on their monthly earnings and expenditure.
A casual approach was adopted by many of the advisers, who, having calculated the monthly premium, simply enquired whether the mortgage they were proposing was affordable. One adviser even took a guess at the monthly expenditure of the applicant, whilst another implied that if you had no debts then you could afford the mortgage.
And did they talk about the benefits of repaying the mortgage early? Did you know that it takes on average 42 years to pay off a 30 year loan? The reason being, that most people move after they have been in their first home for five to seven years. Then they take a hit in value, buy up in the market and end up starting the thirty year cycle all over again. Each subsequent move only adds time to your mortgage payoff. But there is a solution called mortgage acceleration, which enables you to pay off the loan faster than the time originally negotiated in your mortgage agreement.
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