How online mortgage brokers are causing a mortgage revolution

Business Insights

What you need to know about financing a home in today’s financial climate

For anyone trying to sell, move or buy a first home in the city, or remortgage for home improvements to add value, the first step is often speaking to a mortgage broker. However, the mortgage broking market finds itself mid transformation. There are a new breed of online services making it faster, cheaper and easier than ever to finance a property.

Why don’t more people remortgage today?

The latest figures from UK Finance reveal that the remortgage market enjoyed a healthy boost in 2017, with rates up 15% year-on-year. This was in part due to the promise of the Bank of England's rate rise decision, taken in November but heavily mooted from September - spurring homeowners into taking action on their mortgage.

And not a moment too soon. HSBC estimates that 1 in 3 homeowners could save up to £4,000 every year by remortgaging from a standard variable rate mortgage (SVR) to a fixed 2, 3 or 5 year product. Indeed, the Citizens Advice Bureau reported that homeowners are being financially penalised when they’re shifted from their cheap introductory rate to an expensive SVR in a form of ‘loyalty trap.’

Yet astonishingly, 1 in 4 homeowners remain in the dark about the sizable benefits of switching their mortgage provider or product, and cumulatively this costs the nation an estimated £29 billion every year.

The advantages of online brokers over traditional brokers

It may be surprising, but despite the huge amount of free information available thanks to the internet, in best-buy tables or mortgage self-help guides, three in four consumers in the UK choose to use a broker for advice on their mortgage.

Simply put, a mortgage broker is a middleman - linking a home-buyer, to a lender, which is usually a bank or building society. They manage the application on a customer’s behalf, researching products, dealing with lenders, and using their expertise and resources to take the heavy lifting out of an application. Applying for a mortgage is a timely, complicated and often a drawn-out process, and by handing over the application to a broker, many consumers remove a lot of the stress of applying for a mortgage.

Despite all this, engaging a broker does not guarantee a pain-free experience.

A traditional broker still insists on a face to face appointment and often commands a £200 - £400 fee. Most high-street brokers are only affiliated with a handful of lenders, who pay them commission rates. Then consumers suffer ad hoc communications on the progress of their application accompanied by a load of paperwork: it is outdated and unnecessary.

Financial technology has changed our everyday relationship with money with transformative developments across online banking, digital money transfers and mobile payments. Meanwhile, mortgage brokering remained an innovation dead-zone, with processes not changing for over 30 years. Until now.

Daniel Hegarty, the founder of free, online mortgage broker Habito explains

"We’ve come a long way in the world of online personal finance. Mobile payments, money transfers and online banking are the new normal for many people. Thanks to a new breed of free online mortgage brokers, getting a mortgage has now also been brought into the 21st century. Homebuyers can now get mortgage advice from the comfort of their own home, on their mobile, iPad or laptop in their evenings or on the weekend.

"Getting a mortgage used to take weeks, be filled with uncertainty and stress and even cost consumers' money in expensive broker fees. Technology has finally arrived to make it free, fast and simple.”

Once a home-buyer has entered a few details online, a computer algorithm scans over 20,000 products from over 90 lenders for the right product, matched to each individual’s circumstances. This means that unlike high-street mortgage brokers, the recommended mortgage is not influenced by teaser-rates, flashy advertising, or commission rates.

The algorithm works in seconds and as online services do not require hours of face to face meetings the service is usually free. It also means it is accessible 24/7, on week nights and weekends, from any device and homeowners never overpay as they are automatically alerted when a better deal comes along.

That’s not to say computers do all the work! A team of fully qualified mortgage experts then step in to guide people through the application process and answer any questions, either via phone or on instant chat on the website.

There are many benefits of using a traditional broker to source your mortgage, but there are even more reasons to use an online broker. Technology, innovation and human experts allow consumers to make the best decisions on their mortgage.