The research, which questioned over 500 consumers about their attitudes to mortgage finance, found that the majority of borrowers – 58 per cent – would approach their own bank or building society or another mainstream lender for mortgage advice, whilst 40 per cent would go to a mortgage adviser or IFA.
When asked why they would go to a high street lender, 26 per cent said it was because they have a wide range of mortgage products, 21 per cent said because it’s easier than going to a mortgage broker or IFA; 18 per cent said it was because their bank or building society already knew their personal financial circumstances; 14 per cent said they would be able to secure the most favourable rate by doing so; and 12 per cent said it was because they have a well known brand name. The remainder thought they would be able to get a better deal from a mainstream lender or thought mainstream lenders had access to every type of mortgage deal.
With 80 per cent of mortgage business currently introduced via mortgage intermediaries, the vast majority of UK consumers understand the benefits of professional mortgage advice. However this research shows that there are still a number of consumers, who do not.
A large proportion of respondents to this survey had an adverse credit history or spent a large proportion of their income servicing debts, indicating the consumers who are least informed about mortgage advice are at the more vulnerable end of the lending spectrum.
Findings from the survey also revealed considerable confusion surrounding the advice services provided by both mainstream lenders and intermediaries. When asked which statements they believed to be true of their bank or building society 43% did not recognise that high street lenders would only provide advice on their own products. Furthermore, 78% failed to recognise that mortgage intermediaries could provide access to mortgage products that were not available directly from a lender. 35% of respondents believed that mortgage intermediaries and IFAs always charged a fee, and 20% stated that they did not understand how the process of using a mortgage intermediary worked.
It is obvious from these findings that there is much confusion among consumers about the facts surrounding mortgage advice - a fact borne out by the vast majority of respondents, 85%, who believed personal finance lessons should form part of the national curriculum.
Nicola Severn, spokesperson for edeus, said: “With the recent activity in the capital markets resulting in an increase in the cost of adverse mortgages and a potential decline in their availability, borrowers with adverse credit histories are more likely than ever to be in need of professional advice. We know from lending statistics that the majority of borrowers come via the intermediary route, but these findings clearly show that there is sub section of society who are confused about the role intermediaries play.
“With huge marketing budgets, and a high street presence that mortgage intermediary firms are unable to match, it is no wonder that mainstream lenders are able to persuade consumers to visit their branches.
“Although regulation and TCF initiatives have made inroads, more needs to be done to educate individuals about the basic areas of mortgage advice, such as payment structures and the varying levels of impartiality. These consumers represent an untapped pool of borrowers that intermediaries could target, however a greater degree of education is required – and schools might be a good place for this to start.”
