'That's not how it works,' says one
Financial journalist Martin Lewis recently returned to the screens and advised homeowners to start getting cheap rates now to avoid potentially crippling increases to mortgage repayments.
Warning his viewers of a ‘ticking timebomb’, Lewis even spoke about paying a booking fee to lock in a cheap mortgage “in case things get more expensive.”
“It’s like an insurance policy, you lose a few hundred quid, but have locked in a cheap mortgage,” he said.
“If you're coming to the end of your rate, you need to prepare in advance. Speak to a mortgage broker for help,” Lewis added.
That last piece of advice may please a lot of mortgage experts, but the rest of his statements, particularly that of paying a booking fee, did not sit well with them.
“The advice to secure a rate as soon as possible is absolutely correct as they have been rising sharply and continue to do so, but the information around a booking fee is largely inaccurate as you can secure a new rate in most cases without paying any upfront fees,” Robert Payne, director of Bristol-based Langley House Mortgages, said.
Agreeing with Payne, Imran Hussain, director at Nottingham-based Harmony Financial Services, said that anyone thinking to simply pay a lender a large booking fee to get his mortgage sorted will be in for a shock as “that’s not how it works.”
“Martin Lewis may not be a qualified financial adviser, but his heart is in the right place as he is always here to champion rights for consumers and always on hand with money-saving tips,” Hussain said.
“The issue around paying booking fees to secure the best rate is a little off the mark as, for borrowers, it’s always about the best product for their circumstances. People should speak to a qualified adviser about their circumstances to ensure they get the best mortgage deal.”
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Lewis Shaw, founder of Mansfield-based Shaw Financial Services, echoed Hussain’s statement, saying that while Lewis has been a great consumer champion and fought for added consumer protections, he said making bold statements such as ‘mortgages are a ticking time bomb’ does nothing to help anyone.
“It is scandalous that anyone can stand up on live TV and make broad-brush statements, essentially giving mortgage advice, which is regulated by the FCA, to millions of already panic-stricken Brits,” Shaw remarked.
“Any form of financial advice, be it regarding mortgages, investments, pensions, life assurance or equity release and everything in between, has to be client-centred and consider their individual specific needs and circumstances,” he added.
Meanwhile, Rob Peters, director of Altrincham-based Simple Fast Mortgage, reminded that it is important not to get fixated on booking fees alone and miss the bigger picture.
“The most suitable mortgage is the cheapest overall mortgage that meets the borrower's circumstances and priorities. Looking at one aspect of a mortgage in isolation is a sure-fire way to end up with a more expensive overall mortgage deal,” he said.
Scott Taylor-Barr of Shropshire-based broker Carl Summers Financial Services clarified that the act of paying a booking fee does not secure the interest rate with the lender, it is the act of making the application that secures the rate.
“So don’t discount a deal that could be perfect for you simply because it does not have a booking fee. In fact, very few lenders have booking fees on their mortgage deals currently, so there is a very good chance people would miss out on many more suitable and cheaper deals if they blindly went in search of one simply on the basis that it had a booking fee and others didn’t,” Taylor-Barr said.
