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Brokers - what are the most common misconceptions among borrowers?

Journalist: John Fitzsimons, Freelance

ended 11. July 2023

Morning brokers

Earlier this week TML had some interesting data on the number of FTBs who didn't realise they may have to pay stamp duty, while surveys, valuations and mortgage advice fees were also something of a surprise to many of them (https://www.mortgagesolutions.co.uk/news/2023/07/10/nearly-quarter-of-first-time-buyers-unaware-they-have-to-pay-stamp-duty/).

I'd love to get your take on what the most common misconceptions are among your clients. Which are the areas where you most commonly have to educate borrowers?

Is it usually FTBs who have these misconceptions, or are there certain misunderstandings that are more common among those already on the ladder?

And finally, have you had any bizarre or surprising misconceptions among borrowers that you have had to clear up?

 

5 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
Due to the lack of financial education as a whole, a vast majority of people have very little or limited knowledge. TV adverts don't generally help for things such as credit files where people now seem to be fixated on their score without understanding that lenders are more interested in the content of their files. Surprisingly, a significant number have never checked their files or know they exist. Also, many buyers forget that agents are acting for the vendor only and give far too much information away which can end up detrimental to their cause. House buying and mortgaging are very complex procedures so it is important people have the right people on side to guide them.
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Rita Kohli
Managing Director at The Mortgage Stop
We spend a lot longer with first-time buyers and even work with them over months (and in some cases years) to help get them mortgage ready. There are quite a few things that many first-time buyers just aren't aware of. It's not just how stamp duty works but how spending habits, credit cards and things like interest-free credit can affect their borrowing capacity. Even things like salary sacrifice and how this affects income affordability assessment. It's not just first-time buyers - there are plenty of people out there that watch a lot of TV experts or social media gurus that give ideas that just don't work in reality. Link this with a distinct lack of basic financial education that is given to people it isn't surprising that they don't know the complexities of the process of buying a home or even the costs that are involved.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
For First Time Buyers, the usual misconception has been that their borrowing would be based on the ability to afford the mortgage payment, e.g. if they are paying £1,000 a month in rent, surely they can get a mortgage less than £1,000 per month. Where it is based on affordability assessments often with less borrowing than they expect. Another is that how much they can borrow can vary so much between lenders.
The most common misconception among all borrowers is that it is difficult to get a mortgage as someone self-employed. Which aside from the documentation needed, is no more complicated than someone who is employed.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The most fundamental misconception I find is what we as mortgage intermediaries do. Many think our job is to find them the cheapest interest rate, which it isn't. Part of our job is to find the overall best value deal that we can for any given client's circumstances, which very often is not the lowest interest rate option, due to other factors like affordability, fees, or cash backs. However, a very large part of our role is the advice that comes with that product research; which lenders will view a particular client better than others, whether a tracker or fixed rate is right for that individual's circumstances, do we go for a 2- 3- 5- or longer period deal, what's the best term to repay the mortgage over, what the optimum deposit value, plus many more factors that are discussed and decided upon. All of this happens before we even start looking at actual mortgage deals and interest rates.
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Rob Gill
Managing Director at Altura Mortgage Finance
There is a common misconception about how easy it is to port or transfer a mortgage from one property to another. Many borrowers assume that if they move house and don't increase the loan amount they can automatically move their mortgage as part of the new purchase, They don't realise any such port is assessed as a brand new mortgage application and they could be declined.