By Clare Beardmore, Head of Broker Relationships and Propositions, Legal & General Mortgage Club
With the end of the Stamp Duty holiday, many prospective buyers will be feeling that they missed out on potential savings. However, what they might not know is how their mortgage adviser can help them to manage their other housing costs to offset what they have lost out on in Government incentives.
We know that the holiday played a key role in incentivising people to move and the latest research from Savills indicates that 10% of prime property buyers would look to renegotiate the purchase price of their desired property as a result of having missed the deadline. Another five per cent would consider pulling out of the transaction altogether.
However, even with the end of the Stamp Duty holiday meaning that buyers will once again need to pay up to £15,000 in additional purchase costs, there are still ways that advisers can add value to clients by helping them to reduce costs elsewhere. This is a clear proof point for the value of mortgage advice and brokers should be having conversations with clients about how they can help them beyond securing a competitive interest rate deal.
The role of the adviser
As the primary point of contact between customers and mortgage lenders, advisers are uniquely positioned to help guide borrowers towards the best option for their specific needs. It is therefore key that they continue having in-depth conversations with clients about their financial history and future aims, whether that’s in-person or remotely.
As part of this, advisers will want to discuss whether other Government support could provide cost savings. Help to Buy, Shared Ownership and the newly launched First Homes scheme can all help to reduce upfront costs for first-time buyers. This is particularly helpful at present given the record house price growth seen since the start of the year. By bringing down deposit requirements, or the total cost of the home, these buyers can use their savings to furbish their home or pay other fees.
Another potentially less well-considered point among consumers is how changing the term of a mortgage could help them to make savings over the long-term . Though extending the mortgage term could reduce a borrower’s monthly repayments, offering savings in the short-term, doing the opposite could save the client thousands over the course of the loan, making it vital to assess which strategy best suits each borrower. Advisers can also show their value and continue attracting clients away from execution-only channels by highlighting this.
Advisers can also create lasting value for clients by helping them to avoid future penalties. Our latest research revealed that nearly two thirds (63%) of UK borrowers consider the interest rate to be the most important factor in deciding their next mortgage, while just 13% see Early Repayment Charges (ERCs) as being important to consider when on the hunt for a new deal. For those thinking about downsizing or repaying the mortgage in full in the near future, considering the potential impact of
ERCs is significant. Based on current average rates, a borrower with a £250,000 mortgage and a five-year fixed-rate term could face around £10,891 in early exit fees if they need to change mortgage before the agreed end date. Alongside highlighting the importance of ERCs, sourcing products which allow clients to overpay without receiving a penalty is another way that advisers can help keep costs to a minimum.
In the wake of an incredibly difficult period for many, advisers now more than ever need to show how they are finding ways to help their clients keep costs down and ensure financial stability for the future. Many know well that they can pair their client with a competitive deal, but we must continue striving for the best practise in mortgage advice, which means offering a highly tailored service.
