After all, your mortgage rate affects your monthly repayments and the overall cost of borrowing. But while choosing a competitive rate is important, fees, cashback and other incentives play their part too.
Plus, it’s worth thinking about the lender behind the product.
There are hundreds of mortgage lenders in the UK (although four in five mortgages are provided by the biggest 10).
Different providers specialise in different types of borrowers. Some are known for their competitive rates, others for their excellent customer service. While one lender is well-known for its flexible lending criteria, another might have a slick digital process, or a combination of these features.
You might feel more comfortable borrowing from a familiar high street bank, or like the member-owned approach of a building society. Or maybe you need the expertise of a specialist lender.
The best mortgage for you might come from the lender that’s the best fit for your needs and preferences, not simply the one advertising the lowest mortgage rate.
The different types of lender
Most mortgages come from one of three broad types of lender: banks, building societies and specialist lenders.
High street banks are often the best-known names. Many have extensive branch networks, well-developed online services and a wide range of mortgage products.
This year’s winner of the Your Mortgage Award for Best Bank, NatWest, has hundreds of UK branches as well as telephone and online mortgage services, so you can get in touch with them in the best way for you.
If you already have your current account with a bank you may prefer the convenience of keeping everything in one place. And if you pay for a packaged or premium current account, there might also be exclusive mortgage offers available to you.
Building societies are owned by their members rather than shareholders.
According to the Building Societies Association (BSA), they now provide around one in three first-time buyer mortgages. Some also have a particularly strong presence in certain regions or may offer exclusive products for local housing markets. Leeds Building Society, winner of this year’s Your Mortgage Award for Best Building Society, is the UK’s largest lender on shared ownership homes, for example.
Specialist lenders focus on borrowers whose circumstances don’t always fit the standard mould. That might include self-employed applicants, people with complex income, landlords, older borrowers, those with previous credit problems or buyers purchasing unusual properties.
None of these types of lender is inherently better than another. They simply serve different customers and have different strengths.
How much can you borrow?
For many buyers, particularly first-time buyers, this can be just as important as the interest rate.
Every lender makes their own commercial decisions about how much they’re prepared to lend and the types of applications they’re comfortable accepting.
Some lenders may be prepared to lend up to six times your income in certain circumstances, while others offer lower income multiples. The deposit you’ll need varies too. Some products are available with deposits as low as 2% (or even no deposit), while others require 5%, 10% or even 40% for the most competitive rates.
Affordability calculations also differ. Lenders look at your income, regular spending and existing commitments, but they don’t all assess applications in exactly the same way. One lender may be prepared to lend more than another, even if the interest rate is similar.
The same applies if you’re self-employed, receive bonuses or commission, earn overtime or have income from several sources. Some lenders are simply more flexible than others. This year’s Best Specialist Lender in the Your Mortgage Awards, Aldermore, takes a flexible approach to assessing self-employed income, for example, using the highest combination of salary and dividend or salary and share of net profit.
This is exactly why the cheapest mortgage isn’t always right for you. If you don’t meet the lender’s criteria, you can’t get the mortgage, so the headline rate becomes irrelevant.
In person or online?
You also need to consider how you want to communicate with your lender, both during your application and afterwards.
Some borrowers like the reassurance of being able to visit a branch or speak to someone over the phone. Others are perfectly happy managing everything online, from uploading documents to tracking their application through an app or online account. Santander was recognised this year as Best Online Mortgage Lender in the Your Mortgage Awards, and it’s invested heavily in making its digital proposition fast, efficient and easy to use.
Customer service is worth considering too. A mortgage application involves paperwork, questions and, sometimes, unexpected delays. Being able to get clear answers and regular updates can make a real difference to the overall experience. This year, Halifax (now Lloyds Bank) won the Your Mortgage Award for Best Lender for Service, and is well known for its consistently good service and processing times, despite being the UK’s largest lender and handling huge volumes of applications.
Choosing the lender for you
There’s no single lender that’s the best choice for everyone.
Some borrowers will value a familiar brand and a local branch network. Others prefer the mutual approach of a building society or need a specialist lender with more flexible criteria. Some will want the reassurance of excellent customer service, while others are looking for the fastest possible online application. And, of course, they need to have competitive products too.
Look beyond the headline rate and think about fees, lending criteria, affordability, and customer service to find a mortgage that’s the right fit for you.
