Introduction

Mortgage lenders play a pivotal role in the personal finances of the majority of UK homeowners and finding the right mortgage lender is essential to ensure that you get the best possible service and do not end up paying more for your mortgage than you need to. However obtaining the best mortgage rate may not be the only measure with which to compare mortgage lenders. We offer some practical ways in which you can actively compare mortgage lenders in order to ensure that as a new borrower you end up with the best possible mortgage deal from a mortgage lender that is most suited to your individual needs. We examine a range of factors that are essential for comparing mortgage lenders.

1. Customer Service

Trusting a mortgage lender is an essential element for any new or existing borrower. Examining the customer service a mortgage lender provides is an excellent way to compare mortgage lenders and ascertain how reliable your proposed mortgage lender may be before you commit to a mortgage with them. The consumer pressure group Which? offer a fantastic impartial survey of mortgage lenders based on a range of factors which includes customer service. You can view the full Which? survey here.

2. Mortgage Loan Book

The mortgage loan book refers to the volume of mortgage loans and homeowner loans that a specific mortgage lender provides nationally. The larger the number of loans the more likely you may be to get accepted by that specific lender when you yourself apply. This is worth remembering when you make your mortgage application as it may improve the success of your own mortgage application. However a larger mortgage loan book may also indicate that you will be just another number in the mortgage lender's system and sometimes opting for regional mortgage lenders or small organisations may improve the customer service that you receive. Indeed the Which? mortgage survey seems to suggest that smaller providers like One Account, Coventry Building Society and Britannia Building Society faired better overall than some of the bigger mortgage lenders like Halifax, Northern Rock , Abbey , Barclays (Woolwich) and the Royal Bank of Scotland. So having a larger mortgage loan book and approving more mortgage and homeowner loans does not automatically guarantee the best service.

3. Mortgage Lender Ethos

Another factor to consider when comparing mortgage companies is the ethos or values system of the mortgage lender themselves. For example opting for a building society over a bank means that profits will be directed back towards customers in the form of competitive loans, mortgages and other financial products rather than being paid out as dividends to shareholders. In addition some lenders such as the co-operative group seek to invest money more ethically than other organisations for example by avoiding generating money by trading shares from companies linked to the arms trade. Understanding the ethos and values of a company is an important feature to enable you to compare mortgage lenders effectively.

4. Use of Debt Collection Agencies

This may be an important factor when you compare mortgage lenders for the simple reason that it is important to understand how quickly a mortgage lender will resort to using external debt collection agencies to deal with customers who fall into mortgage arrears. It is worth asking the question or doing some research to find out whether debt collection is kept within the organisation or sold off to third party debt collection organisations. If it is kept in house then the mortgage lender may be more open to dialogue if you experience problems meeting repayments, whereas external debt collectors are often driven purely by the need to collect arrears. The speed with which a mortgage lender is willing to resort to debt collection provides an insight into how they value their mortgage customers.

5. Ease Of Contact

This refers to the ease with which a borrower can contact their mortgage lender to discuss a problem or to seek advice or make overpayments. It is highly likely that you will have to contact your mortgage lender at some point and having a good range of ways to do this is important. When you compare mortgage lenders look for dedicated email, telephone and postal addresses to a mortgage team. Ideally the telephone number should be a freephone one so that you don’t have to spend money contacting the mortgage lender. Also look for UK call centres rather than international call centres, as this provides a more personal service and the individual you speak to is more likely to have a good understanding of the cultural context of your query.

6. Loan to Value Ratio (LTV)

The loan to value ratio has become an increasingly important factor to use to compare mortgage lenders. Essentially it is the balance of the mortgage outstanding as a percentage of the home's price. For example a £90,000 loan on a £100,000 house would have a loan-to-value ratio of 90 percent.

Some mortgage lenders will not approve mortgages that have less than a 70% loan to value ratio (LTV) whilst others are willing to do so. When shopping around for the best mortgage you need to calculate your own loan to value ratio and take this into account when applying for a mortgage because otherwise you may be wasting your time applying if your loan to value ratio does not meet the minimum requirements of the mortgage lender.

The higher the loan to value ratio quoted by the mortgage lender the better it is for a borrower as it means that you do not need to put down such a large deposit to obtain that specific mortgage product.

7. Applying Interest Rate Changes

This is another essential factor to consider when you compare mortgage lenders as it will directly impact upon your monthly mortgage payments. Some mortgage lenders are slow to apply changes when the Bank of England reduces interest rates, but quick to apply them when they increase interest rates. Ideally you need to choose a mortgage lender that can pass savings onto you as quickly as possible and has a proven track record in doing this. Often building societies are the best at this because they exist for the benefit of their members, whereas banks are more driven by profit and holding off for an extra week or so before passing on interest rate changes will suit them better.

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