May 13, 2011
The ‘Big Four’, as the media has dubbed them, have declared war on each other, but while they’re distracted with undercutting each other, an exciting new player has crept into the mortgage market and just might save you money – online lenders.
With the major players setting the scene by driving customers online, niche market lenders have sprung up in recent years to take advantage of a tech-savvy customer base keen to compare home loans and save money on the biggest investment they’re likely to make.
Benefits of an online mortgage: No commissions. Cutting out the middleman means no costly commissions need to be paid to mortgage brokers, reducing costs even further.
The DIY factor: Time-poor moderns appreciate that online lenders require no face-to-face appointments. All you need to do is use a mortgage calculator and loan comparison website to find the best deal, and then apply online at a time that suits you, from the comfort from your home or office.
Lower interest rates and fees: Skipping out on real-world costs such as branches, extra staff and the overheads they incur allows online lenders to offer highly competitive interest rates. Many have scrapped extra fees and charges such as application and account-keeping fees while still offering facilities such as redraw and offset accounts.
The pitfalls: Make sure your online lender is not a fly-by-night operator working from the back of a garden shed. Where does their funding come from and do they have enough infrastructure for ongoing customer service? We all hate being in a call centre queue but not being able to speak to someone at all is worse. Also, do not forget to compare the often-seductive headline interest rate with the warts-and-all comparison rate.
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