Mortgage comparison is more of an art than an exact science, despite the fact that it's about understanding numbers. There are always individual circumstances that you'll need to take into account that will alter the parameters of your search and make some mortgage options more attractive to you personally than others.
In 2020, what should you be looking out for? If you are thinking about looking for a mortgage deal or are ready to apply, you've probably been following mortgage news recently and are well acquainted with the current narrative of super-low interest rates and the soaring popularity of ever-longer fixed-term mortgages. There are, however, nuances to the current mortgage market that aren't being covered quite as zealously that you do need to consider if you're comparing mortgages right now. So, think about these factors before proceeding with your application.
1. First-time buyer? Think ahead – now more than ever
There is plenty of evidence that, quite apart from the ongoing housing crisis within the first-time buyer band, the housing market at the middle level (think medium-sized family homes) is contracting. Last year we reported on the many warning signs from within the remortgaging sector where people are having a hard time to find suitable properties to move on to when their needs change (e.g. the decision to start a family). Why is this happening? Partly because the people who moved into the medium-sized homes are no longer able to or willing to move up. The traditional 'housing ladder' model is ailing, and this fact should inform your mortgage comparison practice.
Unless you are moving into a home you plan on staying in for over a decade right now, you should be prepared to move very quickly if and when the right opportunity arises. Be prepared for the chance that this won't be at the ideal time you've planned, and that it might be sooner than you would like. Think twice before locking yourself into a fixed-rated mortgage for five years or longer; a variable rate mortgage has been somewhat maligned in recent years as the least 'safe' mortgage option – yet it's the one that offers you the most flexibility should you find the home of your dreams at an unexpected point. Otherwise, look at the short-term fixed-rate mortgages of one or two years.
2. Mortgage comparison in the low interest rates: assess the risks
Right now, taking out a mortgage can seem like a no-brainer for anyone with a bit of money saved up for a deposit. Some two-year fixed-rate mortgages currently come with insanely low interest rates of just over one per cent. A great deal, right? Yes – but there are still a couple of facts about the current state of the economy that are worth noting. While wage growth is finally outstripping house price growth, the economy remains sluggish (hence the low interest rates) and vulnerable to the potential impact of the UK's exit from the EU.
To put it simply, in the unfortunate scenario of job loss or pay cut, how would the mortgage be paid? How does the lender typically respond to financial difficulty? These are probably the last things on your mind while excited about purchasing your first home, but it's important to read the small print. This is where mortgage brokers are invaluable (and you will speak to one eventually if you use the Habito mortgage comparison service).
3. Mortgage comparison sites: do they give you the full picture?
There's still some confusion about what mortgage comparison sites cover. This is partly due to the association with price comparison sites that are still popular and were once commonly used to get a general idea of how much a mortgage might cost hypothetically. This type of information has very little value now that mortgage assessments are stricter and based on lots of personal details. The good news is that all the major mortgage comparison sites are essentially mortgage brokers, just in online format.
They are regulated in the same way as traditional brokers and have to offer you the best deal possible. They also are 'whole of market' which means they have to offer deals from all representative segments of the mortgage market. Nor is the mortgage deal that seems to you like the best one after playing around with the online calculator necessarily the one you'll be applying for: this will be determined when you've spoken to a mortgage broker from the company over the phone and have had a proper assessment. So, don't hesitate to use them, but do bear in mind that all online platforms are better suited to helping people with relatively straightforward circumstances. If yours are unusual, you might find it easier to have a chat with your broker.