Mortgages on the Internet - Are Borrowers Receiving the Best Advice?

Andrew Frankish, Director of independent mortgage broker Mortgage Talk Direct, discusses whether Internet selling of mortgages is consistent with the principles of best advice.

Distance selling, mail order - call it what you will, its certainly not a new concept. Since the 1950's, it has been popular to buy products and services unseen, and without face to face contact. However, until recently the products that were generally sold this way were either generic items such as books and records, or small ticket products, like housewares.

Nowadays, thanks to the advent of the Internet, it is possible to buy just about anything you want, without ever having to speak to a salesman.
Anything from cars, holidays and electronic goods, up to houses and financial services can be purchased online. And yes, that even includes mortgages.

More correctly, the ability to buy a mortgage on the Web strictly only includes choosing the appropriate product, and completing an online application form. Because of the safeguards built into our financial services legislation, a facsimile of the completed application has to be signed in person, before the formal loan can be granted. But, by browsing and buying on the Web, can borrowers be sure to receive good advice? Are they guided to products that suit their circumstances, or simply encouraged to sign up for whatever the Site operator is pushing at the time?

As you might expect, there's no simple answer here. The point is that the nature and extent of the advice given varies enormously, depending on the Site visited. And that can be a problem for a lot of potential borrowers.
While some are financially astute, and understand the difference between,
say, discounted and capped rate mortgages, the majority of consumers will
have little idea about what they might be buying. And it is these customers that run the risk of making a decision that could, in the long run, cost them very dearly.

Make no mistake, the mortgage industry has responded to consumer demand, by producing some very informative, slick and easy to use Web Sites. Many of these contain highly comprehensive data from all the key lenders, divided into transaction categories such as purchase, remortgage and buy to let.
These are sub-divided further into product categories that include variable, fixed, capped and discounted mortgages. Now, while choice is always a good thing in the consumer marketplace, there is a risk that customers can suffer from information overload.

And that's the danger. All too often, financial services Web Sites are structured so that choosing a product is very easy, but actually obtaining advice on what is right for your circumstances is almost impossible. What's needed, therefore, is a user-friendly resource that provides customers with all the product choice that they demand, but also features additional guidance and information on actually choosing the right product. That way, Web-enabled mortgage brokers can claim to be giving best advice on the offerings that they feature.

The more difficult question is, how can you encourage the prospective borrower to make direct contact with the mortgage broker operating the Web Site, to make sure that they receive professional advice to help them pick the best product? Well, more than anything, the answer lies in structuring the Web Site to encourage more direct contact at the enquiry stage.

This isn't actually as easy as it sounds, because brokers need to maintain a
sensible commercial balance. In other words, if you make it a pre-condition
of the Web Site that every application is subject to a face-to-face meeting
or telephone interrogation, most people would be put off, and will simply go
elsewhere. After all, there are plenty more sites to choose from that don't
have such onerous conditions. What's needed, therefore, is to strike a good
balance between the two extremes.

As such, some mortgage broker Web Sites will feature helpful pop-ups that
explain basic terms and principles, guiding the customer to the product
range most suitable for them. Often, these are supplemented by 'fact finder'
questionnaires that help narrow down the selection criteria, before the Site
displays a list of appropriate products. Some sites even give the option of
either a free phone contact number or instantaneous customer call back
facility.

What this all means is that, rather than insisting that the prospective borrower talks to an agent or, worse still is left totally on their own, these sites pursue a happy medium. They offer assistance and guidance at every opportunity, without negating the reason that most people shop on the Net in the first place.

Of course, buying a mortgage is something that shouldn't be done on a whim or taken lightly. Therefore, any Web Site that does offer phone-based advice and guidance should be applauded. Even more so, the few Sites that give potential customers the option of arranging a face-to-face meeting with a professional adviser should also be welcomed. This latest breed of mortgage broker is successfully combining the best characteristics of bricks & mortar selling with the ease of operation traditionally associated with the Internet. What it means for the consumer is that they have a fast track route to wide-ranging product knowledge, coupled with the level of professional expertise that Web Sites have often struggled to deliver.

For the consumer, this previously unseen combination of choice and service has to be a good thing. And, for the financial services industry, it offers the kind of transparency that customers have long since requested but, until recently, have not received.

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