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Brokers must become clients’ flexible friends

It’s difficult to comprehend how much the mortgage market has changed in a relatively short time. In the old days a borrower was pretty much at the mercy of their local branch manager’s discretion as to whether they would be granted a straightforward variable rate mortgage.

Now, not only has the choice of deals mushroomed but borrowers are courted by lenders with tempting rates and incentives.

Products with sharp incentives can be had without the need to lock in beyond the initial incentive. Borrowers can shop around for insurance rather than be tied into taking lenders’ own offerings and even the cost of switching to a new lender’s remortgage product can be avoided.

Products themselves offer the options of fixed, tracker, capped and discounted rates.

Flexible mortgages have pushed the boundaries further, putting customers in control and allowing them to overpay whenever they choose, whether on a regular monthly basis or in lump sums. These deals also enable clients to take a payment holiday or underpay if that suits them better. And it doesn’t end there, with other banking products incorporated into offset and current account mortgages.

This increased flexibility has entrenched itself into more traditional products and daily interest and partial overpayments of up to 10% per year are now commonplace, as borrowers have responded positively to the promise of flexibility.

We are seeing more flexibility added all the time, most recently even in the product selection process.

Lenders such as Nationwide and Scarborough allow a switch from any of their discount and tracker products to one of their fixed rates without incurring early repayment charges. Portman has also adopted this approach on certain products.

This is a positive and reassuring feature that clients will like the sound of, although naturally it limits them to a choice of fixes from the lender’s range at the time they want to jump deal and there is no guarantee that the lender will have a competitive fixed rate at that time.

While this drop-lock facility is not completely new to the market its implementation as a standard feature across portfolios is further evidence of a market willing to give borrowers what they want, or at least think they want.

Flexibility is welcome but it is important that brokers unravel and explain the value of extra features. Establishing whether they are needed and any effect they may have on the comparative prices of products is vital as all too often the features will not be used.

David Hollingworth is mortgage specialist at London & Country

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