First Time Buyers Fail to Shop Around For a Mortgage

by Mark Johnston

Many first time buyers invest far more time in finding the right house than in finding the right mortgage.

Almost two thirds of first time buyers accept the first mortgage they are offered, therefore miss out on better deals.

House hunting is a lot more interesting than mortgage hunting granted, however the two are equally important. After all would be buyers will be living with both of them for many years to come.

Recent research has shown that most consumers start a property search first in order to discover what they will be able to buy, and then they look in to mortgages to see what they can actually afford.

Only a minority of would be buyers looked for a mortgage or sought an ‘in principle’ approval for a mortgage before commencing the search for a property.

The fact that most consumers have found a property by the time they consider their mortgage options does limit the time available for shopping around. The mortgage offer stage is too late to provide information to facilitate shopping around.

At this stage many first time buyers also feel pressurised by their estate agents in to quickly organising a mortgage for fear of losing out on a property.

Figures have shown that around half of consumers go straight to a meeting with a lender without having done any investigation of their own in to different types of mortgages or the mortgages offered by different lenders.

Data has shown that shopping around tends to be limited with few potential buyers considering more than 3 lenders.

Some research has identified the following reasons why shopping around tends to be limited:

–          some consumers find the amount and content of information confusing

–          others lack financial knowledge which then leads them to think that mortgages are complex and that they are unable to shop around themselves

–          the ‘reputation’ of specific lenders also plays a part in limiting shopping around

In the Financial Service Association’s (FSA) view consumers need clear comparable information in order for them to be bale to shop around effectively and to narrow down their choices.

Some lenders however have suggested that would be buyers may now appear to be becoming more aware of the need to shop around, especially to get a better deal.

Many first time buyers expressed that the key information they wanted was regarding the immediate monthly payments, this was so they could assess the initial affordability. Most first time buyers rarely look in to the longer term.

Studies have found that potential buyers are more focused on initial headline rates and they are less concerned with the longer term implications of a current attractive deal

Although with such a vast range of mortgage lenders to choose from all offering the ‘best deal’ for potential buyers to choose from, it is advisable to take a step back and do little research before they commit to anything.

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