This is an excellent, detailed guide for UK mortgage applicants, provided by MoneySavingExpert (MSE). It covers crucial aspects of shopping for a mortgage, particularly highlighting the importance of independent advice and scrutinising paperwork.
I will structure the response to reflect this step-by-step approach, ensuring all UK-specific advice, terminology, and key considerations (like APRC, broker types, and specific UK-only lenders mentioned) are retained and clearly explained.
Here’s a step-by-step guide to finding the best mortgage or remortgage deal for you in the UK:
Finding the Best Mortgage Deal in the UK: A Step-by-Step Guide
Getting the right mortgage or remortgage deal can lead to significant savings of hundreds of pounds each month. Conversely, making the wrong choice can mean paying substantially more over the loan’s lifetime. This guide will walk you through how to find the best mortgage deal, where to look for a good mortgage broker, and other essential information.
Step 1: Do a 10-Minute Online Search for Mortgage Deals
Before diving into specific deals, ensure you have a basic understanding of different mortgage types (fixed, variable, discount, specialist) and what suits your financial situation. If not, consider researching “What type of mortgage to choose” first.
Once you know your preferred mortgage type, start looking at available rates. The rates you can get are heavily influenced by your deposit size relative to the property’s value (known as Loan-to-Value, or LTV). The larger your deposit, the lower your LTV, and generally, the better interest rates you’ll be offered.
Crucial First Rule: NEVER just go to your bank for a cheap deal.
Your bank will only present its own range of deals, not the entire market’s offerings. This means it’s highly unlikely you’ll stumble upon the best deal for you by limiting your search to a single bank. While it’s worth checking what your bank offers as a starting point, broaden your search.
Benchmark a Good Mortgage Rate Using Online Tools (like MSE’s Best Buys):
While many mortgage comparison sites exist, none can guarantee to show you every single deal. The UK mortgage market is complex, with some deals exclusively available through certain brokers or directly from lenders. Tools like MoneySavingExpert’s Mortgage Best Buys are excellent starting points as they include most direct and broker-available deals.
A Note on APRC – It’s Mostly Meaningless:
All lenders in the UK are legally required to tell you their Annual Percentage Rate of Charge (APRC). This is an averaged annual interest rate calculated over the entire term of the mortgage (e.g., 25 years). However, for most borrowers, the APRC is largely irrelevant because:
- You are unlikely to hold the mortgage for the entire 25+ year term without remortgaging.
- The rate it reverts to (the Standard Variable Rate or SVR) after your initial deal ends is likely to change.
- It’s an averaged rate, not what you’ll actually pay.
What to Focus On Instead:
Focus on the initial interest rate, any fees associated with the deal, and the rate it will revert to (SVR) once your initial fixed or discounted term ends.
Step 2: Now Talk to a Mortgage Broker
Once you have benchmarked a good rate online, the next crucial step is to consult a qualified mortgage broker to see if they can beat it.
Why Use a Mortgage Broker?
- Market Scour: Brokers scour a huge portion of the market, potentially finding deals you wouldn’t otherwise access.
- Access to Exclusive Deals: Some deals are only available through brokers.
- Clout with Lenders: Brokers can sometimes use their relationships to help with complex applications.
- Added Protection: Using an advised broker offers consumer protection if the advice turns out to be unsuitable.
- Expert Knowledge: Experienced brokers know the intricate lending criteria of different lenders (e.g., if a lender doesn’t lend on properties above shops, or is stricter with self-employed applicants). This saves you time and protects your credit score by guiding you to suitable lenders from the outset.
- Scheme Advice: They can advise on various homebuying schemes (e.g., Shared Ownership) if you’re eligible.
Choosing the Right Broker – Key Questions to Ask:
Not all brokers are the same. Some are limited in their offerings. All UK mortgage brokers must be regulated by the Financial Conduct Authority (FCA).
- “Can you get me a mortgage from any UK lender, right now?”
This question helps you understand the broker’s reach:
- “No” (Tied/Panel Brokers): Some brokers are tied to one lender or a small “panel” of lenders, limiting your options.
- “We check all products available to brokers” (Whole of Market – for brokers): Many brokers claim “whole of market” but only search deals available to them via broker channels. This often excludes direct-only deals.
- “We check all lenders” (Truly Whole of Market – including direct): Some brokers do check direct-only deals, but they might charge a fee as they don’t receive commission on these.
- Reality: It’s unlikely any single broker can guarantee access to every mortgage, as some deals are truly exclusive to specific broker networks. Be clear on what your chosen broker offers and weigh it against your willingness to do extra legwork or pay a fee.
- “Do you charge a fee?”
Brokers make money in two ways:
- Commission (Procuration Fee): Most lenders pay brokers a commission (roughly 0.35% of the loan, e.g., £350 per £100,000 borrowed), which doesn’t directly affect your mortgage cost. They are obliged to disclose this fee.
- Direct Fee: Brokers may also charge you a direct fee. This could be on top of the commission, or instead of it (meaning they refund the commission to you, making them “independent”).
- Recommendation: Many prefer to use fee-free brokers (who make their money solely from lender commission) who can still advise on a wide range of mortgages. No reputable broker should charge more than around 1% of the mortgage value, even for complex cases. Avoid those charging large upfront fees before completion.
- “Are you qualified?”
Ensure you’re receiving advice from a qualified mortgage adviser (the most recognised qualification is CeMAP). A qualified broker will assess your needs and eligibility thoroughly before recommending a suitable product. This advised route offers significant consumer protection; if the advice is wrong, the Financial Ombudsman Service (FOS) can investigate. An “information-only” service offers no such comeback.
Finding Top UK Mortgage Brokers:
- Recommendations: Ask friends, family, or colleagues who have recently moved for local recommendations.
- Online Directories: Websites like Unbiased.co.uk or VouchedFor allow you to find regulated financial advisers, including mortgage brokers, in your area.
- National Brokers: Large online or phone-based brokers often have access to a wide panel of lenders and may offer fee-free services (e.g., L&C Mortgages, Habito, Mortgage Advice Bureau, Better.co.uk).
Step 3: Then Check Deals That Most Brokers Miss
Even after consulting a broker, it’s worth doing a “belt and braces” check, especially if your broker isn’t truly “whole of market” for all direct and broker-exclusive deals.
- Lenders That Don’t Operate Through Brokers: Some lenders, like First Direct and historically Yorkshire Bank, primarily offer their deals direct to the public. You’d need to apply to them yourself if you want to consider their rates.
- Lenders That Don’t Offer All Their Deals Through Brokers: A few lenders reserve certain highly competitive deals for direct applications only. Tools like MSE’s Mortgage Best Buys can highlight if a deal is direct-only. You’ll need to do the legwork to apply directly if you choose one of these.
- Exclusive Deals from Other Brokers: Occasionally, specific broker networks may negotiate exclusive deals with lenders. While these aren’t a significant proportion of the market, for “full belt and braces,” you could speak to a couple of different brokers.
To properly compare deals, use online calculators (like MSE’s “Compare two mortgages” or “Compare fixed-rate mortgages” tools) to assess the total cost of the best broker-offered deal versus any compelling direct-only deals you find.
Step 4: Check Mortgage Paperwork Meticulously
You’ll receive a lot of documents during the mortgage process. Pay close attention to these key ones:
- Key Facts Illustration (KFI): This document (now largely replaced by the Mortgage Illustration / Offer Document which incorporates KFI elements) outlines the main facts about the mortgage product. You should receive this before you make a formal application.
- Check for: Correct date, your name, who created it (broker or lender), and if the product was recommended. This is a crucial piece of evidence if you ever have a dispute. Keep a copy safely.
- The Mortgage Offer: This is sent once your application is successful and details all the facts and conditions of the loan. It’s legally binding.
- Check every detail: Misspellings, incorrect loan figures, and unexpected clauses can cause significant delays or even jeopardise your purchase.
- Scrutinise Conditions: Pay close attention to any conditions you need to meet before the funds can be drawn down (your solicitor will also check these).
- Don’t Rely Solely on Others: While your broker and solicitor should check the offer, it is your responsibility to read it thoroughly before signing.
Step 5: Watch Out for the Hard Sell on Ancillary Products
Some lenders and brokers may try to sell you additional products during the mortgage process. While some of these might be useful, they may not be the most competitively priced. Be prepared for a “hard sell.”
- Mortgage Payment Protection Insurance (MPPI) / Accident, Sickness, and Unemployment (ASU) Insurance:
- Purpose: Designed to cover your mortgage payments if you can’t work due to accident, illness, or redundancy.
- Consideration: It’s sensible to think about how you’d meet payments if these events occurred, as government help is limited.
- Caution: MPPI has been mis-sold. Ensure the policy will actually pay out in your circumstances (e.g., check exclusions for pre-existing conditions), understand waiting periods, and how long it pays for (often 12-24 months).
- Shop Around: Your mortgage broker might only be tied to a limited panel of insurers for MPPI. Get quotes from independent insurance brokers or comparison sites to ensure you’re getting the best value.
- Bundled Buildings / Contents Insurance:
- Requirement: All lenders require buildings insurance as a condition of the mortgage.
- Suspicion: Be wary of deals that insist you buy your buildings insurance through the lender. You can usually get much cheaper deals by shopping around independently. While some lenders might charge a small admin fee if you decline their insurance, this can often be recouped from savings elsewhere.
- Life Cover:
- Importance: Often considered for the first time when taking out a mortgage, to ensure the loan is repaid if you die.
- Shop Around: Do not take the first life insurance quote offered by your lender or mortgage broker. You can often save 50% or more by comparing quotes from various independent life insurance providers. (e.g., through comparison sites or specialist life insurance brokers).
By following these steps, doing your research, and leveraging expert advice, you can significantly increase your chances of securing the best possible mortgage deal in the UK.