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Mortgage Comparison

A few decades ago getting a mortgage was a relatively simple process. The mortgage lender market was fairly small and consumers tended to go to the big high-street names for a loan deal. Few consumers would undertake an in-depth mortgage comparison (or indeed any comparison at all) across lenders to get the best deal - their mortgage lender might give them an overview of their current rates but that was about all. Then, it was more about familiarity and security than about making a mortgage comparison to save money.

The lending market today is much different. Mortgages are big business and the sector has become much more competitive in recent years. Rates, terms, offers and mortgage comparison tools change every day to the advantage of the consumer and loyalty no longer has to be a factor. One of the biggest effects that this has had on consumers is in the mortgage comparison stakes. Not only are we more likely to shop around and make cost choices but the Internet has opened up a whole new world of comparison tools for us to use.

The days of accepting a mortgage offer based on whether we can afford the repayments are long gone - we're playing the comparison game based on actual costs now. Let's examine a simple example. At the time of writing this article a major high-street lender is offering a variable rate of 6.54% on a £100,000 mortgage over 25 years. This gives a monthly repayment of around £685. Take a fixed rate mortgage with them, however, and you'll be offered a rate of 5.65% with a monthly payment of around £630. This may not seem much difference on a monthly basis but think of it in yearly terms and it soon starts to add up. The whole point of engaging a mortgage comparison exercise is that you can prevent yourself paying out cash that you don't HAVE to.

A mortgage comparison has various uses. It can help establish the type of loan you want such as fixed rate, repayment, interest only or flexible. It can also be used via one specific lender's comparison tool to see which of their interest rates or deals best suit your needs. Or, if you prefer, you can use a mortgage broker or specialist Internet mortgage comparison site to compare offerings across lenders. This option will give you a much broader market overview and will alert you to best offers and rates before you make a decision.

One of the biggest market changes in recent years was born out of our increasing tendency to take up a comparison. For many years, a consumer would choose a lender, accept a deal and then stick with the same lender and even with the same deal for the life of the mortgage. There was no real need to do this - and consumers began to realise that they were free to shop around, make a comparison and even to change to a different lender if they had a better rate.

This change has created a new breed of consumer - the comparison expert. It's becoming more common to take up a mortgage deal for a few years and then to change it as new offers come out. Some consumers opt to change deals within the umbrella of one lender and some actually regularly move their mortgages elsewhere if the comparison shows significant savings. This type of ongoing exercise can save you thousands of pounds over the loan life. You do need to be aware of penalty clauses and to play the comparison game to avoid them but the only other major drawback of this kind of loan swapping is that it will cost you some extra time. The savings you'll make will generally more than make up for it!