Mortgage specialist Sam Fox, founder of UKMC, explains why first-time buyers could benefit from exploring lenders outside their existing bank
Choosing a mortgage from the bank where you already hold your current account can seem straightforward, but first-time buyers may be overlooking more suitable alternatives by stopping their search there, according to UKMC founder and mortgage expert Sam Fox.
Warrington-based Fox works with buyers across the UK and says existing relationships with high-street banks can make them appear like the natural starting point, even when another lender may have criteria that better suit the buyer.
“For many first-time buyers, the search for a mortgage starts with the bank they already use. I understand why. Your salary goes into the account, you have years of transaction history and there is already a level of trust,” says Fox. “But familiarity does not always mean suitability, and that is where many first-time buyers limit their options without realising it.”
The UK mortgage market extends well beyond the handful of high-street brands most consumers recognise, with more than 100 active lenders and thousands of mortgage products available across banks, building societies, specialist lenders and other providers.
Fox says the scale of the market matters because lenders can take very different approaches when assessing applications, particularly where a buyer’s circumstances are less straightforward.
“Lenders assess mortgage applications differently. While all providers must carry out affordability checks, each lender has its own approach to income, expenditure and risk,” he says.
“For buyers with smaller deposits, self-employed income, bonuses, commission or less traditional financial circumstances, those differences can be significant. A decline from one provider does not necessarily mean you cannot secure a mortgage elsewhere. It may simply mean another lender’s criteria fit your situation better.”
Building societies can provide more choice
First-time buyers should also look beyond the major banks and consider the role building societies can play in the mortgage market, says Fox.
Sector-wide data from the Building Societies Association puts building societies’ share of UK mortgage balances at around 29 per cent. Some building societies have also performed strongly in customer satisfaction surveys.
“The right mortgage is not always attached to the biggest brand,” says Fox. “Building societies and specialist lenders can offer different approaches to lending, and in some circumstances those criteria may be a better fit for an individual buyer.”
The products available across the market show how varied mortgage options can be. Skipton Building Society’s Track Record mortgage, for example, has offered 100% loan-to-value lending for eligible renters with a strong history of meeting rental payments. Major lenders including Lloyds, NatWest and Nationwide also continue to offer 95% LTV products.
With products targeting different types of borrowers, Fox says first-time buyers should consider a broad range of options before deciding which mortgage is right for them.
A lower interest rate does not always mean a better mortgage
Another common mistake, according to Fox, is judging mortgages primarily by their advertised interest rate.
Mortgage arrangement fees can differ significantly, and individual products may also carry other charges. As a result, the lowest rate does not necessarily represent the lowest overall cost or the most suitable product.
“A mortgage is a long-term financial commitment, so the cheapest rate on paper is not always the best option,” says Fox. “First-time buyers should look at the complete package and consider whether the mortgage fits their plans, rather than simply choosing the rate that appears first in a search result.”
Why using an independent broker can make a difference
Fox says independent mortgage advice can help buyers navigate the wider range of lenders and products available.
“When you go directly to your bank, you only see the products that bank offers. A broker can compare options across a much broader range of lenders and help you understand which products may be suitable for your circumstances,” he says.
“That does not mean the recommendation will never come from a major bank. In some cases, it will. The difference is that the decision is based on suitability rather than familiarity.”
For first-time buyers making a major financial decision, Fox says the key is to keep an open mind when searching for a mortgage rather than assuming their existing bank will provide the best option.
“The best mortgage may not be the one sitting on the high street,” says Fox. “It may be the one you discover by looking beyond it.”
