The research from Noddle – a British credit information provider – said that an average consumer from the United Kingdom will spend more time searching for value-for-money holidays than investigating mortgage options. They spend six days investigating cars and take five days to shop around for their next holiday. However, they will only spend 3.6 days investigating mortgage options.
Britons spend three days – almost the same amount of time they spend to investigate mortgage options – looking for an outfit to wear for a special occasion. The Brits display such lackadaisical attitude towards investigating mortgage options despite a mortgage being the biggest financial commitment for most households.
The research by the British credit report provider said that 26 per cent of borrowers did not even shop around for a mortgage loan, while a staggering 19 per cent accepted the first deal they were offered.
This lack of interest in investigating mortgage options has unfortunate consequences, with 17 per cent saying they are now stuck in a financial contract they are not happy with.
Noddle said that getting the right mortgage loan the first time is essential as it may equate to consumers paying an extra £3,000 a year on a typical £200,000 mortgage. The difference in rates on two-year fixed rates offered by the main banks in Britain is huge – varying from 1.84% to 4.22%, said Noddle.
A large 23 per cent of mortgage holders said they took the first mortgage which was offered to them as they feared that applying for others might damage their credit score and jeopardise them from getting a mortgage loan altogether.
Noddle said that their research suggested that that consumers need help to understand more about what mortgage loans they may be eligible for before they apply. It also shows that consumers are aware that credit scores may impact their options.
Jacqueline Dewey, managing director at Noddle, said: “The excitement of finding a house you’ve fallen in love with, combined with worries about being accepted for a mortgage, means it can be easy to rush a decision about a mortgage.
“But when we’re talking about thousands of pounds on the line it really does pay to do your research. Rates vary across the market so don’t take the first deal available and try to speak to more than one lender. Understanding your credit score and getting it in good shape beforehand will also help you get the best rates.”
Chief mortgage consultant at icompareloan.com, Paul Ho, said that the experience in Singapore is similar, in that consumers don’t spend enough time investigating mortgage options.
Mr Ho said: “Many people search for properties but neglect the importance of home loans selection and affordability assessment. Many are stuck when they later realised that they have an issue within credit where they were previously not aware of. Many people could have an inflated sense of confidence while some are over conservative when it comes to buying a property. We see both extremes.”
And also, not all home loans in Singapore are created equal – as some will try to charge more than others. This is why it is very important to find the right lender who meets the consumers’ needs for more funds. Many factors come into play when the consumer is searching for home loans in Singapore – factors like, if have they defaulted on loans in the past and how they service their existing loans.
All these factors affect the consumers’ credit score. A credit score is a number used by lenders as an indicator of how likely an individual is to repay his debts and the probability of going into default. It is an independent assessment of the individual’s risk as a credit applicant.
Finding home loans in Singapore, let alone finding one with a reasonable interest rate can be a challenge if the consumer has defaulted on any loan repayments before. If they have defaulted on home loans in Singapore in the past, it can be extremely hard for them to find a lender with a reasonable interest rate.
But regardless of if the consumer has got a good credit score or not, how to secure the right loan from the right lender remains elusive for many.
For example, if you are looking for the right home loan, the consumer has the option of choosing from 16 banks which offer retail mortgages. The Fed interest rates have gone up once again, which means that the interest rates for bank loans here will follow suit soon. But the truth is, not all 16 lenders revise their mortgage packages as soon as the the SIBOR rises. There is often a laggard response from the lenders and this would be the consumers’ opportunity to grab the right loan for themselves – and that too with the lowest interest rates.
All these factors may make it overwhelming for a layperson to try to make sense of the different loans. Given that it is chock full of technical terms and jargon does not help either.
Mr Ho said: “Which is why consumers these days want to use a mortgage broker to compare and get the best rates. Many are indeed preferring to use a mortgage broker as compared to going directly to a single bank.”
He added: “The 2 years fixed rates for example, have gone up to around 1.8%, some may even come in at 1.95%. It is very dynamic, so it is best to contact us (www.iCompareLoan.com/contact) for an assessment and for us to generate a comprehensive report for you.”
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