Broker or bank
Published 28/03/2013 | 05:00
AT the height of the property boom, there were almost 400 different types of mortgages available in the Irish market and almost 20 lenders offering them.
Times have changed.
Today, there are fewer banks and far less choice, some banks have disappeared or exited the Irish market altogether and the range of mortgages on offer has been significantly pared back.
Recently, there have been some positive signs that lending is on the increase again.
It's early days and since the overall level of lending continues to hover around a 40-year low, the only direction is up.
Mortgage lenders that have demonstrated a positive appetite for lending include Bank of Ireland and Allied Irish Bank.
Both have announced plans to significantly increase lending in 2013.
Both are running national advertising campaigns targeted at first-time buyers, through national media, digital as well as branch advertising.
Ulster Bank, EBS and the returning Permanent TSB also state they have an increased appetite for lending. AIB/EBS offer first-time buyers loans up to 92pc of the value of the property while Bank of Ireland, Ulster Bank and Permanent TSB lend up to 90pc.
KBC Bank, the Belgian-owned bank, lends 80pc of the value of the property.
In this respect, the reduced number of lenders and mortgage options should make the whole comparison process easier for applicants.
Many bank websites provide fantastic first-time buyer guides that deliver a wealth of free information, according to Frank Conway of Irishfinancialreview.ie, a website that promotes financial literacy.
Mortgage applicants that "tick all of the right boxes" should have little difficulty getting their application approved directly from a lender, he said.
This includes security of employment, saving of the necessary deposit, satisfactory credit check and provision of a mortgage protection policy.
For those that may feel their chances of securing mortgage approval may be less certain, a broker can provide particular benefits, according to Mr Conway.
"A reputable mortgage broker will have a direct relationship with many of the main banks, thus providing invaluable insight into the lending criteria and nuances of each lender," he said.
The primary role of a broker is to advise applicants, recommend products, liaise with mortgage lenders and prepare/process relevant paperwork.
Brokers can only advise on the products of banks where they hold a commercial arrangement.
Some banks do not deal directly through brokers which can have a limiting effect on the fullness of the market information brokers can make available to customers.
When it comes to how they make their money, brokers make a significant percentage of their income from fees paid to them by banks. However, since 2008, the level of fees paid by banks has been significantly cut back, Mr Conway said.
Depending on the bank, a mortgage broker will be paid between 0.5pc and 1pc of the mortgage amount on completion of the loan. However, strict Central Bank rules require brokers to recommend on the basis of what is best for the customer, not the income generated.
Because of a significant fall in fee income, some brokers now charge a mortgage-processing fee.
This can range from €500 upwards, so it is important that applicants check in advance if their broker does have a fee policy and what service applicants can expect in return.
As a condition of the mortgage, applicants must take out mortgage protection insurance. This is a particular type of life policy that is directly linked to the mortgage and pays it off in the event of a death.
Banks and brokers generally offer advice in this area although brokers generally provide a higher degree of market comparison whereas banks generally tend to be "tied" to a particular life company, Mr Conway said.
Banks are perhaps best suited to those whose mortgage application is likely to pass all of the bank's rigid qualifying criteria, he said.
"Securing a mortgage is not just a matter of comparing the deals on offer from lenders, but how those lenders will assess income and other relevant personal information.
"For those that may have a few 'kinks' in their application, a broker can provide invaluable advice, especially at the start of the process," Mr Conway said.
With a broker, it is important to establish how many banks and life protection companies they hold agencies with.
The more the merrier, as this should increase chance of getting mortgage approval and, ultimately, the best deal available.
When it comes to comparing mortgages, Mr Conway said an excellent independent website is provided by the National Consumer Agency at http://www.nca.ie/compare.
To locate a broker, there are two primary broker representative bodies: the Irish Brokers Association (www.iba.ie) and the Professional Insurance Brokers Association (www.piba.ie).
There is also a mortgage broker representative body called the Association of Expert Mortgage Advisers.