/ Money

Discussing your mortgage is a conversation well worth having

In this guest post from First Direct, Andy Forbes asks why we don’t do a mortgage review as often as our energy provider or insurer. Especially considering the impact it has on our monthly budgets…

A colleague of mine often reminds me that banking isn’t interesting, but money is. When my colleague mentions money, it’s not in the cold, hard, Wall Street, Gordon Gecko sense. It’s more from an everyday person’s point of view.

Money can be a great enabler, to help people follow their hobbies and achieve lifelong goals. For others it can be an elephant in the room – the cause of an argument or general ongoing stress. Many people have to be careful with their money and do what they can to make it go as far as possible.

I spend a lot of time looking at customer behaviour and trying to design products and services that really tap in to what customers need. So it seems to me that most people spend far too little time reviewing their finances. I’m honestly not the best either – but let’s ignore that for the moment! The fact remains; we should review our finances regularly and use all available resources to do so.

New rules for mortgage lenders

This brings me to the Financial Conduct Authority (FCA) Mortgage Market Review, (MMR) introduced earlier this year (26 April 2014). This required all mortgage lenders to meet new industry rules. The main change was that the majority of mortgage discussions – whether face to face or over the phone – are now to be made on an ‘advised’ basis. In simple terms, the lender now needs to show – in a robust way – that the mortgage is affordable as well as being suitable for the needs and circumstances of the customer.

When it comes to the MMR, the media have focussed on the number of questions a lender may ask a customer. This affects the length of time a mortgage application now takes.

But what may have been overlooked – or perhaps hasn’t had the coverage it should – are the benefits to many existing mortgage holders in the market.

There is nothing to stop those of us with an existing mortgage looking at whether our current mortgage deal is still the right one. Considering how much of our monthly income goes towards making the mortgage payment, checking it’s still suitable makes a lot of sense. When you think about how much this could cost over a common term of 25 years, it can be a small fortune. Reducing monthly payments could also help us all to make ends meet at the close of each month.

Yet, despite this, many don’t carry out a mortgage review; perhaps fearing that the process is long-winded, uninteresting or intrusive.

Overcoming the mortgage review stigma

Ask anyone when they last reviewed their home or car insurance and the answer will undoubtedly be “in the last 12 months”. But when it comes to mortgages, how can we overcome the stigma and make a mortgage review as habitual as comparing our energy supplier or car insurance provider? Yes, it does take a bit of time to go through the process, but is it really disproportionate to the importance of the subject? No, it’s not. And when we are talking about an ‘investment’ the size of most mortgages, it can be time well spent – in some cases thousands of pounds saved.

MMR has made it easier for customers to access a consistent level of advice from any lender in the market. It’s a service that many customers should make use of on a regular basis.

Which?’s campaign around Mortgage fees highlights the need for customers to get the best mortgage deal. This campaign signifies that the simpler we can make it for customers to understand mortgage products, the better. And an advised process can play a pivotal role in this.

Which? Conversation provides guest spots to external contributors. This is by Andy Forbes, Head of Products for First Direct. All opinions expressed here are Andy’s own, not necessarily those of Which?.


When I worked in the industry the primary aim was to make a profit from any service, product offered so I am quite touched to learn ” a person who spends a lot of time looking at customer behaviour and trying to design products and services that really tap in to what customers need “.

What I found that many customers need was someone to monitor their expenditure to a budget and to be “interested”. Unfortunately for a variety of reasons the use of staff for this is uneconomic.

On a personal note I have switched mortgages twice and currently have a rate of 0.38% OBR which is exceptionally fine. The reasons for this were quite simple , a good job, a Bank trying to buy mortgage market share, and more importantly a very large mortgage.

Its a fact of life that it is very much cheaper to look after one mortgage for £500,000 than ten mortgages for £50,000. The cost differential in setting up the mortgages is one thing but the cost of an account is probably £100 a year. It is 10 times cheaper to have a single mortgage account.

For the vast majority of people the ability to change mortgages will actually be limited as I suspect the overall profit margin and mortgage risk elelments wll be of the most interest for the building society or Bank .

I think there is a cherry picking aspect to the business of mortgage lending and First Direct does require above the norm income,
“Sole applicants must have a minimum salary of £50,000. Joint applicants must either have a minimum combined salary of £75,000, or one party have an individual salary of £50,000 or more.

If you are looking to swich mortgages I suggest that wait for low interest rates, and /or a special event such as a move or extension, or more regrettably assisting a child onto the property ladder.