Dangers of internet advice

Andrew Frankish, director of independent mortgage broker Mortgage Talk Direct, has published an open letter stating that while there are safeguards to protect borrowers it is debatable whether quality advice will ever be available on the web.

Frankish said: "...the nature and extent of the advice given varies enormously, depending on the site visited. And that can be a problem for a lot of potential borrowers. While some are financially astute, and understand the difference between, say, discounted and capped rate mortgages, the majority of consumers will have little idea about what they might be buying. And it is these customers that run the risk of making a decision that could, in the long run, cost them dear.

"Make no mistake, the mortgage industry has responded to consumer demand, by producing some very informative, slick and easy to use web sites. Many of these contain highly comprehensive data from all the key lenders, divided into transaction categories such as purchase, remortgage and buy-to-let. These are sub-divided further into product categories that include variable,

fixed, capped and discounted mortgages. Now, while choice is always a good

thing in the consumer marketplace, there is a risk that customers can suffer

from information overload.

"And that is the danger. All too often, financial services web sites are structured so that choosing a product is very easy, but actually obtaining advice on what is right for your circumstances is almost impossible. What is needed, therefore, is a user-friendly resource that provides customers with all the product choice that they demand, but also features additional guidance and information on actually choosing the right product. That way, web-enabled mortgage brokers can claim to be giving best advice on the offerings that they feature.

"The more difficult question is, how can you encourage the prospective borrower to make direct contact with the mortgage broker operating the web site, to make sure that they receive professional advice to help them pick the best product? Well, more than anything, the answer lies in structuring the web site to encourage more direct contact at the enquiry stage.

"This is not actually as easy as it sounds, because brokers need to maintain a sensible commercial balance. In other words, if you make it a pre-condition of the web site that every application is subject to a face-to-face meeting or telephone interrogation, most people would be put off, and will simply go elsewhere. After all, there are plenty more sites to choose from that do not have such onerous conditions. What is needed, therefore, is to strike a good balance between the two extremes.

"As such, some mortgage broker web sites will feature helpful pop-ups that explain basic terms and principles, guiding the customer to the product range most suitable for them. Often, these are supplemented by 'fact finder' questionnaires that help narrow down the selection criteria, before the site displays a list of appropriate products. Some sites even give the option of either a free phone contact number or instantaneous customer call back facility.

"What this all means is that, rather than insisting that the prospective borrower talks to an agent or, worse still is left totally on their own, these sites pursue a happy medium. They offer assistance and guidance at every opportunity, without negating the reason that most people shop on the Net in the first place.

"Of course, buying a mortgage is something that shouldn't be done on a whim or taken lightly. Therefore, any web site that does offer phone-based advice and guidance should be applauded. Even more so, the few Sites that give potential customers the option of arranging a face-to-face meeting with a professional adviser should also be welcomed. This latest breed of mortgage broker is successfully combining the best characteristics of bricks & mortar selling with the ease of operation traditionally associated with the internet. What it means for the consumer is that they have a fast track route to wide-ranging product knowledge, coupled with the level of professional expertise that web sites have often struggled to deliver.

"For the consumer, this previously unseen combination of choice and service has to be a good thing. And, for the financial services industry, it offers the kind of transparency that customers have long since requested but, until recently, have not received."

Flexible mortgages under 3 per cent

Britannic Money has cut the initial rate on its Flexible Start Mortgage to below three per cent.

Rates begin at 2.89 per cent although there is an early repayment penalty within the first five years.

Rachel Ramsden, head of marketing at Britannic Money, said: "Our Flexible Start Mortgage is ideal for those customers such as first-time buyers who need an initial low rate but also want the option to use more flexible features as their priorities and circumstances change."

The lender is also offering mortgage payment protection insurance (MPPI) free to all new customers for the first six months of their mortgage.

Ramsden said: "As a lender we have successfully educated customers on how to manage their finances more effectively. Sales of flexible mortgages have soared in recent years. Our predictions show that by 2005, 55 per cent of all new mortgages will be flexible."