Choosing a mortgage
Different Types Of Mortgage Lender
Mortgage lenders in the UK can basically be broken down
into three groups - high street lenders, direct operations
and specialists:
High street lenders
High street lenders have traditionally the dominant player
in the mortgage market. In the past couple of decades however,
the stranglehold that the high street lenders have enjoyed
on the conduct of mortgage business in this country has
weakened.
This group can further be split into the building societies
and the banks. Both usually offer a substantial range of
products to cater for the varying tastes of the consumer.
Banks are profit-making businesses that return their profits
to shareholders in the way of dividends. Building societies
on the other hand are mutually owned organisations, which
exist not for profit but for the benefit of the members.
They claim that this allows them to return profits to their
customers in the form of cheaper products. It certainly
is the case that building societies have traditionally topped
the best-buy tables that are widely published. However,
increasing competition and the fact that banks are trying
to run as efficient commercial organisations means that
many of them have caught up and can now offer products as
cheaply as or cheaper than the building societies.
Direct lenders
Direct lenders usually operate without a branch network
from some central headquarters or centre of operations.
Lower overheads on premises and centrally streamlined processes
mean that the overall costs are much lower and part of this
saving is used to deliver cheaper products. Add to this
the convenience of arranging a mortgage outside working
hours from your own home, and it is easy to see why these
new operations are finding favour.
This is one reason why the telephone and Internet-based
operations have taken such a huge slice of the market in
a relatively short period of time. Many of the high street
lenders are now offering their services over the web as
an integrated part of their business channel strategy, while
others are using it as a means to attracting customers to
their offline business.
Specialist lenders
Though a small number of the high street and direct lenders
offer specialist mortgages, it is more common to find these
being offered by dedicated companies, although even these
are often wholly-owned subsidiaries of lenders with more
recognisable names. Shunning the mainstream, they offer
higher interest loans to special status customers, such
as those with bad credit ratings, buy-to-let investors and
other niche groups.
