Mortgage Lenders

Mortgage Lenders

A mortgage lender is typically a bank that finances secured loans for those looking to buy a property.  

When it comes to a personal mortgage or buy-to-let mortgages, a mortgage lender will typically be a bank.  

However, there are other mortgage lender options across the market such as building societies or specialist lenders.   

Mortgage Lenders - Key Takeaways 

• Banks are the biggest mortgage lenders in the UK, and mainstream banks have branches in most town and cities across the UK 

• Building Societies most often have the best interest rates available but products can be restricted geographically 

• Specialist mortgage lenders are available for borrowers with more complex circumstances, for instance if they’re self-employed, have a high net-worth, adverse credit or are looking for tailored finance products 

What are mortgage lenders?  

The biggest mortgage lenders in the UK are also our biggest banking providers, these include Natwest, Lloyds, Barclays, HSBC and Nationwide.  

When comparing the mortgages available to you, it’s advisable to look at the options you have across the different lenders, comparing banks to building societies. If you have any special circumstances, a specialist lender may have a more feasible option for you.   

With the rise of challenger banks and online-only lenders we now have more options than ever when it comes to lenders.  

It’s therefore important to be aware of all the options you have available, so you don't miss out on a new lender or mortgage deal available.  

A whole-of-market mortgage broker can ensure you get the best possible deals across the market and can connect you with private lenders that you may not otherwise have access to. 

What does a mortgage lender do?  

Mortgage lenders are responsible for lending money to those looking to purchase a property with a loan secured on the property they purchase.  

They assess and manage the risk associated with lending, ensuring that borrowers can afford to repay their loans while maintaining a stable and secure financial environment, meeting regulatory requirements from the Financial Conduct Authority.  

This can often mean strict affordability criteria, and a lengthy application process in order to get a mortgage.  

Types of Mortgage Lenders 

The UK mortgage lending business has a variety of different lender types, each offering their own pros and cons, catering to specific borrowers or offering specialist mortgage products.   

Traditional Banks 

Traditional banks are the biggest lenders in the UK, they provide a wide range of banking and financial services, including mortgage lending. 

Banks are often seen as the most common way to get a mortgage, however, they can often be considered stringent in their affordability checks and criteria.  

They may also be restrictive in their mortgage products if you have credit issues or need a specialist mortgage product.   

Building Societies  

Building societies are member-owned financial institutions that primarily focus on providing mortgages and savings accounts to their customers.  

As they are owned by their members, building societies often prioritise the interests of their customers and may offer competitive mortgage rates and flexible lending criteria.  

Some of the most popular UK building societies include Nationwide, Yorkshire Building Society, and Coventry Building Society.  

Restrictions faced by those getting a mortgage from a building society are typically geographical.  

Challenger Banks  

Challenger banks are newer, smaller banks that aim to compete with established players in the financial sector by offering innovative products and services.  

These banks often use technology to streamline their processes and provide a more user-friendly experience for their customers.  

Atom Bank is the only challenger bank offering mortgages currently.  

Specialist Lenders 

Specialist lenders focus on niche markets or specific borrower needs that may not be able to easily access mainstream banks and building societies.  

These lenders often have expertise in areas such as multiple buy-to-let mortgages, high-value mortgages, or poor credit situations.  

Some examples of specialist lenders in the UK mortgage market include Precise Mortgages, Kensington Mortgages, and Pepper Money. 

Comparing Mortgage Lenders 

With lots of options available across the market it can help to decide on a type of mortgage lender by understanding the differences between them, and the pros and cons of each.  

Competitive Interest Rates 

One of the most important factors when choosing your mortgage lender is the interest rate. Lenders compete against each other with their top line interest rates. 

Building societies are known for offering the most competitive interest rates due to their member-focused approach so these may be the best place to look for low interest rates.  

Online and digital-only lenders may provide lower rates by leveraging technology to reduce operational costs so are worth considering, however their products are currently more limited.  

Flexible Lending Criteria 

Some mortgage lenders differentiate themselves by offering more flexible lending criteria, catering to borrowers with unique circumstances or niche requirements.  

Specialist lenders, for instance, may provide tailored mortgage products for self-employed individuals, those with adverse credit histories, or borrowers seeking buy-to-let mortgages. 

Digital Tools and Platforms 

The rise of technology has transformed the mortgage industry, with many lenders now offering user-friendly digital tools and platforms to streamline the mortgage application process and enhance the overall customer experience.  

Online and digital-only lenders are at the forefront of this trend, providing intuitive websites, mobile apps, and online mortgage calculators to help borrowers navigate the mortgage journey with ease. 

Pros and Cons of Mortgage Lenders  

Mainstream Banks 

Pros 

• Stability: Traditional banks have a long-standing reputation for stability and reliability, which can provide borrowers with peace of mind when obtaining a mortgage. 

• Product Range: Banks typically offer a broad range of mortgage products, catering to various borrower needs and preferences. 

• Established Reputation: Borrowers may feel more comfortable working with banks due to their well-established brand names and reputations in the financial sector. 

• Branch Network: Traditional banks often have extensive branch networks, allowing borrowers to access face-to-face support and guidance throughout the mortgage application process. 

Cons 

• Potentially More Restrictive Lending Criteria: Banks may have more restrictive lending criteria compared to other types of mortgage lenders, which could make it more challenging for borrowers with unique circumstances or niche requirements to obtain a mortgage. 

• Less Personalised Service: Due to their size, banks may offer a less personalised service compared to smaller lenders, such as building societies or specialist lenders. 

• Speed: The size and complexity of traditional banks can sometimes result in slower decision-making and a more bureaucratic mortgage application process. 

• Higher Fees: Banks may charge higher fees for their mortgage products compared to other lenders, such as online or digital-only lenders. 

Building Societies 

Pros 

• Customer Focused Approach: As member-owned institutions, building societies often prioritise the interests of their customers, which can result in more borrower-friendly products and services. 

• Competitive Interest Rates: Building societies are known for offering competitive interest rates, as they aim to provide value to their members rather than maximise profits for shareholders. 

• Flexible Lending Criteria: Building societies may offer more flexible lending criteria compared to traditional banks, catering to borrowers with unique circumstances or niche requirements. 

• Personalised Service: Building societies typically provide a more personalised service, with a focus on building long-term relationships with their customers. 

Cons 

• Limited Product Range: Building societies may have a more limited range of mortgage products compared to larger banks, which could restrict the options available to borrowers. 

• Smaller Branch Network: While building societies often have physical branches, their networks may be smaller compared to traditional banks, potentially limiting face-to-face support for borrowers in some areas. 

• Less Technologically Advanced: Some building societies may lag behind banks and digital-only lenders in terms of technology and digital tools, which could result in a less streamlined mortgage application process for borrowers. 

• Availability: Building societies may have regional restrictions or limited availability, which could make it more challenging for borrowers in certain areas to access their mortgage products and services. 

Specialist Lenders 

Pros 

• Tailored Mortgage Products: Specialist lenders focus on niche markets or specific borrower segments, offering tailored mortgage products that cater to unique circumstances or requirements. 

• Flexible Lending Criteria: Specialist lenders often provide more flexible lending criteria compared to traditional banks or building societies, making it easier for borrowers with non-standard situations to obtain a mortgage. 

• Expertise in Niche Markets: Specialist lenders have expertise in niche areas such as buy-to-let mortgages, self-employed borrowers, or adverse credit situations, which can result in a more knowledgeable and supportive lending experience for borrowers. 

• Innovative Solutions: Specialist lenders may offer innovative mortgage products and solutions that are not available from mainstream lenders, providing borrowers with alternative options to meet their needs. 

Cons 

• Potentially Higher Interest Rates: Specialist lenders may charge higher interest rates compared to mainstream lenders, as they often take on higher levels of risk by catering to borrowers with unique circumstances or niche requirements. 

• Limited Accessibility: Specialist lenders may have limited accessibility, with fewer physical branches or face-to-face support options compared to traditional banks or building societies. 

• Less Well-Known: Specialist lenders may not be as well-known or have the same established reputation as traditional banks, which could make some borrowers hesitant to work with them. 

• Narrower Product Range: While specialist lenders cater to specific borrower segments, their overall product range may be narrower compared to larger banks or building societies, potentially limiting the options available to borrowers outside of their niche focus. 

Factors to Consider When Choosing a Mortgage Lender 

When selecting a mortgage lender, there are a number of factors to consider that will impact your application and overall mortgage experience.  

Here are some things to consider when comparing mortgage lenders 

Interest Rates 

Interest rates are a critical factor, as they directly affect the total cost of the mortgage over its term.  

It’s advisable to compare rates from multiple types of lenders to find the most competitive offer. 

Fees and Charges 

In addition to interest rates, you should also consider any fees and charges associated with the mortgage, such as application fees, valuation fees, and early repayment charges.  

Specialist lenders could be more expensive, so it's worth comparing these. 

Lending Criteria 

Each type of lender has their own lending criteria, so it’s important to understand their differences. Some may be more flexible or better suited to your own specific circumstances or requirements. 

Customer Service and Support 

Excellent customer service and support are vital, as borrowers may require guidance and assistance throughout the mortgage application process.  

If you prefer face to face customer support you may be better suited with a bank that has a branch network, if you prefer online and live chat only specialist lenders and digital first lenders may be a better option for you.  

Digital Tools and Platforms 

For borrowers who value a streamlined and user-friendly experience, it is essential to consider the availability and quality of digital tools and platforms offered by mortgage lenders. 

Mortgage Lender FAQs

What types of mortgage lenders are there? 

 There are several types of mortgage lenders, including traditional banks, building societies, specialist lenders, and digital-only lenders.  

Each type of lender offers various mortgage products and services tailored to different borrower needs and preferences. 

How do I choose the right mortgage lender for my needs? 

 To choose the right mortgage lender, consider factors such as interest rates, fees, lending criteria, reputation, customer service, and digital tools.  

Research and compare multiple lenders, seek professional advice, and read reviews and testimonials to make an informed decision. 

Can I get a mortgage from a lender if I have a poor credit history? 

 Yes, some specialist lenders cater to borrowers with adverse credit histories.  

These lenders may offer tailored mortgage products and more flexible lending criteria, but they may also charge higher interest rates to account for the increased risk. 

Do I need a mortgage broker to find a mortgage lender? 

 While it is not compulsory to use a mortgage broker, they can be beneficial in helping you navigate the mortgage market and find the most suitable lender for your needs.  

Mortgage brokers have access to a wide range of lenders and broker-only products and can provide personalised advice based on your circumstances. 

Is it better to get a mortgage from a bank or a building society? 

 There is no definitive answer to this question, as the best choice depends on your individual needs and preferences.  

Banks may offer a wider range of products while building societies often prioritise customer service and competitive interest rates. It is essential to compare both types of lenders to determine which is the best fit for your needs. 

How can I compare interest rates between different mortgage lenders? 

 To compare interest rates, start by researching and gathering information from various lenders' websites or contacting them directly. You can also use online comparison tools or consult with a mortgage broker to help you compare rates and find the most competitive offer.