Mortgage companies lend money direct to borrowers. Unlike mortgage brokers, who arrange mortgages for householders from mortgage companies.

Most UK mortgage companies are banks and building societies. These businesses borrow money from each other, internationally, to lend to customers who want mortgages.

The worldwide credit squeeze has made banks and other financial institutions cautious about lending money to each other, in case they lose money through another sub-prime mortgage collapse. And they’re charging higher interest rates for the small amounts of inter-bank lending they’re prepared to do.

As a result, mortgages are in short supply and mortgage companies are less willing to lend.

Should I go direct to a mortgage lender?

Mortgages are scarce and many lenders have stopped giving mortgages to new customers. So going direct to mortgage companies might be hard work. In today’s economic climate you will probably have to contact several mortgage lenders before you find one prepared to offer you a deal.

Your own bank or building society is much more likely, these days, to offer you a mortgage than a financial institution that you don’t have any relationship with.

It might be wiser and will save you a  great deal of time and hassle to find yourself a reputable independent mortgage broker (link to Mortgage Broker page) who will search the entire mortgage company market to find the right deal for your circumstances

Advice about mortgage lenders

All reputable UK mortgage lenders are registered with the Financial Services Authority (FSA), which has strict rules and regulations and makes sure your consumer rights are protected. Never take out a mortgage loan with a UK mortgage provider that isn’t FSA regulated.

Find out more at:

For government advice including mortgage comparison tables updated daily: moneymadeclear.fsa.gov.uk

The Financial Services Authority: fsa.gov.uk

Top UK mortgage companies:
Here’s a list of the top ten UK mortgage lenders, from mortgageguide.co.uk June 2008:

•    The Halifax Building Society: Halifax.co.uk

•    Nationwide: nationwide.co.uk

•    Woolwich Building Society: woolwich.co.uk

•    Bradford and Bingley: bradford-bingley.co.uk

•    Abbey National: abbey.com

•    HSBC: hsbc.co.uk

•    Royal Bank of Scotland: rbs.co.uk

•    Lloyds TSB (including mortgages from partner mortgage company Cheltenham & Gloucester): lloydstsb.com

•    Alliance & Leicester: alliance-leicester.co.uk

•    Yorkshire Building Society: ybs.co.uk

•    Compare mortgage companies: MoneySupermarket.com

Please share your experiences about mortgage companies.

•    Word of mouth – ask your friends, family and colleagues.

•    Ask the current owner of the place you’re buying who gave them their mortgage.

•    Search your local newspapers for suitable adverts.

What happens once I’ve chosen a mortgage broker?

•    You work out together how much money you can borrow.

•    The broker will want details of your income and outgoings and credit history plus documents to prove the state of your finances; household bills, your passport, payslips and bank statements, your P60s.

•    Mortgage brokers will make sure your repayments are affordable and will get you the best possible fixed or variable interest rate for your circumstances and needs.

•    Your broker will guide you through the application form and submit it to the lender.

•    After the lender has checked your application, they might appoint a valuation expert to look at the place you want to buy. The valuer will make sure the property is worth what you’re paying for it.

•    If all is well, the lender will offer you a mortgage.

•    Your broker should keep you up to date with development right through the process, which can save you a lot of stress and hassle. They will also answer your questions and keep your application moving along smoothly.

Top UK independent mortgage brokers

There are plenty of good, household name independents to choose from, and many of them let you apply and get quotes conveniently online. Here’s a short list of reputable UK independent ‘whole of market’ mortgage brokers.

•    JohnCharcol.co.uk

•    Moneysupermarket.com/mortgages

•    BeatThatQuote.com/Mortgages

•    FirstMortgage.co.uk

•    TheMortgageOption.co.uk

•    Mortgages.co.uk/brokers

Useful mortgage broker advice and guidance

You’ll also find plenty of free specialist advice online. Try:

•    Guild of Independent Mortgage Advisers: Goima.co.uk

•    Moneysavingexpert.com

Mortgage brokers act as the middle men between you and the mortgage lending company, in much the same way as an insurance broker and with similar specialist market knowledge. A mortgage broker’s job is to find you the best possible deal for your personal circumstances, searching the market to uncover all your choices.

Despite the credit crunch there is still an enormous variety of deals, incentives, interest rates and payment terms out there. And finding the right deal can save you a small fortune.

UK mortgage brokers are regulated by the Financial Services Authority, so there are plenty of consumer safeguards in place. Visit the FSA website for details: fsa.gov.uk

Mortgage brokers don’t lend their own money to consumers. They negotiate loans with mortgage companies who lend the money.

Four kinds of mortgage broker

•    Tied mortgage brokers can only offer the products sold by one company. Although they have access to a very limited range of products, their deals can sometimes be very good. Brokers like this charge a percentage commission on the mortgage rather than taking a fee up front

•    Multi-tied brokers, mostly banks and building societies, have access to several lenders’ products. But the product range is still limited. Like tied brokers, multi-tied mortgage brokers usually charge a percentage commission on the mortgage rather than a fixed fee up front

•    Panel brokers are authorised to recommend products from a panel made up of a handful of specially chosen mortgage lenders. They usually charge a fee up front

•    Independent mortgage brokers cover the whole market. They are free to offer any product available, through any mortgage lender. Because of this, they’re the most likely to be impartial. Whole of market brokers like this will charge a set fee up front rather than take a percentage commission

Mortgage broker fees vary. So once you’ve decided which kind of broker suits you best, contact your shortlist and find the one with the lowest fees or commission levels.

When is the best time to contact a mortgage broker?

People do things differently. Some prefer to get the amount they can borrow settled before they begin house hunting, so that they can move fast once they find their dream home. Others prefer to wait until they’ve found somewhere to buy before approaching a broker.