How to choose a mortgage lender: An interview with Paul Waterfall, founder of WR Ethical
When people compare mortgages, the conversation usually starts with the interest rate. That makes sense: a mortgage is likely to be one of the largest costs a household takes on.
But the cheapest-looking deal today is not always the mortgage that costs the least or works best over time. A lender’s approach to existing customers, its flexibility when life changes and the way it treats borrowers can all matter just as much.
Here, Paul Waterfall, founder of WR Ethical, explains what borrowers should look for when choosing a mortgage lender.
Important: Mortgage products, lender policies and incentives change regularly. The examples in this interview are intended as general guidance, not a recommendation of any particular lender or product. Your home may be repossessed if you do not keep up repayments on your mortgage.
“Isn’t the interest rate the main thing?”
It is an important thing, but it is not the only thing.
The right rate and fee combination depends on how much you want to borrow, your deposit, your credit history, the term of the mortgage and the property you want to buy. Comparing the true cost of different deals is a core part of mortgage advice.
If your cashflow is tight, then focusing on the interest rate is important – it will have the biggest impact on your monthly payment. But similar lenders are usually competing hard on price. Their overall pricing philosophy may save you more – both for this deal, and the next.
Less obvious differences can become more important over the life of the mortgage, particularly if, like most people, you stay with the same lender beyond the initial two, three or five year deal.
I’d encourage people to ask a wider question: “How will this lender treat me over the next few years?”
“What do you mean by a lender’s pricing philosophy?”
A mortgage is a process, not a snap purchase. There may be several weeks or months between applying and the rate actually starting, whether you are buying a home or remortgaging.
That means the deal at the top of a comparison table today may not be the deal that works best when your mortgage begins. A good adviser will monitor the market during that period and check whether a better deal becomes available.
The key question is: which lenders are consistently competitive, rather than appearing at the top of the table only occasionally?
In a period when rates are broadly stable or falling, a lender that remains competitive over time may be more valuable than one that produces the occasional attention-grabbing headline rate.
“How much should customer service influence my decision?”
Probably more than it does for most borrowers.
At the beginning, your adviser may handle much of the interaction with the lender. But the mortgage itself may last 25, 35 or even 40 years. Over that time, you are likely to have more contact with the lender than with your broker.
So I would look at:
The app and online systems
What can you do online? Can you see your balance, make overpayments or request documents easily? What happens when the system cannot answer your question?
The phone service
How long do you wait? Can the team resolve issues, or do they simply direct you elsewhere?
Branches and banking hubs
Is there a physical location or another way to get help if you need it?
Broker and direct channels
Are some services available only through a broker or only if you apply directly? Lenders differ significantly here.
The lender’s overall approach
Does it listen to customers? Is it willing to understand a change in circumstances, or does it apply every rule rigidly?
These things may not change the rate on day one, but they can change how stressful and expensive the mortgage becomes to manage.
“Why does ethics belong in a conversation about mortgage lenders?”
Because a lender’s values often show up in its policies and behaviour.
At WR Ethical, we provide an independently assessed ethical score alongside lender options. We do not decide what each customer should value; we give people information so they can make a decision that fits their own priorities.
For some people, that may mean choosing a customer-owned organisation, such as a building society. For others, it may mean looking at how a lender treats its staff, customers, communities or the environment.
The important thing is that ethics should be part of an informed choice, not an assumption. It is worth asking what a lender actually does, not just what its marketing says.
“What if my circumstances change after I take the mortgage?”
This is one of the most important questions, and one of the least frequently asked.
You may want to move during a fixed-rate period, borrow more to improve your home, consolidate certain debts, or change the mortgage after a separation. If you temporarily relocate or move in with a partner, you may also want to let out your property for a period.
Lenders take different approaches in these situations. Some may listen to the circumstances and offer workable options. Others may follow their standard criteria very closely.
Consent to let is a good example. A lender may allow you to let your property during a fixed-rate deal, but could charge a fee or apply a different interest rate. When that deal ends, it may let you arrange a new residential deal, or it may require you to apply for a buy-to-let mortgage or move onto its standard variable rate.
The policy that matters is not just “Can I do this now?” but “What happens next?”
“What should I ask about when my initial deal ends?”
Many borrowers stay with their existing lender when their first deal ends. Sometimes that is the right choice. It is often simpler, and a new lender may not be suitable if your circumstances have changed.
But convenience should not mean accepting an unnecessarily expensive deal.
Ask:
- Does the lender offer existing customers the same deals as new customers?
- Does it offer better deals to one group than the other?
- How early can you secure your next deal?
- Can you switch to a cheaper deal before the new deal starts?
- How does the lender value your property when calculating loan-to-value?
- Can you challenge the valuation if you have improved the home or the local area has changed?
Timing can be particularly important. Some lenders allow borrowers to arrange a new deal several months before the current one ends and change it if rates fall. Others only allow existing customers to switch closer to the end date. That difference can affect the options available if rates move while you are waiting.
Always check the lender’s current rules, because these policies can change.
“Does flexibility matter if I do not know what I’ll be doing in a few years?”
Yes. A fixed rate can provide valuable certainty, but your plans may not fit neatly into a standard two- or five-year period.
Depending on your circumstances, you may want to consider whether a lender offers options such as:
- one-year fixed rates
- tracker or discount mortgages without the same early-exit restrictions
- longer fixed-rate periods
- products that allow moving home or making substantial overpayments without a penalty, subject to their terms
There is no universally best type of mortgage. The point is to understand the choices before you commit. A slightly different product may give you useful flexibility, while the wrong early repayment charge could make a future change expensive.
“What about cashback and other rewards?”
They are worth considering, but they should come after the bigger questions.
Some lenders offer incentives linked to improving a home’s energy efficiency. Others offer cashback, member rewards, lower administration fees, reduced transfer fees or discounts for holding multiple accounts.
These benefits can be valuable, particularly over a two or five year deal. But a cashback offer should not distract you from a higher rate, an expensive fee or a lender policy that does not suit your plans.
Compare the overall cost and the practical value of the deal, not just the most visible incentive.
“If you could give a borrower one checklist, what would be on it?”
I’d suggest asking these questions before choosing a lender:
- What is the true cost of the mortgage, including fees and incentives?
- Is this lender consistently competitive, or just offering a strong rate today?
- How easy will it be to manage the mortgage online and by phone?
- What happens if my income, relationship, home or plans change?
- How does the lender treat existing customers when the initial deal ends?
- How early can I secure a new deal, and can I change it if rates fall?
- What flexibility will I have to move, overpay or leave?
- Does the lender’s approach fit my values?
The best lender is not necessarily the one with the lowest rate on the day you apply. It is the one that offers a competitive overall cost and continues to work for you as your circumstances change.
“What is the biggest mistake people make?”
Focusing on the first two or five years and forgetting the rest of the mortgage.
Your initial deal matters, but the lender you choose may remain your lender long after that deal ends. The quality of its systems, its approach to existing customers and its willingness to help when life changes can affect both the cost and the experience of managing your mortgage.
That is why choosing a lender deserves more thought than simply sorting a comparison table by interest rate.
Need help comparing lenders?
WR Ethical offers a free consultation for people choosing a mortgage lender, reviewing an existing mortgage or preparing to remortgage. We can explain how different lenders operate, compare the options available for your circumstances and include ethical information in the decision-making process.
