We’ve given the article a bold title. The borrower, when applying for a mortgage, expects to get what is advertised. Not many of them realize they might not qualify for low interest rates. What is today’s reality? What can a borrower expect?

Mortgage lenders in Latvia have been competing on price or interest rates for a while now. On the one hand, it is good for the consumer because it makes the product cheaper. On the other hand, it comes with a package.

The consumer indeed expects the rate promised in advertising. Yet this promise fails to communicate that interest rate is calculated on an individual basis for each client. A borrower is set to be disappointed because not everybody qualifies for the lowest rate. In their search for the lowest offer, consumers spend a lot of time and effort going from lender to lender. And in their pursuit of the lowest rate people are often buying unnecessary additional financial products such as credit cards or lines of credit.

Other important factors, such as customer service or the mortgage lender’s expertise get overlooked. The housing loan is a long-term commitment. A lot can happen in 20-30 years. It is important to make sure that the professional approach and open communication are not sacrificed for a slightly lower interest rate.

You mentioned a customer’s disappointment and overlooked factors. Could the reason be low financial literacy?

I believe this is definitely one of the factors. The product itself – the housing loan – is not sufficiently understood by the general public. It is assumed that the loan terms proposed by a lender can’t be customized, and as soon as the agreement is signed you are stuck with it for the next 20 years. In fact, mortgage offers quite a lot of flexibility to the customer if only the lender is prepared to educate the client and the client is ready to learn. Adjusting the interest rate by changing the amount of the origination fee, avoiding fluctuations of EURIBOR by choosing a fixed interest rate and refinancing the loan are some of the examples.

In 2017, OECD published data on financial literacy in Latvia. It showed that, in terms of knowledgeability, we are above the average level compared to other countries; however, in our behaviour, we are not. We know but choose to act differently. Once again, a mortgage is a long-term commitment. The borrower should be able to understand the offered deal, how monthly payment may change over time, and what flexibility he has in managing the property after signing the loan agreement.

Therefore, it is worth having at least the very first mortgage experience with a lender who cares about the borrower and is capable of explaining, teaching and offering choices. Even if the price is slightly higher. When you have gained knowledge, and if the lowest price is still something you want to pursue – refinance.

You yourself are a marketing person in a mortgage company. How do you shape communication with customers, and is there a place for financial literacy in it?

Movin is a mortgage lending platform. That means it is a one-stop point where a borrower can get all that is necessary to finance a home. Technology, information, processes are designed so that at any stage of the purchase process customer feels confident, knowledgeable, and gets a quick answer to his question.

If you are not sure where to start the process of purchasing a house, our Resource Centre provides an answer. It also provides guidance on choosing a property. Pre-approval app comes in handy when you start searching for a house. Register with your internet bank and you will know what loan amount is available to you within minutes. You can also talk to a credit specialist at any time. In such an important purchase as housing, the eye to eye conversation with the specialist is still paramount to the customer.