The move follows much outcry from intermediaries over the poor service offered by conveyancing factories struggling to cope with volumes.
As well as ending the free legals option, Nationwide has increased its cashback alternative to £500 from £250.
A spokesperson said: “This is to enable customers to have greater flexibility to choose their own conveyancer and ensure that the majority of customers will have their legal costs covered.”
Managing director of Prolific Mortgage Finance, Lea Karasavvas, said he welcomed Nationwide’s move.
“It’s great to see the new cashback option being given to clients on remortgage deals. It places an element of control back with the borrower and allows them to chose their own representation and have confidence in their choice rather than someone forced upon them.
“Whilst we can’t tarnish all free legal providers with the same brush, it has been clear that service from many has been poor. Giving them the option to chose their own legal firm gives the client more choice and takes away the responsibility from the lender which is often held accountable for the service provided.”
Mortgage Solutions exposed poor service from two conveyancing firms offering major lenders free legal services for remortgages. Breezeplus was one firm used by Nationwide for its free legals.
In May the chief executive of volume law firm Breezeplus admitted he had been forced to increase staff levels by 40% after brokers complained about poor service at the firm – including missed completion dates.
Breezeplus conducts free-legal conveyancing for major lenders including Leeds Building Society, TSB, HSBC, Santander and Metro Bank.
At the time, Brendan O’Brien said: “Where there are concerns we are addressing them. I am looking at the operation specifically as to what changes we need to bring in. I have deployed quite a significant number of changes and I have noticed a major upswing in performance of our teams and turnaround times.”
The law firm introduced a broker engagement programme to tackle the situation and changed its conveyancing processes.
Breezeplus declined to comment on Nationwide’s decision.