In the past almost invariably customers remortgaged to a new lender at the end of their product period.
Unless they had specialist needs or a poor credit history, they were probably eligible for one of thousands of competitive mortgages.
The product transfer market was – and still is – dominated by direct to lender business.
Things are changing and intermediaries are increasingly helping clients get a new deal with their existing lender.
This developing sector of the mortgage market means the decision to remortgage isn’t always clear cut.
As always, the right path for each of your clients starts with them.
New regulations mean that many borrowers who took out a mortgage five years ago could find they don’t have the same borrowing power under current rules, or perhaps they’ve seen their property’s value dip to an extent that they’re now in a lower equity position than they previously were.
Also, some borrowers prefer to take the path of least resistance when it comes to getting a new deal at the end of their current fixed or tracker product. Many will understandably be tempted by a mortgage process that takes little time or effort, especially if the product transfer rate is cheaper than a move onto their lenders reversionary rate.
On the flipside, others will be able to make substantial savings by remortgaging to a new lender and, if they are budget conscious, you’ll be able to guide them to some great cheaper deals.
As with all your clients, it’s horses for courses, but when is a remortgage a sensible approach and for which clients is a product transfer worth considering?
Ripe for a remortgage?
If your client has plenty of equity, and no change in their circumstances, they’ll have a great choice of deals and will hopefully be able to make savings by switching to a new lender.
Assuming they are in no rush, are happy to fill in forms, and confident about their property’s value, a remortgage could get them the cheapest deal available.
They’ll need to go through new affordability checks and a valuation of course, but if it all stacks up, you will receive a procuration fee.
Of course, a remortgage will take a little longer and a bit more legwork than a product transfer, so it may not be for those clients who specify they don’t want the hassle.
Product transfer preference
What if your client just wants a good deal with the minimum of fuss? They’ve already told you they don’t have time for lots of form filling and would rather you do most of the work for them.
A product transfer could be suitable because it will usually be easier for them as well as you. You can do most of the transfer yourself and they simply need to sign. No legal work, often no valuation and no affordability check.
Obviously, you will check the market to see what else they can access but, if they aren’t interested in the extra work, or the savings are negligible, it’s their prerogative to go for the easiest option.
And now that more lenders are paying procuration fees for transfer business, you still get financial recognition for your time. The amount differs between lenders, although with Halifax Intermediaries you get paid the same whether a case is new business or a product transfer.
Know their limits
Maybe your client doesn’t have the remortgage options they were expecting after a change in circumstances. Perhaps they’ve moved into a low equity position since they took out their last mortgage, taken a new job or faced other life changes.
Whatever the reason, if they would struggle to get a mortgage from a different lender, a product transfer should still be available to them if they are up to date with repayments.
These clients are usually better off with a product switch than moving onto their lender’s reversionary rate, not only because they could save money, but also because they have the choice to protect themselves from potential rate rises by taking a fixed deal.
What about the intermediary?
The fact is, there are certain steps you need to take regardless of whether the client ends up with a remortgage or product transfer, such as ID verification, a fact find and a mortgage search, not to mention all the fixed costs of running your business.
The front end of the advice process remains the same and intermediaries understandably want financial recognition for their efforts on product transfers.
Lenders will hopefully move towards a position of parity as intermediaries take a larger share of this significant market – some are already there.
As intermediaries, you are already used to change, and the product transfer market offers new business opportunities that are worth exploring. Lenders are improving their systems and processes so they are better geared to intermediaries advising on and transacting product transfers on their client’s behalf.
But most importantly, by advising your clients on all of their switching options, including those with their existing lender, you are giving them the full picture, with no filter.
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