The figures released this year have certainly been an eye-opener, revealing a greater amount of product transfer lending than had been estimated.
The facts that figure
A total of 291,900 homeowners switched product with their existing provider (product transfers) in the third quarter of 2018, said UK Finance. By value, this represented £38.7bn of mortgage debt refinanced internally.
The Association of Mortgage Intermediaries had previously estimated product transfer lending might be worth as much as £100bn, but the first three sets of quarterly figures alone suggest the annual total could significantly more than that.
When clients choose a new mortgage product, more of them transfer with their existing lender than move elsewhere by remortgaging*.
This enormous sector can no longer be overlooked by the regulator or by intermediaries, as it represents a great opportunity.
So, if you are not already offering them, isn’t it time to embrace product transfers for your client’s benefit, and your own?
With such a high volume of activity in the product transfer market, there is a huge opportunity for intermediaries. You may not agree with certain aspects of the current product transfer market (such as reduced procuration fees), but your clients may want the option to stick with their existing lender. This may be down to appealing deals, perceived hassle of switching lender or early switch with ERCs waived.
If you don’t actively speak to these customers coming to the end of their deal you could risk losing them and any future relationship with them The UK Finance figures also revealed that over 40% of product transfers are done on an execution-only basis and many lenders offer slick and straightforward online transfers to existing borrowers.
As an intermediary, there is obviously scope for you to increase your share of this market if you contact your client early enough in the process – comfortably before their current deal is set to end. By offering to look at all their switching options, remortgaging and product transfers, they know you have their best interests at heart.
You can potentially retain more of your clients and help them get the right mortgage, along with the reassurance of professional independent advice – as well as boosting your income.
Historically intermediaries have been understandably wary of product transfers but the sector has changed enormously over the last few years, so it’s important to make sure you are up to date.
It’s no longer a case of losing your client to the lender if you recommend a product transfer. In recent years lenders have shifted their retention strategies to include intermediaries, not cut them out. Many will let you handle the case and will pay you a procuration fee for introducing a product transfer client, although what they pay differs hugely.
Halifax Intermediaries has long paid an equal procuration fee to intermediaries for product transfers, but many lenders still pay a small proportion of their standard procuration fee for new business. Pressure from intermediaries for parity on product transfer fees is growing, so watch this space…
At the same time, lenders are investing in technology to help intermediaries switch their clients’ mortgages, which reduces re-keying and speeds up application-to-offer times.
With lender technology now able to support product transfers from the intermediary, the process has become far simpler. Halifax Intermediaries, for example, invested in its product transfer system last year, so it sits within Halifax Intermediaries Online and pre-populates your client’s data, before giving qualifying cases an immediate illustration and offer.
Of course, at the front end you still have the same responsibilities as with all mortgage advice, a responsibility to do the factfind, source the right product from across the market and advise your client.
But once a product transfer has been agreed by your client, it can be less time-consuming and less hassle for you both, depending on the lender.
Remember, a product transfer option may be the best and most suitable deal available to your client from across the whole market, so the only way to offer a full choice is to include them in your search.
*Source: UK Finance
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