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Finding long-term savings emphasises value of advice over execution-only – Craig Hall

  • 24/01/2020
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Finding long-term savings emphasises value of advice over execution-only – Craig Hall
Borrowers are increasingly opting for product transfers (PTs) rather than a remortgage deal but those who switch directly with lenders are missing out on the expert guidance an independent mortgage adviser can offer.


In Q3 2019 the number of homeowners switching products directly rose by 7.5 per cent year-on-year, with 135,500 people using an execution-only channel.

While going direct seems like an easy option, many do not realise that by going down this route they risk paying thousands of pounds more than they need to over the lifetime of their mortgage.

It’s here that brokers can really demonstrate their value.


Saving significant sums

While rates and monthly payments are often the main drivers behind the decision to opt for a PT, borrowers can often miss how changes to the term of their mortgage will impact their finances in the long run.

Longer mortgage terms are becoming increasingly popular as extending the term can help many homebuyers with affordability as the same amount of money borrowed and repaid over a longer period means lower monthly repayments.

However, longer terms mean that more interest will be paid on these loans.

When borrowers come to the end of their initial deal, it is a perfect time for them to consider shortening the length of their term – potentially saving themselves thousands on interest repayments.

This is especially true if their financial circumstances have improved since they first took out the loan.


Term changes not allowed

For example, a borrower on a five-year fix with a £995 arrangement fee and paying £778.58 per month over 25 years can expect to repay a total of £283,241 over the lifetime of their loan.

Reducing the term by just 12 months to 24 years and increasing the customer’s monthly repayments to £805.06, could save the client £4,104 in the long run.

With execution-only product transfers this long-term benefit is simply not considered.

What’s more, even if individuals were tempted to change the length of their term, the majority of lenders do not allow borrowers to reduce mortgage terms when opting for a PT.

The value an adviser can play in this situation is clear, but to achieve the best customer outcomes, they need to be on the front foot and engage with their clients.


Transform your client relationship

Many firms already use targeted communication to reach out to clients before their fixed-term products are due to end, but communication must start earlier – in many cases, three to four months before the end of a deal is too late.

One option is to schedule annual financial health checks with clients. These can give advisers the opportunity to start conversations about switching earlier and anticipate any other needs.

Customer relationship management systems can help advisers refine contact strategies by giving easy access to detailed customer history, helping them forge closer relationships or even to suggest other products that could help their clients.

Tools like Twitter, Facebook and Instagram can transform their relationships with potential and existing clients, and it can help increase an adviser’s profile as a mortgage expert as well.

Meanwhile, regular email communication can also support advisers to maintain value-added contact with clients by bringing them news such as monthly house price updates or quarterly newsletters.

Product transfers certainly have their place in the market but consumers should be choosing their next mortgage deal based on a thorough review of what’s available to them and what best suits their circumstances.

By considering a customer’s specific needs, demonstrating the value of advice, and finding the right product for each client, advisers can build truly lasting customer relationships which will help them to future proof their businesses.



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