Well done to them, and why shouldn‘t they, after all they are commercial enterprises and they recognise a good client when they see one…certainly for an existing borrower who has proven a good risk.
Of course, this represents a challenge for advisers to support their client, for ensuring a hasty client decision on a product transfer doesn’t exclude the adviser – with all the consequences that entails – but that it also doesn‘t end up costing the client money.
The value of a mortgage broker
I saw a recent post on LinkedIn from Malcolm Davidson at UK Moneyman, which highlighted just such an issue, and reiterated just how important the role of the adviser is within a product transfer situation.
Malcolm wrote about a recent client who was presented with a product transfer option early. Unbeknownst to that client by making just a couple more mortgage payments, they would become eligible for a lower LTV product which came with a better rate, saving that client a not insignificant amount of money. His post was followed by other advisers reporting the same or similar examples.
Now, as advisers will no doubt testify, having that product transfer option ‘in the pocket‘, so to speak, can be of benefit, but by taking it early when better options will be available in just a short few months, the client could have been significantly worse off.
In a two-year period where house prices have tended to rise, and where many people have been overpaying on their mortgage, this next product maturity could be a good opportunity to not only benefit from those outcomes, but also the highly competitive mortgage market.
The client mentioned above – by making those two mortgage payments – became eligible for an 85 per cent LTV mortgage, when the initial product transfer option was at a higher LTV, and therefore higher price.
Incoming wall of mortgage business
IMLA recently suggested that there are 700,000 mortgages set to mature this year, and if the above doesn’t highlight the importance of continued advice for existing borrowers, I’m not sure what does.
As Malcolm highlighted, the client was completely unaware of what could be achieved and any early decision to product transfer would have probably rendered them unable to secure that better deal.
It seems highly unlikely that lenders are going to make their existing borrowers aware of such options directly, so without adviser intervention, they would have paid more for the next couple of years than they needed to.
Much is made about the smooth process, the quickness of transfers, and the fact that, for example, the client doesn’t need to pay for conveyancing, etc, but advisers must still hammer home the benefits of advice in this and any other market interaction. Ongoing communication especially in the build up to maturity has to focus on clients not taking the first product option on offer and giving the adviser the opportunity to look at what can be achieved.
Product transfers continue to take a bigger share. As an industry we, and the borrowers involved, need to ensure that as many as possible are only taken with advice that shouldn‘t be undervalued.