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Earlier product transfer availability will put mortgage sector and borrowers at ease – JLM

by: Rory Joseph, director and Sebastian Murphy, head of mortgage finance at JLM Mortgage Services, the mortgage and protection network
  • 05/08/2022
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Earlier product transfer availability will put mortgage sector and borrowers at ease – JLM
Understandably, there is a certain degree of nervousness amongst existing borrower clients right now, particularly those who are coming to the end of their deals over the course of the next six months.

Acutely aware of recent product rate increases, and anticipating more to follow, these customers are looking at their existing rates, seeing the disconnect between what they currently have and what they might be able to secure, and wanting to move fast before that gap gets any bigger. 

Unfortunately, there’s something of an unlevel playing field right now for those customers, specifically in terms of what we can access for them via a remortgage and what they might be able to secure from their existing lender in terms of product transfer (PT). 

  

All about the timing 

The reason for that is the discrepancy in terms of when a product transfer becomes accessible for us/the client, and our ability to book a remortgage deal with another lender. 

So, for example, we have just been working with a client who is six months away from renewal. At present, we can secure them a remortgage away from their existing lender which will hold for the six months, but the chances are a PT with their lender is likely to be cheaper – if it was also available now. But it’s not.  

Instead, we won’t be able to access the PT offer for at least another couple of months, possibly three. Meaning we can’t really look after our clients in the way we would like; we can’t protect them against rates rising further in the meantime, and we can’t give them the total reassurance that we would like to. 

 

Better for the lender 

There is however a simple solution and one we would urge all lenders offering PTs to embrace. Simply, make those PT offers to existing clients six months out from the end of the deal, rather than the two, three or four months that many currently offer.  

This would provide a level playing-field for advisers and ensure we can advise and recommend having that full information. 

In a sense, and here’s something of a turn up for the books, this is really not lender bashing but an instance where lenders are essentially being unfair to themselves.  

The fact of the matter is that we understand many lenders don’t really want new borrower business right now for all manner of reasons, however we’re guessing that holding onto existing borrowers, potentially over a five-year term at the current mortgage pricing, will be a profitable exercise for them plus it gives the existing borrower the peace of mind they are looking for. 

Even with PT rates tending to be a little more competitive than that which is being offered to new borrowers, there is still a considerable margin to be had, there is less work involved for the lender, and they have full sight in terms of how the existing loan (and borrower) has performed during their existing term.  

Sounds like a no-brainer? 

 

Limited to remortgage options 

But, given the nature of the market currently and particularly with many existing borrowers wanting to tie in rather than wait, without knowing what the PT is six months in advance, our only option is to advise borrowers on the remortgage products – which they are tending to agree to as they want the certainty.

Now some lenders have already moved to providing PT offers six months out, but these are the outliers rather than the norm, and there’s no doubting that a move by all others to this ‘standard’ would provide parity in the market, and is likely to mean – in the current environment – that far more borrowers end up staying with their lender. 

Again, for lenders, what’s not to like? And for advisers it means we can advise from a position of strength, giving the client what they want with the minimum of fuss.  

Lenders over to you. 

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