The rising Bank of England base rate and inflation figures across the year has impacted affordability for clients making it more difficult to remortgage away from their current lender. This raises the question, do lenders want brokers to do a product transfer or do the lenders prefer to do these themselves?
In previous years, when a client’s deal had ended, brokers were often the heroes securing them a new product, with a lower rate. In 2023 this has been more difficult, if not impossible to achieve as rates have been quickly increasing.
The recent Autumn Statement announced a cut to the rate of National Insurance contributions, and we have seen inflation figures falling towards the end of 2023, consequently this should be good news for clients regarding affordability, although it may not be as material as hoped.
Product transfer trend to continue
In a speech on Monday 20 November, Andrew Bailey, the governor of the Bank of England, stated it was too soon to declare victory over inflation and that monetary policy will have to stay restricted for “quite some time yet”. The squeeze on household incomes might still be influencing wage demand, which risks prolonging inflationary pressures.
Economists have recently been predicting when rates will come down, with most placing the first fall somewhere in 2024 in the wake of subdued economic growth in the UK, though Bailey argued against this, adding: “It is far too early to be thinking about rate cuts. The Monetary Policy Committee’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet.”
Market commentary suggests that there could be a total circa £500bn market in 2024, split with a £200bn market for new business and a £300bn market for product transfers. Therefore, the trend of completing a product transfer instead of remortgaging a client to another lender may continue in 2024.
A new set of circumstances for product transfers
The landscape for clients has been ever evolving in 2023. Consumer Duty and the Mortgage Charter have brought about change, and we now see lenders allowing brokers to complete a product transfer earlier.
This has brought about a new challenge where brokers have to continue to revisit their advice to ensure the client is getting the best deal possible. This also means lenders are likely to write out to their customers earlier, so rather than contacting a customer three months before their current deal ends brokers should be looking to contact their customers at least six months in advance.
In these times, it’s arguable that a broker has never been more needed and valuable. The fact brokers are notified when lenders change their rates, and often notified before changes are made, is why customers who use a broker to complete their product transfer could be at an advantage.
The intermediary market is incredibly resilient, and although 2024 may prove to be another tough year, brokers continue to add real value to their customers.
Ultimately, customers will decide who they deal with, many lenders offer the same pricing regardless of the channel the customer decides to use be that broker, online or telephone. Indeed, all lenders want their customers to understand their choices and brokers are well placed to give advice and hold the customers’ hand.
