Sometimes you look at some of the comments relating to the remortgage market and you would swear they are discussing the lost island of Atlantis.
Apparently, remortgaging is either nigh on impossible and something of a myth or it existed a very long time ago, but nowadays there is no evidence of its existence even though we continue to search for it.
Remortgaging appears, in some people’s eyes, to be the mortgage product that time forgot.
While I appreciate we are nowhere near resurrecting the remortgage market of five or six years ago, I am not of the opinion that it is dead in the water, never to return. We are already seeing some very small amounts of evidence that suggest remortgaging is taking place and the business volumes are creeping up. However, we are a long way from a full scale revival.
There are a number of fundamental reasons for this, not least the fact that a historically low Bank base rate has meant large numbers of tracker rate/SVR borrowers would end up paying more each month if they, for example, opted to remortgage and fix in.
There is nothing more likely to put off a potential remortgagor than the news they will end up paying more, even if you are able to guarantee them a low, long-term fixed rate.
The other major difficulty facing borrowers of course is that many are simply unable to remortgage, even if they wished to.
We hear much about ‘mortgage prisoners’ at present, because there are thousands of people who are not welcome by lenders for a variety of reasons. The self-employed, in particular, have found it increasingly difficult to remortgage as lenders pulled products and the full impact of the credit crunch hit.
Perhaps, it is with good reason that many brokers look at the remortgage market as an avenue barely worth pursuing.
Certainly, brokers will not have seen droves of potential remortgagors wandering into their offices over the past couple of years, however this is not to say there are not a significant amount of borrowers who could benefit from quality remortgage advice.
I know of mortgage practices that are still specialists in remortgaging today and, with a large amount of work and focus, are doing very nicely.
There is still a potential client base out there; recent research from Barclays suggested 58% of borrowers had never remortgaged and were under the impression that doing so would, at best, only save them somewhere in the region of £10 a month.
This is clearly not the case and as SVRs begin to creep up, there will be many more individuals who should remortgage and, perhaps more importantly, are able to do so.
The point about SVRs is an important one and we have a prime example at the moment where, with a bit of work, advisers should be in a position to help.
I am talking, of course, about those former Bank of Ireland borrowers who now find themselves part of The Mortgage Works (TMW) and, as a result, will be dealing with a significantly higher SVR.
Bank of Ireland’s SVR is 2.99%, TMW’s is 4.79%.
It will not take a genius to work out that some borrowers could find themselves with a dose of ‘payment shock’ when this arrangement kicks in. Looking at the TMW rate, I certainly believe, even with arrangement fees and so on to add in to the overall calculations, that a number of those borrowers will be better off remortgaging.
The tricky part, as the Barclays research highlights, is convincing borrowers it is worth their while to do so.
Many borrowers will think it some sort of administrative faff akin to changing current accounts and it is important that brokers put this myth to bed by showing how they can handle all the paperwork and smooth the way to a remortgage.
Clearly, it is also vital for brokers to show the economic benefits for such a move – in today’s environment saving what could be a significant amount of money each month will certainly not be sniffed at.
The point should also be made that it is mortgage brokers who are best placed to take borrowers through the remortgage process, rather than allowing them to go direct to their local bank or building society.
Many borrowers will be reading the press around the potential to remortgage and, as a default setting, simply walk into their high-street branch. It is up to brokers to put the case for whole of market mortgage advice.
All in all, news of the death of remortgaging is (to my mind) greatly exaggerated and, as long as brokers are prepared to put the work in, there is still a healthy degree of such work available.
Now would certainly be the time to begin a marketing campaign about the ability of the firm to service such remortgaging needs.
I am not suggesting this will bear fruit immediately, but perhaps a simple invite to analyse and discuss a borrower’s current situation will be enough to get you on their radar and to eventually secure the business.
