It’s estimated product transfers will be worth far more than remortgaging – although unlike the latter, UK Finance doesn’t publish value or volumes for the sub-sector.
Ray Boulger of broker John Charcol estimates product transfer is worth around £100bn, citing reliable sources within the industry, a figure other experts have agreed with.
With a typical retention proc fee of 0.2%, brokers could tap into around £10m of fees if there were to carry out just half of all product transfers.
Yet, it’s thought only up to a quarter of business is carried out by brokers.
With improved access to the product transfer market, the amount of business going through intermediaries is set to naturally increase.
To kickstart change, brokers need to consider at which time lenders are contacting borrowers and be a part of the conversation, Boulger said.
Some suggest that brokers must contact the client before the provider – even if the lender is contacting the borrower earlier and earlier.
Insiders say a cultural shift has already taken place in many firms, with brokers meeting with clients on a regular basis.
This also helps when borrowers go through unexpected life changes – divorce, for example – that could affect their mortgage needs.
There is also a role for brokers to play in educating clients about the benefit of advice during a product transfer.
At the end of deals clients should be considering the amount or even term of the mortgage, according to Boulger.
He said there is a danger that people will keep taking out two-year deal one after another and never revisit their circumstances.
Many clients also don’t realise that, in the event of a complaint, there are fewer avenues for recourse if the deal hasn’t gone through the broker, Boulger added
It’s important that lenders make sure all product transfer direct deals are also available through intermediaries, so borrowers can get the best mortgage.
Bumper product transfer and remortgage market in 2017
Tapping into the product transfer market could be especially important in the coming year, as UK Finance forecasts homemover activity will remain flat, while buy-to-let will continue to stall in 2018.
Opportunity will also be greater in 2018 than in previous years because large amounts of mortgages will be up for renewal, according to Mike Jones, managing director of intermediaries at Lloyds Banking Group.
Speaking to Mortgage Solutions, he said: “With large numbers of products maturing, the remortgage and product transfer market is set to be enormous in 2018.
“For brokers, this is ultimately about looking after your customers and making sure there are good client contact programmes in place.”
Product transfers can also have additional benefits compared to remortgages, according to Jones.
He added: “There are reasons why product transfers are good solutions for customers – they typically have no valuations, are faster than remortgaging, can often be set up early with the ERC waived, all of which creates early certainty for clients.”
The main issue is the difference paid by many lenders for retention versus new business.
If brokers are getting half the fee – they need to be doing double the amount of work to generate the same amount of income.
It comes as critics say the practice of paying a lower product transfer fees are becoming harder to justify, because the broker advice process isn’t any different to a remortgage.
Industry pressure helped bring about widespread retention procuration fees.
And it’s hoped that collective action could again spark change to bring product transfer fees in line with new business.