The latest Mortgage Solutions poll asked how much effort brokers plan to put into the product switching market in 2018 compared to last year. The results showed that 69.1% said they will be targeting the sector more, where 23.6% said the same as in 2017, while 7.3% said they will be spending less effort on the market.
Huge opportunity
Aaron Strutt, director of Trinity Financial, said lender moves to open up product transfers is a “huge opportunity” for intermediaries given the lacklustre purchase market.
“Product transfers have completely transformed the market,” said Strutt.
“The thing is, it wasn’t that long ago lenders weren’t offering product transfers for brokers, so brokers used to just remortgage to another bank.
“But now the whole advice spectrum has changed, and lenders have new platforms that enable brokers to do the product transfer.”
“The process seems to have simplified as well,” he added, “With five or six clicks and you can secure a new rate without needing to prove your income again, and sometimes even keep your interest-only mortgage.”
Strutt continued: “Sometimes lenders prompt the customer to do a transfer directly, and a lot of the big banks are pushing to keep their existing customers this way.
“But, at the moment we’ve got access to the systems with lots of the lenders, and clients still want advice so they’re coming back to us, the trust is with the broker as opposed to the lender.”
“It’s a huge opportunity for brokers,” he added.
Goodwill
Ian Gray, senior partner at Kinnison, said the product transfer market is opening up to intermediaries because lenders recognise the value of retaining customers, and are look to shift the liability of advice to brokers.
Consequently, lenders have pushed down rates for product transfers and brought out procuration fees.
“The banks have woken up, they’ve realised that it’s easier and cheaper to keep a client for another two years than to get a new customer,”
“It’s driven by profitability. But by making product transfers lucrative to brokers, lenders offload the advice function and the liability to brokers.
“Basically, the banks are trying to take a backseat when it comes to advice on a regulated mortgage.
However, Gray said that product transfers also offer broker a chance to improve goodwill and truly provide the best advice to their clients.
“As a broker, we should be giving our clients the best advice, and we should not be motivated by whether we earn or not,” said Gray.
“If you help a client to execute what is clearly the best advice, you may earn less – but if they know you’ve done what’s best for them, that’s ultimately better for your business as a broker in the long run.
“They’ll thank you and refer people to you, and improve your reputation and feel good will because you’ve done something that people appreciate. That’s more valuable than whether you earn a proc fee or not.
“Besides, whether it’s interest rate or criteria driven, the best advice is more often to stay with the existing lender.”
Customer service
Sally Laker, managing director of Mortgage Intelligence, said that the results are consistent with market trends from 2017, but stressed the importance of keeping in regular contact with clients to stay relevant
“The most valuable asset for most intermediaries is their existing client bank,” said Laker.
She continued: “But regularly keeping in touch with clients is key to ensuring that they are the ‘go to’ person when their client wants to revisit their mortgage or finances.
“Accessing your data and keeping it up to date offers plenty of opportunity to keep clients informed on suitable topics on a regular basis, and always contact them in plenty of time before their current deal ends.
“In today’s world, being able to offer good customer service helps to retain clients and obtain further business by recommendation.”
Laker added the buy-to-let (BTL) maturities will be a particularly interesting sector to look at.
Laker said: “We know that there will be plenty of two-year BTL deals ending in February and March of this year, and the predicted maturities from CACI published in Sept 2017 were £240bn in total with £24bn in BTL maturities.
“So there are many opportunities to write business this year,” she added.
