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Product transfer business soars post-lockdown as SBG reports busiest months on record

  • 02/11/2020
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Product transfer business soars post-lockdown as SBG reports busiest months on record
Product transfers (PTs) have continued to be the dominant form of refinancing since lockdown restrictions were lifted, as remortgage delays put borrowers at risk of paying costly standard variable rates.


Sesame Bankhall Group (SBG) told Mortgage Solutions May and August were its busiest months ever for product transfers.

Meanwhile brokers are reporting product transfers have overtaken their remortgaging business and Simply Biz Mortgages chief executive Martin Reynolds said he expected to see the trend continue.

And with one of the biggest months of the year for mortgage refinancing expected in December, when approximately £33bn of deals are up for renewal, brokers are being warned to plan ahead by booking rates for borrowers now.


Delays fuel PT business

While England spent six weeks of Q2 in lockdown, and Scotland and Wales even longer, product transfer activity grew while overall refinancing activity fell.

According to UK Finance, product transfers grew by two per cent from Q1 accounting for 77 per cent of all refinancing, compared to 72 per cent the previous quarter.

The trade body said there was also an indication that borrowers with higher mortgage balances, who tend to shop around for a new deal, were choosing to stay with their existing lender instead.

But as lenders continued to struggle with the volume of house purchase applications, remortgage turnaround times have suffered. A six to eight week deal is now taking ten to 12 weeks in some cases. Brokers say these delays have been fuelling their PT business.

Mortgage broker Rachel Dixon of RH Dixon said: “I have had a complete reversal in my product transfer-remortgage split of business. I have only done one remortgage this month and all the rest of my refinancing deals have been PTs. Out of the 28 deals I did in September, none were remortgages.

“The hassle it takes for borrowers to switch to a new lender for the sake of 0.1 per cent isn’t worth it, especially if they are not raising funds.

“I explain the options and timescales and ask them if they want to go through the process of being assessed by a new lender or I can push a button right now and their new deal will be lined up.

“I think switching lenders is especially an issue for self-employed borrowers right now, why would I want to put them through that trauma.”


Record months

SBG said May and August were its biggest ever product transfer months in terms of both volume and value. October has yet to be counted.

The distributor’s market analysis also points to December being one of the busiest for refinancing this year with £33bn of product renewals up for grabs.

Jane Benjamin, director of mortgages at SBG, said: “We’ve seen an increase in PT business this year especially during the lockdown months.

“While the purchase market was closed, brokers remained resilient and supported their clients by making sure they remained on the best rates. But it actually shows that with more time, brokers had the chance to refocus even more so on their existing client bank.”

While December’s refinancing market is set to be in excess of £30bn, it will be dwarfed by the bumper month expected in October next year when refinancing opportunities will be worth almost £40bn. In total, the refinancing market in 2021 is estimated to be around £250bn.

Benjamin said thanks to “fantastic” collaboration during the pandemic between lenders, distributors and brokers, product transfer information was now more readily available to support borrowers who needed a new rate.

“Lenders have been prepared to share when and how they contact their borrowers so that brokers have the opportunity to speak to them first and retain their client.”


Plan ahead

SimplyBiz’s Reynolds said: “It is understandable why there are more product transfers, the PT and remortgage market are behaving very different at the moment compared to how they would historically.

“Remortgages were always so quick to carry out. But the current situation with lenders’ capacity and product pricing being very similar across both types of transaction, would you want to risk going on the lender’s standard variable rate and losing any saving you were making on the rate difference?

“As long as the adviser presents all the choices to the borrower, I think we will probably see more product transfers being arranged.”

The soaring demand for house purchases risks overshadowing the refinancing market, and brokers may not have the time to serve both.

Reynolds added: “We know that over 60 per cent of refinancing is not carried out by the original broker so there is always a risk brokers will not have time to serve their existing clients.

“It isn’t the remortgage itself that is time consuming to do, it is the time it takes to engage with the borrower. Brokers need to make better use of their systems to help them with time management.”

Reynolds said brokers who are not using technology to help them manage their client bank renewals, must make sure they know how many clients are rolling off their rates in future and start planning when they can book those rates.

Some lenders allow rates to be booked up to four months in advance.


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