Seamless switching to an existing lender was relatively unavailable a decade ago but has become an ever larger part of the mortgage market and an important tool for advisers. The number of transactions now dwarf remortgages, according to data from UK Finance.
The trade body has been monitoring PT numbers since 2018 and showed a peak of 341,810 in the final quarter of last year. This is around three times the number of remortgages carried out.
Lenders have been putting more effort into retaining customers in recent years, with investment in slick PT processes that mean customers can lock in for another period at just the touch of the button.
To the benefit of consumers, this has coincided with a reduction of borrowers left on Standard Variable Rates (SVRs).
The case against transfers
However, Rhys Schofield, managing director at Peak Money worries that PTs are a “slippery slope to poor advice and execution-only”.
He added: “The fact that such an important financial decision can be done in five minutes online by someone who doesn’t know what they’re doing worries me a lot.
“The Mortgage Market Review did great things when it came to raising standards and more or less eliminating execution-only so it’s a bit sad to see this being rolled back steadily.”
Scott Taylor-Barr, adviser at Carl Summers Financial Services, agreed that PTs can lead to clients looping their broker out of the process.
He said: “ ‘I’ll just do it myself’ [mentality] is one of the issues that a simple rate switch process can produce. This is obviously bad for brokers, but it’s also often very bad for clients, too.
“Not only do they lose the expertise of a professional broker, they also no longer compare the rate they are being offered to stay on against the wider market.”
Lewis Shaw, founder of Shaw Financial Services, added: “I’ve seen scores of people take decisions into their own hands only to be bitten by that further down the line either because they’re on a worse deal costing them more money or they end up having to pay considerable redemption penalties due to making assumptions and not thoroughly reading the paperwork.”
The case for transfers
On the other hand, certain advisers welcome the ease and remuneration that product transfers provide.
Jonathan Burridge, founding adviser at We Are Money, said: “We are making a good saving in time as we are not having to prospect to find the client and a good percentage of our income is spent on gaining new customers.
“For every customer we recommend to remain with their lender, there is at least one where we are recommending a remortgage.
“It wasn’t that long ago that we would have lost the product transfer for that transaction.”
Michael Aldridge, director at Lucra Mortgages, added: “The availability of product transfers and specifically lenders paying brokers for them has, in my humble opinion, only been a good thing for brokers.
“After all, I can remember a time when PTs weren’t an option and if staying with the current lender was the best thing to do, then you’d lose out. Yes, you may lose the client to a lender directly because it’s ‘easier’, however, I’d argue in this scenario we need to remind our clients and ourselves of the value of a broker and the importance and value of advice both now and in the future.”
However, there is always room for improvement. Product transfers would be even better if they also allowed changes to the mortgage term, one broker said.
The balance of advisers, lenders and technology in PTs also broadly sets an example for other areas of the market to follow. Transfers of equity and further advances still tend to exclude advisers, one broker highlighted, while the wider process of applying for a mortgage can learn from the PT transaction.
