The last Mortgage Solutions poll asked: “Are product transfers becoming more popular than remortgages?”.
Some 80.6 per cent of respondents said they were, while 6.5 per cent said no. Some 12.9 per cent had not noticed a change.
For those who are identifying a preference for product transfers, the ease of the process was named as the major draw.
Not deciding on price
Aaron Forster, director of Create Finance, said that in general, customer buying was increasingly “based on convenience and not price”.
He added: “When faced with a decision between paying a little bit more and having no hassle it becomes a no-brainer for most customers. People want things that are quick and convenient and a product transfer ticks this box.”
Gary Bush, financial adviser and MortgageShop.com, said something similar.
He said that product transfers took much of the rate change frustration away during this “awful time for the mortgage industry”.
Bush said: “They are easier to process and far less time-consuming – which allows advisers to act much faster and secure a fixed rate.”
Justin Moy, managing director of EHF Mortgages, said there were “a lot of positives with product transfers at the moment”, including “the ability to reserve a mortgage deal quickly, especially with rates being pulled at a moment’s notice”.
He said product transfer rates were “quite competitive” too and added: “Rarely is there a huge difference between the open market options and those on offer by the current lender.”
Moy also said the ability to reapply if rates decreased was advantageous.
Adam Wells, co-founder of Lloyd Wells, said most mortgage customers wanted an easy life.
He added: “They want the best deal, but they also don’t want to have to jump through hoops to get it. When it comes time to remortgage, many customers choose to stay with their existing lender, even if they could get a slightly lower rate elsewhere.”
Wells said this was because switching lenders could be a “hassle” due to the paperwork required. He also said lenders sometimes offered perks to existing borrowers that they would not get with a new lender, such as waived fees or lower rates.
He added: “For example, a recent case involved a NatWest customer who was coming to the end of their two-year fixed rate mortgage. They wanted to borrow slightly more money to renovate their kitchen. The market-leading rate at the time was with HSBC, but when we looked at NatWest’s rates for existing customers, they offered exactly the same rate without the need to involve a solicitor. They also told us the value of the customer’s home immediately. NatWest were also happy to lend the extra money for the home improvements.
“In this case, the convenience of staying with NatWest outweighed the small difference in interest rates. This is likely to be the case for many mortgage customers, especially as interest rates rise. As a result, we expect to see more customers staying with their existing lenders in the coming months.”
Not always the best deal
Other brokers reiterated the point that product transfers did not always offer the best deal and said there could be a risk if borrowers were not getting good advice before choosing to switch.
Emma Jones, managing director at Whenthebanksaysno.co.uk said: “Product transfers are becoming increasingly popular among borrowers looking to switch their mortgage product with their current lender. There has been an increase due to tighter affordability.”
However, she said while product transfers could be quicker and remortgages could be more time consuming and costly, product transfers “may not offer the best deal or terms”.
Jones added: “Borrowers may want to see better technology and information sharing. This could include online platforms that make it easier for borrowers to compare rates and products, as well as more transparent information on fees and charges.”
Imran Hussain, director at Harmony Financial Services, said: “When it comes to product transfers, any adviser worth their salt has to consider the client’s overall position, so, can they save money by moving or is staying put the best option for the client?
“The pros for product transfers are that they are quicker to process for the client. The downside is if a thorough review is not carried out, it could cost a client thousands of pounds if there is a better offer available on the market so always seek advice and do what’s best for the client.”
Aaron Strutt, product and communications director at Trinity Financial, said: “The overwhelming majority of borrowers are sticking with their lenders when their rates finish and there is no doubt PTs have transformed the remortgage market. Last year 87 per cent of remortgagors opted for a product transfer with their lender, instead of moving elsewhere, according to UK Finance. This was up from 80 per cent in 2021 and 73 per cent in 2019.
“While it is great that most borrowers have remortgage options, especially at a time when standard variable rates are shockingly high, some existing customers probably are not getting the best deal or a choice of rates available to new customers. They are also not getting proper advice before they lock into a new rate. Many lenders do not provide products without early repayment charges which forces borrowers to take a fixed rate or revert to the standard variable rate.”
Matthew Jackson, director at Mint FS, said: “From a broker perspective the difference between a product transfer and a remortgage is negligible. We still diligently consider all options, collect relevant proof and justify our advice. However, the main difference is that the lender will generally not require any new proof for a product transfer.
“With criteria having shifted hugely in the last three years, a number of clients will be pushed towards a product transfer simply because their circumstances or income will no longer fit the mortgage they have.”
Jackson said both remortgages and product transfers have their advantages and disadvantages.
He added: “We as a firm have used remortgages to secure long-term offers in times of high market volatility for clients.
“My main wish would be for all lenders to recognise the value of brokers servicing and advising on their client book and pay a more reflective procuration fee for product transfer in the future.”
