So this week, Mortgage Solutions asked: Do you conduct a sufficient or healthy amount of product transfer business?
We don’t think about it in those terms at all. When we are reviewing a client’s mortgage, we simply start the whole advice journey again.
We examine factors such as whether the client plans to move, their risk appetite, and the movements we seen in money markets. Then we will assess the client’s personal situation like indebtedness. One of our company’s core values is getting our clients debt free. We assess their income, occupation and crucially the real house price rather than the perceived value.
Only by weighing up all these factors will you come to the best conclusion for a client. Then we will start to look at which lender is best for the specific product.
It is also very lender driven. The likes of HSBC, Santander, Barclays, Nationwide and a few others price very keenly. If it is simply that their own bank offers the cheapest product and it is the most appropriate, we will do a product transfer. If another lender is cheaper, we do that.
As I alluded too, valuations are also a factor. We commonly use product transfers if there is a cheaper product in a lower loan to value tier that the client qualifies for.
We can test the valuation before the product expires and if it does not come back favourably, we can still use the product transfer option with their existing lender. While this is more work for us, we have complete confidence our clients are getting the best possible outcome.
As mortgage brokers our duty of care to clients is to present them with the best mortgage product recommendation to suit their needs.
So why, as soon as brokers start receiving proc fees for completing product transfers do they resemble 25 per cent of the mortgage market? I can understand that a very small percentage of clients have had dramatic life changes which necessitates staying with their current lender, but 25 per cent?
This eagerness for an easy life is playing into the lender’s hands as we are teaching clients the habit of remaining with their current lender and switching products no matter what else is on offer. The easier this process, is the less need clients have for brokers when it comes to remortgage.
To truly underline the point, Bob Singh launched a cashback product transfer deal where customers get 0.1 per cent back if they complete a product transfer for over £200,000. You may think its suicide but to me, it’s a brilliant business decision.
Just think how many product transfers you can complete in a day and how soon you receive the proc fee, diminished or not.
Compare this to the work involved in completing a full mortgage review submitting all documentation, then waiting three months for your money.
This approach – although it could be considered a cute business decision – further undermines the value of a broker and the service offered.
We can’t bemoan the lenders not being willing to pay more to the broker for completing a two-page document and we can’t wonder why clients don’t want to pay a fee for something they can complete themselves far more conveniently.
Unless we’re willing to maintain standards and offer a quality of service that has real value, the product transfer market really is a race to the bottom for advisers.
Our clients find themselves in a position where going to another lender is a challenge. They need to change jobs; they’ve just changed jobs or gone from employed to self-employed or they have to finish credit card payments; life happens.
Aside from that, sometimes the lender actually does offer a better deal than a remortgage and then there are clients who are just better off staying with their current lender because they have a low mortgage amount. Changing to another lender financially wouldn’t make sense.
Out of our client base we carry out product transfers whenever it makes sense. I do lose clients to lenders who don’t allow me to do a product transfer. That does happen.
Some lenders say they will do product transfers but they don’t want to advance with it. That does not help me either.
On the whole, I wouldn’t say we do a huge amount of product transfer business.
I would be happier to do more if more lenders allowed it. It would only make a difference to a few cases but still it would be good if more lenders could offer it through brokers.