Brokers around the UK have noted the growing popularity of product transfers, with one saying it’s “positively raining” them.
The reasons are affordability issues and, given reduced transaction levels, lenders “pricing their product transfers in line with their new business ranges”.
A selection of brokers and advisers have given their view on the situation below:
Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages: “With new mortgage transaction numbers down given all the market uncertainty, many lenders are more focused on retaining existing customers to maintain their mortgage back book as they know there will be less new business this year. Many borrowers also stretched themselves financially during the pandemic stamp duty holiday to move up the property ladder, and now find themselves falling foul of affordability with a new lender due to the cost of living crisis. This over-exuberance has resulted in many mortgage holders having no choice but to stay with their current lender once their deal expires.”
Chris Sykes, technical director and senior mortgage adviser at London-based broker, Private Finance: “At the moment, the product transfer is very often the most competitive option for people and doesn’t involve a whole re-underwrite. Most lenders are pricing their product transfers in line with their new business ranges, so if their new business is competitive they’ll likely have a good customer retention rate. With transaction levels down, retention is key for lenders. Affordability is also a contributing factor: whereas previously every lender may have given a client the amount they are borrowing, now it might be that only a few competitive lenders will do it, so a product transfer is better. Whenever a client’s deal is up for renewal, we undertake a full review of the market, which includes product transfer versus a remortgage elsewhere. Product transfers are obviously a low-stress option so there needs to be some quite attractive options to justify a remortgage especially when there will often be costs involved with a remortgage that are not incurred on a product transfer.”
Gary Boakes, director of Salisbury-based mortgage broker, Verve Financial: “It is positively raining product transfers at the moment. The reason? Lenders see this as easy business to keep, the rates are all competitive and with the ability to cancel and switch to new rates if they become lower, they have been the perfect solution for many people.”
Bob Singh of Uxbridge-based mortgage broker, Chess Mortgages: “The popularity of product transfers is definitely on the up, not least because borrowers want the least friction possible to switch. There is no underwriting involved and for someone whose financial position may not be as robust due to the cost of living crisis, it’s easier than trying to remortgage to another lender. For larger mortgages, it pays to plan ahead and compare what is on offer from competitors before making a decision. More and more lenders are permitting product transfers to be triggered up to six months before the rate end, but in a climate where rates are expected to drop, playing the waiting game may pay dividends. Some lenders will allow a change of switched product closer to the end date so it pays to monitor rates from your lender. A broker is well placed to do this for you.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions: “With the volume of new mortgage transactions unquestionably less than in recent boom times, the previously neglected or taken-for-granted area of customer retention has become a higher priority for most lenders. Some of the UK’s largest lenders are now offering bespoke and often very attractive pricing for existing borrowers and so, along with the relative ease and speed of the process, product transfers are undoubtedly on the rise and will often represent the best advice. However, with something of a rate war ongoing currently, comparing what your current lender may offer with what the overall market has to offer remains a vital part of the process. Advice and discussion around your personal circumstances, outlook and the length of any initial deal should also always be sought and fully considered to ensure decisions made now do not seriously impact your options in the future.”
Michael Webb, managing director at Brandon-based Mortgage Republic: “Product transfers have been on the up for the past few years. Lenders have started to really focus in on the retention of good business, and as such often price very competitively within the remortgage market. A level of apathy from clients about moving lenders for marginal gains, added to more difficult affordability tests, has driven more people to be advised to stay with their existing lender and product transfer. There is definitely a growth in the number of clients who are finding they cannot remortgage elsewhere what they already have due to the increased costs they have incurred, be it from unsecured debts or increased dependants. They therefore have no choice but to product switch. This has also been prevalent in the buy-to-let market due to rental stress tests no longer working out.”
Mike Staton, director of Mansfield-based Staton Mortgages: “Product transfers have become the most popular option for many of our clients over the past two months. As there is often little difference in rates between lenders, the safest option has been to pay a little more but save on time with valuations and slow free legals. While product transfers are rarely the cheapest option for the client, they do tend to be the least stressful route for the majority of people. Do make sure you speak to a good broker about the product transfer route as they can potentially save you a lot of money and time with their invaluable experience. A product transfer will rarely be the cheapest option, but if you want something done quickly with minimal fuss then it will be a product transfer hands down. Just make sure you have checked the rates elsewhere, preferably with a good broker, just to see how out of pocket you will be.”
Craig Fish, Managing Director at London-based mortgage broker Lodestone: “We are most definitely seeing more product transfers than in previous years. The reason is twofold: firstly, fewer transactions are happening and lenders need to secure business, so the easiest route is via their existing client bank. Historically, lenders didn’t reward loyalty but this year has seen a change to that with rates that are quite often the same as those that would be available to new customers. Secondly, it’s because many borrowers overindulged during the era of record low rates are now falling foul of lenders’ affordability calculations, and so for them it is impossible to move to a new lender full stop. Regardless of this, a good broker should always look at all options for a borrower, not just a rate switch, and offer the best solution and rate for that person based on their circumstances.”
Aaron Forster, director of Derby-based mortgage broker, Create Finance: “Product transfers are becoming much more popular for a variety of reasons. One of the main reasons is they have become far more competitive in pricing. Lenders are being significantly more proactive in holding onto valued clients rather than spending money on marketing trying to bring new clients in. Also, Covid has had an impact. Self-employed borrowers may have taken a hit to their income, meaning they don’t meet affordability now or they have issues with their credit, meaning if they moved their mortgage they would end up paying a higher rate going to a more specialist lender. Product transfers have also increased the number of secured loans being taken as customers are keen to take advantage of the low rate offered by doing a product transfer but still then need to borrow extra funds.”
Rhys Schofield, managing director at Derbyshire-based mortgage advisers, Peak Mortgages and Protection: “We don’t seem to be doing a higher proportion of product transfers than normal. Whilst product transfers might seem an easy option and be absolutely right for some of our clients, I think a good broker still needs to stick to their principles, do a thorough job and, if a better option is out there with another lender, make the process easy for their client to move over. We could be talking about potentially saving people thousands of pounds in interest so they shouldn’t be cutting corners.”
Scott Taylor-Barr, financial adviser at Shropshire-based Carl Summers Financial Services: “No one comes to a meeting with me and says, “I want a product transfer” or “I want to remortgage”. What they say is, “my current deal is coming to an end, what do I do?”. People don’t care whether they have a remortgage or a product transfer, and many don’t know what the differences are. Product transfers have started to take a greater share of the market because they represent great value at the moment. Though perhaps not market-leading, many lenders are offering existing customers good deals. When you explain that the deal with their current lender is only a few pounds more than the very best on the market, but you don’t need to faff around with loads of documents and have conveyancing done, that extra cost is seen as worth paying. However, this is only true for straight balance swaps. If you want to amend the term, borrow more or change the names on the mortgage, many product transfer systems can’t do that yet, so these cases could benefit from a remortgage to a new lender.”
Austyn Johnson, founder at Colchester-based Mortgages for Actors: “If you had an ultra-low rate two years ago on your 95% mortgage and affordability only just passed then, you probably won’t be able to remortgage straightaway. A product transfer gives you a good option to stay with the lender and refix without any extra checks. For some borrowers, this is their only choice. Equally, some borrowers just can’t be bothered with a new application. Either way, brokers need to present people with their best options and let them decide. If a product transfer is best, why not? For highly mortgaged borrowers, of course, a rate drop will help them move if needed.”
Gary Bush, financial adviser at the Potters Bar-based MortgageShop.com: “All being well, product transfers take hours to complete while remortgages, with lender backlogs, shortage of valuer slots and solicitors taking much longer to process the legals, they could take 8 weeks plus. During this time anything could happen to the fixed rate market, and added to this the risk of reprocessing a client’s remortgage to another lender, due to a poor underwriting decision or a down valuation, is quite high. When you explain this to borrowers, they often opt for a product transfer, potentially at a marginally higher rate, just for peace of mind.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “With the property market on a knife edge and the cost of living crisis likely to make prices fall over the short term, there are more down valuations occurring, as lenders look to protect their loan book. This means it is more difficult to remortgage at the rate you were expecting as your loan to value might be less once the valuation comes back. In contrast, if you are switching product with the same lender they are less likely to be so stringent about the valuation, opting for the desktop valuation. This will mean you could be seen to have more equity, offering cheaper rates. Of course, some brokers are advising to opt for a tracker with no early repayment charges so clients can benefit from the fall in interest rates we are all expecting. That way, when more competitive rates come back into the market, they can fix with a more suitable offer.”
Rob Gill, managing director at mortgage broker Altura Mortgage Finance: “We are seeing a significant increase in remortgage borrowers opting for product transfers, with the key driver being the competitive rates lenders are offering existing borrowers. We’ve also seen clear examples of lenders offering less competitive deals direct than the same borrower could obtain via a broker. Remortgage borrowers should always speak to an independent mortgage broker, if only to make sure any deal they’ve been offered direct by their existing lender is the best they can obtain.”
Ross Lacey, director at Rayleigh-based Fairview Financial Management: “We always go through full, whole-of-market research so we can advise people of the best course of action. In most cases we’ve worked on recently, clients could indeed secure deals with other lenders but it hasn’t made sense — mainly because the deals offered to existing customers are so competitive. There are a few notable exceptions though, for example where borrowers may have a mortgage with a more specialist lender because of past credit issues and they’re now in a position to remortgage to a more mainstream lender at a much better rate. Even where a remortgage is marginally lower cost than a product transfer, our experience tells us there needs to be enough of a difference for clients to warrant the extra steps involved in a remortgage such as the legal work.”
Joe Stallard, director of Stroud-based House & Holiday Home Mortgages: “Whether to opt for a product transfer or remortgage to a new lender can often be a marginal decision and really depends on the individual borrower’s wants and needs. We always need to explore other lenders as well and make people aware of what the best financial option is. Sometimes the product transfer is the lowest cost, but sometimes it’s marginal. And sometimes the client doesn’t find any savings from going to a new lender when valuations and legal costs get added in. We also find it’s criteria-driven, and borrowers often make their decision based on that. A whole host of reasons are contributing to each person’s decision and there doesn’t seem to be a general rule.”
Ashley Thomas, director of London-based mortgage broker, Magni Finance: “Product transfers are more popular for two reasons. Firstly, the rates are very competitive as lenders are trying to keep as much business as possible. Secondly, it is a lot quicker and easier to complete a product transfer. If there is only a marginal saving moving lenders, a lot of borrowers prefer the ease of completing a product transfer instead.”
Lewis Shaw, founder of Teesside-based mortgage broker, Riverside Mortgages: “Let’s not beat around the bush. The biggest reason for product transfers is laziness, both from a broker and borrower perspective. People say they want the best deal, but what they really mean is they want a better deal than the one they’re currently on but can’t be bothered with the perceived hassle of a proper remortgage. Occasionally, a person’s current lender will have the best deal. However, those situations are few and far between. If lenders are going to pay a broker a full procuration fee, in some cases upwards of thousands of pounds for clicking three buttons, then you’ll not be surprised that lots of clients are told it’s best to stay with the same lender.”
