Written by Rob Stanton, sales and distribution director at buy-to-let lender, Landbay
For brokers, product transfers have emerged as a vital bit of kit in their mortgage market toolbox. Unlike full-scale remortgages, which involve switching lenders, product transfers allow borrowers to switch to a new mortgage product with their existing lender. They have gained a lot of traction over the course of the last ten years – but why are product transfers increasingly popular? What are the benefits for brokers and borrowers beyond the standard remortgage?
While the idea of switching mortgage products with the same lender existed, it wasn’t formalised as such (or marketed as a “product transfer”) until regulatory changes made the concept more popular. Since then, product transfers have become a more significant part of the UK mortgage market’s landscape. In Q1 2019, 290,000 homeowners switched products with their existing lender, representing £39.2 billion in mortgage debt refinanced internally. Product transfers surged in the 2020s, driven by rising interest rates and economic uncertainty. In 2022, product transfers outnumbered remortgages six to one, with 1.27 million transfers compared to 190,000 remortgages. By Q2 2023, 84% of remortgagers chose product transfers over switching lenders, up from 77% in 2022.
The primary reason that they are such a popular alternative to remortgages is one of cost. Product transfers typically involve lower fees than remortgaging. That’s only natural given that they avoid legal fees and arrangement costs. That makes a product transfer a more affordable option for clients looking to adjust their mortgage terms.
Because they’re simpler, they’re also faster. A product transfer requires minimal paperwork and no new underwriting, so the process is quicker and can often be completed within days – allowing brokers to deliver quick solutions for time-sensitive clients.
That simplicity means less stress, too.
Unlike a remortgage, in some cases product transfers don’t require a new property valuation. Not only can a valuation cost a borrower money, by avoiding a valuation entirely, a product transfer can also help borrowers swerve the dreaded down valuation. Down valuations are almost exclusively a remortgage-related problem, and are widespread – they affect one in every five inspections. Down valuations tend to clusters around specific locations, generally, around areas which are going through economic downturns. In these locations, there’s a greater need – understandably, given the circumstances – to achieve specific figures to secure finance. Product transfers, of course, sidestep the issue all together.
Quite apart from costs, simplicity and speed, product transfers with an existing lender also strengthen broker-client relationships. Once a broker can offer this sort of option – quite a seamless one – they put themselves in a much stronger position to maintain existing business with a borrower, reducing the risk of clients switching to competitors during a remortgage.
There’s also a great deal more flexibility than there once was – with lenders providing a range of product transfer options (from fixed rate products to trackers, and discounted rates), enabling brokers to tailor solutions to clients’ evolving financial goals without the complexity of a full remortgage.
Product transfers can help clients sidestep early repayment charges (ERCs) often associated with remortgaging, particularly if they are within a fixed-rate period. By staying with the same lender, borrowers can switch to a new product without triggering costly penalties, preserving their financial flexibility.
Looked at purely from a broker’s point of view, product transfers also generate procuration fees (“proc fees”). With lenders increasingly incentivising brokers to promote product transfers, this option supports both client outcomes and business profitability.
In addition, many lenders acknowledge the loyalty of existing customers and offer preferential rates to those looking to transfer to a new mortgage product.
Product transfers have transformed the UK mortgage market, offering brokers a powerful tool to meet client needs efficiently. Their cost-effectiveness, speed, and flexibility, combined with the ability to bypass affordability checks and earn procuration fees, make them a compelling alternative to remortgaging. As economic pressures and regulatory complexities persist, product transfers empower brokers to deliver tailored solutions, strengthen client relationships, and thrive in a competitive landscape. By leveraging this option, brokers can position themselves as trusted advisers in an ever-changing market.
