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Brokers and conveyancers warn borrowers about free legals as mortgage rates drop

ended 16. September 2024

At a time when mortgage rates are dropping regularly, brokers and conveyancers have warned consumers that ‘free legals’ may not always be the best option, as each time a rate is changed they may be charged.

For example, one broker, Michelle Lawson of Lawson Financial, says: “I have a client whose interest rate has reduced by 0.75% since application, has had five mortgage offers and has been charged £50+VAT by the solicitors to check each one when the only thing that has changed is the rate.”

Newspage asked brokers, conveyancers and other property experts for their views on this.

Chris Barry, Director at Thomas Legal, said: “The firms offering fee-free legals are under extreme financial pressure because the model only stacks up when transacting very high volumes of work due to small margins. This has left many firms searching for ways to raise additional revenue and in a market of declining interest rates, multiple mortgage offers does create additional work for lawyers, which falls outside the fee free offering.”

10 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
There is no such thing as a free lunch, as the saying goes. Free legal services offered by lenders on a remortgage are a great example of this. The firms that lenders use are often paid minimal amounts per case and then make up their costs with additional fees levied to consumers, one of which can be a charge to review a new mortgage offer issued due to a lower rate becoming available. I have a client whose interest rate has reduced by 0.75% since application, has had five mortgage offers and has been charged £50+VAT by the solicitors to check each one when the only thing that has changed is the rate. The money saved covers the cost but this is not the point. Borrowers may also not be aware that in such cases the solicitors act solely on behalf of the lender and not the borrower, with their service and communication often poor. Some lenders offer a cashback option and good broker will recommend and offer a suitable alternative legal solution which you should consider.
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Craig Fish
Director at Lodestone Mortgages
Free legals should be avoided at all costs. In many cases there are other costs involved that are not included in the 'standard' service. What is more worrying though is the lack of attention to detail which often results in lost time and emotional distress. These costs are unquantifiable and in many cases have consequences far beyond the transaction that they relate to.
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Chris Barry
Director at Thomas Legal
The firms offering fee-free legals are under extreme financial pressure because the model only stacks up when transacting very high volumes of work due to small margins. When interest rates rose sharply, a lot of people found themselves unable to remortgage due to failed affordability leaving a product transfer as the only option for many. This has left many firms searching for ways to raise additional revenue and in a market of declining interest rates, multiple mortgage offers does create additional work for lawyers, which falls outside the fee free offering. We are seeing a new wave of demand for fee paid legals for remortgage work given clients now expect to pay even with fee free legals and can get a higher level of service when the client chooses a lawyer they trust.
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David Robinson
Co-Founder at Wildcat Law
Free legals are a recipe for disaster. Conveyancing has long been a race to the bottom when it comes to costs but the reality came home to roost with the management fee debacle. Factory-style processes left no space for proper client care and resulted in clients entering into purchases without being properly informed. Unfortunately the industry has not learnt from past mistakes, which is why insurance premiums for conveyancers are still sky high. It is no surprise therefore that firms providing the "free legals" are being forced to levy additional charges to cover what appears to be minor additional pieces of work. Unfortunately, until the conveyancing market gets out of its costs death spiral, we can expect to see more, not less of this.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
I hate to say it because I’m all for clients saving money but fee-free legals seem to be the biggest pain during a remortgage transaction, partly because of secret last minute fees but also due to the delays we see them often cause. When you’re sat on a hefty standard variable rate, it can be costly. Consider using a local firm with a strong reputation even if it costs, especially when you have complexity on the Land Registry or during a relationship split.
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Simon Bridgland
Director at Charwin Private Clients
The profit margin on a ‘free legals’ case for large volume law firms is so tight that if any additional work is being done outside of a vanilla case, they have to charge to cover costs. Typically the profit on a case is under £100 and so if they keep repeating the same tasks due to alterations such as reviewing offers due to a rate change, which at the moment is every five minutes, then they need to add extras or conveyancing firm are basically paying to work on a case. Most consumers are not aware of how little money is being made on a their transaction. Frankly, the word free is misleading and instead they should be described as fee-assisted.
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Dariusz Karpowicz
Director at Albion Financial Advice
Free legals might sound like a great deal at first glance—who wouldn’t want to save on solicitors’ fees? But as the saying goes, "you get what you pay for". These providers often find ways to charge for the smallest things, like £50 just to "check" a new offer. It’s not unusual for something "free" to come with hidden costs, and the process can drag on much longer than expected. I’ve seen plenty of cases where "free" actually meant extra charges for basic services. Always read the fine print before diving into free legals.
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Elliott Culley
Director at Switch Mortgage Finance
The profit margin for firms offering this service is minimal, so they have to charge when something classed as non-standard provides more work/time than a standard remortgage application. With free legals you will get what you paid for and you can't expect your application to be prioritised and it will take some time. However some will seem as necessary to the market as borrowers would likely end up sticking with their current lender rather than remortgaging to a new lender.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Although we often shorten it to "free legals" the full title given to this by the majority of lenders is "free standard legals"; meaning that they will cover the cost of the basic work of switching your mortgage from your current lender to them. As soon as you require extra work to be done, then that becomes an extra charge; this could be adding or removing a borrower, dealing with a second charge on the property or a special purchase scheme (such as help-to-buy), or an issue with your property Title (such as a restrictive covenant). These charges will vary depending on the amount of extra work being undertaken, so if you are unsure it is best to raise any known issues or additional work you may need as soon as you can, as it may impact on the advice your mortgage broker gives you as to which mortgage deal is the best for your situation.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
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