Benefits of product switching for brokers

Product transfers have become a vital tool in the mortgage brokers' arsenal and lenders that don't offer a PT pathway are now getting fewer and fewer. PT's very often pay around 50% of the normal new business proc fee, with a few notable exceptions who pay brokers at the same rate as new business. Many brokers are aggrieved by this as a good chunk of the work done is the same whether the end result is a full remortgage to a new lender or a product switch with the current lender. However, it can also be argued that the post-advice process is much quicker; as any application is minimal, there are no supporting documents to submit and no underwriters and solicitors that need to be chased.

Lenders need to wake up to true cost of advice on product transfers. Broadly speaking the same process is followed regardless of whether it is a remortgage or product transfer, we have to engage with the client, update documentation and review the market for both. If a product transfer is best advice then we are earning almost half the amount for doing the same work.

I am on the fence on this one. Yesterday I spoke to a client, within 5 minutes had ascertained that a PT was the best option when looking at relative costs elsewhere and criteria. Within an hour I had done everything on the case. A remortgage with a relevant lender would have taken 3 times the amount of time and effort for us as a business. So being paid half on the proc is arguably a better hourly rate. I think brokers need to start getting more honest about the effective hourly rate of PT's given there is zero post app admin involved. Actually, there isn't even an application to key! As always it depends on the case/client and lenders at play and what fees brokers charge for remo vs PT, however the idea that a PT is simply half the income, without recognising the case requires far less time, is over-simplifying things.

When the UK's largest lender Lloyds Banking Group pay 0.4% there isn't really an excuse to pay less in my book. Yes the application process is potentially more straightforward but a broker still has to prepare a case to show they've given suitable advice as well as pick up the liability if it goes wrong. LBG's offering should really be the starting point for the industry.

I feel that product switches should absolutely be paid on the same level as standard mortgages. Many years ago I used to work within a large team at a higher street bank and my sole purpose was to retain their existing customers. Now that most high street banks are more focused on using intermediaries like myself we have replaced that team and offer a huge amount of value to banks in assisting them retaining business. Whilst I appreciate that the work involved in slightly less the value to the bank or building society is the same if not more.

The most important consideration when making recommendations to a client is what product is best for their needs. A good broker will take a remortgage and a product transfer into consideration and discuss the pros and cons of each with a client, then make a recommendation on that basis. The procuration fee payable should not be making any difference to the advice a client receives. Having said that, it is frustrating that some lenders continue to offer very low procuration fees for product transfers, especially since in many cases the time taken and paperwork required to process this is not really much less than a full mortgage application.