More people turning to PTs

With affordability tests being tightened by lenders and real incomes stalling with outgoings increasing, affording your mortgage is a real dilemma. This makes remortgaging challenging, where it would have been simple two years ago. If you cannot meet the criteria, you limit your choice and in some circumstances your only option is to remain with your lender as they won’t do further checks. The good news is that lenders have become more savvy to those coming to an end of their mortgage deal and lots of lenders are now offering really competitive rates to people to remain, so if you’re in this situation it might not be as dire as it once was.

Product transfers account for around 75% of my mortgage renewals so far in 2023, up from 50% last year. In general, the rates offered through a product transfer tend to be competitive, especially with the high street lenders, with many now personally pricing their deals (Halifax, Santander as an example) based on credit bureau information and account management. Tighter affordability assessments have also ruled out a remortgage for many of our clients, even to borrow the same amount, but with the pricing of many product transfer products as good, if not better than equivalent open market options, the need to move to a new lender is not justified for the costs involved. And their lack of a formal affordability assessment and ease of application is appealing to clients, too.

We are seeing an uptake in product transfers, but not because of affordability issues (on residential mortgages). This is more down to lender tactics, and the cost of obtaining business (or retaining business). More lenders are realizing that this is going to be a difficult period in which to obtain new business so it is far easier and cheaper for them to offer good rates to existing clients. It is still vitally important for clients to speak with a broker who can compare the current lenders offering to the rest of the market, but in many cases, current lender rates are the equivalent of, if not better than those on the open market. The process is much simpler too. It's a different story with buy-to-let though, and the reason for the rise in product transfers here is because of affordability and the rental stress test calculations that lenders are using due to higher rates. Rental income is just not sufficient to obtain the current level of mortgage required in most cases.

There is no doubt that product transfers really help homeowners and make the rate-switching process straightforward. The issue is many borrowers automatically stick with their lenders rather than shopping around so they potentially end up paying more in the long run. This is often because they do not want to go through the hassle of remortgaging. Some lenders also do not offer existing customers the same rates as their new customers. We have found many no early repayment charge free deals are not offered when taking a product transfer which is why many borrowers stick on super high standard variable rates often price around 7.5%.

We always go through full, whole-of-market research so we can advise people the best course of action. In most cases we've worked on recently, clients could 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 a 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.