Product transfers - broker views

Product transfers are an essential tool for client and broker. Sometimes the best terms are with the existing lender, or the benefits of remortgaging are too small to justify the hassle. Borrowers should welcome the opportunity to have a broker facilitate the switch as by virtue of the process a broker will carry out a full market review and provide advice on the most suitable solution even if this is with the current lender. Other benefits offered by the broker are exclusive product transfer rates and accurate mortgage information is kept on file for future mortgages enabling the broker to act efficiently and effectively.

The advice process of a Product Transfer is the same as a remortgage. It is shortened somewhat as we already know the client, but there is still updating of documents, a market review and client conversations. However, we are making a good saving in time as we are not having to prospect to find the client and a good percentage of our income is spent on gaining new customers. For every customer we recommend to remain with their lender, there is at least one where we are recommending a remortgage. It wasn't that long ago that we would have lost the product transfer for that transaction. The system works and is fairly remunerated at around 20bps. I would like to see lenders rely on their intermediary partners for more mortgage transactions like transfers of equity, further advances are still widely adviser-excluded.

Whilst I don't mind PTs, I think it's a slippery slope to poor advice and execution-only. Not that the high street lenders care if they're locking in a client for another five years - the fact that such an important financial decision can be done in 5 minutes online by someone who doesn't know what they're doing worries me a lot. It's exactly that conundrum which puts brokers between a rock and a hard place. Do their job properly, or lose the client who panics and takes the easy option. The Mortgage Market Review did great things when it came to raising standards and more or less eliminating execution-only so it's a bit sad to see this being rolled back steadily. I'm yet to hear a compelling reason for why execution-only should be a readily available option other than that it's cheaper for lenders who care more for their bottom line than the interests of customers.

Product Transfers are a great tool for both broker and client. The ability to stay with your current lender and simply renegotiate the interest rate is less work for the broker and less hassle for the client. They are by no means perfect, however, as many will not allow changes to the mortgage. So if a client needs to extend the term, for example, to keep payments at around the same level they have been paying at the previous interest rate, then a full remortgage becomes the only option. It is also important to not get too caught up in how easy they can be; there are still many times when a full remortgage to a new lender will be a lower overall cost option and well worth doing. They are part of the mix of different product options that brokers need to consider to give clients the best possible outcomes. "I'll just do it myself" is one of the issues that a simple rate switch process can produce. This is obviously bad for brokers, but it's also often very bad for clients, too. Not only do they lose the expertise of a professional broker, they also no longer compare the rate they are being offered to stay on against the wider market. The current lender's deal may well not be the best option and end up costing the client more. The other issue is around the guarantees and safety of the advice process for clients. Whilst well understood by advisers, it is not very well understood by clients, that by electing to do a new product direct with their lender they move outside the protections of an advised process and the regulatory protection that brings, which is akin to buying a brand-new car, but choosing the one without the manufacturer's guarantee.

The idea that less work goes into a product transfer than remortgaging to a new lender for a mortgage broker is a false one. To do right by the client, we still need to assess options fully and present the best option. Sometimes that will be a product transfer, sometimes a remortgage elsewhere but crucially the full research and recommendation process still needs to occur. The recent move from a number of lenders to increase their product transfer offer periods is about trying to still be in the running when looking at lending options, with many clients worried about rising rates and looking for new deals earlier than they have done previously. Given the current landscape, I don't think advice has ever been more important. Those lenders that try to direct clients back to their broker clearly value the role of the broker and believe clients should too.

In our eyes, if it is right for the customer the lower proc fee on product transfers is irrelevant. It wasn't so long ago when many lenders didn't offer the facility to brokers and we could end up losing the client for life due to the direct offer available to them. Because there is minimal work involved with the lender when completing product transfers, it also frees us up more to help even more customers within the business, which offsets the reduction in commission received. Ultimately, if you do the right thing for the customer and treat them well clients will recommend you to other people so we shouldn't see this as something to be afraid of.

The availability of Product Transfers and specifically lenders paying brokers for them has, in my humble opinion, only been a good thing for brokers. After all, I can remember a time when PT’s weren’t an option and if staying with the current lender was the best thing to do, then you’d lose out. Yes, you may lose the client to a lender directly because it’s ‘easier’, however I’d argue in this scenario we need to remind our clients and ourselves of the value of a broker and the importance and value of advice both now and in the future. Moreover PT's have highlighted the need for lenders and brokers to work together to make applying for a mortgage with a new lender as slick and efficient as a product transfer. Embracing tech and collaboration will of course be pivotal in making this a reality.