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Product transfers soaring as remortgages hit 24-year low

ended 30. October 2023

Bank of England data published this morning showed that net approvals for remortgaging, which only capture remortgaging with a different lender, fell from 25,100 in August to 20,600 in September, the lowest level since January 1999 (18,300).

Brokers said the reason for the low volume of remortgages is the sharp rise in product transfers, as many people have no choice but to stay with their existing lender, lenders placing more emphasis on retaining borrowers to maintain market share given the lack of purchase activity, and broader apathy around seeking advice, which could prove costly.

Anil Mistry, director at Leicester-based broker, RNR Mortgage Solutions was unsurprised by the extremely low remortgage numbers: “No surprises here. This was bound to happen. With sky-high inflation and interest rates skyrocketing in the past year, lenders have been cranking up their mortgage stress tests and the way they assess borrowers. Your chances of scoring that mortgage you thought was a sure thing just over a year ago? Well, they've likely gone down the drain, even if your income and debts remain the same. Product transfers are the only option for some borrowers.”

Gary Bush, financial adviser at the Potters Bar-based broker, MortgageShop.com, agreed that affordability was a key reason for the ongoing decline in remortgages: “The level of remortgages for September is surprisingly low. In fact, I haven't known a time when arranging a remortgage with a UK lender has been so troubled, with rate changes and lenders re-assessing assessed cases and niggling on so many points. The remortgage numbers highlight very clearly how many people have no choice but to stay with their existing lender due to affordability and lender processing reasons.”

According to Derek Watson, mortgage and protection adviser at McGill Mortgages, another reason for the rise in product transfers is lenders pricing more competitively to keep existing borrowers: “High numbers of borrowers are staying with their existing lender and opting for product transfers as lenders are currently offering lower rates for retention clients. I am not sure if this is to help their existing borrowers or because lenders are struggling for market share and would rather keep their clients than let them fall out the back door and go elsewhere. It may be a combination of the two.”

Hannah Bashford, director at Model Financial Solutions, also said convenience and ease are playing a role: “Affordability, fees and hassle all make product transfers an attractive option and this is feeding into the low level of remortgages. We live in a world of convenience and if someone is going to save a small amount over the rate period, but has to provide their last three months of payslips, bank statements, complete a questionnaire with the legal adviser and sign all the paperwork etc, is the saving worth it and have they really saved any money when you consider the time taken to complete the process? The simplicity of a product switch is certainly an attractive option and, for some borrowers, the only option.”

Much the same view was shared by Ross Lacey, director at Fairview Financial Management: “The product transfer is the lowest friction option, other than simply doing nothing at all and moving onto a standard variable rate, which would be very expensive. For some people, this will be the right option but I think there's a risk that borrowers take the default view that staying with their existing lender will be the best option without fully exploring the other options, which could potentially save them hundreds each month.”

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, agreed that convenience plays a role but warned borrowers of the dangers of choosing the wrong product: “Product Transfers, or Product Switches as they are sometimes known, are generally good value at the moment for many people. Maybe not the very lowest cost option, but close enough that the ease of not requiring a full application, underwriting and the legal process, makes the slightly higher cost worth paying. That being said, many lenders' product transfer processes won't allow for a straightforward change to the contract, so if you want to extend the term, for example, this can be far from simple. There are still, however, lots of potential pitfalls in remaining with your current lender. Even if you know the sort of deal you want, many lenders will have multiple versions of these products, meaning it is easy to make a mistake and end up paying more than you need to. For example, this could be by picking a deal with a great rate but high fee, which on a lower mortgage balance is not good value."

Like Mistry, Jack Tutton, director at SJ Mortgages, was also unsurprised by the data: “This latest remortgage data isn't a surprise and reflects what we are seeing in the market. People are staying with their existing lender due to the lack of competitive products offered by other lenders. Also, lenders are trying hard to retain more of their mortgage book due to the lack of movement in the purchase market. Affordability is another issue that we are seeing."

Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions, added: "Many borrowers are understandably asking why have the hassle of valuations, slow legals, and the need for additional documents and underwriting when their existing lender is offering hassle-free product transfers at largely competitive rates. For many, only if the rates available from their current lender are seriously lacklustre does a remortgage to a new lender have any appeal or make sense. Factor in an obvious surge in product transfers driven by those who either wouldn't meet current affordability standards or simply choose to overlook the crucial need for advice, and you have a mortgage landscape where convenience often trumps full exploration of all the options potentially available."

Lewis Shaw, owner at Shaw Financial Services, echoed that sentiment: “The huge rise in product transfers is due to many borrowers either not fitting current affordability with new lenders or a broader apathy around seeking advice despite it being more important than ever.”

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14 responses from the Newspage community

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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
Many borrowers are understandably asking why have the hassle of valuations, slow legals, and the need for additional documents and underwriting when their existing lender is offering hassle-free product transfers at largely competitive rates. For many, only if the rates available from their current lender are seriously lacklustre does a remortgage to a new lender have any appeal or make sense. Factor in an obvious surge in product transfers driven by those who either wouldn't meet current affordability standards or simply choose to overlook the crucial need for advice, and you have a mortgage landscape where convenience often trumps full exploration of all the options potentially available.
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Derek Watson
Mortgage and Protectipon adviser at McGill Mortgages
High numbers of borrowers are staying with their existing lender and opting for product transfers as lenders are currently offering lower rates for retention clients. I am not sure if this is to help their existing borrowers or because lenders are struggling for market share and would rather keep their clients than let them fall out the back door and go elsewhere. It may be a combination of the two.
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David Stirling
Independent Financial Advisor at Mint Wealth
With little to no underwriting from lenders to "product transfer" at the end of an existing deal, why would a client go through the drama of valuation, legal processes and providing proof of income. Remortgaging to a new lender will continue to be less attractive, unless the product transfer rates are particularly uncompetitive.
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Simon Bridgland
Director at Charwin Private Clients
This comes as no surprise considering that product transfer rates are often very competitive when compared against remortgage deals offered in the wider market. Why would you put the client and yourself through the wringer having to evidence this, that or the other if you are not making any changes to a client's mortgage other than seeking a better rate? Given that product transfers can be done in minutes on a lender's portal compared to a remortgage, which in some cases can still take months to happen, due to lenders vetting of clients, surveys (including downvaluations) and then, of course, the legal work, often for no better rate. The downside for the broker of course is that many lenders still pay lip service on proc fees for a product transfer, even though the broker is still taking on the compliance risk and often onerous back office administration, which is just the same as a remortgage case.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
The product transfer is the lowest friction option, other than simply doing nothing at all and moving onto a standard variable rate, which would be very expensive. For some people, this will be the right option but I think there's a risk that borrowers take the default view that staying with their existing lender will be the best option without fully exploring the other options, which could potentially save them hundreds each month.
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Craig Fish
Director at Lodestone Mortgages
Many clients are burying their heads in the sand, despite being told not to do so, as they are worried about the 'rate shock' that they are going to experience. As a result, they often leave it too late to consider the option of switching to other lenders. However, until recently the benefits of moving to another lender have been negligible so sticking with current lenders is often the easiest and most cost effective thing to do. Lenders for once were focusing on customer retention, but it seems this may be changing as lenders ramp up their rate reductions. Hopefully the numbers for remortgaging will slowly improve, but only time will tell.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Horrific remortgage figures setting records in all the wrong ways. This is a clear indication that consumers are not feeling bullish about the market and their current situation, opting to switch rates with existing lenders. The reasons behind this astonishing lack of activity could range from underlying affordability to a lack of confidence in raising additional cash for projects such as home improvements, whilst others will be electing to sit tight for another two years, hoping that the world will be a better place in 2025.
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Jack Tutton
Director at SJ Mortgages
This latest remortgage data isn't a surprise and reflects what we are seeing in the market. People are staying with their existing lender due to the lack of competitive products offered by other lenders, plus lenders are trying hard to retain more of their mortgage book due to the lack of movement in the purchase market. Affordability is another issue that we are seeing. The typical standard variable rate is significantly higher than it has been for many years making the stress tests more difficult to pass. This is something that we are finding is common for single-income households, which leaves people with little choice but to stick with their existing lender.
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Graham Cox
Director at Bridging Hub
The incredibly low level of remortgage transactions taking place reveals two things. First, many homeowners are staying with their existing lender and switching mortgage products as it's easier and often cheaper than remortgaging to a new lender. Second, some are selling up and downsizing, simply unable to afford the higher monthly payments.
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Anil Mistry
Director and Mortgage Broker at RNR Mortgage Solutions
No surprises here. This was bound to happen. With sky-high inflation and interest rates skyrocketing in the past year, lenders have been cranking up their mortgage stress tests and the way they asssess borrowers. Your chances of scoring that mortgage you thought was a sure thing just over a year ago? Well, they've likely gone down the drain, even if your income and debts remain the same. Product transfers are the only option for some borrowers.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Product Transfers, or Product Switches as they are sometimes known, are generally good value at the moment for many people. Maybe not the very lowest cost option, but close enough that the ease of not requiring a full application, underwriting and the legal process, makes the slightly higher cost worth paying. That being said, many lenders' PT processes won't allow for a straightforward change to the contract, so if you want to extend the term, for example, this can be far from simple. There are still, however, lots of potential pitfalls in remaining with your current lender. Even if you know the sort of deal you want, many lenders will have multiple versions of these products, meaning it is easy to make a mistake and end up paying more than you need to. For example, this could be by picking a deal with a great rate but high fee, which on a lower mortgage balance is not good value.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
The level of remortgages for September is surprisingly low. In fact, I haven't known a time when arranging a remortgage with a UK lender has been so troubled with rate changes and lenders re-assessing assessed cases and niggling on so many points. These dire mortgage approval figures from the Bank of England were always on the cards and it's been a nightmare year all in all. The remortgage numbers highlight very clearly how many people have no choice but to stay with their existing lender due to affordability and lender processing reasons.
Copy

Hannah Bashford
Director at Model Financial Solutions
Affordability, fees and hassle all make product transfers an attractive option and this is feeding into the low level of remortgages. We live in a world of convenience and if someone is going to save a small amount over the rate period, but has to provide their last three months of payslips, bank statements, complete a questionnaire with the legal adviser and sign all the paperwork etc, is the saving worth it and have they really saved any money when you consider the time taken to complete the process? The simplicity of a product switch is certainly an attractive option and, for some borrowers, the only option.
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Jamie Thompson
Mortgage Broker at Jamie Thompson Mortgages
When interest rates were 0.87% just a couple of years ago people wouldn’t think twice about borrowing large additional sum for elaborate home improvements and extensions. Borrowing more now is simply unthinkable to many who don’t want to owe the bank a penny more than they have to. Especially on an asset that is going down in value every month. Borrowing more to have bifold doors is less important now than overpaying before big rate hikes hit for many as they roll off their current deal, and more frequently than ever take a new deal with their existing lender. One major advantage of taking a new deal with an existing lender is removing the risk of spending time on the standard variable rate, many of which start with an 8, which paying for one month could more than wipe out any minor saving by remortgaging. People value certainty a lot more than a tiny potential saving.