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Debate: 3-month Product Transfer windows

Journalist: Justin Moy, Contributing Editor

ended 02. December 2023

There has been plenty of debate on LinkedIn and other social media platforms recently as to whether reverting to a 3-month window for Product Transfers will work better for the industry, i.e. lenders, brokers and borrowers.

Currently, lenders are struggling to price products and manage their margins, borrowers are becoming more uncertain as to what they will pay on their mortgage, and brokers are revisiting cases so many times before the PTs complete, for what is less than 0.2%, they are losing any profit to administration costs.

Newspage asked brokers for their views, below.

11 responses from the Newspage community

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Rohit Kohli
Director at The Mortgage Stop
I don't think going back to a 3-a-month product transfer window makes sense, particularly as you can start to remortgage six months out. What does make sense is for lenders to auto-switch clients when they reduce rates for like-for-like products until the new product goes live. Given the bumper profits many lenders have made I see no reason why they could not make tweaks to their systems to achieve this.
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James Vince
Managing Director at Castle View Finance
We focus on client onboarding and client journey. With this approach, we pre-upload client criteria into our mortgage sourcing tools with clear case-specific details. This allows for a quick search at periodic times to double-check the latest rates in the open market as well as current retention product rates. If these improve, we engage with the client and give them the good news, which is a new rate, potential new lender and or stay as we are. By having a wider window the client has a much more informative journey, allowing for a longer advice process, with better knowledge of the client's risk profile. For our clients, it makes sense to lock in longer and engage more with them at a time of industry changes with AI capabilities improving all the time. I hear talk about costs, but if everything is in place this is a 20-minute process, and the outcome may result in some new processing. One referral from the client makes the effort worthwhile.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
In a market of rapidly rising interest rates, brokers were pushing all lenders to have a 6-month PT window, now in a falling interest rate market it's creating more work and a shorter window would be preferable. However, that won't last forever and, at some point, rates will rise again and the longer PT window will be required again. You can't have it both ways. At least the 6-month PT window fits in with lenders' remortgage offers: it allows a like-for-like comparison between a client's PT and remortgage options.
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Justin Moy
Managing Director at EHF Mortgages
Extending the window for Product Transfers has been one of the few positive moves by lenders this year, to give both borrowers and brokers an opportunity to plan ahead and provide some much needed assurance, especially in a rising rate market. With rates now slipping slowly downwards, this is causing some issues with lenders and brokers with their administration of constant switching to better deals, and also it is putting off borrowers to make a commitment, even knowing that it can be changed over the coming. months. Moving to a 3-month window might work if the market continues its recovery and we have a better spread of FTBs, movers and remortgages, but with 70% of applications in the PT market, I would be loathe to make a change immediately, but only perhaps when rates have found their new low.
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Simon Bridgland
Director at Charwin Private Clients
Careful what you wish for. It wasnt that long ago that brokers were bemoaning a shorter than 6-month window. Okay, it's more admin work to complete but at least you can forecast pretty accurately what you'll be completing on in six months' time. Getting the commitment from the client early doors is great for any business, it also helps to give you plenty of opportunities to help cement the relationship with the client for the long term, evidencing that you will always do right by them. Is it not better for business and the client/adviser relationship to be together for the long term rather than a transactional client? We are going to see much more of a natural steer towards 'transactions' as the next generation inherits the estates of baby boomers. Research is already showing that they are more likely to be transactional in how they use financial services, doing their own research and seeking their version of advice online. I welcome every chance I get for client interaction.
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Darryl Dhoffer
Founder at The Mortgage Geezer
I can see the benefits of a 3-month Product Transfer window in a falling rate environment, however with remortgage offers in line with six months, which is standard, this would cause advisers and their clients to potentially plump for a remortgage, particularly if we see any movements in interest rates northwards. The other issue we have regarding switch deals is the house price index may fluctuate when a new rate is announced, which could actually increase a rate higher than may already have been secured already. I appreciate it's an admin nightmare, but hence it proves our worth as advisors that we are always looking for the best deal every time for the client.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Brokers fought and campaigned for a long time to get 6-month windows on Product Transfers to align with remortgage windows, so that we could review clients early and check all options at once. This was particularly useful when rates were increasing to be able to secure rates as early as possible. Of course, now rates are regularly dropping, this creates more work and admin costs for brokers reviewing their clients' options several times up to completion, but rates will soon stabilise and this will be less dramatic in its impact. So overall six months works well, with brokers beating lenders direct on service, as they will review the rates where the banks direct will not.
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Jamie Alexander
Mortgage Director at Alexander Southwell Mortgages
In the context of a 3-month Product Transfer window, there are certainly advantages, especially in a scenario where interest rates are declining. However, it's important to consider that remortgage offers typically align with a 6-month period, which is the industry standard. This longer timeframe could sway both advisors and clients towards opting for a remortgage, particularly in a climate where interest rates are trending upwards. The 6-month window is advantageous as it enables clients to secure a rate early, effectively safeguarding against potential rate increases From a broader perspective, the 6-month period proves to be quite effective. It's worth noting that brokers often outperform direct lenders in terms of service. This is primarily because brokers actively review and compare rates, offering clients the best possible options, whereas direct lenders may not provide this level of proactive rate assessment. This distinction in service can be a decisive factor for clients.
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Gary Bush
Financial Adviser at MortgageShop.com
We've been running a 6-month preparatory window to start discussions and provide an advice process for over two years now. We won't work on a 3-month window when we know that some lenders work between 4-6 months ahead of redemption dates ending. Mortgage account holders have busy lives and need fair warning from their advisers to be able to properly engage in these important discussions. Three months just doesn't work well from experience.
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James Bull
Mortgage Broker at JB Mortgages
When interest rates are so volatile, the longer a client has to reserve a rate, the better the chances of them getting a good deal. Six months is ideal as we can reserve a rate early, which is the worst-case scenario. Then, if rates drop in the interim, clients can be switched to the lower option.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
I don't really mind the product transfer window being that wide as it actually gives us time to arrange a proper remortgage in most cases as this is often the best client outcome from a cost point of view. What I'd be more concerned about is the repricing of rates by lenders, which seems to be very quick for new business yet, product transfers always seem to happen after the first of the month meaning existing clients can't take advantage and pay over the odds. It feels a little predatory to me.