Like hundreds of thousands of borrowers every single month, I am not a million miles away from the end of the special rate on my mortgage.
Let’s be honest, the product end-date timing could be better, but there’s little you can do about that, and hopefully the trajectory of rates falling from recent highs will continue over the next few months, given that I am approximately six months away from my current deal’s cessation.
Given that timescale, it was no surprise to see a letter drop through my door from my existing lender outlining a range of product transfer (PT) deals available to me six months out from the deal end.
Advisers should be more aware than ever that lenders are promoting PT deals to existing customers – your clients – earlier and earlier. Where once the norm was perhaps two/three months, that has been extended to four to six months for most as lenders seek to maximise retention.
Given the recent turmoil in the markets and the impact on rates, you can imagine lenders seeing this as particularly fertile ground, especially for those borrowers who might have read the recent press and been worried about their ability to secure a new deal from their existing lender or elsewhere.
Some advisers may be nonchalant about this but in my opinion, it needs renewed focus. For all the talk from the lending community – and of course there is some very good practice in this area – the letter I received didn’t overtly suggest I should go back to my original mortgage adviser with these PT offers in order to receive advice, to review my changed circumstances and to see if these were the most suitable mortgage products for my current circumstances
Far from it. Indeed, for a lender that originates a significant amount of business via the intermediary sector, you might have thought, ‘Take this to your adviser’ would have been one of the primary options in the letter. It obviously wasn’t. And while I wouldn’t say this suggestion was completely buried, it was not far from it.
We know the PT market in the UK is significant in size – in the £180-£200bn pa range – and while the advisory community has been taking a growing share of this in recent years, it still accounts for a significant amount of lending, picked up direct by lenders, meaning millions of pounds worth of procuration fees – albeit with many paying less than a remortgage – is not making its way into the hands of advisory firms who first introduced the borrower to the lender.
Of course, the preference here would be for advisers to proactively make contact with the customer, preferably prior to the existing lender, and let them know of the importance of advice, the protections it extends, and note the PTs on offer may not be the best deal for client circumstances right now. Especially in a market in which product rates and criteria are shifting so quickly.
For the most part, that message may be getting through. The Q2 Household Finance Review from UK Finance this year suggests product transfer activity was actually falling month-on-month in the middle of the year, putting it down to the fact more borrowers look at the entire market via an adviser and they are therefore more likely to remortgage away from their existing lender.
However, as we know, the market has shifted again since then. The figures for the past few months may well look different, with more borrowers perhaps panicked into taking the lender’s immediate PT offer, concerned the market may be closed to them and they had to think twice about ignoring the lender’s marketing.
As we know, bypassing advice has the potential to go horribly wrong for the borrower, and again it reiterates the importance of the adviser communicating regularly with clients throughout the term of the mortgage, and then increasing those comms, the closer they edge towards the product end date.
Intermediaries should not expect to receive any special treatment from the lending community on this.
For every lender that provides details of the original broker to the client on the notification letter, who also notifies the broker the deal is coming to an end, and who pays the broker the full procuration fee for the PT, there will be those less than willing to draw borrowers’ attention to the adviser and the continued importance of advice.
With this in mind, Revolution, our wholly-owned tech platform for brokers, enables our ARs to create a scheme-end report to run up to six months in advance, so they can easily find out which of their existing clients to contact to discuss their upcoming needs.
Firms continuously tell us how they would have missed a number of remortgage opportunities each year, had they not made use of that tool.
As we head into an unpredictable few months, it’s vital advisers get in first and make the case for why their clients should continue to get impartial advice. Without that, there is a danger that everyone – except the lender – misses out.
Rob Clifford is chief executive of Stonebridge
