Q2 2023 saw 84% of remortgaging deals being internal product transfers, according to data published by UK Finance this morning.
In comparison, the average for 2022 as a whole was around 77%.
In light of these findings, Newspage asked brokers why product transfers have risen so sharply.
Reaction:
Jamie Lennox, director at Dimora Mortgages:
“With the slowdown in property purchases in 2023, lenders couldn’t afford to lose their existing customers to other lenders and we therefore underwent a period where many were offering extremely competitive terms for borrowers to stay with them.
“The other factor is you have a large number of mortgage holders coming off ultra-low interest rates who stretched themselves to the max on affordability during the crazy COVID period.
“With lenders now tightening their affordability models, mortgage holders are now finding they can no longer switch to a new lender.”
Justin Moy, managing director at EHF Mortgages:
“A combination of factors has driven product transfers to record levels.
“Typically, these rates are more in line with the open market rates, if not better priced with a few lenders, and the lack of a full affordability check has appealed where finances are already tight.
“Being able to secure a new deal up to six months in advance via a product transfer has been very popular, and being able to re-book deals should rates continue to slide downward is an added bonus.”
Riz Malik, founder and director at R3 Mortgages:
“Lenders have been desperate not to haemorrhage lending through the backdoor knowing they cannot get it through the front.
“However, although product transfers have been the flavour of the year so far, we have started to see the tide turning a little in the past few weeks.”
Ashley Thomas, director at Magni Finance:
“The benefit of product transfers is that they are much quicker and easier to complete than a full remortgage with another lender.
“With a product transfer, you don’t need to be re-assessed for affordability as they do not require this or documentation.
“Also, the pricing with product transfers is very competitive, usually very similar to other lenders or in some cases a lower cost.”
Samuel Ewen, managing director at Rosehill Financial Services:
“We have certainly seen an increase in product transfers, however this has not been due to clients failing affordability and being unable to switch to a new lender.
“Instead, it has mainly been the case that product transfer rates, from what we have seen over the past few months, have been very competitive.
“This may be due to lenders wanting to retain clients while market conditions are more uncertain.”
Elliott Culley, director at Switch Mortgage Finance:
“With the shrink in the purchase market, lenders became competitive to try and retain customers and this led to a lot of mortgage holders sticking with their current lenders.
“In the buy-to-let market, affordability has become a real issue so completing a product transfer has become the only option for many landlords.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This is to be expected. Purchase business has slowed, and as can be seen by the flurry of rate reductions from lenders, they are short of their lending targets.
“Retaining existing clients on new deals is the low-hanging fruit.
“However, there is also for many clients a need to product transfer as opposed to remortgage, whether that is down to new lender affordability, potential down valuation or just to avoid the added hassle that a new application and legal process involves.
“Especially on buy-to-let, where for most landlords product transfers will be the only option due to increased stress-test criteria.”
Peter Stamford, director and lead adviser at Moor Mortgages:
“With the property market cooling this year, it pushed lenders into a retention war, offering competitive product transfer rates to keep homeowners from switching.
“These product transfers are super quick and don’t usually require full affordability checks, and as such have become increasingly popular, especially for mortgage holders whose budgets aren’t as strong as they were 2 to 5 years ago.
“Lenders, anxious not to lose business, have made these offers even more appealing by allowing advanced booking and rate re-negotiations.
“Though initially a tactic to prevent customer exodus, product transfers have evolved into a primary option for many, including landlords stymied by tightened affordability constraints in the buy-to-let market.”
Ben Tadd, director at Lucra Mortgages:
“Lenders are now focussing their efforts on pricing competitively for existing customers more and more to maintain their client banks and ensure that existing borrowers don’t leave.
“This, coupled with the fact the mortgage charter now asks mortgage lenders to try to adhere to a six month window of opening up new retention rates available to select from much earlier, means existing borrowers can lock in a new rate with their current lender much earlier.
“As the rates have increased significantly over the course of the year, this often means the retention rates secured with a client’s existing lender are much more competitive versus a new lenders rates closer to when their deal ends.”
