Across the industry, some lenders are choosing to reward advisers, financially, for, what the industry call ‘product transfers’. Product transfers are applicable when a borrower reaches the end of their initial deal period (2-year fixed, 2-year tracker, 5 year fixed etc.), and are due to revert to the lenders standard variable rate – a product transfer is exactly that, at this stage, you transfer your product over to another available option, in order to avoid the higher level SVR. Often, this is a seamless, and painless process, however, the clients may not necessarily get the best deal available to them.
A product transfer, can be good for clients, who’s situation has changed, for the worse (income, debt etc.), and their mortgage can no longer be deemed affordable, to a new lenders’ underwriting team. As a result, they can switch to a new product, with their current lender, without undergoing further underwriting, and avoid paying the often extortionate Standard Variable Rate, offered by the lenders. The unfortunate side of this, however, is often, the lenders “product transfer” range, is not as competitive as their “new customer” range, or switching lenders altogether. Birmingham Midshires for example, are one of the largest lenders in the buy-to-let market (by market share), and their product transfer options can be as much as 1.25% more expensive than their new customer offering. With the new taxation laws, BTLs will become increasingly hard to remortgage, especially if highly leveraged here in London. This is where the product transfer will become useful. Furthermore, BM solutions do not deal with clients directly, which forces clients to speak to an advisor. As a result of this, BM Solutions are often referred to as the broker’s lender – because they will thank, and reward the broker for business, even if they are simply ensuring the client stays with them as a borrower.
From an advisor’s side however, due diligence, and underwriting, must still go ahead, so clients will often be asked to provide documentation – such as bank statements and proof of income. Not every lender though will allow product transfers – and it can fall on the responsibility of the borrower, to be aware of their deal end date, and to do all the legwork involved in changing deals when appropriate. So, why aren’t lenders all allowing PTs to be processed by advisors? There are a few reasons for this, ranging from financial viability to technology/systems required. Some big players, are engaging, and paying brokers for PTs, such as Halifax, Clydesdale, Scottish Widows, Barclays, BM Solutions, Virgin Money, Metro, Kent Reliance and Bank of Ireland . This may cause some advisors, when faced with a decision on lending, to avoid lenders who do not offer a positive product transfer solution in the future.
All we need is for a few more “big player” lenders, like NatWest or Santander to start engaging in product transfers through the intermediary channel, and the rest should follow suit. Either way however, clients should be speaking to their advisors, as often, if caught early enough, a remortgage to another lender, can, in some cases save clients’ money. It is always good to have a broader view of the market when making decisions on lending. A professional broker should always advise you if staying with your current lender (even if it doesn’t pay them anything), if it is the most suitable option for you – I have always thought that “honesty is the best policy” in my advice.