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Product transfers are a vital tool, especially if remortgage eligibility is squeezed

09 August 2022

It’s always good practice to check what’s on offer from your client’s existing lender in addition to their remortgage options.

But, this year, a product transfer could be particularly beneficial, especially for borrowers who could struggle to refinance.

With mortgage rates rising and affordability criteria being amended to account for higher costs of living, some clients could find it hard to borrow what they need with a new lender.

The remortgage opportunity

The cost-of-living crisis is impacting many of us and the energy price cap is expected to increase yet again in October, meaning households will face further bill hikes this winter.

At the same time there's set to be a spike in mortgages coming up for renewal at the end of the year.

There’s an estimated £137bn of mortgages set to renew between August and December this year. The largest months for maturities are September (£33bn), October (£33bn) and December (£36bn)*.

This maturity spike is a great opportunity for you to help your clients secure a new deal and avoid moving onto their lender’s standard variable rate.

However, there may be some challenges to overcome.

If they’ve experienced financial problems due to the cost-of-living crisis (or the pandemic), your client’s remortgage eligibility could be impacted as a result of the rising cost of living.

This is all happening in the context of rising mortgage rates on new deals and standard variable rates, so it makes sense for borrowers to start looking for a new rate sooner rather than later. It’s possible to secure a rate up to 180 days ahead of their current deal ending.

The average two-year fixed rate was 3.74% in July, 1.40 percentage points above its level in December 2021 (2.34%), and its highest level in over nine years, said Moneyfacts.

Average SVRs have breached 5% for the first time in 13 years, so doing nothing is unlikely to make sense for most clients.

Time for a PT?

When you check out your client’s mortgage options, include product transfers with their existing lender. For starters, they could offer the best and most competitive rate available to them. But they come with a raft of other benefits too:

  • Your client should be able secure a product transfer rate early, ready to switch at the end of their current product period. This means they can lock into today’s rates and protect themselves from future rises. With some lenders they may be able to secure the rate three months before actually switching, or even earlier. Of course, they can also do this with a remortgage, but the process of getting a mortgage offer is more likely to be quicker and easier with a product transfer.
  • You already have your client’s details on file and, so does the lender, so there is less admin to do at the submission stage (although you’ll still want to make sure you’ve considered the client’s remortgage options). With some lenders, including Virgin Money, the switching process can be done quickly and easily online, often with no valuation or legals required.
  • Product transfers are particularly useful for clients with limited remortgage eligibility, as the lender already holds the risk and doesn’t need to make the same affordability checks. Perhaps they’ve seen their income drop, have experienced a credit blip or have recently become self-employed and don’t have sufficient accounts history to get a remortgage. A product transfer allows them to lock into a fixed rate if they prefer.
  • Many lenders now pay a proc fee to brokers to recognise the work you’ve already put in upfront, advising your client on all their options.

Quick and easy

Your client just wants the best mortgage product for their needs, arranged as quickly and smoothly as possible.

It always makes sense to consider product transfers alongside remortgages, and never more so than in 2022.

If their mortgage is up for renewal before the end of this year, make initial contact with your client now.

See if their needs or circumstances have changed, whether they’ll be able to access a new remortgage and how quickly they can secure a new rate with their existing lender in advance of switching.

A product transfer could well make the most sense.

You can find more information in our product transfer guide. If you’ve got any questions, get in touch with your Business Development Manager.

*Source: Virgin Money interpretation of CACI data

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