July 29, 2021

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Attractive mortgage rates make it impossible to advise a lender to switch – Marketwatch

Delays in the mortgage application process and additional checks to ensure that borrowers are still financially healthy have made obtaining real estate financing a tedious and daunting task for many.
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For some, avoiding heavy accessibility checks and securing a favorable rate with a product transfer may seem like the best option.

So this week Mortgage solutions asks: Do you suspect you will be doing more product transfers this year?

Lilla Dilliway, Director of BlueWing Financials

While we have closely monitored customer circumstances in all cases, we have actually made more product transfers than last year due to the impact of Covid on a customer’s income situation.

This is especially true for self-employed who have received a SEISS (Self Employed Income Support Scheme) grant, which some lenders do not accept or review on a case-by-case basis, making switching lenders quite difficult at the moment.

Working clients are usually not bothered by this until they are no longer on vacation.

Meanwhile, contractors have been impressed by the IR35 changes introduced in April and have seen some umbrella companies avoid taxes by changing their employee structure. This has made it difficult for some contractors to find a new contract, especially during the turmoil of the pandemic.

Overall yes, we are seeing an increase in product transfer requests compared to previous years.

James McGregor, Director of Mesa Financial

This is certainly an interesting situation and as consultants our role has certainly changed due to the pandemic.

Lenders have significantly changed their processes, causing delays. Plus, they’re getting smarter with their pricing for existing customers.

They found that it’s cheaper for them to keep existing customers than to spend money on buying new ones, which means they can save a few points on mortgage margins. If you then give a purely interest advice, it becomes impossible to advise your client to switch to a new lender and this leads to the advice of a rate change.

Lenders also like to shelter people for longer because they guarantee their debt books, but the general public should be aware of the high prepayment fees that come with these attractive rates.

Lenders need to make a profit somewhere and set customers on long-term interest rates, so charging huge exit fees when individual circumstances change seems to be a strategy to take right now.

I think they are protecting themselves from the fact that a lot of people will have to pay upfront repayments over the next five years. People should remember that banks aim to make the maximum profit they currently don’t find in their lending margins.

People’s life is constantly changing and evolving. This means that the mortgage price is quite low on the priority list for many.

It is crucial for our consultants to stay close to our clients and ensure correct advice, reducing the risk of problems.

John Phillips, Director of National Operations for Just Mortgages and Spicerhaart

With the huge amount of changes this year, there will likely be many more product transfers in 2021 as it may be more difficult for many people to move to another lender.

A lot has changed in the job market in recent months; clients are now quitting their jobs, taking leave, some are self-employed. All of these changes could make it more difficult for people to switch to a new lender and should involve more product transfers.

On the upside, product ranges have returned to near-pre-pandemic levels, so the choice is there. To make the right choice, regardless of whether a client has a remortgage or a product transfer, it is essential to conduct a thorough evaluation.

One major difference in how Just Mortgages approaches product transfers is that our brokers take a holistic view of the client, just as we would a new client. We will conduct a full investigation, from top to bottom, to understand what has changed.

Whether it’s the salary or the client’s family circumstances have changed, our brokers do a full review with the client to make sure he’s switched to the right product and has the right protection.

Once the review is complete, it becomes clear whether transferring a product is the right move for the client and our brokers can ensure that he receives the best possible advice.

With fierce competition among lenders, rates are currently extremely low and most constant pay customers are better off switching products rather than switching to the lender’s standard variable rate.


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