Dark clouds on the horizon
Steve Harness is commercial director at The Loans Engine
In uncertain times, the best action may be to sit tight. And I suspect this will be the inclination of many homeowners right now. But perversely, inaction could generate opportunity.
Brokers have been up in arms for years about the lack of commission on product transfers. And just when commission terms start to become more attractive, I hear from brokers that some lenders are approaching their clients directly some six months ahead of fixed rate maturities. Waiving ERCs and switching to lower rates early is going to be incredibly appealing to customers, but as we know leaves the broker high and dry.
I therefore see dark clouds on the horizon as this battle unfolds. But the creative intermediary will always find a silver lining.
It doesn’t matter where you are geographically or where your clients are in the social spectrum, they all have one thing in common – show them how to save money and they’ll be your client for life. That’s the appeal of the product transfer mail shots. The banks know this and have huge marketing machines to shake the tree.
So how do you trump the big banks? You could try to change their strategy – good luck with that one – or you could simply focus your energy on your clients and show them it’s you who cares most about their finances.
If the product transfer delivers a great outcome for the client, don’t fight it – just think beyond it, and ask your client this: ‘How much are you going to save each month, but more importantly, how much would you like to save each month?’
It’s certainly not too late for you to go through a full financial review, even if the client has already put the product transfer form into the postbox.
It is inevitable that they will have other loans and credit, or aspirations to improve their home – if only they could afford it. Well the royal flush would be monthly savings through a product transfer, combined with a well thought through debt consolidation and financial plan, utilising those monthly savings to make their grand designs become a reality.
And it couldn’t be easier. Second charges have come a long way since March this year. They can take less than a week to arrange, rates start at 3.88%, it’s unlikely that a valuation will be required and set-up fees are low. For instance, we charge only £295 for our second charge service. And you’ll earn just as much in commission on a second charge as you would on a remortgage or product transfer.
You can either refer the client for second charge advice or deliver the advice yourself. The outcome is the same – a happy client and commission to you.
So, although it may not seem it, that product transfer mailing could be the best thing that’s happened to you. Why? Well the client is now locked into a new long-term deal with the bank, meaning they clearly want to save money and you can bet your boots they won’t be thinking second charge. But, as part of your financial review and holistic advice offering, you will.
One final thought; our average loan size is £60,000. You wouldn’t really leave this additional borrowing unprotected – would you?