More product transfers than ever but only half on advised basis

Michael Lloyd

December 21, 2018

home sales

The residential product transfers market will break the £150bn mark by the end of 2018 but only £80bn of that will be on an advised basis, LMS has found.

Some 1,155,000 homeowners will switch products with their existing provider over the course of 2018 – representing over £150bn of mortgage debt refinanced internally. But LMS forecasts that only 610,000 of those transfers, worth £80bn, will be conducted on an advised basis.

This means that, over the course of 2018, almost half (47%) of product transfers will have taken place on an execution basis, without advice.

Nick Chadbourne, chief executive of LMS said: “Our research suggests that over the course of the year, 545,000 borrowers are going to have undertaken an execution only product transfer. If you compare that to the wider mortgage sales market, it appears to be about 510,000 too many.

“In a rising rate environment, consumers appear to have opted for the perceived quickest route. But a mass volume of products selected without advice represents a significant gap in the amount of advice borrowers are getting when they remortgage.

“It’s a common misconception that selecting a new product triggers vast legal work and expanded timeline.

“Many products are offered with Free Legals – specifically designed to ensure the appropriate legal work is undertaken to protect both the consumer and lender, using a process that is quick and efficient.

“Consumers need to be aware of this when making their decision and should take advice that ensures they have selected the best product most suitable for their needs.

“Even a 0.25% saving on a £150,000 mortgage could save borrowers a meaningful amount of money over the course of the deal. The product transfer advice gap represents a missed opportunity for borrowers.”

Product transfers became one of the most important drivers of the remortgage market in 2018. November 2017 saw the first rate rise in over 10 year, which triggered consumers to act to secure new deals as their current fixed rate products concluded.

The rates of non-advised product transfers do not reflect the available rates within the wider mortgage market.

The number of non-advised mortgage sales, which includes remortgages, has dropped significantly in the decade since the financial crash – falling from 35% of sales in Q2 2008 to just 3% in Q2 2018, suggesting another 44% of product transfers should be advised.

Chadbourne added: “Full advice is not just about the cheapest rate. It’s about the path, the aspirations, and the intentions of borrowers. Ideally, we’d like to see more borrowers consulting brokers even if, on the surface, it doesn’t seem that much has changed since they secured their last mortgage.

“While an execution-only product transfer might look like the easiest route to remortgage, it’s still worth seeking advice – it’s an opportunity for borrowers to consult a broker and search the market more fully.”

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