Within lender product transfers are popular - but will it save you money?
Wednesday 3 July, 2024
Thomas Oliver’s North London mortgage broker, Katherine Mumford, reviews product transfers. Agreeing a product transfer with an existing lender is easy but is it the best mortgage decision?
Product transfers are being utilised much more than in previous years, this is for a variety of different reasons.
What is a product transfer?
A product transfer is when a client moves their current mortgage product onto a new mortgage deal with the same lender. This is usually done just prior to the current mortgage deal moving to the lenders variable rate in order to prevent the client’s monthly mortgage payment increasing.
Why are product transfers beneficial?
A product transfer can be very beneficial to a client for a number of reasons:
- A product transfer can be a very quick process, so if the current mortgage rate is due to expire within the month, everything could be processed so that the mortgage moves on to the new deal once the rate expires. Whereas, if you move to a new lender, it takes longer to set up as you need to use solicitors and there are additional checks that are carried out when you apply for a mortgage.
- For a product transfer there is no need for a solicitor to be involved in the process and using a solicitor can be both time consuming and expensive.
- The mortgage case is not re-assessed by the lender to determine if there has been a change in the client’s circumstances. For example, if the client’s income has reduced since they took out the original mortgage it would not cause any issue if you move onto a new mortgage deal, as long as you have been maintaining the mortgage payments.
When is a product transfer not appropriate?
However, a product transfer isn’t always the most appropriate choice for a client. If mortgage lenders begin to dual price on these products and clients proceed down an execution only method, it could have a detrimental effect on the client.
Dual pricing on a mortgage product refers to the practice where a lender offers different interest rates and terms for the same mortgage product based on certain criteria or channels through which the product is obtained.
This can mean offering one rate to new customers and a different rate to existing customers or having different rates for mortgages obtained directly from the lender versus through a mortgage broker.
A mortgage broker could save you money when you transfer to a new mortgage product
A mortgage broker can offer mortgage advice on almost all types of mortgage products, so you find the most fitting mortgage for your financial circumstances. It is easy for clients to transfer to a new mortgage product with the same lender, but the client may not know the positive and negatives of all the various mortgage deals available.
Katherine Mumford, Mortgage Broker, Tottenham, North London said:
‘If a client is being offered a deal from their mortgage lender which a mortgage broker cannot match, they may proceed without speaking to their mortgage broker. For instance, the client may have come to the end of a 5-year fixed rate mortgage deal and believe the best mortgage option is to take the same product again.
However, they may not be aware of how the early repayment charges work and, if they are planning to move to a new house in a couple of years the product may not be suitable. If they discussed their plans with a mortgage advisor, the advisor would review all their individual financial circumstances before giving mortgage advice then advise them on the type of mortgage deal that would be the right product for them.
Also, it may be that the mortgage lender is no longer the most appropriate lender for the client. An example of this would be, if the client wanted to make overpayments on the mortgage and their current mortgage lender only allowed them to pay down up to 10%. A mortgage broker would know of other mortgage lenders that allow larger overpayment each year. Alternatively, they could discuss an offset mortgage with the client which would allow them easy access to the money that they are using to overpay.’
Product transfers in summary…
In conclusion, although product transfers are a good option for some clients, they aren’t always the best mortgage solution for all clients. If mortgage lenders start dual pricing, it could lead clients to potentially make detrimental decisions.
At Thomas Oliver, our mortgage broking team always discuss our clients’ current position and their financial goals before offering mortgage advice. It may be that, after providing mortgage advice, we advise the client to stay with their current mortgage lender, but if you don’t have the conversation, you could put yourself into a position which may negatively impact you at a later date.
For a fee free initial mortgage consultation please contact one of our Thomas Oliver mortgage brokers on 01707 872000. Our mortgage brokers offer mortgage advice to clients in North London and Hertfordshire.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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