Continued focus on product transfers

As the impact of inflation continues to bite, clients need your expertise and advice to secure their next mortgage deal, says Alan Longhorn, Head of Sales, Distribution & Marketing at Bank of Ireland for Intermediaries.

UK Finance forecast the ongoing impact of cost of living pressures and a higher rate environment will lead to an 8% fall in the house purchase lending in 2024 to £120 billion. These factors will also affect the remortgage market which is also expected to see a reduction. With less new business borrowing, mortgage lenders can be expected to continue competing to retain customers with product transfers, particularly as these are not usually subject to affordability tests.

In 2023 the product transfer segment grew by 11% to £219 billion. This year, although UK Finance predict both the remortgage and the product transfer segments will reduce by 8%, product transfer business will remain a key focus for lenders.

With around 1.6 million fixed rate deals coming to an end in 2024, your clients are going to need your expert help to secure their next deal.

Borrowing power squeezed

The cost of living increase has affected most people’s finances in some way. With lenders adjusting their affordability calculations to account for higher inflation, and increased average product rates, mortgage eligibility continues to be impacted.

We’re likely to see the following trends:

Ongoing higher rates: Even if your client’s finances and credit record are in good shape, both reversionary and new fixed rates are likely to be higher than when they took out the mortgage, so they could face some payment shock. According to Moneyfacts, the average standard variable rate at the end of 2023 was 8.19%, and with fixed rates at around 5%, there will be value for most clients in finding a new deal through an internal product transfer or a remortgage.

Focus on affordability: Lenders have to factor in the cost of living and interest rates when assessing affordability which could affect the amount your clients are able to borrow in the current environment. Understanding a client’s eligibility for a mortgage is where brokers really add value. Options such as reviewing the mortgage term, fixed rate period and repayment methods are not always things clients have considered. They may also believe remortgaging to another lender is the only option to secure a good rate.

There are many ways to help your clients:

Look at product transfers: With remortgage eligibility having changed for many since they last took out a deal, a product transfer could be a good option for them. It means they can still benefit from locking into a competitive fixed rate and avoid reverting to their lender’s SVR. And, as internal product transfers are not usually subject to affordability tests, they are a viable option. Most lenders pay a procuration fee for this business and at Bank of Ireland for Intermediaries we recognise your work on product transfers and further advances, and have recently increased our procuration fee for this business.

Further advances: If they want a further advance to raise capital for home improvements, talk to them about considering energy efficient improvements at the same time to minimise disruption and costs, and save money on energy bills over the long term.

Make contact early: Get in touch with your clients early to see if their circumstances have changed and how it could affect their remortgage eligibility. Build in extra time to look at their options.

Make it personal: If your client is worried about the increased cost of a new mortgage rate, discuss with them the risk of doing nothing. Make it personal by showing them how their repayments will increase if they revert to their lender’s SVR compared to switching to a new fixed rate.

Whether your client wants to move to the cheapest rate, review their term or repayment method or raise capital for home improvements, refinancing will be a challenge for many this year.

They’ll be looking for you to help them secure a new mortgage deal at a competitive rate. And with purchase business expected to dip, existing clients will provide you with a good source of business and the opportunity to cement some longstanding client relationships.

Visit BOI4I.com to find out about a product transfer or further advance with Bank of Ireland for Intermediaries.

Follow us on LinkedIn

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.