30 January 2024

PT grows in importance in a fluctuating rate environment

By Steve Cox, Chief Commercial Officer, Fleet Mortgages

Look at the wider mortgage market in 2023, and you will have a clear view on just how important (and large) the product transfer (PT) sector is, and how - particularly in a higher rate environment - the need and demand for PTs grew considerably.

We don’t have specific PT figures for the buy-to-let sector, but overall PTs accounted for £219bn of lending last year for the UK mortgage market – according to UK Finance – and while this is forecast to drop over the next two years, the same trade body suggests it will still reach £202 bn and £195bn, respectively.

In other words, for many borrowers – and many advisers – PTs have been a go-to product choice, not least because of the impact of higher rates on affordability, and the fact so many existing borrowers have been coming off much lower rates than have been achievable over the last 12 months in particular.

This was quite apparent within the buy-to-let sector, as existing landlord borrowers came up against the very same issues. With their last mortgage having been completed two/three/five-years ago, in what was a time of historically low rates, the difference to what greeted them in 2023 was stark.

It’s why we saw a great deal of growth in lower rate/higher fee products in order to help landlord borrowers meet affordability criteria, and to secure the level of loans they required.

And, while rates have clearly come down off those highs in recent months, there are no guarantees they will continue to drop further, and from that perspective, we are still likely to see landlord borrowers who mortgaged their properties two/three/five years’ ago, still needing the option of a PT from their existing lenders.

It was for this reason, and the need to provide intermediary partners and qualifying borrowers with the peace of mind that of having options from Fleet, that we launched our own PT range of products last year, with rates mirroring those which are currently available to new borrowers, but also benefiting from a 50 basis points reduction on the equivalent fee.

We’re aware PT business can sometimes be a ‘difficult area’ for advisers in terms of proc fee level, etc but we believe it’s an important option to be able to provide to qualifying borrowers, particularly as mentioned, when landlords find themselves coming to the end of deals in what might be a much more challenging interest rate environment.

To that end, we think it also provides further armoury for advisers to use going forward when recommending Fleet from the outset, because they know there will – at the very least – be PT options to offer qualifying clients from us at the end of their deal. That seems to be especially important and we’re pleased to be able to offer this now.

We are just at the start of 2024, and it’s positive to see rates being cut by buy-to-let lenders – including ourselves – and as a result, the lending industry as a whole should be providing end-of-deal landlords with far more remortgage opportunities, simply because it’s likely that affordability will be more achievable at lower rate levels and therefore the opportunity to move lender should be more available.

However, no-one can predict the future. As I write, swap rates have inched up over the last week or so, which might mean we don’t see continuous cutting of rates. Plus, who knows what inflation will do next? Calls for continued rate cuts will fall away if inflation rises again.

It’s in this unknowable situation where landlord borrowers want to at least have the peace of mind they can access PT deals from their existing lenders, and it also ensures advisers have a starting point to work from when reviewing the situation for the landlord borrower, building this into a full advice process and recommendation.

PT business will fluctuate, but having the option available seems like a good idea to us. We believe it’s a real positive that we’re now able to offer qualifying borrowers this avenue, should they need it.

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