"Lenders need to value the work advisers carry out, the business they provide, the risk they take, whether it is a PT recommendation or not."
So, according to the main trade body forecasters and those who track lending figures, product transfer (PT) business saw a healthy drop in 2024 compared to the year previously, down approximately £20bn over that time period.
It’s interesting to delve a little deeper into the reasons why the trade bodies might believe there was a drop in PT business last year, and what else might have contributed to that.
Fundamentally, and of course there is a lot of truth in this, remortgaging became easier and more attractive for a larger number of existing borrowers in 2024 than had been the case the year previously.
Sharp increases in rates back then hoisted the affordability barrier even higher which meant many existing borrowers were left with little choice but to stick with their existing lender on a PT, plus there wasn’t a great deal of value to be had in seeking a remortgage to a new lender anyway.
Move forward and 2024 was clearly a different beast with rates dipping, affordability easing, and yes, competition for that business growing.
One point that might be missed when reviewing the drop in PT business – and why the forecasts for PT to rise again might not be as set in stone as some would think – is the perennial strategy for some of lender greed, which undoubtedly contributed to PT activity falling.
Now, don’t get me wrong, certain lenders operate quite brilliant PT strategies and it results in them retaining the huge majority of their existing customer business. They offer their borrowers startlingly competitive PT rates which effectively make it almost impossible to advise them to go elsewhere.
However, and this is a very important point that is often overlooked, what about those existing borrowers who don’t just want a pound-for-pound refinance? What about those who want to borrow more money?
Let’s be honest, there are a large number of lenders for whom this is an incredibly difficult PT process to work through. They make it difficult. And their systems are antiquated. And, of course, related to this is the fact some still won’t allow advisers to write further advances in the first instance, which again feels like a hugely retrograde strategy to be pursuing.
Making advisers and the clients jump through these types of hoops, or not even allowing them to use the hoop in the first place, in order to get cases through means that when you add in the fact they may not be the most competitive anyway, then it should not be surprising when the adviser recommends a move away from them.
And because of these system issues, you have a situation where some lenders require a huge amount of time to process PTs, even when it should be a digital transaction done with a click of a button. Some need the best part of four weeks to process a PT, which quite frankly, beggars belief.
Secondly, you have what I deem the arrogance of certain lenders in the PT space. A working assumption that, for example, because they lent to that borrower five years ago at five times income that they couldn’t possibly have options to move at the end of their deal.
Fundamentally misunderstanding that five years on, armed with perhaps a better salary/more income, having paid off a chunk of the mortgage and with a property worth more, having a lower LTV, that they are in a much better position, they do have options and they can move to a different lender.
And when presented with a frankly uncompetitive PT option then it makes absolute sense to recommend that client move to a different lender, even if it is going to cost a fee, be slightly more work-intensive to move them across, although of course lenders are aware of this and will endeavour to make the remortgage process as smooth as possible.
In that sense, forward-thinking lenders should recognise the opportunity that exists for them in terms of procuring good quality borrowers from their competitors, who might be labouring under the misapprehension that their borrowers have nowhere else to go.
So, while it might be understandable to view 2024 as a potential PT ‘blip’, to think that this business will bounce back to the levels we saw in 2023 (£240bn) and then on again in 2026 (£260bn) there should also be a strong sense that not all lenders are equal in how they approach PTs. Far from it.
That being the case, some will continue to be much better than others at holding onto their existing customers, and some will continue to lose those that they might previously have expected to hold onto.
We also cannot discount the perennial PT elephant in the room of procuration fee parity, or rather lack of it. My views are widely known on this, and I think are shared by pretty much all advisers. When you are conducting the same amount of work, when you are taking the responsibility and risk of that advice and recommendation in perpetuity, who can be comfortable being paid less money, even if the lender has a slick-ish system to achieve this.
Every adviser who comes into contact with any lender representative who doesn’t pay parity for PTs should spend some time explaining this to them. Especially if that lender rep is high up in the business and has the potential power to change their structure positively.
I would be mightily surprised if one of the bigger lenders operating in the UK didn’t do exactly that this year. Perhaps not parity, but much closer to it, sending the right message and hopefully helping move others in this direction.
Lenders need to value the work advisers carry out, the business they provide, the risk they take, whether it is a PT recommendation or not. If it is then it has still required a full review to get to that point so, quite frankly, what is the difference here?
It’s time for lenders who don’t acknowledge this to change their ways, otherwise my view is we’ll continue to see a shift to switching lenders, particularly if certain players continue to misunderstand their customers’ needs, which undoubtedly includes having professional advice. They have been warned.
