Opinion: The transfer vs remortgage conundrum

Our current situation sees us all looking for some level of clarity; now more than ever, given the wholesale change to lending rules and lack of normal service standards.
With this in mind, I thought that it would be a good time to take a closer look at an area upon which I probably receive the most regular questions and queries when I am at events; mortgage product transfers / switches.

As you will be aware, the landscape for a full remortgage service with lenders has changed significantly over the past few weeks, as the lenders’ ability to service new business has decreased. Add in the associated issues that currently go hand-in-hand with a move to a new lender, such as potentially reduced support from professional service providers including surveyors, solicitors and accountants, and you can start to understand why product transfers are currently so firmly in the spotlight.
The questions and scenarios that appear to be cropping up most are around product transfer v full remortgage include whether a product transfer should recommended in the current climate as the only credible option available when, under normal circumstances, a full re-mortgage would be advised?  If so, what should a compliant advice file look like?
We are living in extraordinary times but should always remember that the MCOB rule of acting in the customer’s best interest still applies at all times, as does the requirement to provide each customer with advice and recommendations.
I’d recommend that, as always, you apply your full mortgage advice process (disclosure, ID, full fact find or appropriate update, research and suitability confirmation) when completing product transfer business.  Therefore, much of the answer to this conundrum will come from the information that you either collect or update around your client’s current needs and objectives, and their financial situation.
The ability to collect accurate, relevant and up-to-date information in order to convey the “story of advice” is a skill set that will need to be at the forefront of your mind when considering a product transfer. Encourage appropriate conversations with your clients around their income, expenditure and affordability, current savings position and future work prospects.
Really try to get to the nub of any short-term effects that a switch to a lender’s standard variable interest rate could have, and ensure that you note these conversations down in your new or updated fact find, taking time to ensure you use the client’s own words and statements where possible.
In short, your decision to recommend a product transfer over a full re-mortgage will stand or fall on the quality of the supporting information and “story of advice, needs and circumstances” that you collect and confirm.
If, after having considered the above and conducted appropriate research in relation to your client’s bespoke circumstances, you feel that the MCOB “best interest” rule is served by a product transfer, then it should be appropriate to proceed on this basis.
Lastly, please ensure that you remember to take time to transfer your various notes and reasoning into your suitability report, so that you can demonstrate a joined-up thought process, and that the “story of advice” flows from the initial collection of client information right into the actual delivery of the advice via the report – your client advice file is likely to stand or fall around the quality of this crucial task.
Extraordinary times call for extraordinary efforts but I imagine that much of what I have conveyed within this article is already normal practice for your advice process. Take time to understand your client’s needs, consider appropriate options, treat them fairly and always act in their best interests and you won’t go far wrong.
Steven Howard, head of mortgage and lending intermediaries Compliance Services, The SimplyBiz Group

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