MORTGAGE MARKET NEWSLETTER 16 MORTGAGE MARKET NEWSLETTER 17 Product Transfers Why transfer a product? The key positive elements to product transfers are that they enable customers to switch to another product as quickly and efficiently as possible. As opposed to remortgaging, a product transfer application will involve less paperwork and most lenders will not subject a customer to a new affordability assessment or a full valuation. Some lenders have exclusive intermediary rates for product transfers, so if a customer chooses to go through a broker not only will they benefit from their expertise but also they will benefit from a competitive product range. Another positive aspect to product transfers is that if the customers chooses to undergo a new property valuation and the valuation is higher than the previous property value, customers could slide down the LTV bandings and take out a mortgage with a lower LTV/ monthly cost. This is particularly pertinent at present as we are witnessing a consistent rise in house prices since the market has resumed. Alternatively, if a customer wishes to stick with the original house price valuation as they aren’t confident in a pro-longed rise in house prices they can do so, thus protecting themselves should house prices fall. Product transfers a safe bet? Lenders have adopted a common-sense approach during Covid-19 to ensure that product transfers are still available for customers on payment holidays or those who have been placed on furlough or used the Self Employed Income Support Scheme. Whilst the ease and efficiency of undergoing a product transfer will certainly appeal to customers, could they now also be seen as a safer option during the uncertainty that Covid-19 has brought upon us? Customers who are or have been on furlough or those who are uncertain regarding the future of their income and overall job prospects may opt to remain with their current lender and tie themselves into just as a competitive deal as a remortgage. Evidence from UK Finance and their household finance review seems to support this as in Q2 last year the average loan size for a product transfer rose by 5% to £145,000. When you compare this to only a 1% rise in the average loan size for remortgages, this could be an indication that customers who would usually shop around externally for another deal are now more inclined to pick another deal with their current lenders. Conclusion – the big unknown It is very difficult to predict not just the long- term future of the product transfer market, but the housing market as a whole. Whilst the UK battles with recession and the far reaching impacts of the Covid-19 outbreak, it can be said that since the resumption of the housing market there are reasons to be optimistic for the product transfer market. NatWest Intermediary Solutions approach to Product Transfers What are the benefits of Product Transfers with NatWest? • No additional underwriting. • Quick, straight forward processing. • Customers can benefit from additional borrowing at the point of switching (subject to Underwriters decision). • Valuation options – The customers have the choice of accepting the House Price Index (HPI) value, or if they are not happy with the stated HPI value, they can proceed on the original house valuation or request a standard valuation. (This will be completed at a cost to the customer and they will need to call 0345 302 0190 to arrange this.) • Exclusive broker rates. • Existing customers on furlough or with payment holidays will be accepted on a like for like basis. The facility is available for customers who are within their roll-off period (110 days before end date), those on a standard variable rate (SVR) and those with ‘track and switch’ functionality. The balance available to switch must also meet the product minimum of £10,000. If you require further information or wish to talk through potential business, please speak to your knowledgeable Business Development Manager. ● A healthy market Just under 1.2 million homeowners transferred their mortgage and stayed with their existing lender throughout 2019, this is 1.4 per cent more than in 2018. Of this total 662,700 transfers, worth £97.0 billion, were conducted on an advised basis which is 6.9 per cent more than in 2018. 532,400 transfers worth £70.4 billion, were on an execution-only basis which is 4.8 per cent fewer than in 2018. These figures all point to a healthy product transfer market pre-Covid-19, and whilst product transfers took a hit earlier in the year (which wasn’t limited to all lenders as NatWest reported positive growth in product transfers between April and July) just like the rest of the mortgage market, we are now witnessing a resurgence in customers choosing to stay with their current lenders.