Now that we have more clarity around the amount of product transfer (PT) business being conducted in the UK – albeit with a significant over-estimate by one top six lender in the first iteration of those figures – it’s now possible for advisers to use that greater understanding to develop their overall advice proposition.
Even within a very short space of time we’ve started to see advisers ‘go after’ PT much more aggressively, no doubt fuelled by the large amount of lending involved and the fact that it is no longer seen as the lenders’ God-given right to hoover up this business.
Indeed, the data released by UK Finance showed that intermediaries were responsible for over half of all PT sales, which perhaps gives an idea of just how ingrained the advice process is within the mortgage market.
We are asking for a lot but it would be a ‘nice to have’ to develop a system where every borrower took their PT offer to their adviser before ticking any boxes.
For what it’s worth, product transfers made up 25% of our overall remortgage submissions in 2018, and given what is happening in vanilla/mainstream, one might well argue that the level of product transfer business could continue to take a bigger share of that space.
There does however remain a rather large fly in the ointment, and that is of course procuration fee payment and the level it is pitched at. As a network we now have 30 lenders on panel paying procuration fees on PT business, which is very welcome, and should perhaps be a wake-up call to those that still do not.
Given that proc fees are less for PT business, when compared to remortgage, and the argument is that an advisers’ process to recommendation is exactly the same regardless of which product (transfer or otherwise) is chosen, I have some sympathy with the view that such payments should be upped.
Do I think this is likely to happen anytime soon? I wish I could say yes but I can’t, especially given the highly competitive nature of the market at present, and the impact this is having in terms of squeezed margins.
We have already had lenders pulling out of the market because they have been unable to compete in their chosen spaces, and – given the outlook for 2019 – that looks unlikely to change.
You might be surprised to learn that we now have more ‘active’ lenders in the UK than we did before the Credit Crunch. You probably don’t need to be a genius to work out how much business the big six take, how much the top 20 take, and therefore we have over one hundred lenders fighting for their share of what is perhaps 10% of total gross lending.
Given that, it’s perhaps unsurprising that some lenders don’t pay PT proc fees and those that do, will be unlikely to want to raise them. That said, this is still a significant amount of lending worth pursuing and, given the pre-eminence of the intermediary, those who can ensure their existing and new clients come to them for advice, are likely to continue to up their share.
Richard Adams is Managing Director of Stonebridge Group