2018 has been dubbed ‘the year of the product transfer’ by participants in ‘The Big Mortgage Panel’ but advisers have been warned that margins could be squeezed if intermediaries don’t maintain their share of this business and if lenders continue to pay lower procuration fees on these cases.
Speaking at yesterday’s FSE Midlands, tDavid Copland of LSL Property Services said that lenders should stop “bleating about margins” when it came to product transfers.
“2018 for the intermediary has been the year of the product transfer,” he said. “But the proc fees are too low from some lenders, some of whom have come kicking and screaming into this market. There’s no reason why two-year deals can’t pay 35 basis points and five-year deals 50 basis points, which also leads on to why there can’t be trail commission paid for such products. A lot of work with product transfers has been done before they reach the lender, plus you’re carrying the risk of the advice as well.”
Martin Reynolds of Simplybiz agreed that intermediary margins would be squeezed if more and more product transfer business was written. “The procuration fee is a lot less,” he said. “This could be a fundamental shift for advisers and they need to look at the business and make sure they maintain their income. Clearly fees are not at the right level and need to be higher. To be fair, a few lenders have upped their fees this year and that comes from recognition of the work that needs to be done on such cases.”
Dev Malle of MyHomeMove also had a word of warning for advisers on product transfers, particularly in terms of treating them as a ‘soft option’ “Brokers shouldn’t see this as a soft option,” he said, “especially if consumers also begin to see this as a soft option. In two years’ time, consumers might look at their options and think that, because their adviser said they should stay with their existing lender last time, they should just go direct and do it themselves.”
The panel also reviewed this week’s Budget announcement and questioned whether it would need to be repeated within a short period of time. “I think this was a Budget announcement which helped us to tread water until next year,” said Simplybiz’s Reynolds. “We’ll probably have an Emergency Budget next year as a result of Brexit.”
Jonathan Stinton of Coventry Building Society agreed 2019 would clearly be influenced by any deal (or otherwise) agreed prior to the end of March. “Undoubtedly, there are a lot of fears around Brexit,” he said. “ We’ve already seen an impact in terms of a reduction in purchase activity although I expect remortgaging and product transfers to play a bigger part in the market.”
