RemortgageNov 30 2016

Ami calls for product transfer shake up

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Ami calls for product transfer shake up

The Association of Mortgage Intermediaries has called for more transparency around product transfers lending.

In its quarterly economic bulletin, the AMI said the Financial Conduct Authority has been eager to encourage shopping around in general insurance and annuities.

But it said it appeared to have taken the opposite view in mortgages and called on lenders to disclose product transfer lending volumes.

Product transfers can occur at the stage of remortgaging when a borrower switches products. 

It said: “If shopping around is deemed good for the customer when purchasing a one year contents insurance policy, how can it be justified not to shop around when locking into a 25-year term mortgage?

“It is right that customers should have choice, but it is definitely not right that both regulators and the industry should be unable to see how many customers are encouraged to opt for a product transfer to a rate or terms that might not have been recommended to them by an independent adviser.

“The ongoing refusal of lenders to disclose the volume of lending done on a product transfer basis is opaque at best and highly questionable at worst.”

According to the AMI’s estimates, product transfer gross lending have reached between £80bn and £100bn a year.

David Copland, director of TMA mortgage club, said: "The risks of this continuing unreported are extremely concerning. Although we know that this market is increasing, we don’t know by how much and how fast it is growing.

"However, it is clear millions of people are at real risk of switching to a mortgage which isn’t right for them and the financial implications of this could be irreversible for the individual and their family.

"If this market is not made more transparent, the underlying strength of the UK mortgage market could be in for a major shock."

The bulletin also said Britain is facing a period of “economic pain” with inflation increasing but pay remaining flat.

It said: “Mortgage rates may start to rise irrespective of ongoing loose monetary policy as global political and economic uncertainty puts pressure on long-term interest rates.

“Activity in the mortgage market has been strong and despite an unexpectedly lumpy year for buy-to-let, there remains significant appetite for advice in this sector according to AMI members.”

The FCA and the Council of Mortgage Lenders have been asked to comment.