RBS, Lloyds, Barclays and Santander have revealed they have no plans to follow Nationwide's lead and ditch free legals for remortgages despite brokers claiming problems with this option are widespread.
Last week Nationwide decided to withdraw the free legals option for customers remortgaging with the building society.
From Thursday (13 July) the nation’s biggest building society ditched free legals after the service came under fire from a broker back in May who claimed their client may require compensation after their fees-free remortgage through Nationwide was delayed by more than a month, leaving them paying the standard variable rate for longer than expected.
At the same time as ditching free legals the lender has increased the cashback alternative from £250 to £500.
FTAdviser contacted Nationwide's rivals RBS, Lloyds, Barclays and Santander to see if they would follow the building society's lead.
However all four insisted brokers and their clients appreciated the option of free legals and they had no plans to follow Nationwide.
But several brokers told us problems relating to free legal opinions were “commonplace” and far from just an issue with Nationwide.
One broker revealing around a third of mortgage cases are adversely affected by conveyancers struggling with demand for free legals.
Clients missing out on a forward purchase as they are not in a position to close the deal was also highlighted as an issue.
Robert Lewis, operations director at Heritage Financial Solutions, said: “Problems associated with free legals are far from rare and they are not limited to Nationwide. It is a common trend and one I don’t see getting any better.
“I reckon around 30 per cent of our mortgage dealings encounter problems directly related to free legal opinions. I’d opt for cashback every time because if it’s ‘free’ for customers, there will be cuts, most probably in expertise to cover outlays.”
Adrian Anderson, director of Anderson Harris, said: “Generally speaking most brokers will have experienced similar issues. I know we have, so removing free legals is a positive step as by giving the customer the option of choosing their own conveyancer they are in control, to an extent.
"Certainly they are not reliant on whichever firm their lender uses, who could be good or bad, or just very busy and behind target.
“When there are delays it doesn’t reflect well on the broker, even if we’ve done an excellent job in all other areas. It reflects poorly on the lender as well."
Lenders have made use of free legals to entice customers to consider their services over those of their rivals.
However, with interest rates so low there is a glut of good deals on the market, which has left some conveyancers struggling.
Aaron Strutt, from mortgage broker Trinity Financial, said: “The problem is the big lenders will use certain conveyancers and then jump to another one if they become dissatisfied.
"Then this new conveyancer attracts business from other lenders and creaks under the huge weight of business, and so it goes on.”
When asked would RBS ditch free legals, Andrew Neilson, media relations manager of RBS, said: "We always listen to customer feedback and will do everything we can to help."
Alan White, media relations manager of Barclays, said the lender offers free standard legal work for remortgage applications for residential and buy-to-let mortgages with a number of suppliers on the remortgage panel - Enact, QCAS (also known as Shulmans), BreezePlus and Optima Legal.
Mr White said: "We have found that there’s strong demand for free legals and this outweighs the demand for cashback."
Alison Wearden, assistant communications business partner at Halifax & Connect, said the lender regularly reviews and updates remortgage products including promotional campaigns in line with the market to ensure they continue to add value and meet the needs of our brokers, while providing greater customer choice.
She said: "This enables customers to benefit from offers including both free legals and cashback. Our panel of legal providers ensures we can maintain high service standards for customers."
Cecilia Cran, media relations manager of Santander, said brokers have told the lender that they always like to be able to give their customers choice.
She said: "With this in mind, we offer the choice of either free legals or £250 cashback on customers remortgaging. This enables the broker to discuss what will be most helpful for each individual customer and their personal circumstances.
“We have had positive feedback from customers and brokers and continue to work closely with legal firms to monitor our processes, ensuring that customer service is maintained and improved if and where necessary.
“Offering free legals or £250 cashback is something that benefits our customers and goes someway in helping what can be for many people the most significant financial commitment they will ever make in their lifetime and we have no current plans in changing this.”
dan.moore@ft.com
