The ability for consumers to self-service their mortgage after taking initial advice is “baffling” and “flies in the face of regulatory rules”, according to Hudson Rose managing director, Graham Taylor.
Following a reported increase in people undertaking products transfers directly, often with just a few clicks of an app, brokers have given their views on what the potential pitfalls of products transfers are.
Taylor argued that considerations such as future home moves, job changes, inheritance and expanding families are all “crucial” and must be taken into account when deciding on the correct product and structure for the mortgage.
“The product transfer system allows consumers to sidestep advice easily and can lead to decisions that come back to bite them in future in the form of early repayment charges,” he added.
Brokers are always looking out for their clients, whereas lenders are always looking out for themselves The Mortgage Expert mortgage expert, Darryl DhofferBarnsdale Financial Management financial adviser, Scott Taylor-Barr, said the most common mistake for people looking at mortgages and product transfers is that they “simply look at the lowest rate on offer”.
This does not take into account how long the deal is for or the fees to set it up.
Charwin Private Clients director, Ranald Mitchell, warned that “financial advice goes way beyond getting a rate”.
He explained that strategy, future planning and identification of opportunities are just as important as rates and these only come through conversations with a broker.
“Why deny yourself the overall advice opportunity, even if this results in a product transfer with your existing lender? It can only lead to better customer outcomes,” he commented.
MortgageShop.com financial adviser, Gary Bush, argued that: “The general public seems to have no idea that their existing lender has no obligation to worry about if they are making the right decision when changing rates with them.”
This sentiment was shared by The Mortgage Expert mortgage expert, Darryl Dhoffer, who pointed out that the lender will not notify the borrower if the rate reduces before the new deal starts, whereas a broker will, and change it to the lower rate.
“Brokers are always looking out for their clients, whereas lenders are always looking out for themselves,” he added.
Recent economic circumstances may have exacerbated this issue according to Dimora Mortgages director, Jamie Lennox, who said that mortgage holders are more likely to make rash decisions due to "so much despair" in the mortgage market over the past nine months.
Lennox explained that their decision making may be motivated by fear of losing a rate but that they might not fully understanding the extent of that decision.
tom.dunstan@ft.com
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