AMI urges FCA to address growing product transfer market
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.
The Association of Mortgage Intermediaries has raised concerns about the increase in lenders encouraging straight product transfers at the point of remortgage.
Product transfer gross lending has now reached between £80bn and £100bn - more than a third of the entire residential mortgage market - but the AMI says lenders continue to refuse to specifically disclose the scale of this lending.
It says customers face potential detriment as a straightforward product transfer does not always trigger a revaluation, affecting LTV, rate and affordability.
Similarly to the market study into annuities, which resulted in providers being forced to reveal the best open market rates, the AMI says the FCA should be encouraging consumers to shop around when faced with the choice to remortgage.
In its Quarterly Economic Bulletin, the AMI criticised the FCA for appearing "less concerned by a seeming shift in the mortgage market".
The AMI asked: "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?"
The Association continued: "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.
"It cannot be acceptable to continue to sweep this under the carpet. Consumers must undoubtedly be allowed to choose a product transfer and there is room in the market for advice and execution-only remortgages. But lenders must disclose their volumes and stop hiding behind the small print allowing them to pretend this has no impact on customers’ long-term financial well being."
Earlier today, TMA mortgage club warned that the unreported product transfer market is a "ticking time bomb" as millions of borrowers are at risk of waiving their right to full personal liability protection if they switch through a product transfer.
TMA says borrowers may lose the full Financial Ombudsman Service protection covering the provision of advice. With each unadvised product transfer, lenders are therefore increasing the underlying risk in the mortgage market as they are providing potentially unsuitable products to mortgage holders.