"I’m told that these borrowers don’t really exist, and “why would I arrange a second-charge for them when I could move these people onto a five-year fix”."
Some couples have an innate ability to argue and disagree about almost every single topic of conversation that could be raised. I admire their fortitude and commitment to the cause, but it’s not really for me. Now, while I wouldn’t put my sister and brother-in-law in this group, we recently had them around for Sunday lunch and everyone gathered was treated to one such disagreement the origin of which vanished to distant memory the longer they disagreed.
Let me add some meat to this particular bone. My sister and brother-in-law are looking to move home and, as I’m sure many people who work in this market are prone to be asked, they began quizzing me about their existing mortgage. You see, they have a potential buyer for their home, but are yet to find a property to their discerning taste, so they may sell and rent for a short while. Top of their agenda is how they might hold onto the ‘great tracker rate’ they currently have, how they don’t want to lose it, and how long might their existing lender allow them to port this rate, before they lose it?
Now, I’m sure this type of conversation has been had within many families for many years, (bragging rights over a great tracker rate), particularly since Bank Base Rate moved down to its current, very low level. But, this type of conversation appeared (at first) to be music to my ears, because here before me was a prime example of a couple with (and I quote) “a mortgage rate to die for” who wanted to move, would need to borrow more, but were “obsessed with keeping hold of their existing rate”.
Whenever I talk about the potential for second-charge mortgages within the market, this is an example which will often come up – the borrower(s) who have a great tracker rate, for instance, and don’t want to lose it, but still need to borrow more (albeit, not moving home). And yet often I’m told that these borrowers don’t really exist, and “why would I arrange a second-charge for them when I could move these people onto a five-year fix”, for example.
And yet this appears to miss the point completely because, for such borrowers, this is the last thing they want to do – they want to hold onto their existing rate because of the incredible value they feel they have, and in my sister and her husband’s situation, while they want to move and port the existing mortgage, they need further funds, but are not willing to countenance the loss of that existing product. They were totally dismissive of my suggestion to look at some of the great five-year fixed rates around today. So, what is an adviser to do?
In that sense, I have to side whole-heartedly with those borrowers and their understanding of what they have, what they could get elsewhere, and the negative this might be for them. We shouldn’t really be creating an environment where customers lose these great rates through a capital-raising remortgage, when it’s possible to opt for a second-charge fulfilling all their goals and ensuring they have peace of mind about what mortgage they have been fortunate to have over X number of years.
Which takes me back to my sister and her husband. After spelling out just how they may potentially keep hold of their ‘terrific mortgage’ all seemed settled... until they began discussing what rate they actually had. It was 0.5% over BBR said one; no, no, no, it’s definitely 0.75% over BBR - back and forth went this argument for what seemed like the rest of the afternoon, until an impasse was reached, when they finally agreed that neither of them really knew what their current rate was. All they knew was, “It’s a great rate, and we don’t want to lose it.” Which is perhaps another article altogether about borrower knowledge regarding existing mortgage rates, and whether they have the most appropriate one for them.
That said, peace finally did reign, and it became clear to all, that some borrowers really do want to keep their existing products – and by utilising products like seconds, an adviser can make all of this happen.
