‘All is fair in love and mortgages’?

Rory Joseph and Sebastian Murphy | JLM Mortgage Services
26th January 2021
Sebastian Murphy Rory Murphy JLM
"Advised sales in the PT sector tend to be the majority of all such transactions but increasingly the larger lenders are viewing this as a market share well worth going after, and going after aggressively."

There’s a very good reason why the famous saying is not the headline to this article, quite obviously because there is no real comparison between mortgages and ‘war’ although it’s fair to say that some lenders treat their pursuit of customers via direct channels with all the zeal, planning and hi-grand tech associated with a military operation.

Understandably, with the number of purchases we’ve seen over the last six months likely to fall back – particularly with the end of the stamp duty holiday – there has been a renewed focus on existing borrowers, the maturity of their products throughout 2021, and the line that is drawn between product transfer and remortgage business.

There is no denying that some lenders’ focus on securing their existing borrowers’ ongoing mortgage deal – at the expense of the original introducing adviser or any other adviser come to think of it – has been ratcheted up 100-fold over the course of the last few years.

It has also been exacerbated by the pandemic – look at the UK Finance figures for the first three quarters of last year and you’ll see product transfer numbers rising with each quarter, while at the same time remortgage numbers have shrunk with each three-month period.

Of all product refinances in Q3 2020, 79% were PTs which may well raise some concern amongst intermediaries, particularly in an environment where ‘seeing’ clients is more difficult, and of course where lenders’ propositions in this area have moved on exponentially.

Now we not only have a heavyweight lending machine targeting existing borrowers, sending communications both in advance, offering products on the very first day they are available to switch, and effectively enticing the client to ditch their adviser, we also have a situation where many existing borrowers might only have the will to take the line of least resistance, to log into the souped-up/bells and whistles lender apps that are increasingly available and just get the mortgage ‘out of the way’.

Of course, it’s not all doom and gloom in this – advised sales in the PT sector tend to be the majority of all such transactions but increasingly the larger lenders are viewing this as a market share well worth going after, and going after aggressively. Some, in their client communication, still not making any references to the original introducing adviser or advice in general.

This is worrying for all kinds of well-rehearsed reasons regarding client protection and the like. However, it is even more bizarre when these are lenders who will also get 75/80% of all their mortgage business via the intermediary channel and are still busting a gut to inch advisers out of their refinance business.

It has always amazed us how heads of intermediary lending at some of the UK’s biggest lenders can sit there straight-faced, suggesting that the two different parts of their business are somehow not linked in any way, shape or form, and what the direct distribution team do is not related to the intermediary team.

How, in one breath, can you argue that you’re a lender which has the intermediary at its very heart, when you know full well all the technological development and investment is happening on the direct side, when you are more than willing to undercut your pricing for direct deals, when you are quickly willing to offer mortgages to those advisory clients who have been turned down, and why you will leave no stone unturned to get those clients through your execution-only doors. To say it leaves a bad taste in the mouth would be an understatement.

Now, we’re well aware, that advisers often lose recurring business with their existing client base because they don’t communicate well throughout the term, they don’t get in contact at all when a product is about to mature, they don’t have a marketing or communication plan in place to ensure that existing clients keep coming back to them. Quite frankly, if these advisers don’t secure the repeat business then tough.

However, there are plenty of advisers who do all of the above and then some, who work with lenders who purport to have their best interests at heart and to always put the client back with the original adviser, and yet are also doing pretty much everything to undermine the existing relationship, and will quite happily offer a mortgage which simply isn’t available to the advisory sector.

That cannot be right even if it has been part of the mortgage market for as long as we can remember. All is not fair in the world of mortgages, but this should not be a war. The lenders who treat it as such should reflect on their practices, ask who they are really trying to defeat by adopting these tactics, and change their ways.

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