"The continued use of ‘fees-free legal’ services to borrowers is, quite frankly, in so many cases nothing short of a disgrace."
In many ways 2019 has started off where 2018 ended. Despite the political machinations, and it’s clear and obvious impact on purchase activity, it is the UK’s remortgage market which continues to deliver the bulk of business.
For what it’s worth, and we hope this is the same for advisers across the country, our start to the year can best be described as ridiculously busy with remortgage enquiries at something akin to an all-time high. We would suggest that unless you have a very strong remortgage proposition at present, you are likely to be whistling in the wind when it comes to securing business for the foreseeable future.
Within that remortgage space however, all is not a bed of roses, and in particular the continued use of ‘fees-free legal’ services to borrowers is, quite frankly, in so many cases nothing short of a disgrace.
You might recall that in the summer of 2017 there was a huge furore around the service levels of some ‘fees-free legal’ suppliers. Huge numbers of cases were stuck in a terrible limbo and many of the lenders concerned acted in the face of significant client disgruntlement. Nationwide for instance stopped offering this ‘service’ and chose to offer cashback instead.
Slowly but surely however the ‘fees-free legal’ offering regained its prominence – indeed it’s never really gone away - but, in our opinion, the problems have remained and even got worse. On many occasions we can best describe the service as appalling, with (somewhat ironically) the conveyancers either taking months and months to secure a completion leaving borrowers paying more on an SVR, or completing too quickly meaning borrowers end up paying an ERC.
This is not a big surprise of course when you learn that the firms involved are effectively being paid peanuts for this work, and are making tiny margins in order to maintain these lender relationships. However, what adds further insult to injury, is that in recent months we’ve seen conveyancers attempting to charge our clients fees for services they do not need, such as a copy of the title registration. When challenged on this, they take them off the completion statement but how many borrowers are simply unaware this is the case?
The somewhat galling thing about this whole ‘fees-free offering’ is that a suitable alternative, in the form of cashback, does actually exist although in many cases this is not enough to cover the costs of a client’s legals. Lenders however who don’t offer cashback really need to consider what is in the best interests of these borrowers.
Even if the cashback is in the region of £250, platforms like The Moving Hub (which we use) are able to source conveyancers who, lest we forget, will work on behalf of the client, rather than, as with ‘fees-free legal’ firms, who only work on behalf of the lender. Plus, they can also pick up a protection policy which means the client gets their fees back should they, for example, get gazumped or the vendor pulls out, etc.
For advisers too, recommending your client take the cashback rather than the lenders’ ‘fees-free’ offering brings with it so many advantages. What is your leverage with a ‘fees-free legal’ firm? It’s pretty much non-existent. Talk to such a firm about escalating a deal, even chivvying them along and you’re likely to get no response at all. After all, they are working in the lenders’ best interest not your clients’.
Plus, where does this leave you with a client should the ‘fees-free’ firm not deliver? “Why did you let me go with them?” is likely to be the question asked of you. Even if, at a push, time is no object in terms of completion, would you really wish to put you or your client into a system which fails so often?
The word ‘free’ is attractive but if your client is insistent on moving down this route make sure you present the case against and tell them it is not your responsibility if this mortgage doesn’t complete within their required timescale.
In our view, all lenders should – at the very least – be offering their borrowers a choice because, given this year is likely to be even more remortgage-heavy, a growing number of cases could put even more pressure on these ‘fees-free’ firms and they appear to be already struggling with the work they have.
The odd thing is that we are so neurotic as businesses about clients, for example, not going with an estate agents’ choice of adviser or a developer’s choice of solicitor, and yet we can be happy to place the client with the lenders’ choice of conveyancer? Perhaps we need to practise what we preach in this area and ensure that the client is the one that is independently represented by a quality conveyancer. That power is within our hands.