Tackling the negative connotations of remortgaging

Patrick Bamford | AmTrust Mortgage & Credit
8th November 2019
patrick bamford genworth
"If those who already have a mortgage don’t know what a remortgage is, or think its bad, then where do we stand with the next generation of mortgage clients"

I’ll be the first to admit that when it comes to the language we use in the mortgage market, we haven’t tended to make it easy for customers to understand. We tend to have an obsession with acronyms, for instance, and there can be a danger in using ‘industry speak’ to a customer base which is far from au fait with it.

However, even I felt somewhat shocked to read some recent research from Moneysupermarket that almost half of homeowners felt the word ‘remortgage’ had negative connotations, while 60% didn’t know what the word meant, and 20% would be embarrassed to admit to having remortgaged.

The other somewhat staggering statistic from this release is that only 57% of all those asked actually knew if they had remortgaged or not. They may have done but they were not truly sure, which to me suggests that they haven’t remortgaged and they are more than likely to be sitting on a lender’s SVR as a result. On such inertia significant business models are built.

It got me thinking further because, lest we forget, this was a survey of existing homeowners who (one presumes) know exactly what a mortgage is, and currently have one. If this is the truth of the matter, then what might we think about the understanding of potential first-time buyers, for example, who haven’t even gone through the mortgage process once yet, let alone are looking at their next one.

The negative connotations of ‘remortgaging’ is an interesting one because I sort of get where people are coming from. Think of television dramas and soaps over the years where individuals in financial trouble were ‘forced to remortgage the house’ in order to get themselves out of a monetary fix. I remember plenty of such storylines which seems to suggest that remortgaging is the last resort of the financially desperate. It is perhaps no wonder that many people think it is only something to be done in extremis.

And yet, to us that work in the industry, to us that have or have had mortgages and have remortgaged a number of times to either get better rates, cheaper monthly payments or to release equity, this type of research should really tell us just how far we have to go in terms of consumer education on our market. If those who already have a mortgage don’t know what a remortgage is, or think its bad, then where do we stand with the next generation of mortgage clients who might be coming from a source of even less knowledge?

Advisers clearly have a role to play and, one can safely assume, that those homeowners mentioned above who did use an adviser would be clear about what a remortgage is and would be securing access to the market via their broker. Indeed, lenders – while they might wish for their existing client base to slip onto their SVR en masse in order to generate the most margin – at least have the ‘decency’ to point out when special rates are coming to an end, and that there may be more suitable and better-priced products available to them, albeit without the provision of advice or with access to the whole of market. However, you would probably agree that it’s better for borrowers to product transfer within their existing lender’s range rather than be moved to the SVR.

And yet, there is a nagging doubt that we have much work to do here. It’s not that I expect every single borrower to be able to tell me what their LTV is, what BOMAD is, know what an AIP is, or explain clearly how much the ERC is on their mortgage – although I might anticipate that a number would know what I was talking about – but when so few seem to understand even the most basic of terms or believe them to be negative, then I really do worry.

Or perhaps I should be seeing the opportunity that exists, especially when it comes to those who are going through the process for the first time. And, for whom, education and guidance should be a must, and could certainly set up the adviser-client relationship for life if it can be got right.

By educating our client base more and explaining the true situation, we are potentially opening up a whole area of business expansion and ensuring that borrowers (whether existing or not) know exactly where to go to when their mortgage needs require fulfilling. Historically, as these results suggest, our industry has not been good at this. We need to get better and fast or we could see a generation of potential clients lost.

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