Remortgage and product transfers – the case for reassessing borrowers' options

A New Year and the news for borrowers looks to be improving. Having struggled with affordability issues since September 2022, mortgage swap rates appear to be falling at last*. Additionally, Andrew Bailey recently said that he expects the Bank of England to hit its inflation target in April, and analysts are pencilling in a rate cut in May**.

All this may change, of course, but the tone and mood are a vast improvement. The markets' opinion can be seen in the steady fall in Swap rates – significant for lenders, brokers, and borrowers alike. It's all a far cry from the affordability crisis born out of the Truss/Kwarteng budget of 2022. So, how does this impact the remortgage and product transfer market? Brokers will likely face three key questions from borrowers that will influence any course of action they suggest and that clients take.

How do continuing falls in mortgage rates affect the products available to me?

Certainty is very often crucial for borrowers, and fixed rates offer just that. But while fixing in a rising rate environment feels like the obvious course of action, when rates are falling, it is not such a straightforward equation. Locking in 5% + in a product period of three or five years may be unnecessary if we are looking at an environment of 3% two years from now. No one has a crystal ball, but flexibility may be the order of the day. The long-term look for rates may be benign, and some borrowers may benefit from the flexibility to move without redemption charges if rates continue their downward trajectory.

Should I take a product transfer or look around further?

Concerns have not disappeared but may recede as pricing readjusts. On top of that, the new Consumer Duty focus on borrower outcomes suggests that some of the habits of the recent past need revisiting. 2023 was the year of the product transfer, but in 2024, brokers need to be ready to discuss and advise on whether product transfers really present the best option after all.

Should we expect to see greater loosening of criteria if the market continues to flourish?

As lenders look to secure market share over the opening six months, expect criteria changes as well as pricing improvements as they look to bolster margins. At the back end of last year, we made a whole host of product and criteria enhancements and ended the year with even more rate reductions and two new limited-edition products. The market changes in criteria will often address the gaps many brokers highlight when dealing with clients with light adverse credit. Brokers are more than capable of moving with the market, and it is beholden upon lenders like ourselves to do likewise to support them and their borrowers. 2024 will not be a repeat of 2023.

*https://www.cityam.com/falling-mortgage-rates-to-provide-support-for-house-prices-in-2024/

**https://www.theguardian.com/business/2024/jan/11/bank-of-england-may-cut-interest-rate-sooner-after-surprise-inflation-forecast