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Best mortgage rates not always offered to existing customers

Some mortgage lenders exclude cheapest deals from product-transfer offers

Homeowners who accept a product transfer from their mortgage provider could be paying £600 more a year than they need to, new data shows.

Some lenders are excluding their best deals from the product transfers they offer to customers at the end of their fixed-rate period, according to the The Telegraph.

In the worst cases, this is costing homeowners £600 more per year than if they’d been transferred to the best deal available from that lender.

  • For advice on product transfers and help finding the best deal for your personal situation, call Which? Mortgage Advisers on 0800 197 8461.

How do product transfers work?

When you’re nearing the end of your mortgage’s introductory deal period, your mortgage lender will usually offer you a ‘product transfer’.

They will send you a list of available deals based on the equity you hold in your property. For example, if you’ve paid off 25% of the original price of the property, you’ll be offered a 75% loan-to-value (LTV) mortgages. These may be more competitive than the deals available when you first took out the loan.

There are two main benefits to accepting a product transfer. First, it will almost invariably be cheaper than being moved onto your lender’s standard variable rate, which is what will happen if you don’t accept a transfer or remortgage.

Second, it’s a lot quicker and simpler than remortgaging. You won’t be subjected to a credit check or affordability assessments, a property valuation won’t be carried out and there’s no legal work involved.


Do product transfers give you the best mortgage rates?

Some lenders will offer you exactly the same products as they would to remortgage customers. If this happens, you will be able to take up the best rate available from your lender, although of course you might be able to get a better deal by remortgaging with a different provider.

However, some mortgage providers offer a restricted list of deals, and this is where the problem lies.

Researchers from The Telegraph looked at two-year fixed-rate deals being offered as product transfers and found that Leeds Building Society, NatWest and Bank of Ireland UK didn’t offer existing customers their best rates.

When the researchers repeated the exercise for five-year fixed-rate deals, Leeds Building Society and NatWest again didn’t offer their best rates as product transfers.

The worst scenario they found would have resulted in an existing customer paying £600 more per year than a new customer with the same provider.

However, the researchers also found cases where existing customers were offered better deals than new customers. Bank of Ireland, Platform Home Loans, Accord and Nationwide all offered cheaper five-year fixed-rate deals as product transfers.

What do the mortgage lenders say?

When The Telegraph put its findings to the lenders, it received the following responses:

  • Leeds Building Society: products cannot be directly compared as their features, including fees and incentives, vary.
  • Bank of Ireland: ‘some differences can occur from time to time due, for example, to timing or where some products have different features.’
  • NatWest: new and existing customers are currently offered the same rates if they’re applying directly, but some lower rates are available via brokers.

Should you remortgage or take a product transfer?

Usually, when you’re offered a product transfer, your lender will send you a list without any advice on which deal would be best for you.

It can be very difficult to work out which is the best option, as arrangement fees often mean that the deal with the lowest interest rate isn’t cheapest overall.

Comparing the product transfers with deals from other lenders can be even more confusing. For this reason, it’s well worth taking advice from a whole-of-market broker such as Which? Mortgage Advisers.

Which? Mortgage Advisers’ David Blake says: ‘It often makes sense to accept a product transfer, but this isn’t always the case.

‘A good broker will look at all your options and make an informed recommendation on whether there’s any point in remortgaging away from your existing lender as opposed to conducting a product transfer.’

How to find the best mortgage lender

When you take out a mortgage, you should research the lender’s customer service as well as its products. This will help you understand how well you’re likely to be treated towards the end of your deal.

At Which? we regularly survey thousands of homeowners about their mortgages. We use the results to create unique scores for all the major lenders, based on a combination of customer feedback and our expert analysis of how competitive their deals are.

You can find out the best and worst providers in our mortgage lender reviews.

For expert advice on the right mortgage for your personal circumstances, call Which? Mortgage Advisers on 0800 197 8461 or fill out the form below and they’ll call you back.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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