What is a Product Transfer?

Mortgage providers are changing the rules on eligibility for product transfers, allowing homeowners who are on payment holidays or furlough to switch mortgage products at the end of their term. Mortgage holders on payment holidays wouldn’t usually be eligible for a product transfer, but UK Finance have announced that lenders are amending the rules to help those financially impacted by the epidemic. With one in seven mortgages in the UK utilising the support of payment holidays and many workers furloughed, this will potentially impact on mortgage holders’ ability to afford higher interest rates if they’re on a payment holiday at the end of their fixed-term.

Product transfers, even before coronavirus can help reduce your monthly repayments: by switching to a new deal with the same lender you could see a lower interest rate, saving you money. These transfers are usually unavailable to mortgage holders on payment holidays: however, in the current circumstances this has been changed. Homeowners on payment holidays, or who have been furloughed can now transfer products at the end of their term.

It’s worth talking to a mortgage adviser, such as Clever Mortgages, who can assess your options of a product transfer or a remortgage to another lender, this ensures you get the very best solution.

How does a product transfer work?

A product transfer is when you move from your current mortgage deal to a new one with the same lender, usually at the end of a fixed term. After a fixed-term on your mortgage, where the interest rate stays the same, the interest rate will usually switch to the lenders Standard Variable Rate (SVR) which is often higher than the rate of the fixed-term. The process of transferring products is usually quite simple and it’s unlikely you’ll need a valuation on your property.

Many product transfers don’t require affordability assessments as you’re not borrowing more money, as you might with a remortgage for example. It’s simply a case of switching products, meaning homeowners who have been furloughed as a result of the epidemic could transfer products without having to be subject to the usual affordability assessments, fixing the interest rate and preventing them from paying a potentially costly SVR.

Pros:

• Not usually subject to a full valuation
• No legal fees
• Could reduce monthly repayments by going from your lenders SVR to a fixed-rate mortgage
• Often a quick process

Cons:

• You might not be getting the best deal, only what your current lender offers you
• Other providers could offer a better rate or product, saving you money in the long-term
• You won’t be able to borrow more money if you wanted to carry out home improvements for example.

Why it might not be the best option?

You might not be getting the best deal or product on the market if you transfer product with your current lender. It may be the case that you could lower your repayments further or have more options by remortgaging with a new lender. Our specialist brokers can search to find the best product or deal for you.  Whether through a product transfer or remortgage, they can give you reliable advice for your situation and could save you money. They’ll be able to compare deals from across the market helping you make an informed decision. Get in touch to find out more!