Borrowers pushed on to pricey rates as lenders ‘delay remortgage process’
Remortgaging borrowers risk being stung by Standard Variable Rates (SVR) because of the way lenders deal with parts of the switching process, brokers have complained.
One of the biggest issues is around redemption statements, according to advisers.
The statements confirm the exact amount, including any fees and interest due, to fully repay a mortgage on a given date and are needed by solicitors to remortgage to a new lender.
But some lenders will only release these statements in the final month of the mortgage term or else an Early Repayment Charge is added (ERC), brokers have told YourMortgage.co.uk’s sister title Mortgage Solutions.
Robin Purdie from adviser Motiv8 said it should be easier than it is to switch between lenders.
He said that it can then take five working days to produce the redemption statements.
Pushed onto pricey SVRs
Usually the documents will be requested in time for a term’s expiration. But lenders that wait until the month of a term end potentially pushing borrowers with a rate expiring at the start of the month on to a pricey SVR.
Purdie said: “If other lenders can produce them, why can’t every lender? There must be a way a lender can calculate on any given date. The redemption should reflect a future date in time, you shouldn’t have to go back and request.”
Purdie said it is one example of “how much harder it is to remortgage than it should be”.
He added: “There’s a drive to make things as easy as possible but there’s lots of hurdles.”
“It’s not something you see on every single case – but it’s stuff that needs to be pointed out to the borrower.”
Purdie said if it was easier to remortgage, there would be more cases coming through.
Earlier approach to borrowers not supported by lenders
Redemption statements have become more of a problem as brokers have started to approach borrowers earlier in the process, according to Paul Clark from broker City Mortgage Solutions.
When requested months in advance an early repayment charge is typically added – often putting the final figure out by thousands of pounds.
If solicitors don’t have an exact amount to remortgage, the time taken to request a new statement can mean a collapse in a completion.
He said: “It would be nice if the lender can ask what date – and then give an idea of what [the redemption] would be then.”
Instead completions can end up delayed when the solicitor needs to request a new statement.
He said: “Most lenders don’t get it. The work could have been done [by an adviser] three months in advance, but then the transaction can be two weeks late.”
Jane King, mortgage adviser at Ash-Ridge Private Finance agreed that lender policies in this area can be “annoying”, as remortgaging clients are not sure how much they need to borrow.
She said it would help if lenders released redemption statements earlier.
King added: “My research software gives me a rough idea of outstanding balances at the end of each year, but this is not 100% accurate. Some lenders allow their borrowers to check their balance online at any time. You would think that to include a redemption figure at the same time would not be all that difficult, although where there are early repayment charges as a percentage of the loan it may be more difficult.”
A spokesman from lender trade body UK Finance said: “UK Finance encourages its members to conduct periodic reviews of their processes for providing redemption statements, to ensure the information provided to customers and conveyancers is as accurate as possible.”