Case Study: Product Transfer For Homeowners in Church Crookham

Introduction

We recently helped our customers in Church Crookham, Hampshire, arrange a mortgage product transfer with HSBC before their existing fixed-rate deal expired.

Our customers were considering moving home within the next two years. They wanted to secure a new mortgage rate without committing to a longer fixed-rate period that could result in early repayment charges if they sold their property.

After comparing remortgage options with the products available from their existing lender, we recommended a two-year fixed-rate product transfer with no lender product fee. We also arranged the switch without charging our customers a broker fee.

The Scenario

Our customers were existing homeowners whose fixed-rate mortgage was approaching its expiry date.

They had previously arranged their mortgage through Kerr & Watson and returned to us for advice on securing their next deal.

One customer was employed, while the other was self-employed and had an established business with more than two years of trading history.

They had an existing repayment mortgage with HSBC, with borrowing representing approximately 58% of their property’s value.

Their main priority was to avoid moving onto HSBC’s Standard Variable Rate (SVR) when their current fixed-rate deal ended.

However, they were also considering selling their property and moving within the following two years.

This made the length of the new mortgage product one of the main priorities. They wanted the stability of a fixed rate without unnecessarily restricting their future plans.

The Challenge

The main challenge was balancing the cost of a new mortgage product against the possibility of moving home within two years.

Avoiding an Unnecessary Long-Term Commitment

Our customers wanted the certainty of fixed mortgage payments but were reluctant to commit to a longer deal.

A five-year fixed-rate mortgage, for example, could have created difficulties if they decided to sell their property before the fixed period ended.

Depending on the product, repaying a mortgage during an early repayment charge (ERC) period can result in additional costs.

Some mortgage products offer shorter ERC periods than their fixed-rate periods, so we needed to compare these arrangements rather than simply looking at the length of the fixed rate.

Importantly, even a two-year fixed-rate product could involve charges if the mortgage was repaid before its ERC period ended.

Comparing Remortgaging with a Product Transfer

Our customers also needed to decide whether to remortgage to another lender or remain with HSBC.

A remortgage could provide access to different rates and product structures, but moving lenders could involve a new affordability assessment, underwriting, valuation and legal work.

With one customer self-employed, the income assessment and supporting evidence required by a new lender were also relevant considerations.

A product transfer with HSBC offered a simpler alternative, provided the available rates and fees were suitable.

The challenge was establishing which route offered the most appropriate combination of cost, convenience and flexibility.

What We Did

Compared Whole-of-Market Mortgage Options

We reviewed the customers’ existing mortgage arrangements, outstanding balance and financial circumstances.

We then researched remortgage options across the market alongside the product transfer rates available through HSBC.

Our comparison included conventional two-year fixed rates and alternative products offering longer fixed-rate periods with shorter early repayment charge arrangements.

We considered how these different structures would affect our customers if they decided to move home.

Rather than comparing interest rates alone, we reviewed the overall costs associated with each option.

Assessed Mortgage Fees and Early Repayment Charges

We compared the costs of moving to another lender against remaining with HSBC.

This included reviewing lender product fees, potential remortgaging expenses and the ERC periods attached to the available products.

We also considered the customers’ preference for avoiding unnecessary upfront costs.

We prepared side-by-side comparisons to help them understand the advantages and disadvantages of each route over their anticipated two-year timeframe.

This was an important factor because a product with an attractive interest rate would not necessarily represent the most suitable choice if it involved additional fees or restrictions that conflicted with their plans.

Reviewed the Existing Lender’s Options

We investigated HSBC’s existing customer product transfer range and discussed the case with the lender and a business development manager before proceeding.

The available retention options allowed our customers to select a new mortgage product without completing a full remortgage application.

This avoided the need for a new property valuation, conveyancing work or full income underwriting.

We also verified the existing mortgage details and reviewed the customers’ current income information as part of our advice.

Arranged the New Mortgage Rate

Following our comparison, we recommended remaining with HSBC and arranging a two-year fixed-rate product transfer.

The selected product had no lender product fee, and Kerr & Watson did not charge a broker fee for arranging the switch.

We secured the new fixed-rate product before the existing deal expired.

We also arranged to continue monitoring the available rates in case a further reduction became possible before the new product took effect.

The Solution

We arranged an HSBC product transfer, allowing our customers to remain with their existing lender.

The mortgage arrangement included:

• Lender: HSBC
• Transaction: Residential product transfer
• Product: Two-year fixed rate
• Repayment type: Capital repayment
• Mortgage term: 30 years
• Loan-to-value: Approximately 58%
• Lender product fee: None
• Kerr & Watson broker fee: None

The two-year fixed period offered payment stability over a shorter timeframe than the longer fixed-rate products considered.

It also allowed our customers to review their mortgage arrangements again relatively soon, which was more consistent with their potential moving plans.

The new product could be arranged without the additional administration and costs associated with switching lenders.

Why This Solution Worked

Remaining with HSBC addressed several of our customers’ priorities.

Firstly, the product transfer provided a new fixed rate before their existing deal expired, avoiding an unnecessary move onto the lender’s Standard Variable Rate.

Secondly, the two-year fixed period was better aligned with their potential plans to move than committing to a longer fixed-rate product.

The decision did not eliminate the possibility of early repayment charges if they sold during the new product’s ERC period. However, it avoided committing them to a longer charge period than the one they had selected.

Finally, the absence of lender and broker fees reduced the upfront cost of arranging the new deal.

Because HSBC already held their mortgage, the switch could also be arranged without the full underwriting, valuation and legal processes normally associated with moving to a different lender.

The Result

Our customers secured a new two-year fixed-rate mortgage product with HSBC before their previous deal expired.

The product transfer allowed them to:

• Secure a new fixed rate without changing lenders.
• Avoid moving onto the Standard Variable Rate when their existing deal ended.
• Choose a shorter fixed-rate period consistent with their potential moving plans.
• Avoid lender product fees and broker fees.
• Arrange the switch without a full remortgage application.

We also arranged ongoing monitoring for potential rate improvements before the new product started.

The customers achieved their immediate objective of securing a new mortgage deal while retaining the ability to reassess their borrowing arrangements as their moving plans developed.

What This Case Shows

When a fixed-rate mortgage is approaching its expiry date, remortgaging to another lender is not always the most suitable option.

A product transfer can offer a straightforward alternative, particularly when the existing lender has suitable products and the customer does not need to change their mortgage borrowing arrangements.

However, the decision should not be based on the interest rate alone.

Product fees, early repayment charges, potential moving plans and the costs of switching lenders can all affect which option is appropriate.

This case also demonstrates why future plans matter when choosing between two-year and longer fixed-rate products. Selecting a deal that reflects how long a customer expects to remain in their property can help avoid unnecessary costs, although any early repayment charges must still be considered.

Need to Review Your Existing Mortgage?

If your mortgage deal is approaching its expiry date, Kerr & Watson can compare product transfers with remortgaging options to help you decide which is more suitable.

We provide independent, whole-of-market mortgage advice in Fleet and the surrounding areas.

Contact Kerr & Watson to review your mortgage options before your current deal expires.