Question – when is a mortgage offer not final? Answer – when it is a retention offer and the lender involved is under pressure from the borrower to be more competitive, usually because their broker has discovered a cheaper deal with a rival.
Many lenders are prepared to better their offers when solicitors ask for redemption statements, leaving brokers with nothing to show for their efforts.
Treating customers fairly is a mantra by which lenders and brokers must now live. But I question whether all lenders bear it in mind when it comes to formulating their retention policies.
With so much publicity surrounding re-mortgaging and consumers being advised to think about new deals months before their existing mortgages come to an end, lenders are being inundated with calls asking what they will offer.
But are lenders being straight with borrowers? Some are keen to retain them and offer favourable terms. Not only that, they are upfront from the start so customers know where they stand.
But not all lenders are so straightforward. Some offer retention products when pushed but these are hardly attractive. Others only offer SVRs as an option because, like Northern Rock, they don’t want to retain clients and are keen for them to go elsewhere.
Brokers can get caught up in this maze and unwittingly improve borrowers’ retention offers while not benefiting themselves.
For example, it’s not unusual for a client to consult a broker to see if they can improve on a retention offer. Once the broker has done the legwork and found a more competitive rate, the cli-ent may return to the original lender to ask whether it can better the deal.
In many instances, the original lender simply matches what the broker has come up with so the client decides to stay put.
This costs clients legal fees while brokers get nothing for a lot of hard work.
It is hardly fair, and not just to brokers. Clients who don’t compare the deals on offer may end up paying more than they need to.
For example, lenders may offer no more than the minimum they can get away with in the hope that desperate customers will believe negative press reports and think they won’t find anything better.
If only the borrowers who kick up the biggest fuss stand a chance of getting the best deals, it’s hardly treating customers fairly.