A rise in product transfer activity is changing how the commercial mortgage market works. Why have we seen an increase in commercial product transfers, and what are the benefits for your property investments?
When you’re approaching the end of your current mortgage deal, whether fixed or variable, you have three main options available to you:
- Remortgage to get a new deal with a new lender
- Product transfer to get a new deal with your current lender
- Stay on your lender’s standard variable rate (SVR)
A standard remortgage might be the most common way to secure your new deal, but a product transfer may be a better option for you. The most important thing is to ensure you don’t revert onto your lender’s SVR, as these are much more expensive and could significantly increase your monthly mortgage costs.
The Benefits of Commercial Product Transfers
There are several benefits to choosing a product transfer as your refinance option. For one, you don’t need to worry about paying any legal fees, and you most likely won’t need another valuation, which keeps your refinance costs down.
Furthermore, most product transfers aren’t subject to additional underwriting, which can help speed up the application process. It’s very easy for your broker to organise your product transfer, so it’s an excellent option for last-minute borrowers who don’t have the time to go through the remortgage process.
Why have Commercial Product Transfers Become So Popular?
Over the last 10 years, there’s been a notable increase in clients using challenger banks (the specialist lenders) for their commercial investment and owner-occupier mortgage requirements rather than taking the finance via the ‘big four’ high street lenders.
This is because clients wanted to take advantage of specialist lenders' more competitive interest-only and repayment options. What’s more, these challenger banks offer higher loan-to-value (LTV) product ranges with less stringent underwriting. With better debt-servicing calculations, specialist lenders have become the most popular option for commercial mortgages.
From 2012-2016, specialist lenders mostly offered variable-rate mortgages for a 10-year term. Rather than offering their own fixed mortgage rates, these variable products either followed the Bank of England Base Rate or LIBOR. Variable-rate mortgages were the most popular choice among investors, as they were more competitively priced. It’s only in recent years that fixed-rate products have been on our clients’ radars.
Interest rates climbed significantly over the last two years, and it’s fair to say that mortgage rates rise much quicker than they come back down. As such, we’re now in a position where variable rate options remain more expensive.
As pricing for variable-rate commercial mortgages is above 10%, many of our clients find that a product transfer is the most cost-effective route for their property finances. Many banks and specialist lenders are looking to offer fixed rates at lower LTV levels from 6%, offering a drastic saving compared to the variable options.
Given the complexities of the commercial market, the lenders that offer commercial product transfers are intermediary-only. This means you have to contact one of our expert brokers to explore the rate options available. It’s a quick and easy process, and our team will compare the best deals on the market to find the right mortgage option for you.
How to complete a Commercial Product Transfer
To start exploring your product transfer options, get in touch with our team of commercial mortgage experts.
With extensive experience and expertise in this property market area, our team is best positioned to support you with your refinancing plans. We can calculate the most cost-effective next steps for you and find the best lender to suit your individual circumstances.
To see what types of rates you can access and discuss your property investment plans, get in touch with our team here or call us on 0345 345 6788.
Get in touch
To see what types of rates you can access and discuss your property investment plans, get in touch with our team here or call us on 0345 345 6788.
