Product withdrawal timescales and how brokers can adapt

Bob Hunt

22 June 2023

Product withdrawal timescales – and the significant differential between lenders – have roared into the collective consciousness in recent weeks, as an ongoing series of withdrawals, and the late notice provided for them, has impacted not just advisers but of course their clients.

It is not surprising to see an adviser-led campaign being launched to try and secure some sort of standardisation across the industry, with a particular focus on a minimum of 24 hours’ notice being provided.

What is interesting, in this context, is that we recently went out to Paradigm’s panel of lenders asking them what notice period they provide, and the majority said 48 hours. However, with a few notable exceptions – the major one being the Coventry – there is always a caveat attached which suggests special circumstances may see this reduced.

Clearly that caveat has been doing a lot of heavy lifting for a lot of lenders in recent weeks, while some of our very biggest lenders conducting the bulk of market volume don’t give any set notice period for withdrawals at all.

Now, first up, I fully understand – and have sympathies – with a section of lenders whose funding models dictate certain behaviour under extreme market circumstances. That makes it incredibly difficult to keep to a 48-hour notice period if the money or swap markets move as quickly and as far as they have done.

But my concern perhaps lies more with those bigger lenders which I believe could act differently – and could certainly commit to a minimum period of at least 24 hours – and who really shouldn’t be acting as they have in recent weeks.

In fact, for a number, this hasn’t simply been a problem or a habit of the past few weeks. Very extreme financial circumstances aside, advisers have had to put up with this at a wide variety of points from certain lenders in recent history – when a Stamp Duty holiday has been in place, as a result of staff working from home, the pandemic in general. I could go on.

A major issue we have is the extremes of what has been deemed acceptable. Product withdrawal at 48 hours for some, less than an hour or two for others. How is the latter timescale in anyway fair, when you have the size, resource, price committee structure, etcetera, to be able to actively plan for these types of markets, meaning you should never be pulling products or rates with minutes’ notice?

Now, there are some dissenting voices against this. I’ve read of brokers’ themselves suggesting that, when it comes to this type of action which is beyond their control and where they can’t possibly get cases through in such a short timescale, why should they ‘sweat this’? You can only do your best.

To an extent I agree, but I also know that many advisers will still attempt to secure their client the better rate, because they know what a difference it will be to them if they miss out, particularly when the repricing is upwards.

So, in that sense and certainly going forward, advisers should not have any qualms about using product withdrawal and past performance on this, as part of their lender or product selection criteria along with rate, criteria, funding lines, PT policy, and everything else you take into account.

Indeed, following our communications with lenders, we’re creating a directory outlining our lender panel’s withdrawal policies, which can be accessed by our adviser members to use as part of their overall recommendation evidence.

I’ll leave on a positive. Product withdrawal is a ‘noisy’ issue and advisers who have raised it, and those who have supported some sort of industry-wide approach, have definitely put it on the radar.

Will that mean we have an industry-wide approach? No – as mentioned, some lenders would never be able to sign up to a standard withdrawal period, for the reasons outlined above, but a consensus is hardening that those who can, should.

If a few of those bigger players are able to adopt a Coventry-esque approach, then this not only benefits them, but puts the ball in the court of their main competitors who do not. As outlined, this will be a consideration for advisers when they are working through their criteria for lender or product selection. The talking is likely to be done with the feet.

What we have is a groundswell of opinion that the current approach, the extremes we have between lenders where some offer 48 hours’ notice and some offer pretty much zero, is not sustainable and certainty not conducive to quality customer outcomes.

Dare I highlight Consumer Duty in that regard.

Given what has happened in the past few weeks, this has reached a national consciousness, and we have consumers being adversely impacted by the decisions some lenders have made. Prior to this point, I wonder if the lender community was OK with this being merely a trade issue, with the ‘noise’ being manageable?

As that noise has grown, one wonders whether they will still consider that to be the case now, or if they feel the time has come for us all to see a marked improvement in this area?