There are some moments and decisions that, in years to come, you are able to trace back to as the start of a sea-change in the way an industry or market works. They are effectively lines drawn in the sand, or leaps forward, that ultimately usher in a new approach that soon becomes the norm, and results in everyone saying, ‘How did we manage before XYZ happened?’
For those who might look at Nationwide’s recent decision to scrap its free legal offering for those borrowers remortgaging to the building society and increase its cashback to £500, there might be a hint that this could be one of those moments. I’m afraid to say that while the decision will I’m sure be welcomed by many in the industry, particularly advisers, I don’t get the sense that this will be a ‘red line’ moment for lenders and their continued use of free legals.
There are a number of reasons for this. Firstly, I hear on the grapevine that this is only likely to be a temporary decision by Nationwide. Given the recent media furore concerning the many problems advisers/clients have had with free legal conveyancers, then it seemed likely that a reaction was imminent and Nationwide have been the first to respond.
But, you’ll notice that no other big, mainstream lender has followed suit and the suggestions I’m hearing is that this could be a policy that last weeks/months rather than years. Now, this might be hearsay at the moment, but perhaps the best we can hope for is that the £500 cashback level is maintained alongside any return to a free legal option – that too might be tricky as I’m not sure if £500 is sustainable given it’s likely to impact too much on product pricing.
And there’s the rub in all of this – the ability of lenders to provide options to clients when it comes to their conveyancing. I am not here to lecture lenders about whether they should, or should not, be offering free legals – clearly there are many benefits for them in choosing which conveyancer the client uses because they are effectively acting for them not the borrower, and there are clearly cost factors at play, relationships to be maintained, and conveyancers to be ‘fed’.
But, we should perhaps start all of this from a commitment to provide the client with more than one option. Clearly, the term ‘free’ will resonate with a client but, with an adviser’s involvement and a decent level of cashback, the case can be much more compelling for taking that money and using it for their own representation. The adviser will be able to outline the benefits involved in such an approach and make the comparison with the service they’ll get from the free legals, and then the client has information and transparency to make their decision.
If they opt for the free legal option, so be it but at least there is a tangible choice on the table. Where I would like to see movement is in the level of cashback available to borrowers? At present, Nationwide’s move – certainly in the mainstream mortgage space – sets them apart from most of their peer group who tend to only offer £250. This makes the adviser conversation, advice and recommendation that much harder – for what it’s worth Broker Conveyancing can make £250 work in order to cover the legals with our Cashback Remortgage option, but not many conveyancers are able to do this.
Therefore, moving the cashback to £300 would make this a better fit for more conveyancers as they can make this fee work – and what the world really needs now is more conveyancers who are able to deal with the growing remortgage volume in the market. Which, let’s face it, is the underlying problem here and the reason why the issue of free legals, and the service levels, have come to the fore. Add in the fact that conveyancers are paid so little for free legals and again there’s part of your answer to the resource problem. In that sense I would urge lenders to pay a bit more to their free legal conveyancers, so there’s more who can do the work for them.
So, while I would like to see other lenders following Nationwide’s lead on free legals I recognise this is unlikely but it doesn’t mean progress can’t be made in this area. Inching the cashback level up would ultimately have an impact in levelling the playing field and, as mentioned, taking some of the pressure off the free legal conveyancers and bringing in new firms to this part of the market. At the moment, those active are being battered from pillar to post in terms of the pressures placed upon them to get the work done, plus maintain service and communication levels.
A better choice for clients can be secured but it is likely to mean some movement on cashback levels and an acknowledgement by the larger lenders that the free legal option should not be the only one on the table for clients.
Harpal Singh is managing director of Broker Conveyancing