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Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

December 2020

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LOOKING BACK, LOOKING FORWARD


10 YEARS OF SPECIALIST LENDING

Celebrating 10 years of specialist lending solutions Supporting you yesterday, today and tomorrow, through the good times and bad. We’ve launched a wide range of new products across our Residential Mortgages, Buy to Let Mortgages and Bridging Finance ranges.

Virtual appointments with your Business Development Manager.

Wide range of online tools including a searchable criteria guide, calculators and submission checklists.

0800 116 4385

precisemortgages.co.uk

FOR INTERMEDIARIES ONLY. Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales with company number 06749498. Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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EDITORIAL

COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Associate Editor Jessica Bird Jessicab@sfintroducer.com Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Campaign Manager Victoria Hubbard Victoria@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk Mortgage Introducer, CEDAC Media Ltd 23 Austin Friars, London, EC2N 2QP

Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.

Ryan Fowler RyanFowlerMI

21 years of Mortgage Introducer

I

t’s now 21 years since Mortgage Introducer was first brought in to being. It was 1999 when Nia Williams was tasked with creating a magazine for mortgage advisers in just three weeks. It was a bit of a rush but Mortgage Introducer was born – the first magazine dedicated to UK mortgage professionals. Reading through this supplement is a great reminder of the tumultuous time the market has had over the past 21 years – the rise and rise of the property market; the huge number of lenders entering the market; regulation; the credit crunch; lenders collapsing; the long recession; General Elections; interest rate hikes and interest rate falls and COVID to name but a few. In fact, Mortgage Introducer itself is a good reflection of what was happening to the industry. The magazine was well received when it was launched and quickly became the flagship magazine of Charterhouse Communications who owned it at that time. It continued to go from strength to strength but then, in September 2007, everything stopped. In April 2008 Charterhouse Communications went into administration and the entire Mortgage

Introducer team was unfortunately made redundant. However four colleagues (Nia Williams, Ramesh Sharma, Andrew Goldsmith and Marco Callegari) had such faith in Mortgage Introducer that they bought it from the administrator and set about relaunching it as a monthly magazine with a strong website giving the latest news. That was in June 2008; it was slow going at first but, as the mortgage market slowly began to recover, so did the magazine. And here we are today. It is good to see that some of the people who have contributed to Mortgage Introducer’s success over the years are still writing about mortgages. I should also mention some of its editors – Robyn Hall, Rob Griffiths, Ben Marquand, Scott Philipson, Vicky Hartley, Sarah Davidson, Robyn again... who were responsible for the success over the years. And of course, there is the current brilliant editorial team of today – Jessica Nangle, Jake Carter, Jessica Bird and Felix Blakeston, along with all the rest of the team who work behind the scenes. Last but not least I’d like to thank all of you who have read and supported the magazine over the past 21 years. Here’s to the next 21! 21

Stream this year’s glittering Mortgage Introducer Awards on demand. www.mortgageintroducerawards.com www.mortgageintroducer.com

DECEMBER 2020

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MAGAZINE

WHAT’S INSIDE

Contents MI_Mar 09_Cover.qxp

27/2/09

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Page 1

Champion of the Mortgage Professional

MORTGAGE

March 2009 £5.00

INTRODUCER www.mortgageintroducer.com

April 2020

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Champion of the mortgage professional

FREE

to reg all ist rea ered ders

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AN ILL WIND Weathering the COVID-19 storm

Difficult decisions Review your distribution options Technology

Protection

Stay ahead of the game with the latest technology page 18 ➔➔

Keep in touch with your clients’ protection needs page 27 ➔➔

6 A brief history of mortgages Natalie Thomas reflects on two decades of the mortgage industry and how the sector went from highs to lows then back again Through the years Our columnists look back on 21 years of Mortgage Introducer

www.mortgageintroducer.com www.mo ortgageeintrodu

Champion of the mortgage professional

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Champion of the mortgage professional

SELF-CERT

John Ahmed Craig Calder Steve Carruthers Bret Jackson Karen Rodrigues Michele Golunska Terry Pritchard Paresh Raja Matt Smith Stuart Wilson Millie Dyson Alan Cleary Rob Jupp Richard Pike Mat Montgomery Ryan Fowler Matt Tristram Rob Barnard Jeff Davidson Mark Arnold Adrian Maloney Paul Fryers

Goodbye Go 2009 200

Mortg Intro age duce wi Happ shes yo r and y Chris u a a Pr tmas New ospero Year us

And good riddance! r Distribution

NACFB

The evolution of distribu distribution and what the future may hold Page 10

New plans for the NACFB and future benefits for its members Page 34

FEBRUARY 2016

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

MORTGAGE INTRODUCER

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MORTGAGE February 2016

December 2009 £5.00

The murky world of self-cert ROBERT SINCLAIR

THE OUTLAW: GODFATHER PART II

HoF : TEQUILA SUICIDE

The Scottish Mortgage Awards Are back! September 2021 For more information email matt@mortgageintroducer.com

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FEATURE

HISTORY

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FEATURE

HISTORY

A BRIEF HISTORY OF MORTGAGES Natalie Thomas reflects on two decades of the mortgage industry and how the sector went from highs to lows and back again

A

s Mortgage Introducer celebrates its 21st birthday it is hard to believe just how much the sector has been through during the last two decades. From market highs to near-cataclysmic lows, there has never been a dull moment for the industry. In many ways, the mortgage market we have today is unrecognisable compared to the one that existed in 1999; yet in other ways it is just the same – gripes with the regulator, talk of imminent house price crashes and disputes over proc fees. So, sit back and put your feet up while Mortgage Introducer takes you on this trip down mortgage memory lane. PARTY LIKE IT’S 1999-2003 The turn of the millennium represented a shift in confidence for the mortgage market. When Mortgage Introducer launched in 1999, the market was still a relatively cautious one, with thoughts of the late ‘80s and early ‘90s house price crash and subsequent recession still fresh in peoples’ minds. Many of the specialist markets that we know today were just starting out – buy-to-let included. It is incredible to think that just 21 years ago, a buyto-let loan was a fairly revolutionary concept, with www.mortgageintroducer.com

the phrase itself not being coined until 1995 by the Association of Residential Letting Agents (ARLA). Until that point, loans taken out for investment properties were few and far between, and not really offered by mainstream lenders. The house price crash of the early ‘90s had, however, created nervousness among buyers, so demand for rental properties increased. With what was deemed to be a low Bank of England base rate of between 5% and 6% in 1999, investors started flocking to the market. Just 44,400 buy-to-let loans were taken out in 1999, jumping to 72,200 in 2001, according to the Council of Mortgage Lenders. An interest rate of 6% might seem high compared with today’s 0.10%, but it was nothing in comparison to the near 14% seen in 1990. The security of a lower interest rate helped lenders to gradually take on more risk. The average income multiple for first-time buyers in 1999 was around 2.2 times income, and lenders were beginning to make the news for ‘bending the rules’ and offering loans up to 95% loan-to-value (LTV) at four times income multiples. As lenders grew more confident, so did their appetite for risk – aided by an influx of American lenders into the UK market during the early 2000s. → DECEMBER 2020   MORTGAGE INTRODUCER AT 21

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FEATURE

HISTORY

Timeline

Mortgage Introducer reported that gross advances for self-certification products totalled just £4.4bn in 2000, according to Datamonitor. This figure would almost quadruple to £12.3bn by 2004. Specialist lenders continued to push the boundaries when it came to products and criteria, and it wasn’t long before high street lenders were getting in on the act too. Sub-prime and self-cert soon became the stars of the show – as did the industry heavyweights affiliated with the sector, most notably former GMAC-RFC chairman Stephen Knight and BM Solutions managing director Michael Bolton. During this time it was often the specialist lenders who dominated the pages of Mortgage Introducer, with the likes of Southern Pacific Mortgages Limited, Mortgages Plc, GMAC-RFC, Kensington Mortgages, Mortgage Express and BM Solutions battling it out to see who could offer the most compelling products. By 2003, the mortgage market had started to hit the headlines for all the wrong reasons, though a BBC exposé which claimed a number of BM Solutions advisers were encouraging borrowers to lie about their income resulted in the temporary suspension of such lending. Questions were also starting to be asked about the proc fees on offer for recommending sub-prime deals, and whether certain brokers and packagers were always acting in the best interest of their clients. The market very much felt like a man’s world during this period. This was evident at the 2003 Mortgage Business Expo, which infamously became known as the ‘Sexpo’ after a number of scantily clad women graced the stands of various mortgage firms – the most notorious being Majestic Mortgages, which featured pole dancers. As the market gathered momentum, so did the need for brokers to have their voice heard. In 2003, the Association of Mortgage Intermediaries (AMI)

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JUNE 2001

The Association of Mortgage Intermediaries launches

came into being, headed by Chris Cummings, with membership reaching 6,500 by the end of the year. Mortgage business may have been booming, but most of it was still being done via post, meaning that BM Solution’s One Minute Mortgage was a revolutionary step when it came to market in 2003, as was the launch of the Mortgage Brain-owned Mortgage Trading Exchange. Desktop valuations were also a new and emerging innovation at the time, with Hometrack having launched its automated valuation model in 2002. SHOW ME THE MONEY! 2004-2007 One might think that the arrival of the Financial Services Authority (FSA) in 2004 would spell the end of the sub-prime party for many in the industry, but it was not necessarily the case. The lead up to regulation was messy, with the FSA initially toing and froing on a lot of issues, such as whether lenders would supervise brokers and whether packagers would also be regulated. Nevertheless, at the time the regulation, or M-Day as it became known, was something that was celebrated. Many were sad to see the end of the self-regulatory body the Mortgage Code Compliance Board, but there was a real air of optimism that regulation by the FSA would be a good thing for the industry. Aside from the cost, one of the biggest challenges regulation brought was the introduction of the Key Facts Illustration. Many lenders ended up working during the night to perfect theirs in the lead up to M-Day. At the time, it was also estimated that up to 25,000 mortgage intermediaries were regulated by the FSA. The principles-based approach of the FSA did not suit all firms, however, as the proceding years would show, and many criticised the new measures for lacking detail. Alongside mortgage regulation came a new breed of mortgage firm, such as the mortgage network and

OCTOBER 2003

M-Day: mortgage regulation comes into force

November 2005

April 2003 The Financial Services Authority announces it will regulate the UK mortgage market

APRIL 2003

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NOVEMBER 2005

BBC exposé alleges BM Solutions staff are encouraging borrowers to inflate incomes

OCTOBER 2004

Derbyshire Building Society launches sub-prime lender Salt

www.mortgageintroducer.com


FEATURE

HISTORY mortgage club. The market entered a period where brokers and packagers held all of the cards when it came to distribution, with lenders fighting to gain market share over their rivals. As lenders battled it out, proc fees started to rise – up to 2.75% for sub-prime cases. The FSA started to take heed, and in 2005 announced that it was launching a probe into the adverse markets. Another hot topic making the news in 2006 was the impending launch of the Home Information Pack – an unpopular initiative, which it is fair to say didn’t gain much support from the industry. In the summer of 2006, the government performed a U-turn and ruled that the main component of the pack – the home condition report – would not be mandatory, in a move that would mark the beginning of the end for the marmite packs.

“It wasn’t until the summer of 2007 that the sector started to get wind of the troubles in the US arising from toxic sub-prime debt. By September 2007 there was no hiding it, as depositors rushed to withdraw money from Northern Rock”

THE CRASH: 2007-2010 Very few in the mortgage market envisaged just how bad the Credit Crunch and its subsequent fall-out would be. It was not until the summer of 2007 that the sector started to get wind of the troubles in the US arising from toxic sub-prime debt. By September 2007 there was no hiding it; fearing its collapse, depositors rushed to withdraw money from Northern Rock. As funding began to dry up, there was little anyone in the mortgage market could do beyond just sitting by and watching as household names such as Bradford & Bingley and Alliance & Leicester suddenly entered dire financial straits. Some of the most devastating losses from the industry came from networks: Network Data, Premier Network Group and The Mortgage Times Group. Their demise was not only a huge blow to those that worked at the firms, but also left many mortgage brokers financially struggling.

The Association of Mortgage Packagers and Distributors launches

JANUARY 2006

SEPTEMBER 2006 GMAC-RFC becomes first lender to complete a point of sale mortgage offer

www.mortgageintroducer.com

Northern Rock withdraws its controversial 125% LTV mortgage

FEBRUARY 2008

In 2009, Britain officially entered recession, and the merger of Lloyds TSB and HBOS was finalised to create Lloyds Banking Group. The Bank of England cut the interest rate to a then historic low of 0.50% and began the quantitative easing process in a bid to boost the market. No firm seemed to be exempt, and the news that Towergate Financial had bought mortgage broker John Charcol out of administration in early 2010 sent shockwaves around the industry. In September 2010, AMI figures showed that the number of brokers had fallen from around 31,000 at the peak of the market to 12,000. As society and politicians looked for answers, the FSA unsurprisingly was in the firing line, with its response being the release of its Mortgage Market Review (MMR) proposals in 2009. It set out its plans to ban self-cert mortgages, regulate second charge and buyto-let, tighten rules around interest-only and impose affordability tests for all mortgages. In 2010, then Chancellor of the Exchequer George Osborne subsequently revealed that the FSA would be scrapped and replaced by a tripartite regulatory system. The world of sourcing systems was also in line for a shake-up, as Mortgage Brain announced in December 2010 that it would buy rival group TrigoldCrystal. Mortgage Brain, however, pulled out of the deal in March 2011, following the Office of Fair Trading’s decision to refer the deal to the Competition Commission. →

MARCH 2008 BM Solutions withdraws all selfcert and sub-prime products

Network Data appoints administrators

MAY 2009

OCTOBER 2009 FSA proposes ban on all self-cert products, nicknamed ‘liar loans’

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FEATURE

HISTORY

“As the process of obtaining a mortgage became harder, the door to the specialist sector opened once again, most notably to bridging finance. There had been little need for bridging loans and other short-term finance options during the boom years, given the ready access to credit”

Timeline

NEW BEGINNINGS: 2011- 2015 The market was still badly bruised from the Credit Crunch, and was very much in recovery mode in 2011. Yet there was some hope returning to the market, and 2010 saw the launch of two new intermediary lenders: Aldermore and Precise Mortgages. Lenders were slowly starting to move back into offering 90% LTV loans, and in 2011 the market saw the launch of the first 100% LTV mortgage since before the crisis – Aldermore’s Family Guarantee Mortgage. The 3-year fixed rate at 6.48% needed a relative to provide a guarantee secured against their residential property for any lending above 75% LTV. Although lenders were regaining their appetites, it was not happening quickly enough, which is why between 2011 and 2015, the government announced a number of measures to help speed the recovery. One of its first initiatives was the Bank of England and Treasury’s Funding for Lending Scheme (FLS), which opened for business at the beginning of August 2012. One year later, the first Help to Buy scheme launched on 1 April, with phase two being rolled out in October. The initiatives were largely welcomed, although there were fears they would lead to a rise in house prices. Regulation continued to dominate the pages of Mortgage Introducer, and in April 2013 the FSA handed over control to the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). 

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FEBRUARY 2010

Government announces plans to scrap Home Information Packs

Many of the rulings in the MMR had already been implemented by lenders, such as a ban on self-certification mortgages, tightened rules around interest-only mortgage and stricter affordability tests. The introduction of the latter gained a lot of attention, with Santander in particular coming under the spotlight for reportedly asking applicants how much they spent on magazine subscriptions, gifts and holidays. The measures introduced by lenders made it hard for many borrowers to obtain a mortgage, and led to reports that applicants were committing fraud by not disclosing all of their outgoings. Another knock-on effect of the MMR was a growing concern around mortgage prisoners – an issue the market is still toiling with today. As the process of obtaining a mortgage became harder, the door to the specialist sector opened once again, most notably to bridging finance. There had been little need for bridging loans and other short-term finance options during the boom years, given the ready access to credit. The MMR, however, had extended the mortgage process and bridging increasingly became appealing. According to West One Loans, gross bridging lending more than doubled in 2011, reaching a total of £911m for the year. The years preceding the Credit Crunch and MMR had seen a power shift between brokers and lenders. As mortgage lending decreased, dual pricing was a contentious issue for brokers, with many lenders accused of offering better deals direct as they looked to take back control of their distribution. HSBC faced wrath for not allowing brokers to access its often market-leading rates. This all changed in 2014, however, when it shocked the intermediary market by revealing it had struck a deal with Countrywide, signalling distribution through brokers for the first time. Just as banks were starting to rebuild their reputation, along came the Payment Protection Insurance (PPI)

FEBRUARY 2011

Help to Buy equity loan scheme launches

November 2005

April 2003 Towergate buys John Charcol out of administration

MAY 2010

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APRIL 2014

FSA fines DB Mortgages £840,000 for irresponsible lending

APRIL 2013

Mortgage Market Review comes into play

www.mortgageintroducer.com


FEATURE

HISTORY scandal, which reached its peak around 2012 with 12,000 complaints a week. In 2015, the FCA fined Lloyds Banking Group £117m for failing to handle PPI complaints fairly. The scandal also forced many firms into the controversial act of phoenixing, where they would enter into administration, leave their liabilities behind and relaunch under a similar name. There was a feeling among some that second charge mortgage brokers in particular had been left to take the rap for the PPI scandal, and not the lenders who sold the products.

10% wear and tear allowance and the introduction of an additional 3% stamp duty surcharge on second homes. Added to this was the 2016 Mortgage Credit Directive, which regulated consumer buy-to-let and introduced tighter affordability stress tests for landlords. The rule changes around portfolio landlords in 2017 dealt another blow to the market. These changes hit the sector hard, but have not brought about the doomsday prophecies that many predicted they would. Both the residential and buy-tolet markets have been helped over the last few years with the exceptionally low interest rate environment, leading to some record low rates. It was also the end of an era for mortgage lender trade body the Council of Mortgage Lenders in 2017. The trade body served the mortgage industry for almost 28 years before being merged with five other bodies – the British Bankers Association, Payments UK, the UK Cards Association, Financial Fraud Action UK and the Asset Based Finance Association – to form UK Finance. The merger was largely a cost-cutting exercise and followed a bank-commissioned review in 2015. In more recent years, the mortgage market has found itself in a similar position in many ways to where it was when Mortgage Introducer first launched. It has have seen a notable increase in specialist lenders, and demand for these types of products will undoubtedly rise in the next few years. Regulation should put the brakes on lenders steering too far into what could be deemed riskier lending, but it is likely the coming years will need to see clever innovation when it comes to helping those who are struggling as a result of the pandemic. There is no denying that the situations brokers and lenders are living through now will certainly claim a large chunk of the mortgage history book in years to come. 21

THE TECHNICAL REVOLUTION: 2016-2020 The last five years have seen the mortgage industry play catch-up in its use of technology. The launch of online mortgage broker Trussle in December 2015 and digital lender Atom Bank in 2016 marked the start of an era where technology would play a bigger part in the mortgage process. Feared by some, revered by others, the growth in technology and so-called ‘robo-advice’ has been the cause of much debate. This last 12 months, however, have been an eyeopener for many when it comes to the opportunities technology can provide. COVID-19 and the subsequent lockdown have forced many brokers and lenders into the unfamiliar setting of working remotely with a new reliance on technology. Lockdown – I think it is fair to say – has demonstrated that advice and technology can go hand-in-hand, and has diminished some of the pre-existing fears. While the last few years have seen a rise in technology, the sector has also witnessed the partial fall of buy-to-let. The 2015 Budget and Autumn Statement delivered a huge blow to this sector, with the government announcing restrictions on tax relief on mortgage costs for landlords, the removal of the

Chancellor George Osbourne announces BTL tax changes

JULY 2015

MARCH 2016 Second charge mortgages and consumer BTL regulated by FCA

Michael Bolton, chief executive of Edeus goes on the run after being sentenced to two years in prison for tax fraud

MARCH 2016

APRIL 2017 Yorkshire Building Society launches lowest ever UK mortgage rate of 0.89%

The Council of Mortgage Lenders closes its doors

MARCH 2020

JULY 2017

The Bank of England slashes interest rates to 0.10% in the midst of the coronavirus crisis

MI

www.mortgageintroducer.com

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REVIEW

1999 I was dreamin’ when I wrote this... John Ahmed chief executive, Movin’ Legal

B

ack in 1999, I was working at Mortgage Advisory Service (MAS) as managing director, and what an interesting time it was, too. As Prince predicted back in 1982, 1999 really was a case of “twothousand-zero-zero party over, oops out of time.” The very first day of 1999 witnessed the introduction of the Euro – from which, thankfully, the UK had opted out – and come May the first election to the devolved Scottish Parliament would take place. It would also be the last time we would write ‘19’ at the start of each year. That might not seem a lot to any Millennials reading this, but for us oldies it was quite something else. As the turn of the century loomed ever closer, for many the end did indeed seem nigh, with the Millennium Bug threatening to bring the century to an end with an almighty bang. The Y2K scare came from wild projections that computers, computer networks and basically any technology with a clock, would face a cataclysmic breakdown once the timer ticked over at midnight on 31 December 1999, as they wouldn’t be able to recognise the year 2000 with their current software. The world was warned that such an event would see a total communication breakdown, nuclear plants failing, reactors melting, rockets accidently firing and planes falling from the sky. It even spawned a whole new Y2K survival industry for the gullible. The public and the press lapped it up, of course, with millions upon millions of column inches devoted to the topic as the year wore on. If you believed what you read, it really was going to be a case of being “oops out of time.” www.mortgageintroducer.com

Quite a bang with which to see in the New Year, then. Of course, when the clocks ticked over nothing of the sort actually happened, much to the dismay of global doom-mongers. 1999 was also the year that saw the launch of PayPal, which at the time was voted as one of the 10 worst business ideas of the year. Somewhat of a turnaround since, given it’s now a billion-pound brand used by over 300 million people worldwide. Doommongers: 0; rest of the world: 2. Back in the world of mortgages, we saw the launch of the UK’s number one print magazine dedicated to mortgage advisers – Mortgage Introducer – and competition was beginning to hot-up, with Norwich Union (NU) making its first foray into lending with the first ever tracker mortgage. Their April launch date was no fool, though, with the deal guaranteeing to be no more than 0.85% above the Bank of England base rate (then 5.25%) and pegged between 5.9% and 6.1% depending on the size of the loan. It was seen as a direct challenge to Standard Life Bank’s 6% mortgage, which had grabbed 15% of the home loan market since the beginning of the year. The NU deal was a win-win for homeowners – if rates fell, so would the tracker rate, but if they rose NU would let borrowers switch to a fixed rate (then 5.94%) at no cost. It was a brave move, and helped pile pressure on the likes of Halifax and the then Abbey National, which had only dropped their variable rates just 0.1% to 6.85% after the last base rate cut of 0.25%. Indeed, 1999 was the start of an expected long run of low interest rates. The average Bank of England base rate was 5.5% and with government 25-year bonds at 4.4%, lenders started to talk about offering long fixed rates of up to 30 years. Barclays had offered a 25-year fixed rate in 1993 at 9.75% (standard rates at the beginning of the decade

averaged 13%-plus), but appetite just wasn’t there. But in 1999, Woolwich – then the UK’s fifth biggest lender – announced a link with California-based Countrywide Credit Industries, the largest independent mortgage lender in the US. Its core product across the pond was a 30-year fix, and the Woolwich was planning to embrace the concept wholeheartedly. Abbey National itself was also making waves, having jumped onto the European bandwagon with the launch of a mortgage denominated in Euros. Oh, for the benefit of hindsight. Yet more change was afoot in the mortgage market, and the Budget saw the removal of Mortgage Interest Relief at Source (MIRAS) starting in April 2000, by none other than Mr ‘Goldfinger’, or was that ‘Eurofinger’, Chancellor Gordon Brown. But perhaps the biggest lasting change to hit the UK mortgage market – and one that would still have consequences two decades later – was another that stemmed from our cousins across the pond. The soon-to-be boom in subprime lending began with financial liberalisation in the US and the repeal of the 1933 Glass-Steagall Act in 1999. The repeal of that act allowed the merging of commercial and investment banking, enabling financial institutions to separate loan origination from loan portfolio. Basically, it meant banks no longer had to keep hold of their own loan portfolios and could sell them on for vast profits, encouraging them to provide risky loans without applying the three Cs to each borrower: collateral, credit history and character. As the US investment banks in the UK had their eyes on higher returns, well, the rest as they say, is history. The world was certainly changing, and so was the mortgage market. The use of internet and email started to become more commonplace, but the way it helps us all today was almost unimaginable 21 years ago. It’s canny how times change, eh? 21

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Intermediary Use Only

CONGRAT ULATIONS to all at Mortgage Introducer

Happy 21st birthday. Thank you for your contribution to the UK mortgage industry.

Make money work for you

Barclays Bank UK PLC. Registered Office: 1 Churchill Place, London E14 5HP.

IBIM10226 November 2020


REVIEW

2000 Finding the value of advice Craig Calder director of mortgages, Barclays

T

he year 2000, or Y2K as all the cool kids called it, proved to be a pretty big year for both Barclays mortgages and the mortgage market in general. It also gave rise to a collective sigh of relief from businesses and IT departments across the world, as the infamous Millennium Bug – which was anticipated to cause global chaos – thankfully proved to be something of a damp squib. The mortgage world was really starting to see a rise in the private rented sector in the year 2000. This came on the back of the growing profile attached to what was still a relatively new product type – the buy-to-let mortgage. This was driven by growing confidence in the housing market, the decline in personal pensions, and the need for alternatives to underpin future income and offer inflation-proof capital growth. Typically, investors at that time were private households buying a small number of homes to rent, although property companies were emerging to build more significant portfolios. With increasingly complex product ranges being constructed throughout the mortgage market, the value attached to independent mortgage advice really started to rise at this point. This rise was dramatically changing distribution dynamics. Networks and mortgage clubs were being formed and growing in stature. More packagers were appearing, and all these distribution outlets were becoming increasingly important for a growing number of lenders around this time. From an internal perspective, August 2000 saw Barclays take over the recently de-mutualised Woolwich PLC, formerly the Woolwich Building Society, in a £5.4bn acquisition. The Woolwich name was retained after the

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acquisition, as it subsequently became the mortgage brand of the Barclays Group – one that lasted many years. In product-related news, 2000 saw Barclays become the first UK high street lender to launch the ‘offset’ concept, although this was a product first pioneered in Australia during the early 1990s. To get a better idea of how this came about, let’s take a little trip further back in time. In today’s mortgage market, it’s relatively common practice to make overpayments, underpayments, or even take a payment holiday, but it took the introduction of the first variable mortgage in 1994 to offer borrowers a degree of control over their finances. The beginning of this flexible approach to finance and mortgages was further enhanced by the introduction of the current account mortgage in 1997. However, the drawback is that all the accounts are pooled into one account, which can leave some borrowers feeling somewhat uneasy about having a giant overdraft facility and being so far in the red. This led to the next generation of flexible mortgages: the offset. Over the years, offset has become an integral part of our mortgage range, and enabled borrowers to have a greater

degree of control, flexibility and ease of access to their money. This is in no small part due to the substantial rise in the number of contractors, small business owners and the self-employed – all of whom have been long-time advocates of the offset facility. A recent study from the Institute for Fiscal Studies highlighted how selfemployment has grown steadily since 2000. This rise is said to have largely been driven by a rise in ‘solo selfemployment’ – own-account workers without employees – who now account for one in eight workers. This means that the offset is even more relevant as a product type in 2020 than it was in 2000. 20 years is a long time, and we have seen a huge amount of change throughout the mortgage market, much of it positive and some negative, over this period. One huge positive is the continued emergence of the intermediary market and the increasing importance of the advice process. Even when looking 20 years down the line, while practices and processes will inevitably change, I still expect the value of advice to remain the backbone of the mortgage journey. 21

Thankfully the Millennium Bug hype proved to be something of a damp squib

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REVIEW

2001 Two ideas that shaped our thinking Steve Carruthers principal consultant, Iress

T

he year is 2001, and as a young(ish), enthusiastic and regular technology adopter with my spanking new Nokia 3395 and Apple iPod, I embarked on my very first role within the world of intermediary mortgages as a key account manager at RBS looking after Openwork and Connells. The next 20 years would take me on a journey of growth and achievement at RBS, NatWest, Ulster Bank, Aldermore and Newcastle Building Society, before taking up my current role at Iress in 2019. Back in 2001, Iress Market Technology Limited had just completed its first year of trading on the Australian Stock Exchange. Since then, it has grown to become a leading technology provider across financial services in markets spanning Australia and New Zealand, South Africa, Canada, Asia, France and the UK.

As I was starting my career with leading edge devices like the iPod in my pocket, the green agenda was producing another innovation in 2001 that would come to be a world first. Co-founded by Sir Tim Smit, the Eden Project in Cornwall opened its doors to the general public that year. Born from a clay pit, it has become a world famous visitor attraction and educational charity, and is one of the leading attractions in Cornwall. Since it opened on 17 March 2001, the Eden Project has contributed £2bn to the local economy and welcomed 20 million visitors. Its blend of technology and vision for a greener future has come to influence current thinking as much as the technology we enjoy. Steve Jobs and Sir Tim Smit in 2001 had embarked on work that would shape the way we think about the world we live in.    If you don’t believe me, look at two recent pieces of news. In his speech in November, Rishi Sunak’s vision for the nation’s financial services sector postBrexit included among its four themes technology and sustainability.

TECHNOLOGY REVOLUTIONS

My love of new technology has accompanied me throughout my career. I have worked through technological revolutions in banking services and products. Technology has underpinned almost all of the innovation in the mortgage industry over the last 20 years – and certainly since 2001 – from the advent of daily interest calculations, offset mortgages, and broker case-tracking to applications submitted via apps. The automation of mortgage origination and servicing is ongoing, and is something I am now proud to be a part of.  But if technology started as a way of improving the products and services we take for granted now, its remit grew to embrace other benefits including that of sustainability. www.mortgageintroducer.com

Technology’s remit has grown

The COVID-19 pandemic we are living through today has facilitated a shift away from cash towards contactless payments to open up the potential growth in the use of cryptocurrencies – something that featured large in Sunak’s vision. He set out plans to mandate disclosures for large companies and financial institutions by 2025, and to implement a new system of classifying activities to be defined as environmentally sustainable. He also announced he would, subject to market conditions, issue the UK’s first Sovereign Green Bond next year. SUSTAINABILITY AND TECHNOLOGY

At the same time as this speech, the legacy of the Eden Project was also making the news in modern day politics. Leading business and education figures united to urge the Prime Minister to harness the opportunities of the Eden Project North, among other initiatives, to fulfil the government’s 10-point green industrial revolution plan. The Eden Project North can offer economic, environmental and social benefits for Lancashire and the wider North West region, as well as contributing to the wider levelling-up agenda and the government’s 25-year Environment Plan.    Sustainability and technology were news in 2001, but they are now embedded in much of the thinking nationally and in financial services, and are central to our thinking at Iress. Technology has to play a significant role in delivering a greener future. Helping cut carbon emissions through reduced travel by facilitating remote and seamless business has become less a fringe benefit of technology, and instead a core deliverable.   Amongst all these big trends, we should not forget the rise of Mortgage Introducer, which I’m pleased to include in that group of sustainable good ideas.   Happy Birthday to you. 21

DECEMBER 2020   MORTGAGE INTRODUCER AT 21

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REVIEW

2002 Knock-on effects Bret Jackson director of operations, Lifecover.com

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n 2002 I had already made the transition from a tied financial adviser with Royal London, to independent status. The demise of the tied adviser was well on its way, and independent was the way forward, for many at least. The firm I was working for certainly had different compliance procedures to what I was used to. Hence, I left being an adviser. Some of my mortgage colleagues were frantically working through their CeMAP qualifications, already established as the industry standard, but I clearly had other ideas.

“At the beginning of 2002, the effects of 9/11 were still being felt across the world. Corporate casualties were inevitable” Still wanting to conduct mortgages with my clients, I went and sat the Chartered Insurance Institute (CII) equivalent of the CeMAP bridging paper, the little-known Mortgage Advice Qualification (MAQ). This was to CeMap like Zune was the Microsoft equivalent of the iPod that nobody remembers. I think I have now removed it from my CV. AFTERMATH

At the beginning of 2002, the effects of 9/11 were still being felt across the world. Corporate casualties were inevitable. US Airways, the seventh largest airline in North America, went under, and WorldCom filed for bankruptcy protection following the largest accountancy fraud investigation at the time, equating to over $11bn in www.mortgageintroducer.com

overstated figures – to name just two illustrative examples. South American nations were also pushed to the brink of collapse. Uruguay’s situation was so severe that its cash machines stopped working – luckily the IMF came to the rescue, for them and Brazil. Argentina was also on the edge, but that is nothing new. The aftermath of 9/11 also brought about a very memorable speech by then US President, George W Bush. We all laughed and joked about the world’s most powerful nation choosing him as leader, but fast forward to 2016, and we were laughing even more. Bush’s ‘Axis of Evil’ speech led to wars and hostilities across the globe, costing more than just dollars along the way. EUROPE

Closer to home, the Euro became the currency for 12 of the European Union’s members. No more Francs, Lira or Pesetas for British holidaymakers to use whilst enjoying their Sunday roast in the Red Lion in Benidorm. Now they could travel to a variety of nations and keep their change for next year, rather than queuing at Thomas Cook and moaning about the commission. Whilst the Euro has its benefits, the Pound is a fundamental currency for trading purposes, and it has always felt like the UK would never lose its sovereignty. Throughout the pandemic we are currently experiencing, the government and Bank of England have been able to make rapid decisions that do not involve other nations. In addition to the Euro, the European Union voted to add an additional 10 new member states. Again, the EU has some excellent benefits, but also some major flaws, which would bore you to tears and reach well over the word count of this article, if I was allowed to ramble on. INTERESTING EVENTS

I am using the word ‘interesting’ loosely here, but I couldn’t think of

another that would fit. On researching 2002, I was a little shocked to find the following all occurred 18 years ago:   The Queen Mother passed away   Brazil won the football World Cup in Korea Republic and Japan   Queen Elizabeth II celebrated her Golden Jubilee   Tony Blair was Prime Minister   The films Harry Potter and the Chamber of Secrets, Gangs of New York, Ice Age, Star Wars Episode II and Lord of the Rings: The Two Towers were all released in cinemas How old do we all feel now? LIFE INSURANCE

Now, back to my industry. Even though longevity in countries such as Japan and Switzerland is greater than the UK, according to an article in Cover Magazine the UK has the cheapest life insurance premiums in the world. Since 2002, premiums have continued to fall, despite costs for other forms of insurance increasing. In June 2002, Zurich’s 20-year level term for a male smoker aged 40, with a £134,500 sum assured, had a monthly premium of £141.40. Now it is £92.76. If you factor in inflation and the increase in insurance premium tax (IPT), this is a significant decrease. Granted, not all scenarios have seen a decrease, but in general the trend has been downwards. The improvements and enhancements to the protection market since 2002 have been incredible. Critical illness (CI) and income protection (IP) policies are unrecognisable. So it is still puzzling why so many families feel it is not a necessity to protect their loved ones, but will happily insure a watch or jewellery against theft. Protection products are constantly evolving. One of the reasons Lifecover. com was formed was to provide a fully advised proposition, to ensure people obtain the level of cover they require, throughout their life journey, and not just for a one-off. 21

DECEMBER 2020   MORTGAGE INTRODUCER AT 21

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REVIEW

2003 Pandemics, fixed rates and tech innovation Karen Rodrigues sales director, ULS

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eputedly it was Mark Twain who said, “History never repeats itself, but it rhymes.” If looking back at a particular point in time proves anything, it is that some themes and events persist in the present day. Pandemics, long-term fixed rates and technology were all big news in 2003. In February, the world was dealing with the outbreak of a new virus in China that sent shivers through world financial markets. SARS, an airborne virus, spread through small droplets of saliva in a similar way to influenza, and was the first severe and readily transmissible new disease of the 21st Century that showed a clear capacity to spread rapidly via international air travel. At the time, what scared people about SARS was the mortality rate. People didn’t take public transport, stayed away from work, stayed away from shops, restaurants, cinemas and conferences. The impact was massive on the economy, but almost all of it indirect, due to the precautionary behaviour of the population. Sound familiar? Closer to home in the mortgage market, there were yet more familiar themes. By January 2003, there were an estimated 275,500 buy-to-let (BTL) mortgages outstanding, worth a total £24.2bn and accounting for around 3.5% of all residential lending. In response to the February cut in the base rate to 3.75% – the first change since November 2001 – lenders cut mortgage rates, a trajectory that would continue until the present day. Figures showed that fixed-rate mortgages had become much more popular, www.mortgageintroducer.com

accounting for 47% of new lending during the month, compared with 30% in the previous year. Yet probably the most significant event for the market was the then Chancellor’s announcement of a review examining why long-term, fixed-rate loans formed such a low proportion of UK mortgages. Gordon Brown tasked David Miles with analysing the supply and demand factors which limited the development of the fixed-rate mortgage market in the UK, especially around why the share of fixed-rate mortgages in the UK was much lower than in the US and many other EU countries. 17 years later, Boris Johnson has just asked UK banks to find a way of delivering a 25-year fixed-rate mortgage for the nation’s future first-time buyers. While the debate about long-term fixes rumbles on, some inventions of 2003 went on to have far-reaching and rapid impacts on our lives, especially in the world of technology. We are all familiar with LinkedIn which launched in May 2003, and the VoIP service Skype that went public in August of that year, a precursor to the tech that we all rely on so much today. After rising to prominence in just a few years, Google was fast becoming the company to beat, and Bill Gates apparently offered to merge Microsoft and the search engine together – an

offer that was turned down. Later in the year Google announced plans to float on the stock market. Not wanting to be left out, Apple took a significant step towards its domination of the new digital music market, announcing the launch of the iTunes store at an event in April. More than one million music downloads were made through the store within just two weeks in the US. Arguably the most significant technological innovation of 2003 in the UK mortgage market was the birth of eConveyancer – offering a comparison platform for mortgage intermediaries and customers. Today, the most recent iteration of the platform is in regular use by thousands of mortgage advisers and customers to source and instruct conveyancing, surveys, wills and more. Along with its newer sister product, DigitalMove, the eConveyancer offering has become an essential intermediary tool in these pandemicstruck times. While there are some similarities between 2003 and today, things have most definitely moved on for the better over the years. When we look back at that year, we should take the time to remember how much of what we take for granted now was started then. Throughout the period, eConveyancer has been there to help brokers, conveyancers and customers do better business. It may not be eConveyancer’s 21st birthday quite yet, but in the meantime it’s our pleasure to say Happy Birthday, Mortgage Introducer. 21

Technological innovation has moved fast

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REVIEW

2004 M-Day to B-Day Michele Golunska chief executive officer, Sesame Bankhall Group

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f you ask someone who’s been working in the mortgage industry for the last few decades to name a key milestone in 2004, then M-Day will probably be the answer. However, other events took place that year that have also had farreaching implications, not just for how we work, but also how we live. This is not to overlook the impact of M-Day on 31 October 2004, when the Financial Services Authority (FSA) took over responsibility for the regulation of mortgage lending and advice. However, two other events earlier that year are also worthy of note. The social networking service Facebook launched as TheFacebook on 4 February 2004. In the same month, Skype introduced its first conference calling facility. These developments probably passed largely unnoticed at the time, but their impact today is indisputable. 2004 could be described as the year that people and businesses around the world became truly connected. This is incredibly relevant to our lives today, and we’re seeing the positive effects even more in a COVID-19 world, where the importance of remote communication and online purchasing

TheFacebook in 2004

www.mortgageintroducer.com

has increased. What really resonates is the way businesses talk to their customers, and how people virtually connect with others. The way in which customers consume information and businesses use data has completely changed over the past 16 years. We’ve seen a shift away from paper to digital, and from post to online journeys – often personally tailored. Greater emphasis is now placed on life outcomes, with lived experiences – alongside familial possessions – seen as holding the highest value. Financial advice has supported this change in behaviours and values. Advisers centre their services around each individual’s personal goals. For example, what type of life do you want in retirement? How important is it that your family are protected? These conversations mirror the ongoing changes influenced by social media in how people communicate, measure success or make purchases. People increasingly expect to experience a personalised service. This is something that plays to an adviser’s strengths, given their skill in recommending a solution that’s tailored to the needs of each individual customer. We see advisers not only helping customers achieve a single outcome, such as purchasing a home, but also ensuring they protect it should an unexpected event occur. Advisers can do this by helping their customers to understand the risks when taking on debt, along with how these risks can be mitigated through appropriate protection cover. It’s a constant challenge, because customers have many choices to make in life. Technology, in the form of digital tailoring, secure messaging, graphics and product sourcing, now helps advisers to communicate with customers throughout their relationship, in a proactive, relevant, and timely way. This drives better customer outcomes.

Technology has enabled us to drive for increased consumer engagement and advocacy. If you take mortgages as an example, this has translated into people being able to instantly check the value of their mortgage account, or find out when their fixed-term deal ends, or their additional borrowing capacity. This year has seen an encouraging increase in adviser contact with their existing customer base. It’s enabled advisers to help their customers obtain new mortgage deals when their existing one comes to an end. Many advisers have seized this opportunity and restructured their business accordingly. It’s a trend we expect to see continue in the future. We’re also seeing many more virtual conversations, and the confidence that business can be done without having to meet the customer in person. Some of the previous stumbling blocks have now been overcome, such as the acceptance of digital signatures and photo IDs. Furthermore, customer data can be gathered and increasingly used multiple times across different products, helping ensure the right selection is made for the customer. Advisers can now see the full range of products available – in one place – making the selection for the customer far easier. TECHNOLOGY IMPACT

Evolution is all around us, but what’s remained constant is the value and role of the adviser in obtaining good outcomes for the customer, along with the trusted relationships that advisers are skilled at building and nurturing. Many of these relationships are long-standing and support a variety of complex needs for the customer and their family. Technology will play an increasing role in the life of an adviser. We embrace this and see digital technologies used as an overlay with adviser services – not a substitute, but an enabler. 21

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REVIEW

2005 Bench warmer to table warmer Terry Pritchard director, Charter HCP

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005 was a year of highs and lows. The major news stories were the devastating tsunami which dominated the headlines in the early part of the year, and Britain’s joy at London winning the right to host the 2012 Olympics and Paralympic Games. However, this was immediately tragically flattened by the terrorist attacks in the capital on 7/7. This was a devastating day for all of us involved and close by. It was also, more importantly, a tragedy for the families who lost their loved ones. It still makes me feel emotional now that innocent people lost their lives for a terrorist statement. On a brighter note, at least if you’re a cricket fan like me, England defeated Australia 2-1 in the Ashes for the first time in 16 years. My son Tom – who is a co-director with me at Charter – is my oldest offspring, and not a cricket fan because of an alleged incident in his youth whereby I subjected him to a barrage of quick(ish) bowling with nothing more than a £3.99 piece of timber with which to protect himself. In 2005, he was preparing for sixth form, and the other three were causing varying degrees of chaos in my life.

2005: Not the most memorable year

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The pubs in England and Wales were permitted to open for 24 hours, which I know not only made me happy but most of the industry – by 2006 many were turning into nocturnal creatures with pale skin and deep-set eyes. Many of these can still be seen at dinners and other industry events, normally in the corner with their arm stretched out for another top up of the free (£300 per head) Pomagne labelled as House Champagne! Two additional interesting (or not) events occurred: 1. The launch of the unmanned Cosmos 1 failing. 2. YouTube was launched on the World Wide Web ready for Christmas... and has since grown into a platform for all sorts. Putting world (and personal) events to one side and looking at the industry in general, 2005 saw the way that we bought and sold insurance products – from buildings and contents and pet cover to critical illness and dental plans – undergo a major shake-up when the Financial Services Authority (FSA) became responsible for regulating the firms selling such products. At the same time, I was running a now defunct packager called Chase and working with a number of other potential lenders in the much-maligned sub-prime market. Oh dear, I’ve mentioned the banned words sub and prime in the same sentence. Let’s not be coy about it, 2005 was the height of this sector of lending,

and the US had landed on our shores, trying hard to take over by force. I think it was this year when a very prominent industry leader stood on a stage and made a comment about the Americans having a “big swinging dick mentality.” A statement which I must confess made me laugh a lot. However, his bosses from across the pond found it a little less funny, and promptly banned him from speaking to the press for a while. It was also the year that the any mortgage came to market. Yes, this really did exist, and I will not embarrass a good friend by naming the lender. What I will say is that any product allowing any amount of arrears and any amount of County Court Judgments (CCJs), along with self-certification of income and a rate that was equivalent to the Halifax 5-year rate, was asking for trouble. The fact is, coming back to earth with a bump, this was the beginning of the end as the quality of securitised book sales went off a cliff. Unfortunately, the rating agencies and the buyers of these books – mainly pension funds in Europe – took two years to find out, and by this time the door may have been shut, but the horse had bolted and was running in the 3.30 at Fontwell. The simple facts are that 2005 was the catalyst to the tragedy that occurred two years later, and I sorely wish I had listened to my own advice and planned better for the crash. On the positive side, at the time we were writing 300 mortgages a month and I was as well off as I was ever going to be. Was 2005 a good year? Probably, but not the most memorable. Unfortunately, that year was already taken, as the hierarchy has me as a late fill-in as usual. But there you go that’s always been my place in life: the bench warmer, always the bridesmad, and jack of all trades, master of none. Perhaps somewhere in there is a new category for next year’s Mortgage Introducer Awards? 21

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REVIEW

2006 The year bridging took hold of lending Paresh Raja CEO, Market Financial Solutions

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he UK bridging industry has experienced significant growth this century. In less than two decades, bridging loans have transitioned from relative obscurity to worthy alternatives for businesses, property buyers and brokers. As a result, the market is now worth over £4bn. It is difficult to pinpoint exactly when bridging first came to prominence. Most commonly, people associate the rise of bridging with the more general growth of alternative finance, which was largely born out of the 2008 Global Financial Crisis (GFC). In the aftermath of the GFC, banks introduced stringent lending criteria, reducing the number of products available or the number of people who could access them. In response, specialist finance firms emerged to fill the gap in the market – bridging lenders were chief among them. Suddenly, finance brokers and their clients were able to access loans that could be deployed quickly and, importantly, could also be tailored

2006: The beginning of the bridging boom

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to meet the needs of the individual borrower. Free from the more rigid application process associated with mortgages, bridging loans could also adapt to people’s complicated financial profiles and circumstances. However, at Market Financial Solutions (MFS), we had already noted before the GFC that there was growing awareness of and demand for these specialist finance products. It is therefore worth tracing the bridging boom back further – specifically, to 2006. BRINGING BRIDGING INTO THE 21ST CENTURY

Prior to 2006, the bridging sector was not an established entity. There was little visibility in a lending market dominated by large banks and mortgage providers. In reality, bridging loans were seen as an expensive form of borrowing, only to be considered when all other options were completely exhausted. Nonetheless, the rise in demand for UK property in the 2000s led to a subsequent rise in demand for lending solutions. At the time, property investors were after finance that could be deployed quickly to fund renovation and refurbishment works. There was also rising need from developers for commercial finance that could be tailored to meet the timelines of individual projects. This all came to a head in 2006. As banks struggled to meet calls for fast and tailored loans, brokers, investors and businesses began seeking out other options. Heeding the call, a handful of business leaders with proven experience in the financial services industry launched companies focused on the arrangement and deployment of bridging loans. 2006 was a standout year for the UK property market, which is part of the reason why bridging was able to quickly claim a proportion of the

lending sector. According to HMRC, 140,000 monthly home sales were taking place by the middle of year – a record amount that has yet to be surpassed. The property market was alive with activity, triggering a competitive market that ultimately worked to the borrower’s advantage. In October 2006, Datamonitor estimated that the total amount of outstanding bridging loans was £1.2bn. This is an impressive figure, given the relative infancy of the sector. What’s more, Cheval Property Finance estimated in 2005 that the bridging loan sector was on track to grow at an annual rate of 25%. LEADING FROM THE FRONT

MFS was established in 2006 as part of this new wave of modern, innovative bridging lenders. The decision to launch at a time when the property market was alive with activity ensured that MFS was able to establish its credentials and work with brokers and property investors to provide specialist finance solutions. In fact, the decision to launch the bridging arm of MFS came from demand from previous commercial clients for this type of loan. Based on our experiences, while the GFC accelerated the industry’s growth, 2006 was the year that the bridging sector was able to redefine itself as a viable finance alternative to traditional mortgage providers. Lenders like MFS challenged traditional misconceptions about the industry by demonstrating why bridging loans are an innovative form of finance that can stand alongside other products like mortgages. Since then, MFS has worked closely with the National Association of Commercial Finance Brokers (NACFB) and Association of Short Term Lenders (ASTL) to assist in the creation and promotion of an industry standard that all lenders can adhere to. Moving forward to 2020, even when faced with a global pandemic, the bridging sector has once again proven why it is a credible form of finance for those looking for options beyond the high street. It has been an exciting and rewarding journey, and I look forward to seeing the industry reach new milestones over the coming years. 21

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REVIEW

2007 Some things haven’t changed Matt Smith

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managing director, WPB, chief content officer, WHJE

007 heralded some seismic cultural and economic events. Harry Potter and the Deathly Hallows was published, closing a series of books that are still enjoyed the world over, and Steve Jobs announced Apple’s first-generation iPhone, an invention that has changed the way we behave and the way we work.

But no trip back to that time could be complete without mention of the Global Financial Crisis (GFC), which heralded a moment when the West came as close as it ever has done to destroying its financial way of life. The medicine dispensed to the UK plc at the time continues to be administered to this day.

My own experience of the impending crisis in 2007 started in a conference call with a well-known US investment bank and colleagues from a high street bank, discussing how a new sub-prime lender might work for the various parties, and the practicalities of bringing such an entity to market. In an unprecedented act of handsoff management, in my experience anyway, the gentlemen on the call from the US relayed that they were relaxed with us in the UK progressing without their customary intensive oversight. My colleague and I looked at each other, somewhat surprised, and I mouthed ‘something is wrong’. I didn’t know what, of course. I thought perhaps it was another Enron moment, but days later the Financial Times ran a graphic showing that the market capitalisation of several US investment banks was deteriorating at a pace. The rest, as they say, is history. The sub-prime mortgage market was imploding as investors became rattled by the sudden unravelling of their mortgagebacked securities. For the first time in history, we had contrived to tie together investment and debt products in a manner www.mortgageintroducer.com

and at a scale that was unimaginable before, and with devastating results. In the short-term it had helped maintain a house price boom. In the longterm it did not. A rise in the number of borrowers defaulting was the start, and as the housing market in the US stumbled, the repackaged mortgage investments became toxic. No one knew who held the bad debts. Banks became wary of lending to each other, and what compounded the problem was that all mortgage assets were tarred with the same brush. That UK assets continued to perform relatively well was irrelevant, the herd had moved and was voting with its feet. As the first few small stones began rolling down the mountain, an avalanche began that closed the money markets and triggered large-scale panic. There was an exciting run on some banks – a thing I had previously only seen in Westerns. I remember calling Matt West, who was working at Mortgage Introducer at the time, and describing the perestroika-esque queue outside the Northern Rock branch at Moorgate. The avalanche went on to crush the securitisation markets, but more importantly put a knife through economic confidence. Very soon, Bear Stearns and then Lehman were no more. AIG fell over and

we all had an opportunity to reflect on the prospect of the end of the world as we knew it. These, of course, were the good old days before the pandemic, when tragedies and disasters were of our own making and therefore could actually be sorted out, to a degree, by our own doing. Even so, such was the scale of this mess that the reverberations are still felt today. Many of the schemes dreamed up by central bankers and policymakers back then are still supporting our way of life now, though we wonder how much more central banks can really do when interest rates are practically negative. Intervention is now conducted through fiscal levers, but it remains the go-to strategy for the UK. Adam Smith’s invisible hand is not only out of sight, but pretty much out of mind, and Margaret Thatcher’s free markets and small state are part of a dim and distant past. Bigger government, bail outs, quantitative easing, and historic low interest rates came about, and stayed. Many of the things we experienced for the first time in 2007 continue shaping our lives, our attitudes and thinking. So, Happy Birthday to you all at Mortgage Introducer. Like an epic dose of quantitative easing, long may you continue. 21

An avalanche of bad debt put a knife through ecomomic confidence

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REVIEW

2008 Parallels and parables: Lessons from 2008

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£200 2008 Q2

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he year is 2008 and Barack Obama is elected as the first black President of the United States, with a certain Joe Biden as his running mate. In the UK, Boris Johnson is making news headlines as he becomes Mayor of London. It is also the year that more2life made its debut on the equity release stage, with funding from the one of the largest asset management firms in the world: Lehman Brothers. Against this backdrop, the world is about to be plunged into a crisis the like of which has not been felt for almost 100 years. Fast forward 12 years, and there are some uncanny parallels, not least the emergence of yet another worldwide crisis – again not seen for 100 years – that has plunged economies into uncertainty and made the future less predictable than we would like. The collapse of firms once thought ‘too big to fail’, like Lehman Brothers in 2008, was certainly a body blow for more2life. Indeed, the entire equity release market in the UK suffered greatly as a result of the financial crisis in 2007 and 2008, and the so-called ‘Credit Crunch’ that followed. Lenders disappeared from the market, – perhaps most notably Northern Rock, a significant casualty of the crisis – and options for clients shrank drastically. The chart provided shows how the Credit Crunch impacted on equity release lending volumes for several years, not fully recovering and surpassing 2008 levels until the middle of the decade, before accelerating quickly over the last five years. Once again, as in 2008, confidence was knocked out of the equity release

2008 Q1

marketing director, more2life

Millions

Stuart Wilson

established ourselves as an important new lender in the market. Today, we have become the largest lender by volume and expanded our proposition across five funding partners and more than 60 product options. What lenders like more2life learned market, with COVID-19 slashing throughout the financial crisis of lending volumes in Q2. But despite 2007/08, and its aftermath, was the the ongoing challenges the pandemic importance of focusing on creating presents us with, lending activity robust lending propositions, investing bounced back significantly in Q3, and in technology to streamline lending we should end the year on a par with processes and delivering modern, where we were at the end of 2019. Not flexible lending options that could meet a stellar year for the market, perhaps, burgeoning consumer demand. but a result I think many of us would Indeed, our own online solution of 21sthave Supplement thought unlikely back in the early paperless applications and e-signatures dark days of the first lockdown. was so well-suited to the COVID-19 Strap: 2008 release is now, without Equity crisis that there was barely more doubt, a mainstream later life financial than a few days’ interruption to our Page: 31 planning tool. Since the introduction new business operation while remote for pension freedoms in 2015, for valuation processes were agreed with Pic: Stuart Wilson, marketing director, more2life example, one pound in every three funders and deployed in early April, released by retirees has come from just one week after lockdown started. Headline: Parallels and parables – lessons from 2008 housing wealth, compared to that Financial crises are a regular feature Thereleased year is 2008 and Barak Obama is elected as the first black president of the United States, with a through flexible pension of our market, whatever the underlying certain Joe BidenThe as hisimportance running mate. Johnson is making as he us drawdown. of In the UK, Boriscause – the lessonsnews eachheadlines one teaches becomes Mayor of London. It isofalso the year that more2life its debut on the equity release housing equity in terms delivering need tomade be remembered. stage, with funding from the oneisoffar themore largest asset management firms thedid world Lehman a more secure retirement 2008 dented – in but not–deter – the Brothers. pronounced today than it was 12 years inevitable rise of equity release, and the and that is intopart a reasoninto fora crisis thepandemic ofbeen 2020felt will Andago, the world is about be plunged like of whichcrisis hasn’t forsimilarly almost 100 the resilience the market has shown only pause, not permanently restrict, years. through this new crisis. further growth. Fast-forward and thereofare some uncanny parallels, not leastthat the lending emergence yet another While 12 theyears availability funding We predict willofgrow to worldwide crisisin – again seen following for 100 years – thataround has plunged economies intoproviding uncertaintythat and – critically shortnot supply £4.7bn in 2021, made future less predictable to as think generallycontinue is. thethe financial crisis 12 yearsthan agoperhaps – was we likewe an itindustry to focus on arguably a bigger existential threat to consumer outcomes. The collapse of firms once thought “too big to fail”, like Lehman Brothers in 2008, was certainly a the equity release market than a virus, Consumers will continue to look body blow for more2life. Indeed, the entire equity release market in the UK suffered greatly as a these two events have nonetheless for lending solutions to help fund result of the financial crisis in 2007 and 2008 and the so-called ‘Credit Crunch’ that followed. Lenders demonstrated the robustness of a retirement. With later life lending set disappeared from the market (perhaps most notably, Northern Rock – a significant casualty of the market that has been able to meet to be valued at around £300bn by the crisis) and options for clients shrank drastically. substantial threats and bounce back to end of this decade, the equity release consumer demand. marketonwill play an important role infor Themeet following chart shows how the Credit Crunch impacted equity release lending volumes And what more2life? delivering moreoffinanciallyseveral years, not of fully recoveringWe andresurpassing 2008 levels untilbetter, the middle the decade before emergedquickly with new and quickly secure retirements for our clients. 21 accelerating over funding the last five years.

Once again, as in 2008, confidence was knocked out of the equity release market, with COVID-19 DECEMBER 2020   MORTGAGE INTRODUCER AT 21us with, 31 slashing lending volumes in Q2. But despite the ongoing challenges the pandemic presents lending activity bounced back significantly in Q3 and we should end the year on a par with where we were at the end of 2019. Not a stellar year for the market perhaps, but a result I think many of us would have thought unlikely back in the early dark days of the first lockdown.


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REVIEW

2009 Too much happened in 2009 and I struggled to fit it all on one page. So, here’s my 2009-themed take on Billy Joel’s ‘We Didn’t Start the Fire.’ Feel free to sing along. Millie Dyson

The Year 2009

Head of Marketing & Communications at MT Finance

Farah Fawcett, Federer, flash floods, Hubble repair Stephen Gately, Lisbon Treaty, Rio named as host Boko Haram, Swine Flu, Matt Smith Doctor Who Twilight Saga, Lady Gaga, Patrick Swayze’s ghost Octomom, Labour cash, Taylor Swift, Hudson crash Ice Age, Roman arrest, North Korea nuclear test Half Blood Prince, Big Freeze, Barack wins White House keys Single Ladies, Stig reveal, Prince of Pop laid to rest Chorus This is 2000 and 9 GDP is burning Recession still turnin’ This is 2000 and 9 BoE don’t like it Printin’ pounds to fight it Amanda Knox, Avatar, Santos signs up Neymar The Hangover, Slovakia, Ledger Oscar Hadron, Woolworths gone, Ares rocket, Richardson Grand Slam Ireland win, bombs in Jakarta Air France, gamma rays, Kanye at the VMAs Exoplanet, Carol-Ann, Lunacy, Pakistan Farmville, Phoenix raps, Stan Lee Day, Grant Shapps Record snow, rates so low, Icelandic bank collapse <repeat chorus> Katie Price, Bel Paese shook, Ben Bernanke, Netbooks Bitcoin, Wogan goodbye, no Russian gas supply Chrysler, Jenkins draft, attempted coup d’état Climate change, Pratchett knighted, Sri Lanka stops the fighting Captain Philips, Glee airs, Pirate Bay, Lloyds Bank shares Windows Worm, Wolf Hall, U2 360 tour Bushfires, Black Eyed Peas, Obama Nobel Peace Lionel Messi, Juan’s brawl, roommates on Jersey Shore <repeat chorus> Bulletproof, Chris Brown, Brewdog Dragon turndown Acas, HBOS, he’s back Jonathan Ross Trialling HIV vaccine, Susan Boyle dreamed a dream Foot fault, Hull’s in, Usain Bolt in Berlin Heathrow, Grindr launch, Tiger Wood’s been texting raunch RBS, stocks a mess, the Consumer Price Index <repeat chorus> Lindsay strike, Balloon hoax, Hawking’s party a no-show Iraq, Attack, Skeleton, Nutt sacked Gordon, Dugard, night club fire, declare of ceasefire Deadly Taiwanese typhoon, they’ve found water on the moon England’s Ashes, 3GS, Edward Woodward, ONS Pirates fight, Armstrong lies, Bale, Rage, The Blind Side Summertime solar eclipse, Barbara Windsor calls it quits Mon Mome 100-1, MPs on the ruddy rob This is 2000 and 9 GDP was burning Recession still turnin’ This is 2000 and 9 Rates cut so low When will they all grow, and grow, and grow, and grow...

21

www.mortgageintroducer.com

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10 YEARS OF SPECIALIST LENDING

Celebrating 10 years of specialist lending solutions Supporting you yesterday, today and tomorrow, through the good times and bad. Weâ&#x20AC;&#x2122;ve launched a wide range of new products across our Residential Mortgages, Buy to Let Mortgages and Bridging Finance ranges.

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FOR INTERMEDIARIES ONLY. Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales with company number 06749498. Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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REVIEW

2010 10 years of specialist lending Alan Cleary group managing director, mortgages, OneSavings Bank

T

his year marks a decade since we first launched, and a quote I read recently by Bill Gates really struck a chord with me: “Most people overestimate what they can do in one year and underestimate what they can do in 10 years.” I’m not comparing myself with Gates, but I know where he’s coming from – it’s only when you look back that you realise just how far you’ve come and how much you’ve achieved. It was back on 20 May 2010, in the aftermath of the Credit Crunch, that we quietly launched a new specialist lender from a cramped office in Wolverhampton. The market looked very different to the way it does today, and many people questioned our judgement in launching a buy-to-let lender into a market which was battered and bruised after taking a real beating post-2008. However, we’d been watching the market at very close quarters and had developed a deep understanding and insight into mortgage credit. We passionately believed there was a gap in the sector for customers who were struggling to secure a buy-to-let mortgage because mainstream lenders’ criteria was so strict. We weren’t trying to reinvent the wheel; we simply wanted to bring new choice to a market that had been starved of funding for a number of years following the Credit Crunch. Our underwriting criteria was similar to the high street, while our lending approach was equally responsible and rigorous, but our unique selling point was that we offered a new, dedicated source of funding for borrowers who could prove their income and affordability, but who were being squeezed off the high street for something as trivial as, say, having www.mortgageintroducer.com

missed a single credit card payment six months earlier. After launching with just a handful of buy-to-let products, the early months were certainly a rollercoaster ride. We started with a team of 27 people and our telephony service consisted of just one person. I remember when we first launched, I would nervously ask them every day, “Have we had an application yet?” only to be told no. It seemed to take an eternity for that first case to come, but once it did, things really started to take off. We were able to offer residential mortgages later the same year, all the while remaining completely focused on writing good quality, responsible loans. We extended our offering in 2011 by introducing bridging finance, concreting our proposition by partnering with packager and solicitor firms to make our brand more visible and the products even more accessible to customers. The introduction of second charge loans in 2013 meant brokers had even more choice in finding the most suitable solution to meet their customers’ circumstances. In case you’re wondering, that same person who made up our telephony team in those early days is still with us more than 10 years on, only now they’re in charge of a team of more

than 60 people who took upwards of 22,000 calls from brokers in October. We gained a crucial edge over nonbank lenders in 2014, when our parent company Charter Court Financial Services (CCFS) was granted a banking licence. CCFS’ subsequent listing on the FTSE 250 in March 2018 meant that we were given an excellent base from which to continue our growth strategy. It all culminated in CCFS’ merger with OneSavings Bank last October, a move which enables us to use our joint scale and resources to seek out new opportunities for you and your customers, whilst our complementary products give us even greater reach in the market. Yes, we’ve certainly come a long way since we started, but one thing has stayed the same: our commitment to you and your customers. Intermediaries have always been at the very heart of our proposition, and we remain as dedicated to delivering outstanding products as we were back in 2010. Just as we were here for you yesterday, we’re here for you today and we’ll be here for you tomorrow. It’s been quite the rollercoaster ride for us all. Thanks for all your support over the past decade, and I look forward to helping you and your customers in the years to come. 21

A lot can be achieved in a decade

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FOR INTERMEDIARY USE ONLY AND NOT INTENDED FOR THE GENERAL PUBLIC

The year we learnt to substitute Did you know that the water in a can of chickpeas can substitute eggs when baking? Neither did we until 2020 came along. Shelves were stripped bare, stockpilers stocked up, and if we wanted cake, we’d have to become more resourceful.

Bridging finance is by its nature the perfect fast and flexible option during times of unprecedented disruption, their versatility making them suitable for a wide range of client circumstances, including helping to beat the stamp duty deadline.

There’s a lesson to be learnt here; looking for alternative options can provide different paths to success. Are there new avenues your business could explore to create opportunities in 2021? We believe so.

Commercial finance will be one to watch and speak to your self-employed clients about in 2021, with a rise in landlords offering to sell to their tenants and demand almost certain to increase significantly when government support packages and loans come to an end.

We can see new consumer behaviours and trends forming which will result in fewer straightforward cases and in turn increase the demand for some of the more complex products in our industry. Second charge mortgages could be an ideal solution for homeowners wanting to make home improvements or extensions to their property, a developing trend following a surge in property purchases and with people spending more time at home.

These are just a few areas of potential new income opportunities in 2021. As a specialist distribution partner, we help brokers spot these emerging trends and fast-track their ability to offer suitable solutions to their clients. So why not get in touch today. We’re here to help. brightstarhub.co.uk


REVIEW

2011 Leading the way to recovery Rob Jupp CEO, The Brightstar Group

I

n 2011, the mortgage market was still tentatively finding its feet following the shock of the Global Financial Crisis. After peaking at £363bn in 2007, gross mortgage lending fell off a cliff by 2010, and reached just £140bn in 2011. Mortgage choice improved slightly throughout the year, with greater availability of high loan-to-value (LTV) deals and fixed rates falling to record lows, but caution continued to dominate the lending environment. A key feature of the year was the European debt crisis, during which several Eurozone countries were unable to repay or refinance their government debt, and this weighed heavily on the capital markets, restricting the availability of mortgages, particularly for specialist lenders. In December 2011, the Financial Conduct Authority (FCA) launched proposals for its Mortgage Market Review (MMR), which would impose stricter controls on affordability assessments and was to set the benchmark for new standards in mortgage lending. When it came to the property market, it was a tale of two cities. Or rather, one city and the rest of the country. Prime London was booming, partly in response to the crisis in Europe, and prices in Kensington and Chelsea rose by over 10%. However, outside the capital, prices were falling by as much as 7.2% in the North East. Overall, average prices across England and Wales were 12% below their peak in January 2008. So, it was not the most fertile of environments to sow the first seeds of The Brightstar Group, which began life in a small serviced office near Brentwood, with just myself, Bradley Moore and Kit Thompson. www.mortgageintroducer.com

We started the business with the strapline that we were the leading specialist distributor in the industry. That was a difficult claim to prove, given that we had only just opened the doors, and that the resurgent specialist market was still in its infancy. But nine years on, I think we can support that claim with more than a little evidence. Since 2011, the Brightstar Group, which includes Sirius Property Finance, has won more than 100 awards, while Brightstar Financial has won more than 90 national awards on its own, including numerous accolades for Best Specialist Distributor. However, it’s awards from outside the industry that have really shown just how far we have come since those early days in 2011. In February 2019, Brightstar was named by The Sunday Times as the best small company to work for in the UK, and the top company to work for overall in the East of England. Then, earlier this year we were named as Best Small Company to work for in the UK by The Sunday Times for an unprecedented second time, achieving an incredible score, some

The specialist market will bounce back

30 points above last year’s. This is the first time that any business – from any industry – has topped the list for two years running, and it is clearly testament to the continued focus that we place on people development and employee engagement. Brightstar was an early adopter of the Women in Finance Charter and has been a trailblazer and ambassador for the campaign ever since. We have also been a pioneer in championing awareness about employee wellbeing and mental health issues. In 2017 we opened a ‘wellbeing room’ to provide our people with a dedicated space to relax and unwind as part of our Mental Health Action Plan, and we continually identify new ways to engage our staff and encourage employee wellbeing. We also launched Young Brightstars in 2018, with the aim of supporting the development of young people in work and sport. Over the last two years, we have provided bursaries to invest in the development of outstanding young sports stars and encouraged young people to engage with the world of financial services through work experience placements, taster days and mentoring opportunities. Unfortunately, since the announcement of The Sunday Times award in February, “unprecedented” is a word that has become synonymous with something far less positive, as COVID-19 has left its dramatic impact across the globe and caused havoc in the UK economy. However, as we saw in 2011, the specialist market – and The Brightstar Group in particular – has a track record of growing in a difficult environment. We have already bounced back with record lending volumes, and we are recruiting new people to join our team. Just as the mortgage market was still tentatively finding its feet following the shock of the Global Financial Crisis in 2011, we can expect another year of tentative recovery in 2021. Just like 2011, you can expect Brightstar to lead the way. 21

DECEMBER 2020   MORTGAGE INTRODUCER AT 21

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REVIEW

2012 A game changing year Richard Pike sales & marketing director, Phoebus Software

B

eing asked to write about 2012 and what it meant to Phoebus Software has jogged a lot of memories. On a cheery note, the first thing that springs to mind is the end of the world. Conspiracy theorists and new age travellers alike were having a field day in 2012, as the ancient Mayan calendar seemed to state that the world would end in December. A film was even made, in which a final dramatic 20 minutes or so saw meteor showers and a tidal wave coming over the top of the Himalayas, before the human race and many animal species were saved in arks. How ironic, that concern created by an ancient Central American civilisation which believed in sun gods and the underworld would be saved by a trick out of the Old Testament. Could this be the earliest example of an agile implementation involving multiple partners? Albeit one took around about 2,000 years, which even by the standards of some in our industry could be seen as a tad slow. You may wonder why I’ve opened with this introduction, and how it

2012: The end of the world?

www.mortgageintroducer.com

relates to what Phoebus Software was up to in 2012. Well, from an industry perspective, we had seen what was perceived by many as the end of the world: the 2008 credit crisis. From Lehman’s going under in September 2008, to watching firsthand as our industry collapsed and many friends and colleagues lost their businesses and jobs over the subsequent months and years, it is a time many will never forget. However, I do genuinely believe that lessons learned from that period have helped in our decision-making during this awful pandemic, and this is why we will come back stronger and faster than many originally predicted in March. For Phoebus Software, the financial crisis assisted us in making some really positive decisions on the direction of our products and services.

“I remain as proud of the business and our people today as I did [in 2012], and it has been great to see us continually grow” Coming out of the crisis, for example, by interacting with the market we discovered many significant areas that key banks and lenders felt they would need. Effectively, the crisis gave us time to invest in our product to ensure our clients and new prospects received a significant return on investment. And so we arrive at 2012. The Solihull version, where we are based, not the Hollywood blockbuster. Not only did 2012 mark my 25th anniversary of working in our industry, but 2012 was also my first full year at Phoebus Software, and the one in which I was appointed to the board. I remain as proud of the business and our people today as I did then, and it has been great to see us continually grow to become the hugely successful business we are today.

2012 saw the benefit of us of having taken stock during the crisis and investing research and development into what the market required from a servicing platform. We invested in automating processes in Phoebus to allow users to deal with cases they needed to concentrate on, such as arrears. Our already successful securitisation module received further investment as we knew this market would return. As loan books were being downvalued, portfolio acquisitions would become a major strategic part of growing some businesses verses originations, and so a smooth way of migrating portfolios from systems became a pre-requisite, especially with Phoebus Software having such a large footprint within the UK third-party administration marketplace. In 2012 we also kick-started our strategic partnership programme. This enables us to have partners who can deliver specialist requirements that are not key Phoebus components, thereby allowing us to concentrate on delivering what we do best, whilst facilitating integration with specialist businesses boasting bespoke expertise in other areas, such as document management. In hindsight, we were probably one of the first software houses to create the benefit of technology ecosystems, which we still deliver today and are now seen as a standard requirement. This allows a ‘best of breed’ approach, rather than trying to select one supplier to do everything. In summary, from a Phoebus Software perspective, 2012 was a real game changer. Improved product features meant that our new business pipeline grew by record levels, and in the following two years we more than doubled our client base, all with clients that are still with us today. These include specialist banks, lenders, servicers, equity release lenders and development finance lenders – all sectors that we still continue to successfully support. 21

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Evolution Money wishes Mortgage Introducer a very S P E A K TO A M E M B E R O F T H E T E A M TO S E C U R E YO U R P L AC E TO DAY !

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REVIEW

2013 The year the journey gained pace Mat Montgomery chief operating officer, Evolution Money

E

volution Money had just turned two years old in 2013, having launched successfully with the objective of providing loan products to customers in an underserved segment of the market following the financial crisis that hit the world in 2007. Recognising that there was a need to service creditworthy customers, who had experienced a temporary level of financial distress, through the adoption of a traditional underwriting approach, Steve Brilus, myself and Kerri Pender teamed up and the Evolution Money journey began. We knew that launching what was the first new secured lending business following the financial crisis would require a significant level of differentiation, and that, through an underwriting approach delivered in line with our core value of trust, we could create a business that was trusted by our customers, introducers, investors and regulators. Our strategy was to identify customers we could lend to for whom the ‘computer said no’ elsewhere by applying a traditional approach to underwriting. This was completed – and still is – via our own in-house team of mortgage advisors. Today, we have one of the largest teams of CeMAP-qualified mortgage advisers, helping customers in the search for funds on a daily basis. We have relationships with the complete range of introducing partners, from large brokerages to smaller independents, and we transact business through a blend of packaged cases and direct customer referrals into our team. The rest is history, but 2013 remains a significant year in our Evolution. Starting in a 25 square metre office in central Manchester, the business www.mortgageintroducer.com

quickly outgrew the space. After several expansions in 2013, we got the keys for a new 3,500 square foot office in the heart of the financial district. 2013 was the most significant year for us in terms of investment, as we secured our first – and we believe one of the first overall post-crisis – significant senior credit line with RBS. It was this investment that gave us the confidence and the platform to grow into the business we are today. RBS/NatWest remains a significant investor in our business today, and

“We knew that launching what was the first new secured lending business following the financial crisis would require a significant level of differentiation, and that we could create a business that was trusted by our customers, introducers, investors and regulators” we thank them for the support they have always offered us – especially throughout this COVID-19 period. It was also that year that we sponsored a budding young rower, who was showing promise at a local level but sought help to progress, with a vision of competing in the Olympics. She currently rows for Team GB and is on track to meet her objective. 2013 also saw the formation of Darwin Loan Solutions, the group of companies that consists of Evolution Lending, Evolution Money and Progressive Money. The business increased its product portfolio from two plans to five, with increases to the maximum loan advance and loan term. Colleagues working in the business had grown from the initial 11 in 2011 to 63 in 2013, and by the end of the year there were already signs that we were rapidly outgrowing the new office space.

Continued expansion saw the business spread across three different sites in Manchester before we eventually brought everyone back together in 2015, at which point we moved into our newly refurbished 12,000 square foot headquarters in Manchester City Centre, where we remain today. We have grown our team to more than 170 colleagues, allowing us to accept upwards of 24,000 customers, and we have developed our portfolio of products to meet changing opportunities and customer demand. The business has appeared twice in the Sunday Times Fast Track 100 of fastest growing companies. The business continues to evolve, through the adoption of technology to enhance our customer and colleague experience, investment in the development of our colleagues within ‘Team Evo’ and the further expansion of our portfolio. That original value of trust remains as important to us now as we approach our 10th anniversary as it did when we launched back in 2011. Entering 2020, the business had never been in a better position, with strong funding in place, the biggest number of partners actively introducing customers, and a strategic plan that was on track for delivery. Then came COVID-19, and the last nine months have been some of the busiest in our history, but for totally different reasons. As we approach the end of 2020, the business has just completed on a new syndicated facility, bringing in additional senior and mezzanine lenders and allowing us to continue to deliver our strategic plan, achieving growth and further diversifying of our product portfolio. We are very excited about 2021, with new products on the horizon and the opportunity to continue to grow and build on our mutual successes with all our partners, for which we are grateful. Thank you for your trust and your business. 21

DECEMBER 2020   MORTGAGE INTRODUCER AT 21

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REVIEW

2014 A tale of two halves Ryan Fowler publishing editor, Mortgage Introducer

T

he start of 2014 saw a wave of optimism ripple across the entire financial services industry. The previous year had been one where the market began to pick up following the financial crisis. Government intervention in the form of the Funding for Lending initiative and Help to Buy had got mainstream lenders lending again. Indeed, in many ways 2013 acted as the confidence booster for 2014. This was especially felt in the specialist market, where bridging, for instance, grew by 24%. It would be fair to say that this positivity extended across the entire economy. Inflation fell, GDP was up, and employment was at the highest it had been in years. The specialist lending sector experienced an upsurge throughout 2014, as brokers recognised the value this type of lending could add to their businesses and client experience. The increased confidence of 2013 had brought developers back into the market, with many correctly calling the bottom of the market and picking up for refurbishment.

There was also strong growth in the number of business owners looking for short-term funding secured on their property to fund business deals, such as acquisitions or other growth plans. An increasing number of new lenders were also entering the market as they looked to capitalise on a market that had gone from lending £3.2m a week in 2011 to £50m a week in 2014. Times were good for specialist lenders and brokers. But the year was also a busy one for residential mortgage lenders for different reasons, with the Financial Conduct Authority (FCA) implementing the Mortgage Market Review (MMR) and the Bank of England’s Financial Policy Committee (FPC) introducing its macroprudential housing tools. The implementation of the MMR in April marked the single biggest shift in mortgage market regulation in years. Self-certification mortgages were banned, interest-only and affordability rules were tightened, and the qualification requirements for sales staff were beefed up. The then executive director of the Intermediary Mortgage Lenders Association (IMLA), Peter Williams, said: “MMR represents a seismic shift in mortgage regulations, but also the end product of a gradual process since the recession to focus in on affordability and responsible lending.

2014: The year the the FCA implemented the Mortgage Market Review

www.mortgageintroducer.com

“The last 12 months have heralded the welcome return of consumer confidence to the mortgage market. MMR is another important milestone in the continuing recovery, and careful handling will ensure that customers are better off for it.” June saw the changes from the FPC come into effect with its two housing levers. Namely that: 1: Lenders had to check that borrowers would be able to meet mortgage payments if mortgage rates moved 3% higher in the first five years (the ‘affordability test’). 2. A soft cap was introduced that limited high-income multiple loans (those at or above 4.5) to no more than 15% of new loans (the ‘flow limit’). These latest changes were far more prescriptive than the tighter lending rules introduced by the MMR in April, which required stress tests but did not set a rate. Combined, these changes saw a softening in the market with the number of first-time buyers and both house price growth and mortgage lending falling. By December, gross mortgage borrowing was £10.0bn for the month, 12% lower than in the same month in 2013. However, over the whole year, gross mortgage borrowing was upstanding at £130bn, compared with £110bn in 2013. One sector that escaped the impact was buy-to-let lending, which boomed in 2014. By January 2015, lending was up 12% year-on-year. Historically low rates had made the market attractive to landlords, whilst the sector was classed as unregulated, meaning the full weight of MMR did not come to bear. Overall looking back at 2014, it was a tale of two halves – with strong lending in the first half and a more subdued second. Robust employment data made many of us feel more secure in our jobs and optimistic about our futures. 2015 would tell the final story of the longer-term impact of regulatory changes on the mortgage market. 21

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REVIEW

2015 A look back at the year that was Matt Tristram director and co-founder, Loans Warehouse

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s I’m in charge of the content here, I will cheekily start with a little background on Loans Warehouse. We’re one of the most recognised and respected second mortgage brands in the UK – although that title has actually changed since 2015, when we would have said secured loan broker.  We have proudly won multiple awards across many years, and if memory serves me, 2015 was the year we won our first SFI Award as a secured loan distributor.  We process over £100m of second charges and bridging loans a year, from brokers and comparison sites alike.  Looking to the headlines from 2015, the Paris terror attacks, Calais migrant crisis, and the surprise election of Jeremy Corbyn to the Labour leadership – if only we had known – were among the defining events.   Meanwhile, Jeremy Clarkson was suspended by the BBC after he attacked producer Oisin Tymon over a steak sandwich, and the Hatton Garden heist gripped the nation, when a gang carried out what is thought to be

the most substantial burglary in English legal history.   May saw the birth of Princess Charlotte, who is fourth in line to the throne, at St Mary’s Hospital in Paddington. Days later, the UK went to the polls in the first General Election in five years, and returned Prime Minister David Cameron for a second term. Again, if only we had the benefit of hindsight... June saw terrorists strike again, this time in Tunisia, where they killed 38 people – 30 of them holidaying Britons. One Loans Warehouse employee was in fact on holiday there that day. Now that we’ve jogged your memory, what happened more relevantly in lending in 2015? LEADING UP TO THE MORTGAGE CREDIT DIRECTIVE

My outstanding memory of 2015 was waiting for our ‘landing slot’ to start our authorisation to become Financial Conduct Authority (FCA) regulated before the 21 March deadline. With 50,000 advisor firms in the UK in the same position, it was a nervous wait. With limited information coming from the FCA at the time, the rumour mill was in overdrive about what changes would face us, but overall there was optimism.   I remember one of the biggest changes was actually the terminology,

The secured lending market was well on the way to recovery by 2015

www.mortgageintroducer.com

we were no longer ‘selling’ a loan, we were giving ‘advice’ on a mortgage. That took some getting used to, but what I do remember is that Loans Warehouse was credited with not just the first but also the second second mortgages to ever complete – and indeed the fourth and fifth. Most brokers will remember MCD primarily for its abolition of the consideration periods, a very outdated practice that stopped a broker initiating communication with their client for 14 days once a quote had been given, often to the frustration of the client if the offer changed slightly late into the process.  For all the possibilities, it was thought that FCA authorisation and alignment with the mortgage market would bring greater collaboration with the wider mortgage market and awareness of the second mortgages.  Whilst many brokers have used surveys – even this year – to seemingly grab headlines stating that this awareness hasn’t been achieved, it’s our belief that great strides have in fact been made. If you deliver great service it brings awareness, and our partners have definitely increased in the years since the Mortgage Conduct of Business (MCOB).  SECURED LENDING HIT A SIGNIFICANT LANDMARK 

The secured lending market crashed during the Credit Crunch, with monthly figures as low as £21m, a huge fall for a market that at one time boasted lending in excess of £400m per month.   The recovery was well underway, though, and we entered 2015 with lending figures recorded for January at £51m, at that point the best since 2008. But it was the big finish to the year that made the most headlines, hitting £100m of lending for the first time since 2008. Rates also hit an all-time low of 4.704%, as Paragon Bank broke new ground to lead the way with a new historical low rate. 21

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Happy 21 Birthday st

Weâ&#x20AC;&#x2122;ve been proud to work with Mortgage Introducer and the broker market over the years. As well as reflecting on 2016, the year we launched as a bank, hereâ&#x20AC;&#x2122;s our sales team celebrating their 21st birthdays!

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Richard Deacon Sales Director

Robert Barnard Director of Intermediaries

Wes Baker

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Melanie Norman nt Executive Business Developme

Neil Molyneux Head of Sales

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John Smith

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Ginny Warby


ales

REVIEW

2016 Reflecting on a Masthaven milestone Rob Barnard director of intermediaries, Masthaven

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016 was a milestone year for Masthaven. It was the year we came of age and launched as a bank, building on our years of experience as a bridging and development finance lender. Our bank launch saw us offer flexible retail savings, before launching into the mortgage market to support homebuyers who may not meet conventional banks’ requirements. Since then, it has been an amazing four years and quite the journey. We decided to look back on that pivotal year by speaking to the people who were there at the time of launch. Richard Deacon, our sales director for short-term lending, was right in the thick of it. Asked to sum up the day Masthaven became Masthaven Bank in just one word, Richard replies: “Excited,” before adding “…oh, and cake! An awful lot of it…” For Richard, who had been with Masthaven from the start, it was a landmark day. “The general hubbub amongst the team was fantastic – it was the first day of the journey, and four years later here we are today,” he says. Indeed, here we are. Since 2016 Masthaven has come a long way. To date we have lent almost £1.4bn across mortgages and short-term lending and raised the same in retail deposits. We’ve picked up some 57 industry awards, consistently achieved an excellent rating on Feefo – just having exceeded 4,000 reviews – and have grown our team to 194. We even found time to move offices twice in the past five years in London, and open a new office in Reading. We have also continued to support our charity partners, raising more than £42,000. www.mortgageintroducer.com

Looking back, Richard notes just how far Masthaven has come. “When I started 12 years ago, it was myself, Andrew Bloom (Masthaven’s founder) and a couple of others,” he says. “Today it’s 190 people with expertise across long and short-term lending, savings and experienced people in running a regulated bank.” For Alex Fern, team leader in our mortgages team, the sense of teamwork was really important. Fern says: “I remember the build-up to it all. It was a high-pressure situation, but everyone came together which really stands out for me.” Back in 2016, we were the first new bank to be granted a retail banking licence that year. Born out of the award-winning lender Masthaven Finance, our aim was to disrupt the market with a customer-led flexible savings and lending proposition. By the end of the year, we successfully completed our first second charge mortgage, working with CSC Loans, and naturally, the news featured in Mortgage Introducer. The loan went to a self-employed couple who hadn’t taken a dividend or salary in their first year as they reinvested in the business. That meant the couple didn’t comply with the

standard lending requirements of two years of company income. We took a broader view, howeverm, reviewing the affordability and sustainability of their income, approving the loan and allowing them to consolidate their existing loans and borrow in order to carry out further home improvements. The case exemplifies in a nutshell our approach: taking an individual view on applications and meeting the needs of borrowers that are underserved by the high street. Today, we have matured into a specialist lender that is built for the changing world around us. Our product suite has evolved significantly, and we now offer first and second charge residential lending, buyto-let lending and bridging finance. We were also a development finance lender until we temporarily halted this lending as a result of the pandemic. Back in 2016, we were excited by the opportunity for new specialist banks – and today we still are. While we still have to get through the COVID-19 pandemic, we remain optimistic that the mortgage market – and the country as a whole – will come through it stronger together. In 2020, we have harnessed the entrepreneurial, can-do spirit that saw us successfully launch as a bank and applied it to the COVID-19 crisis, staying open for business and supporting our brokers and customers. If the year has taught us anything, it’s that you can achieve great things when you work together. 21

Teamwork is the key to success

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REVIEW

2017 A significant year for the sector Jeff Davidson, head of intermediaries, Fluent Money

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fter a tumultuous 2016, by 2017 we were living in a new period of uncertainty. The economy had slowed in the wake of the Brexit vote and we saw the first interest rate rise in more than a decade. In a bid to kick-start growth in the housing market, many changes were brought in that year which boosted mortgage lending in the UK. These included initiatives such as the government-funded Help to Buy schemes for first-time buyers and the scrapping of stamp duty for both first-time buyers and those purchasing homes under £300,000. There was also the reduction in tax relief for landlords; intended to redress the balance between investor and buyer. Meanwhile, the mortgage market benefitted from some of the lowest base rates on record, clear signs that competition in the mortgage market was rife, which again was encouraging for borrowers and presented opportunities for brokers to review their client bank. There’s no doubt that 2017 was a significant year for the mortgage industry, and it was also a special year in the Fluent Money Group story. Fluent recognised that these countless changes in the industry were placing even greater importance and value on building relationships with master brokers, and their industry knowledge and product offerings were becoming increasingly important. Fluent was already well-established and successful in the second charge lending area, but this was the year we really expanded the breadth of our offering by entering the mainstream mortgage market. On 6 June 2017, the Fluent Money Group acquired Manchester-based www.mortgageintroducer.com

broker, Brytannic, which specialised in first charge mortgages and equity release. Sharing the same philosophy on customer care it was a logical choice. Brytannic became Fluent Mortgages and provided the perfect platform to offer a range of specialist services which would complement Fluent’s existing proposition. This was both timely and strategic for Fluent. Not only did the first charge lending capability allow an opportunity to grow business volumes, it also promoted natural expansion into other product types, allowing access to a new and extensive suite of products such as commercial and buy-to-let. The most significant diversification that this allowed was the introduction of an additional niche business, specialising in later life lending, now known as Fluent Lifetime. Fluent Money Group could now satisfy the needs of the client throughout their financial life. Dan Payne, managing director at Fluent Mortgages, says: “I remember the 6 June 2017 like it were yesterday. We were delighted to be joining the Fluent family and become part of this highly successful brand. “I knew our skills and specialist lending experience, mixed with Fluent’s presence in the wider national marketplace was a great match. We

Digital solutions benefit the customer journey

have created business that offers the complete range of residential lending products under one roof, providing an even more attractive suite of lending options to our customers and business introducers.” Both Fluent Mortgages and Fluent Lifetime have benefitted from Fluent Money’s many years of experience, spent fine-tuning the end-to-end customer journey and developing industry-leading software and digital solutions. All Fluent Money Group businesses benefit from Fluent’s fintech-first approach, which introduces seamless digital journeys for customers throughout the process. Since 2008 Fluent has come a long way, but particularly in the last three years since 2017, when all of the other businesses have been initiated. One of our unique offerings is the MyFluent app, which allows customer cases to be tracked throughout the application, and provides real time lender updates. We also use electronic identity software to verify customer ID, allowing important documents to remain with their rightful owners. More recently, the introduction of Lendex, a platform which allows advisers to access multiple decisions in principle (DiPs), introduces a time and efficiency benefit to using Fluent to arrange finances. The knowledgeable broker team in our Fluent for Advisers division are always on hand to work together with intermediaries to find the best financial solution for clients, while intermediaries can also access bespoke case tracking platform, Fluent View. This is a tool we’ve developed specifically for intermediaries to track the progress of their cases in real time. Kevin Hindley, group CEO of Fluent Money, concludes: “Fluent Money Group is a growing family and I’m really excited by the future. “As we grow, I’m sure that we will always be able to look back on 2017 fondly as a pivotal year in our history.” 21

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REVIEW

2018 Regulation and the value of advice Mark Arnold, CEO, Kensington Mortgages

KMC/DM/0058/001/NOV20

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018: The year of the Beast from the East, a Summer heatwave and the FIFA World Cup. For the mortgage market, changes and more regulation reinforced the importance and value of intermediaries. So, as we look back, what market events were the movers and shakers? It was a bit of a slow start. In January, the Bank of England published data showing first-time buyer mortgage approvals were at their lowest level since January 2015. A three-year low is something we would laugh at now after the year we’ve had, but hindsight is a wonderful thing. As the year progressed, first-time buyer activity hit pre-crisis levels as the stamp duty exemption – first introduced in the 2017 Autumn Budget – helped approximately 60,000 buyers, according to the 2018 Spring Statement. The Help to Buy (HTB) scheme also played its part. Although it accounted for just 14% of first-time buyers in England, the scheme has been extended until 2023, albeit under different terms and conditions. On the flip side, 2018 was less ideal for sellers, particularly in London. Price growth was relatively stagnant, averaging around 3% year-on-year compared to 5% growth in 2017. According to the Office for National Statistics (ONS) House Price Index published in September, London prices had dropped to the lowest level of growth in nearly a decade, likely due to decreased interest from overseas investors following the Brexit referendum. The North-South gap was also beginning to close. With increasing demand for property outside of London, the lender rate war www.mortgageintroducer.com

was rife. According to Moneyfacts, 95% loan-to-value (LTV) rates hit a record low as lenders battled over low deposit borrowers. Overall, 2018 was a ‘strong and stable’ year for the residential market, propped up by remortgage activity. Gross mortgage lending rose by 3.8% in 2018, to £267.5bn, according to UK Finance data. It was also a good year for us – Kensington entered the 10-year fixed rate market and 95% LTV space, as well as launching our Options range. In September, we also hit a £1bn lending milestone. 2018 is perhaps not remembered as fondly for landlords. 2017’s buy-tolet tax changes continued to impact the market. Stricter affordability tests for portfolio landlords and interest rate rises, combined with tax relief reductions, made it much harder for some landlords to seek funding. Profits were hit too. Landlords made a choice. Some incorporated and bought through limited companies – a range that we first introduced in May 2018 – to avoid the impact of the tax relief changes and tighter lending rules, since commercial lending was outside the scope of the current Prudential Regulation Authority (PRA) changes. Some landlords also increased their portfolio size to cover the costs of incorporation. Many ‘dinner party’ landlords left the market. In January, research from the National Landlords Association showed 20% of its members planned to reduce the number of properties in their portfolio. Considering that a lot of 2-year fixed-term mortgages secured before the stamp duty changes in 2016 were due to end in March, some would have found remortgaging a very different experience. One of the biggest changes happened towards the end of the year, as houses of multiple occupation (HMOs) needed to be licensed, and a minimum room

size for bedrooms was introduced, again putting amateur landlords off. But for professional landlords who decided to stick it out, with less competition and more formalised and safer regulation, 2018 helped them show their worth. The difference between the buyto-let and residential markets was also exacerbated, and we saw a divergence between the high street and specialist lenders. According to ONS figures, 15.6% (4.6 million) of the workforce were self-employed in 2018, compared to just 12% in 2001. At Kensington, we realised early on that the self-employed demographic was under-represented, and sought to address the issue. Between January 2015 and early 2018, we had already helped more than 4,000 self-employed workers secure a mortgage. However, we wanted to help shape the future of the market to make it easier for underserved borrowers and brokers operating in this growing sector to access the solutions they need. Scotland is home to a growing population of contractors, selfemployed workers and entrepreneurs, and that’s why we decided to launch there in 2018. The Scottish mortgage market had not kept pace with demand from these borrowers, and the potential for a specialist approach to lending was a logical step. Looking back, 2018 was a good year – perhaps something that was underappreciated at the time. Residential mortgage lending was strong, and while the buy-to-let market had a few bumps, it was still an attractive place to invest, with regulation separating the rookies from the professionals, while the predicted landlord exodus did not materialise. I joined Kensington in 2018. We stressed back then that a greater number of people across all age ranges were in need of specialist solutions, and a more flexible approach to mortgage lending was required industry-wide. As we approach our 25th year, that advice resonates just as much, if not more, today. At Kensington, we will continue to innovate and challenge market assumptions to help an ever diversifying and growing client base. 21

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THE SPECIALIST LENDER YOU CAN BANK ON


REVIEW

2019 Reflections on 2019 Adrian Moloney group sales director, Precise Mortgages, Kent Reliance for Intermediaries and InterBay Commercial

I

look back at 2019 with great fondness for a couple of reasons. As a life-long red, I watched in jubilation as Liverpool swept all before them. Records fell left, right and centre as they were crowned not just champions of Europe, but champions of the World. You’d think that would’ve been the pinnacle of any Kopite’s year, but for me that was just the start of things to come. Without doubt the highlight of the year was the combination of OneSavings Bank and Charter Court Financial Services, creating a leading specialist mortgage lender in the UK. Right from the start, there was a natural feel to our combined cultures. Our mantra has always been that together we’re bigger, better and stronger, and with our shared focus on the intermediary market, our lending brands, Precise Mortgages, Kent Reliance for Intermediaries and InterBay Commercial have kept their own identities, enabling the group to meet broker demands by leveraging each brand’s key individual strengths. Precise Mortgages is all about speed of service and automated systems, offering quick lending decisions 24/7, when you need them most. There us a more personalised approach with Kent Reliance for Intermediaries, where we utilise the expertise of our manual underwriters to provide a common-sense approach to those cases that the high street chooses not to support. For your more complex cases, you’ll still receive that bespoke, tailored service you’ve come to expect from InterBay Commercial. Our culture such that we look for ways to lend on cases whilst providing you with a direct line to decisionmakers, helping build confidence in our www.mortgageintroducer.com

processes and ensuring consistency in our underwriting. It was clear that great things would follow, and sure enough our combined knowledge and understanding of getting specialist cases across the line led to a number of industry accolades. Precise Mortgages scooped Specialist Finance Business of the Year, Specialist Buy-to-Let Lender of the Year and Secured Loan Lender of the Year at the Specialist Finance Awards, and that was just for starters. We also took home the Specialist Lender of the Year award and the highly prestigious Mortgage Lender of the Year at the Mortgage Introducer Awards, beating Halifax, Barclays and NatWest. It was a similar outcome for Kent Reliance for Intermediaries, which was named Best Specialist Mortgage Provider at the Moneyfacts Awards and Best Specialist Lender for the second year running by Paradigm Mortgage Services. The cherry on top was being voted Best Specialist Lender by the members of Legal & General Mortgage Club. The relationships we build with our intermediary partners are key to our continued mutual success, particularly in such difficult times, and to be recognised with such prestigious awards is testament to the hard work that each and every member of staff across the group continues to produce, day-in day-out. So, I’d like to thank everybody involved in reaching these achievements, as well as all those who took the time and voted for us. All this success was against the backdrop of economic uncertainty fuelled by ongoing Brexit debates, and the continued government and regulatory intervention in the buyto-let sector. Mortgage interest tax relief entered its penultimate phase, before finally coming to an end in April of 2020. The Tenant Fees Act came into force in June, designed to protect tenants from unexpected costs and hidden fees when renting out a new property. The minimum Energy Performance Certificate (EPC) rating

introduced in 2018 for new tenancies would soon become effective for all existing tenancies from early 2020. All of these changes resulted in the buy-to-let sector continuing to see an outflow of amateur landlords. But as one door closes, another opens, and the vacuum caused by their exodus was filled by a more professional counterpart – one who chose to review their rental portfolios and subsequently consider diversifying into areas where rental yields were more attractive. This changing landlord dynamic created a heightened demand for more specialist aspects of the market, such as limited company structures. Research conducted by BVA BDRC throughout 2019 continued to evidence this, with rental yields for complex buy-to-let such as limited companies or HMOs outstripping more traditional property types in each quarter of the year. The private rented sector continued to be a vital segment of the UK housing market. Despite a softening of house price inflation, property prices were still high, and with affordability measures remaining stretched, this led to strong year-end buy-to-let lending of £42.2bn. Political uncertainty and lower remortgage activity had an impact on the market-wide residential sector, with activity remaining largely flat in 2019 and residential remortgage activity decreasing by 1.8% to £80.2bn. The second charge sector grew strongly, with approximately £1.25bn of gross new lending as homeowners chose to stay put, partly due to market uncertainty, and instead make home improvements. And that was 2019, the year Liverpool laid the foundations for a footballing dynasty not seen since the Shankly era, and that the OneSavings Bank Group laid down its own foundations to weather the storm that 2020 has brought. As I’ve highlighted throughout, we’re bigger, better and stronger together and we’ll continue lending to you, our broker partners and your customers for many more years to come. 21

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REVIEW

2020 Keep calm and carry on (lending) Paul Fryers MD, Zephyr Homeloans

I

n this article I am going to share my thoughts on 2020, and provide some views on the year ahead. To set some context, Zephyr Homeloans is a dedicated buy-to-let (BTL) lender offering standard and specialist products. Launching in 2018, we’re part of Computershare Loan Services (CLS), the UK’s largest thirdparty mortgage servicer. Alongside Zephyr, CLS also manages around £41bn of mortgages on behalf of numerous clients and investors. This includes a back-book of nearly 165,000 residential and BTL accounts within our own Topaz Finance subsidiary. 2020 BC (BEFORE COVID)

When looking back at 2020, it’s hard to remember that there was a time before the pandemic dominated every aspect of our lives. At Zephyr, the year started with a sense of optimism. Buoyed by our recent partnerships with Legal & General Mortgage Club and Sesame/ PMS, we launched into 2020 with an improved website, a new telephone business development manager team, and a reduced range of interest cover ratios (ICRs) on our specialist and newbuild products. With our enhanced proposition, business levels were strong and confidence was high. Then came COVID-19 – and with it a set of unprecedented challenges for every sector of the mortgage market. INITIAL IMPACT OF LOCKDOWN

At Zephyr, we temporarily tightened our criteria amidst uncertainty around the economy and wider capital markets. With public health measures making it difficult for surveyors, estate agents, landlords and prospective tenants to visit properties, there were

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several months of disruption as many transactions were delayed. We were still very busy at CLS, as over this period we supported tens of thousands of back-book customers across our broader servicing business who were enquiring about payment holidays, now called deferrals, following the new regulation. In the background, our people all moved to home working, so I’m proud of how we maintained positive service levels for brokers and customers over this challenging period. EMERGING FROM LOCKDOWN

Since property valuations restarted, we’ve seen a high level of sustained demand in the BTL market. I believe we’re still experiencing a ‘concertina effect’, with pent up pre-COVID demand being further fuelled by the Chancellor’s stamp duty cut, bringing forward demand that would otherwise have existed beyond March 2021. Whatever the reason, it is clear that landlord investors did not lose their appetite during lockdown. On the supply side, in the late summer we also saw cautious optimism return to the capital and securitisation markets, leading to the reopening of funding lines for many specialist BTL lenders. This brought increased competition, which is good news for brokers and landlords. At Zephyr, we enhanced our lending criteria several times following the initial lockdown, and relaunched some competitive standard and specialist deals up to 75% loan-to-value (LTV), with loan sizes up to £1.5m. BACK INTO LOCKDOWN

The movement from the tiered system of restrictions into a second form of lockdown in England – with similar rules in Wales – has thankfully not caused a huge level of market disruption, with property transactions able to continue. Like many lenders, Zephyr has seen demand for its products remain high, so across the industry, the issue now

DECEMBER 2020

is working with our partners in the conveyancing and valuation sectors to move these transactions smoothly towards completion. IMPACTS ON THE PRIVATE RENTAL SECTOR

As we move toward the end of 2020, whilst the buy-to-let market appears to have bounced back strongly, clearly there will be some further impacts on the sector. The latest quarterly Rent Index from The Deposit Protection Service (DPS), issued in October 2020, revealed some interesting knock-on effects of the pandemic on renters. Whilst market activity has yet to fully return to 2019 levels, the DPS data suggests that having experienced the benefits of working remotely, renters are starting to reconsider city living, and look for more spacious properties to call home in rural locations. These findings echoed those from similar studies looking at homeowners, such as the Savills’ Global Market Sentiment Survey. At the Autumn Intermediary Mortgage Lenders Association (IMLA) update, I noted the latest landlord survey data presented by BVA BDRC, which suggested that confidence levels hit an all-time low in Q1 2020. That same data showed that confidence levels had risen since the slump, but the pandemic must clearly have impacted some landlords’ property investment plans. OPPORTUNITIES AHEAD

There are undoubtedly challenges ahead, but I believe there is a positive outlook for the sector. With moves toward a vaccine continuing and restrictions due to ease, I expect demand for rental properties to increase in many areas. Renters are increasingly seeking tenancies with more than just ‘a room with a view’. This move could potentially offer higher yields and create opportunities for professional landlords, brokers and specialist BTL lenders. 21 www.mortgageintroducer.com


FOR INTERMEDIARIES ONLY

The A to Z of BTL

BBROAD IS FOR

CRITERIA

CRITERIA HIGHLIGHTS... MAX. AGE 95 YEARS AT END OF MORTGAGE TERM

STANDARD AND SPECIALIST PRODUCTS AVAILABLE AT 75 LTV

NO HEIGHT RESTRICTION ON FLATS & DECK ACCESS

FLATS ABOVE COMMERCIAL PROPERTIES UP TO 75 LTV

Talk to our experts todayâ&#x20AC;¦ Call: 0370 707 1894 Email: newbusiness@zephyrhomeloans.co.uk Visit: zephyrhomeloans.co.uk This information is correct at September 2020. We reserve the right to withdraw and amend our products at any time without notice. All applications are subject to our full Underwriting Criteria, details of which can be found on our website. Zephyr Homeloans is a trading name of Topaz Finance Limited. Registered in England & Wales. Company No 05946900. Registered address: The Pavilions, Bridgwater Road, Bristol BS13 8AE. Topaz Finance Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No 461671). Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.

12OJIA D04 (10/2020)


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