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MORTGAGE March 2019 ÂŁ5.00

INTRODUCER www.mortgageintroducer.com

Champion of the mortgage professional

ODD IS GOOD Broader criteria for complex buy to let cases

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Take the lead in buy to let cases At Kent Reliance for Intermediaries, we’re experienced in dealing with odd cases. In fact, we have the expertise to solve some of the most challenging residential and buy to let mortgage cases. And thanks to our broader criteria, we could help you find bespoke solutions across the UK.

Do you know where to turn? Our expert underwriters are ready to go. They could help with complex buy to let cases, including HMOs, large loans of up to £3m, limited companies and much more. Simply put, Kent Reliance for Intermediaries can apply criteria beyond the scope of mainstream lenders, which means you could find the right solutions for your clients.

Kent Reliance for Intermediaries: ‘Odd Is Good’ Kent may be in our name, but we help customers with complex mortgage cases across the UK. You can see some real-life, complex cases we’ve placed near you with our free personalised guide – just enter your details on our website. It even has some top tips for simplifying cases, and details of your local BDM.

Broader criteria could help you do more Brokers come to us for our range of products and specialist support. Complex or simple. Let’s see how our broader criteria could help you: • Large loan lending from £750k to £3m • Minimum loan size from £50k • Portfolio lending accepted • Income-backed buy to let available for non-portfolio landlords • Lending on HMOs available.

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MORTGAGE March 2019 £5.00

INTRODUCER www.mortgageintroducer.com

Champion of the mortgage professional

Field of dreams 170 years and counting for the Saffron Building Society MI front cover strip ad PRINT.pdf








Buy to Let Mortgages for complex cases Here at Precise Mortgages we’re proud to help landlords with complex lending needs as well as those who have been underserved by high street lenders. Whatever their circumstances we have a broad range of specialist lending solutions.

ÂŁ Refurbishment Buy to Let Maximise rental yield and increase capital growth

Top slicing Use disposable income to demonstrate affordability

Portfolio landlords A dedicated team to do the heavy lifting for you


5 5 year Fixed rates Affordability assessed at pay rate

HMOs and Limited Companies

Contact your local BDM 0800 116 4385 precisemortgages.co.uk


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 (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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Multi-units and Holiday Lets


Publishing Editor Robyn Hall Robyn@mortgageintroducer.com @RobynHall Managing Editor Ryan Fowler Ryan@mortgageintroducer.com @RyanFowlerMI News Editor Ryan Bembridge RyanB@mortgageintroducer.com Reporter Michael Lloyd Michael@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com @mortgagechat Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Manager Francesca Ramsey Francesca@mortgageintroducer.com Campaign Manager Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Photography Alex Moore Printed & distributed in England by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk

March 2019 Issue 128

MORTGAGE INTRODUCER WeWork c/o Mortgage Introducer, 41 Corsham St, London, N1 6DR Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of Mortgage Introducer Ltd.

A powerhouse union Some good news for once. In the same month that Magellan stopped lending for new business we have the merger of Precise Mortgages parent Charter Court Financial Services and OneSavings Bank expected to go ahead after both boards approved the move. For Magellan, as with Secure Trust Bank earlier this year, a shifting competitive landscape with reducing mortgage rates and a rise in the cost of funding has created an unsustainable market. For Charter Court and OSB, the merger will unite existing specialist mortgage brands, all reporting to Alan Cleary, managing director of Precise Mortgages. And in a massive boost to all those employed by the firms both Charter Court and OSB are set to stay in the same locations of Wolverhampton and Chatham respectively and the strategy is to maintain a ‘multi-brand model’ – excellent news for both staff and brokers alike. Both have strong brands in the intermediary sphere and offer up a wealth of competitive products. This powerhouse union will create a specialist lender like none we have seen before. Charter Court shareholders will own 45% of the group after the move goes through and the new group will employ 1,684 full time members of staff. Although still subject to shareholder approval as well as change of control approvals from the FCA and PRA as well as approval from the Competition and Markets Authority, City pundits now believe the deal to be as good as done. David Weymouth, chairman of OSB, said that this combination will create a leading specialist lender that will benefit from enhanced scale, product offerings and a robust and diversified funding platform. “Both businesses bring complementary strengths which we fully expect will position the combined business to continue to deliver for its customers and shareholders. “The OSB board and management team have built a strong, customer-focused approach that we believe can develop from strength to strength through the combination with Charter Court and continue to grow the businesses within the fragmented specialist lending segment.” Indeed, the strategic fit of the two banks is compelling. As Sir Malcolm Williamson, chairman of Charter Court and would-be chairman of the combined group, pointed out, this is creating a specialist lender that will be well positioned to deliver sustainable returns and take advantage of future growth opportunities. Indeed, this move creates opportunities for savers, borrowers and brokers alike. We wish them well.

5 AMI Review 6 Market Review 10 Brexit Review 12 London Review 13 Buy-to-let Review 24 Self-build Review 26 Performance management Review 29 Protection Review 34 General Insurance Review 41 Equity Release Review 44 Conveyancing Review 52 Leasehold Review 53 Technology Review 56 The Outlaw

A stubborn approach

58 The Bigger Issue

Lenders up their direct game

60 Interview

Harpal Singh and Mark Snape

62 Interview

John Cowan on all things Sesame

64 Cover

170 years of Saffron BS

70 Round-table

Getting to grips with General Insurance

79 Loan Introducer

The latest from the second charge market

85 Specialist Finance Introducer FIBA, bridging finance and stamp duty

67 The Last Word

David Gilman on the future

70 The Hall of Fame

Being a good sport

The specialist lender you can bank on The specialist lender you can bank on

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Residential Mortgages

Buy to Let Mortgages

Bridging Loans

MARCH 2019

Second Charge Loans



“Platform does things differently” Sue Beeston, Broker We’re a little bit different from other lenders. We offer expert support with a human touch, and a simple process that’s transparent and fair. In fact, we do things differently every step of the way. We’ve been chatting with brokers to find out what that means to them. “We consider them almost like partners”

“They’re totally transparent”

“Their difference within the market is that they listen”

Peter Atherton, Broker

Jane King, Broker

Neil Stephens, Broker

We bring a human touch

We’re transparent and fair

We’re always listening to you

We know how precious your time is, so we won’t waste it. If we can’t accept your case, we’ll let you know upfront to avoid any delay. We also endeavour to give you 48 hours’† notice if there are any product rate changes.

Our service is built around you and your needs. In fact, we continuously evolve our processes based on your feedback – which we ask for in real time. It’s why we’ve changed the Declaration Form process, introduced a range of new retention products and launched our product transfer.

We know how much you value good customer service with a personal touch. So we’ve increased the number of people in our support teams, to make sure you always get the best service possible. Better still, we’ll answer your calls on average within 30 seconds.^ That’s why we’ve been voted the No. 1 ‘Best Mortgage Desk Team’ for the third time running.*

See more of our broker stories on

Call 0345 070 1999** to find out more or talk to your BDM.

www.platform.co.uk Lines are open between 9am and 5pm Mon, Tue, Wed & Fri and between 10am and 5pm on Thur. The Co-operative Bank p.l.c. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (No.121885). The Co-operative Bank, Platform, smile and Britannia are trading names of The Co-operative Bank p.l.c., P.O. Box 101, 1 Balloon Street, Manchester M60 4EP. Registered in England and Wales No.990937. Credit facilities are provided by The Co-operative Bank p.l.c. and are subject to status and our lending policy. The Bank reserves the right to decline any application for an account or credit facility. The Co-operative Bank p.l.c. subscribes to the Standards of Lending Practice which are monitored by the Lending Standards Board. The Bank reserves the right to change or withdraw the donation arrangement at any time. Centrepoint is a registered charity in England and Wales, No. 292411 ^Calls taken between Jan and Aug 2018 on Lending Policy queries and password resets on 0345 070 1999 were answered on average within 30 seconds. †Product rate changes only. *Voted Best Mortgage Desk team by brokers who have recently placed a case with Platform, in the BVA BDRC survey in September and October 2018. **Calls to 03 numbers cost the same as calls to numbers starting with 01 and 02. Calls may be monitored or recorded for security and training purposes.

Review: AMI

Changes to the Financial Ombudsman Scheme This month the FCA announced it is ploughing ahead with increasing the award limit for the Financial Ombudsman Scheme (FOS) from 1 April. Seemingly the majority of those who responded to its proposals strongly disagreed, including AMI, yet the FCA has said “this has not changed our view” and plans to implement all of its proposals unchanged – a significant shift in the regulatory framework with very little notice. The original purpose of FOS has now changed. It was set up to cater for cases that could be dealt with speedily and by using dispute resolution techniques to gain agreement. Cases above these levels were deemed to be more appropriate for legal decisioning in courts based on contract law. By more than doubling the compensation limit the FCA has lost sight of this. When the industry supported the innovative introduction of the safety nets of FOS and the Financial Services Compensation

Aileen Lees senior policy adviser, the Association of Mortgage Intermediaries

Scheme it was important that these were limited by scope and the scale of compensation. Continual expansion of both risks users of financial services taking less responsibility for their actions and decisions. The FCA’s idea that these changes are appropriate is a worrying stance. In its feedback statement, the FCA has pointed out that it has increased its estimates of the number of claims paid above the current limit. However it seems to miss the point. This is not the first time we are seeing an over-reliance and focus on data analysis, assumptions and theories, which are resulting in a siloed and ultimately flawed approach detached from reality. Despite no previous acknowledgement of the regulatory framework, in its response the FCA suddenly decided to draw international comparison to justify its decision without further research or comment – the new £350,000 limit is “significantly below the roughly £600,000 limit” in

Australia, therefore the UK legal basis on which FOS was set up is seemingly irrelevant. There appears to be a lack of balance in the regular expansion of the FCA’s remit as we continue to see a widening of scope every time any “harm” is identified without any reflection on whether this is appropriate or with sufficient justification. Firms have less than a month to update their information on complaints handling and to train staff on the new, complex limits. The one month that firms have been given is all because the FCA thought it was “logical” to align the timings with the expansion of remit to include larger SMEs. However it hasn’t considered that the SME proposals were first floated three years ago with a formal consultation in January 2018. Claiming that firms should “already be planning” for the new award limits as the consultation was published in October reaffirms what the regulator considers to be a true consultation process. Unfortunately the realisation this has been another consultation in name only is unsurprising given the noticeable shift in the regulatory approach over recent years.

Keeping us all busy that is not another trap and The Government and the that brokers who advise on Treasury Select Committee these are also not open to any have been increasing pressure later criticism or sanction. on the FCA to do more to help We will ensure the interests borrowers trapped on SVR or of brokers and lenders what some might consider to are protected in any new be penal rates of interest often processes. We are also as a result of their loan being Robert remaining vigilant on the costs sold to an asset manager. Sinclair coming out of the FSCS. This has been a chief executive, Robert The announcement that campaigning point for AMI Association Sinclair they had received hundreds for some years and we got of Mortgage chief executive, of claims for poor debt traction last year when we Intermediaries Association consolidation advice given combined with Martin Lewis of Mortgage by The Mortgage Matters and MoneySavingExpert Intermediaries Partnership was a surprise, but we during the party conference season. are talking to them to ensure they We are now working with FCA and recognise that any compensation other trade bodies to see what can be should only relate to relative interest done to assist. costs not the capital advanced. We need to ensure that consumers It is important that firms should end up with a genuinely better deal


only compensate for the advice on the refinancing solution not the debt advanced originally. Responsible lending is not an intermediary accountability. Finally, I have been troubled to hear of some brokers who have recently been taken off panel by a lender and accordingly also lost their jobs. In dealing with product transfer cases they had made calls to lenders pretending to be the customer and giving instructions. Whilst this may have been in the customer’s interest this is an unacceptable practice and cannot be condoned. Please ensure that you always have appropriate authority to act. Many lenders’ systems have controls and authentication processes that make such activity relatively easy to detect.

MARCH 2019



Review: Market

Brexit uncertainly continues to dominate There has been lots of talk revolving around first-time buyers in recent weeks, and the growing appetite of first-time buyers continues despite Brexit uncertainly. In fact, data just in from UK Finance revealed that the mortgage industry helped 370,000 people buy their first home in 2018, the highest number in 12 years, as competitive deals and government schemes such as Help to Buy continue to boost activity within this sector. And there are other factors – some higher profile than others – currently influencing this lending arena.

Craig Calder director of intermediaries, Barclays Mortgages


House prices

Analysis of the Land Registry’s UK House Price Index confirmed that 2018 saw house prices grow at the slowest rate seen since 2013. Scot-

“Activity levels are likely to remain modest despite the growing availability of highly competitive mortgage rates plus some much-needed activity and positive pricing trends across the higher LTV bands”


The Rightmove House Price Index for February found that the average asking price for a home in the UK is now £300,715. This is just 0.2% higher than last year’s average, while wages grew by 3.4% over the same period, outstripping asking prices at the fastest rate since 2011. The report suggested that this combination resulted in affordability improving at its fastest rate in eight years. In years gone by this would set the scene for a lively spring market. However, activity levels are likely to remain modest despite the growing availability of highly competitive mortgage rates plus some muchneeded activity and positive pricing trends across the higher LTV bands.


land, Wales and Northern Ireland were reported to all experience higher house price growth compared to 2017, yet the poor performance of the English market served to drag the overall rate down. For example, growth in Scotland rose from 2.9% to 4.6%, Wales saw an increase from 4.3% to 4.8%, and Northern Ireland enjoyed a growth rise from 3.8% to 4.6%. In contrast, English house price growth slumped from 4.8% in 2017 to just 3% in 2018. This weakening level of growth was seen most keenly in the South and East of England, while prices in London fell outright on a year-on-year basis. Additional figures from Nationwide also suggested that UK house


prices grew at the slowest annual rate for nearly six years in January. It said that price growth “almost ground to a complete halt”, with prices up by just 0.1% from a year earlier, down from a rate of 0.5% in December. These figures highlight a stable housing market but also one which is seeing Brexit uncertainly dominate the thoughts of many potential buyers. This stability is in no small part down to many positives emerging from the mortgage market. One of these being increased affordability.

Research from Defaqto outlined that rates have been falling for 95% LTV mortgages. The average interest rate on a 2-year fixed rate mortgage was 3.98% in February 2018, compared to 3.46% at the time of writing. Not only are such mortgages getting cheaper but there is also a greater number of available options. The research added that there were currently 290 fixed rate mortgages available at 95% LTV, this represented an increase of almost 50% over the past 12 months. There is also a reported 10% increase on lender numbers servicing this market, up from 52 a year ago to a current total of 58. In addition, e.surv’s Mortgage MARCH 2019

Monitor found that there was a shift in the market from large deposit borrowers to those with smaller deposits during January. It suggested that over a quarter (27.1%) of all January mortgage approvals were to borrowers with a small deposit, up from 25.2% in December. The proportion of loans approved for borrowers with a large deposit fell from 30.1% to 28.1% over the course of a month. This represents a positive swing and let’s hope this trend continues throughout 2019 as it will enable more first-time buyers to get a foot onto the property latter. There is no magic wand being waved to help bolster the supply of affordable housing or is this likely anytime soon. We all realise that, despite increased government and local authority intervention, this remains a huge issue without any quick fixes or short cuts. Although, a growing number of FTBs appear to be taking things into their own hands.


PlotSearch, part of BuildStore, kicked off 2019 with over 1,000 new subscribers in January, which represented a ‘substantial’ year-onyear increase. The data also highlighted that the largest demographic group looking to self-build across the UK, is subscribers aged 26-40 – going against the assumption that self-build is only for the older and more established generations. This could indicate that younger people who are struggling to get onto the property ladder are looking to selfbuild as an alternative to buying a new build or existing property. This is evident in the south of England where the housing crisis is keenly felt and where an increasing demand for building plots can be seen.2019 will also see the first self and custom build serviced plots become available as a result of the Government’s ‘Right to Build’ legislation and this is certainly an area that intermediaries should be keeping an eye on over the course of the next 12-18 months. www.mortgageintroducer.com

Review: Market

Three ways to build a great 2019 There is plenty of uncertainty swirling around at the start of this pivotal year for the UK and the lending and property sectors are not immune to its effects.


Although there are many things which we are unable to control, we can, however, look at what is within our remit and try to ensure that our businesses are plugged into the sectors where the greatest amount of traction can be found and also look at how we can leverage what we have. All businesses have to adapt to

Tim Wheeldon chief operating officer, Fluent Money

changing circumstances and having lived through the financial crisis 10 years ago and previous downturns in the past, while the causes change, fallow patches are inevitable in any business cycle. Since the crisis, a new generation has come into the industry who will only have known growth, but things can alter quickly, as can be seen by the changes to the market caused by the taxation and stamp duty increases on buy-to-let. There is still a buy-to-let sector, but it has seen new business volumes shrink and those lenders and brokers who concentrat-

Retaining customers to keep it in the family kept up to date with what is going on in the market and that you have their interests in mind. A simple newsletter perhaps, backed up by a regular follow up call pattern can work well. If you are in a network, they should have tools to help you keep in touch.

This is an area which could mean the difference between a poor year and a good one. In Bull markets, it is easy to concentrate on new business from new customers when the demand is high, but the asset that continues to be undervalued is an adviser’s client bank. The rise of product transfers and robo advice highlight that, while many of us consider our existing customers to be automatically loyal, the reality is very different.

Paying dividends

A simple investment in changing the way you allocate your time and resources could revolutionise your year. Allocating more time looking at and working directly with your existing customers will pay dividends in a number of ways. 1. Letting them know that you are in touch, while not guaranteeing they will stay loyal, will go a long way to ensure that you will be in their minds when they want to take action. 2. It helps re-establish a relationship and provides opportunities to review and update customer needs. 3. It gives you a chance to talk about new products and services which are proving to be popular, such as equity release, RIOs, second charge mortgages and of course, protection.

Customer loyalty

Customers are not prepared to wait for us to tell them when they are eligible for a better deal and are generally very quick to reach for their smartphones, to see what is out there. It is not just the high street retailer who is finding that customer loyalty is migrating to the internet – mortgage brokers are not immune. If you are not interested in your customer base, someone else will be! However, rather than believe that it is another nail in the coffin, it should be interpreted as a wakeup call to look after existing customers and make time to ensure they are



MARCH 2019

ed on this channel have had to make changes. There is actually much to be positive about, if we are prepared to adapt our business models to the realities that we now face.


It has been clear for some time that the purchase market has also stalled and that the low hanging fruit from those enquiries has been less plentiful. The remortgage sector still looks buoyant, but the growing trend of direct product transfers is where advisers do need to be vigilant and is something I will come back to later.

Two lending sources that could transform your year Second charge mortgage origination is now running at over £1bn per annum. With the current political uncertainty, we are also now seeing plenty of evidence that more homeowners are staying put rather than moving and making home improvements instead, for which second charge loans are well suited. It is a message we need to broadcast very loudly. Second charge borrowing can provide a realistic alternative to remortgaging for clients wanting access to equity to meet their current requests for funds. Equity release origination topped £3.65bn last year and no one can ignore the positive impact that equity release is having on meeting the needs of older customers. Gaining access to equity previously tied up in domestic property is allowing a generation to boost retirement funding, pay off mortgages and fund a wide variety of financial goals.


Review: Brexit

How to prepare your business for Brexit How well prepared for Brexit are you? Probably not very if you’re being honest with yourself. Last month the Federation of Small Business es(FSB), warned confidence among small to medium sized enterprises (SME) was at its lowest level since 2011. Half of Britain’s SMEs believed they would be impacted by a no-deal Brexit, the FSB said, but only 14% were prepared for such a scenario. More worryingly a third of small businesses are simply in no position to prepare for a no-deal Brexit. Surprisingly most small business owners, even at this late hour are taking a wait and see approach. After all, how do you prepare for something when you don’t know what’s going to happen? You can invest now and spend a lot of money trying to protect your business from something that might never happen. Or you can wait and see what is actually agreed. But there are some basic steps that almost any business owner should consider in order to insulate themselves from the current economic uncertainty. Mortgage brokers, in particular, may feel as if they have been here before. Ever since the financial crisis brokers and independent financial advisers have had to adjust to a new normal where mortgage approvals are 40% below their pre crisis level. Unlike the Global Financial Crisis however we have all known Brexit is coming for the past two years. And even in the softest Brexit scenario the Government forecasts the UK economy will be 3.9% smaller in 15 years’ time compared with if Britain stayed in the EU.

Toby Ryland head of corporate tax, HW Fisher & Company

Review how profitable your business really is

If your business suffered a sudden loss of income, could you cope? If finance charges were to increase, how much would this affect your bottom line? You should review whether there are any changes that you could make that might streamline your business. If you operate as a sole trader would it make sense to share resources with another mortgage broker to save costs? Alternatively is your mortgage network, club or packager relationship working well for you? These are the sorts of questions you should ask yourself ahead of Brexit. Leaving such things until afterwards could be potentially damaging to your business. Meanwhile if your business is already suffering from financial distress or simply stressed, the earlier you obtain advice, the wider the range of solutions that will be available to get your business back on track.

Review your Professional Indemnity Insurance

Review your cash flow

So what to do? One of the most obvious, but consequently most easily forgotten, is to ensure you have enough cash flow to continue to operate after Brexit. To do this you should estimate all the cash inflow and outflow of your business on a weekly or monthly basis. If you are unsure how to do this, seek help. Use the process to consider if there are any changes that you can make.



A cash flow forecast will help you identify any difficult periods such as a potential collapse in house prices. If, as the Bank of England has suggested, average house prices, fall by as much as 30% in the event of a chaotic exit from the EU, there will be an immediate impact on property transactions that is likely to impact on the cash you hold in your business. To put this in context property values fell 20% in the wake of the Financial Crisis a decade ago. Transactions volumes fell from 1.65 million to 730,000 in a year.

It is well documented that Brexit has already put the brakes on property transactions in Britain but mortgage brokers also have to be mindful of their clients. Those that are buying property now with small deposits will be the most vulnerable to an economic shock that impacts on house prices. So how you advise them will prove crucial. It would be wise to check your professional MARCH 2019

indemnity (PI) insurance covers you sufficiently for any claims that could be made against you. If a hard Brexit pushes some of your clients into negative equity you will need to ensure you have adequate PI cover to fight claims that you gave poor advice.

Be prepared for fewer products...

Another potential problem that may occur in the immediate aftermath of a hard Brexit is that mortgage lenders could withdraw mortgage products. European banks, like Santander could, theoretically, lose the right to sell financial products in the UK overnight. This could not only impact on clients just days away from completing the purchase of their home, and the inevitable collapse of the purchase, but mortgage brokers who would be left to deal with the fall out and any subsequent loss of procuration fee. Regardless of whether your clients are buying their first mortgage, want to remortgage or their current deal is near to ending, reviewing their circumstances with them now will ensure that they and you are well prepared for whatever happens in the months ahead.

… and higher interest rates

Higher interest rates in the event of a no deal Brexit also cannot be ruled out. The Bank of England has based its inflation and economic forecasts on the assumption of an orderly Brexit. But the impact on the economy may be such that the Bank is left with no choice but to hike interest rates A rapid series of rate hikes to prevent a flight of capital or shore up Sterling would have a very dramatic effect on borrowing costs for many households and on the availability of mortgage products. Once again mortgage lenders would most likely remove products that no longer reflected the new reality of rising interest rates. Even if they replaced those products quite swiftly, the extent of the challenge posed by monthly rate hikes could see mortgage products available one day and gone the next. www.mortgageintroducer.com


Building Society

Local knowledge, nationwide We’re focused on supporting you and your clients’ needs. That’s why you have a dedicated Business Development Manager. PLUS, a new team of expert Business Development Advisers in each region, just a call or click away. See all the ways we support you at nationwide-intermediary.co.uk/support Together we’re building society, one home at a time.

For Intermediary use only Nationwide Building Society. Head Office: Nationwide House, Pipers Way, Swindon, Wiltshire, SN38 1NW. Details correct at time of going to print. F1245 V1 (02 2019) F1246_NFI_MI_205x270mm_AW.indd 1

28/02/2019 11:20

Review: London

The London buyers creating a house price anomaly It is said that one man’s loss is another’s gain and this can certainly be said of the London property market right now, especially in the context of foreign buyers. On the surface, the latest figures don’t make for encouraging reading. Average prices in December for Prime Central London property fell 6.0% over the month and 10.2% over Q4 2018, according to London Central Portfolio’s (LCP) December Residential Index. Excluding new builds, this represents just 3,514 transactions in 2018, around 68 sales a week, – a fall of 16.4% over the year and below the previous all-time low during the financial crisis, according to its findings. Yet, those of us who have worked in the property and mortgage market for some time know only too well that when the market loses its appeal to one, it presents an opportunity to another. For any investor who is willing to break from the crowd, there are potentially rich pickings to be had and there were two areas which bucked the Brexit trend during 2018: superprime and prime new-builds.

Peter Izard business development manager, Investec Private Bank

The Ripple Effect

So, should we expect to see the buoyancy of the super-prime market feed into the prime market anytime soon? Prime Central London property prices may have slumped towards the end of 2018 but overall, they finished the year at £1,844,031, up from £1,774,517 in 2017 (excluding newbuilds), according to LCP. Naomi Heaton, chief executive officer of LCP, says in its December report that the upsurge can be accredited to greater activity at the higher priced end of the market. But says: “Whilst prices have increased marginally over the year, this is not a cause for optimism. It is attributable to greater activity at the higher priced end of the market where the most significant discounts are available.But she does go on to echo the sentiment from Savills. “From a buyer’s perspective this period of low competition and suppressed prices is an excellent opportunity. The fundamentals that underpin the desirability of Prime Central London as a global destina-

Super time for super-prime

Brexit negotiations may have been enough to make even the most hardened of investors a little anxious in 2018 but super-prime buyers it seems were not fazed. According to Savills, almost £4bn worth of Prime London homes worth over £5m were snapped up in 2018, up 10% on 2017. “The price falls we’ve seen in the Central London market, when combined with the depreciation of sterling, means the trophy properties of Central London look relatively good value in an international context,” says Lucian Cook, head of residential research at Savills. As the figures highlight, the fundamentals and the appeal of London



property is still strong and while Brexit may have dampened appetite in the short-term, the trend we are seeing at the very top end of the market offers some reassurance that once the Brexit smog has cleared, London property should regain its zeal. In fact, the higher value the property, the more Brexit proof it seems to be. Some 73 properties worth over £15m were sold last year, according to Savills, with a combined total value of just under £2bn. This the agency says is the highest figure since 2014 when the government introduced its Stamp Duty reforms. The 73 properties are also an impressive gain on the 51 that changed hands in 2017, which had a combined value of £1.4bn.

MARCH 2019

tion have not changed,” she says. “Those who still believe in these fundamentals are able to acquire properties at material discounts, with the potential for significant uplift in the medium to long term.”

Building confidence

The super-prime sector is not the only one showing its resilience. New-builds in Prime Central London saw some remarkable gains in 2018. According to LCP, the most recent data shows that the average prime new-build price in the capital now stands at £4,461,072, an increase of 54.2% over the year. In its report it says this is largely due to the development and completion of Ashburton Place in Mayfair, which created a “cluster” of superprime properties and distorted prices somewhat – also leading to a 74.3% increase in the premium commanded for new-build properties. It is uncertain whether the new build anomaly will continue in the capital in 2019, with much depending on the supply and demand of such properties and the economic sentiment. Asking prices may be up but prime new build transactions in the capital are down by 16.4% on an annual basis, according to LPA, with quarterly transactions seeing a fall of 75.1%.

Reasons to be cheerful

It pinpoints Brexit and the introduction of the additional 3% Stamp Duty rate as the reason for this. Overall there are still plenty of reasons to remain optimistic. Knight Frank’s latest London Residential Review reveals the ratio of new demand to new supply rose to 4.9 in the final quarter of 2018 – the highest level in four years: – while prime central London saw an annual gross yield of 3.35% – the highest figure in almost seven years. Whilst perhaps not obvious at face value, it can be seen that there are several indicators suggesting that under the right conditions, a profitable market can be found again. www.mortgageintroducer.com

Review: Buy-to-let

Five reasons for landlords to be positive in 2019 Given all the upheaval in Britain currently, you might be expecting more doom and gloom. But for landlords at least, 2019 is looking pretty good. There are several reasons for them to be happy.

Costs are going down

Competition between lenders is fierce and buy-to-let mortgage rates are very good value at the moment, even on longer-term fixed rate deals. This is in spite of two rises in the base rate since the second half of 2017. Data from Moneyfacts shows that three years ago average buy-to-let rates were 3.25% on 2-year fixes and 4.15% on 5-year fixes. Compared that to data from January 2019 when the average 2-year fixed buy-to-let mortgage was 3.11% and the average 5-year fixed buy-to-let just 3.56%. For landlords on SVR, there is a strong financial incentive to remortgage and lock into rates while they continue to be low. Indeed, remortgage activity in the sector is strong with the latest UK Finance figures showing there were 15,000 new buyto-let remortgages completed in November 2018, some 9.5% more than in the same month a year earlier. By value this was £2.4bn of lending in the month, 9.1% more year-on-year.

Criteria is increasingly flexible

Two years ago the entire market moved from an interest coverage ratio (ICR) of 125% at 5% to 145% at 5.5% following tighter underwriting rules. It posed problems for landlords remortgaging, particularly in areas where rents were already high and tenants’ own affordability was close to maxed out. But today, ICRs are far more accurate, reflecting the borrower’s income tax bracket and therefore the impact that tax relief loss will have on profitability. Top slicing rental income with earned income is also more broadly available and something that we at Precise Mortgages have been doing for well www.mortgageintroducer.com

Alan Cleary managing director, Precise Mortgages

Profits are healthy

over a year now. Our latest research from BDRC shows that 54% of landlords use income from their lettings business to supplement their day jobs. So it makes sense to allow borrowers to make use of their income in a way that works for them when assessing whether they can afford the loan.

Portfolios, tax relief and the professional

The other major change to underwriting buy-to-let was the introduction of portfolio rules. This came at a time when landlords had just begun to lose their tax relief on buy to let mortgage interest. The combination of tougher lending criteria and pressure on profit margins could have proved a massive headache for landlords, but instead it became a catalyst for professionalising the private rented sector. Small-time landlords who were dabbling in property or those who weren’t making clear profits on some properties in their portfolios were forced to reevaluate and either sell or rebalance. The result over the past 18 months has been the slow but steady exit of

“According to BDRC, 88% of landlords are making money on their property portfolios, an all-time high. Over half of landlords make a full time living from their letting activity when they have 6+ properties, with this rising to three quarters of those with 20+ properties” amateur landlords from the sector, leaving a contingent of committed landlords whose investments make commercial sense. That is not only good for them, it’s good for their tenants and for lenders financing them. MARCH 2019

The end of January this year will have seen thousands of UK landlords file their self-assessment tax returns. It is the first time that the lower tax relief will have bitten, but rather than there being a big drama around this, landlords appear to have taken it in their stride. Political uncertainty may be weighing on landlords’ confidence – as indeed it is on everyone’s – but the financial reality for landlords is far more positive. Our latest research from BDRC shows that yields are still healthy, particularly where landlords are clever about property type and location. According to BDRC, 88% of landlords are making money on their property portfolios, an all-time high. Over half of landlords make a full time living from their letting activity when they have 6+ properties, with this rising to three quarters of those with 20+ properties.

Opportunity to create value exists

As a specialist lender we have long understood the value of discovering and opening up niches. Landlords are an entrepreneurial bunch and they too have spent the past couple of years considering where to find and how to create value in today’s buy-to-let market. There is a strong swing away from single lets for professional landlords, and towards multi-let and HMOs. In fact, our BDRC data shows that HMOs continue to deliver the highest rental yields averaging 6.9%. That’s 1.3% above the average and 1.1% higher than the next most profitable property type, a semi-detached house. Using refurbishment to bring down capital outlay, add residual value to a property and attract quality tenants is also a popular route, prompting our own decision to offer our refurb-to-let loan that combines a bridge to fund improvements before refinancing directly onto a term buy-to-let all with just one application. This was always a resilient sector and it remains such. Brexit bumps aside, buy to let looks set for a positive 2019. MORTGAGE INTRODUCER


Review: Buy-to-let

Buy-to-let remains crucial to housing strategy It’s just shy of three years since the government introduced the 3% surcharge on stamp duty paid by landlords when purchasing buy-to-let property. It has been a turbulent 36 months since. The Prudential Regulation Authority has implemented stricter affordability assessments and introduced portfolio rules for landlords with four or more mortgaged properties. The government has also begun its staged removal of tax relief on buy-to-let mortgage interest, with January this year marking the first time landlords will have filed tax returns that register this loss. Since 2016, British landlords have undoubtedly felt a bit battered by change; on top of all of these very fundamental financial reforms has been several additional rule changes requiring stricter fire safety, energy efficiency and a crackdown on letting agents that has/will see landlords’ overheads rise. It has changed the shape of the UK’s private rented sector considerably, even in such a short time. Buy-to-let purchase lending to individuals has fallen off a cliff while received wisdom across the market suggests that smaller scale private landlords have sold out in their droves. At the market’s peak in 2007, around 183,000 purchase mortgages were approved each year, according to UK Finance. The most recent figures show the number of buy-tolet mortgages approved in 2018 was 66,400, some 11.5% less than in 2017. The £9bn of new lending in the year was 15% less than in 2017. Remortgage has partly filled the lending shortfall. In 2018, there were 169,100 new buy-to-let remortgages completed, 11.2% more than in 2017. The £27bn of new lending in the year was 11.6% more than in 2017. This underpins the view taken across the market that smart landlords are rebalancing their portfo-



Stuart Miller customer director, Newcastle Building Society

MARCH 2019

lios, selling off properties which are leveraged too highly, repurchasing through limited companies (not collected in the UK Finance data) and reinvesting capital from sales outside the historically popular areas of London and the South East. Cities including Leeds, Liverpool, Birmingham, Manchester and Nottingham are increasingly cited as the nownot-so-new hotspots for buy-to-let investors. When the government began its fiscal reform of the buy-to-let sector, it repeated one ideological driver behind the policies. As the private rented sector has grown in size over the past 20 years, it has come to account for around a fifth of all housing in the UK. But the nature of the attractions it offered to investors encouraged smaller scale landlords into the sector, making it nebulous, hard to keep track of and harder to regulate standards in. The private rented sector in England alone has grown to 4.5 million households – equivalent to 20% of England’s housing market according to M&G Real Estate. This is up from 10% in 2001. As more and more peo-

ple in the UK have chosen or needed to rent for longer – the average age of a first-time buyer is now 34 – the social challenge that vast inconsistencies in the quality of rental stock across the country presented to the government became something it could not continue to put on a backburner. When the former Chancellor George Osborne announced his sweeping policy reform of the sector, using tax to make it a far less financially attractive option for smaller private landlords, he was clear that one of the government’s aims was to drive more institutional grade investment into the private rented sector to encourage greater transparency and consistency of standards across the market. That is an aim that is beginning to be achieved. Several large scale developers have invested heavily in build to rent schemes, where previously they might have focused on build to sell. Companies such as Legal & General have created strategies to invest their own institutional pension fund money into residential property in the UK, because the funding duration match, supply and demand on both sides of this equation make it a no-brainer. In a white paper published last year by Jones Long LaSalle, the international property firm forecast that a further £3bn of institutional money would pour into the private rented sector in the UK. Meanwhile, housing completions for 2018 are estimated to be less than 150,000, highlighting the ongoing need for continued investment in the private rented sector, particularly as population growth – Brexit or no Brexit – is going in one direction only. It’s an interesting time to be involved in the sector but far from the public fear that buy-to-let is over, we are of the view that it is simply evolving. The market is fundamental to the social welfare of millions of people living in the UK and it will continue as such for decades to come. How landlords approach their investment in it is the thing that is subject to change. And that is something that is worth remembering. www.mortgageintroducer.com


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Review: Buy-to-let

The future is still bright for buy-to-let Even though we all swim in essentially the same mortgage ‘sea’, there are some very different navigation techniques used to get different advisers/firms to their destination. And, as was brought home to me very recently, this is an industry made up of some very different opinions – indeed some diametrically opposed viewpoints on what the current shape of the market (and the wider economy) looks like and what might happen in the future. At our recent strategic partners meeting, we presented a number of (shall we say) differing analyses on the mortgage market, the buy-to-let sector, and the next stages for the UK economy, if it is to be outside the EU. This was enlightening because while one speaker was very bullish about all of the above, others were less optimistic for the future of the mortgage market, talking about the market having peaked. I sat there wondering what to make of this because, from our perspective, we are rather bullish about our own prospects and the market demand within the buy-to-let sector. But others clearly do not feel the same way – if there was ever a living example of a ‘glass half full/glass half empty’ mentality then it was on display in various forms at our meeting. Of course, such disagreements are what make life interesting – if we were all to hold the same views then it would be a boring place. However, it’s also intriguing that people who work in the same field, see the same data, are deeply intelligent, understand what success looks like, and everything else, can come to such different conclusions about what the future looks like. So, what do we make of it all? As I write this, we are a little over a month away from the 29 March ‘Brexit Day’ – and I’m incredibly conscious that,



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by the time you read this, so much could have changed that it renders any thoughts somehow meaningless. However, at the heart of my feelings is a significant kernel of positivity about how this will end up. One of our speakers suggested this period is still in the ‘pantomime’ phase and that, putting a deadline on the UK leaving the EU, inevitably means that no deal will be done until the very last minute. I tend to agree, simply because we will reach a point where ‘no deal’ really works for no one – not the UK and certainly not the EU. At that point we should have the certainty that we all crave, although clearly there will be much to contend with during the transition period in terms of the actual nature of trading MARCH 2019

arrangements between the UK and the EU. That certainty should effectively release the brakes that many have put on while we await ‘the deal’ and I’m confident that we can begin to move forward. It’s wholeheartedly an optimistic view of what might happen but based on the realities of what a ‘no deal’ would do, not just to the UK economy, but that of the countries in the EU, particularly those who rely heavily on this country for their levels of wealth. And so, what might this mean for the UK housing and mortgage market, and specifically the buy-tolet sector? Well, the demographics of the UK are not really changing – house prices while plateauing currently are still high, which means that so are deposit levels for poten-

Review: Buy-to-let

tial first-time buyers, plus we have a growing number of households (particularly one-person households), all who require somewhere to live if they are unable to purchase. Add in those groups which are predominantly ‘renters’, such as young professionals, students and the like, and you’ll see that tenant demand is unlikely to shift, the number of houses being built is unlikely to change too much, and therefore the private rental sector remains a good investment opportunity. Of course, as it always has done, the PRS and landlords in particular will continue to be subject to a

high degree of intervention from the Government, regulators and officialdom in general. That, I’m afraid, is not going to stop especially when the political mood music is so in favour of ‘landlord bashing’ or at the very least not providing any sort of incentive for landlords to provide the housing the market so desperately needs. This approach has pretty much done for a number of ‘amateur landlords’ and there will be other measures which exacerbate this including the likelihood of longer-term tenancies, more licensing requirements and maybe even rent controls

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in the future. Along with the taxation changes, increased stamp duty and the like, it may well be that this could be a sector dominated by the portfolio and professional landlord in the very near future. However, we’ve always felt that this was the way the sector was heading – ever since our launch, our focus has been on delivering a specialist lending service to the specialist landlord community and this won’t change. It’s why limited company buy-to-let applications are at an all-time high and, I suspect, it will be the reason why landlords begin to shift more properties into such structures – even with the added stamp duty cost – and why new purchases will, for the most part, be completed through limited companies. It’s also why we’ll see a greater degree of diversification from landlords – moving into higher-yielding properties such as HMOs or multiunit blocks, and it’s important as a lender that we respond to that and continue to improve our offering in

“New purchases will, for the most part, be completed through limited companies” that area. Student accommodation is likely to grow considerably especially with more and more international students coming to the UK in order to further their education. We should expect investment in student properties to continue to rise. Overall therefore, while we seek the certainty we all crave in the short-term, there are opportunities available within our market that seasoned professionals will be seeking to take. Those landlords require advice, and the good news is they have access to a strong buy-to-let mortgage market at present, with specialists willing and able to ensure they get the finance they need. There is a large degree of difference in outlook at present but we certainly believe the future is bright for the buy-to-let sector and advisers are well-placed to make the most of this.

Just call us on

0344 770 8032 foundationforintermediaries.co.uk ©2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of £3 million with Foundation Home Loans. Calls may be monitored and recorded.

MARCH 2019


17 05/03/2019 08:37

Review: Buy-to-let

Buy-to-let remortgage uplift will create opportunities Activity levels might be lower than we would all like but this hasn’t stopped lenders from extending their offerings and pushing to generate more business. In the last month we have seen Tipton and Coseley Building Society launch into expat lending and Mansfield Building Society extend its offering to include a no completion fee deal exclusively for expat borrowers. This adds to the likes of Paragon, Family Building Society and Kent Reliance – amongst others – who have been active within this area. The entrance of Paragon provided a big boost, as this is/was previously the domain of smaller building societies and specialist lenders. The move by one of the larger players in the residential and buyto-let sectors is certainly helping to bring this product type to the attention of a wider circle of intermediaries and generate more enquires. We’ve spoken to many intermediaries over the past few months whose clients are UK nationals working or living overseas, and Brexit has certainly got them thinking more about UK property. Which is no bad thing. Whatever the Brexit outcome there will continue to be expat demand for UK investment property. The emergence of additional product choice can only be a good thing for such investors. Increased competition will positively impact criteria and pricing to encourage more borrowers to view this as an appropriate form of borrowing now and in the future.


The evolution of offerings within the buy-to-let sector is important in terms of not only generating additional business but also in bolstering confidence levels – an important factor in challenging times. Paragon’s latest Financial Adviser and Confidence Tracking (FACT) Index found that mortgage advisers anticipate virtually no growth in business lev-



Ying Tan founder and chief executive, Buy to Let Club

els in Q1 2019. It added that Brexit uncertainty has and will continue to weigh heavily on the UK’s housing market at least until current political negotiations point to a more definitive outcome. Despite this expected dip in activity, the Q4 2018 FACT index did highlight an increase in the proportion of remortgage business, up from the recorded level of 37% in Q3 2018 to 43%. When assessing product terms, it found a slight drop in the proportion of customers opting for a 5-year fixed rate mortgage, down from 46% to 43%. This remortgage uplift is also likely to be reflected in the buy-to-let

“This remortgage uplift is also likely to be reflected in the buy-to-let sector, thanks to a sustained low interest rate environment and healthy competition” sector, thanks to a sustained low interest rate environment and healthy competition amongst lenders. Which means that this area – along with others such as expat and limited company borrowing – should provide plenty of opportunities for intermediaries, even if the immediate prospects for any major business growth remain slim.

Rental growth, spend and regional trends Rental growth, spend and regional trends Over the past month there has been a raft of data surrounding rental growth, spend and regional trends, so let’s take a whistlestop tour of this. The English Housing Survey found that the proportion of income spent on rent in the private rented sector fell from 35.4% in 2010/11 to 32.9% in 2017/18. Over the 10 years between 2008/09 and 2017/18, average weekly rents across England, excluding London, increased by 22%. The latest Landbay Rental Index found that annual rental growth in the UK – also discounting London – is at its lowest point (1.16%) in nearly six years (1.13%, February 2013). However, the index powered by MIAC, also showed that since the vote to leave the European Union in June 2016, total rental growth across the English regions has been seven times that of London (3.69% to London’s 0.52%). In addition, according to HomeLet’s Rental Index, average rents across the UK have risen by 2.5% in January 2019 when compared to January 2018 figures. The average monthly rent is now said to stand at £932. Rents in London were suggested to have increased by 3.7%

MARCH 2019

year-on-year. Rents rose in 11 out of the 12 regions covered in the research. With London excluded, the average rent in the UK for January was £775 and average rents in London (£1,588) were 104.9% higher than the rest of the UK. So, what does this all mean? This data highlights that the private rented sector remains affordable in many areas of the UK. Although that’s not to underestimate the costs associated with renting, especially in and around the capital. We must also consider lingering affordability issues and a lack of willingness amongst potential homeowners to commit to the homebuying process in the current political and economic conditions. Factors which highlight the continued strength of rental demand in a muted purchase market across the UK. Regional variations mean that, as always, landlords and investors must undertake strong levels of research, due diligence and thoroughly assess their portfolio/personal demands. Yields need to be maximised, and intermediaries remain best positioned to successfully steer such clients through these choppy waters.


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Review: Buy-to-let

Finding solutions for complex buy-to-let As the myriad of changes that have impacted the buy-to-let sector in recent years are being experienced by landlords, some are looking at different property types to maximise their investment returns. Changes to buyto-let taxation have affected potential profits for landlords and lenders are using stricter rental calculations to determine affordability. Some landlords have turned to Houses in Multiple Occupation (HMOs) or Multi-Unit Blocks (MUBs) for greater rental yield and portfolio growth.

4. No. of rooms and size

Jane Simpson managing director, TBMC

5. HMO licensing

Check your client’s HMO property is correctly licensed. Properties with 5 or more bedrooms, occupied by more than 1 household, who are sharing facilities will (as of October 2018) need to be a licensed with the local authority. Lenders will need the appropriate licences in place before completion.


Houses in Multiple Occupation have always been a popular choice with professional landlords looking to increase their rental yields due to the potential provided by having multiple paying tenants. At TBMC we deal with HMO enquiries on a daily basis and we have around 25 different lenders on our panel who consider this property type. Dealing with complex buy-to-let cases can be rewarding for intermediaries and they can be quite straightforward to place. However, there are a number of factors that always come into consideration when handling HMO applications. TBMC’s experts place these cases every day so here are our top tips for sourcing HMO mortgages.

Multi-Unit Blocks

Multi-Unit Blocks have also been amongst the most enquired about property types every week since the new year here at TBMC. Almost exclusively accessible to

Most lenders will require each unit in the block to be individually saleable. To know what the lenders are looking for let’s break this down into more detail: - Separate utilities Each unit must have its own gas, electric and water supply. - Separate entrances Each unit must have its own secure entrance be that inside or outside. - Separate facilities Each unit might be required to have its own living space, kitchen and bathroom. Check the individual units’ square footage. Lenders will have a minimum each needs to meet. Exceptions for smaller units can be made where the majority of units meet criteria. TBMC has placed an MUB with one unit at 19 square metres before.

Check the number of ASTs your client has in place with their HMO tenants. Some lenders accept multiple ASTs and others will only accept one.

3. Experience

Your client will typically need letting experience when purchasing their first Multi-Unit Block. The average minimum requirement is two years’ landlord experience.

2. Facilities

Most lenders will only expect to see one kitchen and one living room in a HMO. If the property has more you may need to source specialist lenders.

It is interesting to see the changes in buy-to-let investment strategy as landlords look to find ways of maximising their investment potential and how lenders are developing their appetites for more complex buy-to-let business.

3. Tenant Type

Your client’s HMO might have a specific tenant type. Check criteria for DSS tenants, students and vulnerable tenants. MORTGAGE INTRODUCER

1. Individual units

2. Unit size

1. ASTs


HMO lenders have criteria on how many bedrooms they will accept in the property. TBMC works with lenders ranging from a maximum of 4 bedrooms to those with no limit at all. Checking minimum room sizes is also important as new HMO regulations stipulate a minimum of 6.51 square metres for an adult bedroom.

experienced landlords, MUBs can be valuable assets to portfolios, significantly enhancing profits and helping landlords develop into full time investors. For tenants seeking city centre locations and amenities for modern living, MUBs might be a solution for rental demand and perhaps a key feature of the investing market. TBMC’s experts place cases daily for Multi-Unit Blocks, so here are our top tips for sourcing.

MARCH 2019


Review: Buy-to-let

Competitive sector is good for landlords and intermediaries Remember 2009? It was when the UK officially entered a recession, after the turmoil of the previous 18 months. Woolworths was on the brink and interest rates were cut to a historic low of 0.5%. It was also when the buy-to-let market was dominated by a duopoly, resulting in limited product choice which stifled intermediary business. Fast forward to today’s conditions where, despite all the Brexit gloom and increased regulatory demands, we have a sector which has evolved to offer so much more. You only have to navigate through the buy-to-let section on the Mortgage Introducer website to see the constant raft of product enhancements and positive criteria changes being made. Not to mention the new product areas being explored.

Limited company borrowing

Even four or five years ago, we were still operating in a relatively onedimensional marketplace which was mainly focused on the individual ownership of property. Limited company offerings were available but unless landlords had a substantial portfolio then the costs associated with this type of borrowing were highly prohibitive, and only viable for a select few. Subsequent tax changes have seen a healthy shift in pricing, and demand, for this type of offering. In the recent BVA BDRC Landlords Panel Report for Q4 2018, it was outlined that 50% of intermediaries have placed a limited company case and over half expect to see this type of business rise. Boundaries have shifted. Many landlords may still be content owning their existing properties as individuals but, when it comes to adding to portfolios, the tax advantages and changing nature of the buy-to-let mortgage market make the option of borrowing through a limited company vehicle much more attractive. www.mortgageintroducer.com

Jeff Knight director of marketing, Foundation Home Loans

by 187% since 2015. It’s not only London where Airbnb is booming. The biggest increase of the 10 cities sampled was in Birmingham, which saw a 678% rise in the last two years, while Liverpool recorded a 535% growth in demand. We also have a far more fluid workforce than ever before. For example, short-term lets can be beneficial to contractors who often move from job-to-job and town-totown. It’s easy to see the appeal from a landlord’s perspective. This can prove to be a potentially lucrative market as they can command higher rates than long-term rentals, not to mention the flexibility to extend tenancy contracts weekly or monthly at

There is also a growing number who are willing to move property across to a limited company even though this is treated as a sale and does mean a stamp duty payment. And this is not the only area within buyto-let which has seen huge forward strides being made and opportunities opening-up for proactive intermediaries.


Activity around HMOs has grown substantially in recent times, and this now comes with a very different perception than it did in the past. I can remember a time when mentioning HMO could result in an entire risk department swiftly changing the subject, even leaving the room entirely – or maybe that was just me. Today it is simply seen as the norm and is backed by some impressive yields. Factors driving this include student lets and graduates no longer looking to immediately settle down. A growing number are looking to continue a student lifestyle – but with money – and like the appeal of HMO properties as they have a bigger group of house mates. This also makes sense financially, especially in and around the capital – alongside other major UK cities – as rents remain high. All of which further adds to the appeal for landlords.

“Another growth area is short-term lets”

Short-term lets

Another growth area is short-term lets. This is a relatively new sector but a burgeoning one. A short-term let (also known as a short-term rental) is generally understood as a letting agreement lasting less than six months but it can often be just a few weeks, or even one night. The Airbnb revolution has widely changed the awareness around short lets. Research by the Residential Landlords Association published in December found that the number of Airbnb rentals in London has increased MARCH 2019

their discretion. In a sector dealing with a series of costly changes, the lure of higher returns has tempted many to move from assured shorthold tenancies (ASTs) to the higher stakes of short-term lets. This remains somewhat of a niche market but does highlight how – even in a period of uncertainly – buy-to-let can generate additional opportunities and that innovation is still alive and well. At this juncture it’s also important to point out that mortgage intermediaries are not expected to decide which option landlords could, or should, be taking. Landlords need to look beyond capital gains vs yields and view their portfolio as an investment for their family’s future, rather than just their own. Tax situations will also be different for individual landlords and as such they need to seek independent tax advice, especially those looking towards the limited company route. However, when reaching that decision, the good news is we are now operating within a highly competitive sector where attractive options exist for landlords and intermediaries which were simply not available 10, five or even a couple of years ago. And long may this continue. MORTGAGE INTRODUCER


Review: Buy-to-let

Building more niche areas in 2019 2019 didn’t start well for a couple of lenders in our sector as Fleet and Secure Trust both announced, in quick succession, that they would be ceasing lending. And now we have Magellan. While Fleet presented themselves as a victim of their own success, promising a new funding line would be up and running soon the Secure Trust story was different. And perhaps more indicative of the challenges facing smaller lenders this year. It blamed the current economic climate, increased competition and pressures on the housing market as it launched a consultation with staff. As I write Fleet have published a clarification on their situation in a bid to reassure brokers they will be back in the market soon. Fleet chief executive officer Bob Young reiterated 2018 had been its most successful year yet and asked brokers not to group it with other lenders who are not looking to come back into the market. “We are most definitely not in that bracket,” he said. Fleet has “secured the next funding line and is in fairly advanced discussions with other potential funders that are likely to bring other funding pools online.” Bob is an old friend of many of us at TML and we’re looking forward to seeing Fleet return to lending soon but I don’t feel it’s going to be the last lender we see encountering challenges this year.

Funding structures

When we launched into residential loans nearly three years ago we did so with a robust funding line that would allow us to offer competitive products in a changing economic environment. We’ve now proved our proposition in the intermediary market and are constantly reviewing and improving our products to ensure they fit with our real-life lending proposition. That doesn’t mean we’re not experiencing the challenges other lenders with our funding structure are facing. It just means we’re better prewww.mortgageintroducer.com

Peter Beaumont deputy chief executive, The Mortgage Lender

pared, we’ve found our niche and are increasingly successful at becoming known for our pragmatic approach to borrowers’ circumstances. That means we’re happy with progress and so are our funders. But it’s not going to stop the deposittaking lenders broadening their proposition as they look to increase volume in an increasingly competitive market. That means the reasons for Secure Trust pulling the plug on new lending will resonate across the boardrooms of non-deposit taking lenders.

Uncertain times

The economic climate is uncertain, homebuyers and movers are more cautious, there are less of them around and more of us competing for a slice of the action. There are also pressures on the housing market, prices are falling in London and the debacle of Brexit is making people reticent about a house purchase or investment.

But even with all of the uncertainty people will still move home, they will still invest in property and the borrowers will be the beneficiaries of increased competition as lenders tweak their margins and criteria to find the niche that resonates with brokers and delivers their numbers. I feel we’ve hit the high point of new lenders for the time being and 2019 will be a year of contraction. It will be lucrative for the lenders that know their market well, have established robust funding lines and have strong niche products that stand out from the crowd. And you won’t be surprised to know that’s exactly where we are at. Our real life lending proposition is simple and resonates with the market for residential and buy-to-let borrowers. Our products are consistently competitive and our criteria borrower friendly. Unsurprisingly we’re confident about 2019 and the success we’ll share with our introducer partners.

I feel we’ve hit the high point of new lenders for the time being and 2019 will be a year of contraction. It will be lucrative for the lenders that know their market well, have established robust funding lines and have strong niche products that stand out from the crowd”

MARCH 2019



Review: Self-build

The importance and growth of self-build Earlier this year I saw a piece of research about the Right to Build Register. If you are unfamiliar with this, it is one of the government’s many initiatives designed to boost housebuilding and address concerns about affordability. Before Brexit, the government passed a new piece of legislation as part of the Housing and Planning Act 2016. Local authorities are now required to help self-builders locate land for those who have an interest in building their own property.

Anita Arch head of mortgage sales, Saffron Building Society

Research shows growing demand

At the start of the year, new research by the National Custom and Self Build Association (NaCSBA) found that since 1 April 2016, over 40,000 people have signed up to registers across England to secure a plot. In the last year over 10,000 new registrations have been added. The NaCSBA believes that the numbers are far less than the real underlying demand, because most local authorities do not sufficiently promote the registers. What would happen if councils did more to stimulate activity? NaCSBA are adamant that they should be doing more. Its research illustrated that one council’s only proactive promotional activity consists of a “press release around the introduction of locally-set criteria and fees”. With the power of social media surely more can be done? The research has again highlighted that self-build is growing in popularity and I think this and custom-build will increasingly become mainstream ways to secure a new home.

Mortgage applications

Brokers need to be aware that the application process needs thorough planning on behalf of the applicant, with the broker and provider all working closely together. All appli-

There are new products coming onto the market and Saffron has just launched one of its specialist products with a new rate. To make sure the application is successful you should get as much information into the application as possible, so you don’t have to go back to your client with lots of questions later on. It will save you time if you get the client to complete the fundamentals in advance.

The future of self-build

Self-build represents a far smaller proportion of house construction in the UK than other forms. In the UK, self-build equates to about 10%, compared to most European countries where the figure is much closer to over 50%. In the States, the equivalent is around 45%. However, the number of self-build completions has risen every year for the past six years. An Ipsos MORI MORTGAGE INTRODUCER

cations must be accompanied by full planning consent. If this is unavailable, it will be impossible to proceed with the application. Planning consent can take approximately 12 weeks. Without it, a mortgage valuer can’t assess the value of the property so it is an essential component of the application. Detailed costings are always required when applying for a mortgage, but in some instances it is clear that applicants have not given this adequate consideration. A fixed price contract with the builders always provides more certainty, and without one more information will be required. It’s also important to have a warranty in place. A warranty provides the guarantee that any future problems will be fixed by those responsible for the build. However, construction warranties come in many different shapes and sizes. Before submitting an application it’s important to check that the warranty in place is acceptable to your chosen mortgage provider.

Mortgage products

Growth in self-build


poll suggested that one in seven Britons expect to consider building their own home, which equates to around seven million people. I think self-build represents a major opportunity for brokers. One of the popular misconceptions about self-build is that it has to be constructed under the watchful eye of Grand Designs’ Kevin McCloud and a six to seven figure budget, but selfbuild projects don’t need to be grand designs on a greenfield site. They can be a standard build, renovation to an existing property, or conversions to a barn, basement, loft or garage. In essence, any large extension could be classified as a self-build construction.

As the research suggests, there is growing evidence that self and custom-built homes will assume an increasing proportion of the mortgage market. Specialism and expertise in this area may yield high returns in future if demand continues to grow. If you are unfamiliar with the intricacies and nuances of self-build, then it could pay to invest some time in learning more. MARCH 2019



 It’s load up time Introducing our new direct upload facility that’s now available to all brokers who use our website to submit mortgage applications. As well as being easy-to-use, it also has these added benefits: Cases underwritten quicker

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Upload pdf and jpeg files up to 10MB

Everything you need to know can be found on page 2 of our Packaging Requirements guide which is in the Forms and guides section of our web site. For more information go to

intermediary.natwest.com or log on to

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Review: Performance management

Are you ‘managing in’ or ‘managing out’ in 2019? Even in the very best organisations, there will always be some members of the team who fail to meet expectations and who fall beneath the required performance standards: not everyone can be a superstar all of the time. Equally, some new recruits get off to a slow start and may find it hard to find their feet in the initial stages. Does this describe some members of your team? If so, what are your plans in 2019 for tackling the under (or mediocre) performance of such members of staff? What interventions (if any) do you plan to make and how long will you be giving the under performers to ‘up their game’? I believe that the philosophy behind how you deal with under performers speaks volume about your whole organisation. If people are valued and regarded as individuals; each with something to contribute, then your approach will be to help them to improve with a genuine desire for them to succeed. This ‘help’ will be varied and well planned and targeted specifically to the areas of weakness. If people are just ‘numbers’ in your organisation; renewable commodities, then you won’t feel that same sense of responsibility nor the desire to improve them and make a success of them. Consequently, staff turnover will be high and retention obviously low. If you fall somewhere in between in your thinking, then it’s almost certainly the case that your people are important to you and it’s your belief that people can improve. However, your support of under performers might be somewhat limited: a ‘pep talk’, some objectives and a ‘I know you can do it’ approach. So, what is your company philosophy towards managing under perfomance? Is there a zero-tolerance approach to falling short of requirements where ‘fools are not suffered gladly” and quickly moved on? Is there a belief that the person con-



Clare Jupp director of people development, Brightstar

MARCH 2019

cerned has a time-bound opportunity to ‘shape up or ship out’ albeit with a solo approach? Or does your organisation hold the belief that bringing about improvement is a shared responsibility between employee and employer and that this concerted effort is the key to getting the team member ‘winning’ again? Whatever your philosophy and desired approach might be, your first call will obviously be to pinpoint the cause; the problem, the issue. Is it linked to ‘skill’ or more so to do with attitude? In the case of a salesperson, are figures low or lower due to technique or knowledge or is it down to poor motivation, poor approach and a lack of desire to achieve? In the case of a manager, is his/her team ‘coasting’ and lacking harmony due to a lazy, demotivated leader or because that leader needs to ‘sharpen’ his/her coaching skills and hold more effective, well planned team meetings? Skills, of course, are much easier to improve. Effective training, mentoring, buddying, peer observation, to name but a few, are all useful approaches that, in my experience, can bring good results. A poor attitude,

however, poses you with a different challenge altogether. If a person has the desire to change, then she can and will eventually do so. If the underperformer finds excuses (all beyond himself) for lack of success and lacks that drive and courage to change and bring change, then you have quite a battle on your hands. Intensive coaching can of course help him to find the way, to see things differently and to change, but this will invariably be a time and labour-intensive process: how patient are you for success and is your under performer worth this level of effort? Our own people development programme is vast and varied and allows all team members to access an appropriate programme for their role, experience and needs. One of these programmes is our performance management programme which serves as a temporary ‘safety net’ for team members who require extra input beyond our usual training and development. Once identified by the directors as a candidate for the programme, coaching sessions will be organised and held weekly. These will involve lots of questioning, contemplation and ‘unravelling’ and a fair amount of ‘soul searching’. My agenda focuses upon developing and improving people as ‘people’, not as managers, consultants, administrators and so forth. As they develop as people, I find that they will generally improve in their


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Review: Performance management

Number One workplace Last month Brightstar Financial was named as the Best Small Company to work for in the UK by the Sunday Times, receiving a Three Star Best Companies accreditation; the highest quality mark possible. The specialist mortgage distributor was praised for its ‘extraordinary’ levels of workplace engagement. Brightstar, which was founded in 2011, was an early adopter of the Women in Finance Charter. It has also been a pioneer in championing awareness about employee wellbeing and mental health issues. In 2017 the business opened a Wellbeing Room to provide its people with a dedicated space to relax and unwind as part of its Mental Health Action Plan. In July 2016, Brightstar was named the Investors in People (IIP) Gold Employer of the Year, beating more than 300 companies from 29 countries across the globe. Brightstar was also named ‘Equality Employer of the Year’ in 2018 and is also a Living Wage Employer.

roles through the benefits of selfrealisation, greater confidence and a renewed sense of vigour. Confidence is indeed key to success and I am a firm believer that confidence breeds competence. Alongside my coaching, other interventions will take place including one-ones with the appropriate line manager. These will focus on job role such as work flow, business levels, tasks and objectives for that week. The manager will have tight control of this part of the process as he/she, naturally, knows best. Alongside the manager and myself, participant observation of the team member will take place by all directors and often by our ‘Learning Champions’ too and their findings will be fed back at our directors’ weekly meetings. These team members contribute crucial ‘eyes and ears’ and can often add vital observations and reflections to help us to identify the issues and to, of course, monitor and spot progress. Additionally, a buddy will be assigned to help with particular skill areas e.g. IT, product knowledge and a desk mentor will step into role and will help to give that ongoing support and encouragement on a daily basis, albeit more informally. Using this approach, our experiences have been very good but not entirely successful. www.mortgageintroducer.com

Returning to my original idea of skills versus attitude, my experience has been that where the problem is attitudinal, progress is often only temporary and whilst labour and time intensive techniques may well bring improvement, once the ‘scaffold’ is removed, the staff member may well revert to type. It is my belief that if a situation is reached whereby a person is being ‘carried’, is affecting the team ethos and ultimately damaging the culture, the option to dismiss has to be regarded as the only one. I conclude by saying that when it comes to performance management, no leader wants to be seen as a pushover, but conversely, I would advocate that the label of ‘ruthless tyrant’ is equally undesirable. Surely, having a reputation for firing people reflects poorly on your people management philosophy and also your recruitment policy: how did you get it so wrong to start with? High staff turnover is costly and damaging to morale and therefore it is crucial to recruit the right people, retain them and support them when things go off track. Dismissal might be the only option in certain cases, but my strong belief in people leads me to believe that success is always just ‘round the corner’.

Paul understands

Paul Mansell understands that you are looking to work with an approachable, adaptable and dependable partner who will look for reasons to say 'Yes' to your proposals. That’s why in uncertain times our book stays open. • Responsive decisions at attractive rates • Flexible funding tailored to individual needs • Loans from the everyday to the extraordinary Paul is one of UTB's Business Development Managers just one of our growing team of Bridging specialists working closely with broker partners across the UK to help them deliver flexible short term loans. T: 020 3862 1002 E: bridging@utbank.co.uk

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MARCH 2019



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Review: Protection

Simplicity plan no threat to advisers Scottish Widows’ new ‘Plan & Protect’ range of life and critical illness plans might offer branch advisers a quick, easy to understand sale but it’s no match for the leading plans in the market in terms of comprehensiveness, says CIExpert director Alan Lakey. Offered through Halifax, Lloyds Bank and Bank of Scotland branches, Scottish Widows’ plans buck the trend of recent years with regards to CI upgrades and extensive lists of conditions covered. Instead, the provider has opted for a simple design with the mortgage market specifically in mind. Lakey says: “Of course, when you market to a captive audience you do not need to offer top of the range as

Kevin Carr chief executive, Protection Review and managing director of Carr Consulting & Communications

this particular consumer sector has decided to trust the bank and not take specialist advice. “Given this scenario it makes sense to then smooth the path by producing a more easily understandable plan that covers the main claim areas, reduce the pages within the documents and use seven qualifying health questions. This resolves the longstanding problem of timesensitive meetings and boredom. “This plan is not a threat to advisers because I am confident that any consumer with such a plan will be a first-time buyer who with added knowledge, and the comfort of already having a CI plan, will be more agreeable to evaluating the pros and cons of coverage.”

The collaborative effect It seems mortgage brokers are embracing protection like never before, thanks to collaboration across the industry, says life and pensions technology expert iPipeline. The amount of protection business from mortgage brokers “increased dramatically” in the second half of last year, according to the provider. Traditionally, the greatest volume of income protection new business is received from independent financial advisers. However, over the second half of the year the volume of new income protection and new short-term IP with critical illness business from mortgage brokers substantially overtook the volume of protection sales from IFAs. Overall, sales of IP increased by 85% during Q4, reports iPipeline. Half of IP business was from mortgage brokers, with this channel seeing year-on-year IP levels increasing by 165%, compared with 68% for IFAs. Paul Yates, Product Strategy Director, iPipeline, puts the increase down to the


introduction of easier, streamlined processes that aid the sourcing of protection and help do away with unnecessary questions. A better range of IP and CI products, such as the addition of affordable short-term IP to the traditional IP model, is helping brokers address the needs of more customers, he says. “Over the past 12–18 months, a number of distributors, especially mortgage brokers, have really focused in on protection and helping to chip away at the 2.4 trillion protection gap. “To those on a budget, protection can have a reputation of being expensive. However, advisers can introduce an indication of cost upfront based on data they have gained through the mortgage application process, therefore nudging the client to the view that there can be an affordable option. “As part of this process, advisers can also highlight to the client their personalised risks associated with no, or reduced, cover, therefore addressing the importance element.”

MARCH 2019

News in brief • Legal & General has partnered with Police Mutual to distribute life, decreasing life and critical illness to police officers, staff and family members. • Defaqto has launched a critical illness comparison tool, which has the ability to compare and contrast current products as well as earlier versions and closed plans. It promises whole of market comparisons in under five minutes. • AIG Life has announced that it paid 99% of life claims in 2018 – the same figure as 2017 and 94% of critical illness claims – up from 93%. • Holloway Friendly has launched an online calculator, which allows clients to see how long they could afford to pay the bills if they suddenly lost their income. • Income Protection specialist PG Mutual announced a record increase in new policy sales for the second year running and 96% of claims paid in 2018. • The Association of British Insurers (ABI) has launched ‘Percy the Protection Calculator’ an online calculator, targeted towards customers, that estimates the financial entitlements of people should they miss work due to illness or injury. • Income protection mutual British Friendly has added to its ‘mutual benefits’ added-value services range, partnering with total wellbeing provider LifeWorks and Hotelogical, a hotel booking and discount app. • Financial technology business IRESS has launched a ‘buy now’ term assurance option via its quote and apply sourcing engine, The Exchange. It aims to provide advisers and clients with price certainty at the point of sale.



Review: Protection

Insurance does pay (out) There’s a school of thought in some quarters of our industry that insurers should not highlight, herald, trumpet the statistics around how many claims that insurer has paid out on. I know of one industry practitioner who has been a broker and an insurer in his time who says: “Why are they shouting about what they should do anyway? They make a big deal about paying out on an insurance claim. That’s what they are supposed to do!” Well I sort of know what he means. But the trend to announcing what proportion of claims have been paid out started to address the suspicions from the wider public that insurance doesn’t pay – or at least, doesn’t pay out! So it does look a bit like trumpet blowing but one can also see the reasoning behind them doing it. I am therefore happy to see stats such as those just out from AIG Life that it paid out £92m (up from £73m in 2017) for life and critical illness claims in 2018. It says it paid 99% of life claims in 2018 (same as in 2017) and 94% of critical illness claims. Poignantly there have been an increase in the number of claims for children’s critical illness pay-outs to

Steve Ellis head of risk and protection, Premier Choice Group

parents. The thoughts of having a seriously ill child and not be able to take time off work to be with them or leaving a job and wondering how you are going to pay for anything, to be with them. Those aren’t the sort of choices a parent should have to make. A critical illness pay-out could enable parents to be with their children – and with all the horrendous worries they may have, the ones they don’t have are around paying the mortgage, or the food bill, or the trips to hospital. Best Doctors is a service most insurers and healthcare intermediaries know about. It is offered by a number of insurers to their policyholders free of charge. It offers people who

have had a medical diagnosis a second opinion. AIG says that four in 10 customers who accessed the service received a new diagnosis in 2018 for themselves or a family member, or changed their treatment following the advice given. And on one in six Best Doctors cases reviewed were for the child of a policyholder. Best Doctors is an oddly simple idea – one that can have an immensely life changing effect. One thing that concerns me is that these stats stories tend to be run in the professional trade press – so we all know about it – but not in the consumer press so that the people we want to sell insurance and protection to know about it as well.

Mental healthy It seems mortgage brokers are embracing protection like never before, thanks to collaboration across the industry, says life and pensions technology expert iPipeline. The amount of protection business from mortgage brokers “increased dramatically” in the second half of last year, according to the provider. Traditionally, the greatest volume of income protection new business is received from independent financial advisers. However, over the second half of the year the volume of new income protection and new short-term IP with critical illness business from mortgage brokers substantially overtook the volume of protection sales from IFAs. Overall, sales of IP increased by 85% during Q4, reports iPipeline. Half of IP business was from mortgage brokers, with this channel seeing year-on-year IP levels increasing by 165%, compared with 68% for IFAs. Paul Yates, Product Strategy Director, iPipeline, puts the increase down to the introduction of easier, streamlined



MARCH 2019

processes that aid the sourcing of protection and help do away with unnecessary questions. A better range of IP and CI products, such as the addition of affordable short-term IP to the traditional IP model, is helping brokers address the needs of more customers, he says. “Over the past 12–18 months, a number of distributors, especially mortgage brokers, have really focused in on protection and helping to chip away at the 2.4 trillion protection gap. “To those on a budget, protection can have a reputation of being expensive. However, advisers can introduce an indication of cost upfront based on data they have gained through the mortgage application process, therefore nudging the client to the view that there can be an affordable option. “As part of this process, advisers can also highlight to the client their personalised risks associated with no, or reduced, cover, therefore addressing the importance element.”


Review: Protection

Helping to get clients over the protection line Over the last decade protection providers have added some fantastic additional benefits to their plans. Knowing these benefits and being able to explain them to clients can help turn a ‘no’ into a ‘yes’ when asking if they want to go ahead. In this article I cover three common benefits to be aware of, but it’s important to know that the benefits offered can vary considerably between providers.

Second medical opinion

Some providers offer access to a second medical option as a free additional benefit. For example, Royal London offers this service via their Helping Hand support service and providers like

Tom Conner director, Drewberry, a founding member of the Protection Distributors Group

Aviva and AIG offer access to worldrenowned medical experts for a second option via Best Doctors. I would argue this service can be even more important than the actual payout from the plan. There are numerous examples of this service literally saving lives. Best Doctors use top specialists around the world that are often trailing ground-breaking treatments not currently available in the UK yet, so a terminal diagnosis in the UK might not necessarily be true in the US or Germany, for example.

Nurse and GP helplines

I don’t know about your GP surgery but at mine there’s a two week wait for an appointment. This can be frustrating when all we want to do is

Raising consumer awareness is everyone’s responsibility The latest protection research from Royal London gave me food for thought. First it’s good that companies such as Royal London are undertaking research to better understand why income protection is undersold in comparison to other forms of protection. The research found that almost 90% of advisers agree that income protection is massively undersold. Furthermore, Royal London found that one of the biggest barriers amongst customers is the perceived cost. On one hand this demonstrates a real lack of consumer awareness, but on the other it highlights a strong call to action for our industry, as the community who are ideally placed to increase consumer engagement and education. I believe that every adviser has a moral obligation to help drive greater awareness about the importance of www.mortgageintroducer.com

this topic. It’s also about changing the protection conversation, so that income protection is potentially discussed first, ahead of critical illness and life cover. After all, in statistical terms, that’s the order of what’s most likely to happen. As an industry, we know that consumers should be as interested as we are in these issues, but many will never appreciate this – unless we tell them. Furthermore, the perception highlighted in the research findings – that income protection is too expensive – will remain a perception unless someone talks to them about it. If we engage and talk to people about the opportunities and options available then they will appreciate that it’s actually far more affordable than they realise. Even for people in Class 3 or 4 occupations, there are plenty of friendly societies that do age related policies and who will make it

Jeff Woods campaigns and propositions director, Sesame Bankhall Group

MARCH 2019

get back to health as quickly as possible. Many insurers offer access to a nurse helpline. For example, Aviva provide access to the Bupa Anytime Healthline. Going a step further, LV= offer remote GP access via video or telephone, which also enables the client to get a prescription without having to visit their local GP.

Discounted gym membership

Anyone that’s a member of a gym knows they can cost a fortune. With Vitality it’s possible to get discounted membership of up to 40% at Virgin Active, Nuffield Health and David Lloyd Clubs and with Aviva it’s possible to get up to a 25% discount at Nuffield Health, Kinetika, and Spirit.


If you have clients that are umming -and-ahing about going ahead, being able to explain the additional benefits that come with their plan is often enough to get them over the line. affordable for people. There are also budget IP policies available, which can potentially reduce the cost to the customer by as much as 40%. In addition, just covering people’s essentials can again reduce the cost right down. As for the product providers, many are delivering excellent support and running great training sessions, which demonstrate to advisers how they can utilise the products available in the market to make income protection affordable to virtually all types of clients in all occupations. The product providers are working hard to develop new innovative products and for our part, the advice profession has a responsibility to educate customers about what’s available and increase their awareness of the need for this protection, perhaps ahead of other consumer items in their daily lives. So saying that there’s no awareness is not an excuse, because we have the opportunity and obligation to change perceptions and increase knowledge. It just takes the will to do it, so let’s work together to make it happen. MORTGAGE INTRODUCER


Review: Protection

The challenge of protecting the roof over our heads Allegedly, from what we hear from our politicians, 29 March will be a watershed moment in British politics. We will, as it stands, have a clear route out of our marriage with the EU which began over 46 years ago on 1 January 1973. Regardless of political persuasion, we have all heard arguments for and against for some time now, and while we do not now appear to be able to influence much since the vote took place, the reality is beginning to have a severe effect on the UK economy. With industrial giants like Ford, Jaguar, Honda and Bombardier all announcing cuts to their relative workforces there will be an impact on most of our doorsteps and with many of our clients. And it is not just the major manufacturers who are suffering. Without wanting to appear too gloomy, according to a survey mentioned on the BBC Business website on 1 March, manufacturers are cutting jobs at the fastest pace for six years with confidence in the sector hit by Brexit uncertainty. Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), which helped to produce the survey, said: “The UK manufacturing sector continues to suffer the slings and arrows of outrageous fortune as the harsh realities of Brexit uncertainty, challenges in the global economy and a weak pound affect confidence, jobs and overall activity.” So, how does this affect the potential demand for protection sales? Many will know the difficulty in persuading customers to part with their hard-earned cash to purchase protection, given that few wake-up in the morning and put life assurance on their daily shopping list. Protection is a discretionary spend from a consumer perspective and it is thanks to intermediaries who explain its importance to customers that so much gets sold year on year



Mike Allison head of protection, Paradigm Mortgage Services

MARCH 2019

in the UK. But how can protection products combat the uncertainty? The positive news is that there are still insurers in the market that will provide unemployment cover for clients and Paradigm has links to them. But thinking beyond that, as an ‘offshoot’ of the current economic issues, many people in all sectors will undoubtedly suffer from stress in the workplace. Typically in the short term, especially in the SME sector, a reduction in workforce numbers places a greater burden on those who remain. Without the support of the employer in managing these stress levels a domino effect may well occur, meaning more and more of the workforce will be affected thereby affecting output but most importantly the income of the employee. At a recent Paradigm workshop it was noticeable that the session we did on Group Risk got a huge amount of interest – hardly any wonder when over five million businesses in the UK have less than 10 employees. UNUM has Unemployment Cover as an option on some of its policies and in addition have an Employer Assistance Programme which will support firms in managing stress in the workplace via early intervention, behavioural therapy or ultimately rehabilitation. Currently around 30% of quotation enquiries come from SMEs with under 50 employees, so it is important not to think of Group Risk policies as options for large organisations – ‘Group’ can mean as few as two lives and the level of assistance given to firms at that level by UNUM is the same as would be given to large employers – thereby protecting the employer as well as the employee’s income. Clearly in the individual sector more and more providers are sup-

porting individuals with similar rehabilitation programmes built in to their income protection contracts. A large proportion of claims in the IP sector come as a result of stress in the workplace and it is important to remember this when looking at a range of potential life cover scenarios for clients.

“Protection is a discretionary spend from a consumer perspective and it is thanksto intermediaries that so much gets sold year-on-year” Paradigm has seen a huge increase in the sales of income protection policies in the past two years and the provision of cover for stress and mental health could be seen as one of the reasons for this, as stress in the workplace becomes a bigger factor in our daily lives. Clearly the threat of redundancy can be a trigger to that stress. Unemployment can have a devastating effect on an individual and all commensurate liabilities – the mortgage normally being the largest. However, protection products come in many shapes and sizes to fit a variety of clients. For example, for those landlords with portfolios it is important to remember that tenants who get made redundant may struggle to pay rent too – we often see surveys quoting less than a thousand pounds available in short-term savings were the worst to happen, so it is very much worth remembering that Rent Guarantee policies are available to protect private landlords in the event of non- payment of rent. It is often quoted ‘where there are problems there are opportunities’ and although we are not totally sure of the economic implications post-Brexit, we do know there are a number of solutions available for quality brokers to support their clients whether they are individual or corporate. www.mortgageintroducer.com

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Review: General Insurance

A case of new year, new you... We’re only just into March but no doubt you will have heard or read the phrase ‘new year, new me’ countless times. Whether it’s on a poster, a t-shirt or plastered all over Facebook, it’s a slogan that gets rolled out at the start of every year. But what’s actually meant by it? For some, it’s little more than a social media caption, usually used alongside a selfie of themselves in expensive gym gear that ends up being relegated to the bottom of their wardrobe by April. For many though, it’s a fairly binding pledge to do things differently this year and ‘take the bull by the horns’. Whether it’s visiting somewhere new, trying different foods or taking up new hobbies, many of us make a real commitment to broadening our horizons and improving ourselves. So what can “New year, new me” mean for mortgage brokers? How about selling General Insurance? Traditionally, there’s been a collective groan at the mention of GI. For a GI provider this is obviously disappointing, but we get it. In the past, GI wasn’t an easy sell – systems were clunky, the value it can add to a business wasn’t truly understood and many customers weren’t interested in talking about it. It’s an entirely different ballpark now though; quotation systems can return binding premiums in a matter of seconds, the effort of selling GI is now commensurate to the reward and homeowners (and the regulatory bodies) are becoming wiser to the tricks of the comparison sites (PCWs) – there’s a serious lack of trust in the PCWs now that has led to a willingness from homeowners to discuss General Insurance with their advisers. Last year’s Fairer Finance report highlighted what some of these tricks from the PCWs are, and it made for pretty bleak reading – a 50% increase in cancellation and amendment fees in recent years (with it costing as much as £35 to amend a policy and as much as £100



Jason Berry director of sales, Uinsure

to cancel a policy in some instances) and 66% of comparison site policies having higher excesses than their direct counterparts were just the tip of the iceberg. Research from Channel 4’s Supershoppers, which aired back in 2017, also showed that some PCWs are charging £300 more than other providers for the same insurance… ouch! So if you’re not sourcing home insurance for your clients, and they’re doing it themselves via PCWs, how confident are you that they truly understand what it is that they’re buying? Do they know what underinsurance is and why it’s crucial to properly tally up the value of their contents? Do they understand what Trace & Access cover is and why it can be so important to have this cover in place? Unless they’re an insurance expert, the answer to these questions will probably be no. The Fairer Finance report said as much, with their research demonstrating that there are low levels of understanding around the types and levels of cover available. Unsurprisingly, Trace & Access was one of these types of cover; with 35% of consumers not knowing whether they’re covered for this scenario. Remarkably, despite the importance of this type of cover, 19% of policies on comparison web-

sites don’t offer any form of Trace & Access cover. With your clients potentially being at risk of paying over the odds for a policy that doesn’t meet their needs, is 2019 the year to make a commitment to offer GI to your clients every time? If you don’t, who’s to say that another adviser or broker won’t. If they do, you can guarantee that they won’t just stop at Home Insurance – especially now that re-mortgaging is ever-growing in popularity. Selling GI, therefore, isn’t just a sign of the duty of care that you offer to your clients, but it also ringfences your business whilst providing you with residual income. So why not try to slip GI into your next conversation with a client; warn them of the pitfalls of the PCWs, ask them if they understand what they need to be covered for and emphasise that you really do get what you pay for when it comes to insurance. I think you’ll be pleasantly surprised should you have that GI conversation with your clients - not just by their openness to discuss their insurance needs, but by how quick and easy it is to obtain quotes for home insurance nowadays. There’s never been a better time to sell GI – so will it be a case of new year, new you?

“Many of us make a real commitment to broadening our horizons and improving ourselves. So what can “New year, new me” mean for mortgage brokers?”

MARCH 2019



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Review: General Insurance

The problem with pricing The FCA market study into insurance pricing strategies and how they impact customers has shone a spotlight on one of the biggest reputational risks facing our industry since the PPI scandal. I recently read a quote in the Independent that went: “You should never be a loyal customer to an insurance company. Never.” Dual pricing, online discounts, new customer deals… to the public this simply translates to the view that insurance loyalty is not something valued, but rather punished. Existing customers appear ripe for financial exploitation, whilst new customers are worthy of the best deals. I ask myself why did anyone think this approach was a good idea? Selling to existing customers is one of the most effective, and easiest, ways to increase revenue and profitability.

Existing customers

Many studies demonstrate it’s more cost-effective to generate revenue from existing customers than it is to go out and find new ones. However, for many years the insurance industry has taken the opposite approach. A relentless drive for new customers driven by price has resulted in massive fluctuation in premiums and a lack of focus on quality. The result is high customer churn. Churn to the extent we have now, where a customer can get a price that’s below the true cost of the risk in the hope they will simply stay with the insurer through inertia when the price doubles at renewal is bad for everyone. The market study could lead to some much needed reform. We need a return to realistic pricing for risk, whereby customers get the right cover at the right/true price from the outset, so when the premium doesn’t go up or even reduces at renewal they feel valued and have greater peace of mind. It’s Cavere’s experience that customers are happy to pay a little more



Paul Thompson founder and chief executive, Cavere Intermediary

for peace of mind, knowing an adviser has taken the time to help them get the right cover for their needs. Our retention rate of 92% stands as testament to the success of this approach. As intermediaries you have long understood the value of looking after your loyal band of clients, let’s hope that in time loyalty will be rewarded by all insurers. In the meantime make sure you’re working with a GI provider with strong insurer relationships, sound retention strategies and the expertise to deliver quality cover at not just a right first time price, but a right long term price.

The age of enlightenment I’m still dismayed by the number of brokers and intermediaries I meet that still think selling GI is not worth the effort, or that they cannot compete with price comparison sites. For the brokers we work with these things are not an issue. Why? Because they are enlightened. Let me explain… I was recently asked what I consider to be the biggest threat to brokers in 2019 and my answer was the threat of missed opportunities. Too many opt not to sell GI due to perceived burdens of regulation, training, and competition, rather than invest in doing it right. For the enlightened, those that see the benefits of selling GI in terms of meeting the full range of client needs and fulfilling that customer experience, the retention opportunities offer the best route to sustainable growth. I believe that those that invest can and do steal a march on their peers.This is about turning a threat into an opportunity. With an unstable economy, Brexit looming large and a bright light shone on unfair pricing strategies, the ability to differentiate will improve as customers realise the value of trusted counsel. This creates a great opportunity for the enlightened. And with a strong GI provider behind intermediaries, supporting them with training as well as strong relationships with insurers, the opportunities are bountiful. Take the path to enlightenment.

MARCH 2019

Flood cover must be seen as standard

FloodRe made a return to the headlines in January when it announced it had cut the reinsurance premiums it charges to insurance companies thereby lowering the cost of flood protection for those most at risk of flooding. As one of the first to provide FloodRe to brokers we often get asked if more still needs to be done to raise awareness of the importance of affordable flood insurance. My answer is always that flood cover should no longer be considered a non-standard purchase, it must and can be written as standard. Unfortunately, as there’s no consensus amongst insurers or a standard flood risk database, the result currently is that some insurers class this area as a risk when others don’t. This can undermine the intermediary’s ability to find the customer the right product. It also highlights the importance of having a GI provider with the experience and relationships with insurers that back into FloodRe, rather than those that accept or decline flood cover based on potentially inaccurate historical data. I urge intermediaries to not shy away from flood risks, cover is standard and available and it’s no different to selling normal buildings and contents, you just need to use the right provider. www.mortgageintroducer.com

WE’RE NOT ALL VANILLA USING REAL PEOPLE TO MAKE DECISIONS, NOT JUST CREDIT SCORES, IT TAKES ON AVERAGE 15 WORKING DAYS TO GET AN OFFER.* Helping your customers own homes faster. Discover a Difference Call 0800 111 020 or visit kensingtonmortgages.co.uk *Figures correct as of 11/03/2019. Average application to offer 15 Working days from the 28th January 2019 to 8th March 2019. Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited. Registered in England & Wales: Company No. 03049877. Registered address: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ. Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the FCA. THIS INFORMATION IS FOR INTERMEDIARIES ONLY

Review: General Insurance

Top tips to boost your business Are you looking for ways to boost your business? The secret to adding extra value to your clients and also increasing your revenue could be as simple as a conversation. Conversations give you the chance to find out about your clients’ circumstances, the financial products they have in place and test the suitability of these products. They can provide an insight into what your clients really need that cannot be matched by any formal fact find or algorithm. What’s more, not having a conversation takes value off of the table – both for you, as you could miss out on income, and your client who could miss out on the opportunity to switch to a more appropriate product that gives them more suitable cover, a better price, or both. It’s particularly useful to have that conversation with your clients when discussing a remortgage or product transfer, as there is often less time sensitivity during these processes and so your client is likely to be more open minded to a discussion about their broader financial requirements.

I’ve started so I’ll finish

Of course, starting a conversation with your clients is one thing but ultimately its purpose is to deliver a solution for your clients that improves their position and benefits your business. So, be prepared to progress your conversation once you have established your client’s needs and requirements. So, for example, prepare two or three different quotes that offer different levels of cover, to start them thinking more practically about the general insurance policy they want. This is a good starting point for your client to best identify what type of cover they are looking for before you tailor it to their individual needs. Think about how a simple conversation can boost your business. Prepare some techniques to stimulate a conversation about general insur-



James Watson sales director, Paymentshield

ance and identify a way to progress this conversation to positive outcomes and tailored solutions for your clients. So how can you start to stimulate more meaningful conversations with your clients that help to boost your business? Here are our top four tips that we believe can help kickstart the right types of conversations with your clients that will help you to start a dialogue about general insurance which could lead to a positive outcome for you and your clients.

presenting an attractive price to new customers, price comparison websites exploit the inertia of customers who probably don’t want to go through a lengthy process every year and might also worry that they are providing incorrect information that could affect their cover if they ever try to make a claim. Customers who use an adviser should never be penalised by loyalty pricing and this is something that you should make clear when you are talking to your clients.


Case studies

Let’s face it no one really enjoys sorting their insurance, which is another reason why people end up online, because it’s supposed to be quicker. However, this can be a false economy for insurance customers as the real time saver though you sorting their insurance for them, plus, you’ll be able to make sure the cover they’re getting is actually the cover that they need. The recent super complaint, which included general insurance, and the regulator’s investigation into loyalty pricing have highlighted the value of good advice and the potential cost of loyalty to customers. While there is nothing wrong with

When discussing the benefits of a policy including any optional extras it’s likely to have more impact if you have some claim examples to refer to. This can be your own experience or the experience of other clients. So, prepare some case studies to help add more meaning to your conversations, and if you don’t have any to hand, ask your general insurance provider if they can help.

Fact check

Ask your clients to bring their existing home insurance policy along with them to a meeting so that you can see who they’re currently getting their insurance from, what they’re paying and anything else you need to know. By doing this you can check the product they have is fit for purpose. Don’t just ask for their home insurance policy, ask them to bring all their other financial documents, you could end up winning more business.

Completion dates

Don’t just forget about those clients who said they’d sort their own insurance. Instead, contact them just before they exchange contracts as a courtesy call (their solicitor will need them to have cover in place by this point). You may find they’re yet to put their insurance in place, meaning there’s another chance for you to win their business. www.mortgageintroducer.com

Review: General Insurance

A battle for hearts and minds in building safety The Neo 200 building in Melbourne, Australia suffered a catastrophic fire in February, bringing back disturbing memories of 2017’s Grenfell Tower disaster. Mercifully, no-one was killed in the Melbourne fire; nevertheless, it is a timely reminder of how important the ongoing work to remove combustible cladding from high rise buildings is. It is almost two years since the tragedy at London’s Grenfell Tower which saw 72 people lose their lives. The public outcry at the failure of both the construction industry and Kensington & Chelsea council to make this building safe – especially following multiple complaints and warnings from residents – has prompted much needed action from the government. In the immediate aftermath of the fire, ministers set up a building safety programme with the aim of identifying and removing combustible cladding of the type used at Grenfell from all affected buildings in the UK. Meanwhile an independent expert panel was established to advise the Secretary of State for Housing, Communities and Local Government on the immediate measures needed to ensure building safety and to identify buildings of concern. As part of their work, ministers commissioned a review of building regulations and fire safety, conducted by Dame Judith Hackitt, which was published in May last year. She looked at the regulatory framework around the construction, maintenance and ongoing use of buildings, with a particular focus on multi-occupied, high-rise residential buildings. The review concluded that the system was not fit for purpose and left far too much room for those who wanted to take short-cuts to do so. Hackitt set out 53 recommendations to establish a new regulatory framework and achieve the culture www.mortgageintroducer.com

Kevin Webb managing director, Legal & General Surveying Services

change needed to create and maintain safe buildings. She warned: “This new regulatory regime needs to change the culture and mindset of those people and businesses involved in the design, construction, maintenance and operation of certain buildings so that they take proper ownership of the potential building safety risks and provide intelligent leadership in managing and controlling those risks (rather than being told by government what to do).” The government accepted her recommendations and identified 470 high rise blocks using aluminium composite cladding, similar to that used at Grenfell. So far, £400m of public money has been spent replacing the combustible panels and insulation on social housing in England. Some 289 of the high rise buildings with combustible cladding are in the private sector and several developers – including Legal & General – were swift to step up to the plate, taking responsibility for cladding replacement on private residential buildings. But despite the horror suffered by those at Grenfell, many freeholders and landlords have been slow to make these buildings safe for those who live in them. After months of warnings and evidence given by multiple housing ministers, the government lost patience. Regulations were laid in November to ban combustible cladding on the external walls of new buildings over 18 metres containing flats, as well as new hospitals, residential care premises, dormitories in boarding schools and student accommodation over that height. These became law on 21 December but apply only to new buildings. In a bid to protect those living in the estimated 160 buildings built since 2013 using combustible cladding, a second rule change in December also gave power to local

authorities to enforce action by existing landlords. Essentially, they can now sanction private landlords for failure to strip private buildings of the cladding and enforce remedial works to their properties. Furthermore, government has committed additional funding to support councils carrying out work on private buildings. Even so, its estimates suggest the changes will cost developers around £30m a year to implement. It has been a welcome move, particularly following reports in the media that many landlords were planning to foist the cost of remedial works on leaseholders – often to the tune of tens of thousands of pounds.

“Regulations were laid in November to ban combustible cladding on the external walls of new buildings over 18 metres”

MARCH 2019

Next on the agenda is a full technical review of the guidance given to developers and the construction industry on standards they must adhere; the government is currently taking evidence from the industry and experts as to what this should include. Back in November when the government initially published its legislation, it said explicitly: “We want a step change: from a passive system centred around compliance with building regulations to a proactive one where developers and building owners take responsibility for ensuring that residents are safe, with stronger assurance provided by a tougher regulatory framework.” There are those of us in the industry committed to ensuring that everyone living in the UK is living in conditions that provide for their safety. But clearly, there is still work to be done and culture and attitudes take time to change. MORTGAGE INTRODUCER


Review: General Insurance

Stockpiling for Brexit Uncertainty about Brexit has caused fears in supply chain management, leading to stockpiling by some firms in the UK. For instance, retailer Majestic Wine is reportedly holding an extra £8m worth of wine as a contingency against a no deal Brexit. This raises questions over commercial insurance provision and the risks of under insurance. Will those firms considering stockpiling be contacting their broker or insurer to make allowance for the extra cover needed? If there’s a claim and a variance in the value of stock held compared to the sum insured under the policy, then there’s a potential issue with the value of the claims award they’re going to receive. As well as higher policy limits, there could also be knock on effects to the Business Interruption (BI) element of the policy as delays on importing items or increased costs of importing post Brexit need to be taken account of within the sum insured and indemnity periods under the BI cover. And it’s not just stock this applies to – consider for instance if a manufacturer needs to source a complex machine from abroad post Brexit following a fire. They need to be on top of both any increased costs (whether that be due to higher charges from the supplier, tariffs being applied or simple currency fluctuations) as well as delays in delivery due to increased paperwork. This could increase their BI claim as a result of it taking more time before they are fully back up to speed. You should also discuss with clients the need for enhanced security. Insurer’s attitudes to the level and type of security are based around the type and value of stock, so increased stock levels may require enhanced security measures to be in place. Every cloud however has a silver lining. Inevitably, stockpiling and storage facilities go hand in hand. There has certainly been an increase in commercial space being used



Geoff Hall chairman, Berkeley Alexander

for storage, so this has become an emerging commercial opportunity for brokers. It is a topic that has been starkly highlighted recently following the Shurgard fire in January – a selfstorage warehouse based in Croydon that was destroyed on New Year’s Day. Insuring commercial storage units like this can be complex, but for brokers the commission is attractive and placing the risk is unlikely to be an issue for a GI provider with access to the right commercial lines insurers.

Food allergy claims to increase Staying on the theme of commercial risks, you can’t help but have been aware of some high profile food allergy claims that have hit the headlines. Businesses in the hospitality and leisure sectors face the prospect of increased claims as a result of a coroner’s ruling in the case of the tragic death of Natasha Ednan-Laperouse, which has received widespread attention. The teenager from London collapsed on board a flight in July 2016 after a serious allergic reaction to sesame baked into the baguette, the presence of which was not highlighted on the packaging, and sadly died. In a ruling at the end of last September, the Coroner, expressed concern over existing rules that mean individual food items prepared instore are not required to carry allergen warnings.

Dodgy baguette

Terrorism risk? Dive in! State-backed terrorism insurer Pool Re has recently announced that it has ceded terrorism cover back to the open commercial market. Pool Re began offering terrorism contingency cover for events after London won the 2012 Olympic Games over concerns there wasn’t sufficient capacity to handle the risks. Now, whether it is because no such significant claims have materialised, or for other reasons, from the first quarter of 2019, insurers will no longer be able to cede the class of business to Pool Re. Whether it is as a result of this decision, or just better awareness of the potential commercial risks from terrorism, we’ve seen a marked increase in the number of insurers moving into the gap to offer stand-alone cover. Is this another commercial market opportunity for brokers?

MARCH 2019

Instead, allergy-specific advice is currently allowed to be communicated via general notices and verbally by staff. Although the Coroner accepted the retailer in question had acted within the rules, he felt that the allergen information relating to the baguette was “inadequate in terms of visibility” and “difficult to see” and that the lack of specific information on the baguette’s packaging had in fact reassured the teenager. From an insurance aspect, it’s not just about ensuring the business has adequate insurance to protect it against claims resulting from situations such as this, it’s also about good risk management to avoid the situation arising in the first instance. Prevention is better than cure, and if a business can avoid a claim arising, that’s not just good for their clients, but it saves the business staff/management time in dealing with the issue and also saves them potential reputational damage. www.mortgageintroducer.com

Review: Equity Release

It’s time to change. This is not fake news, it’s fact The entire culture of retirement finance needs to change. In our modern, technology-fuelled, society, hundreds of industries have been forced to revolutionise and take a different path in order to survive. And yet, we are lagging behind. For those of us concerned with the retired or the retiring, there is an obvious problem staring us in the face: an over-reliance on pensions. In the past, pensions have served as the primary, sometimes even only, source of retirement income for millions of people up and down the UK. However, as life expectancy has risen and, conversely, as returns on pensions have shrunk, other forms of retirement finance have become far more important. But people still believe or hope that their pension will be enough but unfortunately far too often this is not the case. According to a recent study by OneFamily reported in Mortgage Introducer, Over-65s today have nearly five times more wealth stored in their properties than their pensions. In fact, pensioners control some £1.6 trillion in property wealth nationwide compared to £336bn in pension savings. In essence, a chasm has been allowed to open up between pensions and property, and yet most people remain fixed to the idea that their pension will come to the rescue. But, when the numbers are crunched, the average retiring person with no back-up savings will see their pension wiped out in a measly two years! An alternative therefore needs to be found, and property must be the leading candidate when you look at the data. However, this will not be a simple, overnight fix. Reliance on pensions has become so entrenched that telling people they must find an alternative will be difficult. ‘Why should I?’ they will ask, and ‘my parents’ generation www.mortgageintroducer.com

Andrea Rozario chief corporate officer, Bower Retirement

didn’t need to, so how come I have to?’ Which, to be honest, are fair questions. Successive governments have repeatedly failed to heed the warnings of this coming crisis and have left us all fumbling for solutions and now its crunch time. What’s more, as many have enjoyed living longer and healthier lives, few have stopped to think of the negatives an extra decade of life can have on people’s finances. But now we must stop and actually make the entire country understand that today is different, and things like property wealth will have to be a consideration for the vast majority of modern Brits. So, what to do? Downsizing is of course an option, and many pensioners should consider selling up if they can find somewhere suitable to buy and have the money to do so.But what about the millions who do not want to move or simply cannot afford it? How are they supposed to secure the retirement they deserve?

Well, for these people, equity release is becoming an ever more appealing option. The ability to stay in one’s home, not to mention not having to pay any punitive costs up front, and still release the money they need to improve their retirement is proving incredibly attractive. However, although record numbers of customers are indeed flocking to our industry, I still feel like we are somehow flying a little under the radar. Ultimately, property wealth is going to be thrust into the limelight over the coming years, so we need to tell more people about their options. As pensions continue to become less reliable and Brexit settles, whether or not to use equity release will be a dinner table discussion had by millions of homeowners. The challenge, therefore, is to equip these people with as much knowledge as possible. Right now, equity release is going through a brilliant period of growth, but I still believe the man on the street is not as clued up as they could be and could know more about the nuances of the lifetime mortgage. This, therefore, is our biggest challenge; spreading fact and defeating fiction.

“Although record numbers of customers are indeed flocking to our industry, I still feel like we are somehow flying a little under the radar”

MARCH 2019



Review: Equity Release

The growing appeal of intergenerational wealth Although house price growth has slowed and average salaries have picked up in the last 12 months, in much of the UK house values are still at near-historic highs. So, it’s little surprise that younger generations look to the Bank of Mum and Dad, or Gran and Grandad, for help securing the deposit for a first home. Let’s face it, for many, cutting back on daily expenditures won’t be enough to save the thousands needed as down-payment on a home. In this context, January saw the welcome return of a way of using intergenerational wealth transfer to help more young people onto the housing ladder. Lloyds Bank announced that it would be introduc-

Alice Watson

head of marketing and communications, Canada Life Home Finance

ing family-backed 100% mortgages which don’t require a deposit from the homeowner. One reason this product is well placed to succeed is that it allows retirees who want to help but don’t have the financial resources to fully gift the amount needed for a deposit. After all, they might need these savings themselves in the future. In fact, this is a popular reason for retirees using equity release – unlocking their property value to gift a deposit. Retirees continue to live in their home, while using its value to help their children or grandchildren establish a foothold in the property market. We estimate 46 first-time buyers were helped onto the housing

ladder every week in 2018 thanks to equity release. While some provide an entire deposit outright, we’ve seen examples of others using it to bolster their grandchildren’s savings. With a larger deposit, the young homeowners can benefit from lower monthly mortgage repayments, and then pay some of the difference back to their grandparents to help fund their retirement. It’s also a popular reason because it provides grandparents with a living inheritance benefit, by seeing the value of the legacy they leave. Intergenerational wealth transfer alone won’t solve the housing crisis. But products that allow grandparents to fund deposits without giving up ownership of their assets can give more families the opportunity to help relatives onto the property ladder. This more holistic approach could help to ease the problem a little, for a lot more people.

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MARCH 2019



Review: Equity Release

Support for brokers wanting to offer later-life advice Those looking for a clue as to how the equity release market might run through 2019 should look at the latest figures for lending that have been released by the Equity Release Council. They show just how far the sector has come in the past few years, the growing demand (and need) for these products, and give a strong indicator about the potential for further growth that lies ahead. Figures for quarter four 2018 show that (as predicted) over £1bn of property wealth was released over the three months, and this meant that the sector was incredibly close to breaking the £4bn barrier for a calendar year for the very first time. In terms of the number of plans, 12,891 were agreed in quarter four, bringing the annual total to 46,397 – a new high for any quarter and any year since records began, and a 25% increase year-on-year. Without wanting to count our chickens before they hatch, we are very confident that during each quarter of 2019, we will see the £1bn barrier broken, which I suspect will leave us very close, if not beyond, £5bn of new property wealth released during 2019. Considering that just a few short years ago, the industry ‘celebrated’ breaking £1bn of lending during a full year, to have this achieved within a three-month period is definitely worth recognising. However, the job is far from done, and my own understanding of the market and the key demand drivers which exist across the later life demographic seem to suggest that a more ‘natural home’ for equity release would be in the region of £710bn of lending per year. That might take a few years to get to, however when we understand the demands and needs that are driving more and more customers to look at the equity release option, then it seems a fair figure to aim for. For www.mortgageintroducer.com

Stuart Wilson managing partner, Later Life Academy

example, the average amount saved in pensions is not rising anytime soon for those nearing retirement, more and more mortgage borrowers will be taking their loans into retirement and will need to service their payments, fewer people will be picking up their State pension before their late 60s, the need to pay for long-term care will increasingly fall on the individual, plus of course we have a housing situation where many people in later life either want, or are expected to, help the younger generation get onto the housing ladder.

“In an economic environment which looks uncertain at best, I would urge all advisers to look at their ability to offer advice in this area” All of these drivers – and a number of others such as simply ensuring a standard of living or paying off other debt or renovating the house or perhaps paying for some luxuries – are likely to grow and grow, which suggests we will see an increasing number of consumers looking to use, what is likely to be, their most significant asset to fund them. In that sense, one of the biggest challenges facing the entire advisory profession – even those not currently active in the later life market – is the signposting of advice to those individuals who undoubtedly will need it, if they want to secure the right deal. Prior to the end of last year, David Burrowes of the Council, outlined how the political environment and (dare I say it) support for the later MARCH 2019

life/equity release sector is not just benign now but positively encouraging. This is a long way removed from the deeply-held suspicions some in Parliament have had about the equity release market in particular, and the fact that we now have an endorsement that the single finance guidance body should be signposting consumers to equity release amongst other options, is a real positive. However, the point is now to translate signposting to successfully ensuring consumers contact advisers and get the advice they need. We’re all acutely aware of the current discrepancy that exists when it comes to equity release and RIO products, but the industry should be able to find a workable solution to this. Indeed, the fact that a growing number of RIO lenders will not accept business from those who do not hold their equity release qualification/authorisation, is a perfect example of what can be done. We would certainly call upon all those lenders active in the RIO market to have a similar policy. Within such an environment, we can ensure that consumers not only know where to go to for advice, but are able to distinguish between those who can offer all product options and those who can only offer either equity release or RIO and mainstream loans. That should help ensure that customers get the full 360-degree advice treatment and will help provide far greater confidence to all concerned that they end up with the most suitable product for them. The final point to make is of course around market potential. In an economic environment which looks uncertain at best, where residential purchase activity is likely to bump along the bottom until we have some Brexit clarity, and where there is clearly a growing demand for later life financial solutions, I would urge all advisers to look at their ability to offer advice in this area. There is plenty of support to do this, so why not take it up, and make it a high-profile part of your advice proposition? MORTGAGE INTRODUCER


Review: Conveyancing

Sourcing the right legal services for equity release As the number of equity release customers in this country continues to swell to record breaking levels, the need for high quality legal advice and conveyancing support has become a matter of increasing importance. Figures published by the Equity Release Council (ERC) reveal that almost 83,000 customers chose to unlock wealth tied up in their properties in 2018. Current provisions dictate that all prospective ER customers are legally required to seek independent, specialist financial advice before taking out an equity release plan so as to match the suitability of products to personal circumstances, evaluate overall costs and determine the impact of schemes on tax liabilities and state benefit eligibilities. Yet, the legal consequences of signing up to a given scheme or provider are also of the utmost significance. These cover everything from the terms and conditions of a particular plan and the conveyancing requirements involved, with the transfer of documentation for home reversion plans or the need for legal charge documentation in the case of lifetime mortgages near the top of the list. Also vital to the process are

Kevin Tunnicliffe chief executive, SortRefer

meeting property queries from service providers, such as the nature of ownership arrangements or occupation rights and changing the terms of wills in order to reflect any reduction in the amounts of money that can be transferred to friends or family after death. This, in turn, emphasises the pressing need for intermediaries to choose the right kind of conveyancing support for customers who are taking out equity release plans and to recommend a legal practice or conveyancer who is able to offer advice on a full range of legal factors. These will inevitably play a fundamental role in determining whether those customers understand the terms of the mortgage, the lifelong nature of their commitment and the effect that this decision will have on extended family members. Apart from advice on the mortgage, maintaining unimpeachable standards of legal advice to equity release customers should be a benchmark to which we all aspire, both in terms of ensuring that customers receive the right kind of information and of providing a foothold for intermediaries in this fast expanding sector. However, given

Concerns about security I return to a theme, which I have talked about before, but which I believe is too important not to keep highlighting. As most of us are all too aware, the threat of cyber criminals and the rise of socalled Friday afternoon fraud has become a growing area of concern to both conveyancers and solicitors over the past few years. Yet, the three day data breach reported by Mumsnet at the beginning of February has raised additional fears that conveyancing firms could be put at risk by employees who use similar or identical passwords for online forums as those used to access internal systems.



MARCH 2019

Issues such as these are fundamental to the reputation of our sector and need to be addressed as a matter of urgency. Security experts have been warning that the use of ‘duplicate’ passwords and other lax security measures have been overlooked or ignored by a number of legal practices for far too long now and this story is a timely reminder that staff members need to be trained or reminded to adopt a greater sense of vigilance when setting passwords. The consequences of failing to do so could prove catastrophic for customers and infinitely damaging to businesses. Be safe!

the projected growth for the sector, worrying research by the ERC has established that only around 30 of its 229 members are currently law firms. The demand is growing but the numbers of law firms affiliated to the ERC remains low with widespread concerns about the range, complexity and past reputation of ER products being cited by many

“Unimpeachable standards of legal advice to ER customers should be a benchmark to which we all aspire” legal firms. Thankfully however, we have also begun to see much needed moves towards conveyancing service helplines and online advice portals over the past few months, most of which have been specifically designed to offer basic advice prior to commitment and offer fair, impartial advice for both intermediaries and customers alike. At SortRefer we have just launched a conveyancing service for equity release customers which gives advisers access to the kind of service which they have become used to for their conventional mortgage customers. Equity release lending is seeing massive growth. Not many legal practices have the working expertise in this area and it is vitally important that advisers have the confidence to recommend the right legal service to complement their mortgage advice. The forms we have appointed are both Equity Release Council members with the expertise and knowledge of the sector to ensure that the process runs smoothly, and customer needs are addressed in a way that everyone involved has confidence in the outcome. Accessing the service is as easy as it is for any of our other conveyancing services and introducers can generate instant penny accurate quotes and instruct online. This is the perfect service for an increasingly important market niche. www.mortgageintroducer.com

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Review: Conveyancing

Goodbye, farewell, auf wiedersehen, good night Anyone who owns their own business will know just how all-encompassing it can be. Successful firms do not just magically happen overnight – they require hard work, they often require very long hours, they need like-minded individuals to support you and often put into practice what you have decided, they will also need some luck, and that’s before you even consider the quality of the product or service you’re offering. It can be incredibly difficult to see the wood for the trees when you’re working within such an environment. A lot is made about business owners having an exit strategy in mind, which is obviously important, but sometimes when you’re working within a maelstrom, when the only thing on your mind is getting through the next day/week/month/ year, that exit can seem like a very long way away. It doesn’t mean that you’re not working towards that exit, but it can mean that it’s not the entire focus of your work or that of your business at every single moment. I think, as John Lennon said, “life is what happens when you’re busy making other plans”, and that if you do look too far ahead, or think the job is already done, then that’s when you’ll get bitten in the backside and you can fall a few steps down a ladder which has taken you any number of years to climb up. I write this having got to a point in my business where both I, and my directors, will be leaving at the end of this month. When we announced we had sold the Conveyancing Alliance business – which includes Broker Conveyancing – to ULS at the tail-end of 2016, 2019 seemed a long time away but now we are here and as the song goes, ‘It’s time to say goodbye’. Given this is an ending, and this will be my last column for Mortgage Introducer before I hand the pen over to Mark Snape who will continue to www.mortgageintroducer.com

Harpal Singh managing director, Broker Conveyancing

push the business forward to even greater things, I wanted to reflect a little on some of the key industry themes which have been a major part of the last decade for both myself personally and the business we work within. Interestingly, we’ve seen a major shift in a number of those areas, whereas in other parts, I can barely decipher any change at all. Clearly, one of my major aims was to try and get more advisers offering recommendations on conveyancing to their clients. I think it’s fair to say that we’ve seen some incredible

“Advice has never been more important and has never been so much in demand. The MMR pushed it to new heights, where it has stayed and if firms can offer that 360-degree service then their future is not just secure, but they can continue to thrive” progress on this, although does this suffer when the mortgage market is going great guns? Of course it does. However, the argument about greater diversification within an advisory practice is just as relevant now as it was 10/20 years ago. We all know exactly what the landscape was like in the immediate period post-credit crunch, when many businesses only survived because of their ability to cover off every single client need, whether that was the mortgage, protection, GI, or conveyancing. I’m still of the opinion that to stray from this approach risks, at best, difficulty, and at worst, MARCH 2019

all-out obliteration. Given the nature of the purchase market at present and the fact that remortgaging/ product transfer activity might not be so vigorous in the years to come, I still think it’s a worthwhile endeavour to pursue. Why wouldn’t you offer every single service possible to your clientele? Secondly, is the nature of the conveyancing advice recommendation, how it fits with free legal offerings, how lenders respond in terms of cashback, and the quality of service a client gets. To say this is a mixed bag would be an understatement. I read a couple of articles just this week from JLM talking about issues with free legals and the problems that can be caused for clients. This has been a constant issue for as long as I can remember. Of course, many conveyancers offer this free legal service and if the deal gets completed within the right timeframe, the client is ‘happy’ and the adviser probably gets away with it. For others, it can be a veritable nightmare and a couple of summers ago it seemed like the whole free legal system was collapsing for some conveyancers. My opinion has not changed on this matter and that is the fact that clients deserve their own legal representation, that cashback should be offered and used, and that the service provided to the client with their own conveyancer is going to be much better than that which they might secure from a free legal offering. Nothing will change my mind on this but I suspect this will remain an issue for the foreseeable future. Finally, what I do know is that advice has never been more important and has never been so much in demand. The MMR pushed it to new heights, where it has stayed, and if firms can offer that 360-degree service then their future is not just secure, but they can continue to thrive. Regardless of what political and regulatory changes throw at them. So, it’s perhaps odd to finish with a quote from Tony Blair, but just like when he left the Despatch Box as PM for the last time: “I wish everyone, friend or foe well, and that is that, the end.” MORTGAGE INTRODUCER




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Review: Conveyancing

Digitalisation requires the real vision There’s an old saying, the more things change, the more things stay the same. It’s worth remembering at times like these, when change feels like the only constant. The first quarter of this year has felt as though it’s been about nothing other than Brexit. Will they pass Theresa May’s deal? Will the backstop stay or will it go? Will we actually leave on 29 March? Is Government going to kick the can down the road? There is a seemingly endless list of unanswered questions and it is making it very hard to plan too far ahead. The effect of this uncertainty is showing in the UK’s housing market already. The latest RICS data showed a sharp drop in activity in January, usually a busy month for the housing market. New buyer enquiries fell again at the headline level marking the sixth successive monthly decline. What’s more, demand declined to some degree across virtually all parts of the UK. Scotland was a slight exception, but even there the trend was only flat. Alongside weakening demand, the number of new properties being listed on the sales market also deteriorated, with the net balance reading of -25%, the weakest since July 2016. Agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to December. People understandably want clarity. However, and while I know it doesn’t feel like it at the moment, this uncertainty isn’t going to last forever. There are several much longer term trends that will underpin our economy and housing market for the decades to come. The most recent data from the Office for National Statistics shows the UK’s population in 2016 was at its largest ever, at 65.6m. It is projected to reach 74m by 2039. While it is growing, improvements in healthcare and lifestyles also mean the population is getting older; in 2016 in the UK, 18% of people were aged 65 and over and 2.4% were aged 85 and over. Interest rates meanwhile are hiswww.mortgageintroducer.com

Steve Goodall chief executive, ULS

torically low at 0.75%. Even if the Bank of England hikes rates relatively consistently by 25 basis points each time, it will take years to bring the monetary environment back to historical norms. That makes mortgage finance cheap – one could argue that is a good thing given the surging demand for housing, a clampdown on landlord profits and the still inadequate supply of new social housing. Digital transformation will continue regardless of Brexit. According to analysis carried out by professional services firm RSM, the number of new tech companies being set up in the UK rose by almost 60% in 2017. In total, there were 10,016 software development and programming businesses incorporated in 2017, a 59% increase on the 6,300 companies set up in 2016. Data from Companies House also revealed growth in tech company incorporations

The mortgage sector has seen enormous digital transformation over the past few years. Lenders, networks and sourcing systems have invested in streamlining how product recommendations are made using technology”

MARCH 2019

across every region in the UK. London recorded the highest number of annual incorporations at 4,238, a jump of 76%. This was followed by the South East on 1,296, a 40% rise while the North West recorded 707 new tech firms, 29% up on the previous year. For its part, the mortgage sector has seen enormous digital transformation over the past few years. Lenders, networks and sourcing systems have invested in streamlining how product recommendations are made using technology. Alongside this, the sector has seen the entry of several online mortgage brokers, aiming to automate the advice process. The jury remains out on the effectiveness of this to date, but the efforts being made are testament to the industry’s commitment to improving customers’ experience. We are still at the beginning of this journey; currently lenders, networks, brokers, estate agents, valuers, surveyors and conveyancers are looking to automate their own areas in isolation. There remains too little integration between the technology developments that are underway in our industry. But before we can get to the ideal and seamless online transaction, there are necessary steps that must be taken. This is where we are at the moment – we’ve just launched our own platform, DigitalMove, designed to make the experience of buying a property considerably easier by creating a central hub where all legal documentation can be stored and exchanged. We expect that there will be scope to integrate this more fully with other areas of the property and mortgage transaction in future. Life goes on, even at a time when so much is up in the air. The fact remains that people need to move house, they get older and need to downsize, they get divorced and need new places, they die and properties are sold, they have children and need more bedrooms. It may be hard to know what the next six months will hold; it is not so hard to guess what the next six years will. MORTGAGE INTRODUCER


Review: London

Some glasses half empty are half full Nearly all of the data coming out about the property market at the moment is on the gloomy side. Transactions are down, house prices in London and the South East are down, sentiment among surveyors in January’s RICS survey was down. But we Brits do love a glass half empty perspective, and I’m not convinced that what is going on in the property market, in London at least, isn’t actually more of a case of how you look at the data than the data itself. Yes, Brexit negotiations, uncertainty caused by the seemingly endemic lack of resolution with Brussels on the Irish backstop and more recently, the resignation of multiple MPs from both the Conservative and Labour parties to form an independent group in Parliament, have done nothing to comfort homeowners and would be buyers. But equally, death, divorce, growing families and debt are all situations that occur when they occur, chaos in Parliament or no. If you talk to mortgage brokers, their desks are still piled (figuratively speaking) high with enquiries and applications. The latest UK Finance data showed there were 370,000 new first-time buyer mortgages completed in 2018, some 1.9% more than in 2017. This is the highest number of first-time buyer mortgages since 2006, when this figure stood at 402,800. The £62bn of new lending in the year was 4.9% more than in 2017. The mainstream market is proving very resilient, even in the face of all the goings on in Westminster and Brussels. Pressure on the economy is also not feeding through into unemployment. The latest Office for National Statistics figures showed employment rising by 167,000 in the three months to December, pushing annual employment growth up from 1% in November to 1.4% and left the unemployment rate unchanged at 4%. Meanwhile, headline threemonth average annual pay growth both including and excluding bonuses held steady at the post-crisis



Robin Johnson managing director, Kinleigh Folkard & Hayward Professional

MARCH 2019

high of 3.4% reached in November. While consumers and businesses might be feeling glum and worried about what the future holds, the reality is that we are not in too bad shape – particularly given how close we are to the Brexit deadline. Even the areas of the economy that are foundering could have a positive flipside. The weaker pound, depressed house prices in the capital and the endurance of a long-term mismatch between housing demand and supply in the UK has also proved an interesting prospect for foreign investors who still need somewhere to park their cash. London super prime property is still a fairly safe longterm bet, particularly in the wake of ongoing trade wars between the US and China which have created months of stock market volatility further east. Indeed the latest results from Hamptons International’s International Buyer and Seller Survey, out mid-February, showed that 57% of homes bought in prime central London in the second half of 2018 were purchased by an international buyer, the highest level since H2 2012 when the figure stood at 58%. In Greater London the proportion of homes bought by an international buyer also rose to the highest level in six years, according to the research. In H2 2018 international buyers

bought 36% of homes in Greater London, up from 31% in H2 2017. This proportion is 15% higher than in H2 2015, pre-referendum, when 21% of homes were purchased by an international buyer. The pickup was also caused by an increase in EU buyers in Greater London where 14% of homes were purchased by EU buyers in H2 2018, up from 8% in H2 2017 and 10% in H2 2015. Over the past year, the proportion of homes bought by buyers from India (+3%), Russia (+1%) and Hong Kong (+1%) has also increased. I don’t deny that there are some real doom-mongering scare stories out there, and that those are based on real data. But things are not necessarily as bad as all that. Appetite to invest in UK property, particularly at the higher value end, shows little sign of abating if the figures for prime central London are to be believed. Typically, London sees a ripple effect on prices from the centre out. This always takes time, but it represents a fact that London property looks a good investment now with the depressed exchange rate. There are currency market analysts who predict soft Brexit and a consequent rise of up to 8% in the value of Sterling off the back of a deal with Brussels. This might yet unleash a pick-up in the property market come April.



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Review: Leasehold

When and when not to extend a lease Ever since the ground rent scandal, which hit the headlines in 2017, leasehold reform has been high on the government’s agenda. The government estimates that there are 4.3m leasehold homes in England, 1.4m of which are houses. Of these, campaigners estimate 100,000 homeowners are locked into contracts with soaring leasehold related costs. These include ground rents that double every 10 years, costs to obtain planning permission, or even costs to make home improvements. To make matters worse, some homeowners are finding that homes with soaring ground rents can often be more difficult to sell. Law Commissioner Nick Hopkins undoubtedly spoke for many when he said: “people feel they are buying their home twice as a result.”

now, or wait for new legislation and, with it, a potentially better deal.

Voluntary deals

Jolanda Peters partner and head of leasehold enfranchisement, Moore Blatch

Leasehold reform

For all the reasons outlined above, the government “is committed to banning leaseholds for almost all new build houses and restricting ground rents to a peppercorn.” Housing minister Heather Wheler says it is “unacceptable for leaseholders who want to buy their freehold or extend their lease to be faced with overly complicated processes and disproportionate costs.” Tasked with reviewing the legislation is The Law Commission, which has been asked to “tip the scales in favour of leaseholders”. They’ve also been asked to “make enfranchisement easier, quicker and more cost effective” and to “simplify legislation to look at how we can improve access to enfranchisement.” However, with other political priorities taking up much of the government’s time, The Law Commission announced earlier this year that we are unlikely to see reform in 2019. Despite the delay, the government’s intentions are clear and leasehold reform is certainly on the horizon. This means that those property owners needing to renew a lease find themselves in a dilemma – renew



With the prospect of leasehold reform further away than many had hoped, ministers have been urging developers to come to voluntary agreements with homeowners regarding leasehold related fees. Some developers have offered to link ground rent to inflation as opposed to doubling it every 10 years. But, as some point out, with inflation currently so low, this could prove even more costly in the long term. Others are helping homeowners find a better deal, with Taylor Wimpy putting £130m to help their leaseholders find ways to reduce their costs. However, critics say this doesn’t go far enough. How well these voluntary agreements can work in practice is debatable, not least as freeholders and leaseholders have very different priorities.

Issues facing leasehold reform

The problems with leasehold reform are perhaps more complex than they originally seem, with property tycoon Vincent Tchengquiz arguing that changes to the leasehold system could threaten “unintended detrimental consequences to the entire property market”. Many developers have sold freeholds to investors, and much of that money has been invested in pension funds. Tchengquiz argues that changes to current leasehold legislation could result in pension funds

MARCH 2019

being forced to write down loans. Added to that, with UK interest rates currently low, a rent that doubles every decade (equivalent to a 7% return on investment) is hugely attractive, and a source of finance few will want to readily give up.

When to extend your lease

Leaseholders are therefore faced with a tough decision – extend your lease now or wait for much needed reform. If a lease is approaching the 80year mark, without question, you should look into extending that lease now. Age old rules mean once a lease falls below 80 years, it becomes much more-costly and complex to extend. And once the term of a lease falls below 70 years, it can be extremely hard to get a mortgage – making the property very hard to sell. In short, waiting to see the outcome of leasehold reform (if your lease is approaching 80 years) before renewing a lease could be a potential gamble. With the leasehold enfranchisement process currently so complicated, some are tempted to undergo an informal lease extension. However, this isn’t without its pitfalls, not least as an informal lease extension does not carry the same legal rights or protections as the statutory lease extension process does. There is a statutory process – admittedly it’s complex. But it has all the necessary legal protections to ensure that there are no costly pitfalls, and sound advice can make sure you don’t succumb to any unexpected costs. Leasehold reform is overdue and we are likely to see a shift in balance away from the developer and freeholder and towards the leaseholder. But until these changes come into force, extending a lease that is approaching the 80-year mark, or is even lower, is extremely important. Not doing so could be costly at best. At worst, a property could become unsellable. www.mortgageintroducer.com

Review: Technology

Do not lose sight of why customers interact We live in a fast-paced world. Advances in technology delivering time-saving gadgets and increasing connectivity is allowing – perhaps forcing – us to jam more and more into our days. As a result, we’re demanding quicker responses to just about everything but not at the expense of the service we receive or experience that we get. Whether researching or buying something, chatting with a bot or a real person, visiting a store or browsing a website, every interaction with a business leaves an impression on the customer.

Brand perception

Each encounter along the way to concluding their journey has a major impact on their experience and ultimately how they perceive the brand. Businesses across pretty much every industry sector are under enormous pressure to deliver because if there is one distinction to be made between those who have loyal customers and those who struggle to retain them, it is probably the speed of their customer service. Thanks to the rise of mobile devices, the speed at which the customer’s journey takes place has become possibly the most important part of their overall experience. So it’s no surprise that businesses are investing in technology to deliver a fast and seamless customer journey. Digital natives such as Amazon and eBay have led the way. Way back in 2015, Amazon extended unlimited same day delivery on millions of items to its Prime subscribers. eBay’s Now mobile app is a little more recent but provides one-touch ordering from any of its retail partners. A less obvious example perhaps is TGI Fridays, which has been investing in artificial intelligence over the past 18 months to use data obtained from customer tweets, online bookings or cancellations or even credit card www.mortgageintroducer.com

Kevin Paterson managing director, Source Insurance

payments to make the individual’s experience of their brand the best it can be. For those who get it right, the customer reaction – often shared through social media – can have a hugely positive impact. On the other side of the coin, if a company gets it wrong, it can turn into a PR nightmare. Think about the huge disruption TSB customers faced last year when the bank made the decision to split its computer systems migrating over a billion customer records but bungled the job and locked customers out of their accounts. It received almost a quarter of a million customer complaints with thousands remaining unresolved. The chief executive ended up quitting and the costs pushed the bank to a large loss. The insurance industry is no

“Our newly introduced quote journey allows intermediaries to complete a standard household quote without the need to run through declarations relating to non-standard risk” stranger to being complained about, but many in the industry are making huge strides to embrace new and emerging technologies to improve our interaction with our customers – and speed up various elements of their journey wherever possible. It’s perhaps refreshing to see that rather than using technology to cut costs and improve profitability, insurance businesses are investing in technology that focuses on their customer proposition. Much of their focus has been on speeding up their service both when it comes to buying cover as well as making and settling a claim. My own business, for example, is committed to investing in our own technology to help our partners to MARCH 2019

deliver the best experience possible to their customers. In response requests for a quicker question set, we’ve worked on the configuration of our platform over the past 12 months to drastically reduce the time it takes to complete a wholeof-market GI quotation. Presented in simple statements, our newly introduced quote journey allows intermediaries to complete a standard household quote without the need to run through declarations relating to non-standard risk.

Financial resource

However, creating technology solutions for technology solutions’ sake will never deliver the right result. Customers will soon see through any move that makes it quicker for them to buy household insurance at the expense of the quality of the cover they receive. And while technology will be able to provide solutions for the many challenges insurers and intermediaries face to improve speed of service, the importance of the human relationship should not be ignored or underestimated. We must not forget that it’s not just about finding the right mortgage or loan or insurance cover. A vital part of our role is to provide advice and guidance to help our customers maximise their financial resources and manage their risks.

Data profile

I believe that over the coming months we’re going to see increasing consideration given to how we harness the vast amount of data we collect and how we use it in a more proactive way to help our customers manage their risks. Just as telematics is being put to good use in the world of motor insurance to help customers understand their driving behaviour in order to present a better risk profile to insurers, how can insurers and intermediaries make better use data in the world of household insurance to the benefit of the customer? Speed of customer service is going to remain a vital component of the overall experience but we must not lose sight of why our customers interact with us in the first place. MORTGAGE INTRODUCER


Review: The Month That Was

Each month The Outlaw draws some tongue-incheek parallels between society at large and a mortgage market in flux

The Good, the Bad, the Boring & the Vulgar There’s that famed definition of insanity isn’t there? Continuing to do the same flawed things but expecting a different result! Anyway, we’ll come back to the May-bot’s inauspicious Brexit strategy later. But the madness of a myopic, unimaginative and stubborn approach to literally anything in life does of course also run true in our own intermediary world and especially amid the results season we are now in. Let’s look no further than the recent out-turn (a bottom line loss of £218m) at the industry behemoth that is Countrywide... whereas with Jamie Oliver, Nissan, Honda, Carluccio’s and a host of others, Brexit was all too conveniently part-cited as the primary reason for regression. What nonsense. Like some of Countrywide’s closest rivals (LSL is closing 124 agency offices), the plain fact is that this UK bellwether business over-stocked itself with too many core and non-core businesses during the market’s ascent. Many of these featured businesses with high fixed costs and text-book only management teams who’d never operated in times of famine. (It’s important and also balanced to remark



Peter Andre: Sycophant

Michael Jackson: defending the indefensible

here that the Group’s mortgage brands all actually grew their revenues!) Trading results in the estate agency sector can often be the lagged consequence of decisions made up to five years’ earlier.... but I doubt whether the business’s leaders and their lazy stewardship from that period will even be questioned. The guilty are long departed with their bags of cash. Somewhat Ironically, it’s the reverse at LBG who themselves announced a £2.4bn increase in profits. Profits up – but at a cost. For I know of no other mainstream lender whose popularity and broker-centricity has changed so markedly in the past five years. Where once this group was perceived as the market-leader on most brokers’ blended scorecard, it is now ‘back in the pack’, so to speak. For sure, some niches such as lending to the first year self-employed, or to high rate tax payers via the excellent Scottish Widows remain. But virtually every broker I enquire of on matters of the group’s personality, decision-making, entrepreneurialism, flexibility and identity etc, remark that it’s sadly not the business it once was. But you know what… it’s Groundhog day again


Countrywide; industry at Lloyds. The Bank is investing in up to 700 new behemoth advisers (I wasn’t aware that they even had 700 branches any more ?). Cue a fresh fleet of Ford Mondeos, white socks back in fashion, sales targets dressed up as “customer outcome thresholds” and the tawdry cycle can re-commence once more! With brokers picking up the compensation tab in about five years. Though probably (and thankfully!) the top 50 advisers by 2024 will be working for us all in the intermediary sector!?? Never mind. As with all of society’s great myths (… Anyhow, moving on to some good news items and there are no American troops in Cambodia / the Spice specifically two cause celebres of the ever ubiquitous Girls can truly sing / Big Jock knew what was going on Robert Sinclair. at Celtic FC etc) the truth will out in the end. And that Inferences and hints continue to abound that truth might just reveal that those investment firms and the FCA is finally (!) close to framing a constructive hedge funds who have blindly ploughed gazillions into approach to helping genuine mortgage prisoners. our sector’s digital warriors at a lemming like pace, are Further, it appears that the much vaunted going to be whistling Dixie within two years or so. Or Senior Persons Regime is also going to be both most certainly when the next correction comes! proportionate and reasonable. These are two Next month, The Outlaw will address some searing significant results and once again serve to endorse just what an exceptional role Sinclair and his team national concerns. Photo: Rwendland perform. For one, how come all these anonymous and unfancied Irish cart-horses turn up at Under the heading of Bad News Chelt–en-ham every year and win at odds this month I must however table the of 33/1? proposed merger between One Second, is Jurgen Klopp going Savings Bank and Charter Court. to have a Kevin Keegan-esque This is akin to successive England meltdown in the title run -in (when football managers of the 1970’s perhaps an unkempt pitch or a and 80’s being told that they blustery English rainstorm upsets can have Peter Shilton and Ray his karma…?) and why is it that the Clemence in goal… when in all Governor of the Bank of England truth, we only needed one top consistently gets away with overclass practitioner in that space! egging the allegedly apocalyptic Suffice, I hope the deal impact of Brexit on the economy doesn’t proceed! but is never called to task for his And in its place (… should the unlicensed scaremongering? rumours of the FCA ‘’ encouraging And you know what? ‘’ lender- mergers at the moment We may also even be debating who be true…!?!?) then I’d prefer to see should be the next Prime Minister. As each of them bolster their capital by thankfully, the Maybot has now palpably run doing two separate deals with two other Theresa May: P45 out of road and whether it’s underlings. Alas, there is probably too much Jeremy Hunt, gold and silver already apportioned in this deal. Dominic Raab or some Talking of precious metals, this leads nicely onto other come-lately, the next palladium (yep… it’s a precious metal folks!) where incumbent surely can’t at the London venue of the same name this month do a worse job than the paying public can be treated to a show called our Theresa, who “The Magic Of Michael Jackson”. I wonder if Peter regardless of the Andre and those other legions of Whacko-Jacko treachery of the likes psycophants will still be turning up and defending the of Hammond, Rudd indefensible? and Grieve surely Further vulgarity this month came in the form of needs to be given her the digi-broker Habito’s most recent TV advert which P45 before the April it defended as not being in any way yet another showers arrive. anti – mortgage broker piece of propaganda… this I’ll be seeing despite the fact that the advert had 25 complaints Groundhog day: you… (Out meant to the ASA and featured a projectile of green vomit At Lloyds Out… No deal, No emerging from a screen at the typed mention of the Problem!!!) words “mortgage broker”.




Harpal Singh’s goodbye to the industry Harpal Singh will leave Broker Conveyancing to be replaced by Mark Snape at the end of March. Ryan Bembridge catches up with the pair to discuss this passing of the baton Harpal Singh joined Conveyancing Alliance as managing director in 2007, having come from an intermediary background as director of packager Optima Broker Solutions. Woking-based Conveyancing Alliance is known in the intermediary sector from its broker arm, Broker Conveyancing, while the estate agency brand is called Agency Convey. It works by offering conveyancing services through a panel of law firms. Singh was hired to grow the business, though the focus quickly shifted towards survival after the global financial crisis started to take hold and the market shrank almost overnight. “This tsunami hit the industry and we as a business had to reinvent ourselves.” Singh says. “As the dust settled post-credit crunch the intermediary market was reborn – it grew up.”

Harpal Singh and Mark Snape

Broker Conveyancing

In the same year that he joined Singh launched the Broker Conveyancing brand. “We wanted to disturb the market,” he says. “We had good relationships with key law firms and a strong service. “I was a mortgage broker myself once upon a time, so I had a good idea of what brokers were looking for. The key thing is service; being consistent on service is the hard bit. “We wanted to launch a brand



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that offered better value for money than what’s out there. “Our technology is rock hard. Using that technology we could work on a skinny margin and therefore offer better value than many of our competitors.” While people in the mortgage market often assert that price isn’t everything, for Broker Conveyancing keeping it affordable is a key part of the model. “The broker market is price sensitive,” Singh adds. “We beat everyone on price; we always do. “You get the same law firm at a better rate, that gives us a huge edge on our competitors.” The firm also pays brokers on exchange, as Singh says one of the most frustrating parts of his time as a broker was chasing commission.

Conveyancing partners

After launching, Broker Conveyancing built close links with a number of major law firms, effectively growing alongside them

after the setback of the global financial crisis. The company can talk to senior figures within these law firms at any time, so there is a level of trust and understanding that comes from working together for so long. Law firms that work with Conveyancing Alliance include O’Neill Patient, Shoosmiths and Ramsdens. When looking for conveyancing partners Broker Conveyancing typically seeks larger firms, which Singh says are most professional, can handle volume and can price appropriately. They also need to have experience of dealing with referred work, to ensure they can look after intermediaries and not just consumers, while they must have good case management systems to connect with Broker Conveyancing’s tech. Singh says he’s regularly approached by law firms who don’t fit these criteria and he’s quite selective. “The relationships with law firms is the jewel in our crown,” Singh says. “On any day a law firm can give customers a red carpet. The trick is doing it a thousand times a month – there’s not many that can do that.” Typically, busy periods are six weeks before Easter, the end of the summer holidays and Christmas. That’s when these firms are



likely to be under most pressure and they need to be able to keep service levels high. It’s also up to Broker Conveyancing to make sure one law firm doesn’t have to deal with too much.

Changing broker habits

Singh says the number of intermediaries using Broker Conveyancing has increased day-by-day. He thinks some brokers currently aren’t using the system owing to reliance on habits or even a sense of apathy – however he’s very confident more will end up coming on board in the end. “At one point their existing supplier will get it wrong because they’re not as good as us,” Singh says. “At that point they will give you a try – that’s what I did as a broker. ‘They screwed up so I’ll try you’.” He uses the analogy of going to a supermarket to sell the offering – if you want to buy from strong brands like Coca Cola this is where you can do it. “Our brands are the strong bands,” Singh says. “Somebody else in our market has got to approach our law firms and take our capacity from us. “In the remortgage market you can count the number of law firms brokers want to use on one hand. It’s like launching a mortgage sourcing system without Santander and Halifax – good luck!”

2012 buyout

In 2012 Singh, as well as sales director John Phillips and investor Paul Duckworth bought the firm. By this time the business was getting back on track after the shockwave of the financial crisis. “We’d been through five years or changing the business, coming away from losing money, stabilising the ship, making the business profitable. We wanted more and the owners at the time were very open to us making them an offer, which we did.” By this time Singh says Broker Conveyancing had pulled ahead


when it comes to tech, as it started integrating its platform with law firms. This means that when law firms update files on their systems this is automatically picked up, without anybody having to rekey information.


In December 2016 it emerged that ULS Technology, which focuses on tech and conveyancing, had acquired 100% of Conveyancing Alliance for £12.5m. This represents quite the windfall for the shareholders, while Singh says it was always part of the plan to exit the business. As part of the deal Singh and John Phillips agreed to stay on until March 2019 to achieve some continuity with brokers and law firms. “We had a number of suitors – ULS weren’t the only ones,” Singh says. “Financially it worked for us. They wanted a long transition period of two years and three months. “We wanted the business to grow and thrive after us. They didn’t want to reinvent or change it.”

Mark Snape

Mark Snape has ben recruited to take over from Harpal Singh as managing director from 1 April. Snape has gotten to know the conveyancing market as corporate distribution director of My Home Move, which he joined in November 2015. He has also worked for lenders like Secure Trust Bank, GE Money and Magellan Homeloans. “Why have I joined the business?” he asks. “As a total proposition it’s one of the strongest things I’ve seen, mainly because of the quality of the law firms we deal with, the quality of the service, the quality of the relationships.” Snape was first introduced to the opportunity after speaking to Ben Thompson, then chief executive of ULS Technology, who has since moved on to Mortgage Advice Bureau. He says he quickly fell in love MARCH 2019

with the business, which he called ‘a best kept secret’. Indeed, he admits he wasn’t very aware of it while at My Home Move, though saw Harpal Singh’s articles in the press on a regular basis.

Faster growth

Though new MDs commonly want to put their own stamp on a business, Snape thinks if it ‘aint broke don’t fix it, though he wants to accelerate the speed of the company’s growth. He is looking to achieve this firstly by hiring an area sales director and account managers. “We need more sales people,” he says. “There is a direct correlation between extra resourcing and extra volume. “We will grow the resource this year which means we will get a substantial hike in volume.”

End of an era

It seems like Singh couldn’t be more confident in what he is leaving behind. “I know I sound cocky but we are best by 100 miles, nobody is close. “Not many businesses can double their growth every couple of years and that’s the kind of benchmark we’ve been looking for. Our growth comes from brokers; we have to grow the number of brokers that use us.” After retiring Singh plans to lose weight, take up sport and spend more time with his young family, which he says he probably hasn’t done enough of in the past few years. “We want to tell the intermediary market ‘thank you for helping us getting to where we are,” Singh sums up. “But the business is going to carry on delivering what it has already delivered.” It’s an end of an era for Conveyancing Alliance and Broker Conveyancing, and we wish Snape all the best after taking the baton from Singh. Snape has big shoes to fill as he steers the ship of the market’s ‘best kept secret’ in 2019 and beyond. MORTGAGE INTRODUCER



Plotting the future Ryan Bembridge talks to John Cowan, Sesame Bankhall Group executive chairman, about the firm’s ongoing strategy Much of the PMS mortgage desk is moving from Birmingham to Sale in Manchester between March and April, which is where Sesame Bankhall Group is headquartered. The group has also done away with separate marketing roles for the Sesame Network, with one team now representing the group. John Cowan says it’s necessary to make changes, as the group looks to move on from past regulatory issues. The business got into financial difficulties owing to poor pensions advice between 2010 and 2012, and Cowan went from non-executive director to executive director in 2014 with a remit of sorting things out. Aviva bought Sesame from Friends Life in 2015 – and Cowan says he has the backing of the parent to effectively invest in the group.

idea that he’d close it is “nuts” and says it will receive investment. Much of the PMS mortgage desk operating from Sale will be a new team, though to alleviate the risk of there being a ‘cliff edge’ there’s been a six-month transition between the two teams, with the old team training the new and some moving into field-based roles. Cowan says PMS staff were offered the chance to move to Manchester, but as with any change not everyone wants to locate, or favours the way the business is moving – and therefore there have been some departures. One such departure was Sesame’s group operations director Stuart Davies, who joined rival network Intrinsic in January. However Cowan says the number of roles hasn’t been reduced – and the number could go up this year.


Moving PMS Mortgage Club to Sale isn’t a small decision. PMS is one of the UK’s largest and oldest mortgage clubs – and Cowan professes to have an emotional connection to the business. The mortgage desk took 60,000 calls in 2017, completing £42bn of lending with 235,000 mortgages. “It’s an enormous amount,” Cowan reflects. “I wouldn’t do anything to disrupt that.” The mortgage desk will remain at least the same size and he stresses that it’s being moved, not closed. He brands the very



Martin Shulteiss

One major change at Sesame Bankhall Group was the appointment of Martin Shulteiss in MARCH 2019

January 2018, who came from a private equity background in South Africa. He has since been promoted to chief operating officer in March last year and group managing director in November 2018. It seems like Cowan considers Shulteiss to be something of a right-hand man. “We looked in the market for somebody different – not going to Openwork, Intrinsic – we wanted to look at it differently,” Cowan explains. “Could we find somebody who would help us build a future strategy and think differently?” He adds: “We are joined at the hip in terms of thinking about what is this business going to look like? “‘Are we going to turn into a Kodak?’, as he [Shulteiss] likes to say. “Are financial advisers going to go out of business? What do we believe? Do we believe in financial advice and if so, how are we going to drive it to make it grow; make it number one in the mortgage market? “We’ve spent all last year thinking about that and developing our strategy for the next three years.”

New MDs

Sesame Bankhall Group appears to have gone for a similar strategy with its managing director appointments – in terms of hiring people from different backgrounds. In November 2018 Ross Liston joined as managing director of both Bankhall and PMS from



Standard Life, where he held a number of roles over a 26-year career. And in April 2019 Richard Howells will join as managing director of Sesame Network. He was hired from Experian, where he was director of insurance, wealth, life and pensions at Experian, while he previously worked at Zurich and Bankhall. Cowan describes Howells’ history as a combination of mortgages and digital – which fits the bill.


Cowan says technology will lie at the heart of what it does in the next few years, though he says a raft of non-disclosure agreements stop him from being able to go into details. “Technology for me will be the fightback against what I call ‘the big bad wolf’”, he says. “There are people that want to come and put mortgage advisers out of business – banks, new entrants, Amazon – so we are determined to help financial advisers to survive.” Cowan says he is putting a management team together with this in mind. “I want an executive team that can look to the future,” he adds. “I want to think about mortgage brokers and redefine the mortgage business and the collection of data and what they might do with all of that, in running a modern mortgage financial planning business.” The group first moved into the Sale office in Summer 2017 when Bankhall, which specialises in compliance, moved a few miles from Altringham. And shortly the Sale office will welcome the PMS Club mortgage desk, though PMS will keep a small presence in Birmingham. Sesame Network has teams in Sale and Huddersfield, the group has an office in New Delhi in India that checks for financial promotions and compliance, while it can also use the London office of Sesame Bankhall Group’s parent,


Aviva, in London. Cowan says in an ideal world, if he was starting the business from scratch, he’d have everyone operating from one building with a flat floor.

No more siloes

Cowan wants different areas of the group to know what other parts do to help those who get in contact speak to the right people. In the past few years he reckons Sesame Bankhall Group has become too siloed. He says in general those running Bankhall haven’t known about PMS, while those at PMS haven’t known about the Sesame Network. “We should say you can buy a package that includes compliance services [from Bankhall] and using the mortgage club [PMS],” Cowan says. “If you do protection we’ve got fantastic connections with Legal & General, Aviva and so on, so you can buy the whole package from us. Our business has formed in siloes and the strategy has to be far more joined up. “Quite a lot of people in Altringham and Sale didn’t know either of the staff or much about what PMS was doing.” This joined up strategy will improve the level of training new staff gets according to Cowan. Brokers should also notice a difference too.

“Technology for me will be the fightback against what I call ‘the big bad wolf’” “What they will see is a much more rounded front of house team of people who can talk across the piece about what this business offer, rather than saying ‘you’ve got a mortgage enquiry – great the mortgage desk can fix that’,” Cowan adds. “We will have people much more connected to those people who are phoning with an enquiry.” Cowan is currently consulting

with a firm looking to buy into both Bankhall and PMS – and he says he wants to put more packages together where firms can benefit from different parts of Sesame Bankhall Group. This influenced his thinking when hiring Ross Liston as MD of both Bankhall and PMS. Frictionless mortgages Cowan seems to be someone with a strong vision of the future of the mortgage market, which seems to strongly influence his thinking. “I am aware that some people think the digital world and artificial intelligence could replace the human touch,” he says. “But I think they are wrong with that; I think if you roll the game forward three, four or five years you will find modern advice businesses using the latest technology to do frictionless mortgage applications into lenders. “Valuations, desk-based valuations… linking all these bits up in a technological, digitalised and logical way, in my opinion will take out a lot of the grunt work that goes on with advisers. The objective is to free advice capacity.” Some have suggested that lenders will be able to plug into HMRC data to eliminate the need for P60s, and Cowan definitely thinks that’s on the cards. “If you look at the market people trust brokers to look at your banking affairs over lenders,” he adds. “The technology guys will go ‘advisers are dead because people will just do all this on their tablet or on their iPhone’. “But it’s not an everyday use, taking out a mortgage.” It seems that Cowan and Shulteiss put their heads together and decided to try and reshape Sesame Bankhall Group as a more efficient unit, with an emphasis on using the latest technology. Whether this is a successful strategy remains to be seen, but they say you’ve got to move with the times – and that’s certainly what Sesame Bankhall Group is looking to do.

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Interview Cover

170 years and counting

After celebrating 170 years of Saffron Building Society, its chief executive Colin Field met with Ryan Bembridge to discuss its past, present and future The society was established in 1849, as Saffron Walden Second Building Society. Saffron Walden is a market town based in Essex and the society is still headquartered there today. In 1857 it lent £1,730, compared to around £165m last year and £240m in 2014. In more recent history, it merged with the Herts & Essex Building Society based in Bishop’s Stortford, Hertfordshire, in 1989. It was then known as the rather long-winded Saffron Walden, Herts & Essex Building Society. The name was changed to Saffron Building Society in 2006 – though the locals of Walden have apparently never forgiven the society for changing its name and still refer to it as ‘The Walden’. While it has a long history some major changes have occurred in the last decade, as it started lending on a more national basis and launched Saffron for Intermediaries five years ago. Today the society employs around 170 members of staff. It has 11 branches around the East of England, though only 10% of its business comes direct and 90% is from intermediaries. Colin Field, its chief executive, says the past five years has been



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about establishing itself as a national lender and making necessary technological changes. Indeed, he adds that he spends more time talking to staff about the future rather than the past.

His appointment

Field joined Saffron in 2013 initially as financial controller, before rapidly rising to chief financial officer in 2014 and chief executive officer in 2015. Saffron went from being a paper-based lender to online in June 2015, while it has signed deals with numerous networks and clubs including L&G Mortgage Club, Sesame and Tenet. Over that time he says the organisation has become more seamless – and he seems to have focused on bringing the lending and savings side of the business closer together. “When I joined the society it was talked about how ‘we’ve got a number of different businesses, a lending business and a savings business,’” he says. “I thought at the time ‘this is the wrong way of looking at it. We are a relatively simple savings and loan business, looking at dealing with customer needs end-to-end’.” He says the overriding focus,

whether customers are taking out savings or lending products, is to establish deeper relationships with them. Indeed, this is what arguably sets apart a smaller lender to the major banks with deep pockets. So far Field says he’s most proud of helping fellow members of staff progress – that’s where he says he gets his energy from.

His background

Unusually for the chief executive of a mortgage lender, Field has a background in chartered accountancy. He was an auditor for PricewaterhouseCoopers between 1995 and 1998, before going from practice to industry (working directly for a firm) in business planning. Field joined Barclays and had a few roles in business support and decision support, eventually progressing to finance director of Barclaycard Central Functions from 2012 to 2013. However, he got tired of being a small cog in a large wheel at Barclays, which was when the Saffron opportunity came up. “Having worked in very large businesses it’s very hard to see the end-to-end and make a 



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significant difference,” he admits. “Having done 10 years at Barclays I enjoyed it, I was reaching my 40th birthday and I thought ‘is this really what I want to do?’ “I was very fortunate because my wife was very supportive. I said ‘I don’t really want to do this for the next five years. I want to find a business which I can love, where you feel part of it.’ “In a small business you really can make a difference quite quickly and you can see how it changes. “That was my motivation – to get back to being a proper FD [financial director] responsible for all the things an FD is responsible for.” Funnily enough in some ways he’s ended up following in his Dad’s footsteps, who is a relationship banker. Owing to his background he



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reckons accountancy, problemsolving and decision-making are his strong suits but creativity isn’t – which is something he needs his colleagues to provide. “Most businesses I see are not short of ideas and enthusiasm,” he adds. “What they are short of is turning that creativity into real change and innovation. “That’s hopefully what I bring to Saffron.”

Planning for everything

Field admits Saffron, like many other lenders, has been affected by the uncertainty that has hit the market owing to the UK’s planned departure from the European Union. “People are uncertain, they don’t want to move,” he admits. “We are seeing a slowdown in house prices. Even without the economic factors we’re seeing at

the moment that makes people more uncertain.” He says we are now in a remortgage-focused market. “There’s still plenty of business out there,” he adds. “But what we’re seeing is we’re having to fight hard for what we have and if you speak to others they would probably say exactly the same thing.” Despite the caution he expects Saffron to achieve a slight uptick in lending in the next couple of years. Indeed, Field says the main strength of being a smaller society like Saffron is the ability to adapt quickly, as he’s keeping a close eye on the market – whether it rises or falls. He’s conscious that based on normal economic cycles the UK could be due a recession, though pent-up demand caused



by uncertainty around the EU may help the industry bounce beck depending on how negotiations pan out. “We will adapt,” he pledges. “As the year progresses either people’s confidence restores, the market comes back and people look to move house – and we move on from there. “Alternatively there could be downturn and then we’ve got to consider what we want to do.”

have that we can use better?” Field used the analogy of the process being like a game of chess – when the case is in Saffron’s hands how can the lender present it to brokers in the best possible way? Solicitors may slow things down, valuers may slow things down on occasion, but the key is making sure Saffron’s part of the process is as seamless as possible.

Speed and execution

Later life lending

In January 2019 Saffron hired Simon Taylor as chief commercial officer from Nottingham Building Society, where he was chief operating officer for eight years. He says Taylor has brought a new sense of focus on process, efficiency, speed and execution and the society. Field says everyone expects to be able to use mobile technology now, so the focus is on making sure Saffron is as joined-up as possible, whether the customer wants to submit an application online, over the phone or in branch. Field uses his dad’s banking habits as something of a barometer of how far technology has permeated society – and Field senior uses both mobile and internet banking. “We can’t hide behind ‘many of our customers are 55-80 they won’t do this’ because they do!” he says. “When we look at the people on our website they cross all ages and demographics.”

Room for improvement

When it comes to supplying what brokers want Field says he’s keen to hear all kinds of feedback, including negative, as it gives the society areas to improve upon. “The real push that I’m looking at is given that we’ve spent so much time, energy and money in the last few years on new technology, how can we maximise the use of it?” Field says. “It’s less about how we bolt on new technology than what do we


Field says later life lending is something the society has a keen eye on, while he feels the UK’s trillion pound pension deficit doesn’t get talked about enough. “It’s a continued bugbear of mine that my generation is probably the first that will be poorer than my parents,” he says. “I’m 45, my father retired at 58; they had a tremendous retirement. I look at people of my generation and that is not open to them. “What does that have to do with mortgages? Historically people talked about mortgages as wanting a house to live in – now they are challenged to do that. “The house is the biggest asset someone is going to have – whether it be equity release, equity reversion or intergenerational propositions, how do we make the house work for people?” Field says Saffron has been spending time getting comfortable with the mechanics of retirement income, as it has launched a different mortgage affordability calculator based on retirement incomes. The society also separated how it looks at lending into retirement and lending in retirement to properly cater for each customer type. In February Saffron launched a ‘lending into retirement downsizing mortgage’ for customers who would like to consider downsizing in future, potentially when they retire. And the lender is looking to follow this up by going into Retirement Interest-Only (RIO)

mortgages in the second quarter of this year. Thirdly it is exploring whether it can refer to an equity release broker, so Saffron can compare different product types side-by-side, or even move later life customers onto an equity release mortgage if necessary.

Buy-to-let and development

Another development will be the introduction of a limited company buy-to-let proposition, which is looking to launch in the second quarter. Meanwhile Saffron plans to do more for HMO property investors in Q2, which Field says is where demand is coming from. Field says the lender is also exploring how it can widen its selfbuild and development finance offerings. “As a business we want to be looking at, and specialising, in those little bit more niche areas,” he says. “It’s about how can we find a way of doing business others wouldn’t do, and how can we provide a better service? “For example self-build and development, that’s absolutely the niche we are looking for.” Saffron has so far funded selfbuilds in a variety of locations, from the West Country where the land is cheap to West London where there are high value deals.

Modern Methods of Construction

Field is enthusiastic about Modern Methods of Construction (MMC), which he feels could have a major impact on the market – though he admits it’s a slow burner. He’s noticed people in the selfbuild market are becoming more open to using offsite construction, as it can be cheaper as well as extremely energy efficient. “In the future we are looking to increase the amount of housing in the country – where are all the trades going to come from?” he asks. “We had a session with a group of development lenders and one guy said ‘I don’t do anything 

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other than Modern Methods of Construction because I know I can get a quality product and get it done quicker’. “It takes everything in the market to come together. You need confidence in the quality, awareness, ability of people and willingness to buy. That is catching up quite quickly.” Field likens MMC to contactless credit card payments: they are everywhere and people seem to think it’s been an overnight success, but for three years it was a slow burner. “It was a chicken and egg situation,” Field remembers. “You had to have a contactless reader, a contactless card and people having confidence that this is safe way of doing business. “When I look at MMC I see it as being similar. “It’s starting to gain momentum now. I’m speaking to smaller developers and they are starting to get confident in it.” He estimated that roughly a third of the self-build projects Saffron looks at are with MMC.

Offset mortgage lending

Field says he’s interested in intergenerational lending schemes helping first-time buyers, though he’s not keen on following the likes of Lloyds Bank into 100% loan-to-value mortgage lending. He is complimentary about Family Building Society’s offset mortgage lending proposition, while he is exploring how Saffron could have something in the same ballpark. “In the East of England there are wealthy areas, you’ve got people sitting on extremely expensive housing assets,” he says. “The challenge is how are they dealing with old age and how are they going to manage through their inheritance tax and care  needs? We’ve also got people growing up in these areas where they can’t afford to live – linking those two things together has to be a proposition. Or you can have security with a solution over two or three mortgages.”


20 years on

Field is thoughtful about how the mortgage industry and wider society will develop over the next two decades. “I think lending will have to mirror the flexibility in people’s lives,” he predicts. “You have to mirror what people want. “You are going to see more portfolio careers, more selfemployed people, more not working 9 to 5, more people working three months on and three months off and demanding that flexibility and rightly so from lenders and other people to support their lifestyle. “We need to be flexible and recognise that. The pace of that is quite fast. As a lender that means we are going to have to focus on changing the way we think about our working hours. For a smaller MARCH 2019

organisation that’s quite challenging. “At the minute we are 9 to 5 but our customers are often saying 8 o’clock is best for me. How are you going to deal with that? “In terms of lending businesses, they are going to have to be very clear on where their specialities are, especially the smaller lenders.” Saffron’s selling points in the ever-changing environment will be, according to Field, regionality and closeness – really looking at people’s lives closely building a relationship. It’s clear that, while this is a year to celebrate 170 years of Saffron, Field’s focus is very much on how he can ensure the society has a valuable role to play in the market for decades to come.  MORTGAGE INTRODUCER



Insurance life Our experts talk about whether transparency around claims is the way forward for the industry. Words by Michael Lloyd Ryan Bembridge: Where are the financial knowledge gaps amongst clients with regards to preparing for the mortgage process? Rachell Geddes: I think some clients think everything’s electronic and they can just go online and not think about anything bar the mortgage and see what they can borrow. Some just want to know the figures while some want to go through every step of the process but when it comes to protection and general insurance they have no idea. It’s never been discussed with them apart from when they’re getting a mortgage. Paul Shearman: With purchases being quite tough at the moment if there’s any part of the market that’s actually reasonably buoyant it’s probably first-time buyers who have the least amount of knowledge. You’d think they’d be younger and more tech savvy, more comfortable going online but they’re probably the highest segment of customers that go through a broker. Emma Green: When I was a first-time buyer, many years ago and prior to joining Paymentshield, I just wanted my new house, I worked out with an adviser roughly what I could afford to pay and didn’t think about anything else. My adviser didn’t talk to me about protecting that commitment and I wasn’t really interested, I was at my budget limit. Then a few years later my then partner was made redundant and I ended up



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paying the whole mortgage for some time. These kind of things can put intense pressure on relationships and families especially with children. Only then did I see the value in MPPI which I have not had for 12 years. First-time buyers don’t think about other things like protection, life insurance, critical illness and mortgage protection, they think about the new sofa or new furniture they are going to buy.

customers and when talking about excesses, within that group of 12 they determined that an excess was something you bought as an add on, in excess of the core product. I was quite shocked but where they got to was logical.

Mark Graves: General insurance is easier on the building side because the customer needs it and the lender insists on it. They get the fact the house could burn down or flood but they don’t see themselves as an individual the same way they view the property. They don’t understand they are the asset the same way the house is to the lender. That’s the biggest problem and the other problem is no one ever thinks it’ll happen to them. They always think it’ll happen to someone else. Only when we can relate it to a personal experience, or they can see something happen to a family or friend is when their attitude changes. The challenge is how the adviser creates that need without scaring the client to death in their most exciting time. It’s getting that balance right and it’s a difficult skill.

PS: The task of the broker is to educate.

PS: Because we’re all in the industry and absorbed in it there’s a tendency to expect customers to know more than they do. I remember doing a group discussion on general insurance with 12

RB: They shouldn’t have to know all this though, should they? The point of going to the broker is filling in the gaps.

RB: Is there anything that would make advisers’ lives easier in terms of knowledge that customers should have? PS: A lot of our advisers would engage with clients up front in terms of asking them to bring in certain information to a meeting, such as a credit report, ID documentation, three months of bank statements. The more they can bring along to that early meeting the quicker and easier the process will be. MG: The word is awareness. You don’t need the knowledge. Through these mechanisms you’re creating an awareness that the customer then realises there’s a need and the adviser fills in the knowledge gap via the fact find information to come up with a solution. But you need to come up with the awareness in the first place and when you’ve done that it’s a much easier place for you to



(From L to R) Katherine Mumford, Thomas Oliver; Dean Mason, Masons Financial Planning; Joseph Bishop, Paymentshield; Billel Zardoumi, Capricorn Financial Consultancy; Rachel Geddes, Mortgage Advice Bureau; Mark Graves, HLPartnerhips and Mortgage Support Network Emma Green, Paymentshield; Paul Shearman, Openwork

explain what the customer needs. Katherine Mumford: As a mortgage and protection adviser I think it’s really important that the adviser themselves have to really believe in it and drive it themselves. If they don’t believe in it and just see it as a byproduct of the mortgage they’re not able to personalise it, tailor it and sell it. Once I became a mortgage adviser and could see the importance of it, it made the difference with myself selling the product. MG: So perhaps the knowledge gap is with the adviser and client. EG: The only product you have to have is buildings insurance. It’s a requirement of the lender. I think if you talk to the customer right upfront at the start and let them know that they have to have buildings insurance as it’s a lender requirement, but they don’t need to worry as their adviser they can sort it all out for them, then it’s a different conversation. When you don’t believe in it you’re not going to sell it. CB: I have buy-to-let properties and have insurance for all of them so I can


say this to clients and explain why I have the insurance and why I think it’s important. They can then understand it because I can personalise it. RB: In January the FCA said it plans to make it compulsory for GI providers to report claim statistics. Is more transparency around claims the way forward for the industry? EG: Yes. We’re quite passionate about this at Paymentshield. Until April 30 there’s the FCA paper to consult on. We think it’s important to give transparency around what happens when someone claims but I also think there are some risks. It needs to be defined what a valid claim is. If someone has bought a policy from an adviser and the adviser hasn’t offered accidental damage cover because they haven’t provided the advice, that claim could then be declined if the customer wants to claim for accidental damage. You then have a declined claim that can count in those stats and is no fault of the insurer. So there needs to be some clarity on what can be a valid claim, MARCH 2019

but clearly insurers generally pay out on 100% of valid claims. It’s understanding those metrics. When a customer goes online, they don’t get advice, they don’t get asked a lot of the questions they should be asked and they just buy the cheapest possible product. This often ends up with them being underinsured and as a result trying to claim for something they didn’t cover in the first place. It highlights the need to get good advice. RG: It’s down to the adviser that’s discussing protection being fully aware of all the ins and outs and knowing the policy. We did a group study. Some questions are ignored on online questionnaires. It’s astonishing what people might not be covered for. People aren’t aware what the impact is if they don’t fully fill it out. It comes down to the broker or adviser knowing the products and having the discussion. Are they having that extra five, 10-minute conversation with the client to get the accurate information to ensure that the claims if needed are paid out? Joseph Bishop: Anything that MORTGAGE INTRODUCER



makes it clearer to the customer is an improvement but there needs to be a consistency on how these things are gaged, managed and recorded. It’s managing each insurer’s definition of what a claim is. Otherwise you’re misleading a customer. MG: I think it’s helpful to define what non-disclosure is because if you’re doing it online there’s 50% more chance of non-disclosure than doing it with an adviser who knows what they’re doing. If we have to deal with a complaint from a customer and find the adviser hasn’t done something right he’s not selling another GI policy again and his group of people are scared and not doing it again. So I think technology will help by making it harder to actually be negligent, but I still think it won’t improve it at all online and as long as the claims are done right you’ll see the gap between claims where there’s been no advice and it’s done online and those done with an adviser.

EG: Things can change the next day.

EG: And that’s the benefit of giving good advice. Most good advisers doing GI say you need to make sure you review it and if things change, tell us. If you just go online you’ll never have that conversation.

MG: The price of jewellery has doubled but how many people do you think have gone back and had their situation revalued? It isn’t they turn down a claim, it’s turning down a percentage of that claim. Is that up to an adviser on the financial review to update that or are you relying on the marketing of the GI provider? EG: I think it’s both.

MG: If a customer contacts you direct about a change like buying jewellery do you then tell the adviser? EG: It would come through to our broker support team, we’d amend the policy, the premium may potentially go up and the adviser would still get a commission. We wouldn’t tell the adviser we’d changed the policy. MG: So maybe that’s a thought. That’s a trigger, another USP. EG: We could probably do something within our Adviser Hub, it’s a good idea if advisers act on it and have another conversation.

EG: Is any of that on the life side to do with the fact it’s underwritten at point of sale, while with general insurance we ask some questions and you find out later whether you’ve got what you need?

PS: We recently launched a high net worth general insurance provider which includes doing an audit of clients’ general insurance needs. We had one client who worked in financial services who we found to be underinsured by £1m.

Dean Mason: That’s a key point.


RG: It’s a great excuse to have another contact with clients. We do reviews every six months with our clients and one of the questions is ‘do we have to look at anything?’. It might be a quick change is needed or a whole new policy. The broker isn’t responsible if the client changes something and doesn’t update them but it’s a great excuse for the broker to go back to the client to review circumstances.

DM: So can life cover. As far as the insurer is concerned they’ve underwritten you at that stage.

PS: The life industry has been publishing stats on claims paid and claims declined for many years and the numbers are really high on those paid out. It’s a strong message to communicate to clients, 95% of critical illness claims are paid. We live and breathe this while consumers don’t. I’m less convinced they’ll take on board this information as part of their buying process.


Public perception is important. They don’t see it as a product. There are still customers that think it’s 1985 and we’ll flog an endowment of PPI. I’m afraid it’s very difficult to get around that. In the GI space you’re dealing with people that can go online and get a quote straight away and it’s the job of advisers to say ‘the most important thing is you get a claim paid so let’s spend another 10, 15 minutes asking the right questions to make sure the claim pays out’.

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MG: He’s now going to be the biggest advocate of that product.

like a reducing term or level term product. Face-to-face you could sell income protection, which is really hard to do over the phone.

RB: In the tech-driven environment what are the benefits of face-to-face conversations with clients?

DM: I agree and I think sometimes meeting a customer gives triggers for them and you which generate those conversations, whereas over the phone it’s not quite the same.

KM: A personal approach, tailoring it to them and making them feel comfortable with your advice. DM: Some customers want to do stuff over the phone which is fine but you build the relationship by meeting face-to-face. It’s that personal touch that means they’ll come back to you. I think it’s a massive advantage. RG: I think face-to-face for some clients is the right thing. I went from being only face-to-face to 85% over the phone and it’s a huge learning curve regarding the process. You can get a good process over the phone and build a good relationship over the year, which won’t be as good as face-to-face but will still be good if you take the same time and interest over the phone. It comes down to the advice. So much more of our industry is going over the phone and it’s making sure you’re having the same conversation over the phone you would be if you were face-to-face. And if you do that the outcomes should be the same. PS: I think the more face-to-face you can be the more likely you can build that relationship and do a more holistic job with their whole mortgage package. One lender did lots of advice over the phone then introduced video links to some branches. They monitored and found on the video link it took longer to do transactions and there


KM: If you’re doing face-to-face advice it brings the sale into reality, making the client see and feel it whereas over the phone it’s more of a sales process. was a much higher conversion because the adviser felt more comfortable, eyeballing the client.

RB: Is there a place for the process online in terms of home insurance?

DM: Mine’s probably 50:50 now. My conversion rate over the phone in terms of protection and GI is much lower over the phone than face-to-face. But now there’s also Skype and some want to use that. It’s great. As an adviser you can pick up their body language, whether they’re understanding you or are distracted by something else.

EG: Looking at the models of people we work with who do general insurance, the retention over the phone is far worse than when it’s done face-to-face. The message you hear on TV is ‘go to comparison websites, it’s really easy’, when actually it’s not. You get asked 56 questions or more to get a price which takes a long time and I guess is alright if you’re scrolling through while watching TV with a glass of wine in your hand, but you aren’t getting advice. You are not responsible for the advice and the outcome. Comparison sites give people the impression it’s easy but we find that when customers go through the process with advisers, they are asked the right questions and that’s when they realise it’s not actually that simple – there are more intricacies. They think ‘I didn’t get asked about my ring or Rolex watch online, they didn’t ask me if I left the home unoccupied for example or what excess I wanted’. That’s when you can see the value of the adviser and asking 

MG: It’s a lot easier to do over the phone if it’s a second or third time around sale to an existing client because you already have that relationship and fact find and plan. The difference with face-to-face is you’re more likely to do a fully comprehensive multi-benefits sale, whereas generally the premiums sold over the phone are lower because you can sell it, but you can’t do the emotional side with body language. You add much more face-to-face by things you probably didn’t think about but find you can sell while on the phone but you’re more likely to just sell what you already decided to try and sell

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questions. We find that if that conversation hasn’t happened, when it comes to renewal, the customer is more likely to look elsewhere if the policy goes up a bit. They don’t think about the conversation they had, the feature and benefits of the product, and the retention is a lot worse on the call centre models, that just do non-advised telephone-based selling.

RB: Are we limited in terms of the API tech for GI?

PS: That’s the trouble with telephone-based selling. That’s the trouble with a lot of very busy mortgage advisers who see GI as a peripheral sale and don’t get into the intricacies of the policy and therefore can’t tailor the solution to the individual client’s requirements and then lose it at renewal.

questions and didn’t like the idea that technology was taking that away. We’ve come to the conclusion that everyone is different but if you’re putting a solely technology solution together to make life easier, you’re probably taking yourself to the quickest no you’ll ever get in your life.

RG: You have specialists in your business that can go and speak to those clients. It goes back to the businesses and clients to ensure the client has that discussion, whether over the phone or face-to-face. There’s too many just not discussing it.

PS: One insurer did consumer research on this and ended up with the consumers feeling uncomfortable that fewer and fewer questions were asked. They used big data to drive down the number of questions asked and you just immediately come up with a quote for the client and they think ‘do you really understand my requirements, how have you arrived at that?’ so this is a great opportunity for the adviser to demonstrate the value they have.

EG: There’s other tech like giving an adviser a price very quickly without asking any questions or a very limited number of questions. We see benefits in doing APIs with network CRM systems and putting through information already asked but we’ve got a slightly different approach. Using technology and not asking questions is the quickest way to get to a no. We’ve gone out with a campaign called “always ask”. Our proposition director got a group of advisers together a few weeks ago for a forum and asked them ‘if we could have zero questions and give you a price how would you feel?’. Two thirds actually wanted to ask



EG: If you don’t ask questions they’re probably going to shop around and go elsewhere to someone who’ll ask questions and put their mind at ease that the product is good for them. Maybe not in year one but potentially at renewal.

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EG: I don’t think we’re limited for API. I think there’s two bits around this. There’s using data, building an API between provider and network which is quite simple to do and is using information already attained in the fact find. I think that is vital because the information has probably just been provided by the client in the mortgage app but then going and asking additional questions not in the fact find: like let’s talk about your kids, your hobbies, husband/wife, jewellery, what’s changed in life?’, is great. Those questions are important and what differentiates an advised sales to an online one. PS: Are you using technology to make life as easy as possible for the broker? That’s key. 18 months ago we introduced the client risk report on protection. As you go through the mortgage system, the adviser automatically gets a one page report tailored to that individual client, saying during the period of the mortgage, this is the likelihood of death, having time of work, this is the cost of addressing that potential risk and this is the cost of the mortgage and therefore the cost of the total package. Two months ago we introduced a very similar report on general insurance. Automatically as the adviser goes through the process whether they like it or not they get a sheet with average cost of claims and buildings insurance. That’s part of the process which should make it easier for the broker and client. DM: In the 1990s Nationwide’s mortgage system automatically quoted for their building insurance for every case.



MG: Does anyone think what technology package you have as an adviser will make any difference to how many sales they make? Is a broker asking for what they’re end up getting forced to use because someone else with a vested interest says it’s the best? Has any tech package been developed by advisers? EG: If you ask people who don’t write general insurance why they don’t, the first thing they often say is they don’t have time. When you probe and ask more questions it goes far deeper than that, there are other factors such as they don’t understand the product and they don’t know where to start. A GI quote in the intermediary market with us and other providers only takes a minute or two now. MG: Is a client you’re sitting with on a two and a half hour mortgage process going to decide to do GI with one provider rather than another because it’s 10 minutes quicker? The only reason is it’s the state and mind of the adviser in that sale, they’re either going to sell it or not. If they get it online, they’ll probably answer wrongly. Clients don’t even know if they want it cheap, they have no understanding of the cost until the adviser starts giving them comparables. EG: We launched QuickQuote, which is something to give an adviser a price quickly so if they’re sitting with the client and their bank statements, they can quickly see one what their current provider is charging and then do QuickQuote to see our price. If the price returned is similar or lower then it gives the adviser something to at least have a try with. We don’t see that as a complete solution. The


people who already sell GI don’t use that function because they want to ask questions. We are often asked if we’ll deliver solutions like some others, asking fewer questions, but it’s not something we are looking at. We want to ask questions. We think asking questions enables advisers to give advice and of course earn commission for that advise sales. Based on conversations we have had recently we think there’s options for both and its up to advisers to decide what works for them. MG: That’s your USP as an adviser on what separates you from technology. Technology should be all about supporting a broker and getting right behind them to make their job easier and slicker and certainly shouldn’t be a barrier to talking to a customer. KM: The idea of QuickQuote for myself takes away some of that personal factor to it. It’s presumed answers so I’m not a fan of it because I think it’s not just giving you the advice as an adviser. EG: That’s why we’re giving you both options.

RB: When in the advice process is it appropriate to talk about a customer’s protection and general insurance requirements? PS: Right from the beginning. Billel Zardoumi: At Capricorn we try to introduce how you package a mortgage, protection and GI all in the conversation. When you finish talking about mortgages and you start discussing protection and GI the client isn’t taken aback because you’ve already mentioned it briefly that you’ll discuss it. They’re more receptive to the options. KM: I think its important to bring it up multiple times. A lot of people haven’t considered GI. They’ve come for their mortgage. To get it implanted into them that it’s something they really need you need to keep bringing it back into conversation. RG: When you first speak with a client you explain what the process looks like and you’ll take lots of information on their finances, looking at affordability. Most brokers in some way are called mortgage protection advisers. You have to incorporate it from the first phone call, ‘we’ll be looking at your mortgage and protection needs because they come hand in hand’. This needs to be discussed and it comes up. MG: I think we all agree it should be embedded into the interview from the very first second because you’re building relationship and rapport and the longer you leave it the bigger the hurdles and barriers in the way and adviser confidence then wanes and they try to figure 

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out how to do it. A lot of advisers generally believe it’s a two-interview process and haven’t got the time to do one or the other. It may well work for them and even if it is a two interview process you should still be having that discussion in the first interview and referring it to them in the second interview because otherwise it’ll never work.

the husband said ‘I know you touched on income protection but you didn’t try hard enough’ but thankfully we had a trail of emails to show the broker was trying to arrange to meet to talk about income protection. It’s a very sad story and critical the adviser has gone through it from a risk mitigation perspective.

DM: I changed my process about two and a half years ago. Those buying, particularly first-time buyers, are excited about buying the property and are just thinking of the mortgage. I just touch on it on the first interview and say ‘obviously once you’ve got the home you want to make sure you can keep it and in one piece if you can and this is how you can do it but we won’t get into that now, we’ll get your home first’. Also, some haven’t even found a property yet so you can’t quote them for GI yet. The customer loves you when they get the mortgage offer. Then I mention: ‘now we’ve done that, that’s the hard part out of the way, let’s talk about this now, do you want me to pop round or book a time on the phone?’ and my protection figures doubled when I started doing that.

DM: It’s the cornerstone of financial advice. Different people have different processes. We have a duty of care to customers. It’s frightening how many customers have a broker for the mortgage then go to another broker firm for protection. My disclaimer says ‘we’ve offered you this and you’ve decided to decline’ and it’s surprising that when you ask customers to sign it, about half of them will return and say ‘can you talk about that again and give us a quote?’.

need to be assumptive at the start and say you need this, don’t worry when the time is right I’ll do it for you. RG: Also, they only need you to the offer stage. Some brokers do it both ways, some go back and do reviews. Its which way works for the client, like for clients with the most horrendous background and it’s highly likely they’ll get declined, the broker might try and get them agreed and then do the review. If you delay the conversation on protection they could end up exchanging and not being protected. EG: I think 70% of cases people will research online themselves first. It’s a lot harder to sell if you haven’t mentioned protection earlier in these cases because they already have a mindset of what they want.

MG: When you exchange contract the solicitor then becomes the most important person for them, so the window is between offer and exchange.

RG: One of my best salesman for protection says: ‘I must have this conversation purely to make you aware, to give you all the advice, not just a little’. Even if they don’t choose to take it up you’re covered yourself.

EG: And the ironic thing is the solicitor would chase you for the confirmation of building and contents insurance. We’ve seen situations where customers have gone back to brokers and said ‘the solicitor has told me I need cover, can you get me a quote?’. You



PS: We had a case where the wife died unexpectedly weeks before the mortgage came through and

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RB: What tips do you have for advisers? PS: Have the confidence to be able to do it every time. Know your products inside out, take the proposition to the client and do it irrespective of it being a purchase, first-time buyer or a client you have but didn’t do it last time around. EG: Be assumptive. Make sure you say you need this and I’ll do this for you and show it’s specialist and not as simple as comparison websites tell you. Use the guides different providers, like ourselves, offer. Ours is not branded and brokers love it and say it helps them start the conversation. Using a disclaimer too makes them realise they need it too. MG: Make it a habit.


















BACK FOR 2019!

THE SPECIALIST FINANCE EVENT OF THE SUMMER. Contact the team to confirm your support today.

FRIDAY 28 JUNE 2019 MADISON | ST PAUL’S | LONDON 12PM TO 4PM Matt Bond | matt@mortgageintroducer.com | 07525 456 869 Francesca Ramsey | francesca@mortgageintroducer.com | 0203 883 9017

Loan Introducer

Equitable charges Jeanette Burgess and Rachel Elgar discuss legal and practical advice surrounding the implications of equitable charges The security that a legal charge provides is much more straightforward than an equitable charge as the title register can be relied upon in order to determine priority. The priority of equitable charges is governed by the date of their creation (rather than their registration, as is the case for legal charges). An equitable charge can be protected by noting on the title of the secured property. This will not affect the priority between equitable charges, so if the customer has already granted an equitable charge to another lender, but the charge has not been protected by notice, it will take priority over any later equitable charge. It is still advisable to protect an equitable charge by notice, because a failure to do so means that any later legal charge would take priority over the equitable charge. If the equitable charge has been protected by a notice, sections 28 and 29 of the Land Registration Act 2002 provide that a subsequent legal chargeholder takes subject to the equitable charge. If the first legal chargeholder makes a further advance to the customer, the further advance will not take priority over any subsequent lender (legal or equitable), unless the first lender has not received notice of the second lender's security. The second chargeholder should therefore notify the first charge lender of the second charge. The holder of an equitable charge does not have power of sale in the same way as a legal chargeholder. An equitable chargeholder can apply to the court for an order for possession and sale. However, unlike the position with a legal charge where the court's ability to delay or prevent pos-


session is more limited, the court has significantly wider discretion whether to make an order for sale. The court can take into account a number of circumstances, including the lender's conduct; whether the debt can be repaid by other means; whether the property is the customer's home; and the circumstances of any other people living in the property. This does not mean that an order for sale cannot be obtained and it has been established that if there is a dispute between a lender and a person who has an interest in the property (for example a partner or child living there), the interests of the lender will sooner or later prevail. The court is used to dealing with equitable charges, not least because charging orders are equitable charges. We have obtained orders for sale in respect of charging orders, as well as enforcing equitable charges created in difficult circumstances (for example, where one borrower forged the second borrower's signature on a mortgage deed and therefore the charge that remains is an equitable charge over the forger's interest in the property). Once an order for possession and sale has been obtained, the lender can apply for a warrant of possession. The lender's power to sell the property is governed by the order, which may provide, for example, a minimum price at which the property can be sold. If the lender wants to vary the terms of the order, it must apply to the court to do so. Equitable charges are not commonplace because of the relative difficulties in establishing priority and in enforcement. So, whilst an equitable charge seems like a MARCH 2019

solution to the problem of a first lender refusing its consent, if the customer is prohibited from entering into subsequent charges by the first charge's terms and conditions, an equitable charge will not circumvent this and may result in the customer being in breach of their mortgage conditions. Although equitable charges are an option, the core problem is the lack of clarity and understanding for customers and second charge lenders of why consent has been refused. It is not immediately obvious that this issue is resulting in consumer detriment; however it clearly has the potential to do so if first charge lenders refuse consent without good reason and the customer's borrowing options are thereby restricted to unsecured loans, which may be more expensive or less suitable for their needs. All regulated firms must comply with the FCA's Principles for Business including Principle 6 (Treating Customers Fairly) and Principle 7 (the need to ensure all communications are fair, clear and not misleading). First charge lenders who refuse consent without communicating a valid reason for so doing should be challenged on this basis. In addition, a mortgage condition which confers the unilateral right of refusal on a first charge lender without a corresponding obligation to act fairly and reasonably may well be challengeable as an unfair contract term under the Consumer Rights Act 2015. Jeanette Burgess is partner and head of regulatory and compliance and Rachel Elgar is associate, real estate and banking litigation at Walker Morris LLP



Loan Introducer

Thrive and survive Natalie Thomas looks at the ideas helping to propel the second charge market along

Innovation is often the key to survival and the second charge market has long been one to demonstrate its creative streak when it comes to helping borrowers who don’t fit the mainstream mould. Over the last 12 months lenders could be forgiven for not wanting to stick their head above the parapet and embark on new product endeavours, with other more pressing matters such as the regulator’s review of the sector to contendwith.If the sector is to continue to thrive and entice first-charge brokers, it will need to continue to display its ingenuity and make sure that when a first-charge broker does come knocking, a solution for their client is ready to meet them.Master brokers are often the ones at the forefront of the market and the first to hear customer demands and spot new trends emerging. So, Loan Introducer asks: What products do you think would help propel the market further?

Darren Perry, head of second charge mortgages, Brightstar Financial

“If you’d said to me two or three years ago, we would have second charge rates of 2.9%, I would have laughed at you and said they are first-charge mortgage rates, not secondcharge rates but that is what we are now seeing. I would personally like to see the second charge world mirror the first charge world more. We’ve seen a little bit of this with the introduction of fixed, tracker and discounted rates but I would like to see more. It would be good to have an option for clients to take a new deal with their existing second charge lender when their existing deal has expired – a product transfer - just like they can in the first charge market. The majority of clients we speak to take out a product with a plan in place to roll



their first and second charge together at the end of a certain time period but that plan might not always work out. As such, when they get to the end of their fixed rate they move onto their lender’s variable rate, which might not always be the best thing for them. If they want to move onto a new rate, even with their existing lender, they have to go through a whole new application which comes with its own set of costs.”

Steve Walker, managing director, Promise Solutions

Whilst there is an opportunity to tweak around the edges, I don’t see any major opportunity to introduce totally new regulated products. Lenders seem generally most nervous around affordability and acceptable income proof. We are seeing cases, which would be accepted by a first charge lender, being turned down by some second charge lenders – possibly as a result of Financial Conduct Authority’s focus on the sector at the start of last year. We should be playing by the same rules/guideline, so perhaps second charge lenders will relax a little or some first charge lenders need to tighten up.

Damian Cain, director of Complete FS;

My product wishes would centre round facilities to work on specialist investment properties, such as House in Multiple Occupation (HMO) and Air BnB properties. In a perfect world, I would also like to see more understanding and underwriting flexibility around the selfemployed generally and the treatment of contract workers and agency workers specifically.

MARCH 2019

Tim Wheeldon, managing director, Fluent Money

Second charge lenders have been, in the main, supportive of the promotion of the sector by us and others, but I would perhaps like to see more vocal support from them in respect of countering some of the more negative statements made by commentators looking to knock the sector.

Anna Bennett, marketing director, Positive Lending

There are some great products available for customers at the moment but one product option we would like to see more of is second charge buy-to-let. We are in a very fortunate position in that we are regularly invited to meet with second charge lenders and help them form their new product strategies. These partnerships are vital for further improving the sector.

Martin Stewart, founder, London Money;

I’d like to see more interest-only products for the right client and the right deal. We reviewed our first charge interestonly book recently and the average LTV was around 35% and average income multiple was around 3 x. In anyone’s book that is good, safe, sensible lending. Clearly you wouldn’t be lending at 75% LTV or above but many second charges deals are lowly geared properties in the first place. We had a case recently where the client borrowed £85,000 on a £1.5m property. His existing mortgage was £500,000 but his earning capacity for the future was enormous. I can see there is very little risk there. As Les Dennis might say, ‘I’d give him the money myself ‘.


Loan I

Loan Introducer

Alistair Ewing, managing director, The Lending Channel;

I would like to see more product choice for second charges at the higher LTV end of the market, this would certainly help clients. I also feel later life lending is an area where the second charge market should be doing much more in.

Chris Barker, co-owner/director, Manchester Money;

I see a possible place in the market for a debt consolidation product where the client is tied in for a minimum of 12 months but has the option of interestonly during that time. This would provide a low-cost option for clients who have a very high debt to income ratio on unsecured lending. They could consolidate all of it into secured lending, while still keeping their outgoings manageable. After the 12 months, the client could then switch the amount to repayment – thus giving them the nudge to remortgage. The interest-only element would make the loan more affordable. Most first-charge lenders won’t allow a borrower to remortgage if there is too much unsecured debt which is higher than earned income – which is why a product like this would be quite attractive.

Joe Breeden, managing director, Crystal Specialist Finance;

This year we will no doubt see a lot of later life lending first-charge products come to market and I just hope the second charge market follows suit because there is definitely demand for it. Another area we are seeing demand around is debt consolidation and second charges are proving to be a good option, especially for those who are perhaps fixed onto their first charge mortgage and don’t want to mess with that but reduce their monthly outgoings. Buy-to-let is another area where we would like to see lenders continue to innovate – a lot of borrowers have been fixing their buy-to-let rate and as such they might be tied into their first charge but be looking to capital raise to buy more properties or to refurbish or enhance their portfolios.

Robert Sinclair, chief executive, Association of Mortgage Intermediaries;

A lender’s flexibility around products is as much about its funding model as it is anything else. There are always going to be limitations in the second charge market around how high lenders can go with things such as LTV because there is an issue around property valuation security. We don’t want to go back to interest-only seconds – that is probably not the right thing to do. We might see developments around affordability and LTV from lenders but I think the sector already has quite a broad range of products. There is a section of the market accommodating those borrowers who are highly credit worthy and taking out a second charge because they don’t want to disturb their first-charge. Then you have an entirely different market for those who are taking out a second-charge for debt consolidation reasons and might be under financial pressure. Such clients are at the opposite ends of the scale but the market covers them well, so we already have quite a wide selection of products on offer.


MARCH 2019



Loan Introducer Cover

Connect four The second charge sector still has a way to go. Natalie Thomas highlights its merits to a ‘disengaged’ broker audience For mortgage brokers, especially Appointed Representatives, their main gateway to offering clients a second charge is via their network, either through one of its preferred second charge master brokers or direct to lender. So, it is integral to the future growth of the seconds market that these processes operate effectively and smoothly. Yet there is a fear amongst some in the industry that certain network panels are actually doing the opposite of what they were created to do and are acting as a deterrent for mortgage brokers looking to offer seconds. In last month’s Loan Introducer Q&A, Alan Cleary, managing director of Precise Mortgages commented: “AR brokers can become disengaged with second charges as they’re forced to use a certain master broker, particularly when the master brokers’ fees scales are considered excessive/not in line with what an adviser would normally charge.” He went on to say: “If the broker is conducting the advice, they feel they should be able to select an appropriate firm for the packaging.” So, is the network panel model flawed and if so, is there a better way? Loan Introducer finds out…

Limited choice

Depending on the network, ARs will generally have two options – to use one of the network’s preferred master brokers to package the case; or to go direct to a lender. Networks and their panel size can vary greatly from one to the next. One network might have five to choose from whilst another only one. In terms of choosing which master brokers or lenders sit on their panel, Robert Sinclair, chief executive of the



MARCH 2019

Association of Mortgage Intermediaries says networks will usually go out to tender for any firms that wish to be on the panel. “The network will then carry out their due diligence on the firm and agree commercial terms,” he says. Some networks might also offer brokers the option to ‘go off panel’ and use their own selected master broker, yet this is generally frowned upon by mortgage networks. “A lack of Personal Indemnity cover means mortgage networks aren’t always too comfortable with this,” Sinclair says. Networks may not welcome it but in practice some mortgage brokers do feel the need to select their own master broker. “There is no doubt in my mind that some AR’s go off panel because they don’t like something about the second charge firms they are forced to use,” says Steve Walker, managing director of Promise Solutions. “Having a choice of two or three second charge partners must make sense,” he says. What constitutes an acceptable number of master brokers on a panel seems to differ though. Having just one master broker on panel allows the network to keep a tighter rein and gives them ultimate control over where their ARs are placing business, whilst having more master brokers and lenders on panels ultimately gives ARs more choice. “Mortgage networks fulfil an important role for mortgage advisers in that they represent their compliance support, control, monitoring and oversight,” says Buster Tolfree, commercial director of mortgages at United Trust Bank. “It is each mortgage network’s responsibility to also ensure that the panels they operate cater for the widest choice of product, and therefore post-advice the best possible consumer outcome,” he adds. He says offering a lot of choice does create challenges but the mortgage market is highly competitive, and the best product today isn’t necessarily the best tomorrow, especially when it comes to specialist lenders. “Choice and competition are, on-thewhole, very good for the customer,” he says.


Loan Introducer

A golden ticket?

A place on the panel of a prominent mortgage network can seem like the golden ticket, not just for master brokers but also lenders – offering a ready-made steady flow of business and enquiries; yet this is not always the case. Tolfree says for a lender, getting on a network panel is only half the job and a lot can depend on how much work they put in. “Each lender must decide how much time and effort they are willing to invest on engagement, training, communication etc. to make them stand out from the crowd,” he says. Some do this better than others but being on a panel is only a ticket to the game. Lenders must still have the right products, engagement and processes to truly bring AR’s onside and maximise that opportunity.” Brightstar Financial is on a number of network panels and its head of second charge mortgages Darren Perry thinks the panel model works well and is a driving factor for brokers to consider second charges. Though he says there can still be some hesitation amongst brokers when it comes to handing over their client. “Some ARs are concerned about passing over their client but as we say ‘they are your client – we are just an extension of your service’. In the majority of cases we provide the advice ourselves, so it is just a handover for that broker. We allow them access to the second charge market and we aim to do the same job as them for their client,” he says.

Going direct

For master brokers in particular it seems that standing out from the crowd is important when on a panel, with a reluctance amongst some brokers to opt for the master broker route. Network Intrinsic has five master brokers on its panel but Gemma Harle, the managing director of its mortgage network says its members would still prefer to go direct. “We operate a panel of master brokers to ensure we provide our appointed representatives with choice as to who they use,” she says. “We ensure the master brokers are able to provide a quality service which meets our regulatory standards and ensures that charges to the customer


are proportionate for the service they provide,” she adds. It imposes a maximum fee on what its master brokers can charge, capped at 4% or £2,000 of the loan balance. Yet even with five master brokers to choose from and a cap on fees, she says its ARs would prefer to bypass the master broker.

“Offering a wider choice of either master brokers or lenders appears to tick all of the boxes when it comes to offering a viable solution for ARs wanting to offer seconds” “This means they remain in control and also the charge to customer is normally less as there is no fee to be charged for the master broker.” Rory Joseph, director at network JLM Mortgage Services, also operate a panel of preferred master brokers but don’t mandate their use. “We have preferred master brokers, due to our prior experience of their service standards, quality of advice and fee costs. However, we do not restrict our advisers in this way,” he says. The network’s head of mortgage finance Sebastian Murphy, says fees can also be a sticking point for its members. “The vast majority go via a master broker, though those with greater experience in this space may go direct in order to reduce the fees payable by the client,” he says.

The DIY approach

Fees it seems can act as an influencer for mortgage brokers when choosing which route to take via their network, yet going direct might not always be in the best interest of the client, says Walker. “Some brokers may choose to deal direct with a lender and that model can work if they are getting the best rates on the market every time,” he says. “But if not, they may not be doing their clients any favours because an experienced underwriter who deals with 20 lenders every day could, and usually

does, identify a better deal. I know this because I see the efforts they go to in ensuring the best rates are negotiated and complex scenarios are understood and accepted by the lender, rather than dismissed by the lenders less experienced front line staff. “A good packager really fights for every deal rather than cherry picking the easy ones,” he says. “Brokers who are used to relying on sourcing systems are likely to either fail to find a product at all or not offer the cheapest / best product because of the complex and manual underwriting required. That is the nature of second charges,” he adds. Tolfree says a lender’s ability to offer its products direct can depend on what type of product they are offering. He says: “New lenders to market tend to initially concentrate on packager relationships as this is likely to be the easiest route to generating new sales whilst ensuring that they can manage the fewest number of relationships they need to have; as well as the pure logistics and technology required to accommodate them all to an acceptable standard. “However, as a lender grows it is  natural that they may seek to widen that distribution to mitigate volume risk and do so by offering a direct proposition,” he says. “The requirements of both distribution routes are different, but I believe it’s more of a reflection of the type of mortgage product on offer, and the scale plus appetite of the lender,” he adds.

The solution

Offering a wider choice of either master brokers or lenders appears to tick all of the boxes when it comes to offering a viable solution for ARs wanting to offer seconds but perhaps this can sometimes clog the process through confusion or uncertainty over the best route to advise. Whether this is attributable to a lack of understanding around the market or a reluctance to use a master broker in a perceived attempt to minimise the fee for their client to pay is unclear; probably both can be factors. A lack of consistency among networks also doesn’t appear to help. It seems the sector and perhaps networks themselves still have some way to go in terms of highlighting the merits of the sector to a ‘disengaged’ broker audience.

MARCH 2019















SFI: Retention

It’s all about the customer The old expression ‘May you live in interesting times’ seems particularly relevant as I write this. However, the question we need to ask is how we can insulate ourselves against the current volatility in the market. Clearly, no business can be fully future proofed, yet there are plenty of steps we can take to improve our situation.

Keep customers close

Our biggest asset, and one which we tend to ignore, particularly when times are good, are our existing customers. The lure of new business can tend to divert us from maintaining a regular contact. t is my contention that we should take every opportunity to stay in touch. Not only are our existing customers an untapped source of potential business, but with the rise in online broker services, none of us can rely on client inertia for them to

Shaun Almond group managing director, HL Partnership and Mortgage Support Network

still be there when we actually get around to talking to them. Expecting customers to pick up the phone to us, after what might be a year or more since we helped them with a mortgage or similar issue, is not going to work in today’s competitive environment. When I talk to our firms inside HLP/MSN, one of the first questions I ask is whether they already have a process of existing customer engagement up and running Those who have not, tend to cite the amount of work it would need to make it happen. My immediate counter is to ask whether they can afford not to make that sacrifice in terms of time. In the current timeframe, with new business being more difficult to come across, turning our back on the potential goldmine that is our client bank is not a sound move. If you are talking to your custom-

ers, then no one else will be. The first step towards keeping them as clients. In terms of the message, here is a chance to reassure them, as there is bound to be anxiety around the future and the financial implications could, without your help, have significant repercussions. Listening, allied to a new factfind, will allow you to isolate areas for discussion and identify potential areas for which you can offer advice and solutions.  New mortgage savings could unlock opportunities to recommend a greater degree of protection  Product transfers can produce a steady income stream  Later Life Lending is one of the fastest growing lending sectors In today’s market, we must maximise the value of our customer base. By constantly looking further afield for business, we are in danger of ignoring the potential in what we already have right on our doorstep. Customers are for life, but only if we look after them.

SFI: Technology

Technology and customers The path to becoming a successful mortgage broker is no different from any other profession. In essence the formula is to work hard, find a proven way to generate new prospects, put together a proposition that delivers what customers want - and repeat. But unless we review our strategy, particularly in today’s market, we are in danger of just spinning our wheels and see our business decline. Technology and its application are the first areas I would look at. Can my business benefit from adopting new technology to help me manage my business better? We have all seen the inroads made by robo-advice brokerages, but rather than be concerned that they will steal business from traditional human brokers, much of the technology that they employ can be adopted www.mortgageintroducer.com

to help build improved service in yours. For example, CRM systems to help manage customers and the opportunity that it presents to move from a passive strategy of ‘storing’ customers to a proactive one where your existing customers become your biggest asset. Everyone wants to do business with your customers. Lenders, product providers and robo advisers to name a few, are out there trying to make it easy for your customers to leave you and join them. Adopting technology via a good CRM system can not only help you keep customers, but will open up ways for you to set up regular contact and identify their needs, before someone else persuades them that the grass is greener with them, regardless of how good a job you did on their mortgage. In today’s market,

Clayton Shipton managing director, CLS Money

none of us can expect our customers to be loyal. It is up to us to maintain the relationship. Just a small change in attitude towards our existing customers from passive to active engagement can open up new business origination opportunities and keep them onside. It is good to see some of the initiatives coming to market from firms like Dashly and Ladder. They are bringing something new to the market, based on taking a long hard look at the sector and working out what they believe will give customers a more complete level of service. This does not undermine the mortgage broker who is prepared to adapt, but actually points the way towards thinking outside the box and reexamining the way customers want to see a modern mortgage service delivered.



SFI: FIBA Bridging

Raising standards and professionalism This month we have returned to one of the subjects that really sits behind the FIBA brand and that is for us to continue to raise standards and professionalism in our industry. I want to pose some questions and highlight a number of areas, which I think are going to be important in the coming year and have already featured strongly in some of the events we have run in 2019. We have now hosted four joint trade body meetings with ASTL, which also brought together our members, lender partners, our pro-

Adam Tyler executive chairman, FIBA

“We have now hosted four joint trade body meetings with ASTL”

fessional partners and other industry service providers. This is far from a talking shop and the practical outcomes are already being seen because of these Industry Forums. This is not an area of finance that has sought standardisation, whether in terms of the information that lenders require from introducing brokers, through to making it easy to place business with bridging and development lenders on a simple sourcing tool. However, we can help make it simpler and easier for lenders to assess an initial enquiry, for our members to be able to make their way through the full range of lenders and even for a solicitor unfamiliar with our world to be assisted independently at the outset by industry experts. For example, one debate centred

The Yin and Yang of underwriting Not a week goes past without a new bridging lender coming to market and if you add in the growing number of commercial lenders entering the sector, as brokers and indeed our customers have never had it so good. Yet, there is always a Ying to go with the Yang in any situation and while the proliferation of lending sources is a cause for celebration, there is a growing underlying worry. As far as I know, there is no seat of learning dedicated to the art of underwriting, no conveyor belt of newly minted and eager young underwriters, ready to fill the increasing demand for what is a very underrated talent. Where is the next generation of underwriters coming from? There is only so much poaching and moving that can be done and I know that an experienced underwriter is worth his or her “weight in gold” at the moment.



MARCH 2019

As an industry, lenders will have to look carefully at the available talent they currently have and the amount of work they are going to have to put into ensuring that the next generation is up to the task of making good consistent decisions. Therefore, what can we all do now to help and in returning to an earlier topic above, how can this be combined with ensuring the information at the point of entry from the broker community meets the standards required. This is the subject of a long running debate and as was pointed out to me last month by a truly imminent industry figure at our lender committee meeting, the two of us have been talking about this for 15 years. There is a lot to be said about ongoing training and education or as we should call it Continuing Professional Development, and this has to be a consideration in the Education debate.

on the minimum amount of information that would allow a lender to give an in principle agreement subject to the necessary verification. But at this point, as there was so much variation in requirements between lenders, we knew that we could not expect uniformity, but education and awareness will help everyone and we can return to this topic in the future. As a result of the success of these London meetings, at FIBA we want to regionalise these forums. We will begin in Manchester in April, followed by Leeds in May, then Glasgow, Birmingham and Cardiff. We have of course scheduled another two in for the capital in conjunction with our colleagues at the ASTL.

Women mean Business Even after all my years in the commercial lending market, I was shocked by the Treasury’s own findings that female entrepreneurs receive on average 157 times less funding than businesses run by men. In stark terms, male only businesses received over £5bn last year in funding, while the sum afforded to female led businesses was a meagre £32m. For every £1 of venture capital investment, less than a penny goes to all female teams according to the British Business Bank. A slight imbalance to say the least. What is worse, 10 years ago the overall proportion of funding going to women was 7% of the total. So regardless of the massive increase in funding sources since that time, the actual proportion going to female start-ups and other businesses has tanked. I am not going to use this article to go through the reasons, because the figures are damning enough on their own without searching for the whys and wherefores. Suffice to say, that FIBA is going to get behind the campaign to improve the situation and help more women entrepreneurs and business leaders to fund their businesses. Watch this space. www.mortgageintroducer.com

The Last Word

Uncertainty and fear David Gilman says let’s not throw the baby out with the bathwater As the prospect of a disorderly Brexit continues to deepen divisions within the political hierarchy and to undermine levels of confidence amongst both consumers and professionals, many within the housing market are bracing themselves for a potentially turbulent ride over the next few months. Growing concerns that a no-deal Brexit could precipitate a disastrous increase in mortgage or inflation rates have also led some surveyors to warn that many homeowners could be left with negative equity or the possibility of their house being repossessed – a blood curdling scenario. Yet, some within the industry have taken a rather different view of recent events and figures, with professor Andrew Baum of the Said Business School describing house prices as “probably higher than they should be” given current circumstances and research conducted by the property market analysis company, Hometrack, concluding that the present decline in values are a reflection of ‘market fundamentals’ (such as the impact of taxation and regulation on levels of demand) as opposed to the effect of Brexit – a mere ‘compounding factor’ for existing market problems. The Hometrack report has also highlighted the discrepancy between property markets in London and the SouthEast (where average price drops of around 0.4% were recorded over 2018) and those in parts of the Midlands and the North (where some cities registered annual growth figures of between 4-5%), attributing shortfalls in the former areas to the gap between ‘overheated’ prices and flagging ratios of income growth while asserting that there is unlikely to be an ‘imminent deterioration in the outlook for prices’ as a result of Brexit in the future. Which, depending on your point of view, is either entirely reasonable or laughably naïve – a piece of Eurosceptical propaganda at best. Yet, as the differences between expert


David Gilman, partner in charge, Blacks Connect

analysis begin to widen, so too do the ‘perceptions’ of a bewildered consumer base. ‘Uncertainty’ and ‘fear’ are two of the words most commonly used by journalists, politicians and industry experts when discussing the possible ramifications of Brexit on the housing market, yet the importance of popular perception and the recurring effect of ‘worst case scenario’ headlines on both consumer and industry confidence are often overlooked or understated. Indeed, according to figures published by the Office for National Statistics, average house prices in the UK have continued to rise and plateau according to the usual seasonal variations for each of the years since the referendum of June 2016, with comparative reversals only being felt during the latter months of 2018 (when prices fell from a high of £232, 797 in August to £230,630 in November- the largest month-on-month decline since 2012 according to the property website Rightmove). However, with average prices experiencing overall growth rates of 3.3% during 2018 (albeit at the slowest annual rate since 2013, according to the UK House Price Index) and transactions remaining stable, it has become increasingly difficult for the neutral observer to discern whether the current dip in house prices represents an ominous harbinger of things to

come or the result of ‘corrective’ market forces – a cyclical process in which markets go “up and down over time”, as Andy Foote, the director of SevenCapital has summarised it, before “coming back stronger” in the longterm. Moreover, with growing numbers of experts offering up their forecasts for a post-Brexit property landscape, it has become something of a chore to try and make sense of the sheer variance of opinions on offer, with projections ranging (rather inevitably) from the unspeakably dire to the unfeasibly optimistic. In short, we find ourselves at a point where conjecture, bias and an entirely nebulous flow of contradictory information have combined to promote an ever greater climate of uncertainty- a self-perpetuating cycle if you will. Which is not to downplay the potentially damaging impact that Brexit could have on confidence and prices over the next few months but to suggest that a withdrawal period which is driven by panic or (even) scaremongering could actually exacerbate the problems which the property sector will have to face in the future. In September of last year for example, Mark Carney’s warning that a no-deal Brexit scenario could lead to a potential crash in house prices provoked condemnation from the usual Euro-sceptics and a slew of hysterical headlines from (some) news outlets. This, in turn, prompted the BBC’s economics editor, Kamal Ahmed, to write that although “the Governor believes that a no-deal scenario would be bad for the economy (it would not be) as bad as the headlines…which are based on a doomsday scenario”. The point being that ‘uncertainty’ should be regarded as meaning precisely what it says and not as a byword for ‘collapse’ or ‘disaster’. In other words, this is an emotive, contentious subject with many different opinions and possible outcomes – let’s not throw the baby out with the bathwater.







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Up to £45k Basic + Bonus Uptoto£45k £40kBasic + Commission Up + Bonus SelftoEmployed, Fantastic Commission Up £40k + Commission Up Employed, to £40k + Fantastic Uncapped Commission Self Commission Uptoto£40k £30k++Uncapped UncappedCommission Commission Up SelftoEmployed, Fantastic Commission Up £30k + Uncapped Commission Up Employed, to £25k + Fantastic Car Allowance, £50k+ OTE Self Commission Uptoto£25k £28k++Car CarAllowance, Allowance,£50k+ £50k+OTE OTE Up Uptoto£28k £40k++Car Commission £60k+ OTE Up Allowance, £50k+ OTE Uptoto£40k £35k++Commission Car Allowance, £60k+ Up £60k+ OTEOTE SelfEmployed, Employed,Fantastic FantasticCommission Commission Self SelfEmployed, Employed,Fantastic FantasticCommission Commission Self Uptoto£28k £28k++Car CarAllowance, Allowance,£50k+ £50k+OTE OTE Up Uptoto£32k £32k++Commission, Commission,£60k £60kOTE OTE Up Uptoto£32k £32k++Car CarAllowance, Allowance,£65k+ £65k+OTE OTE Up Uptoto£35k £35k++Car CarAllowance, Allowance,£50k+ £50k+OTE OTE Up SelfEmployed, Employed,Fantastic FantasticCommission Commission Self Uptoto£28k £28k++Car CarAllowance, Allowance,£50k+ £50k+OTE OTE Up Uptoto£32k £32k++Commission, Commission,£60k £60kOTE OTE Up Uptoto£35k £32k++Car CarAllowance, Allowance,£60k+ £50k+OTE OTE Up Uptoto£35k £35k++Car CarAllowance, Allowance,£50k+ £50k+OTE OTE Up Uptoto£30k £30k++Commission Commission Up

The Hall of Fame

What backstop? The HoF can exclusively reveal that below is what the UK looks like according to Rotherham-based Scott Thorpe of London Money fame. Not quite content on removing Northern Ireland from the ‘map’, Thorpe managed to destroy most of Wales, obliterated Scotland and God only knows what he did to London and Manchester. A safe pair of hands then. Or not. Perhaps new school rather than old school is needed.

Everest expedition after stroke recovery Jeanette Mountford has climbed her own personal mountain after a serious stroke left her life hanging in the balance… The Leek United customer assistant, 47, of Stockton Brook, Stoke-on-Trent, has spent the last three years fighting to regain her health, strength and fitness, following a sudden collapse at home in April 2016. Now, Jeanette is set to test her mind and body to the limit on the world’s highest mountain, joining an expedition, climbing up to seven hours a day for almost two weeks, to reach Everest Base Camp, at an altitude of 5,364 metres. All proceeds from Jeanette’s sponsored trek will be donated to the Acute Stroke Unit at the Royal Stoke University Hospital in Stoke-on-Trent. “When I collapsed, my partner Warren recognised I was having a stroke and called 999,” Mountford told The HoF. “Without his quick-thinking and the expertise and dedication of the stroke unit, I wouldn’t be here today – so now I want to give something back to the unit for saving my life. “What doesn’t kill you makes you stronger and I hope as many people as possible will help me give back to our wonderful NHS emergency units who save lives every single day,” she added. Jeanette, The HoF salutes you.



MARCH 2019

Red Carpet Treatment…

Longstaff’s 100km desert trek Adam Cheal, founder and managing Director of Lincoln-based conveyancing specialists, Fletcher Longstaff, walks his way on to the red carpet this month, with his mission to cross the Sahara Desert to raise money for children’s charidee Young Minds. Cheal, who has been training since October, is setting off to Morocco in November this year to take part in the eight-day Saraha Desert Trek. Adam will join a group of walkers who will tackle the 100km journey, which was set up by organisers Charity Challenge in 1999. “I’m really excited to be preparing for what could be the biggest challenge of my life,” Cheal told The HoF. “The trek is incredibly arduous so I’ve started training in earnest. Since starting healthy eating and training, I’ve lost more than 23 pounds so I’m well on my way to being fighting fit to take it on! “My aim is to raise more than £3,500 for children’s charity Young Minds, as it is a cause close to my heart. We’ve had some fantastic donations so far but any help is welcome. The charity works with young people to ensure anyone who reaches out for help related to mental health is supported, no matter what the challenge.” Cheal and those taking part can expect to explore the Jebel Saghro region, starting on the Maider El Kbir plateau, before ascending Jebel El Mrakib. They will then walk on through palm gorges, joining the dry Rhris River and heading towards an oasis of tamarisk trees. The final days are spent trekking along the Tikertouachene River, before celebrating a successful end to the challenge in Ouarzazate. Donations are welcome and can be made via Adam’s Just Giving page: https://bit.ly/2SWfPY8 Adam, The HoF salutes you.


STRUGGLING TO PLACE ODD MORTGAGE CASES? See some of the cases Kent Reliance for Intermediaries have recently placed: London: Large loan, greater than £3m We helped a high-net worth individual get a large mortgage loan on a detached buy to let property worth over £10m. They needed £6m at 65% LTV to refinance existing mortgages at a better rate. They also needed to swap from a residential to a buy to let property. After some negotiation and a thorough examination of the circumstances, we worked closely together and accepted the application.

“We’re able to support those with large portfolios” Manchester: Small buy to let loan needed for sole applicant A sole applicant came to us looking for a loan of just over £55,000 at 75% LTV. The applicant had a steady income and was the director of a successful company. They also had no defaults, CCJs or arrears. The minimum loan size in our buy to let criteria is from £50k, so with all the factors taken into consideration, we were happy to help the applicant.

Surrey: Portfolio of over 10 properties We helped a full-time landlord from Surrey with a 13-property portfolio, valued at over £4m. Half of their properties were already mortgaged with us and they needed a loan of over £430,000. We’re able to support those with large portfolios – but due to its size, this case was sent to our internal credit committee for approval. A face-to-face meeting was then arranged, and after this, we accepted the application. Liverpool: HMO case requiring specialist attention An existing customer with a buy to let portfolio needed a loan for over £110,000. The property was in good condition with a high debt service coverage ratio. As we can accommodate HMO cases with up to 85% LTV, and because we knew about the client and their background, we were able to approve the loan.

For help with complex buy to let cases call us on 01634 888260 This material is for professional intermediaries only 8580_KRFI_MortgageIntroducer_Wrap_270x205mm_AW.indd 3

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At Kent Reliance for Intermediaries, we’re for broader criteria. Our manual underwriters ensure we have the expertise to fetch more solutions for your clients. Speak to us to see how we could help you place complex buy to let cases across the UK, including HMOs, large loans, limited companies, and beyond.

Have a specific case in mind? Call us today on 01634 888260 This material is for professional intermediaries only 8580_KRFI_MortgageIntroducer_Wrap_270x205mm_AW.indd 4

07/03/2019 10:45

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Mortgage Introducer March 2019  

Mortgage Introducer March 2019