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Optimism returns for the new year
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elcome to your new look Mortgage Introducer. With renewed optimism in the market we felt the time was right to renew the look of your favourite mortgage magazine. Following December’s General Election we now have a majority government. This can only be seen as a positive. Whether you are remainer or a leaver it was clear that something had to break the deadlock in the commons. Hopefully the UK can now push on and all the pent-up demand in the mortgage market will now be released. However it remains to be seen if the government will tackle the issues which plague the property market. When the �ueen laid out the government’s plans just before Christmas there was some mention of the housing sector – which makes a change. Local aﬀordability, lifetime deposits for renters, plans to abolish ‘no-fault’ evictions and the largest change to building safety laws in 40 years all made the cut in HRH’s speech. What was lacking however was any plan to address the elephant in the
room – we are still not building enough housing stock. The Home Builders Federation has said that almost 380,000 more homes are in the pipeline but political support is needed to meet the target of building 300,000 homes a year by the mid2020s. As a country we need to see policies that enable people to buy the homes they want whilst ensuring that planning is quick and enough land is made available in the right places. We also need to see more support for SME builders and specialist providers so as to ensure that supply continues to grow where and when required. Across the UK there are numerous issues which impact the market that still need to be addressed. This issue we have our annual State of the Nation feature which looks at some of those problems. We spoke to brokers up and down the country and you can read their take on the market on page 56. On the whole there seems to be an air of positivity surrounding the market. Let’s hope that it remains so moving forward. M I
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Contents 7 AMI Review 8 Market Review 10 Marketing Review 12 Adverse Review 15 London Review 18 Interview: Visionary Finance 20 Buy-to-let Review 27 Protection Review 33 GI Review 36 Surveying Review 37 Equity Release Review 41 Conveyancing Review 43 Technology Review 44 Education Review 46 The Outlaw Woke eviscerating Gervais
50 The Bigger Issue Mortgage market new year resolutions
STATE OF THE NATION
52 Interview MI speaks to Lesley Sharkey and Joanne Carrasco from Stonebridge about their ambitious targets
56 Cover: State of the Nation We cast an eye over the UK to find out what really matters to brokers 62 Loan Introducer The latest from the second charge market 69 Specialist Finance Introducer Development finance, bridging and FIBA 74 The Hall of Fame Bye, bye abdominable slowman
INTERVIEW: VISIONARY FINANCE
THURSDAY 5 MARCH 2020 PRESTONFIELD HOUSE, EDINBURGH www.scottishmortgageawards.com
The residential renaissance Robert Sinclair chief executive officer, AMI
s we leave behind the election, the new government has a range of challenges facing it. One amongst many is the housing dilemma, in that all parties committed in their manifestos to get Britain building even more. The delivery of new homes, and the achievement of building 240,000 over the past 12 months, falls short of the accepted 300,000 a year target vaunted as sufficient to meet demand. Within the house building figures is buried a success story however – the number of commercial to residential redevelopments, driven by “permitted development”. The latest figures published by the Ministry of Housing Communities & Local Government showed annual housing supply in England amounted to 241,130 net additional dwellings in 2018-19, up 9% on 2017-18. Within the additional figures for the past year were 213,660 new build homes, 29,260 gains from change of use between nondomestic and residential, 5,220 from conversions between houses and flats and 940 other gains (caravans, house boats etc), offset by 7,940 demolitions. Some 14,107 of the net additions from change of use were through ‘permitted development rights’ where full planning permission was not required. These comprised 12,032 additional dwellings from former offices, 883 from agricultural buildings, 199 from storage buildings, 69 from light industrial buildings and 924 from other non-domestic buildings. Current government policy as set out by the last Tory administration is to extend permitted development rights, which is welcome and necessary for improving the supply of new residential units to the market. Waiting for magic www.mortgageintroducer.com
to come from modern methods of construction will take longer than next year’s pantomime season. This is more likely to marginally reduce the cost of construction question than deliver short-term scale. NEW REGIME
The extended permitted development rules would initially apply to purposebuilt blocks of flats from January 2020, but if continued would be rolled out to detached houses. These would allow homeowners to add an extra two-storeys to their homes without seeking planning permission, under the same rules that currently apply to small extensions and loft conversions. It will be interesting to see if the new regime wants to continue down this road. It is not without risks, particularly in ensuring that the property remains fully mortgageable. Further extensions are necessary if house building targets are to be met. Indeed, the Bank of England projections suggest that growth in housing investment has dropped significantly in 2019, to just 1% from an average of 2.75% between 2010 and 2018. It is only projected to rise by 1.75% in 2020.
But, where these homes are developed raises questions relating to re-sale and secondary market valuations that should be considered by both lender and borrower. Where these are urban re-generation projects then it is likely that demand is sustainable. However there are some in industrial areas where the risk of the units looking less attractive five years later is significant. As this sector expands in scale and popularity, as profit margins are positive, surveyor valuations will need to have empathy with longer term implications. As with the impact on values of poorly written contracts around estate and management charges, the industry needs to protect its reputation better. The introduction by some developers of rapidly escalating or unlimited costs for freeholders to maintain roads and public spaces cannot be in anyone’s interests. These practices need to be curtailed or the rapid march of regulation will be the only show in town. The relaxation of planning rules and the inability of local authorities to invest in infrastructure means that the industry must effectively selfregulate or risk destroying an already weak reputation. M I
Changes at the FOS
he new year is set to bring a consultation on changes to the funding of the mbudsman service. It appears that the PPI debacle has masked a savage increase in overheads at the service where the PPI case fees have subsidised a huge cost transformation. As these cases run off the industry is now being asked to step up. The review of FSCS funding run during 2016 and 2017 was a great example of FCA, FSCS and industry sharing thinking to deliver a new solution. It appears unfortunate that FOS has wanted to ask the industry for written views but complete all its thinking behind closed doors. The FSCS review of its funding was characterised by great open forum debate with
the FCA holding the industry coats. The plan to reduce the number of free cases from 25 to 10 will impact a number of firms and with the move to increase the share paid via the levy, it moves us away from the “polluter paying” to the costs being more widely visited on all. With the near certainty that the PPI endowment will now run all through 2020, I think that we could defer the model change until financial year 2021/2022, to give all parties more time to fully understand the operational, cost and funding dynamics. The industry deserves a more transparent consultation and discussion process than to date. We need to get under the skin of the numbers we are being given limited sight of.
JANUARY 2020 MORTGAGE INTRODUCER
Getting the balance right Craig Calder director of mortgages, Barclays
n my first article of 2020 I’m going to try, and I emphasise try,to steer clear of any political or Brexit related talk for two simple reasons. Firstly, I’m writing this on the cusp of the General Election and secondly, it’s difficult to know quite what to say at the moment amidst so much talk and uncertainty. So, let’s focus on the market as we know it. As a lender we are looking ahead to 2020 with cautious optimism. We are operating from a firm lending base. The remortgage market is at the core of this and any potential Brexit Bounce (that didn’t last long) would be welcomed within the purchase market, although this remains healthy and stable as it currently stands. Upon entering a new decade of lending, it was certainly an apt time for UK Finance to release its ‘The Changing Shape of the Mortgage Market’ report. POLICY DRIVERS
This is a collaborative effort between UK Finance and Hometrack aimed at highlighting how mortgage lending has changed and to consider the regulatory and policy drivers that have influenced this. Needless to say, it is a must read for lenders and a highly useful one for intermediaries. As this is an extensive document, let’s focus on a handful of points raised in its executive summary. The Help to Buy equity loan scheme, launched in 2013 to help those with small deposits buy new homes, has become an important feature of the new homes market in England. The proposed ending of the scheme in 2023 presents a major challenge to growth in new housing delivery.Whilst
the Help to Buy scheme is not perfect, it has served to meet the needs of many borrowers and provide impetus across the new build sector, Inevitably, it will leave a large gap which needs to be plugged. On a positive note Homes England has revealed that housing starts are at their highest for 10 years and completions are at their second highest levels since 2011. Between 1 April and 30 September, 16,955 housing starts and 14,792 completions were delivered by schemes managed by Homes England, excluding London. Nearly three-quarters (73%) of starts were for affordable homes from the beginning of April to the end of September, up 24% from the same period last year. However, 10,295 completions were delivered as affordable homes, 70% of the total and 7% fewer year-on-year. The uplift in affordable housing starts is a step in the right direction, although it remains an ongoing issue. This momentum needs to be maintained, and then some, from whichever party gains power so that more people throughout the UK can achieve their homeownership goals. Let’s hope that this objective remains high on any government policy in the year ahead. Lengthening mortgage terms have been a consistent trend for the past 15 years, allowing borrowers to stretch their incomes as affordability pressures build. 30-year plus terms are now common. The trend for longer mortgage terms potentially has further to run across all borrower type. As an industry, we have moved on from a ‘standard’ mortgage term of 25 years to 35 or even 40 years becoming the ‘norm’. Longer term deals have become increasingly attractive for borrowers to keep repayments levels low and help with affordability issues. Of course, this also comes with additional longer-term costs which only serves to highlight just how integral
MORTGAGE INTRODUCER JANUARY 2020
and valuable the mortgage advice process will continue to be in 2020 and beyond. Lenders’ risk appetite for mortgages has slowly recovered. The availability, choice and pricing of mortgages for existing and new customers has increased, including more 90% plus loan-to-value (LTV) deals. LTV TIERS
According to recent Moneyfacts data, rates for higher LTV products are falling. The average 2-year fixed rate at a maximum 95% LTV was said to have decreased by 0.02% from 3.27% to 3.25% in November and the average 2-year fixed rate at 90% LTV also fell by 0.04% from 2.66% to 2.62%. Furthermore, the average 5-year fixed rates at the higher LTV tiers have also decreased during November, with the maximum 95% LTV dropping by 0.03% from 3.60% to 3.57% and the average rate at 90% LTV down by 0.02% from 2.96% to 2.94%. Heightened competition within the mainstream lending arena continues to drive headline rates down across all LTV bands. It’s a hugely positive trend to see lower rates for those with a smaller deposit, with the average rates at 90% and 95% seeing greater reductions than their lower LTV counterparts. And long may this continue, in a responsible and appropriate manner of course. This report highlights how the unfolding housing cycle, together with policy and regulatory changes, is shaping the demand for mortgage credit. While gross lending has doubled, the number of homeowners with a mortgage is falling. Lenders have the appetite and capital to support more mortgage lending, but the market opportunity is evolving between lower and higher-risk business. Mortgage lending remains a tricky business, especially in such an uncertain political and economic climate. M I www.mortgageintroducer.com
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Equity release and your ikigai Paul Hunt director, Paul Hunt Marketing
he renewal of my passport may not immediately seem relevant to the later life lending sector, but on seeing the expiry date, it quickly did to me! Traditionally, by then I’d be expected to wind down and possibly even retire, but since becoming selfemployed, I’m not sure that’s the path that I wish to follow and it did remind me of an article I read a while ago about finding your ikigai, as I think I’ve found mine. REASON FOR BEING
As quoted in The Guardian in 2017: ‘In Japanese culture, retiring and not keeping your mind and body busy is seen as being bad for your health since it disconnects your soul from your ikigai. Ikigai can be translated as “a reason for being” – the thing that gets you out of bed each morning. Finding your ikigai is felt to be crucial to longevity and a life full of meaning. The people of Japan keep doing what they love, what they are good at, and what the world needs even after they have left the office for the last time.’ Whether you find your ikigai or not, later life lending will still be a consideration for most of us and although I have never worked directly in the sector, I’ve always taken a keen interest and I remember undertaking some detailed research, probably around 15 years ago, which included two focus groups. We were looking at the sector as one of the many potential opportunities for us to expand into and it was fascinating to see and hear the views of the two groups, as the younger group were very clear about wishing to use the equity to fund
their lifestyle into retirement with the second older group much more focussed on property maintenance and improvements to help them to continue to live in their home. This month, I pitch Canada Life against Just Group, as both issued releases in December which were based on new research and statistics relevant to the later life lending sector. EQUITY RELEASE EXPLAINED
Canada Life conducted research that found that 15% of people surveyed said they wouldn’t use equity release to fund their retirement because they don’t understand it, which was a three-fold increase on findings in 2016. What I liked about this release, was not that they commissioned their own research, but that off the back of it they did something. This was their ‘Equity Release Explained’ brochure which set out to explain the subject better to homeowners and their friends and families. Therefore, I’ve scored them well
across the board, as I do believe greater awareness and education is needed, amongst other things, to grow the market. The second release is from Just Group, who used recent ONS data which showed that overall life expectancy at age 65 in the constituent countries of the UK is at its highest ever level for both men and women. They make the point that although average life expectancy may be interesting it is not a good figure to anchor on given the range of possible outcomes that might apply to their unique case. WIDE RANGE OF POSSIBILITIES
Therefore, as we don’t know which group we will fall into, it is important to make financial plans that cover a wide range of possibilities. Canada Life wins this month as they followed up the research with an aid that helps both brokers and customers, but both them and Just Group should be applauded for continuing to seek to advance and provide solutions in this much needed sector. M I
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Keep on moving Stuart Miller customer director, Newcastle Building Society
ith our support, brokers can provide the crucial advice homeowners will always need. December’s General Election result has provided some political stability at last, a fact that will be very welcome in the housing and mortgage markets, which have been somewhat subdued over the past 12 months as the flipflopping that characterised 2019 put many homeowners off moving. The Tories made a number of promises relating to the housing market in their manifesto, the biggest of which was to build 300,000 new homes each
year by the middle of the next decade. This target has been kicking around for almost 20 years now, and no government has yet managed to hit it. 2019 was in fact rather a good year for house building, with just over 240,000 new dwellings completed. If this government can continue to deliver with this momentum, it will be positive for the market which is still suffering from a shortage of stock for sale. Another of the Conservatives’ manifesto pledges was to ‘encourage’ mortgage lenders to offer long-term fixed rate deals to first-time buyers with smaller deposits. This sort of promise sounds great in news headlines, but in practice most borrowers don’t typically want to lock into a mortgage rate fixed for that long – the cost of doing so would be high. The argument for this type of market
Advisers make all the difference
aniel Mullen is a mortgage and protection adviser with RSC New Homes in Leeds – a company that specialises in new build mortgages and works closely with many new home builders. The company prides itself on securing mortgage finance for their clients with as little fuss as possible in what can be a difficult and complex lending market. When Daniel’s client, a 57-year old recently divorced lady who had only just returned to the UK after a long period living abroad, approached him, he recognised her case would need flexibility and understanding beyond that offered by the usual Help to Buy new build lenders. Daniel’s client had her heart set on an ‘off-plan’ new build semi-detached home in a brand new development in Bradford; however, over and above the difficulties he anticipated with other lenders with regard her lack of credit history, her current business only had one year’s worth of accounts and she required a term of 17 years taking her age to 74 by the time the mortgage would be redeemed.
Daniel’s client had a suite of issues that had resulted in his client being declined by traditional large players. Diana Fyfe, lead underwriter for Newcastle Building Society, said: “Upon receiving the application, it was clear that Daniel’s client, a UK citizen, had been continually successful over the past decade in her field of work abroad and that there was nothing to suggest she would be anything other here in the UK given her accounts, client base and line of work. “Within 10 years of the start date, we were very comfortable that the repayment mortgage balance would be reduced enough to be easily covered by her current state and public sector pension provision. Her company net profits showed she had enough reliable business opportunities as a sole trader to continue supporting any obligations she had to the society. “The earnings and her income, taken with the various savings she has, meant that with a clean property valuation we were pleased to offer our self-employed Help to Buy product so she could move into her first home in the UK in over a decade.”
MORTGAGE INTRODUCER JANUARY 2020
intervention is also not that strong; the latest figures published by the Bank of England in December revealed that the share of mortgages advanced in Q3 with loan-to-value ratios exceeding 90% increased to 5.9%. Lending in this LTV bracket is at its highest since Q4 in 2008. The value of pushing long-term fixes for those with small deposits is unlikely to improve access to mortgage finance for borrowers in this position. The reality is that the confidence engendered by the size of the Conservatives’ majority in parliament is far more likely to support the housing market. Those who have held back from moving, worried about the impact of Brexit-related uncertainty on the value of house prices, are likely to get moving with their plans in 2020. There is plenty of money available for mortgage lending in the market as it is – the price war going on across all LTV brackets, but particularly in the prime credit, low LTV slice, is testament to lenders’ appetite to lend – notwithstanding any renewed capital pressures. MARGINAL BORROWERS
A bigger challenge for the market is how lenders support borrowers who are increasingly being deemed as marginal or specialist as well as those who are buying for the first or perhaps last time. More and more of us now fall into these types of category, particularly as the way people work shifts from fulltime employment to portfolio careers, contract work and self-employment. Dealing with historical credit blips, complex income streams or modern employment structures is also increasingly problematic for borrowers applying to most of the mainstream high street lenders due to their reliance on technology-based underwriting. As suc the role of intermediaries, building societies, such as ourselves, and the other specialist lenders in the market is critical to support all homebuyers. M I www.mortgageintroducer.com
The most flexible income criteria of any specialist mortgage lender. (We checked*.)
www.togethermoney.com/residential For professional intermediary use only. *Comparison of published income criteria for residential mortgages from 9 specialist lenders, conducted by Together, November 2019.
The most flexible income criteria of any specialist mortgage lender. (We checked*.)
The right mortgage for a client in a DMP Paul Adams sales director, Pepper Money
It’s worth noting that DMP providers don’t always register on your client’s credit file so it’s not something that you can readily recognise. Clients can also struggle to know the difference between an informal arrangement to pay, which is usually made by the client with one creditor at a time and a DMP, where a specialist company negotiates reduced payments with a number of the client’s creditors on their behalf. Even where a DMP has not been registered it is possible to recognise patterns that suggest one is in place. A more straightforward approach, however, would be to examine the client’s bank statements as part of your fact find. HELPING HAND
If you do find out that your client is in a DMP, the next step is to establish how long the plan has been in place and if your client has successfully maintained their payments. There are lenders that will take the view that a borrower who has successfully maintained payments on a plan for a year or more has demonstrated a determination to rehabilitate their finances, and there are competitive options available for borrowers in these circumstances. Household debt is growing and it seems that more people are choosing to take a DMP. This is often a sensible move, and doesn’t have to mean closing the doors on getting a new mortgage. It can be hard to identify whether your client is in a DMP, but by taking the time to look through their bank statement, you can learn to recognise when a plan is in place and this will help you to choose the most appropriate mortgage for their needs. M I
“It’s worth noting that DMP providers don’t always register on your client’s credit file so it’s not something that you can readily recognise”
ith the increasing indebtedness of people across the UK it is perhaps unsurprising that one of the most popular criteria searches for Pepper Money on criteria based sourcing systems is for clients in active Debt Management Plans (DMPs). A DMP is an agreement between an individual and their creditors to pay debts and the FCA has said that there are approximately 400,000 people on commercial DMPs. With a DMP a borrower should ultimately repay the debts in full, and this makes it different to an IVA, which is a form of insolvency where a percentage of the debt is written off. It is possible for borrowers to arrange DMPs themselves, but they will generally approach a debt management company that will usually charge a fee to arrange a plan with creditors. The debt management company works out a realistic monthly payment with the borrower by considering their income, financial commitments and household expenses.
So we can help people like Brenda. She’s technically retired, but tops up her pension working a few hours each week at a local garden centre – although her contract says she works ‘zero hours’. All of which we can take into account. MI
LONDON That rise reflects the fall in high LTV loan pricing, with the spread between the average quoted rate on a 2-year 75% and 95% LTV fixed rate loan falling by 80% over the past 24 months. Despite the uncertainty that characterised 2019, activity in the last quarter was up on previous years and buyer registrations are up. This activity will feed through into the market in the first quarter and we expect there to be a second quarter bounce spurred by improved confidence following the election result. HOUSE PRICE RISES
And Jenny. She runs her own business – but also owns a couple of rental properties, and regularly receives dividends from share investments too. All of which we can take into account. www.togethermoney.com/residential
Our resilient market needed a break Robin Johnson managing director, Kinleigh, Folkard and Hayward Professional Services
Prices are also expected to pick up over the next 12 months on a headline level, with 33% more respondents in the November survey anticipating house prices. Significantly, prices are expected to return to growth across all areas with Wales and Northern Ireland leading the way. People do not put life on hold forever. Jobs, babies, divorces, deaths – none of these life events waits for politics. They are also the most common triggers for moving home. While the much-needed political stability that December’s election result brings is very welcome indeed, we remain of the view that there is a growing recognition that this is the beginning of a long journey politically that will be the backdrop to our lives for more years to come. That said, with a majority now secure in Parliament for the next few years at least, it’s likely that life will go on rather more as usual than has been the case for the past two years. That is very good news for homeowners, first-time buyers, brokers and all those in the property chain. M I
“It’s worth noting that DMP providers don’t always register on your client’s credit file so it’s not something that you can readily recognise”
hatever the hue of individuals’ politics, the Conservatives’ resounding majority win has provided a boon to homeowners and those looking to move in particular. The immediate threat to confidence is gone and with the new year comes a renewed sense of hope for the market. Those who have held off moving due to worry about Brexit are likely to put their homes on the market in early January, traditionally a time when stock levels improve. Stamp duty remains one of the sticking points for those already on the ladder and looking to move up, however, the signs for first-time buyer activity are good. The Mortgage Lenders and Administrators Statistics from the Bank of England published in December revealed that the share of high LTV lending rose again in Q3 2019. Loans with an LTV of above 90% made up 6.7% of all new mortgage advances, the highest reading since 2008.
And Jeff. He lives with his mum, and claims a carer’s allowance. But he also rents out the house he owned before mum became ill, and works part-time at the chemist. All of which we can take into account. For professional intermediary use only. *Comparison of published income criteria for residential mortgages from 9 specialist lenders, conducted by Together, November 2019.
The outlook for London property Peter Izard business development manager, Investec Private Bank
here’s reason to believe that 2020 could prove a turning point for the prime London property market. Research from Savills suggests that in the five and-a-bit years between June 2014 and September 2019, property prices dropped by more than 20%. However, it forecasts prices to grow by over 20% in the next five years – even amidst the current political uncertainty. Property website Zoopla, says that property values in London rose by 1% in the 12 months up to the end of October 2019, which is the strongest pace of growth for two years. So, what is causing this bounce back and what gives London such long-term appeal? WALL OF MONEY
A recent report by property private office RFR property private office, claimed that a “wall of money was ready to cascade into London”, stimulated by the latest Global Power City Index, which named London as the most powerful city in the world for the eighth year running. The annual index ranked London highly for economy, research and development, accessibility, business environment, diversity and tourist attractiveness, and London significantly outperformed the rest of the world for cultural interaction. This reflects the demand we continue to see at Investec Private Bank from high net worth (HNW) individuals who want to live and invest in London. UK property, particularly property in London has long been a top destination for international high net worth clients who are drawn to the
education system, good international connections and respected legal system as well as the prospect of long-term asset appreciation. According to Molior, a company that monitors property developments in London, 5,156 new homes in the capital were sold in the third quarter of 2019. This was the highest figure in a year and a half, with about a fifth selling to overseas purchasers. A weak pound has also benefited the London market, making investment in UK property a far more attractive prospect for those remunerated in foreign currency as the swing in the value of sterling alone has presented buyers with significant discounts. Rental prices are also expected to rise in the prime London market, and Savills says that tight supply will support rental growth of nearly 19% in London compared to just over 15% in the rest of the UK over the next five years. This positive sentiment is echoed by the London Super Prime Lettings Insight from Knight Frank, which says that there were 153 super prime tenancies agreed in the year to June – the highest annual total over the past seven years. Knight Frank says that high-end
rental properties in London are particularly popular amongst US tenants whose spending power has increased as a result of the weak pound. There are plenty of reasons to believe, therefore, that the outlook for the London prime property market is positive and this is good news for brokers actively involved in this market or who work with HNW individuals and expat investors. At Investec Private Bank, we are currently seeing a rise in prime London purchase business as buyers return to the market seeking value. REMORTGAGE DEMAND
There is also continued demand for remortgages in this area of the market as large loan sizes make borrowers hypersensitive to rate movements, and investors recognise opportunities to release equity from their property. With historically low interest rates and the highly competitive lending landscape, we expect this appetite to continue into 2020. It is, however, worth sounding a note of caution. While the outlook is certainly very positive, we must remember that 2020 is still likely to be a transition period as the market adjusts to the political and economic environment. So, we are unlikely to see any spectacular growth in the next 12 months alone. Savills forecasts price rises of 3% in Prime Central London in 2020, but the longer-term outlook is more bullish and so it could be that the London property market is returning to its place of power. M I
The Global Power City Index named London as most powerful city in the world for the eighth year running
MORTGAGE INTRODUCER JANUARY 2020
Business goes back to the future Rory Joseph director and
Sebastian Murphy head of mortgage finance, JLM Mortgage Services
ome with us back to the start of 2019 – as you read this it’s over a year ago and, we might add, back in another decade. It is indeed another time altogether. You stand minding your own business waiting for your chai latte in a local coffee shop, when there is a blinding light and a figure appears. “I have come from the future,” they say, “and I bring you information which, if you act upon it, will make you very rich indeed.” You listen carefully as the figure explains that in less than a year the Prime Minister will be Boris Johnson not Theresa May, an election will have been held and the Conservative party will have won a landslide majority winning some of the most tribal and long-standing Labour-held seats in existence. There is a flash of light and the figure is gone. At this point you consider your surroundings, wonder if you’ve taken any hallucinogenic by mistake, and instead of making a bet on that outcome, you wait in line for your coffee. And yet, one year on from that time, in a new year and a new decade, that’s exactly the political landscape we have and, in all likelihood, unless something seismic happens at the next election, the Conservative Party will be in power for the next 10 years with Boris Johnson as the Prime Minister. Whether you believed Johnson’s focus on ‘Getting Brexit Done’, it does mean that he has the numbers in Parliament to get his deal through – indeed he might have already done it by the time you read this – and leaving the EU at the end of this month looks a racing certainty. Following that, will a Prime Minister not so in thrall to the ERG fringe of
his party, be able to deliver a much softer Brexit now? Many in our sector would not have wanted a Brexit in the first place, however given it is now to happen, I suspect we would prefer a deal which minimised economic disruption. If Johnson is a one nation Tory, then a softer deal should be on the agenda, and that would be good news for the economy. We’ve already seen a marked pick-up in the value of the pound, share prices have improved, and the attractiveness of the UK economy for foreign investment just became that much more alluring. Again, all positive news and hopefully the start of much more to come. FORGING AHEAD
The landscape for 2020 looks positive
And what about our own sector? Well, for a start, Johnson’s victory delivers more of the certainty we (and our clients) crave. Purchasing has been stifled under the current conditions, but now those clients who have been sitting on their hands, should begin to take them out and forge ahead. Whether that’s a residential purchase, a remortgage, a later life loan/equity release, a landlord adding to their portfolio, at least they now know what hue their government will be, we’re leaving the EU and there will not be a second referendum. We should not underestimate just how comforting that will be to many people. It’s early days but we could see a significant ‘turbo charge’ to the housing market as a result. Plus, coming down the track could be a number of housing/mortgage market-friendly policies – cuts to stamp duty on the lowest and highest tiers, plus a commitment to help more firsttime buyers. Again, in a market which is often used as a political football, and for certain individuals particularly landlords/purchasers/first-timers, the election result is likely to be seen as a shot in the arm. For instance, the short-term future
of Help to Buy seems assured, albeit changing to a scheme purely for the use of first-time buyers and given this has been a flagship policy for the Conservatives, you might anticipate that this might even be extended. For advisory firms as well, the political die has now been well and truly cast. We appear to have a resolution to the biggest political challenge of the past 40-plus years and again this might well provide a sense of relief and an opportunity to forge ahead with plans. Firms who, for example, have been waiting on this outcome can now begin investing in their operations and planning for an uplift in business. Overall we believe there are many positive opportunities to be grasped in the advisory sector, particularly in mortgage product areas like specialist lending and later life options, and this election result should act as a catalyst for many firms to take advantage and ensure they are in the best possible place to secure clients in these areas. 2019 looks like being the line in the sand we all needed, and it allows us to get on with our future – after all, noone knows quite what’s coming over the horizon but there should be a lot of business up for grabs. Let’s make sure it’s advisers who take it. M I
JANUARY 2020 MORTGAGE INTRODUCER
The art of seeing Mortgage Introducer spoke to Hiten Ganatra of independent brokerage Visionary Finance to find out more about the firm and get his advice on dealing with buy-to-let clients Firstly, tell us more about Visionary Finance.
correct corporate structures in place are continuing to purchase investment properties.
When it comes to mortgages there isn’t much we don’t do. Being directly authorised enables us to offer a vast array of mortgage services such as your standard residential, home mover and remortgages but also offer services in specialist areas likes buy-tolet lending, bridging finance and lending for foreign and international clients. Our service also extends to developers we work exclusively with by helping them navigate challenges surrounding lending for buyers who have purchased up to three years prior off plan. Many buyers of the off plan properties, who are contractually committed, are having to work with the current mortgage market conditions which will have changed significantly from when they first reserved. Being the conduit between the developer, lender and valuer we have helped negotiate some extremely challenging sites for developers and so allowing clients to obtain mortgage lending and complete on the purchases.
What advice would you give to brokers when it comes to dealing with buy-to-let clients?
What does the business do?
Buy-to-let is clearly a big part of your business What are your views on the market at present? There is a real risk that the market starts to stifle as all the government measures, particularly in relation to mortgage interest rate reliefs (Section 24), start to really bite and hit the small and accidental landlords in their pocket. Research conducted by Paragon found that landlords with just one property has fallen drastically since 2010, from 78% to 45%. Currently, 52% of the private rented sector is occupied by nonprofessional landlords who own between one to four rental properties. Given that there are approximately 1.5 million landlords in the UK the amount of slack which will need to be picked up by corporate and professional landlords just to keep to current stock levels is vast. We are noticing the smaller landlords no longer being active in the market and only landlords with
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Buy-to-let mortgages equated to 73.63% of our business in 2019 and we have used over 48 different lenders. The range of lending policies available amongst more specialist lenders is like we have never seen before with more and more lenders entering the market. If buy-to-let doesn’t form a core part of your business then its probably best you work with either packagers or brokers who specialise in the sector to ensure your client is getting the best advice. Make sure you safeguard your relationship with your client by ensuring that the packager or broker is not permitted to cross sell. Decent and honourable specialist brokers will be happy to agree to this. The market has been expressing a new confidence following the 2019 General Election. How do you perceive things moving forward? Confidence is increasing in the market because it is the first time since 2010 that we have a government with a strong parliamentary majority. Whilst there was a brief majority in the 2015 election the EU referendum in 2016 has provided nothing but uncertainty. The election result has cleared the impasse surrounding the withdrawal date from the EU however it is the negotiation of strong trade terms with the EU that will really help to instill confidence. Given that this is unlikely to happen until December 2020 there will be cautious optimism in the market until then. Help-to-buy is coming to an end in the near future. How do you think this will impact the market? There has to be a clear roadmap put in place by the
what is ... government explaining what initiatives will be replacing the scheme. If there is anything we have learnt over the past three years is that uncertainty helps no one. It is paramount that both buyers and housing developers are given the confidence they need to keep the housing market strong and buoyant.
“We have helped negotiate some extremely challenging sites for developers and so allowing clients to obtain mortgage lending and complete on the purchases”
How important is specialism to brokers? Do you think we could see the end of vanilla brokers? Given the amount of new and specialist lenders that are out there in the market it is very important for brokers to keep updated on products and policies to ensure clients maintain confidence with mortgage intermediaries. Whilst there haven’t been huge changes in the way that the regulated mortgage market operates over the past few years the buy-to-let mortgage market has seen swathes of changes introduced by the FCA and PRA. To keep on top of this constantly evolving area of the mortgage sector is very challenging particularly if, as a brokerage firm, the volume of your specialist business is low. Regular exposure with these lenders to maintain a high level of advice journey for your clients is paramount. I do therefore see it challenging for small brokerage firms to sustain business if they don’t have a broad knowledge of the sector as a whole. Where next for Visionary Finance? What are your long-term plans?
I am exceptionally proud of our growth since 2016 where our total mortgage lending equated to circa £30m rising to £65m in 2017. In 2018 we secured a couple of new developer relationships which meant our total lending figures reach just over £100m. Last year saw over a 60% growth where we completed £162m worth of lending with over £72m sitting in the pipeline waiting for drawdown. I have no reason to doubt that we cannot surpass £225m of gross lending in 2020 given the relationships we have forged with our introducers and more importantly clients. In terms of long-term plans, I want Visionary Finance to be amongst the best fee-free independent brokerage firm in the country. M I www.mortgageintroducer.com
JANUARY 2020 MORTGAGE INTRODUCER
Finding the broker opportunities Jeff Knight director of marketing, Foundation Home Loans
recently put together a presentation for one of our distribution partners and an adviser-based audience. This provided a great opportunity to talk up a buy-to-let market which has been talked down so often over the course of the past 12 months. Don’t get me wrong here, there remain many challenges to overcome and confidence is relatively low, but the market is still working and there are plenty of opportunities emerging for intermediaries within this sector. Landlord confidence may be subdued but intermediary business expectations are strong, and confidence is trending upwards. According to the Q3 BVA BDRC Project Mercury report, confidence in the intermediary channel rose from a value of 0.84% in Q2 2019 to 0.90%. Intermediary confidence within their own firm also edged up from 0.92% to 0.93%. When directly posed the question why such levels were on the rise, we received the following intermediary responses: “Mortgage advising is only one part of what we do. We have a steady stream of recommendations from people in the industry. We have a steady portfolio.” “It’s going well for me at the moment. All my applications are going through. 99% retention of customers.” “A little bit of turmoil is always good because people want to come and talk to you.” “There will always be a need for intermediaries; there is more work coming our way as the market gets more complicated and people need more help to guide them through the process.”
These are just a selection of those collated and they serve to capture intermediary sentiment in the current buy-to-let (BTL) marketplace, at least from our experience. The question is – in an increasingly complex marketplace where professional landlords are rising to the fore, how can intermediaries take advantage of this? Well, unsurprising given the continued expertise and value added from BTL advisers up and down the country, the intermediary market continues to conduct the bulk of buyto-let business. Although there remains a significant amount of business which proactive intermediary firms could, and should, be tapping into as a considerable amount of lending is still being placed directly with lenders. COMPETITIVE WORLD
Additional Q3 research conducted by Foundation Home Loans in conjunction with BVA BDRC revealed that 73% of landlords carried out their most recent mortgage via an adviser, however 19% went direct to a lender and 1% went via a comparison site. While 31% of landlords said they plan to remortgage at least one of their properties over the next 12 months, 65% of those said they expect to use an adviser, 23% would go direct to a lender, 3% would fund it by other means, and 10% were unsure. In the increasingly multifaceted and competitive world of buy-to-let mortgage lending, it seems somewhat surprising to hear that nearly 20% of landlords went direct to a lender for their latest mortgage, and that 23% plan to go direct when they next remortgage. However comfortable some landlords are with the market – and there are many portfolio landlords who feel very able to sort their own finances out – there is always the potential for them to miss out on a more flexible deal, a
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larger loan capacity, competitive rates and favourable criteria. Intermediary firms and distributors have an important role to play in this process. As a specialist lender who is looking to increase its presence not only within BTL but also across the residential marketplace, we are always looking to align ourselves with partners who share our vision and breadth of offering. And this has to be the right fit for both parties. An increasing number of advisers are likely to see borrowers with specialist needs, from those with minor credit blips to professional landlords seeking a limited company product solution. These cases may seem to be far removed but they illustrate the breadth of advice required from borrowers who are simply reacting to shifting demographic and financial trends. The residential sector is becoming increasingly complex which, as highlighted in one of the comments earlier, represents great news for intermediaries. There are growing numbers of self-employed people who need additional support in servicing their mortgage requirements. We are seeing record numbers of CCJs being issued. More people are having portfolio careers, often creating a mix of employment, freelancing, and/ or consultancy work - therefore generating multiple streams of income. People are working beyond traditional retirement ages, and a rising quantity of credit-worthy borrowers who are falling short when it comes to the strict tick-box mentality of many high-street residential lenders. The specialist markets will continue to escalate in importance for landlords and residential clients in 2020. We anticipate that our range of residential products for those who are just missing out on mainstream deals, plus our specialist landlord offerings, will be the biggest hits with our intermediary partners in the year ahead. Despite the lingering challenges facing the economy and, to a certain extent, borrowers, it’s far from doom and gloom when it comes to the opportunities emerging within intermediary market. M I www.mortgageintroducer.com
What does 2020 hold in store? Alan Cleary group managing director, OneSavingsBank and Precise Mortgages
’m not typically one for Mystic Meg-style predictions, but this year I think there are a few trends that are likely to persist as well as some that may emerge. BUY-TO-LET WILL BECOME INCREASINGLY PROFESSIONALISED
With so many negative headlines focussed on the demise of buy-to-let, spiralling rents and narrowing profit margins, you’d be forgiven for assuming this part of the market is suffering. That’s not the case at all. We saw strong demand for buy-to-let in 2019 and believe this year will prove a similar story. What is changing is the type of demand. The much maligned changes to the tax relief landlords can claim against their mortgage interest have served to reshape the market, particularly as house prices are still high in most areas of the country. Yields on single lets have undoubtedly been squeezed in London and the South East, but this has driven landlords to invest in other areas of the country. The type of property landlords are opting to purchase now is also a shift from the buy-to-let of 10 years ago. Last year saw the sell-off of a large number of single lets in high value areas of the country – leading the press to warn of a landlord exodus. Indeed, the latest survey from the Association of Residential Letting Agents suggested the number of buy-to-let investors selling their properties remained high, at an average of four a month per branch in 2019. This fails to account for the landlords who sold and repurchased, either elsewhere in the country where better yields were attainable or in multi-unit lets and houses in multiple occupation. www.mortgageintroducer.com
This year is likely to see a continuation of this trend towards purchasing higher yielding HMOs and multi-lets as landlords come to the end of their terms and consider how best to rebalance portfolios. While much of the buy-to-let purchase activity is outside of London and the South East, we still think that landlords in this part of the country have options. Last year we began to apply blended loan-to-values for landlords who hold their portfolio with us; that has proved very popular as it allows for higher yielding assets
“The latest survey from the Association of Residential Letting Agents suggested the number of buy-tolet investors selling their properties remained high, at an average of four a month per branch in 2019” to effectively subsidise lower yielding assets which, nevertheless, have high capital values. More innovative types of underwriting such as this, and also allowing landlords to top slice using earned income, is likely to increase over the course of this year. BRIDGING OPPORTUNITY
Figures published by the Ministry of Housing Communities & Local Government showed annual housing supply in England amounted to 241,130 net additional dwellings in 2018-19, up 9% on 2017-18. Some 14,107 of the net additions from change of use were through permitted development rights where full planning permission was not required. These comprised 12,032 additional dwellings from former offices, 883 from agricultural buildings, 199 from storage buildings, 69 from light industrial buildings and 924 from other nondomestic buildings. This tallies with our experience in the
short-term sector. Last year saw a large amount of bridging activity focussed on developing single lets, former commercial and residential stock into HMOs and multi-units for let. This is just another way that landlords are adapting to add capital and rental value to existing properties to support their profitability under today’s tax regime. Current government policy is to extend permitted development rights to purpose-built blocks of flats from January 2020, and eventually roll permitted development rights out to detached houses. This would allow homeowners to add an extra two storeys to their homes without seeking planning permission, under the same rules that currently apply to small extensions and loft conversions. It’s likely that this type of conversion will support solid lending volumes in the bridging sector this year, with a pick up in activity plausible. RECOVERING RESIDENTIAL CONFIDENCE
The latest survey from RICS, predicts an improvement in the residential market, which has been relatively subdued amid the political uncertainty that has dogged Westminster for the best part of the past year. Sales expectations over the next three months look more stable, with a net balance of +11%, up from 5%, while the 12-month outlook was the most positive sentiment since February 2017, with a +35% net balance. Looking at regions individually, RICS is predicting a solid increase in transactions over the next 12 months across virtually all areas covered by this survey. Prices are also expected to pick up over the next 12 months on a headline level, with 33% more respondents in the November survey anticipating house prices will rise rather than fall over the next 12 months. Significantly, prices are expected to return to growth across all areas of the UK with Wales and Northern Ireland leading the way. M I
JANUARY 2020 MORTGAGE INTRODUCER
We finally have some certainty Bob Young chief executive officer, Fleet Mortgages
lections by their very nature are divisive events and, given our political climate over the past few years, they tend to be even more so now. The country is clearly polarised and, let’s be honest, the Parliamentary situation in the lead up to 12 December was not helping anyone. Regardless of what you think of Boris Johnson personally and the rhetoric he uses, he was right in saying that government had effectively come to a halt because of its inability to get anything passed through Parliament, and that was having a deep impact on the UK economy, on our businesses, and of course the general public in their ability to make decisions, particularly on ‘big ticket’ items like property purchase/remortgage, etc. TREPIDATION
However, even with last month’s General Election there was always going to be a risk of another hung Parliament and, from our perspective, a Labour-led coalition or minority government which had a combination of policies for the private rental sector which would have caused the biggest damage to the PRS since the illconceived 1974 Rents Act. Having lived through this pernicious legislation, I had no wish to return to those days however we live in a democracy and that was certainly a potential outcome. Which is perhaps why I treated this election lead-up with more trepidation than many others – it’s my view that the leadership of the Labour Party have viewed the existence of private
landlords as not a ‘necessary evil’ but a full-blown evil that needs to be eradicated. Indeed, part of me thinks it views the entire PRS as a terrible thing and that private landlords only exist to do a number of things – to rip-off workingclass tenants, to make as much money as quickly as possible, and to have no interest in the quality of the homes these people live in. Needless to say, in my line of work, I’ve met a large number of landlords – I am one myself – and with exceptions you could number on one hand, I’ve found them all to be decent people, investing in property yes, but also caring for their tenants and wanting to ensure they are safe, secure and living in excellent conditions.
“Our sector is always going to be in the political crosshairs but I believe we have a government that values the PRA” Of course, you want a market rent from those properties, but on the whole you would probably much prefer to have excellent, long-term tenants in those homes, rather than an extra couple of quid every 12 months. Again, I’ve lost count of the number of times I’ve heard from landlords who have kept rents at the same levels often for years on end. From a business perspective and as an intermediary-only buy-to-let lender, I also feared a Labour victory because it would have delivered seismic changes in our sector and, let’s face it, these take time to bed in, they often come with many requirements in terms of being understood and implemented, they bring about unforeseen circumstances, and they can be a major destabilising presence which takes all stakeholders
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time to react to. That type of wholesale change tends to un-nerve investors in particular, and I think we would have seen investment – particularly from outside the UK – into buy-tolet lending pulled or at least seriously slowed, while both us as lenders and these institutions secured a complete understanding of what this new world would look like, and how it would have impacted on the market. As mentioned, because of my long memory, I could see the incredibly negative impact those Labour policies would have had right across the PRS and the buy-to-let market and, I’ll make no apology for feeling mightily relieved on the morning of December 13 when I awoke to find that that outcome had been averted. UNCERTAINTY
Over the past 12 months in particular we’ve all talked a lot about uncertainty and the damaging impact this has had on the UK economy, and all of our individual businesses. Trying to second-guess what might happen with regards to the UK leaving the EU has been both exhausting and debilitating in terms of investment and resource within our firms. How can you prepare when no-one quite knows what happens next? A large majority for the Conservatives might not be everyone’s cup of tea but one thing it does do is give certainty and we can all plan accordingly. My feeling is that many people have been putting off major decisions because of this, but that should start to work itself out during the course of this year. In that sense, I feel very positive about the PRS, the buy-to-let market and the position of advisers within it. There will of course be ongoing challenges – our sector is always going to be in the political and regulatory crosshairs – but I believe we have a government that values the PRA and indeed, to a very large extent, is reliant upon it in terms of helping bridge that housing gap. 2020 not only looks more certain for all, but the future does seem bright. It’s now up to us all to make the most of it. M I www.mortgageintroducer.com
Learn from the trends of 2019 Ying Tan founder and chief executive, Dynamo
he UK housing market is a multi-faceted beast containing hundreds of micro marketplaces. Each have their own collection of conditions and challenges which have evolved over the years in a variety of ways for homeowners, landlords and tenants. In any evolving marketplace it’s important for all links in this chain to closely follow market trends. So, let’s start by evaluating a selection of trends which emerged in 2019. DATA AND TRENDS
Data from NAEA Propertymark suggested that, over the course of 2019, demand was slightly higher than last year with an average of 320 house buyers registered per branch, compared to an average of 318 throughout 2018. Looking back over the past decade, demand was reported to be up 16%, from 275 per branch in 2009. The number of properties available to buy didn’t significantly change yearon-year, with 39 available per branch throughout 2018 and 38 in 2019. Supply has dropped considerably over the past decade, from 65 on average per branch in 2009. The number of sales agreed per branch through the year remained the same, sitting at an average of eight per month in 2019. The proportion of total sales made to first-time buyers increased by 2% in 2019, from 25% in 2018 to 27%. Meanwhile, ARLA Propertymark found that the supply of rental accommodation increased in 2019, from an average of 187 per branch in 2018, to 197 this year. It reached an annual high in March, when letting agents were managing 203 properties per branch. As landlords continued to feel the pinch, the number www.mortgageintroducer.com
of buy-to-let investors selling their properties remained high, at an average of four in 2019. In April, the figure spiked to five per branch. The number of tenants experiencing rent hikes hit a record high in 2019, rising from an average of 26% each month in 2018, to 46%. This was said to be due to the impact of the tenant fees ban, with 64% of tenants experiencing rent increases in August – the highest figure seen this year. Agents reported an increased number of prospective tenants searching for homes in August, when 76 were recorded per branch, compared to 73 on average across the year. This analysis highlights a relatively stable year for the property market, despite buyers, sellers and investors facing lingering political and economic issues, factors which inevitably affected sentiment and decision-making. It’s fair to say that landlords have had it tough of late. Many landlords have exited the market due to a combination of regulatory demands, tax changes and the aforementioned cloud of uncertainty, but let’s also reaffirm that the buy-to-let (BTL) sector stood firm to deliver some decent lending volumes and plenty of opportunities for the intermediary market. And the private rented sector continues to thrive across many regions of the UK. The ongoing challenges facing all property professionals further highlights how prudent it is to get to grips with ever-shifting market conditions and keep up to speed on regional trends. This is especially apparent across major cities within the UK, making Aldermore’s Buy-to-Let City Tracker – which analyses five factors to calculate the best areas for landlords to buy – all the more thought-provoking. When considering average total rent, short-term yield, long-term return through house price growth over the past decade, vacancy numbers and the rental population, the tracker identified Oxford as the number one conurbation with a total score of 74. The data showed that 28% of the
city is housed through the private rented sector, the average price per room is nearly £600, properties are generally not vacant, and house price growth is strong. The score was dragged back by short-term yields, which the lender reported as being poor. It will be interesting to track how these cities perform over the course of 2020 and if any emerge from the pack to challenge for the top spot. Inevitably, much will depend on the fall-out from the General Election and any impact this might have on the property market. A SPECIALIST VIEW
So, what do landlords think their biggest challenges and opportunities will be in 2020 and beyond? According to a study from Monmouthshire Building Society, nearly half (45%) of landlords believe the economy will deteriorate and 53% think legislation around tenancy and eviction will get worse for landlords. However, on a much more positive note, despite the potential challenges of tax and legislation, nearly a third of the landlords surveyed said they were interested in growing their portfolio over the next few years and nearly twothirds (71%) think demand for rental properties will increase. There was also interest in building diverse portfolios, with a fifth of landlords considering investing in a property type they don’t already have in their portfolio. Holiday lets were highlighted as a growth area with 64% of new landlords having a holiday let property in their portfolio. It’s always interesting to hear from medium to smaller-sized building societies and specialist lenders as these really are at the heart of the modern BTL marketplace and have their finger firmly on the pulse in terms of what their landlords and intermediary partners really want. And despite their relative individual size, these will continue to have a major collective influence on the BTL sector in 2020. M I
JANUARY 2020 MORTGAGE INTRODUCER
2020 vision for buy-to-let Jane Simpson managing director, TBMC
t is expected that gross buy-to-let lending in 2019 will be recorded at around £37bn but what are the prospects for this sector in 2020? Some industry pundits have suggested that buy-to-let lending may fall slightly during the coming twelve months as the relatively buoyant remortgage market in 2019 begins to slow; more landlords are now choosing 5-year fixed rates rather than shorter term products which is lengthening the remortgage cycle for intermediaries. AFFORDABILITY
The trend for longer term fixes was stimulated by the 2017 PRA
regulations impacting affordability assessments and rent stress tests. At TBMC, over 50% of applications were for 5-year fixed rates in 2019. The purchase market was sluggish in 2019, due in part to the reticence among professional landlords caused by the uncertainty surrounding Brexit. However, following the General Election in December and the success of Boris Johnson’s ‘Let’s get Brexit done’ campaign, the path ahead seems clearer; we are definitely leaving the EU. Now that the political furore of 2019 has abated, there may be a boost to the buy-to-let sector as portfolio landlords release a pent-up demand for new property investment and begin resurgence in the appetite for purchase finance. It is certainly a good time to obtain buy-to-let finance as strong competition in the marketplace has led to prices being driven down, with
Lenders have adapted their lending criteria to widen their appeal to landlords
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rates currently below 1.50% with some high street lenders, but rates may have bottomed out. There is still economic uncertainty in the UK as we endeavour to leave the EU in the best possible circumstances and until the new Governor of the Bank of England in situ. Depending on Brexit developments and other socio-economic factors, there could be some movement in interest rates in the coming year, although a difficult thing to predict without a crystal ball. What does seem clear is that lenders have a strong appetite for buy-to-let business and some have adapted their lending criteria to widen their appeal to landlords. PROPOSITIONS
For example, there are now more lenders offering buy-to-let finance for expats, limited companies, HMO landlords and Airbnb. This trend is likely to continue in 2020 with lenders modifying their propositions as the demand for more specialist or ‘complex’ buy-tolet mortgages continues. Recently published figures from UK Finance for buy-to-let lending in 2018 indicated that specialist lenders recorded higher rates of growth compared to banks and building societies. However, following the PRA regulations relating to ‘professional landlords’ (those with four or more mortgaged buy-to-let properties), there is still a divide between those lenders servicing large property portfolio investors and those opting to limit their offering to smaller scale landlords. This is likely to remain the case in 2020, with lenders deciding on their target market and honing their propositions accordingly. From the broker perspective, 2020 will offer plenty of opportunity for arranging buy-to-let mortgages, but it will require specialist knowledge about the different product providers and their lending criteria to help identify the best options for landlord clients. M I www.mortgageintroducer.com
Preventing a generational divide Jeremy Duncombe director of intermediary distribution, Accord Mortgages
he latest report from the Intermediary Mortgage Lenders Association (IMLA) reveals the eye-watering stat that today’s average private renter could be £352,500 worse off over the next 30 years compared to the average homeowner. In the study, entitled ‘The Intergenerational Divide in the housing and mortgage markets’ the data highlights that the average homeowner could expect to save £133,700 when paying a mortgage as opposed to renting and gain £218,000 of equity from paying the mortgage off. On paper, it seems simple – it’s often cheaper per month to buy than rent. But in reality, we know there are multiple barriers to ownership which are giving the next generation no other option than to continue being tenants. This is at the detriment of their own finances and consequently, to the detriment of future generations, as those who will be forced into rental for their entire life will have no equity to use to support their retirement and unable to leave a property asset to their children. It is also an issue for UK plc, with the state potentially needing to fund those who can’t afford to pay rent in retirement. Today’s millennials face a number of obstacles when trying to get onto the housing ladder. Much has been made of rising house prices, but the IMLA report explores the more prevalent factors such as increased student debt, the changing nature of employment and reduced job security. It also references the growing divide
between young people who have financial support from parents - the Bank of Mum and Dad - and those who do not. Research from Yorkshire Building Society found that half (50%) of people who purchased their first house in 2018 were helped by parents, compared to just 17% in 2012 and with more lenders launching specific products to enable intergenerational lending, this divide is only going to get greater. The overall debate, and the other main takeaway from the report, is access to mortgage finance and tighter affordability criteria. Regulation imposed in the wake of the 2008 financial crisis meant that the availability of high LTV loans and interest-only lending were massively reduced and heavy restrictions imposed. This was absolutely the right thing to do, and nobody should be arguing for the return to pre-crisis lending rules. TIGHTENED AFFORDABILITY
Lenders have tightened affordability requirements and imposed stricter criteria to comply with the FCA regulatory regime. However, we understand it is confusing and difficult to explain to a customer, who can clearly evidence they can service rent at a similar or higher level, that they may be turned down for a mortgage on affordability despite the payment being less than they have been paying for the past three years. Whilst the IMLA report calls for the government to commission a cost benefit analysis of mortgage regulation, there are things that, in the meantime, our industry can do to support the younger generation. As a lender, we are continually working to find solutions to help those who can afford it to secure their first home. Changes such as our recent extension of maximum term and age
can help with affordability whilst our common-sense underwriting means we have the flexibility to review more applications on a case by case basis, especially where incomes are more complex. We’ve had great success with Help to Buy since launching last year and have helped more than 10,000 people get their own home thorough this and our new build offering. Clearly, when the Help to Buy scheme ends in 2023 there needs to be a sustainable replacement and with the current stress test rules, that can’t be just doing more 95% LTV lending. The difference in price from 90% to 95% can be significant because the lender needs to pass the higher cost of the funds and capital requirements on to the customer, which inevitably affects affordability stressed at 7%. A buyer has to choose between finding a bigger deposit, a cheaper house, or continuing to rent. Advice in these situations is crucial and this is where brokers have a very important role to play. Never has there been as many product and criteria options for borrowers. A first-time buyer approaching a purchase without seeking advice could be exposing themselves to unnecessary risk. Whilst they may do initial research online, there’s a real opportunity for brokers to show the value of advice in ensuring every relevant question is asked, every consideration explored and ensure the application is packaged up in the best way to get the desired outcome. Successfully appealing to this market means having a good online presence, knowing how to position your business to this audience of tech savvy self-servers, and building a base of satisfied customers who will happily recommend you and refer new business. The Accord Growth Series is a great place for brokers to start with this. Hopefully, the findings of the IMLA report will encourage the regulatory bodies to review the current restrictions. Increased awareness and debate of the issues can only be a good thing and encourage more innovative thinking in the sector. M I
Helping clients with expat buy-to-let Anita Arch head of mortgage sales, Saffron Building Society
or many, the opportunity to live and work abroad has great appeal. However, becoming an ‘expat’ comes with a myriad of things to think through and can be a stressful and emotional time. At Saffron for Intermediaries, we have talked to many brokers about expat buy-to-let mortgages and know that they often provide advice about much more besides. Expats usually have a good income which makes them an attractive prospect to lenders. However, there are potential problems and pitfalls along the way which can scupper progress and frustrate everyone involved. We have been offering an expat product for many years and in that time have noticed several common and recurring issues. LANDLORDS
Becoming landlords may not have been on customers’ agendas when they decided to move overseas, so it is important that they’re given support. A property might be retained for investment purposes, and clients can benefit from the income it provides while they are away. Alternatively, they may decide to invest in new properties to ensure that property remains a future asset option for them. One of the main considerations for British citizens moving abroad is whether to keep their home, or purchase a UK property while they are overseas. Many will decide to maintain a property in the UK and let it. However, many lack the experience or do not
fully understand the implications of this decision. Will your client want to use a letting agent to manage the property? This will of course incur an extra cost, but could be beneficial as it would be difficult to look after matters from afar. Insurance will be another cost and will be taken into consideration when underwriters assess the mortgage application. In addition, the applicant will need to set aside money for potential repairs.
that clients use a UK solicitor, which improves communication and dialogue during the process. During the letting process, there will be other costs and responsibilities for your client to decide upon. They may need to consider putting their furniture and belongings into storage as lenders will differentiate between furnished and unfurnished properties. This can add unexpected costs if a lender will only lend to unfurnished buy-to-lets. If your client intends to rent their property to an immediate family member this will require a regulated buy-to-let product. At Saffron we accept this option from clients living in non-EEA countries. We also accept first-time buyers. SERVICE AND OPPORTUNITY
WHAT HELP IS OUT THERE?
At the beginning of the process, it’s important that clients are aware of what they need to get to grips with. For example, those thinking of retiring abroad will need to consider pensions and inheritance tax. There are websites which offer general advice before clients leave the country, for example, Age UK and Gov.uk. WHAT DO YOUR CLIENTS NEED TO KNOW?
To be able to put the right mortgage in place requires a real understanding of the expat buy-to-let mortgage product options, as well as a detailed understanding of your client’s plans. There are so many different product types, regulations and requirements governing expat buy-to-let that it can be hard for clients to see their way through. Some lenders impose restrictions and will not lend if the client lives in or is moving to specific countries. Lenders may also have other criteria to be addressed if the client has previously owned a property or been a landlord before. Customers will need to have secured their overseas address before a lender can help. Quite often we see applications made before this is done, and we can’t then proceed. We also ask
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There are many things for customers to consider with an expat buy-tolet mortgage. Having a trusted and knowledgeable broker leading the way will ensure a smoother process for everyone. At Saffron we have extensive knowledge of expat buy-to-let, so can give real support to brokers wanting to give their clients the advice they need. A strong relationship between client and broker, and the broker and business development manager is also likely to prove vitally important. M I
Becoming an expat comes with many considerations
Reflections on IP Kevin Carr chief executive, Protection Review, and MD, Carr Consulting & Communications
t’s been a great year for income protection (IP). Thanks to a combination of raised awareness, product innovation and improved technological support for advisers - in terms of sourcing and comparison tools - this vital product seems to finally be getting the recognition it deserves. Technology providers like iPipeline and Iress are playing an important role in boosting sales by making the IP advice process simple and streamlined. Their portals help advisers more effectively tailor the IP offering based on a client’s particular needs. The value of this technology was demonstrated by iPipeline’s Q3 2019 results which showed the volume of multi-benefit year-on year sales increased 63.6% and IP was up 65% in Q3. With regards to innovation, providers are improving new business processes, particularly where IP is taken out as part of a multi-benefit plan or for the self-employed, comments Paul Yates, product strategy director at iPipeline. Short-term product ranges are also helping to improve affordability of IP, particularly for younger first-time buyers, he adds.
Roy McLoughlin, co-chair at the Income Protection Task Force, says friendly societies are also leading the way by developing products that can help underserved parts of society. “IP sales have gone through the roof and friendlies are at the forefront,” he explains. “They are progressive companies which are serving parts of society that really need cover.” As well as providing innovative products, mutuals are making it easier for people to claim on their IP policy. According to Martin Shaw, CEO at the Association of Financial Mutuals (claims are eight times more likely for someone who has an IP policy with a mutual).
“Short-term product ranges are helping to improve affordability of IP” Meanwhile, it seems that women remain an underserved group when it comes to IP. Experts predict an increasing focus on encouraging more women to take out the product in 2020. LifeSearch’s 2019 Health, Wealth & Happiness Report showed that although the number of female breadwinners rose by a third since last year, just one in 20 (6%) women have IP compared to one in 10 (10%) men. M I
NEWS IN BRIEF VitalityLife has enhanced its Dementia and FrailCare Cover, an additional option for those taking out its serious illness cover (SIC). DFCC+ offers a greater amount to cover the cost of dementia and Alzheimer’s or Parkinson’s disease, as well as a stroke or general frailty. LV= has launched a new IP plan for renters. It pays out a monthly benefit to renters if they are unable to work due to illness or accident. Aviva has enhanced its IP plan, increasing the amount of earnings an advised client can cover: 65% of the first £60,000 of customers’ gross earning, plus 45% of any gross earnings above £60,000. Anorak has launched an “instant life” product on its partner and intermediary platforms, promising policy activation in five minutes. The Right Mortgage and Protection Network plans to host a series of events and workshops across the UK in 2020. These are aimed at keeping members up-to-speed on the latest lender, provider and compliance updates, plus examine ways they can improve their businesses. More than one in 10 homebuyers who purchased their mortgage via a broker didn’t discuss their protection needs at all, rising to a fifth (20%) of those aged 55 and above, according to a poll from Canada Life.
Added value potential for protection policies
ast year saw more added value benefits being added to protection policies: virtual GP services in particular proving a popular option. Could we get to a stage where IP products are sold on the value they can bring in terms of everyday well being? Faced with a vast array of such services, which vary from one product and provider to the next, it seems that some proactive advisers are establishing their own spreadsheets of services in www.mortgageintroducer.com
order to give the client best advice. This represented a key finding from a roundtable recently hosted by virtual GP provider Medical Solutions. Adam Higgs from FTRC commented: “Added value benefits have become a staple of protection plans but it can be difficult to compare what insurers offer. Some insurers may only offer certain benefits at point of claim, some may offer certain benefits to wider family members and in some
cases, this may differ depending on the type of product taken out. “Keeping up to date with this can be very time consuming and as such a system that can keep track of this information and help advisers compare the different offerings can provide great support.” Marie Bedding, head of learning and development at LifeSearch, believes this type of benefit will grow in importance, but relevance is key. M I JANUARY 2020 MORTGAGE INTRODUCER
Choice versus circumstance Alisa Wallington senior product manager, iPipeline
nyone who knows me well, knows that I am not the best at planning. However, when I look back at my younger years, I remember deciding fairly early on that that my life would go something like this: find a nice boy, buy a house, get married, have babies. If I recall correctly, 27 was the age I had penciled in to have my first child. It was specifically in that order too, not once did I consider that things might not pan out that way… Why? Because in my mind, this was the only way to do it. Albeit subconsciously, I think I stuck to this vague hypothesis quite well at first. I met a nice boy – let’s call him Dave. Dave and I rented for around 18 months before deciding to buy. I was 21 when we bought our first house. We got engaged a year or so after, so we seemed to be on the right track. However, after a while things stopped “going to plan” and instead of having kids, we split up six months before the wedding and I went back to live with my parents. In the years that followed, I rented again, on my own and with a new Dave. Then I bought again, got married and had a baby aged 33. We separated, I moved out, rented again and have just moved into my third owned property aged 36 with my current (and hopefully forever) Dave. The point of this is not to tell you my life story (although I suppose I just did), it is to demonstrate that despite the best of intentions, life does not always go to plan. Change can happen quickly and unexpectedly and therefore, whether we like it or not, circumstances can
often end up dictating our choices. If you’d asked me 15 years ago if I would be comfortable bringing up a child in rented accommodation I’d have said absolutely not; I would want the security of knowing that I owned my own home first (preferably still married to my child’s father…) but this is no longer the norm. MAJOR LIFE EVENTS
Many of my friends chose to buy a house and have children before getting married, with the latter becoming the least important and by then, arguably redundant factor. Studies show that major life events are now happening much later, but it doesn’t necessarily mean people are no longer focussed on the same vague hypothesis as I once was. It just means that it might be taking them a bit longer to get there. The emergence of Generation Rent cannot be ignored. Some 4.7 million households are now living in private rented accommodation, 37% of them for 10 years or more. Therefore the evidence suggests that renting is now considered a long-term option and not just a stepping stone to purchasing a home. There are a growing number of individuals who are simply not interested in buying, preferring instead to have the flexibility that comes with renting. But as an industry, are we serving the ‘non-nuclear’ family well enough? With only 15% of private rental households having any life cover, let alone income protection and critical illness cover, I would suggest not. With Legal & General and LV= introducing specific products for this sector and with firms like ours developing rental risk reports, the time is now right to tackle this underserved market. With the rise in house prices compared to wages and the average
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deposit now somewhere between £2030k, it is unsurprising that the average age of first-time buyers has risen over the years to 33. At 21, (original) Dave and I had very little savings ourselves and were only able to get on the property ladder by way of a 100% mortgage deal through Northern Rock, the likes of which are long gone. Stricter lending criteria and affordability rules can also mean that despite the applicant often paying more than the required monthly mortgage amount in rent, the lender may still deem it unaffordable.
“Whilst first-time homebuyers with small deposits have some help through the Help to Buy scheme, we are likely to find ourselves dealing with an increasingly older age group unless we take steps to change things” Whilst first-time homebuyers with small deposits have some help through the Help to Buy scheme, we are likely to find ourselves dealing with an increasingly older age group unless we take steps to change things. This does not bode well for inclusivity, with those who often are most in need of protection not being given the advice they need when they need it. LONG-TERM THINKING
Do we really want to risk leaving the younger generation to fumble their way through ‘robo’? The consequences of which could have a considerably detrimental effect on broker business long term. There is huge opportunity here for advisers to show their true value and demonstrate the benefits of continual engagement. Whatever life choices our clients choose, I think as an industry it is essential that we continually try to understand what drives them, be able to identify when circumstances change and offer products and services which are flexible enough to adapt to these changes. M I www.mortgageintroducer.com
Protecting for dementia care Andy Philo director of strategic partnerships, Vitality
he social care crisis was a key topic during the recent General Election campaign and it’s an issue likely to stay high on the government’s list of priorities. At the heart of this issue is the rise in the number of people suffering from dementia. There are 850,000 people now living with the condition in the UKi, and this figure is set to grow to over a million by 2021. One of the greatest concerns for policymakers is that the general public still doesn’t seem to fully understand the costs of dementia care. According to the Alzheimer’s Society, 50% of the public believe dementia care is free
on the NHS and 81% are unaware that dementia sufferers typically spend £100,000 on care over their lifetime. Recently, VitalityLife looked further into the perceptions that exist around funding for dementia care, surveying more than 1,000 people who already have purchased or are considering purchasing serious illness cover (SIC). The findings revealed that 63% worry about future care costs and more than half (58%) worry about the possibility of developing dementia in later life. Yet, despite these fears, only 11% said they are actively making financial provision in case care is required. It’s clear that current solutions to the ageing population are falling short of the growing need for people to prepare for the cost of living with conditions in later life. In response to this clear societal issue, last year we updated the SIC we offer
to support people in their later life, including an instant pay-out for a range of conditions associated with old age. This free optional extra to SIC provides people with the certainty they will be covered for conditions like dementia, and that they and their family will have financial stability were they to get this life changing diagnosis. It’s proven to be very popular, with around two-thirds of people opting to include it within their insurance. The insurance industry can play a key role in developing solutions to help protect people financially and enable them to retain their dignity and independence in later life. Advisers are a crucial part of this mix as it’s they who can have the conversations, no matter how difficult they are, which help their clients understand the role protection can play if they or their family were to get a dementia diagnosis. M I
Showing some interest Steve Ellis head of risk and protection, Premier Choice Group.
he fact that bank interest rates are on hold at 0.75% will be good news for borrowers, potential borrowers, not so much for savers of course, but we’ve had to get used to that over the years. The Bank of England committee made its decision assessing an economy that has seen although employment growth has slowed and vacancies have fallen, the unemployment rate has remained stable and the employment rate is around its record high. There are inflationary and global growth issues to consider in case
adjustments in monetary policy need to be applied next year. As Joe Healey, investment research analyst at The Share Centre puts it, the Monetary Policy Committee group: “has forecast a recovery in the early part of next year, however it seems pressure is also bubbling up on the possibility of a rate cut as we head into 2020. It is something they have acknowledged stating rates may need to be cut if global growth continues to slow, highlighting the crossroads they currently face regarding economic uncertainty. Currently, the probability of a rate cut around the time of the May meeting next year is roughly 32% and a 0.50% cut at approximately 5%. With inflation still low, weaker retail sales announced earlier today alongside
Buy into buy-to-let protection
uy-to-let has not had an easy time of it and the toughest landlords have had to tough it to survive. Buy-to-let lender Paragon predicts a continued increase in portfolio and complex buy-to-let business in to 2020. It envisages that those purchasing will most likely be ‘larger-scale portfolio landlords, with non-portfolio landlords owning fewer than four properties far less likely to expand since the introduction of the stamp duty surcharge in April 2016 and subsequent tax changes. Paragon research found larger scale landlords are three times (11%) more likely to consider buying than smaller scale landlords (4%), within an overall much smaller buy-to-let market. Moray Hulme, director of mortgage sales at Paragon, said: “In recent years, landlords have had to be more strategic in their approach than ever before and the buy-to-let market has seen a significant increase in portfolio and complex business.
Whilst mainstream lenders have limited their involvement to smallerscale landlords, Paragon and other specialist lenders have been able to adapt and offer the right products to enable landlords to remain efficient – and this is a trend that we expect to continue in the long-term. “As we look ahead to 2020, we will start to notice fewer opportunities for remortgage business as a result of landlords having opted for stability with longer-term fixed rate products during a turbulent few years in the buyto-let market. Intermediaries looking for growth in buy-to-let may want to refocus back on house purchase.” The larger and more complex landlord and buy-to-let portfolio investments become the more important it is that specialised – almost corporate protection - plans are put in place to deal with the varying liabilities and protection needs of the business portfolios themselves and the individual landlords protection needs and those of their families. M I
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depressed PMI’s, particularly services which served to be a key supporter of the economy earlier in the year, the case for a rate cut may start to build especially if forthcoming data continues to disappoint to the downside.” What does this all mean from a protection point of view one might ask. It means that borrowers have a little more certainly about their mortgage liabilities on a monthly basis and it hopefully means some certainly over income coming in and cash left over once all the bills are paid. And if there is spare cash it can be used to address insurances that so often either get overlooked or are felt to be unaffordable. They generally aren’t – a little of any protection insurance is better than nothing and any chance to review and increase if needed should not be ignored. M I
Don’t second guess second charge
econd charge is arguably not for the faint heated, either as a borrower or as a mortgage broker advising clients. As a type of secured loan, inevitably secured against a property already owned by the borrower, as an alternative to remortgaging, it can be considered risky. Well some are being brave out there as second charge mortgage new business has increased over 2019. Fiona Hoyle, head of consumer and mortgage finance at the Finance & Leasing Association (FLA), said: “The second charge mortgage market has reported strong new business growth in 2019, with volumes likely to reach over 28,000 in the year as a whole.” You know where we will go as protection intermediaries looking at this market - in that won’t cast doom over risk one way or the other but we will advocate on how one needs to protect any property on which a loan is secured and the income of the individual paying that loan. It is a question of getting the right package of mortgage, income, life and critical illness MI options. www.mortgageintroducer.com
Appreciating where advisers add value Jeff Woods campaigns and propositions director, Sesame Bankhall Group
ver recent months we’ve been undertaking a largescale insight project to gauge our understanding of the protection market from different viewpoints. This work has included a research study with hundreds of advisers, along with detailed conversations with product providers, who in turn shared observations collected from customers. I’d like to share some of the key takeaways from the study, starting with the customer’s point of view. Our study clearly highlighted the need for greater consumer education and awareness of protection. Furthermore, the reasons why consumers don’t currently seek out protection insurance provides a focus for this work. Consumers continue to underestimate the risks of serious ill-health, whilst overestimating the cost of insuring against that risk. Lack of confidence in a claim being paid is a third important factor. Taking each one in turn, it’s frustrating to see the continuing disconnect between the type of insurance customers purchase compared to what most people are most likely to actually need. In opting for life insurance people understandably want to protect their families against the worst, but this doesn’t reflect the true risks when each year one million people in the UK find themselves unable to work for an extended period due to a serious illness or injury. And it doesn’t matter whether we have children or other dependants – because we still need to support ourselves. This brings us to the second big www.mortgageintroducer.com
“Consumers continue to underestimate the risks of serious ill-health, whilst overestimating the cost of insuring against that risk” issue. Whilst we’re fortunate in the UK to have the NHS and benefits such as Statutory Sick Pay and Universal Credit, this can lull people into a false sense of security. It can make some people feel like protection insurance isn’t required, which definitely isn’t the perception in other countries such as the USA and Australia. In reality, the amounts available from UK benefits are very sobering for people to discover. In most cases
it would leave them living on the breadline, which in turn can have an adverse effect on health and recovery. Furthermore, benefits are a notoriously difficult system to navigate, with payments often being either delayed or refused altogether. This situation isn’t helped by the fact that most people who attempt to take action often bail out of the process. For example, of the people who went to aggregate sites to source protection, a massive 90% abandoned their quote. Having nobody to walk them through it was a big factor, and shows that a person-to-person interaction is usually what’s needed to help customers quantify their personal need. Which brings us to certainty of claim. There seems to be a mythology around the difficulty of gaining pay outs in the protection industry. For many customers, discovering that the vast majority of claims are paid out is a big turning point for them in deciding to purchase. This all goes to highlight and reinforce the value that advisers add to the protection process, and provides much food for thought. M I
Discovering that the majority of claims are paid out is a turning point for customers deciding to purchase
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Let’s continue the protection positivity Mike Allison head of protection, Paradigm Mortgage Services
s we start another year we might be already wondering if we’ve kept those New Year resolutions we set out on January 1. Those personal ones might already have gone, but let’s hope the business ones keep for a lot longer. From a Paradigm perspective we have seen a positive move forward in our published results in the protection space and will strive to continue growing our business in to 2020 and beyond. We all know and recognise the need to offer protection to clients where possible and the growth in the protection market over the past reported two years of 2017 and 2018 have been more positive than in the decade or so before. Anecdotal evidence for 2019 is positive too with the main IT distributors showing positive moves in quotation and traded numbers. In addition, intermediary share continues to grow which is positive news for all of us. However, these things don’t just happen, it takes every one of us involved in the industry to help as much as possible in recognising where the opportunities and threats are and help to overcome them as part of a broader plan. If we look at five key areas for 2020 I would say the continued evolution of the following for the next 12 months will be key in achieving goals: Customer contact. Promotion of support services. Mental health promotion and looking at ‘vulnerable customers’.
IT. Business protection – individual and group. CUSTOMER CONTACT
As mentioned in previous articles, perception of what a broker does for his or her customer is not always fully understood by the customer themselves. In the case of a mortgage, for example, the hours of research done to find the best possible rate and affordability may not be fully impressed upon the clients. In turn they may perceive the ‘value’ they are receiving as normal or below par when the truth is clearly different. In reality a client never wants a mortgage, they want a home and the distractions of moving can ‘block out’ almost everything else. For a 2-year mortgage, contact after 18 months would be somewhat normal practice, but in the growing world of 5-year deals that ‘gap’ may become harder to fill, so reminding clients of other support a broker can give could be crucial in binding that relationship so the client has no desire to go elsewhere when looking for another home or better rate ever again. Constant customer contact is therefore vital and shouldn’t be underestimated as a principle. PROMOTION OF SUPPORT SERVICES
One area that can help significantly in filling the ‘communication gap’ is in the promotion of support services now being offered by almost all major providers. Traditionally, it has been the group risk players like UNUM who have been active in promoting the added-value services its group plans have carried for years. Now almost all of the individual life providers have taken on board
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such components as 24/7 GP access, rehabilitation support and others which have already had a major impact on clients. The promotion of these services and the reaffirmation from the broker to the customer as to the reason they chose one provider over another can only aid the customer perception. MENTAL HEALTH PROMOTION – VULNERABLE CLIENTS
One of the biggest benefits added to a policy by today’s more enlightened insurers is the potential support given to a customer during periods of mental health issues. These can be helplines to discuss minor aspects of mental health to fullblown counselling and treatment. The former may definitely help in cancelling the need for the latter. All those now part of the SM&CR regime need to look at their vulnerable client policy. Explaining the full value of these and other services can form a major part of that policy. SOLUTION BUILDER
The success Paradigm firms have had with Solution Builder over the past three years has been nothing short of phenomenal. As we move into 2020 the development and greater use of these, and indeed, other tools will no doubt support further growth in the market as well as adding more contact opportunities. BUSINESS PROTECTION AND THE OPPORTUNITY PROVIDED
Often overlooked as an area for development, the work done by Legal & General yet again in the publication of its ‘State of the Nation’ paper on all things business protection has been a welcome reminder of the scope of the opportunity and real value a broker can add when they are working with SME clients. Likewise, the work carried out alongside the group risk insurers such as UNUM has helped our firms at Paradigm Protect open up new markets for themselves and add real value to their customers. M I www.mortgageintroducer.com
A guide to increasing GI sales Rob Evans CEO, Paymentshield
he propensity for borrowers to take 5-year fixed rates and the growing popularity of product transfers will put pressure on brokers future earnings. As such the smart thing to be doing right now is start investigating other opportunities that will add value to your clients and supplement your income from mortgage sales. General insurance could be the answer. If you’re unsure about what’s on offer and how quality cover can add value to your client relationships here’s an overview of the products you should be discussing with your clients. HOME INSURANCE
What is it: In simple terms, if you could pick up a home and turn it upside down, contents insurance would cover the cost of everything that fell out, while building insurance provides cover for everything else. These covers can be sold separately as buildings insurance and contents insurance, but they are commonly combined together under one policy. Optional extras: Accidental damage is a popular option with home insurance. For buildings insurance it might cover unintentional damage to a property such as nailing through a pipe when putting a picture on the wall or putting a foot through the ceiling when up in the loft. For contents it can cover a range of unintentional events such as spilling paint or red wine on the carpet. Accidental damage is actually one of the most common reasons people claim on their home insurance so it’s a really valuable piece of cover to have. Losing things at home or when out and about isn’t usually covered as part of a home insurance policy. Personal possessions cover can be added to www.mortgageintroducer.com
contents insurance to protect against losing or damaging of items that are normally worn or carried. It covers you both at home and when out and about, so very useful for things like mobile phones or jewellery. Then there’s home emergency cover which provides a 24-hour helpline to access tradesmen who can resolve a range of emergencies, such as being locked out of the home, plumbing emergency or complete failure of the heating or electrics. With good home emergency policies there’s no excess to pay in the event of a claim, there’s no limit to the number of claims you can make and it won’t affect your no claims discount. The biggest benefit though may be limiting the damage to your home by getting help fast. Common exclusions: Common exclusions can include everyday wear and tear, poor workmanship, loss or damage to properties or items within a property while it is unoccupied for a significant period and loss or damage caused by pets. Don’t forget: Unusual properties or living arrangements may require specialist cover. Homes with a thatched roof, non-standard construction materials, properties in buildings that also include commercial premises (like a flat above a shop), or where you are running a business from home, may need a specialist policy. LANDLORDS INSURANCE
What is it: Buildings insurance covers landlords’ properties and contents insurance is available where the property is furnished. Many of the insured perils for Landlords Insurance are the same for Home insurance, such as flood, fire, storm but the different risk also means you’re covered for things such as malicious damage by the tenant. Optional extras: Accidental buildings damage will cover visible damage to a property which happens suddenly and has not been caused on purpose or was inevitable. Accidental contents damage will cover contents owned by
the landlord, such as a television being accidentally knocked off its stand by a tenant, or a spillage on the carpet. It’s also worth landlords considering malicious damage cover, which pays for any deliberate damage. Common exclusions: These will usually include the cost of routine maintenance loss or damage caused by pets and loss or damage by certain perils when the property is unoccupied for a period of time. Don’t forget: While tax relief on mortgage interest is being phased out, the cost of landlord’s insurance is still tax deductible. TENANTS CONTENTS INSURANCE
What is it: It’s worth remembering that tenants can have different contents cover requirements to homeowners and so it’s always advisable to recommend specialist cover to meet their specific needs. Optional extras: Tenants liability cover provides protection for tenants in the event of accidental damage to their landlord’s property, for which they’d be liable for under the terms of their tenancy agreement. Accidental damage can cover for unexpected damage that happens suddenly, such as spilling wine on the sofa, and there are also options for worldwide belongings cover and legal expenses. Common exclusions: Similar to standard contents insurance, these include things like every day wear and tear and loss and damage caused by pets. Don’t forget: To be eligible for cover, a tenant should ordinarily have a tenancy agreement in place for the property they’re renting, and that property should be their main residence. The most important thing about advising on GI is ensuring that your clients are covered and protected. Policies may differ between suppliers, so make sure you understand both your client’s circumstances and the policy terms and conditions to ensure they have the right cover for their needs. M I
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Endings and new beginnings? Geoff Hall chairman, Berkeley Alexander
he start of a New Year always turns thoughts to resolutions and new beginnings. It may feel counter intuitive to be planning exit strategies when your business is still in full swing, but in truth a good exit strategy is a vital part of ensuring your business plan continues to perform right to the bitter end.. and beyond, depending on the plan. EXIT PLAN
Make sure you have a plan in place long before retirement becomes a reality. The key is simple, you need
to make sure your business is worth something when you exit and start discussions early – don’t leave it until you need to make a fire sale. Put customer service first. Customer reviews and brand perception are such an important asset as is evidence of long-term customer loyalty/retention and repeat/cross sales. FUTURE INCOME
If you can manage the transfer to the purchaser, perhaps by working within the new business for a while to help retain clients and get them used to the new brand, this will help as often the value of your business is based on the expected future income rather than past income. Also, don’t lose sight of how GI and protection income can add value. Whilst of course the main value is in
“The key is simple, you need to make sure your business is worth something when you exit and start discussions early – don’t leave it until you need to make a fire sale” your financial services income, GI and protection income is a scalable and credible way of creating value now and into retirement. Develop a good insurance book and talk to your GI provider about how they can support post retirement income as often there is more value in you retaining the commission income on GI into retirement rather than a oneoff upfront sale. M I
Business interruption – up in flames
n November the beautiful Grade II listed Claremont Hotel in Eastbourne, an iconic local landmark, sadly burned to the ground. Thankfully, there were no fatalities, but in terms of the impact on the hotel’s owners and knock on impact to local businesses in the area, the loss has been colossal. The pier too, lined with sea front businesses, was closed for more than a week. The importance of having adequate business interruption for incidents like these is clear for everyone to see, but it’s not always immediately obvious until disaster strikes. Business interruption (BI) insurance covers the loss of income that a business suffers following a loss and is considered an essential cover for a large swathe of companies. The cover protects the profits whilst the business recovers, the aim being for the insured to be in the same position after the loss that they would have been in if the loss had not occurred. Businesses need to ensure they are
The Claremont Hotel in Eastbourne was gutted by fierce flames PHOTO © ALAN FRASER IMAGES / SHUTTERSTOCK.COM
not leaving themselves underinsured when it comes to BI insurance. Too many businesses fail to appreciate how long it would take before their business would be up and running. The BI indemnity period covers from the point of loss to the point it
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takes for you to be able to trade at the pre-loss level, not just the length of time it would take to rebuild, relocate or reinstate. However, crucially this is only if you have an adequate indemnity period. Policies normally cover business interruption as a result of damage to your own business premises/equipment caused by fire, storm, flood and a range of other insured events. Some policies also cover your loss of income as a result of damage to other property in the vicinity of your premises preventing access, or to premises or infrastructure of your public utility providers. Policies can often be extended to cover your loss of income as a result of damage caused to the premises of your suppliers or clients and also mechanical or electrical breakdown of your essential plant items. Every client is unique, but as a rule of thumb you should recommend a minimum indemnity period of at least 24 months and preferably 36 months. 12 months is unlikely to be adequate. M I www.mortgageintroducer.com
Let’s start banging the FloodRe drum Paul Thompson founder and CEO, Cavere Intermediary
looding in Fishlake, the most recent in a series of major floods to hit the UK in recent years, has once again raised questions over protection, financial cover against flooding, and FloodRe eligibility. So let’s get to the point and set the record straight - unless your client’s main home was built after 2009 and it’s only used for residential purposes (not let or commercial), they’re eligible for FloodRe. Fishlake residents that purchased home insurance via a broker, only to discover that they were not covered for flood damage have been seriously let down. There remains an education issue here. Residents often think they don’t need flood insurance because they’ve never previously flooded, Fishlake is a prime example of a village which nevertheless suffered a so called ‘once in 60 years’ weather event. With the onset of climate change, perhaps there’s an argument to say that every resident in the UK is now at an increased risk of flooding. EDUCATION, EDUCATION
I can forgive customers not knowing about FloodRe, and I can forgive those buying cover online via an aggregator and not reading the small print (I obviously cannot forgive the aggregators, again price over quality and substance). What I cannot forgive is the insurance industry as a whole not doing enough to educate, not doing enough to protect, and not doing enough to keep vulnerable customers www.mortgageintroducer.com
cedes out the flood risk part of each customer’s policy to FloodRe at point of sale. FLOOD RISK
away from the aggregators. I would argue that it’s morally indefensible to offer comprehensive home insurance but include a flood exemption, no-one should be exempt from entitlement to this protection, indeed with 94% of insurers now signed up to FloodRe this should be a thing of the past. Brokers come on! Your residential customers can get flood cover as part of their standard home insurance policy at an affordable rate, the insurer simply
Don’t let your clients leave it to chance, check if they have flood cover in place, check that they’ve made the correct disclosures about how close their property is to a flood plain or water course, and speak to them about the importance of flood cover even if not living in known flood zones in order to account for all types of flood risk. Finally, make sure you work with a GI provider with the experience and relationships with insurers that back into FloodRe in order to get your clients the cover they need. M I
Buck the trend in 2020
Y recently wrote in the FT that home insurance is set to make underwriting losses in 2020. EY forecasts that the combined ratio – claims and costs as a proportion of premium income - will worsen to 102%. The report points to several factors exerting pressure including rising claims costs and regulatory attention on pricing policies. This of course does not bode well for intermediaries – if insurers are under pressure then so too are the costs of intermediary management and commission. Five ways you buck the trend in 2020 and make a profit on home insurance sales: Think outside the box – look for emerging opportunities. Adding in new products and services will keep you competitive. Your GI provider should be able to help, providing they’ve strong relationships with insurers and access innovative products, bespoke solutions and off-panel underwriting. Sell on quality, service and value – don’t sell on price. Dual pricing may not come to an end overnight but let go of the misbelief that you need to compete in this way. Less than a third of the market is on an introductory offer, meaning two thirds are open to you - customers potentially overpaying, or not receiving the right cover, who would appreciate trusted advice. Differentiate on quality, service and value – get the right cover at the right price from the outset and you’ll build a sustainable book.
Get closer to customers and drive retention - place greater emphasis on valuing loyal customers, improving experiences, and building relationships. Work with a provider that harnesses advanced technology to assist you in being nimble – act faster on product improvements that could benefit your customers – and one that provides real time notifications of customer activity to ensure you can respond quickly to issues. Turn to technology - embracing latest advances in technology not only allows you to access quotes quickly, but truly realise opportunities to improve flexibility, capability and efficiency - faster, smoother transactions, streamlined quotations and simplified slick policy administration and most importantly the power of data to drive responsive engagement, faster decision making and improved customer experiences. Don’t fall foul of unfair practices - the FCA is tightening its stance on unfair remuneration practices. With increased pressure it may be tempting to get higher or upfront remuneration, or charge cancellation and adjustment fees, but in doing so you’re working against yourself, and potentially driving customers into the hands of aggregators. As a GI provider I believe that great service is not delivered for free. You should be paid a fair commission and trail, and shouldn’t be forced into unfair practices to cover costs – does your GI provider agree?
JANUARY 2020 MORTGAGE INTRODUCER
The evolving nature of later life lending Kevin Webb managing director, Legal & General Surveying Services
n 2019, the number of households in the UK grew by 249,000 from the previous year to 27.8 million, a rise that the Office for National Statistics called statistically significant. There wasn’t one single factor driving this, but notable was the fact that the number of people living alone has increased by a fifth over the past 20 years, from 6.8 million in 1999 to 8.2 million in 2019. The majority of this uplift was driven by the growth in the numbers of men living alone, predominantly aged 45 to 64 years. At the same time, analysis from the ONS also showed that while, overall, the proportion of the population who are divorced has remained broadly the same over time, the age profile of the divorced population has also shifted since 2008. A smaller share of people under the age of 55 years were divorced in 2018 whilst the share of the divorced population has risen for those aged 55 years and over. This could be partly because of people increasingly getting married later in life. Despite the rise in the proportion of the divorced population who were aged 70 years and over in 2018, the rise of the size of the married population who are 70 years and over has been greater. This has implications not just for how we plan for the types of new homes built in this country – there is clearly a need for many more one and twoperson homes than are currently being built. But it also highlights an emerging risk consideration for those in the mortgage and later life lending markets. Much later life lending is done based on the assumption that there are two
co-habitees. The slow initial take-up of retirement interest-only mortgages has broadly been put down to the fact that the affordability underwriting just does not stack when assessed on a sole survivor basis. At the moment, that is fuelling a significant rise in the number of lifetime mortgages provided. According to figures collated by the Equity Release Council, over 33,000 new customers accessed their property wealth via equity release in the first three quarters of 2019, exceeding the total number of new plans agreed in any full year from 1991 to 2016. So swift has the growth of the market, which is up from around £1bn five or six years ago to over £4bn today, been that it emerged in mid-December that the Financial Conduct Authority has been liaising with firms to give it a better understanding of what is driving such rapid growth in the number of homeowners drawing money from their homes. SUPERVISING STANDARDS
The fact that the regulator is supervising the standards of advice, underwriting and regulation in the later life lending market closely must be welcomed. It should also prompt the industry to remember that we must be constantly reviewing our own processes and the assumptions that we make when underwriting deals like this. The demographic shifts outlined above have clear implications for affordability on later life lending where repayments are made rather than rolled up into the capital balance. They also have an effect on the risk associated with the security that underlies the loan. At the moment, equity release providers typically instruct a valuation of the property when the lifetime mortgage application is submitted for approval and then again when the property is sold on the death or move into full-time care of the remaining
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householder. While usually the interim period is around seven years, there is scope for it to be much longer, particularly, as is likely, homeowners with insufficient pension savings and income tap into the equity in their homes to support their later years much earlier in their much longer lives. Without regular valuations (and the implicit remedial works that result from these inspections) there is an increasing risk of property dilapidation.
“There are big ethical questions that need to be asked if we are to serve the increasing number of older homeowners who deserve to have a choice about how they access and spend the wealth they have accumulated over the course of their lives” This not only presents the immediately obvious cost consideration for providers, who also foot the bill for no negative equity guarantees and inheritance guarantees. There is also the very real and ethical consideration for the borrower living in the property. There are providers in the market that have offered (and perhaps still do) development loans to upgrade properties at the start of the lifetime mortgage period in order to mitigate this security risk. This can have huge financial implications for borrowers, who will be charged compound interest on both the development loan and the lifetime loan. There are big ethical questions that need to be asked if we are to serve the increasing number of older homeowners who deserve to have a choice about how they access and spend the wealth they have accumulated over the course of their lives. The issues with later life lending are not insoluble, but they do need to be addressed. It’s important to understand the breadth of opportunity, but also of the responsibility we have towards those we are serving. M I www.mortgageintroducer.com
Improving knowledge for all Claire Barker managing director, Equilaw
uarterly figures from the Equity Release Council have revealed that the equity release (ER) sector is continuing to grow at a staggering rate, with over £990m worth of property equity being released by customers in the three months to September and almost 11,500 new customers recorded over the same period - an 8% and 6% respective rise on figures for Q2. Annual turnovers are projected to achieve somewhere in the region of £4bn, with over 40,000 new customers expected to have taken out an equity loan by the end of the year. And, while overall growth has slowed in comparison to the double-digit returns of the past five or six years, the current figures show that the industry is continuing to achieve substantial market gains irrespective of the decline in house prices, the uncertainties surrounding Brexit and the increasingly conservative outlook found amongst many financial consumers. Moreover, with figures from the Office for National Statistics projecting a 23% increase in the number of people aged 50 or over by 2040 and a 44% increase in the number of people aged 70 or over within the same time-frame, only the most blinkered or prejudiced of commentators would deny that the scope for long-term growth within the ER sector is almost unlimited. Indeed, recent research by More2Life has revealed that the later-life lending market is expected to virtually double over the next 10 years, with lending figures predicted to reach £548bn by 2029 as custom bases and levels of consumer debt continue to soar and pensions amounts fall. And, with the explosion in product choices and interest rate options over the past 12 months starting to www.mortgageintroducer.com
cater to a wider range of lending circumstances than ever before, there is every reason to believe that 2020 will provide a significant springboard for wider popular appeal and commercial viability- a signpost for future success, if you will. For example, figures provided by the ER referral service, Key Partnerships, have revealed that the number of equity release products has almost doubled since the start of the year, with well over 300 options being offered by lenders in November and new products being launched every 48 hours- a staggering upturn. Moreover, the range of features has also expanded significantly, with products supporting the protection of inheritance amounts having grown by 43% since January, fixed early repayment charges by 44%, one-off repayment amounts by 77%, downsizing protection by 103%, lending on sheltered or age-restricted properties by 241% and plans which allow for regular interest payments by 710%. ALL TIME LOWS
Additionally, as widespread competition between lenders continues to intensify, so too are interest rates being pushed to all-time record lows, with average rates of 5% being offered on over 50% of lifetime mortgage deals and some being offered for as low as 3%. And, whilst there is every chance that these will rise again at some point in the future, there can be little argument that the growth in cheaper deals has helped to dispel many of the popular misgivings associated with compound interest rates and to transform consumer attitudes to equity release for the better. Indeed, one of the ways in which this sea-change is currently being felt is by the recent upsurge in demand for drawdown products, with figures provided by Key’s Equity Release Market Monitor revealing that the number of new plans taken out in Q3 rose by 12% on a yearto-year basis - a considerable swing. And, while some within the industry
have suggested that on-going economic uncertainty is encouraging clients to adopt a more cautious approach to borrowing, there is also significant evidence to suggest that the sheer flexibility of these products is beginning to appeal to customers who had previously rejected using equity release at all. Nevertheless, while there is an undeniable basis for future market growth already in place, there is also a need to encourage and support that growth by strengthening the industry’s commitment to the education of clientbases. Indeed, research conducted by Canada Life has found that over twothirds (or 67%) of advisers believe that a greater emphasis on education will be vital to making ER more attractive and accessible to consumers in 2020, with around 15% of homeowners currently saying that they wouldn’t consider using ER as a retirement option because they don’t understand it (up from 5% in 2016). The research has also found that the number of advisers who expect the ER market to expand over the next year has more than doubled (from 31% in 2018 to 69%), thereby placing a considerable onus on advisers themselves to provide the foundation for such a push. However, recent studies have suggested that many advisers lack a decent knowledge of current market conditions or product options and are less confident about discussing ER with their clients as a result. Which raises an urgent need within our own industry to offer better levels of education and support to the advisory community and to provide the kind of guidance and resources needed to raise levels of awareness, particularly if we wish to bridge what many spectators regard as an advice gap at the heart of the laterlife lending landscape. If we can help advisers to engage with consumers on a better informed footing and to convey the considerable advantages of equity release in a way which is easy to grasp, then 2020 will be ours for the taking. M I
JANUARY 2020 MORTGAGE INTRODUCER
Welcome to the roaring twenties Stuart Wilson CEO, Air Group
elcome to a New Year and indeed a new decade. As the ‘roaring twenties’ begin, I can’t help think of the George Michael song, ‘Waiting for the Day’ – written to herald in the 1990s but with lyrics as pertinent today as they were back then: “Now everybody’s talking about this new decade, “Like you say the magic numbers, “Then just say goodbye to the stupid mistakes you made. “Oh, my memory serves me far too well.” Given we have just been through a General Election campaign where the main protagonists seemed to suggest they’d had nothing to do with the past nine years and that they were able to wave a proverbial magic wand to make things right in the future, I think George was particularly prescient 30 years ago about what the next decade might look like for us. Which all sounds somewhat downbeat, and politically I suppose it is, however looking at our industry at a more micro-level there is clearly a lot to be positive about, albeit with the caveat that, when it comes to the later life industry and equity release in particular, I suspect we will be in the spotlight in the months and years ahead like we have never been before. Indeed, at the tail end of last year it was reported in various circles that the FCA has been engaging with the equity release market to ‘understand the market’ better. This has been described by the regulator itself as ‘exploratory work to understand lending into later life’ including both secured and unsecured lending products. Some media outlets have since
suggested that advisers are somehow going to be in the firing line because of the commission payable on equity release products, notably forgetting the stringent rules and regulations which police our sector, the extra qualifications required by all active advisers, the authorisations necessary, the legal safeguards, and indeed the compliance this type of advice will have to go through. ANCIENT BAGGAGE
We are nothing if not thorough in the equity release space, although still having to carry the baggage of a market from 30 years ago and which is so far removed from today’s sector that you’d think it was from another planet. That won’t however stop the naysayers attacking the sector even if the solutions equity release products can deliver to today’s later life customer are absolutely valid and indeed, necessary. In a very true sense we are always fighting that past, which probably seems somewhat ironic to the existing generation of equity release advisers who would probably have been nowhere near the sector back in the late 1980s/early 1990s. Them’s the breaks I suppose. However looking ahead the prognosis for the equity release patient, so to speak, looks very good indeed. In fact, we might even suggest it’s in rude health, and when you add in the other ‘patients’ – notably RIO mortgages and more mainstream mortgages aimed at those in later life I can honestly see a very long life ahead of it. Certainly from an adviser perspective, we’ve 2020: Growth opportunity
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seen a considerable increase in interest in later life advice provision, fuelled I suspect by a greater demand from this client demographic. Let’s make no bones about it, the average homeowner might view the sector as somewhat complicated and the chances are that their needs, their circumstances, their wants and ambitions for the future, require professional advice perhaps more than any other individual. Add in the other later life issues notably pension provision, access to benefits, longevity, long-term care, living standards, and you can understand why the advice profession will be the first port of call for many of those individuals who want clarity on their finances and, if appropriate, access to the equity in their home, or the ability to keep on lending into retirement.
“Let’s make no bones about it, the average homeowner might view the sector as somewhat complicated” One point does need to be made here though and that is we should not be looking at the later life client purely in isolation in terms of borrowing requirements or the ability to access equity. As mentioned above, there are a number of consequences to come from the provision of advice in this area, and there are also a large number of later life client needs that should be covered. Indeed, clients will want to be reassured that their advice needs are being looked at in the round. Overall, however, we should all look positively at the future of later life advice and the ability of advisers to deliver it. Of course, you will need resources, backing, support, the requisite technology, etc. But these are all readily available if you are making that commitment to later life, or you would like to in the future. This is a growth opportunity and it’s one that should be grasped in 2020. M I www.mortgageintroducer.com
Home ﬁnance options for ageing society Alice Watson head of marketing and communications, Canada Life
s we look back on the decade, I suspect that most of us are feeling older, but not all the wiser. Calm heads and reasonable solutions are needed to help the UK cope with an aging population – waiting for the delayed social care green paper has not been an option. With many more people expected to use their own wealth to fund later life care, home finance options can offer more immediate and accessible support. Both single-person households and landlords aged-55 and over can benefit from products that grant them certainty and flexibility for themselves and their families.
“15% of UK homeowners say they wouldn’t release equity from their property to fund their retirement because they don’t understand it” There’s been a recent growth in single-person households, with more than one in four homes now occupied by just one person. Most of these are women, and over half of those individuals are aged over 75. Startlingly, research has found that older people who live alone are more likely to have multiple long-term health conditions. It’s clear then, that the burdensome costs of care will fall more heavily on some groups than others. For over-55s who prefer to stay in their home, lifetime mortgages can offer them the means to pay for homecare www.mortgageintroducer.com
visits, as well as improve the safety and comfort of their homes. As many single-person households will have lower retirement incomes, they will likely welcome the option to access the wealth stored in their home to pay for care. Ultimately, this can improve their financial well-being in retirement and give them peace of mind. This pressing need for greater financial support to help those who live alone is set to continue in the future too. Those aged 45 and over is the most populous age group for living alone, so the industry should prepare to deal with more single-person households as they reach equity release age. And given their different circumstances, providers should also continue to ensure that these customers are afforded the same choice and security as more traditional lifetime mortgage customers. The circumstances for most landlords may be different, but they too are likely to be squeezed by later life care costs. For landlords aged-55 and over who don’t want to spend their hard-earned savings or sell their valuable assets, buyto-let (BTL) home finance products offer them a way to release the equity tied up in their property tax free. They can release between £10,000 and £750,000 from their buy-to-let (BTL), which can be used to finance potential care costs in retirement. Importantly, so long as landlords aged over-55 and over comply with the conditions of their loan, they will retain ownership of their BTL property. This cannot be understated. Recent research by Canada Life found that 15% of UK homeowners say they wouldn’t release equity from their property to fund their retirement because they don’t understand it. It’s incumbent on the industry to clearly communicate to landlords that
Home finance options can oﬀer more immediate and accessible support
their portfolio will remain intact if they use a BTL product. And just like lifetime mortgages, BTL options are covered by the ‘no negative equity guarantee’. This means that landlords will never owe more than their property is worth, giving them all important certainty and financial security. Furthermore, landlords can decide whether to take out a BTL product that allows them to make voluntary payments towards the loan, or let the interest roll-up. We know that this flexibility is much sought after by all homeowners. Home finance options can play an important role in helping a range of property owners aged 55 and over enjoy a more comfortable retirement. But it’s not enough for providers to develop accessible and innovative products. The industry must help more consumers view their wealth holistically, and trust that their property wealth can help improve their wellbeing in retirement. M I
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All together now David Gilman partner in charge, Blacks Connect
esearch conducted by the proptech company, View My Chain, has revealed that up to a third of local authorities are currently failing to meet government deadlines for the return of property searches, with only 68.5% found to have achieved the recommended turnaround time of 10 working days over September and October. In addition, while 84% of authorities were able to return searches within 15 working days, some councils were reported as taking as long as 50 days to respond; a reflection, it is claimed, of a continued lack of local funding and of a perceived ‘disconnect’ on the part of the government. Which many observers would regard as par for the course. ABOMINABLY SLOW, MAN
Yet, regardless of the whys and wherefores for this continuing malaise or of the impassioned response that the report has elicited from the chairman of The Council of Property Search Organisations, the View My Chain research has also concluded that accumulative delays are now pushing average acceptance of offer to completion times to 120 working days or nearly six months (SIX MONTHS!) in real time- 15 working days longer than previous estimates. Which is an abomination. However, there is also an argument to suggest that many of the hold-ups which are typically encountered along the completion journey are much more preventable than some would have you believe. Indeed, some critics believe that the conveyancing sector is too reliant upon the siloed approaches of yore and that firms should shift towards a focus which puts customers at the www.mortgageintroducer.com
forefront of the process; a focus which emphasises communication, proactivity and (perhaps most pertinently) a commitment to ensuring that each requirement is delivered on time. So, for example, delays in local authority searches are routinely cited as being beyond the control of even the most conscientious of solicitors and as a source of much irritation. Which given the issues highlighted by the View My Chain report would seem fair enough (at least, up to a point). However, the research has also established that conveyancers are currently taking an average of 23 working days (or over a month in old money) to order searches once an offer has been accepted on a property. Which, regardless of the view that it is pointless to proceed at the exact moment of acceptance in case the purchase subsequently falls through or that it is sensible to wait in order to allow other parties within a chain to ‘catch up’, is excessive to the point of incomprehensibility. Similarly, a reliance on old fashioned methodology or the use of archaic case management systems can only serve to exacerbate the innumerable delays which already occur at the enquiry stage- enquiries which are necessarily reliant upon a range of disparate parties to find the answers in the first place. So, a failure to organise case files adequately at this stage can often lead to an excruciating and disjointed process, pushing up waiting times accordingly. Moreover, a lack of proper organisation can also increase the time that is taken to respond to queries from customers or other conveyancers in the chain, thereby delaying the return of important documentation and information and producing an unfortunate ‘knock-on’ effect. And, for those practices that continue to rely (God preserve us) on the postal system to drive the progress of their cases or who insist on ‘wet’ signatures for documents that don’t require a
witness, this might be a good time to get onboard with the 21st century and start to consider using emails and e-signatures! WIDESPREAD DELAYS
Indeed, given the widely acknowledged difficulty of getting in touch with conveyancers, the paucity of centralised, electronic management systems and the baffling methods of communication that are favoured by some within the industry, it is little wonder that delays relating to documentation or insufficient information are so widespread. Nevertheless, it would be wrong to run away with the idea that conveyancers are responsible for the majority of delays encountered on the completion journey as this simply isn’t the case. There are any number of scenarios in which even the very best efforts of a representative can do little to unblock the chain, such as cases in which the solicitor is informed at the latter stages of a transaction that a house deposit has been gifted, thereby incurring additional documentation and fiddly money laundering requirements or a client that is re-mortgaging their property closes their direct debit account too early, thereby leaving insufficient funds to repay their existing lender from the amount advanced by the new and incurring the loss of days in trying to explain and sort the problem out. If conveyancers and solicitors made a concerted effort to work together better (like a well-oiled machine) and to prioritise organisation, coordination and responsivity as well as good communications and realistic client expectation management, there seems little reason to doubt that they could substantially reduce the number of potential problems encountered along the completion journey and offer a level of service that is envied throughout the property market. Because, we work better when we work together. M I
JANUARY 2020 MORTGAGE INTRODUCER
2020 looks set to be a good year Mark Snape managing director, Broker Conveyancing
indsight is a wonderful thing, and it’s been interesting to listen to all the political commentators who ‘knew full well’ that Boris Johnson and his Conservative party were going to win a fulsome majority at the General Election. It would however seem that they only felt confident about giving that opinion after the result was known – strange that. For what it’s worth, I did have an inkling that the result might play out like it did, but perhaps not the scale of the victory that was delivered. Many things played into this but perhaps highest on the agenda was the overwhelming fatigue with all things Brexit; in that sense, it was perhaps not that surprising that the one party whose message was it would sort it out, cut through the most. Things of course will now move very fast. I’m writing this on the morning after the General Election result and therefore can’t be certain whether an announcement has been made about a future Budget date, but I suspect (when you’re reading this in January) it probably has. That Budget is going to be very interesting for all manner of reasons, not least the fact that back in the summer of last year, when Boris Johnson first became Prime Minister, there was a lot of speculation about potential changes to stamp duty in the next Budget. Of course, that Budget never happened because Johnson and the DUP fell out of love, Parliament was prorogued, Conservative MPs were expelled, and the road to last month’s Election began.
Now, with a huge majority in place, that Budget can be delivered, and one suspects, it is likely to be a much bolder piece of work, mainly because Johnson won’t have to beg, borrow or steal votes in order to get it passed. So, in that sense we might see some considerable groundwork laid in a number of areas, which could potentially be rather positive for the housing/mortgage markets, and indeed advisers in particular. TREADING WATER
There has been an argument over the past 12 to 18 months that the market has been treading water, held back by cautious borrowers unwilling to take the plunge on a purchase or a sale, waiting instead to see what the government could manage with Brexit and what fallout it would have. Some will have questioned whether Brexit might ever happen – now, of course, the election has set the UK’s withdrawal from the EU in stone. And that might be enough for many people to get off their hands. What might also provide something of a catalyst is further government intervention when it comes to stamp duty. Certainly, at the higher levels – for properties over £1m – there is a widely-held view that transaction levels are down greatly because of the considerable cost of stamp duty for buying properties above that level. In the summer, Johnson himself pledged to cut stamp duty significantly above that threshold, and one wonders if he’ll also cut stamp duty entirely for properties up to £500k, just to show his new working-class voters that he is supporting them as well. Might we even see a fundamental overhaul of the system itself, perhaps moving it from the buyer to the seller? An idea that has been mooted numerous times but yet to be
MORTGAGE INTRODUCER JANUARY 2020
introduced – again Johnson is not going to have any pushback within his party on this, and I wouldn’t be surprised if we see some considerable and major intervention in stamp duty. It’s also highly likely that we’ll see some significant government-led intervention in the conveyancing sector – we may have a different Housing Minister every five minutes but there is a real zeal for making the home-buying process better. Expect to see the introduction of reservation agreements, provision for more upfront information, and potentially the son/daughter of HIPs, Property Log Books, all within the next Parliament. What I think will also please many within our market about the General Election result is the sense that Boris and the Conservative Party seem to generally understand the importance of the UK housing and mortgage markets, and what is required to get it moving. Stamp duty will be one mechanism I’m sure that will be used but there were others that were mentioned in the party’s manifesto, including help for those wishing to get on the ladder for the first time, plus of course a need for greater levels of supply. My view is that there is a very strong level of latent demand within the mortgage market that could be unleashed throughout the next 12 months and beyond. We’ve certainly been ramping up our resource levels during the past three to six months in anticipation of this, plus we’ve invested in IT, developed our law firm relationships, expanded our distribution, and already as a result have seen circa-30% growth versus the market. Overall, I’m highly bullish about the market’s prospects in 2020, and I feel confident that advisers are in a very strong position to tap into this demand, especially if they are able to position themselves as ‘not just a mortgage adviser’ but an advice hub that covers all other ancillary products. That message of increasing your product and service diversification is as relevant today as it has always been. 2020 predictions? It’s going to be a good one. M I www.mortgageintroducer.com
Remortgages need a rethink Steve Goodall CEO, ULS Technology
ou might think that lawyers voting for less law would be akin to turkeys voting for Christmas. In many cases, you could well be right. But on the subject of remortgage and conveyancing, I’m inclined to think differently. Innovation is not just about finding a better way of doing something, it’s about questioning why we do it in the first place. And in the mortgage market, I sometimes wonder whether we sit back too often and accept the process for the way it is, by thinking that improving one element of the journey is sufficient. When a remortgage can take three months to complete, knocking a borrower onto a standard variable rate and putting the responsibility for increased mortgage payments onto their shoulders, we need to be more ambitious. Yes, digitising various parts of the remortgage process is fundamental to improving the customer experience, but even with the best communication, digital title registration from the Land Registry and online ID checks, too often there are delays that cause real customer distress. Often, these delays are caused by conveyancing. The technology may change but property law is not being reformed and so the opportunities to improve the process are limited by what is legally possible and by our appetites for risk. Searches that take time to come back, the exchange of paper and lawyers’ letters that take a week to turn around in either direction, postvaluation queries that arise from quirks in leases – all of these are valid legal points that can compound the wait. At the very least, I think we need to consider the point at which conveyancing begins. Moving it further
upstream would go some way to cutting down the time to deliver a remortgage transaction. Some digital brokers are extending their scope to carry out more of the checks usually left to conveyancers, valuers or underwriters in a bid to speed up the process and give their customers more certainty over whether their mortgage application will complete. Other firms are crossing the divide from broker to lender and offering their own mortgage products. With the right technology and access to decision processes, a 24-hour remortgage is entirely possible. We have already seen the conventional conveyancing process for remortgage can (and has) been dropped with product transfers. DUE DILIGENCE
Lenders have long argued, understandably, that while the customer may be remortgaging with an underwrite from another regulated lender, the lender taking on that customer needs to satisfy its compliance department that sufficient due diligence has been done on both the borrower and the security. If we accept that the re-engineering of home buying is upon us already, A 24 hour remortgage is entirely possible
through initiatives led by the Land Registry or even our own portal, DigitalMove, we can see how digitising current processes is already underway. When it comes to reshaping the process, where it can be done without compromising UK property law, we and others are now looking at reordering and using insurance-backed products to help reinvent entire pieces of the process. This sort of change will require co-operation from all parties involved in the transaction, which means full exposure of changes to the process. In our view, brokers are ideally placed to facilitate the pre-completion relationship with the customer. The broker is key in this arrangement as they are the principal guardian of the home-movers’ interests. Brokers have long understood and articulated the need for speedy decisions is not so much about delivering speed for its own sake but as much to do with delivering decisions which result in quicker client certainty. This is not just about conveyancing but many other parts of the preexchange validation of the sale. We have often heard the sentiment ‘a quick ‘no’ decision is far more helpful than a ‘yes’ followed some weeks later by a ‘no’ decision. The regulatory enthusiasm for execution-only solutions will also support these kind of ‘customer-centric’ improvements to the process. If these elements can be addressed without disproportionately affecting lending risk then the likelihood is that we will see more lenders embrace this kind of process. As an industry, it’s time we faced facts and began to consider alternative ways to innovate. Consumers, regulators, brokers and lenders alike are inching towards more significant process changes that will re-invent the processes we currently employ. We are doing so and plan to do more next year. The first step is to open our minds to a new way of doing things – a way that moves things forward for everyone involved. M I
JANUARY 2020 MORTGAGE INTRODUCER
Attracting a new generation of advisers
the industry can bring fresh thinking and innovations that will help make it fit for purpose for the next generation.
relationship manager, LIBF
SO WHAT’S THE SOLUTION?
he mortgage and financial advice industry face a growing problem – we, like the customers we serve, are an aging population. Various figures published last year suggested that the average age of a mortgage adviser is now between late 40s to mid-50s. It gets worse. For financial advisers, according to figures from Quilter, the average age is 58. We can therefore expect many advisers to retire in the next few years and, with a shortage of younger people entering the industry, we’re facing a massive skills shortage. The consequences of this are obvious. The growing shortage of qualified financial advisers, support staff and paraplanners – coupled with increased regulatory requirements – is presenting a challenging environment for financial advice firms. Meanwhile, for mortgage lenders and later life companies, the lack of qualified advisers comes at a time when demand for equity release has never been higher. Out of the 35,000 advisers registered with the Financial Conduct Authority (FCA), only around 8,000 are qualified to advise on equity release. And, according to the FCA, in the third quarter of 2019, the outstanding value of all residential mortgage loans was £1,486bn – nearly 4% higher than for the same period in 2018. We know that there’s a demand from consumers for younger advisers. Clients feel more comfortable talking to people around their own age, who understand their concerns. We also know that there are younger people who want to join the industry, if only we can reach out to them. A new generation of advisers into
Apprenticeships might provide some help. The Apprenticeship Levy is a tax on employers with an annual pay bill of more than £3m used to fund apprenticeships. Smaller employers, who don’t pay the levy, can still offer apprenticeships but must co-invest in the cost of the training. Government policy is certainly supporting apprenticeships, with a raised investment announced in last year’s Budget to halve the coinvestment rate (non-levying paying) employers pay to 5%. For young people leaving school apprenticeships are an attractive option, offering the chance to train while earning and avoid the burden of student debt. If you’re a large employer, setting up an apprenticeship programme can be quite straightforward. You could use your learning and development team and HR colleagues to lend their expertise, deliver the programme and manage apprenticeship programme providers. In fact, we already work in this way with some of the largest employers in the banking sector to help them deliver apprenticeship programmes at degree level. However, most mortgage brokers and IFAs are small companies. These companies tend to be thriving small businesses, with lots of clients, headed by an experienced adviser who may be coming up to retirement and thinking about succession. Perhaps there’s a son or daughter who’s keen to be trained up. For these companies, setting up an apprenticeship programme might seem a daunting, time-consuming prospect. One approach may be to develop the idea of a ‘training academy’ – a model pioneered by firms like Quilter and SimplyBiz in the financial advice
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sector. These work by forming networks and alliances within the industry to attract new recruits and then take them through their regulated financial advice qualifications, such as our Level 4 and Level 6 diplomas in financial advice, on behalf of employers. The advantage of this model is that the academy can add value, because it’s not only supporting trainees by helping them get through their professional qualifications, and giving them the soft skills they need to become good advisers, but also helping the smaller businesses in the network by providing training and resources they may not have been able to provide on their own. The training academy approach could be extended to also become an approved apprenticeship provider. Indeed, the New Model Business Academy already does this, having secured funding from the Education Skills and Funding Agency – allowing non-levy paying employers the chance to benefit from apprenticeships. APPRENTICESHIP FRAMEWORK
The benefit of taking on an apprentice, for smaller employers who don’t pay the levy, is that up to 95% of the costs of the training are paid for by the government. depending on circumstances. The apprenticeship framework for mortgage advisers is already set out by the Institute for Apprenticeships and incorporates qualifications such as our very own CeMAP. We are an aging profession, but looked at positively, this means we have a lot of collective wisdom to pass on. We also need to provide a modern learning approach that continues to cater for the needs of the next generation, including working parents and mothers on maternity leave. That means funky learning materials, face-to-face training as well as online learning, question banks, and all the academic expertise which can complement an academy approach. And to do that, we need more professional networks and alliances of small businesses to form partnerships with qualification and apprenticeship providers. M I www.mortgageintroducer.com
THE MONTH THAT WAS
Every month The Outlaw draws some tongue-in-cheek parallels between society at large and a mortgage market in flux
icky Gervais expressed it in his own spectacular and overdue wokeeviscerating fashion earlier this month, but it was the screenwriter William Goldman who coined the timeless phrase “nobody knows anything”. How right he was. To that end though, we should celebrate our soothsaying when it does actually ring true and the above pre-election predictions from the December issue may thankfully now set the platform for what might be a Boris Brexit bounce in 2020. And whether the BBC like it or not, charisma is indeed the new gold standard and diﬀerentiator in modern day politics. Bouncy expectations for 2020 are buoyed by some recent headlines. October last year was a phenomenal month for applications which augurs well for brokerages’ cash coﬀers this January and February and ergo, their willingness to grow and invest again. And November was the best month for first-time buyers
Ricky Gervais: Woke-eviscerating
and incompetent since 2007. Equally, we’ve been told that this April will conjure over £21bn in cessations. Three months clearly don’t make a fiscal calendar but there are other tailwindsPrince now blowing I’ll return to shortly. Andrew:which no sweat widespread a and TV presence in 2020 As befias ts many podcasts media content at as he hopes to be. C you next Tuesday, Vincent. this time of the year, it’s a convenient moment to legitimately aggregated in).toBut award some New Year Honours and alsomost maketellingly, this is a some bold predictions, buttressed by myjust forecasting is for Wales. Insecure and over partisan 2007 market capacity with HALF of –the brokers success we below won me a few shekels from cheering when England lose at either rugby hadwhich back then and most of the shysters and the world’s finest bookie, Paddy Power. or football a sour tastefirmly in 2019. We won’t charlatan brokers ofleft that era now removed, So, in albeit time just give it all in of rugby, nor misshonoured Gatland’s dour I’ll “Warrenball” brand some dofashion remain at the perimeter). Ricky Gervais’ glorious technicolour mesh. A few will overrated, media chav, be So,that in this slightly social expanded and finalGareth OutlawBale, piece calendar punts, to be in doubles andsupport trebles orshould he actually tooplaced much ofgetting the year, I’ll try toprovincial keep it snappy and punchy via my possibly a trixie. Amid some customary observations get off the Agolf and make it to the Euro’s in customary to course Z synopsis. of the Good, Bad, Boring and downright Vulgar. summer. Trump will be re-elected. (Once again, there’s is for Anhidrosis. condition I developed simply no charismatic opponent toAdefeat him and is for X-ecution Only. Just where thenephew briefly earlier in the year. My 5-year the democrats living on Main Street, Hicksville - isold clearly FCAbear going with this blatant threw hisconfused Paddington me and for who like the Labour red wall in England, will at hold contradiction ofinits stillunable recent review? their noses in the privacy of the voting booth). several months I was fact toMMR sweat. Most Nothing to doI over-hyped withtell theyou. huge levies which the (ever Furthermore, the much recent events unbecoming, can lendersallied pay to tothe support the FCA ‘s bloated in Iran willlobbying) assist his persona, electorate’s perceivedwaistline wastefulness of his vacuous impeachment i suppose? is for Brussel sprouts and for Belgium. Home of and my hunchthe is that a burgeoning economy getsand unelected planet’s most disingenuous him home with an even larger voteorshare). 4/5point, Accord. is for Yorkshire, more to the political construct. Yet didHe’s you know that on. Lump on. One of 2019’s success stories. Harry Windsor and Meghan Markle: Moody and virtue signalling Belgium itself went 16 months with a paralysed By the year end we might, just might... see the government… during its economy BOOMED! now totally out-dated stress tests which on post-recession Britain hasn’t done badly either, amid lending guidelines relaxed. Our friends at IMLA are Project Fear more digestives and Jaﬀa Cakes get digested than is immature for Zeitgeist, the term used toincompetents define the mood and 630 and disconnected at actual policy decisions made. often accused of running monthly meetings at which of an era or culture . 2020’s Zeitgeist is going to Westminster. But credit to Kate Davies there recently for be “personal responsibility and accountability”. calling out the authorities on this now antiquated No bad thing, and something our politicians could persecution of the market. At 3/1 it’s odds against. is for Charisma and Character. Sadly, so lacking also adopt. But see “Q” above. At what point does the But worth a flutter? in the modern-day politician. But the public’s assessment of isancoming. individual’s Mourinho will rightly be gone from Spurs by kickback Andbehaviour in spades.give way to an assessment of the industry’s own regulator and its own Christmas. Like Wenger, Allardyce, Pulis, Pardew, Moyes and countless others before him, these vain governance protocols and market understanding? men simply don’t know when to leave the party because the modern game has passed them by. So. That was 2019. Have a relaxing break all. He’s 9/2 to be gone, and Harold Kane’s two-month Clearly not every opinion expressed above will absence might only see that price contract further match your own pallet. And you know what... most of as Spurs choke once more? the political sh*te is exactly that. Just noise. Dominic Cummings to be quite rightly knighted. Because in truth, we all simply got on with business There weren’t many of us who’d taken the liberty of in 2019. And we will again next year, regardless Interbay: a Kloppesque year spending time north of Toddington Services in 2019 of what kind of majority the gaffe - prone blonde and who could see what was coming. Like him or bombshell achieves once the Labour heartlands have loathe him, Cummings has now been proved right decided that Blair, Brown, Campbell and now Corbyn on three major zeitgeist moments of our time. www.mortgageintroducer.com have all sold them and their values out. A fellow ‘marmite’ man is of course Nigel Farage. I’ll be seeing you. The most eﬀective politician of his generation, and he too now deserves a trip to the Palace. But it’s a 66/1 shot that they both get Madge’s Excalibur on their shoulders. www.mortgageintroducer.com The moody and virtue signalling Sussexes won’t actually spend their time 50/50 between the UK and north America. It’ll be a 20/80 allocation and Called it: The Outlaw’s pre-election predictions none of us will shed a tear. I mean, come on… £4m sp*nked on a celebrity-chav wedding and a →
AX BY Z C
THE MONTH THAT WAS “cottage”, six holidays a year and an undeserving and grotesque dowry from Prince Charlie. What a croc! In the simply delicious words of David Brent’s creator at the Golden Globes “Meghan, you know NOTHING about our lives”. Now get back on the carbon-emitting jet that you swanned in on four years ago and go do one. Neither of you are fit to share privileges with the likes of Queenie, Princess Anne, or the ever-impressing Kate Middleton. Challenger banks; we’ve had 10 years’ worth of eﬀort now, but any aim of disrupting the Big Six’s market share has sadly failed. The dial has hardly even moved. That said, the One Savings Bank deal has real legs and could look like a piece of bargain pricing by 2021. The valuation is already at a discount to net asset value and so long as the more salty and minger-lite parcels of what is a very profitable book perform well this year, then those boys will be quids in, and so will brokers, though a resuscitating Shawbrook will appreciably oﬀer valuable cross-fire in certain fields. Which leads us on to “those boys” from above. Arise Lord Cleary of Cricklewood, and Monsignor Maloney of Malahide. I recently watched Scorsese’s masterpiece, The Irishman. These two mortgage industry stalwarts would fit nicely into an industry equivalent production… both are effervescent and stylish “capo’s” in their firm. But nonetheless, always approachable and flexible with brokers at any given level. Folk like them deserve (and modestly downplay) their respective riches,
Aston Martin: In a pickle
unlike some of the k*obs in this industry who might clearly be penis-challenged and have to ram their latest Aston Martin acquisition down your throats on social media (they know who they are!). Aston Martin itself is of course an organisation which is in a pickle right now. Not unlike other noisy self-sycophants at industry behemoths such as Purple Bricks and Trussle. The latter has just parted company with its founder… buried neatly in the Christmas news releases. The firm and it’s equally gobby digiwarrior Habito have spent the past two years (and gazillions of mug-punters’ seed capital!) trying to “make mortgages fairer” and also faster. When will these numpties wake up and realise that the intermediary mortgage sector is not like the world of black cabs or fast-food delivery. IT CAN’T BE DIGITALLY DISTURBED ANY FURTHER. IT’S DONE. OVER. GO FIND ANOTHER PROJECT! Because the end-user has never had so much choice, transparency, fairness and speed. Now to the raspberries and four final awards for
anything ranging from complete incompetence to sheer delusion. Firstly we have the award for wastefulness and ineﬃciency, which goes to FOS. Nobody doubts the authenticity and the value of an eﬀective FOS. But the recent whistleblowing there which highlighted the fact that the expensive re-structuring of 2016 has added no meaningful value whatsoever and has in fact deteriorated workings and outcomes for brokers, is galling. Receiving a faux-peerage is the Canadian scaremonger, Lord Carney of Calgary. Awarded for continued and unstinting services to the failed Remain cause, and now vacating his role as the alleged ‘ independent ‘ voice of financial custodianship. Plastic MBEs and OBEs in this category also go to other now thankfully silent bed-wetters such as Naga Munchetty, Hugh Grant, Jamie Oliver, and that total t*at John Bercow. And talking of complete berks, both John Major and Michael Heseltine are stripped of their knighthoods for making treacherous asses of themselves in the Election hiatus. Penultimately, we have the award for the longtime leading mainstream and multi branded lender which continues to slide further and further down brokers’ popularity lists. I’ll let you identify your own winner of this “They Used To Be A Real Market Leader” Award. Clues exist via an unimaginative buy-to-let policy, a service www.mortgageintroducer.com
proposition which no longer rewards premium submissions, and a management team who appear to be more interested these days in avoiding the taking of any undue career risks whilst their pension pots approach the maximum. Which brings us finally to the “more and less” requests for 2020. The folk we want to hear more from this year might include Prince Andrew, Ghislaine Maxwell, Boris’s seemingly charming sweetheart, Carrie Symonds, the ever-astute Bob Young at Fleet, Oasis possibly performing with McCartney at the 50th Glastonbury, Emily Maitliss grilling deviants, and as ever, the sector-crusading Bob Sinclair. Those folk who need to shut TFU for 12 months feature certain fans (but thankfully not all) of LivPull Football Club (who are arguably sport’s least gracious losers and worst behaving winners), the talentless chavs on Love Island seeking 15 minutes of fame before they go back to working at Greggs or being gym instructors, the ambulance chasing parasites at certain interest-only claims firms , Jeremy “we won the argument” Corbyn, and above all else, the gender and ethnicity obsessed mandarins at the BBC who can’t patronise viewers enough with their nauseous virtue-signalling as we scoﬀ our cornflakes. In the words of Britain’s foremost comedy genius “you’re in no position to lecture the public”. Which of course is what 2019 will be long remembered for… the year that the proletariat finally hit back and in abundance. Have a great 2020. I have a feeling that brokers will do just that... M I
THE BIGGER ISSUE
What should the mortgage market’s new year resolution be? Lewis Lenssen
managing director, Mortgage Broker Tools
business development manager, Investec Private Bank
BENEFIT BROKER BUSINESSES The small shift in the way brokers go about researching the options for their clients, rather than reverting to preconceptions, can help deliver more suitable recommendations and this will ultimately benefit broker businesses. MBT Affordability is just one tool available for brokers, but there are now many options that can make life easier for brokers, help them to work more efficiently – and deliver the depth of information they need to select the best option for their clients based on live market information. Tools like this require brokers to think differently and form new habits, so a new year resolution to challenge preconceptions and embrace new ways of doing things could help make it quicker and easier for brokers to access all of the information they need to deliver better outcomes for their clients. M I
REVIEWING THE MARKET A product transfer may deliver the client an improved rate, but there may be better rates available by reviewing the market. More pertinently, a review of the client’s financial position could determine that it is better to restructure their lending, perhaps with a long-term fixed rate, a flexible revolving facility to access locked up liquidity or an interest only loan to reduce monthly cashflow commitments, for example. In 2020, we cannot let the rise of product transfers undermine the value of advice and the benefits of a regular and thorough review of a client’s circumstances and their options. I would therefore like to see a new year’s resolution where we all commit to promoting the value of professional advice. At Investec Private Bank we are committed to accelerating the pace of high net worth (HNW) remortgages. For example, recently we began accepting adequate no search indemnity insurance on residential properties, often the biggest hold-up for a remortgage. Typically, something seen used by standard lenders, now thankfully a feature in the HNW space where loan sizes are larger.This innovation, coupled with a dedicated private banker, helps greatly accelerate and smooth the process of remortgaging. We also pride ourselves on taking a holistic view, working with clients to arrange the best solution for them. M I
his year I would like to see the mortgage market challenging its preconceptions and embracing new ways of doing things. After all, trying a different approach can often lead to better outcomes, and forming healthy habits can have a significant and positive effect on broker businesses. At Mortgage Broker Tools, our analysis of the ways that brokers use MBT Affordability shows that, in some circumstances, comprehensive affordability research can lead to different lender recommendations that deliver better customer outcomes. We have noticed a trend that, without access to fast and accurate information, brokers will ordinarily start the advice process with an assumption as to what will be the best lender for a client based on previous experience. They will then carry out research to support this assumption and their ultimate recommendation. However, with something like affordability, the best lender can change depending on the individual circumstances of each case, and so having access to all of the affordability information at the outset can challenge a brokers’ assumptions and ultimately lead them to make different decisions.
MORTGAGE INTRODUCER JANUARY 2020
ccording to UK Finance figures, in the third quarter of 2019, 311,400 homeowners chose to undertake a product transfer with their existing lender, which is an increase of 7.5% on the previous year. Of these, 56% were on an advised basis and 44% were on an execution-only basis. A product transfer can be the most suitable option for many clients, but there is a danger that the allure of perceived convenience can overshadow any opportunity to improve their financial position and so automatically reverting to a product transfer is a habit we need to resist.
?? ??? ? Our experts look ahead at 2020 and give us their advice on the new year resolutions which the market needs to keep to ensure continued success
managing director, SmartSearch
chief executive, Connect for Intermediaries
ANTI MONEY LAUNDERING Any breach of the regulations now can result in prosecution and hefty financial penalties, so it is wise for everyone in the mortgage industry to make electronic anti-money laundering verification at the very top of their resolution list. What’s more it makes sense as electronic verification checks take only moments to do – and a record of the check can be kept on file for compliance purposes. As fraud continues to climb, anything to combat this continues to make sense as the fraudsters get smarter and losses from mortgage fraud can hit every business. It can be easy to assume that if a client has been referred to you by someone like a solicitor or an accountant that they will have carried out the requisite checks, but this may not be the case, so it is essential that everyone in the process carries out their own online verification checks. M I
CLARITY OF CRITERIA There were many, however that suggested that it would be good if the lenders’ new year’s resolution was to improve communications. There were a variety of frustrations discussed about some lenders. These included improvements to the clarity of criteria, better communication of turn around times and improvements to the skills of underwriting. Many team members feel they benefit from direct access to underwriters as issues can be discussed in better detail so we would like this to be an option in 2020. Speaking directly with the underwriter there is less chance of being misunderstood as can happen when communicating via a third party, as a result this can often speed up the process. Better communication overall would be a good resolution. In the current age, electronic correspondence such as email is widely used, but sometimes things can get resolved far quicker with a telephone call rather than email tennis. Another area that would be a good idea for an adviser to have as their new year’s resolution is to build their knowledge, particularly in the specialist markets and to invest more time when researching their client’s options in different markets. There are currently a significant number of lenders in the market with very wide differences in criteria. The more time advisers spend in fully understanding the lender’s offerings and fully researching their client’s needs, the more clients they can potentially help. M I
n the 10 January the Fifth Anti-Money Laundering regulations came into force in the UK as part of ‘The Money Laundering and Terrorist Financing (Amendment) Regulations 2019’. While mostly consisting of amendments to the fourth directive it does indicate an intention by the government and the FCA to clamp down on firms not carrying out their anti-money laundering checks properly. The new regulations specifically state that electronic ID verification should be used wherever available and that the process should be ‘secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity’. Therefore it should be a resolution of everyone in the mortgage industry to ensure that they have the proper electronic checks in place to keep themselves safe. This does not only affect lenders and larger firms but brokers and their introducers including estate agents, accountants and solicitors.
here are many facets of the mortgage market, but in this article, I have concentrated areas that can be considered by the lenders or by the advisers. Before writing about our new year’s resolutions, I sought feedback from my adviser and case management teams to see what they wanted for the mortgage market. There were some good suggestions, although some I had to rule out, including some of the tongue in cheek suggestions such as higher proc fees and better biscuits!
JANUARY 2020 MORTGAGE INTRODUCER
Business as usual … Jessica Nangle spoke to Lesley Sharkey and Joanne Carrasco from Stonebridge about looking forward to the new year, reflecting on the past and ambitious targets
tonebridge had a successful 2019, seeing growth in adviser numbers and encouraging results. Founded in 1988, the business offers an advisory service to a growing number of clients, with a community of more than 600 mortgage advisers. The business runs with six core values including honesty, support and passion and their website boasts glowing testimonials from those who have worked with Stonebridge over the years. Back in 2015, property services group SDL Group acquired a minority stake in Stonebridge and by March 2019 the business was 100% owned by SDL, bringing Stonebridge together with a range of companies in the property market. Stonebridge follows an ethos of providing a proposition that adds value to their business partners, which both Lesley Sharkey and Joanne Carrasco work to make a reality in their day-to-day roles. Sharkey has worked at SDL Group for a decade but has been dedicated to Stonebridge as recruitment director for the past 18 months. Carrasco has worked at Stonebridge for the past 12 years, and been business partnerships director since October 2017, working on retaining relationships and providing support wherever is needed. Both spoke to Mortgage Introducer about how 2019 was for them, providing comment on the wider industry and also discussing their plans for the coming year. 2019 SUCCESS When discussing 2019, Sharkey explains that she observed an unusual new trend emerging. “One of the things we saw in 2019 is more DAs becoming ARs which is quite an unusual shift,” she says. “I think with SM&CR and compliance regimes becoming more rigorous in general, many firm owners can spend as much time focussing on regulation as they do trying to write business.”
MORTGAGE INTRODUCER JANUARY 2020
Sharkey continues that many more firms are therefore looking towards networks as a solution. “Some are now looking towards networks because they believe they would be better off being protected by a network. It is not cost driven, it is protection driven as they cannot keep up with the requirements of the regulator.” Sharkey believes this trend has been observed particularly within the smaller DAs, which Stonebridge come into contact with thanks to their DA proposition. “The only way to secure full compliance protection and to ensure they are keeping up with the regulatory changes is to become part of a network,” she argues. “It has not been a titanic turn, but we have seen a shift back from the smaller DA firms.” Carrasco discusses last year from a results perspective and says that, despite the gloomy predictions at the start of 2019, the year was a resounding success. “We are up 10% in mortgage completions, and we’re up in terms of the commission that we are generating in protection and GI sales,” says Carrasco. “Part of that growth is because our adviser numbers have gone up but we are also focussing on individual adviser production. It is going in the right direction.” Carrasco says that despite strong levels of growth, the high proportion of product transfers seen in 2019 were a concern. “People don’t tend to sell as much protection when they are doing a lot of product transfers so that can be a bit of a pain, plus the income on product transfers isn’t there either,” she says. “As much as our lending figures look really good, what our ARs have got to be mindful of is that it is not necessarily generating the same amount of income that they are used to because on a large proportion of the business they are getting a lower proc fee.” Despite these warnings, both agree that last year was a strong one in light of difficult market conditions and hope for much of the same in 2020. BUILDING ON FOUNDATIONS Recruitment has been a driving force in 2019 at Stonebridge which did not have a full-time recruitment team until relatively recently. All previous recruitment formerly came through referrals, organic growth and the business’ reputation. Since Sharkey’s appointment, this has now changed. “We have only had a full-time recruitment team of three of us on the road over the past 12 months,” Sharkey says. “It’s MI doing phenomenally well. That is knocking
l … and then some on in terms of recruiting internally as well to support all of the new firms coming in so we have seen some record results.” Stonebridge had a record recruitment month in September last year in authorising 24 sellers. “We have got a huge pipeline of applications going through the process. Recruitment is going crazy,” Sharkey explains. This success is down to a variety of reasons according to Sharkey, but the main one is thanks to brand awareness. “We are making ourselves known,” she says. “I think historically because it was more organic we were not as known as we could have been. Now we are doing a lot of campaigns - we are at shows and sponsoring events so people are coming to us first.” It is this publicity that is attracting the attention of bigger firms with exciting plans in the pipeline, which Sharkey claims would be a “huge win”. However it is not just publicity driving this success. “It is also a result of other networks failings I would say,” Sharkey adds.
“Obviously the success is because we are good, but some of the other bigger networks are not as focussed on the mortgage arms as they are the wealth arms and we take advantage of that.” Technology is also a driver of success, with Stonebridge’s ‘Revolution’ system being a major USP. “When people see it, it is always incredibly well-received,” Sharkey says. “It is our own proprietary system so we are constantly developing it in line with what we know through our network of what mortgage brokers need.” Stonebridge recently went live with an electronic client ID check following a successful initial pilot phase. The ‘RevolutionID’ verification service was developed and launched in partnership with Experian and has been integrated into its Revolution system, allowing users to validate the identification of their client and receive a response immediately along with additional customer insight. The Revolution system is a fundamental part of →
“Stonebridge follows an ethos of providing a proposition that adds value to their business partners, which both Lesley Sharkey and Joanne Carrasco work to make a reality in their day-to-day roles”
STONEBRIDGE the process for Stonebridge AR firms and advisers. Sharkey stresses that moving an AR from one network to another is a significant process so it is important that the business has an attractive proposition. “Moving an AR from one network to another requires a lot of upheaval. They have to take time out to complete forms for new networks, then they have to go through a due diligence process and new systems. It is not an easy decision. It takes people a while to make that decision and move networks every year.” Sharkey explains that the average tenure is six or seven years for a firm, but that there have been cases where people have been leaving firms after over 20 years service because the firm hasn’t invested in the mortgage arm or the technology, which are Stonebridge’s main focuses. RELATIONSHIP BUILDING As business partnerships director, Carrasco looks after relationships with lenders, protection and GI providers to ensure that the proposition that Stonebridge offers is a strong one. “That is part of the job,” Carrasco says. “To make sure that Lesley has got a very strong proposition to actually go out and sell to new recruits.” The other side of the role involves the running of its field-based business development consultant team. “I have got people up and down the country manning the phones providing support to all of our supported rep firms so that support can be all sort of things really,” Carrasco says. “If they are keen to grow their advisers then obviously we would link in with Lesley’s team to help them find the right people so that they can grow but it is also about making sure they are making the most out of the opportunities that they have got.” These opportunities are vast, according to Carrasco, including maximising their mortgage leads on their protection conversation or getting them involved in GI sales and encouraging further referral business in regards to second charges. “It is really about optimising every single lead that they get and making sure they are getting the most out of it,” Carrasco continues. “It is about support - in sales process training, with product knowledge, but also if they need to increase their lead sources as well.” The support extends to sharing ideas about how they can manage their marketing, social media, and also approaching introducers that they have not yet spoken to according to Carrasco. “The key is getting the ideas out there and giving them the right tools to grow their business.” MORE OF THE SAME Moving into 2020, Stonebridge’s dynamic duo is aiming for much more of the same. “Our recruitment strategy hasn’t changed, we have got a clear campaign as to what we do each month,” Sharkey says. “Spending money on recruitment is always a challenge because someone might see the advert today but contact you six months later. It is about that awareness for me keeping Stonebridge at the forefront of people’s minds.”
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Relationship building is key to Sharkey in continuing the success seen in 2019, but there are to be no major strategic or proposition changes thanks to the security of its delivery. With ambitious targets moving into 2020, it has been imperative for the team that they increase their marketing function, which is now headed up at the SDL Group head office. “Some services have now been centralised. We have a marketing manager and executive as part of the wider group and we are quite aligned because their business is driven by mortgage activity as well.” Sharkey claims that this centralisation allows the team to do “more of the day job” and build on their success. Retention is on Carrasco’s mind in the new year, with the main goal being to make sure existing members are getting all that they need from the network. “There is no point Lesley and her team bringing new advisers into the mix if we are not keeping the ones that we have got happy,” Carrasco claims. “My team is very focussed on relationships and we will always continue to do that, making sure our AR’s are happy and providing support in whatever way we can.” Increasing mortgage, protection and GI numbers will always be a target according to Carrasco. “We are raising the bar every year so whatever targets we meet they will obviously be higher the following years,” she says. “It is very much business as usual, and then some; I don’t see many changes for us in terms of proposition or what we are trying to do. It will be about supporting our advisers as much as we can and helping them get the most out of their business.” A key trend that was observed in 2019, and is set to continue into 2020, is the reasoning behind joining a network which has changed, according to Carrasco. “Within the senior management team, we all have clear cut roles and that essentially is why people join a network because it’s for the supervision,” she says. “We will always want to make sure we are ahead of the game in terms of what is coming from the regulator so that we are giving people the best support.” This collaborative approach has gained Stonebridge both trust and increased adviser numbers and shows no signs of slowing this year. THE FUTURE MARKET In terms of the market in 2020 Carrasco has some interesting predictions, technology being one of them. “I think technology is going to be massively important moving forward,” she says. “It is something that we have invested into heavily. I think there will be a focus on making the client and adviser journeys as slick as possible - automated applications to lenders for example.” Keeping up with technological competition is paramount according to Carrasco, particularly this coming year. “As an industry of intermediaries we are always going to fight off the execution-only web-based portals, so that is always going to be a challenge for us,” she argues. “We just need to make sure our technology can keep up with it.” www.mortgageintroducer.com
STONEBRIDGE Carrasco also comments on the growing popularity of 5-year compared to 2-year deals, which is something she believes needs to be kept a close eye on. “Our message to our AR firms is that they have got to keep as close to their clients as possible,” Carrasco says. “You cannot leave it five years between speaking to your clients. It is about making the most of the opportunities, giving them the technology, the marketing ideas and keeping in touch.” The duo agree the need for advice will always be there, with the importance of a mortgage being such that many still need someone to turn to with their concerns. “Whilst some people might like to try and go the execution-only route, I think there is still a massive value in advice from a really great broker,” Carrasco says. Sharkey agrees, and draws upon results seen at Stonebridge’s own brokerage. “We found that a lot of people still want to speak to a broker rather than go through an automated system because they just wanted to speak to someone,” Sharkey says. “I get that you have to be more versatile in terms of availability, but hearing advice is still incredibly important.” At the end of the interview both Sharkey and Carrasco tell Mortgage Introducer about an event they held recently for their Scottish firms, one they hold annually. “The thing that came up most was
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about business standards, which took me by surprise,” Sharkey says. “They were very flattering about our business standards team and the managers. There are really good relationships between the clients and the broker. Many people think that networks’ compliance is stringent and they don’t let you do anything but that really isn’t the case.” Carrasco agrees. “Lesley’s right – it was very encouraging to get some positive feedback. We work together to work out how we can get our advisers to do the best business possible whilst staying within the realms of doing it right.” Both smiled as they explained some of the feedback that they received, and showed how important it is to them that they offer a proposition that is not just appealing but also challenges misconceptions within the marketplace. Stonebridge has gone from strength to strength, and with growing numbers and ambitious targets there appears to be no sign of slowing. With the market growing more competitive and new challenges appearing every day, the duo seem unfazed and look to this year with excitement and determination. It will be interesting to see how the story unfolds in 2020, but let’s hope the success continues. M I
After a good end to 2019 and with a positive outlook for the new year, Mortgage Introducer spoke to the brokers at the coal face to find out exactly what’s on their minds
John Phillips national operations director, Just Mortgages
e expected 2019 to be a tough year, but actually it exceeded our expectations. This does not mean it has been plain sailing by any stretch of the imagination, we have definitely had our challenges, particularly around the purchase market, but the year has ended in a surprisingly positive way, up 18% on last year. I fully believe that what has led to this positive result is our mantra of ‘customer first’. This means making sure all customers get the best service and value every time. We focus on the customer journey from the first referral through the lifetime of that customer. As a result, while the purchase market has remained pretty static for us all year, the number of remortgages we have done has increased significantly. We have retained more and more customers over the past few years through our customer retention strategy. Three years ago, we set up a dedicated customer retention department. Our staff in this department phone every customer every six to 12 months. Not only does this help the borrowers but it is also helping us to keep hold of our brokers as well as all remortgage customers are passed back to the initial broker. This increases their business volumes and their relationship with the client, which in turn helps lead to more referrals. Just Mortgages has also prospered by the number of brokers flocking to join us, our self-employed division increased to 250, up 100 from 150 last year. Including
MORTGAGE INTRODUCER JANUARY 2020
our employed division, we now have 420 brokers, up from 290 a year ago. This is because, as well as looking after the lifecycle of the client we also look after the changing needs of our brokers. We want to keep our brokers for the long term but recognise that a broker’s needs do not stay the same throughout their career. Therefore, we have worked exceptionally hard in the past couple of years to put in place options, to ensure that whatever a broker wants out of their career at any given stage, they can have it. This means a broker can stay with Just Mortgages whether they want to be employed, self-employed, based in an estate agent, work from home, the retention department on the phones or taking a more corporate or managerial role. Looking ahead at the market in 2020, I think we may well see a bounce in demand now we have a government with a working majority. There is a lot of pent up demand as people sat still to see what was going to happen. While we do still have Brexit to get through, I expect that by the beginning of the second quarter we will see an increase in customers wanting mortgages to purchase new houses. Our focus will continue to be on the customer journey however, not only the initial sale but the ongoing financial advice so that the customer always has the best mortgage for their circumstances, no matter how much those may change. M I
“I think we may well see a bounce in demand now we have a government with a working majority. There is a lot of pent up demand as people sat still to see what was going to happen” www.mortgageintroducer.com
COVER Name: Sarah-Jane Ashdown Division: Darlows Location: Caerphilly
Name: Anthony Argent Division: Haart Location: Middlesex It was a really good year in 2019, on target to beat last year’s performance, and with a good split between purchases and remortgages. We managed to take on some high-networth clients in the past year which has been a bonus. There was less activity on the buy-tolet front as rental yields are quite low compared to house prices. The main challenge has been getting first appointments: once the customer is through the door, we are confident we can get the business. I’m planning to do a lot more work with estate agents and on social media in 2020, to try and get past that first hurdle. There’s been a bit of a drop-off in remortgage business and that’s partly due to fees – it just makes it even easier for people to refinance with their current lender. That’s something else I’m going to think about changing in 2020. I think we’ve seen a few people shy away from buying in the current market, thinking that they’ll be able to get a better price when Brexit happens. My own feeling is that there’s a lot of pent-up demand: people still need to move and they will come back into the market.
In the face of major uncertainty, 2019 was quite a good year. It was my second year with Just Mortgages and I finished in a good position in our region. Although some people were scared to think about moving or even remortgaging, there were always properties available and lenders willing to lend. So, I made it my job to talk to people and let them know that there was nothing to be scared of; if they wanted to move or buy there wasn’t anything to stop them. The bulk of business was from first-time buyers (FTBs) and, although Help-to-Buy Wales is available, most mortgages were 95% LTV. Affordability was sometimes an issue, but most FTBs that came to me had saved the 5% deposit to get the house that they wanted. Apart from the number of personal referrals I had another high point was getting my clients to offer working with the estate agency. I am able to walk people through the process and have full control. My clients can contact me at any time, I’m available 24/7 (for my sins), and I offer a service that perhaps they can’t get elsewhere. I believe that business may be quieter at the start of this year and I will be focussing on my existing clients to ensure my business doesn’t suffer from any further downturn.
Name: Ashley Edwards Division: Spicerhaart Group Services Location: Northern region It was an exceptionally busy year in 2019 – and very successful! We did a lot of remortgaging business across the region but purchases dominated. We also had a very good conversion rate for protection. From my point of view a real high was that we took on more than 60 new advisers over the course of the year. In the three years I’ve been with Just Mortgages, we’ve scaled up the self-employed division significantly, but we’ve never fallen into the corporate approach I experienced in my career previously. We’re always moving forwards and there’s a great vision for how we want to progress. We know there are lots of brokers out there who want to go self-employed but we need to consistently evolve our proposition and make it as welcoming as possible. Word of mouth is an important factor. Looking ahead to how 2020 might unfold, I don’t think we’ll see any major changes in the market. I’m not convinced Brexit has had that much impact – some people say the uncertainty has put people off moving house but even if that is the case that presents more opportunities for remortgage business. On the recruitment side, 2019 was beyond expectations, and I’m hoping we can recruit even more in 2020 with an enhanced proposition.
Name: Sam Hyslop Division: Self-employed Location: Exeter Last year was my first as a self-employed adviser, following five years in the employed division, and I can’t quite believe how successful it was. Things have changed quite considerably in the past few years in Exeter. Previously the problem was supply not meeting demand which meant that there were always numerous people trying to buy each property coming to market, which drove prices up. Now we have almost the reverse situation, with so many new build developments springing up that supply is plentiful and prices have levelled out. On the back of this, although new-build isn’t something I have managed to work my way into (it’s something of a closed shop with the developers here), I did have a very good year on purchase, first-time buyers and remortgages. The only area that dropped away was buy-to-let. The most pleasing aspect, since setting out on my own, is the referrals I get from my clients and the relationships I have built with local estate agents who also started referring clients to me. Business was so good last year that I had to take on a full-time administrator and am now planning to bring another adviser on board, something I could never have envisioned this time last year. It’s nigh on impossible to predict how things will go this year, but there’s no point in starting out with anything other than positivity.
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Name: Ben Allkins Division: Spicerhaart Group Services Location: Area director - Midlands
Name: Ryan Jones Division: Self-employed Location: Merseyside
2019 was a very successful year. Just Mortgages’ self-employed division grew dramatically and my own region almost doubled the number of advisers. Of course, when you add more people productivity inevitably increases but, in a particularly flat market when listings were down, it was nonetheless pleasing to achieve the results we did. We evolved the help and guidance we gave our self-employed advisers, helping them to grow. One area that changed particularly last year was in the way we helped advisers generate leads. Traditionally this has been through estate agency introducers, which does still happen, but thanks to our new digital media offering we now get more and more leads through social media. Facebook, in particular, has been a very successful platform that reaches the right demographic. We also use Instagram, which is great for talking to potential first-time buyers. We also had the benefit of the Just Mortgages’ new homes division which complimented our business last year, giving our self-employed advisers access to new developments traditionally reserved for employed advisers in estate agencies. I’m looking forward to another successful year in 2020, although I think it might be a little subdued in the first quarter. Perhaps when things settle down and we get Brexit out of the way the government may also consider some sort of stamp duty reform. Or is that wishful thinking?
Overall 2019 was a really strong year for me. I went self-employed in February and at first it was a bit daunting. I’d wanted to do it for a while but it’s a bit scary not knowing where your leads will come from. I do as much as I can face to face so I rely on referrals and increasingly
social media. The support from Just Mortgages has been great on that front. Now nearly a year on, I just wish I’d done it sooner. I get a good mix of purchases and remortgages but I do a lot of protection work as well. It’s something I feel strongly about, that people need to have the right cover in place. I have an arrangement with another adviser who has started passing me protection cases, which helps us both play to our strengths. I’m looking to bring more people into the business, including some admin support. I’m getting leads from an estate agent now, too, so I’m hoping it’s going to get even busier for me personally. I don’t expect Brexit to have a big impact on the market but in truth I don’t really know – and I don’t think anybody else does either. It hasn’t been slowing anything down where I am and I’m hoping I’ll see continued growth.
COVER Name: David Knight Division: Self-employed – The Mortgage Branch Location: Cheltenham
Name: Emma Bremer Division: Felicity J Lord & Haart Estate Agency Brands Location: London
We took on four new brokers and two admin staff at The Mortgage Branch last year so it’s fair to say 2019 was good for us. Growing the business to that extent took a lot of work – we have developed relationships with multiple estate agents and have worked on our social media presence to ensure a steady flow of leads. Thankfully, that’s all starting to pay dividends now. Most of our business was in purchases and protection but in September we launched a new e-sales website focussed on remortgage business. We felt that would enable us to forecast the pipeline a bit better. We’ve already got plans to expand further. We’ve had a number of commercial cases in the past few years that we couldn’t take on, so we want to be able to do that in the future. And I’m also looking at getting my wealth licence. We’ll consolidate for a bit while we see how Brexit pans out but I don’t see it making much difference. The economy is just about still growing, the financial markets have priced in leaving, and I think we’ll be able to get a free trade agreement quickly. If anything, it will release a lot of pent-up demand and investment that has been waiting for more certainty.
London in 2019 was something of ‘a tale of two cities’. My City and north London team saw a distinct reduction in transactional volumes in branch, resulting in the reliance on remortgage business. Our clients are moving only if they need to. In south London, it is a different picture, less static and generally busier on purchases, fuelled by the government’s Help to Buy and Shared Equity schemes. Q1 was strong across both teams but after Easter business struggled to pick up. I brought two rookies into the team in Q2 in what was a very tough market. It’s rewarding to see them deliver and develop into seasoned brokers. With remortgage business especially, it’s very easy for clients to go online and stay with their existing lender. This is rarely the right outcome; our niche is providing a face-to-face five-star experience, making it easy to do business. Delivering real value by giving clients the best advice possible on their mortgage and protection is where we have focussed. Whatever the outcome of Brexit, we are a service business and as such will continue to deliver a five-star experience. This is how we differentiate ourselves from the competition. First-time buyers especially need the right support and guidance. Londoners are busy people and if we manage the process for them from start to finish, we will continue to win.
Name: Rabinder Rai Division: Haart Location: Leicester There were definite highs and lows in 2019 but, despite everything going on in the country, it was actually better than 2018, although not by much, and I remained top of our region. Looking forward I’m not expecting 2020 to be easy, but neither do I expect it to be very much different to last year. I get a lot of job satisfaction from helping people get the mortgage, and ultimately the home, they want, but in the current climate that is more challenging than ever. Unfortunately, here in Leicester there are many people working on zero hours contracts that are struggling to get a mortgage. Some unscrupulous employers that aren’t paying their staff correctly, so it has been difficult to fulfil lender criteria. Difficult but not impossible. Helping these people, some of whom are not particularly financially savvy, gives me great satisfaction. The other end of this scenario is that willingly or unwittingly I had a lot of fraud to deal with last year. Identifying it was one thing, but calling people out on it was a different thing altogether, and one part of my job that I found particularly difficult. However, my favourite moment was being nominated in the British Mortgage Awards. On the night I came third. It’s great to be recognised for doing your job well, it was a real high for me.
COVER Name: Giovanna Scippo Division: Haart Location: Bristol
Name: Pam Stockdale Division: Self-employed Location: Stoke-on-Trent Unexpectedly 2019 was not a bad year, in fact it was a good year. I’m very much a one-man band so growing my business relies on the effort I put in. Last year I received more referrals from existing clients, which really helped. However, I did find using social media to create leads quite a challenge. They say you can’t teach an old dog new tricks, that’s not quite true, but it’s taken a while to get to grips with. That being said I have seen returns from marketing myself on social media. There were occasions when ‘criteria’ was a challenge. I sometimes felt I was trying to put a square peg in a round hole. The way people are working these days, and the move towards self-employment, meant it was quite hard on occasion to find the right solution for my clients. It is really important in those instances to manage my clients’ expectations and help them understand the process and time it takes to find the right lender and the right mortgage. Last year my business was mostly remortgage with a good dose of purchase activity throughout the year, with a rise in company buy-to-lets. The demographic of my clients changed last year from younger purchasers to older people looking for RIO mortgages to release equity, a trend that I think will continue this year.
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2019 was my first full year advising and I’ve really enjoyed it. I’ve moved around a bit during the year, spending some time in Bristol but also in Weston-super-Mare and Monmouth in south Wales. It was quite challenging getting used to different offices and different markets, and building up my reputation but I managed to write good levels of business – in fact I was the top consultant in the South West region! Most of my business has been first-time buyers but we get a wide range of clients and no two days are the same. We have access to 59 lenders so it’s a challenge to keep on top of all the different criteria. I’m really looking forward to 2020: I’m going to be in Weston full-time, which is a market I know well and has a lot of first-time buyer activity. I don’t think Brexit will have a negative effect. Existing homeowners are only really moving if they have to at the moment so getting Brexit done could bring more movers back into the market. We may even see interest rates going back down again too. Volumes were good despite the uncertainty in 2019, so with a bit of stability, there’s no reason 2020 can’t be even better.
Name: Mike Pitt Division: Self-employed Location: Bedford I went self-employed at the end of 2018 and I expected some fall off initially – but I haven’t really found that and 2019 was as busy as ever for me. Dealing with new technology and systems was a challenge at first but it’s just a question of getting used to different ways of working. Probably about two-thirds of my business has been remortgages, which is partly a change from being in an estate agency environment before, but it’s also the way the market has been going since the Brexit referendum. The first-time buyers are still there – despite needing very large deposits – but ‘next-time buyers’ are holding off. With more people taking out cheap 5-year fixes, I’d expect to see remortgage activity drop off so I’ll need to fill that gap. If we get the B-word done, we will see confidence returning and we’ll see more purchase activity. There was a spurt around April last year, after the first Brexit deadline was pushed back. I think that was people fed up with waiting around and wanting to get on with their lives. Traditionally the housing market has been strong in the UK. It’s been a bit flat in the past few years but I think it will come back.
COVER Name: Helen Whitehead Division: New build Location: Northampton
Name: Kanna Mayuran Division: Self-employed Location: London & South East
For me personally, 2019 was another very good year: I’ve had four promotions in four years with Just Mortgages, achieving executive mortgage adviser status last year. The new build division is a rapidly growing area of business: it’s a constant in the market – and building more homes featured in all the main party manifestos for the General Election! A lot of our business includes the use of the Help to Buy scheme. In 2021, the rules around the Help to Buy Equity Scheme are changing, so I’m expecting to see a bit of a spike in activity this year as people try to get in before the rules change. I don’t think Brexit will make that much of a difference whether it happens or not. From my perspective, there hasn’t been any sense that people are shying away from buying. There has been a bit of a shift in terms of the incentives we’re seeing builders offering: kitchen upgrades, stamp duty incentives, even paying the mortgage for the first six months. There may be a blip if interest rates go up but because they’ve been so low for so long, they’re unlikely to go up by much. Ultimately, regardless of whether the UK is in or out of the EU, people will still need somewhere to live.
I’ve been with Just Mortgages just over a year, becoming self-employed after many years working in either estate agencies or broker firms. It was the appeal of flexibility to work when I wanted and ensure I had a good work-life balance that drove the decision, and to be honest I haven’t looked back. In a year when I had a few personal life events it was very important to be as flexible as possible, whilst still earning a living. I even managed to spend more time with my children, which is great. My philosophy is to give every client an exemplary service and I am passionate about protection. This may mean that, because I spend a lot of time with my clients, sometimes I’m not the most prolific business writer. However, what it does mean is that more often than not I get repeat business from my clients and they are happy to recommend me to others. Great service is paramount for the longterm success of my business. There was a lot of negativity around the market last year, but I didn’t experience any. There are always people looking for deals, you just need to look for them. I’ve already taken on another adviser to help grow the business and, if 2019 was anything to go by, I don’t see why we can’t achieve our goals.
Name: Lee Faulkner Division: BJB Location: Newcastle-under-Lyme I had my best year to date in 2019. I’ve had to settle in a new team, so it’s been a challenge to get everybody trained up and pushing in the right direction, but overall it was a really strong year. I’ve worked hard to motivate our lead-generators, and we’ve used social media to get our name out there, give people new ways to get in touch, and to harness the power of good reviews on Google etc. Being estate agency based means there’s a steady stream of purchase activity so that’s where my main focus has been. It’s my third year with Just Mortgages now so I’d expect to see remortgage activity pick up in 2020 as 2-year fixes expire. That said, one of the biggest changes I’ve seen in the market has been the move towards longer fixes as people look to protect themselves from whatever impact Brexit has. So far, I think Brexit has been good for business: it’s precisely when people are feeling uncertain that they look for help and guidance – and that’s exactly what we provide. When we do leave, that might affect buying and selling for a while, but ultimately people still need to move, and they still need to remortgage, so I’m optimistic that 2020 will turn out to be another strong year.
In with the new Natalie Thomas talks to David Thomas, head of the newly relaunched Society of Mortgage Professionals, to find out what the changes mean for members
he Society of Mortgage Professionals - part of the Chartered Insurance Institute group recently underwent a facelift. David Thomas, joint managing partner of mortgage brokerage Chadney Bulgin, is heading up the relaunched society, with the aim of raising professional standards within the mortgage sector. Mortgage Introducer caught up with Thomas to find out what the market can expect from the new revamped organisation. The Society of Mortgage Professionals recently relaunched, how does the new organisation diďŹ€er from the old one? The new society is a quantum leap from the old. Firstly, we have created a board of senior professionals with a breadth of experience across the mortgage sector. Insight and guidance from the board will give members relevant material as well as thought leadership. A new website is complimenting, with good practice guides, as well as digital content including webinars, podcasts, blogs, e-magazines and e-newsletters. A series of roadshows will also be supplemented into 2020 across the country. Why did you decide to relaunch/how did it come about? Having sat on the Personal Finance Society board for six years and having ran Chadney Bulgin with a team of both wealth and mortgage advisers, I have always felt that mortgage advisers should have similar representation. The Chartered Insurance Group (CII) has recently launched three other societies for those working within insurance broking, underwriting and claims insurance and The Society of Mortgage Professionals fits perfectly into that. What is the aim of the society and why should firms join/how can they? The two strategic objectives of the society are raising
Making it personal Is there something about yourself that people would be surprised to hear? I have a collection of vintage motorcycles, one of which I have owned from new since 1976. When you were young, what job did you aspire to as an adult? A professional saxophonist… maybe one day! What is the best bit of advice you have ever been given? There are always two sides to anything. Make sure you hear all the facts before taking action. What is your most prized possession? My new hip! I’m actually playing tennis again, something I never thought I would.
professional standards and to equip mortgage advisers with what they need to the deliver good consumer outcomes. Membership is individual rather than at firm level and we already have in excess of 10,000 members. Do you feel your remit overlaps with that of other trade organisations – the Association of Mortgage Intermediaries for example? There is a key difference here. The Society of Mortgage Professionals is a professional body for mortgage advisers. AMI is a trade body for member firms. Whilst there will clearly be overlap, our aim is to foster strong collaborative relationships with all other organisations in the mortgage market. Amongst other things, your new website contains a good practice guide on second charge mortgages – why the focus on second charges? The relaunch encompasses a number of good practice guides. My theme as president of The Personal Finance Society in 2014/15 was the launch of good practice guides, and I’m delighted at the traction they have received. Initially we have launched four - second charges, bridging, protection and the Senior Managers and Certification Regime - and the aim is to have later life lending, fraud, and technology in early 2020. Do you expect 2020 to be a good one for the mortgage market? The mortgage market is both dynamic and exciting. The rapid development of the later life market will continue into 2020, technology is ever expanding, and if we ever “get Brexit done”, the uncertainty it has brought should give the market significant impetus. M I www.mortgageintroducer.com
Looking back on a y Natalie Thomas asks our experts about the highs and lows of 2019
he second charge mortgage market has not been without its twists and turns over the past 12 months. Another year older and another year wiser though, the sector has been relatively calm in comparison to some previous years, with little in the way of shocks or surprises – which is perhaps not a bad thing. Lending volumes have continued to rise and lenders and brokers seem to be pushing hard for market share in what appears to be an ever-growing market. So, Loan Introducer asks: “What were some of your highs and lows of 2019?”
Jo Breeden managing director, Crystal Specialist Finance
Over the past 12 months the second charge market has grown largely in line with our expectations. As suspected products have continued to improve significantly, not only in terms of the number of lenders and their offerings but the current interest rates which provide solutions to the large majority of customers’ needs. Add this to the lower barriers to application, removal of early repayment charges (ERCs) and acceptance of digital ID and the market is really coming of age. That said there are still not enough brokers considering second charge as an option for their clients, and while education of the market is becoming more-and-more commonplace in 2019, more needs to be done. Second charge could be a viable alternative to a capital raising remortgage or further advance, but is that message out there and understood? I would say not, specialist finance needs to be frontand-centre for the mainstream mortgage broker and then we will see greater viable options being presented to the customer.
Fiona Hoyle head of consumer and mortgage finance, FLA
The second charge mortgage market has gone from strength to strength, with another month of double-digit growth in September and the latest annual new business volumes reaching a decade high of more than 27,000. In this period of low, and sometimes exceptionally low, mortgage interest rates the second charge product has really found its stride by providing a way for customers to get the finance they want, without disturbing the great deal they’ve already secured on their main mortgage. Some of the popular uses are to fund home improvements or help family members with a deposit on their first home, and interest rates are very competitive. As the market continues to grow, the rate of repossessions remains very low indeed – just 0.06% in the 12 months to September 2019.
Steve Walker managing director, Promise Solutions
At the risk of sounding boring, I don’t recall any industry highs or lows. Anecdotally the effect of Brexit has been to depress demand, and whilst industry volumes have steadily increased I feel 2019 has been largely uneventful with no great innovation or disasters. I am looking forward to next year being more politically settled with an increasing demand for second charges as more advisers/borrowers with longer term fixed rate mortgages opt for a second charge in preference to a remortgage.
MORTGAGE INTRODUCER JANUARY 2020
Alistair Ewing owner, The Lending Channel
Despite the continuing uncertainty on the political front, second charge volumes have shown a steady increase this year – possibly the biggest since the credit crunch. Rates have remained at all-time lows throughout the year and while this may well be putting some pressure on lender margin at the lower end of the scale, I am sure enough volume must get written at higher rates to balance this out. Higher LTVs have continued to thrive, with Optimum Credit launching its 100% LTV product. We have also seen United Trust Bank continue to be one of the leading lights in fintech with the launch of its facial recognition ID verification service, which is further evidence of our industry’s ability to innovate and lead the market.
Robert Sinclair chief executive, Association of Mortgage Intermediaries
Like any sector, the second charge market goes through its challenges but I think 2019 has been a positive year. I can’t think of anything that has caused the market any particular grief. Lending volumes have risen and a lot of second charge firms have diversified in order to gain scale. We are seeing firms go into other markets, even if it just be commercial mortgages for example. Even those firms which were purely packagers are looking at other business areas in order to broaden their reach. www.mortgageintroducer.com
year in seconds Craig Collins wholesale director, Optimum Credit Second charge lending volumes were up 18% in the three months to September, compared with the same period last year. This has been driven in part by prices for prime borrowers falling lower than they have ever been, which makes a second charge a very attractive option for many consumers. We are hugely confident that the second charge market as a whole will continue to grow, serving the needs of consumers who are left behind by mainstream lenders.
Marie Grundy sales director, West One Loans It has been such a positive year for the second charge industry. The latest figures from the FLA show the highest annual completions for over a decade We’re also on course for a record low level of repossessions in 2019, which demonstrates that this growth is underpinned by prudent lending decisions, supported by increased consumer protections and regulation.
Buster Tolfree commercial director – mortgages, United Trust Bank I don’t like to talk in highs and lows really but the continued growth has been pleasing. The market is now averaging £100m-110m of completions a month which is good for double digit percent growth year-on-year. That’s great for everyone involved, none more so than the end consumer. www.mortgageintroducer.com
Paul Huxter head of sales, Enterprise Finance The growth in clients taking 5-year fixed rate remortgage products over recent years has been a high for the second charge mortgage market. LMS estimate that 50% of remortgages this year were on this basis, which means clients have to look at the option of a second charge mortgage to meet any additional borrowing needs when their current lender cannot offer further funds and avoid paying the ERC. The growth of the product transfer market has also fuelled this situation, with many clients taking a product transfer deal with redemption charges, meaning a second charge mortgage is the best option for raising any additional funds. The increasingly restricted criteria on the high street in relation to buyto-let interest coverage ratios (ICR) has also created a substantial opportunity in the second charge mortgage market. A second charge may be able to assist landlords in accessing the equity in their property where their current lender is not able to help. Lenders in the second charge space continue to innovate to meet the needs of clients across the whole market.
Anna Bennett marketing director, Positive Lending The second charge market has evolved and matured this year and is likely to end 2019 on a high. The latest month-on-month lending figures from the FLA remain strong with a 20% increase in lending during September. During 2019, the FLA also reported lowering levels of repossessions in each quarter and predict a record low for 2019 as a whole. We’ve also seen some fantastic lender
innovation this year, with many improving their lending criteria and making it more customer friendly, as well as some exciting fintech solutions. It would be great for this commitment to innovation, timesaving and customer focus to be applied across the market. For example, first charge lenders, when called upon to provide ‘consent’ for a second charge loan, can take up to 17 days to deliver the documentation. There’s plenty of room for improvement there. As we head into the last month of the year with economic uncertainty, more cautious valuation figures, more homeowners choosing to ‘improve’ rather than move and more clients on longer-term first charge fixes with ERCs; second charge loans are a very viable option for clients looking to raise capital.
Darren Perry head of second charge lending, Brightstar It’s been a very eventful year for second charges. The market has seen a fall in rates, increasing competition from lenders with criteria changes and much more mirroring of the first-charge market. The highlight of the year for me however has been the real acceptance from first charge brokers of a second charge as a viable alternative to a remortgage. It’s been a gradual process over the past few years and I don’t think you can pinpoint one moment it happened but I think 2019 was when we saw that shift. The press articles, the education we provide ourselves to brokers and the hard work by lenders to improve second charge process and products has all paid off. The networks and mortgage clubs are now all on board and making sure their advisers are considering the specialist market, and making sure that is on file. I feel the lenders have done all they can and I feel the onus is on us to do all we can to educate brokers.
JANUARY 2020 MORTGAGE INTRODUCER
A time for change? Natalie Thomas considers if 2020 will be the right time for diversification in the seconds market
iversification has long been the name of the game when it comes to ensuring the longevity of a business, whether it be second charge mortgages or otherwise. Insurance and short-term finance have in the past been the weapons of choice for second charge firms looking to expand their remit, with diversification into first-charge mortgages – especially the advice element - often considered a leap too far. Yet with the change of regulator in 2016 by the Financial Conduct Authority and the subsequent need for both first and second charge firms to adhere to the same rulebook - The Mortgage Conduct of Business (MCOB) - that jump is now not so wide and we are increasingly seeing firms try their hand at mortgage advice. So, is this a trend set to continue and will we see more second charge brokerages grab a slice of the first-charge mortgage pie in 2020? Loan Introducer finds out... THE BEST OF BOTH WORLDS Second charge firms have been banging the drum loudly in recent years as to the virtues of first-charge firms offering second charge mortgages but what about vice versa? Residential and second charge mortgages might seem like an obvious pairing from the perspective of a residential mortgage broker but when the shoe is on the other foot, is the appeal there for second charge brokers? Steve Walker, managing director of master brokerage Promise Solutions, has just launched a first charge mortgage advice arm, for both business to business and business to consumer clients – Promise Mortgages. It diversified into residential mortgage packaging a number of years ago but has only recently started to offer an ‘advice’ option to clients, and for brokers who might be too busy to deal with their trickier specialist mortgage cases or need someone to look after their clients whilst on holiday. Walker questions the future of the ‘pure packager’. “As every month goes by, something which was considered specialist in the past becomes more mainstream today,” he says.
MORTGAGE INTRODUCER JANUARY 2020
“This is happening in both the second and first charge sector so packagers and master brokers will feel the squeeze. “How they choose to react will depend on each model but I believe diversification is important to protect the business and to continue to add value to broker and customer relationships. I think it will be difficult to maintain any business on a long-term basis which solely does second charges. “With better technology and more lenders going direct to broker in the first and second charge space the world of a pure packager is pretty precarious,” he says. Promise is not alone in making the extension to residential mortgages and since 2016 a number of second charge brokerages have made the choice to offer residential advice alongside their second charge offering, so could we see more? “I think it’s part of the seconds’ journey,” says Robert Sinclair, chief executive of the Association of Mortgage Intermediaries and Association of Finance Brokers. “Given the alignment of regulation between the two markets it now means it is not such a big step for a firm to migrate from one market into another. “It is also worth noting that the first charge mortgage place is over 200 times bigger than the seconds market – so if you’re a second charge firm, why wouldn’t you?” he questions. Indeed, even on a good year, such as 2019 – overall second charge lending is set to equate to around £1.2bn, compared to overall gross lending of £268bn in 2018 for the mortgage market. “Firms in the second charge market now have to be exam qualified – which wasn’t the case a few years ago,” he says. “This means adding first charge mortgages to the business is a lot easier to do than if a firm was starting from scratch in the years prior to FCA regulation.” NOT FOR EVERYONE The bigger issue for second charge brokerages looking to move into first-charge mortgages is perhaps not the regulatory and advice side of the role but the acquisition of leads. While it surely stands to reason firms should see a natural overlap in demand from borrowers who are seeking a second charge but for whom a remortgage www.mortgageintroducer.com
DIVERSIFICATION is more suitable – attracting first charge clients is potentially a costly exercise for firms. “The issue in all markets is where you get your leads from and the cost of those leads,” Sinclair says. Indeed, the second charge firms that have migrated into first-charge advice have on the whole been the larger ones with an already very visible online presence. Adding first charge mortgages strings to a business’ bow might sound simple enough in theory but for some firms, their strength lies in offering what they do best – second charge mortgages. Alistair Ewing, managing director, The Lending Channel, believes running a standalone second charge brokerage is no different than running any other business and the same rules need to be applied. “The basic principles of controlling costs and getting sales to a sufficient level to make a sustained profit are key to survival,” he says. “Certainly, adding other products into the mix – like first charges or other areas of specialist lending – undoubtedly give brokers a wider opportunity but getting the right resource in place to meet the challenges of multiple products may be a stretch too far for some firms,” he says. Also, for many firms in the second charge sector, the current buoyant market conditions don’t necessarily present an urgent need to look elsewhere. Talk of diversifying usually intensifies during periods of unrest or low lending volumes but with second charge new business volumes at a decade high, some might argue now is not the time to venture into unknown business areas.
“The second charge firms that have migrated into first-charge advice have on the whole been the larger ones with an already very visible online presence” Research by LMS in September revealed that nearly half – 45% - of those who remortgaged in Q2 2019 took out a five-year fixed rate product. This is something many in the second charge domain view as a positive for the market, based on the assumption that such borrowers will potentially be looking to borrow funds within this 5-year period but not want to disturb their existing mortgage. “The second charge market is growing 10% year on year and is an increasingly important product for brokers to help meet their clients’ needs,” says Paul Huxter, head of sales at Enterprise Finance. “A second charge mortgage gives brokers the opportunity to support their client on an ongoing basis, without fear of the them incurring a penalty through redeeming their existing mortgage,” he adds. He also highlights the potential for enquiries from www.mortgageintroducer.com
those with adverse credit who may not be able to raise funds by remortgaging. “It is also estimated that 1.2 million new Count Court Judgements (CCJs) will be registered this year, so the potential that existing clients of an adviser will be classed as impaired credit by the high street lenders is growing,” he says. “A product transfer may be the only viable option for these clients to retain a preferential interest rate on their main borrowing, while a second charge may be the only option they have for raising additional capital from their property,” he adds. ESSENTIAL TO SURVIVAL? Firms might not currently feel a pressing need to move into first charge mortgages, given that business is doing so well but what about in the future? Is Walker right when he asserts that firms who don’t branch out will struggle? Jeffrey List, director at Specialist Money, believes that whilst firms ‘advising’ on residential mortgages shouldn’t be essential for survival, firms should ensure they have some form of residential offering in order to ensure the best outcome for the client. “I do not believe that residential mortgages should necessarily need to be offered alongside second charge mortgages in order to survive,” he says. “However, I do believe that a residential mortgage option should be offered either by the master broker/ packager or by a link-up with a partner firm in order to ensure that the right outcome is achieved for the client. “Ultimately the best outcome would of course depend on the client’s circumstances and whether a residential mortgage or second charge mortgage makes financial sense,” he says. Jo Breeden, managing director of Crystal Specialist Finance, agrees that offering residential advice in itself shouldn’t be a prerequisite of a firm’s survival; but having more than one string to a firm’s bow is beneficial. “Any broker offering one sector alone could be in danger,” he says. “Customers want solutions and outcomes and brokers only offering limited options are not able to fully consider the clients’ requirements. That’s not to say a broker has to be a master of everything, but spotting the opportunity and knowing where to signpost clients is essential.” WATCH THIS SPACE The ever-closer alignment of the two sectors means it’s likely we will see more firms move into offering first charge mortgage ‘advice’. Whether such a move would be worthwhile for smaller firms remains to be seen. The more important aspect however is ensuring the customer is given the right advice and options, with each firm operating within the product scope that best suits their business profile. M I JANUARY 2020 MORTGAGE INTRODUCER
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SPECIALIST FINANCE INTRODUCER INTERVIEW
The time for evolution Phil Jay director, Complete FS
s market conditions within the financial services sector continue to evolve and challenge previously held notions of a working ‘status quo’, intermediaries have come under increasing pressure to adapt to these trends and to embrace a world that is awash with new opportunities, as well as threats. Yet, as we stand upon the threshold of an uncertain new year, the need to engage with three core issues has become a matter of growing importance, not least in terms of an ability to maintain a viable, competitive and ultimately profitable edge. TECHNOLOGY IMPACT
For example, the impact of technology on the mortgage process has become a matter of concern for brokers in recent times, with many concerned that the rise of robo-advice is a threat to the value of the human advice they provide. However, tech-based applications continue to simplify and speed up onerous backroom processes and free up brokers to pursue new business opportunities and there has been a growing recognition that technology can provide the tools to improve service levels and counter the perceived threat to their client banks. Technology, properly harnessed, now offers brokers a seamless and, above all, frictionless process which merges well with their experience and expertise and will become more and more the template that adviser firms should adopt. By placing an emphasis on recognising individual needs and circumstances which in turn underpins applications, backed up by the way that technology can accentuate speed and www.mortgageintroducer.com
quality of delivery in 2020, mortgage brokers can successfully protect their existing customers and offer a customer experience that is slick and personal to each customer. As we go into 2020 in a tight market, failure to see technology as an ally and adopting its use going forward could ultimately make the difference between continued growth or extinction. Similarly, the need to stimulate wider bases of new business should be at the forefront of every mortgage advice firm. For this to happen, certain attitudes will also need to change. For example, the past few years have witnessed a period of unparalleled growth in terms of specialist lending options and products, yet many brokers have shown themselves unwilling to engage with markets which fall outside of their core business models. Indeed, research conducted by Liverpool Victoria has found that up to 70% of brokers currently feel ‘uncomfortable’ about advising clients on equity release, and from our own experience, advisers are still wary about offering advice to customers who don’t fit a standard lending profile, have past credit issues, variable employment or self-employment for example. However, issues such as these can be easily resolved by employing the services of a professional packager like Complete FS. It offers brokers market expertise on the availability and suitability of products and the type of circumstances which lenders will, or will not, accept, while also helping advisers to drive up referral and conversion rates, reduce overall costs by delegating the responsibility for the process of applications, documentation and communication to the packager and taking full advantage of dedicated inhouse underwriters and case handlers. A win-win scenario. Indeed, while the packager is left to deal with much of the ‘heavy lifting’, brokers can use the extra time to stimulate new streams of revenue and increase their viability
and presence at a local level. While many intermediaries may be unsure where to start when looking for the right packager, a cursory glance at their ability to convert applications to offers and offers to completions should put them on the right track as well as checking that the technology that the packager uses is capable of supporting the transfer of information and documentation in a manner which is safe and secure. This brings us to the third and final issue that brokers will need to confront in the coming year – the rising threat of cybercrime. SECURITY SYSTEMS
Data breaches within the financial sector have risen considerably over the past two years according to figures from the FCA, intensifying the need to invest in better standards of data protection and to create systems of security which are proportionate to GDPR obligations. In our sector that means that the use of cybersecurity tools and anti-virus software, as well as using secure online portals and encryption technologies to secure the use of emails should be regarded as mandatory in 2020. In addition, the wisdom of training staff to recognise the signs of malware or of implementing dual authorisation processes, reducing the amount of information shared online and encouraging a collaborative working atmosphere that reduces the risk of so called CEO fraud should not be ignored. No one wants the regulator breathing down their neck. As we advance into 2020 and the line between success and failure is measured in smaller and smaller increments, the need for brokers to step up and seize new working practices is paramount. And, they can do this by embracing the services on offer which marry technological and traditional applications, pursuing better conduits of business and ensuring that standards of cybersafety are second to none. Happy New Year! M I
SPECIALIST FINANCE INTRODUCER
Finding a new home Shaun Almond managing director, HL Partnership
he Senior Managers & Certification Regime (SM&CR) is now in force and from the feedback I am receiving, many DA firms out there are finding that in the cold light of day the practicalities of compliance risk are already proving to be more of a burden that they had planned. SM&CR has marked the tipping point for many firms because the time needed to stay compliant and fulfil the obligations of the permissions they have, now overshadows the time required to conduct and run a business. Yes, there are resources available to DA firms, but to my mind they can
never act in a way that supports the sales process that really understands the customer need and the solutions that must be recommended. In the event of regulatory censure or concern, they are not actually responsible for the oversight advice they have given, the firm is. One of the most often used arguments for maintaining DA status is the concept of independence. Yet in reality, this is just a mirage. In a regulated market such as ours, independence left the building a long time ago because we are all subject to the same regulatory framework. The only real difference in status is whether money is spent on an external or internal compliance function. Either way, the value of an AR relationship is brought into perspective, particularly when put against the cost of maintaining the true cost of a compliance function as a DA firm.
For mortgage and protection specialists in a network, the compliance function becomes more of a partner than a burden in a shared desire to deliver great customer outcomes. An affordable mortgage sale is just a starting point, with the end goal being advice across all product lines identified on the IDD. Not providing protection advice around the mortgage can leave a firm’s financial future as much at risk as the family the firm failed to fully serve. I have had many conversations with mortgage advisers, who are either tired of being made to adopt software which is not designed for their needs in a multi discipline network, or, as DAs, have found that the ever increasing compliance burden is eclipsing their ability to run their business. AR status takes the burden away and with the right network the decision really is a no brainer! M I
A time for reflection Sam Howard managing director, Magnet Capital
s one decade ends and a new one begins, I want to reflect on the 2010s and what has been a bizarre decade from the perspective of the housing market. The decade started with the property market pulling itself off the floor after the slump, caused by the credit crunch. There had been a dramatic slump in housebuilding, as credit lines were pulled with banks and lenders desperately trying to rebuild their balance sheets. The development finance lender where I worked at the time, was getting calls from prospective borrowers, asking
not what our rates were but whether we were lending. We were one of the few funders who still were! The next few years were characterised by a housing market that was stymied by a lack of credit both for mortgage market and development. House prices did fall initially but the lack of new homes being built, combined with low interest rates maintained a lack of affordable housing. The political world turned upside down in 2016 with Brexit, the rise of the hard left and the hard right. Economically, we had the Bank of England continuing to respond to the ongoing crisis, caused by the financial crash, by keeping interest rates low and injecting trillions of pounds of new money into financial systems to ward of depression. This financial wizardry of quantitative easing, counter intuitively seemed to push up asset prices but
MORTGAGE INTRODUCER JANUARY 2020
failed to create inflation. 10 years on we still have historically low interest rates at 0.75%, and little indication that they will be raised significantly. From a housing market perspective throughout this period, various housing ministers have tried to fix the housing crisis. It has been a crisis largely characterised by the chronic lack of supply of housing, leading to rising house prices and rents preventing first timers getting onto the housing ladder and private renters facing crippling rent bills. None of the solutions have got to the root of the problem; which is the need for more new affordable homes. The new Conservative government has promised at least a million new homes this parliament, called for a shaking up of planning, and proclaimed that there would be a 30% discount on new homes to local people and key workers. M I www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER INTERVIEW
Bridging trends to watch in 2020 Steve Burch short term lending and development finance specialist, Brightstar Financial
he definitive nature of the General Election result may help to spark increased activity in the property market this year and confidence amongst investors. But, with Brexit now on course to happen in the next 12 months there will continue to be uncertainty. This is the perfect environment to stimulate demand for bridging lending, so what are the trends to watch out for in 2020? PROPERTY REFURBISHMENT
A growing number of property investors are realising that they can generate better returns by buying a
run-down property and renovating it to achieve a higher resale price or retaining the property and benefitting from increased rental income. Refurbishment finance can be arranged on a flexible basis up to terms of 24 months, during which time an investor can purchase a property in need of renovation and carry out the work to increase its value before deciding whether to retain and refinance onto a longer-term solution or sell the property. AUCTION FINANCE
A major consideration when it comes to the purchase of a property at auction is the tight timescales within which a client would be required to complete. Under typical auction conditions (though this can of course vary depending on the auction house), if a client’s bid on a property is successful, they would be required to pay a non-
refundable 10% deposit on the day and would usually have a further 28 days to complete the purchase. These time frames can pose problems for traditional mortgage lenders, so it’s vitally important for a buyer to partner with a specialist in auction finance if they are to be successful in purchasing at these events. DEVELOPMENT EXIT LOANS
Many developers are in a position where they are asset rich and cash poor, particularly when they near the end of completing a development. Their options at this stage depend on their intentions for the scheme. If they are retaining the development to let out developers will usually refinance onto a longer-term solution. For those who are selling the properties they have developed, there is the option to buy extra time and release equity with a development exit loan. M I
Being competition ready Sonia Shortland managing director, APEX Bridging
n the expectation that with the election, Christmas and the final of Strictly behind us I have returned to the office more confident than I have ever been that Apex will be providing a proposition that will be very well positioned to compete in a market that ever will be driven by service, rate and trust more importantly the strength of lenders distribution relationships. My confidence is based on the findings of the end of year review we undertook in December that reinforced the teams confidence that the business is ready to take up the fight that will inevitably come with the increased confidence in the market, I believe will www.mortgageintroducer.com
reflect, as the Brexit confusion begins to unravelled Talking to other lenders during the review period it became very evident that the focus we were placing on our operational plans was reflecting the plans being prepared by other trusted lenders in the sector. As a small lender we cannot be all things to all people but at the core of our proposition we must have the same elements that will bring success in our defined market. That market for Apex Bridging has been determined by the following: The plan Must be contributed to and fully understood, by all staff and supported by structured procedures that are detailed in your procedure manuals. Communication The plan will note be delivered if internal and external communication is not proactive and designed to drive results for all stakeholders.
Best practices We learn a great deal from our competitors and plan to use their proven ways to improve our growth ambitions. Time management ‘I had no time’ should not be an accepted excuse until all aspects of the situation have been reviewed. We must make time to earn money. Culture statement Many businesses have a culture or Mission statement but how many of us deliver to the client’s expectations of that statement? 2020 will see a more competitive landscape that ever before and those aspiring to be industry award winners will, in my opinion, need to ensure their plans include, amongst many more elements, all the above. Bring on the competition, a healthier market for it! M I
JANUARY 2020 MORTGAGE INTRODUCER
SPECIALIST FINANCE INTRODUCER
2020 set to be breakthrough year Adam Tyler executive chairman, FIBA
e are coming to the end of FIBA’s second full year. It seems to have gone by very fast, but so much has happened in the nearly 24 months since we launched in January 2018. Every new venture takes time to build momentum and it has certainly been true in this case. Launching a brand new trade body is not a project which can be taken lightly. It requires plenty of support to form a firm foundation. FIBA is fortunate to have the SimplyBiz Group as its backer and that relationship has proved to be vital in allowing us to roll out our proposition in such a way that we could make the case for a new trade body supporting specialist property finance brokers and equally importantly to professional partners in the lending, legal and surveying fields. The support of the SimplyBiz Group has been crucial, not only with resources, but in allowing us to offer members comprehensive support from the start, as well as access to a small lending panel while we started to forge our own relationships. The lender panel has now increased by 150% since launch, even with our selective process to ensure we have lenders to suit every possible specialist property finance request. Thanks to SimplyBiz’s support, we have also been able to concentrate on developing our services to members, while giving us time to launch a nationwide recruitment strategy which has accelerated during the last half of 2019 and has seen the membership grow by 67% in the past nine months
alone. There is an old saying that Rome was not built in a day. In our case, we knew it would take time to get our message across, establish our brand and what it stands for. But having put in the hard yards, we are now beginning to see the fruits of that work as we approach the two year mark. In January this year, I set out the goals we would concentrate on for 2019. Expand the lender panel: We now have 47 lenders on panel and I have still to meet up with six further commercial real estate lenders at the start of the year. Block PI scheme: We saw the first participants to the FIBA scheme in early 2019, and as we now enter the busy renewal period, we are already seeing a number of new policies being issued across membership. Industry focus groups: We have held meetings across the country and given our members, lender partners and professional partners the opportunity to get involved and discuss and expand on topics such as fee transparency, the role of our professional panel, future regulation, standards and, of course, industry profile. These have helped us sort out priorities and fine tune our proposition. Membership in 2019: We have had an increase in members every month since inception including all of 2019, with our largest monthly increase coming in November. It is our aim in 2020 to continue this growth as it gives FIBA a stronger presence throughout the industry as well as adding weight to our lobbying on behalf of the sector and our focus on SME funding. Westminster representation: Carrying on from last year, I have been heavily involved in working with stakeholders in the SME sector to raise the profile of SME access to finance building on the report and survey,
MORTGAGE INTRODUCER JANUARY 2020
which I presented at Westminster. I am now preparing to meet and grow new relationships post-election. In 2019, we have successfully established our credentials as a hub for individual broker firms, carrying their concerns to Westminster and the wider specialist finance industry. We now have a large membership base with a variety of advisers and brokers registered as FIBA members. These numbers are growing as the FIBA message is being picked up by more trade media and our presence at trade shows such as the Mortgage Business Expo and the Finance Professional Show has elicited extensive interest not only from
“The FIBA message is being picked up by more trade media and our presence at trade shows has elicited extensive interest not only from brokers, but also from lenders and other potential professional partners” brokers, but also from lenders and other potential professional partners such as solicitors and surveyors. We are at the forefront of debate on the future of specialist finance and the ability of businesses to access the funding they need. We believe passionately that the adviser community, with access to the widest range of funding options and the specialist knowledge to help business owners, is the best vehicle to provide the service that businesses need and we are committed to support you now and into the future. With 2020 beckoning, FIBA finds itself in a strong position, having built a firm foundation on which it can grow. I would urge all advisers with an interest in property finance to engage with FIBA and the services we offer. As FIBA grows, so will our ability to provide even better services and greater choice of member benefits, many of which will become available in early 2020. M I www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER INTERVIEW
The start of an exciting journey Vic Jannels chief executive, ASTL
his is my first column in my new role as CEO of the Association of Short Term Lenders (ASTL). It’s a role that I am very honoured to accept, but one that I honestly never really saw myself holding. Despite my near 50 years in the secured lending industry, including senior management roles at lenders, the majority of my career has been in the packager and broker sectors, I am still chair at Impact Specialist Finance, and I spent many years on the board at AMI. So, how did I end up leading an organisation for lenders? The first thing to note is the respect I hold for the ASTL and the fantastic job that Benson has done. When he first took the role in 2012, annual bridging completions were £885m, and today they total more than £4bn. This is exceptional growth and thanks to Benson and the work of this great association, the industry has grown not only in size, but also in reputation. The ASTL’s Code of Conduct and commitment to high standards of training, underwriting and customer focus have all helped to steer this industry in a very positive direction. We are now at a stage where the bridging market is poised for even bigger things and it’s this opportunity to take an already respected trade association and lead it into the future that I find really exciting. Short-term lending is a very competitive environment. This has driven product innovation and keener pricing and both of these elements have made bridging a more useful and attractive product to a growing number of customers. We have a real opportunity, therefore, to increase this market to reach a wider audience, and a key part of achieving this is extending www.mortgageintroducer.com
our distribution through more brokers. This means engaging with brokers who have not traditionally advised on bridging, working with networks and packagers to initiate more conversations about short-term lending. So, how do we do this? I have some ideas, but I don’t have all the answers and so the first task in my role will be to speak with our members and other businesses within our industry to identify a way of moving forward that is inclusive – where everybody feels they are able to contribute. I also want to get a clearer idea of exactly what our members, and potential members, can bring to the ASTL, and how we can add value to them. A POSITIVE DIFFERENCE
A trade association can only be successful if it delivers a positive difference to businesses and I am keen that we ensure we are delivering this for every one of our members and associate members. I’m also keen to grow the membership. One of the great strengths of the ASTL is the rigorous process we go through before accepting members, which means that membership of our association is very much a kitemark of quality. This
doesn’t mean, however, that we should lack ambition about including every lender and associated business that has a long-term commitment to the market and vested interest in supporting high
“We are now at a stage where the bridging market is poised for even bigger things and it’s this opportunity to take an already respected trade association and lead it into the future that I find really exciting” standards and sustainable growth. There has been much debate about the potential burden of increased regulation, but one thing is for sure – if we all work together to deliver the best outcomes for customers in a responsible and sustainable way, then regulation will never be as intrusive as it might otherwise be. This is the start of an exciting journey for the bridging industry and the ASTL, and I invite you to join us, by getting involved with the association or giving your input and feedback. M I
A sign off from Benson
o 2020 promises to be an interesting year for the country and a very exciting year for the bridging industry. There remain unanswered questions about what the ultimate Brexit arrangements will look like, but at least the significant majority won by the Conservatives has provided an element of certainty to the situation. This will, I am sure, give reason to be positive for many in our market. Unfortunately, I will not be leading the ASTL through this period and I have now handed the reins to the very capable hands of Vic Jannels. I know that Vic has exciting plans to continue the good work of the ASTL and give fresh impetus to our image and membership, and I wish him all the
best in the role. I will, of course, be keeping an eye on the industry; and you may even see me at an event in the future. But, for now, I would like to take the opportunity to thank everybody who has supported me during my seven years as CEO of the ASTL, including board members past and present, our members and our administrator, Kay Woolley. A special thanks is due to all at Bridging Introducer, for promoting the ASTL and being loyal and supportive friends. It has been my pleasure and vocation to help the ASTL to develop to the great Association we have today. It is well placed to grow in reputation and significance in the future. I wish you all a wonderful festive season and a very happy and successful 2020. MI
JANUARY 2020 MORTGAGE INTRODUCER
THE MONTH THAT WAS
HALL OF FAME
R E D C A R P E T T R E AT E M E N T. . .
oF regular Terry Pritchard trots back onto these pages this month following reports he attempted to murder a horse whilst on hols in Malta. The former jockey’s agent turned desk jockey [yep the starred out word is desk. Ed] decided to get in the saddle whilst sunning himself. However the Maltese couldn’t find a horse which would fit the big man so he ended up on a horse somewhat too small. A source at the stable told the HoF: “We told Mr Pritchard that the horse was too small. We pleaded with him not to take it out. “However, he insisted and Chief (pictured beneath Pritchard) has been left walking like John Wayne. He is a shadow of his former self.” Come on Pritch stop foaling around. Yes you are a jockey just not the type you may think. Until next time **** jockey.
Time to say goodbye...
Loans Warehouse gets active for charity
oans Warehouse have got their running shoes on ready to get active for charity. For the second year running machine and bike have been delivered to their Watford oﬃces so they can complete a 441 mile journey throughout the month for three children’s hospitals. The journey starts at Great Ormond Street Hospital in London, then heads north stopping at Alder Hey Children’s Hospital in Liverpool. The journey ends in Queen Elizabeth University Hospital in Glasgow. Matt Tristram from Loans Warehouse said that they wanted to do something in January to “oﬀset the excess of Christmas”. Well, we can’t think of any better reason to do so. The lender has set up a Just Giving page so their progress can be tracked and are aiming to raise £5000. Dig deep and help them with this worthy cause. Well done Loans Warehouse, the HoF salutes you.
Loosening the (black) belt
his month the HoF bids farewell to MI reporter Michael Lloyd, who is leaving for pastures new. Avid readers of the HoF will remember Lloyd after his body building aspirations were revealed on these very pages (Issue 135). However those of you who were waiting to see the end results from the abdominable slowman’s training regime will be sorely disappointed. Lloyd is on his way to the ever progressive and forwardthinking peer-to-peer (P2P) industry. A sector that we all know will go from strength to strength in 2020 and beyond. MI publishing editor Ryan Fowler told the HoF: “We’re sad to see him go. He’s going to an industry on the move. After a stellar 2020 P2P looks set to build on its hard work and continue grabbing the headlines. “Lloydy will fit in well in this fast-paced sector.” Farewell Michael and thanks for the memories.
ith the gluttony of the festive season over 25 brave souls (including MI’s very own Robyn Hall) have signed up for The Money Group’s (TMG) Get Fit, Get Healthy initiative. The cohort agreed to be weighed and monitored over a five week period as they bid to improve their overall fitness. The gang will also train twice with TMG brand ambassador and Olympian Ashley McKenzie. Mckenzie is the currently the number one Judo athlete in the UK and will be heading to Tokyo 2020 for his third Olympic appearance. He told the HoF: “These desk boys have no idea of the pain I will inflict on them in the gym!” Boys and girls we wish you the best. We’ll check in with you and hopefully see your progress next month.
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