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We Hall stand together Masthaven’s managing director and the team on the future of the bank ROBERT SINCLAIR
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Publishing Editor Robyn Hall Robyn@mortgageintroducer.com @RobynHall Managing Editor Ryan Fowler Ryan@mortgageintroducer.com @RyanFowlerMI Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com News Editor Ryan Bembridge RyanB@mortgageintroducer.com Reporter Michael Lloyd Michael@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com @mortgagechat Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Manager Francesca Ramsey Francesca@mortgageintroducer.com Campaign Manager Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com
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June 2019 Issue 131
MORTGAGE INTRODUCER WeWork c/o Mortgage Introducer, 41 Corsham St, London, N1 6DR Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of Mortgage Introducer Ltd.
Being held bang to rights With the Conservative leadership race in full swing you’d hope that the mortgage market would get a look in – not least when it comes to the issue of mortgage prisoners. These homeowners are quite often hard working blue collar families who are stuck on what is now an uncompetitive mortgage rate (which they’ve dutifully paid for years) which they simply can’t break free from. Thankfully, the Association of Mortgage Intermediaries’ Robert Sinclair is all over this injustice with the issue of the trapped borrower having been on the AMI agenda since the MMR was finalised in 2012. Indeed, writing on page 4 of this issue, Sinclair says that at a fringe event at the Tory party conference last year Martin Lewis hosted a debate supported by AMI Board member Andrew Montlake and attended by John Glen, economic secretary to the treasury and Nicky Morgan, chair of the treasury select committee. The arguments promoted at the event captured both of them and they have been passionate advocates for action ever since. And so it was, earlier this month politicians in the House of Commons debated the plight of these homeowners with Dover & Deal MP Charlie Elphicke opening the debate with the accusation that ‘the practice of selling mortgages... to unregulated funds has been creating mortgage prisoners... [who] are being exploited by such funds’. While as much a PRA issue as it is for the FCA something does need to be done to put an end to this travesty. Unfortunately just how far this progresses remains to be seen. With the topic hitting the headlines we can only hope that the Tory hopefuls pick up on the subject and pledge to put a stop to this injustice. Elsewhere in this issue we tackle the thorny subject of whether there’s a whiff of the dotcom era around mortgage fintech firms and whether or not they, or at least some of them, are overvalued. The investment numbers are huge with many businesses being valued on the promise of future returns. There may well be some big winners but then they might all just go pop. The venture capitalists backing these fintech businesses won’t keep splashing the cash forever and will expect to make a return on the vast sums that they have invested. The phrase mortgage prisoner may yet take on a whole new meaning.
5 AMI Review 6 Market Review 8 People Review 10 High Net Worth Review 12 London Review 13 Help to Buy Review 15 Awards Review 16 Buy-to-let Review 22 Protection Review 30 General Insurance Review 34 Equity Release Review 35 Conveyancing Review 39 Specialist Lending Review 41 Technology Review 44 The Outlaw Gimp me up
46 The Bigger Issue
We ask our industry experts: Are tech firms overvalued?
48 Cover
Masthaven’s Jon Hall reveals all
54 Round-table
Technology and the future of the mortgage market
62 Loan Introducer
The latest from the second charge market with commentary from Fluent’s Tim Wheeldon and the spotlight is on the FLA’s Fiona Hoyle and analysis from Natalie Thomas
68 Specialist Finance Introducer Regulation, Bridging and FIBA
72 The Last Word
Accord’s Nicola Alvarez on moving with the times
74 The Hall of Fame Bye bye Benson
The specialist lender you can bank on The specialist lender you can bank on
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Review: AMI
The big trapped borrower debate The issue of the trapped borrower or mortgage prisoner has been on the AMI agenda since the MMR was finalised in 2012. We could be criticised for not getting enough traction on the issue until late 2018, but we were assured that the Mortgages Market Study was looking at this from our early discussions with the team in 2016, following MMR implementation in 2014. However, as we were working on data gathering and analysis with the FCA team and they moved towards reporting it was becoming clear that their appetite might not match the nature of the issue. At a fringe event at the Tory party conference last year Martin Lewis hosted a debate supported by AMI Board member Andrew Montlake and attended by John Glen, economic secretary to the treasury and Nicky Morgan, chair of the Treasury Select Committee. The arguments promoted at the event captured both
Robert Sinclair chief executive, Association of Mortgage Intermediaries
of them and they have been passionate advocates for action ever since. We also now have an All Parties Parliamentary Group on Mortgage Prisoners and they have recently placed a call for evidence on the issues, solutions and shortcomings in approaches. Following the initial market study report from the FCA we anticipated that the discussed potential changes to the affordability rules might allow the industry to fashion some solutions. What we thought would be relaxations to the affordability rules to assist trapped borrowers has however translated into much wider changes. These mean that all lenders will have to have a very serious look at how they wish to transact all their remortgage business in the future. Will they advise the FCA that they have decided to disapply some or all of the affordability rules set out in MCOB?
Calling ‘order’ In an unprecedented step the FCA has issued a Dear CEO letter to a sector of the market before they have completed the firm authorisation process. The issues with claims manament companies (CMC’s) have been expressed by advice firms of all types for many years now, with the capacity of the Ministry of Justice to deal with complaints limited by their scarce resources. However, the FCA is different in that it can mobilise significant resource where they see bad practice and potential consumer harm. So the FCA has written to all those firms applying for authorisation to set out what they see as existing bad practice and warning all those running firms that they need to look at themselves and be sure they are not guilty of any of these practices. The FCA has focussed on: CMCs acting for their customers without getting their appropriate consent or completed letters of authority; CMCs submitting letters of authority and claims in fictitious customer names.
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There is no relationship between the customer and the financial service provider receiving the claim and, CMCs’ financial promotions do not comply with the rules. The FCA has stated that failure to comply with the rules could mean they remove a firm’s temporary permission or refuse to authorise it. They will look at a range of evidence including high levels of Financial Ombudsman Service uphold rates for complaints against the CMC or low levels of uphold rates for complaints submitted for their customers, as this may indicate the firm is not complying with FCA rules. The letter also has a section advising “Do not ignore this letter”, another first from my perspective. An unusual step, but many in the industry will welcome CMC’s now being tasked with the same standards as advice firms. All we now need is those CMC’s hiding behind SRA authorisation to be similarly assessed.
These changes however risk putting a solution for those trapped into further delay. Instead of perhaps eight lenders and a handful of broker firms working in a small project, sponsored by the FCA, with the administrators to find solutions for those who can be helped, we are now into lengthier processes to change policy in lenders. This will necessarily take much longer as all lenders will need to look at how they engineer their entire processes rather than hot-housing a project to convert a limited number of cases which have merit. By making the rule changes a whole of market solution the FCA has risked failing to solve the prisoner issue by over-engineering their rules once more. It still remains a mystery as to how the FCA has managed to policy Uturn from their long-held position that such reduced affordability tests were not possible given the requirements of the Mortgage Credit Directive. Despite AMI’s repeated calls that they had interpreted this wrongly back in 2015, they now must have a different legal opinion. The risk for firms is that the FCA is still wrong and that challenge in the courts could see firms fall foul of European Law, which the FCA might not have interpreted correctly. In the study the mortgage market was considered to be working well for the vast majority. On balance much better than most other markets. The trapped borrower is the one and probably only area which really merits attention as UK Asset Resolution has now repaid the government, but the price of that has been leaving hundreds of thousands of consumers with asset managers who do not offer cheaper loans. Those who pay every month and are not in arrears deserve better, but these FCA plans as drafted risk a further extended period of them paying more than they perhaps should.
JUNE 2019
MORTGAGE INTRODUCER
5
Review: Market
How technology is driving the market New and established players within the industry are developing products and solutions incorporating cutting edge technology such as AI, machine learning and blockchain. The core of fintech is, quite rightly, centred on streamlining and improving the customer experience. Lenders, distributors and intermediaries are all investing in some form of technology to increase market share, improve service standards and generate greater efficiency within the business itself. So, let’s take a brief look at recent data, launches and trends in and around the mortgage market.
Craig Calder director of intermediaries, Barclays Mortgages
Robo-advice and AI
The shadow of robo-advice has been looming over the intermediary market for quite some time and it appears that intermediaries still attach some degree of threat to it. Research from United Trust Bank found that over half (59%) of introducers working in the fields of property and asset finance believe that advances in AI and robo-advice technology could present the biggest digital threat to their businesses. It’s broker sentiment poll found that Open Banking and crypto currencies ranked in second and third place. Nine out of 10 (84%) intermediaries believe that advances in technology over the next five years are going to have a major impact on their businesses. They indicated that E-signature, Biometric ID verification and Open Banking would most likely benefit their businesses. More than half (53%) expected their businesses to invest up to £10,000 in new IT development in the next 12 months. However, just 45% felt that their businesses were doing enough to prepare for and take advantage of potential advancements in technology over the next five years. Speaking at the recent FSE Manchester, Robert Sinclair, chief executive at trade body AMI argued that true robo mortgage advice is “not coming in my lifetime”, but that in-
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termediaries need to be aware of how it might eventually impact their role and the services they offer to clients. He pointed out that even the largest ‘robo advisers’ have needed to change their structures in order to incorporate human advisers into their propositions. This is a sentiment I would certainly agree with. It’s clear that change – in the form of tech enhancements and developments – will continue to impact the mortgage industry but it remains a balancing act for intermediary firms in terms of how to integrate these from a client and cost perspective. Technology is there to better support the expertise and knowledge of the adviser and their business needs – not replace them.
Intermediary-related tech
There is a constant stream of launches around systems and solutions to support the intermediary market in terms of front and back office needs. And it can sometimes be difficult to keep track. In recent weeks we’ve seen The Moving Hub launch a conveyancing platform with the aim of supporting mortgage intermediaries, financial advisers and estate agents to better connect with one of the largest panel of vetted solicitors across England and Wales. Legal & General Mortgage Club also recently changed its criteria search system SmartrCriteria, adding a generic search function, hyperlinks to lenders’ websites and the ability to print lender outcomes. Such moves illustrate how all sectors feeding into the mortgage market are constantly developing solutions both inhouse and utilising the expertise of external tech partners. Lenders, distributors and intermediaries are clearly moving in the right direction when it comes to aligning the application and completion process, although there is still much work to be done. The fifth annual intermediary mortgage survey from IRESS found that 96% of JUNE 2019
lenders believe that Open Banking technology will improve the mortgage application process for customers over the next two years, up from six in 10 lenders last year. 96% of lenders in the survey were suggested to offer case tracking, up from eight in 10 (80%) last year, and 65% now provide tracking in real-time. However, the data outlined that intermediaries are calling for more real-time updates that also include progress with valuations and solicitors. Here at Barclays, in response to intermediary feedback, we introduced a new tube map tool to provide a visual representation of where each case is within the application and highlights where action is required. Such tech enhancements will help allow advisers to focus on adding value and increasing productivity whilst getting the best outcome for clients. And forward-thinking lenders should constantly be looking for new ways to improve end-to-end processes, product offerings and service standards to better support the overall mortgage journey.
The influence of technology on branding
The role of tech in the modern mortgage market is not only changing the way we work but, for some, it is also being reflecting in their branding. The Buy to Let Business/Buy to Let Club recently rebranded as Dynamo to reflect its evolution as a fintech business and to demonstrate its client-centric approach across all sectors of the mortgage market. This represent an interesting move and really underlines how important a role technology can play in a variety of businesses. For those firms really grasping the tech bull by the horns, will we see more rebranding to help emphasise this shift? It remains to be seen, but what we can be sure of is that technology will continue driving the mortgage market in many ways, shapes and forms. www.mortgageintroducer.com
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14/05/2019 15:32
Review: People
Insecure managers might be a threat to your organisation I was staggered to read a recent piece of research that claimed that one third of managers feel threatened by talented co-workers. As part of our people development Programme at Brightstar, I facilitate a ‘Leading from the Middle’ programme but I have never considered opening up the discussion about how existing managers feel about having hugely (and more) talented team members. I assumed they would feel delighted and fortunate, but perhaps I am wrong. It is certainly going to be on the agenda for next session as I understand that this could be the root cause of anxiety or potentially negative behaviour. The research findings that I am referring to are from a paper published in The International Journal of Human Resource Management by the University of Salford Business School and Professor Kirk Chang and his research team. He highlighted that managers often ostracise talented staff who they feel are a threat to their own position. The research revealed that just over one third of managers (34%) regarded talented co-workers as a challenge and as a result of this developed feelings of insecurity. Researchers said that this damages worker morale and can lead to demotivation in teams and loss of talented staff. “Ostracism occurs within all types of organisations and affects both individuals and the organisations they work for. It damages a worker’s sense of wellbeing and reduces their commitment to their work and employer,” said Chang. “This is particularly damaging as these staff are obviously talented and should be being nurtured by the places they work, but the fact that managers are threatened by them means they don’t feel part of the team.” Unlike other behaviours that you can see or hear such as verbal or physical confrontation, the research
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Clare Jupp director of people development, Brightstar Financial
JUNE 2019
noted that ostracism by managers towards their subordinates is more subtle in its style and is difficult to recognise. The researchers gave the examples of employees being excluded from invitations to either meetings or social events, having their views ignored, being neglected from team conversations, or even noticing others go silent when they try to participate in a discussion. “Those subordinates who feel ostracised by managers may show less commitment towards their managers, feel less confident and engage in negative gossip about their managers,” Chang added. “Our research findings have affirmed the influence of ‘competence-triggered ostracism’, suggesting that organisations should take competence-triggered ostracism at least as seriously as other more obvious and explicit acts of mistreatment in the work environment.” If managers who feel threatened by subordinates can indeed cause huge damage to the workplace out of insecurity, then it is essential for organisations to anticipate and deal with this issue: there could be managers within our organisations now that appear competent and effective but whom are actually a threat to stability, morale and progress. So what can organisations do to combat the issue of insecure managers and avoid damage to businesses? The researchers suggested “implementing mechanisms that encourage the identification of feelings of ostracism.” I would see that this could be achieved through having an open, supportive work culture and through facilitating a coaching programme where team members feel they can attend sessions and ‘open up’, confide and describe. Providing the opportunity for team members to participate in 360 reviews of their managers could
also allow for problems to be aired, identified and dealt with. Researchers also suggested having a structure whereby team members can work with more than one manager to limit the potential for competencetriggered ostracism. This might be more difficult in smaller organisations, but if team members feel they have more than one ‘go to’ or manager to report to, this might increase the opportunity for them to feel connected rather than ostracised. The researchers also suggested making accessible training and career development information so as to provide opportunities to progress team members. I am a great advocate of the ‘train and retain’ school of thought and I think if you are to keep your best ‘players’, you have to keep them fresh, motivated and present them with new challenges and opportunities. Interestingly, the research made no recommendations with regards to the ‘threatened managers’ themselves. Again, presented with the prospect of a ‘threatened manager’ in the organisation, it would seem sensible to approach, coach and listen to the manager: what is the root cause of this all and how can this insecurity be tackled and alleviated? I would favour the ‘managing in’ approach to begin with; there could be genuine anxiety about job security, erosion of confidence and self-esteem or similar behind this situation. Poor mental health might also sit behind a situation as a much bigger problem. Yes, I am an the eternal optimist who sees potential in all people, coupled with a desire to support them to succeed, but I would also add that if things have progressed too far with no prospect or desire for selfimprovement, then I would favour more formal measures being taken on the grounds of mistreatment, harassment or so forth. The wellbeing of the talented team member would be my absolute priority and there would be zero tolerance of competence-triggered ostracism and indeed of workplace bullying. www.mortgageintroducer.com
“Platform does things differently” Sue Beeston, Broker We’re a little bit different from other lenders. We offer expert support with a human touch, and a simple process that’s transparent and fair. In fact, we do things differently every step of the way. We’ve been chatting with brokers to find out what that means to them. “We consider them almost like partners”
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Our service is built around you and your needs. In fact, we continuously evolve our processes based on your feedback – which we ask for in real time. It’s why we’ve changed the Declaration Form process, introduced a range of new retention products and launched our product transfer.
We know how much you value good customer service with a personal touch. So we’ve increased the number of people in our support teams, to make sure you always get the best service possible. Better still, we’ll answer your calls on average within 30 seconds.^ That’s why we’ve been voted the No. 1 ‘Best Mortgage Desk Team’ for the third time running.*
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Review: High Net Worth
Why a change is better than a rest when it comes to SVRs The last decade or so has seen something of a revolution when it comes to consumers understanding their finances. Financial gurus such as Money Saving Expert’s Martin Lewis have shone the light on financial services and empowered consumers when it comes to taking charge of their financial affairs. Despite the best efforts of some lenders, brokers, regulators and financial experts, there still remains a remarkably high number of borrowers sitting on their lender’s standard variable rate (SVR). In its recent Mortgages Market Study, the Financial Conduct Authority estimated that around 800,000 consumers – 10% of mortgage holders – may be suffering harm as a consequence of being on their lender’s SVR. The report found that on average, a borrower who switches could save £1,000 per year in the first two years – on a new 2-year introductory deal – and around £100 per year thereafter for the rest of the term of their mortgage. For the HNW clients we work with, savings could potentially be even bigger. Why so many borrowers remain on their lender’s SVR is somewhat of a mystery. While some clients will be unaware of the savings to be had by switching to a new rate; others it appears are just too busy to sort out a new loan, or for various reasons don’t prioritise it – high net worth individuals (HNWIs) included.
Peter Izard business development manager, Investec Private Bank
Another way?
Too busy to switch
Interestingly, in their response to the FCA study, some stakeholders felt the regulator’s focus should not be on trying to encourage borrowers to switch when their deal expires but instead address the use of lenders’ introductory and reversion rates. An introductory deal followed by
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a (typically higher) reversion rate has been the traditional pricing model for mortgages. Yet some stakeholders suggested it would be better for the regulator to tackle the differential between the two rates, as this would “better address the root cause of the issue and mitigate the harm to those customers that do not – or cannot – switch”. However, in response to the feedback, the FCA said in its report: “The rates of switching in mortgages are high compared to other financial markets, suggesting that this model works well for most consumers. “We believe it is better to focus on helping the minority of consumers who do not switch when it would be beneficial for them to do so.” While this model might work for the wider mass-market mortgage lenders, at Investec Private Bank we believe it’s better not to follow the crowd, which is why we recently made the decision to remove the SVR on all of our fixed rate mortgages for new clients. Clients taking out fixed rates with us will now automatically be switched onto the applicable Investec Bank Base Rate (IBBR) tracker, with rates determined by specific loan-to-value (LTV) criteria. This could see a borrower move to a reversionary rate of 2.44%, compared with the current Investec SVR of 3.99%. This, we believe, gives the client the extra breathing space often needed when coming off their mortgage rate and contemplating their next move, or if they unintentionally slip onto the SVR/IBBR. HNWIs are often extremely busy individuals, travelling internationally and entwined in their work. As such, even with optimum effort from their private banker and mortgage broker, some clients can too slip onto the SVR at
JUNE 2019
the end of their current deal – even if only for a short period while they switch over deals. There are of course scenarios where a client may choose to stay on an SVR/IBBR for a short period. If for example they have a major liquidity event coming up which they know will put them in a better position to remortgage further down the line, or if they are waiting for the sale of a property or a potentially large
“While some clients will be unaware of the savings to be had by switching to a new rate; others it appears are just too busy to sort out a new loan” bonus from work. It may be that they are moving overseas or starting a new business and as such now is not the right time to commit to a new rate. Such a scenario was recognised by the FCA in its study, with the regulator stating; “We agree that flexibility is a feature that some consumers may consider worth paying for. “For example, if they plan to move soon or where the savings from switching are considered relatively small.” However, it went on to say: “Many inactive consumers have been paying a relatively high reversion rate for more than five years (around 70% of consumers on a reversion rate in 2016) making it unlikely that many are doing so to gain flexibility.” This we believe is even more reason for breaking from the crowd and doing things a different way. Whether it be one or 1,000 of our clients who don’t have the time or means to switch, pro-actively work with clients to secure them a relevant rate to switch onto following the expiry of their fixed rate and reversion to an IBBR tracker rate. We believe this embodies the Treating Customers Fairly initiative and we hope our clients will too. www.mortgageintroducer.com
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01/05/2019 14:49
Review: London
What’s going on with London property? I know, I know, it’s London house prices again. You might think you’re bored of my speculation on the health of our capital’s property market but I’d challenge you to tell me why understanding what’s going on here isn’t relevant to every mortgage broker in Britain. UK house prices are practically a science – we have the Halifax house price index and the Nationwide index, both of which track the average prices of properties they have respectively mortgaged. Rightmove meanwhile tracks the asking prices of properties listed on its website – a measure that indicates how optimistic sellers are feeling about house prices more accurately than it tells us what buyers are actually prepared to pay. The Office for National Statistics tracks the actual prices that every property sold in the UK has gone for – whether it’s purchased with or without a mortgage. But the data takes so long to lodge with the Land Registry that by the time Joe Public gets a gander at it, it’s wildly out of date and not seasonally adjusted. That’s made worse by the fact that on average, house purchases take about three months from offer to completion. This means that any price logged by Nationwide, Halifax and the ONS not only reflects a market that may have passed between one and three months ago – actually, it’s indicating the price sentiment of the market between four and six months ago. Then we have good old RICS, the bastion of the surveying profession and an index that now commands more trust than most of the house price indices put together. Valuers’ outlook on house prices is invaluable as they know what stock is available to sell and what buyers are prepared to pay. But then, it also has its own shortfalls – it’s largely a survey of sentiment, rather than cold hard facts, and the firms that take
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Robin Johnson managing director, Kinleigh Folkard & Hayward Professional Services
JUNE 2019
part vary month-to-month. All in all, it can be tough to really get a grip on what’s actually going on in the property market – especially when brokers tell me constantly that it’s really not as bad out there as the headlines would have you believe. Nationally, house prices are holding up with all indices showing growth over the past year. In London, it is a slightly more subdued story. Savills’ analysis of the London prime market shows that values at the top end of the market have fallen since the Brexit referendum, but by how much depends on several factors. Properties located in catchment areas with good schools have seen strong valuation resilience, as have areas where transport links have been developed to offer commuters greater access and flexibility. Super prime properties have also seen a bit of a bounce in the first quarter. Research by London Central Portfolio put average annual prices in April in prime central London at £1.93m, a rise of 13.2% over the quarter. New build is going through an interesting change – widespread development of land, particularly next
to the river completing at once has sent a glut of new build flats to market at once, depressing price growth despite fairly consistent demand from both domestic and international buyers looking for investment properties. The LCP analysis puts average new build prime prices in greater London at £714,297, representing a 21.8% premium over existing stock and an annual increase of 14.4%. However, new build transactions are falling much faster than existing stock at 15.2% annually, to 12,900. Why does all of this matter? Well, as a nation whose wealth is to a large extent tied up in property, values matter. They make us feel richer or poorer and that feeling drives behaviour. With Brexit negotiations continuing to drag, uncertainty is putting a downward pressure on how we’re all feeling about our wealth, how confident we feel about investing in property or in moving house. It is undoubtedly having an effect on house price inflation. But the numbers tell the story of fact. And the fact is that prices are generally holding up. We are not about to see a flood of new builds enter the market. Good properties in the right areas are still attracting buyers and selling for good prices. What happens in London isn’t the be-all and end-all for the wider property market, but it is a good bellwether.
www.mortgageintroducer.com
Review: Help to Buy
The impact of price caps on Help to Buy remortgages Help to Buy has been back in the papers over the past month or so, with various titles pointing out that time to take advantage of the government-backed scheme is running out. At the moment, the scheme allows both first-time buyers and homemovers purchasing a new build worth up to £600,000 to apply for a government equity loan of up to 20% loan-to-value across England, with a much larger 40% equity loan available to those buying in London. From April 2021 these allowances will drop, hitting buyers in the north of England disproportionately hard. In London, the cap will stay at £600,000, but in the North East it will be cut to £186,100 and to £224,400 in the North West. According to data compiled by Hamptons International, and published in The Times, the average new build home sold last year in the North East was above the cap at £208,220. About 53% of new build homes in the region would be too expensive for Help to Buy if the caps were introduced now, without factoring in projected property price rises of just over 7% between now and the end of 2020. Last year about 44% of new build homes sold in the East Midlands for more than the region’s price cap of £261,900, while 43% of new-builds in the West Midlands would breach the caps and 40% in the North West. The government is introducing these regional price caps for a number of reasons, not least in response to widespread allegations that Help to Buy has not only helped thousands of borrowers on or up the housing ladder but also helped builders to guarantee sales and make big profits. Particularly in areas of the country where average house prices fall well below the £600,000 maximum property value, you can see the logic of introducing price caps. It does not seem too big a stretch www.mortgageintroducer.com
Stuart Miller customer director, Newcastle Building Society
to hope that they will mitigate the so-called new build premium in areas where it’s a particularly acute problem. It could also encourage builders to build more two-bed properties that fall beneath the price cap and are, arguably, more suitable for more types of homeowner than five-bedroom executive homes. However, as with all big policy changes, beware the law of unintended consequences. These value caps will apply to new Help to Buy loans; the question is, how will they impact on Help to Buy remortgages? We are already in a market where lender appetite to provide remortgage options to Help to Buy borrowers is limited. There are plenty of straight remortgage options where borrowers choose to repay their equity loan in full and they have managed, though a combination of repayment and house price inflation, to build up a sufficient cushion of equity to afford a standard deal. There are far fewer options for borrowers who bought with the equity loan and would like to remortgage their mortgage and part of
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their Help to Buy loan. Despite some pressure from government encouraging lenders to support this remortgage market, especially where staircasing is desirable, it remains a niche product. It will be very interesting to see whether, where and how it is further affected by this latest move. And what will become of customers who have already borrowed up to the maximum – or even just over the impending cap – and fail to find a lender who will move them to a new Help to Buy deal after the cap is brought in? Surely the government does not want to see these borrowers, people it has been so proud to help realise their dreams of homeownership, passed unceremoniously onto an SVR where their payments rocket and affordability plummets? It’s not yet clear what the government’s stance on this will be. It is also unclear how lenders will react to it. What is certain however is that it will have a critical bearing on the personal finances of potentially hundreds of thousands of borrowers who have benefitted from the Help to Buy scheme over the past six years and who will buy with its help over the next two. There is an important role for brokers here; working out what borrower options are early could save them hundreds of pounds when it comes time to remortgage.
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04/06/2019 10:38
Review: Awards
It’s my turn for a u-turn Margaret Thatcher wasn’t for turning and Cher had a go at doing it with time so, clearly, trying to reverse things can be a complex area to negotiate. We have all been lost at some point in our lives and certainly before the invention of SatNav or Google. Lost in a car or in an unfamiliar City, turning an incomprehensible map any which way to find some form of semblance. What generally happens at this point is the arrival of the normally dormant I Will Find What I Am Looking For Even If It Kills Me gene. And off we all went, confidently meandering down roads that slowly became darker and quickly became narrower until we arrive at a dead end with a scary looking shack and where we’d come face-to-face with a toothy kid playing the banjo on the veranda. The moral of the story is, sometimes it is better to recognise early on when you have gone down the wrong street rather than blindly hoping it becomes the right street in due course. Blind faith will not change the name of any road that you are on regardless of how hard you may try. These lessons can be transferred into business and into specific areas or our industry as well. And if you’re wrong its best to admit it as early as possible, even more so if you’re struggling to find someone else to pin it on. And I can’t pin this u-turn on anyone, trust me, I’ve tried! I am talking here about the polarising issue of industry awards. I have been vocal, opinionated and contrarian when debating the plethora of awards that we have in the mortgage sector. I have also been disparaging and patronising and while much of that is genuinely delivered tongue in cheek some words can be misdirected and land where they shouldn’t have and cause offence, or worse, hurt. As usual, it has taken a woman to make me see the error of my ways. At our recent Money Group mid-year www.mortgageintroducer.com
10:38
Martin Stewart director, London Money
meeting I got talking to Steph Whiting from South Yorkshire Money. You may not know who she is but trust me, you soon will. I have never seen a broker want success quite as much as she does. She is insatiable in her quest to be the best she can possibly be and will take no prisoners with her along the way. Steph was asking me how she could gain recognition in the industry, what did she have to do to get known when there is so much background noise going on. I jokingly replied that she could set up her own awards ceremony, nominate herself and then make sure she was on the judging panel. Yeah, that turned out not to be quite as funny as it sounded in my head and it just served to ignite the blue touch paper. Ten minutes later and Steph has chewed one of my ears off and quickly moved on to the other. It was at this point that she said ‘it’s important to me, this IS for me’. And she said it in such a sincere and impassioned way that it dawned on me that I had been wrong and the wider industry had been right.
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You see, award ceremonies aren’t there just to get drunk, slap backs and find out some gossip. No, they are there for the Steph’s of the world. The ones that diligently do a difficult job in trying circumstances and sometimes for very little or even no money whatsoever. They are there so that an award can taken home and placed on a shelf, shown proudly to the kids in the morning, shared on social media and set as benchmark not only for themselves but to colleagues as well. A small ripple of appreciation from above that seeps down into the real work that brokers do at the coal face. And just because it might not be important to me it doesn’t mean that it’s not very important to someone else. So while I wait for a date for my cosmetic ear surgery I ask that we all be allowed a u-turn in life once in a while. If not, I may need to don a leotard and black fishnet stockings to straddle a US naval gun in the hope I can turn back time. I suspect, and hope, forgiveness may be easier to stomach than the thought of me dressed like that.
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Review: Buy-to-let
The value of experience Just recently – and I don’t wish to blow my own trumpet – I picked up an industry award for outstanding contribution to the specialist lending market. It was, of course, a very nice accolade to pick up and I think reflected far more on the quality of the entire team at Fleet, rather than myself individually. After all, we’ve had an interesting start to the year to say the least and I think it is truly testament to their hard work that we’re in a position to pick up such awards. Part of me, however, does tend to think that if you hang around long enough, the chances of you getting such awards is greatly enhanced. And here is where I would provide a tip to Award organisers – put the winner of your ‘Outstanding Contribution’ award on a table close to the stage, otherwise you might be waiting a long time for them to get up and collect it. I josh of course as anyone who saw me bound up on to the stage recently will testify (!) but, there’s no doubt, that not just looking around the room but also the entire industry, it’s pretty obvious that I’m close to being the oldest person currently doing my job. And – while you might think ‘he would say that’ – I think there is much to be said for having people running businesses and firms in the mortgage market who have been around a fair amount of time. I’ve talked before about the value inherent in having individuals active within a business who have a large amount of ‘corporate memory’, especially if they’re in decision-making roles and can draw upon that experience when faced with situations
Bob Young chief executive, Fleet Mortgages
“Looking around the intermediary community, it’s hard not to think that we have an ageing population” 16
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which they might have seen raised time and time again. There’s no doubting that every business needs fresh blood of course – again, looking around the intermediary community, it’s hard not to think that we have an ageing population. Perhaps even more so in the IFA market, where one would hazard a guess that the average age of advisers is at least 50-plus. In the mortgage market I would suspect that it’s slightly less but that’s not necessarily the case when it comes to lender executive teams or others who might be behind various industry initiatives and changes. Young, motivated individuals without doubt provide plenty of impetus and can drive projects forward but if you’re on the wrong track at the start, the right destination is always going to be out of reach. But, I digress. What I’m trying to say is that individuals who are (shall we say) somewhat ‘long in the tooth’ when it comes to our industry should, in my opinion, be nurtured and held onto. You cannot buy or suddenly acquire the type of experience which could make all the difference when it comes to making either the wrong or right decision. Now, there are of course plenty of people in the industry with ‘experience’ and still that’s not always enough. You might have 30 years of experience in this market or you might just have repeated the same year 30 times over, which is no good to anyone. If you’re the latter, then you do not have the depth or breadth of knowledge to be able to steer a business through a troubling time, learn from it, and put into action the necessary measures to push on from it. Being in this business long enough, you do start to see mortgage ‘fashions’ return, primarily because the corporate memory that existed back then has either left the firm or retired completely. I have no doubt – although the regulator might have
“We need to ensure that we have plenty of opportunities for new starters to work in our firms and to develop their skills” a lot to say about this – that at some point in the future we will see the return of 100% LTV mortgages, or some bright spark might suggest that self-certification mortgages for the employed looks like a good idea. It’s almost inevitable although perhaps they won’t actually make it to market and will be scuppered close to source. Let’s hope. However, without those older, more experienced individuals in a business, those mistakes of the past are likely to be repeated, and it would not take a genius, or someone who has picked up an Outstanding Contribution award, to tell you where this might end up. Anyone who was around back in 2007/8 and the immediate years following this, will know only too well. So, of course we need to repopulate our businesses, we need to ensure that we have plenty of opportunities for new starters to work in our firms and to develop their skills, and there’s no doubt that the energy and drive these people can provide, can take us on to new levels. But let’s not discount those who may appear to be part of the furniture but can offer counsel, experience and expertise to ensure not just that mistakes are avoided, but that new channels/products/services can be offered. There’s nothing to say that an idea from 20 years ago couldn’t work – perhaps it was merely badly executed – but make sure you listen to those who might have been around back then and ensure that whatever you do in the future, it has the best chance of success for generations to come. www.mortgageintroducer.com
Review: Buy-to-let
Later life lending for landlords Research shows that in 2018 over half (59%) of England’s landlords are aged 55 or older and one third are retired. Buy-to-let lenders have started to incorporate the market’s age demographic into their lending policies by identifying the pitfalls for later life applicants and then making the changes to remedy this. Lenders impose a maximum number of years an applicant can have a loan for and so for older applicants the loan term may be restricted. This in turn could affect the affordability of the loans as shorter terms might equate to higher repayments. It is worth checking how lenders assess affordability, particularly whether state pensions are considered when calculating minimum income. Lenders are changing their criteria to make buy-to-let finance more accessible to older landlords. There are
www.mortgageintroducer.com
Jane Simpson managing director, TBMC
also longer-term fixed rates up to 10 years which can offer affordability relief and security of monthly payments. Variable and lifetime products may also provide a solution. Pensions including private, widow’s and war pensions are becoming more widely accepted by mortgage lenders and existing landlords may also be able to use rental income in their income credentials. The buy-to-let remortgage market is very healthy, accounting for around 65% of enquires at TBMC and presents a great opportunity for intermediaries. Remortgaging applications may include capital raising – borrowing funds above those currently owed to an existing lender for other uses. Where your client has equity available, raising additional funds through a remortgage might pro-
vide a solution to their modern financial needs.Your client will need to disclose what they intend to do with the capital raised as lenders will want to know where their funds are goings and that they’re being used appropriately. The client may need to provide evidence too. For an onward purchase, a decision in principle illustration may be requested. Credit slip-ups might also affect a buy-to-let landlord’s options when it comes to new lending. Lenders usually give a clear breakdown of the adverse limits they will accept. Checking your client’s credit report gives you the facts needed to source the right lender before adding any unnecessary credit searches to their current file. Often these scenarios are subject to the underwriter’s discretion.
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Review: Buy-to-let
Opportunities in the buy-to-let sector The ushering in of the 2019 Tenant Fees Act marks yet another important date in the history of the buyto-let sector. As we’ve seen in recent times, this integral component of the wider mortgage market has come under even greater regulatory scrutiny. However, despite some obvious challenges, it continues to evolve and provide a wealth of opportunities for the intermediary market.
Ying Tan founder and chief executive, Dynamo
Later life lending
Shifts in life expectancy, the rising age demographics of first-time buyers, second steppers and the borrowing requirements of those in ‘later life’ has led to many lenders eying this market with increased interest. And this also extends to investors. Data from Commercial Trust Limited revealed that there was a surge in the number of older buyto-let investors during 2018. Comparing buy-to-let mortgage applications by age demographics, just two brackets increased their proportion of overall applications during 2018. 25-34-year olds recorded a tiny increase of 0.03% but the stand-out group was those aged 65-75 years, who increased the proportion of buy-to-let applications by 5.43%, when compared to 2017 data. Commercial Trust also reported a 4% increase from 2017 to 2018 in the proportion of buy-to-let purchases and remortgages from the over 55s. Last year, this age group represented 39% of this buy-to-let activity, having accounted for 35% in 2017. The numbers were even more
Top slicing
“Criteria changes have been implemented by both mainstream and specialist lenders across much of the buy-to-let marketplace, meaning intermediaries need to be up to date”
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marked when considering purchaseonly applications; in 2017, over 55s were responsible for 21.7% of this type of business at Commercial Trust. That figure rose to 29.7% in 2018, representing an 8% year-onyear increase. This trend for a greater proportion of older buy-to-let mortgage applicants has been widely recognised by lenders. We have seen age restrictions for buy-to-let applicants rise, and this is also the case for maximum ages permitted at the end of the mortgage terms. These criteria changes have been implemented by both mainstream and specialist lenders across much of the buy-to-let marketplace, meaning intermediaries need to be up to date on changes in individual lending policy or criteria where possible. Or – at the very least – ensure they have a relationship in place with specialists who are ready, willing and able to support their clients throughout this sector.
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Buy-to-let lenders have been forced to impose stricter affordability tests as a result of the Prudential Regulation Authority, but they have also worked on their product ranges to help borrowers in other ways and remain highly competitive in extending their support for landlords, investors and developers. Top slicing is one such example of how some lenders are looking to help more borrowers access suitable financing and optimise investment opportunities. Precise Mortgages recently made the move to accept top slicing on all eligible personal ownership, limited company, portfolio, HMO, holiday and student let applications. First-time buyers are excluded. This means that buy-to-let borrowers will be able to use surplus portfolio or earned income to demonstrate that they could meet any financial stresses on their new prop-
erty application, rather than through the rental income of that property alone. Top slicing may not be the right solution for all landlords, but it does highlight how lenders are having to adjust their product ranges to cope with shifting landlord demands and challenging economic conditions. Will all lenders move in this direction? It remains to be seen, but the wider variety and greater depth of responsible finance options that are available to landlords and intermediaries, the better it is for the housing market as a whole.
Limited company lending
When evaluating the overall buy-tolet sector, the latest data from UK Finance outlined that there were 5,000 buy-to-let home purchase mortgages completed in March 2019, 9.1% fewer than the same month in 2018. However, remortgaging levels were suggested to have increased year-onyear for the second month in a row, up 3.9% when compared to the same period last year. In a similar vein to the rest of the market, dynamics are also changing when it comes to buy-to-let remortgaging. The percentage of buy-to-let properties being purchased through a limited company vehicle has grown rapidly over the past 12–18 months and I expect this tendency to only increase further. This is illustrated in recent Foundation Home Loans/ BVA BDRC research which revealed that one in three portfolio landlords expect to remortgage in the next 12 months, with almost one in five saying they will do so within a limited company. When asked how they intended to remortgage, 51% said they would do so as an individual, 17% said they would do so within a limited company, while 16% said it would depend on their circumstances at the time. Remortgaging clearly remains a very important driver of business for mortgage intermediaries. Looking forward, plenty of opportunities will continue to emerge, especially for professional landlords who will benefit from heightened competition and a wealth of limited company options in both the purchase and remortgage market. www.mortgageintroducer.com
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Review: Buy-to-let
Dancing to the tune of buy-to-let Is buy-to-let really ‘livin on a prayer’? I know it’s difficult to believe but as a child of the 80’s its tough to stop my mind wandering back to those good old days even whilst working my way through a tranche of data. And the messaging in the latest landlord research – undertaken by BVA BDRC in conjunction with Foundation Home Loans – managed to take me on a whole 1980’s musical magical mystery tour.
Jeff Knight director of marketing, Foundation Home Loans
Never Gonna Give You Up – Rick Astley
Funnily enough, as with most events in my life, it all kicked off with Rick Astley. Many landlords are ‘never gonna give up’ on their portfolios. The mass exodus of landlords predicted by some commentators – the majority of which were not directly involved in the mortgage market – has not happened. In fact, many landlords we speak to are more committed than ever to maximising their portfolios and potentially growing them. The research outlined that landlords, particularly those portfolio landlords with more than four mortgaged buy-to-let properties, not only want to expand their portfolios in the years ahead but are focussed on earning rental income from these properties over the long-term. When asked what they intended to do with their portfolios in the longterm, 41% said they would continue to earn income from it, 26% said they would use it to generate an inheritance for family members, 19% said they would sell some but not all properties, while 17% had no fixed plans at this stage. These results were in line with another section of the Q1 2019 research which suggested that over half of all landlords had no plans to leave the private rental sector in the next few years, and only 18% intended to reduce their portfolios in the next year – a quarterly drop of 5%.
Wherever I Lay My Hat (That’s My Home) – Paul Young
Ok, I admit that I might be stretching this analogy a little here, but the research also showed that 77% of all landlords said either all, or more
Opportunities (Let’s Make Lots of Money) – Pet Shop Boys
With more landlords purchasing
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through a limited company – and opting to remortgage properties held in their own names into this structure to claim full tax relief on their mortgage interest payments – remortgage activity through this vehicle type will naturally grow. A factor illustrated in the research. It showed that portfolio landlords are more likely to be refinancing over the course of the next 12 months, however 29% of all landlords did take out a new remortgage in the last year. When asked how they intended to remortgage, 51% said they would do so as an individual, 17% said they would do so within a limited company, while 16% said it would depend on their circumstances at the time. It was also interesting to see that nearly a third of all landlords took out a remortgage last year, and a similar number are expected to remortgage in the next 12 months. This clearly remains a very important part of the market for mortgage advisers and, looking forward, there should be plenty of opportunities to provide quality remortgage advice in what has become a more complex and competitive marketplace.
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than half, of their rental properties were within a 50-mile radius of where they lived, with a further 4% saying about half of their properties were within this locale. Things did shift a little though for portfolio landlords, as the number having all their properties within a 50-mile radius fell to 63% for this portion of the landlord community, while only 55% of those with over 20-plus properties were in a similar position So, whilst we have heard many tales about landlords looking further afield for stronger rental yields – especially towards the Northern regions – this is not always the case. Although, in the case of portfolio landlords, the regional door remains further open to spreading their portfolio risk in terms of location and property type.
True Faith – New Order
Overall, portfolio landlords are showing serious ambitions for the future, while holding relatively low levels of mortgage debt and therefore risk for lenders. The market value of their portfolios is solid, as are annual rental incomes. In Q1 2019, the typical landlord achieved a rental yield of 5.8%. This is up slightly from the three year-low recorded at the end of 2018. Landlords operating in the North East achieved the highest average rental yield at 6.7%, landlords in outer London had the lowest at 5.3%. In addition, 19% of landlords said they had seen an increase in tenant demand over the last three months, down 5% from the last iteration of the research. 37% had seen no change, 21% had seen demand fall and 22% were unsure. Those landlords in the Midlands are currently reporting the strongest tenant demand in the UK. All of which serves to highlight why such faith is being shown in the medium to longer-term value of the buy-to-let market, and as innovation increases and competition gets fiercer – don’t worry just take our hand we’ll make it I swear. www.mortgageintroducer.com
Review: Buy-to-let
Top slicing can give your customers more choice It’s no surprise that landlords have been flocking to 5-year fixed rates in recent months. The combination of uncertainty around Brexit, the looming prospect of further base rate increases and the introduction of stricter affordability testing has seen numbers soar. The latest figures show there was a 14% rise in 5-year fixed rates during the final quarter of 2018 – up from 70% in the previous quarter to 84%. While locking into a 5-year fixed rate mortgage is great for those landlords looking for rate security, what about those investors who want the flexibility and choice provided by shorter-term mortgages but can’t get the product they want? Those who are being prevented from doing so because the rental value of their property means they can’t achieve the loan size they need. We were one of only a handful of lenders to stick our head above the parapets and offer top slicing following the introduction of stricter stress-testing affordability rules. We’ve now taken this a step further by extending it across our entire buy-to-let range, so as well as personal ownership, we now accept applications from portfolio landlords and limited company structures, even holiday lets and refurbishment buy-to-lets. It means even more customers can secure the buy-to-let loan size they want by using excess disposable income made up from their earned disposable income, surplus portfolio rental income or a combination of the two to demonstrate they can meet financial stresses. This is provided the rental income on the property they are looking to purchase meets a minimum 110% interest coverage ratio (ICR) at pay rate. Imagine you have a customer with two buy-to-let properties. They’re reaching the end of the incentive period on one and considerwww.mortgageintroducer.com
Alan Cleary managing director director, Precise Mortgages
ing their options. They don’t want to be tied in for more than two years, however with many other lenders, they’d be limited to a 5-year fixed rate product in order for the rental income to meet the ICR. The greatest benefit with our top slicing option is you now have choice. Assuming the property meets the 110% ICR threshold and there is sufficient disposable earned income to demonstrate they can meet any rental shortfall, 2-year fixed rate products now become an option. Top slicing can also provide portfolio landlords with greater flexibility around how they manage their portfolios. Unlike many lenders we take portfolio income into consideration. So for landlords who may be looking to purchase a new, relatively lowyielding property for capital growth but who are struggling to achieve the loan size they need to buy the property, our top slicing proposition means they now have options We take surplus portfolio rental
income into account, allowing more of your customers to get the loan size they need to expand their portfolio. Better still, where the surplus income used to assess financial stress is taken solely from portfolio rental income, we won’t ask for any additional proof of income. We’re able to do this because we take a comprehensive view of customers’ circumstances, looking at each application carefully and assessing each case on its individual merit. In these challenging times for the buy-to-let market, it’s vital that customers are given as much choice as possible and have access to the products that meet their needs. These are niche products and underwriting these loans – especially where staircasing is involved – takes experience and time and the ability to take a view on individual cases. We’re ready to work with you – are you?
“Top slicing can also provide portfolio landlords with greater flexibility around how they manage their portfolios”
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Review: Protection
Get all your ducks in a row The situation around income protection and means-tested state benefits remains a grey area but progress is being made. Advisers need to be clear with clients that risks may exist, rather than avoiding the discussion, warn experts. The state simply won’t provide. Richard Walsh, fellow SAMI Consulting and co-chair of the Building Resilient Households Group, says: “Last year we achieved considerable clarity from DWP on how customers who claim Universal Credit (UC) can expect insurance payouts to affect their claim. “Term life and critical illness payouts used to pay off a mortgage are now fully disregarded. But before the money is actually paid to the lender the claimant still has the capital and will therefore not be entitled to UC. “Income protection insurance which is intended and used to keep up mortgage payments should also be fully disregarded. While this
Kevin Carr chief executive, Protection Review and managing director of Carr Consulting & Communications
does leave some issues for all three products the picture is much better than before. This is very important for customers as the state no longer provides benefits for mortgage payments. Insurance against income shocks is critical to long-term affordability.” Here’s what we know right now: Nothing is completely water tight but if the product is intended to be used for mortgage repayment (and stated in the T&Cs that it can be), has ‘mortgage’ in the title of the product, and if the benefit is being paid directly to the lender, there ‘should’ be no impact on the client’s state benefits. It may also help if the reason why letter from the adviser (and any recorded calls) also make it clear that the policy was intended for mortgage repayment. The grey areas arise if the policy doesn’t satisfy the above conditions but is being used to pay a mortgage nonetheless.
The only thing certain is uncertainty Job security concerns amongst homeowners and parents are pushing consumers to favour comprehensive income protection over standalone unemployment or accident & sickness cover. This is heightening the need for advice, according to a new report by data and analytics company GlobalData. How Customers Purchase Income Protection 2018 reveals that comprehensive cover accounted for 42% of UK consumers’ IP purchases in 2018, an increase of 9.4% points from 2017. This now just overtakes Accident & Sickness cover at 41.2% and, by a bigger margin, unemployment cover at 16.8%. IP was most popular amongst adults with responsibilities, with 64.8% of purchasers having children and 68.8% owning a house with a mortgage. Ben Carey-Evans, insurance analyst at GlobalData, said: “Brexit uncertainty has had a knock-on effect on the way
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consumers have been purchasing income protection. Price comparison sites were the leading channel in 2017, but declined significantly in 2018.
“IP was most popular amongst adults with responsibilities” “This has seen broker and bank channels in particular, pick up large chunks of business in 2018. “Customer preference moving away from the single lines of accident and sickness and unemployment to comprehensive cover has heightened the need for people to receive advice. “While the more simple lines can be bought through comparison sites, comprehensive policies are more likely to require the consumer talking to someone, whether that is a broker or someone at a bank or insurance company.”
News in brief • RAIG Life’s simple versions of life and critical illness cover (CIC) will be made available to Skipton mortgage customers under a new partnership arrangement. • Guardian has removed the option to add fracture cover to its life and critical illness policies, as it was unable to offer such protection without general exclusions. • IP provider Holloway Friendly has launched an interactive eBook, which includes insights from advisers, product specialists, marketers and underwriters on how to get the most out of IP as an industry. • Legal & General (L&G) has made a number of updates to its IP proposition, including the removal of alcohol and drug exclusions, an increase in the overall maximum benefit limits, the introduction of an income guarantee for specific NHS workers, and extended nurse support services. Separately, L&G announced that it paid 93% of its CIC claims in 2018. • PRIMIS Mortgage Network has adopted iPipeline’s protection sourcing solution across its network. SolutionBuilder is a protection research, quote and apply tool that allows advisers to compare all protection needs within a simplified and responsive user interface. • Sesame Network and PMS Mortgage Club, part of Sesame Bankhall Group, have launched its Rewire Routines campaign (from 4 June – 24 June) to help improve advisers’ protection conversations with their customers. • The nine members of the Association of Financial Mutuals (AFM) that offer IP products paid 94.4% of all claims received in 2018, the bulk of which were for musculoskeletal conditions.
www.mortgageintroducer.com
Review: Protection
The alternative to no cover There can be no doubt that the most powerful sales tool at our disposal when it comes to selling protection policies is personal experience. If you see a client who has suffered a serious illness, bereavement, or extended time off work through ill health or injury, your job becomes infinitely more straightforward. “Disturbing the need” as we used to call it within these customers simply isn’t necessary. They’ve seen how quickly one’s finances can go south if a safety net isn’t in place. Given this, I think it’s important that we talk about our own experiences when reminding one another that life insurance is more than just a chore at the end of the mortgage deal. So, here’s my sobering reminder which I hope will resonate. At the beginning of the month my motherin-law arrived at my front door in an emotional state. Having calmed her down slightly, she told me that my
Phil Jeynes head of sales and marketing, UnderwriteMe
wife’s cousin, Tim, had died the previous night. This information didn’t immediately register. Tim was the same age as my wife and I, as a close family, we knew he wasn’t ill, in fact he’d always been extremely healthy; he didn’t even drink most of the time. It turns out that Tim had come off his motorbike on his way home from work and been killed instantly by a car coming in the opposite direction. The exact circumstances of the accident are yet to be clarified but, frankly, what difference does that make? The fact is that a family has lost a son, brother, partner, step-father, cousin and any number of other relationships for the vast interconnected web of loved ones Tim leaves behind. Of course, our products offer no comfort to those grieving and can give no sense nor purpose to this tragic waste. But what they can do is
stop that suffering extending beyond its already horrific extent. Tim’s partner and step-son must not only mourn his absence but must also assess their ability to stay in their home, maintain their lifestyle, finish their education in the face of a sympathetic but implacable group of lenders, creditors and service providers. Moreover, their extended family feels this weight; worrying about them as they also contemplate their own feelings of grief. What a privilege it is to be able to remove this small but significant burden from a family’s shoulders in their darkest time of need when they call on you. The alternative: confirming that they have no cover, that they’re on their own, doesn’t bear thinking about. Which conversation would you prefer to have with your customers in the years to come?
Make client retention part of your day Our 2019 Rewire Routines campaign is up and running with the aim of helping advisers to create and maintain healthy habits. Having regular protection conversations is central to this but the thinking behind our campaign runs much deeper – and for good reason. One of the most important strategic issues for any advisory firm to think about is the customer data they hold and the need to be the primary controller of that information. A mortgage will often be the primary reason why an adviser is speaking to their customer, but the reasons for advisers to think about all the items connected to the mortgage are becoming increasingly compelling. Whether it’s protection, general insurance, conveyancing or a private survey, it’s crucial for advisers to make sure that if the customer is going to do any of these things then you as their adviser rewww.mortgageintroducer.com
tains control. The alternative is for the customer to go to an aggregator, who I can promise you will make the effort to keep in touch and make full use of the customer data they collect. This means selling them new products and services, which could ultimately lead to you losing that client altogether. The way to combat this is to form new habits that help to retain control of the client relationship and the data underpinning this. This means being in regular contact with customers. It could simply be a question of asking if they’re okay, reminding them how you helped last time and enquiring as to whether anything has changed in their life that might necessitate a conversation? So why is this so important, and why now? One reason is the increasing popularity of longer-term fixed rates. In the past, general industry complacency probably meant that advis-
Jeff Woods campaigns and propositions director, Sesame Bankhall Group
ers could get away with a two-year gap before contacting the customer again, but waiting five years and still expecting the customer to be there is out of the question. However, creating the habit and routine of staying in touch with customers will help to combat these new competitive threats, so that at the point in life when they need help with their finances then you’re the first person they think of and go to – a true adviser and client relationship. And with the new adviser technology now coming to market, there are more ways to make it easier to do it. As their trusted adviser, you’ve already demonstrated to your customers the valuable job you can do for them. In many ways you’ve already done the hard part so now it’s about keeping in touch in order to retain that relationship long-term. It just needs to become a regular habit.
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MORTGAGE INTRODUCER
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06/06/2019 11:58
Review: Protection
The threat of the direct to consumer market D2C propositions have undoubtedly had a large impact on what many see as the complex area of investments. While the traditional IFA model far outweighs the ‘direct’ model there have been some clear success stories with the likes of Hargreaves Lansdown continuing to grow. Politically, there have been regulations which could have been seen to drive these levels of ‘self-investment’. In reality, post-RDR and client segmentation, the amounts to be invested as a result of say pension freedoms do not always fit with IFA ‘ideal customer profiles’. In many cases it would be uneconomic for IFAs to advise clients with relatively low levels of capital to invest. Technologically, it’s still very early days in the digitalisation of personal investing and mobile devices will be the key to this in the future but that does not also fit the profile of the typical age of investors. Some would argue that the investment market is beginning to see younger people investing and efforts are going on to guide the inexperienced investor into appropriate portfolios – probably very simple ones. So, in short, engagement remains low and the digital journey continues and what might be the potential large players have worked out that building an app isn’t enough in itself to get the UK population engaged in making important investment decisions however much they try to simplify portfolios. So what lessons can we take into the protection market and what can we learn? In the recent Gen Re review of Protection Sales in the UK in 2018 we saw that the advice channels (that is truly independent and restricted) both grew and made up by far the majority of total annual premium sales. However, as in the investment sector there is some level of ‘creep’ into the ‘non-advised’ sector and advisers www.mortgageintroducer.com
11:58
Mike Allison head of protection, Paradigm Mortgage Services
should not be complacent in always thinking customers will wait for them to come along and advise them on their protection requirements. Are we to infer from this that there are consumers out there who want to access protection products but cannot find ways to do so, thus they have to search to find it? It certainly seems so. As the RDR evolved we saw that, due to customer segmentation, some advisers could not physically and/or economically deal with some sectors of the public – this may be the case in the protection sector. As ever though, there will be an element of ‘middle ground’ where existing customers of broker firms will want to purchase life cover, potentially due to a lifestyle event, but may not know how to go about it and therefore end up taking the non-advised direct route. As we move increasingly in to the area of ‘big data’ and significantly enhanced consumer research in the protection sector, we are beginning to understand the drivers of protection purchases from a consumer perspective better than ever before. Every adviser has heard the old adage that protection needs to be ‘sold’ rather than bought’ but with the constant reduction in the number of financial advisers – through a
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combination of retirement and lack of significant and sustained recruitment into our industry – a major issue is, where do those who need advice get it from? The Office for National Statistics recently gave us some quite stark changes regarding the behavioural changes in the population of the UK. Fewer people are getting married now than ever before and more children are being born outside of marriage/civil partnerships. In effect, what was traditionally seen as the ‘lifestyle’ events which may have driven the need for house purchase and/or the reason to seek advice from a broker, are dwindling. Plus ‘Generation Rent’ is well and truly here to stay with the private rental sector catering for almost five million households – many of those being unable to get on the housing/ mortgage ladder. The message is that there are lots of people out in the UK population who will be able to afford protection, who fit the profile of an almost perfect protection client, but who due to a lack of contact, communication or education from an intermediary perspective don’t know where to go to get advice and therefore either do not have it or turn to different channels to buy. All intermediaries are far better placed to offer quality advice on all aspects of protection and they therefore need to stop hiding their lights under the proverbial bushel before the direct channels take a greater hold.
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Review: Protection
Time to get critical It’s never an easy conversation – there’s rarely an obvious segue to go from congratulating clients on their new mortgage agreement and then their new home to asking them what they’d do if they couldn’t afford to live in it. Or what they would do if they couldn’t pay the mortgage. Or what they’d do if they could afford the mortgage but couldn’t afford to pay the utility bills or the weekly shop at the supermarket. But these are probably the most important questions that you could ask them. Because all that you and they have just achieved in securing that mortgage loan and finding that new home is of nothing and can crash around them if they lose their means of earning a living because they are too ill to work. It should, really almost be compulsory – that we have life insurance, critical illness and income protection insurance – or some combination of them. But it isn’t and so it falls to the likes of you and me, as our client’s mort-
Steve Ellis head of risk and protection, Premier Choice Group
gage broker or healthcare intermediary to talk to them as if it is. But no-one wants to hear it and everyone thinks it’s a probably unnecessary expenditure that they can ill afford to pay out £50 or £100 – or quite possibly and surprisingly for them, a lot less to insure against the danger of losing everything they have worked for. It therefore likely won’t work to quote some new research at them but while you are wasting your breath you may as well give it a go. A new angle on why they should throw good money at an eventuality that they are determined will not befall them is that 75% of people with a serious illness spend more money on basic necessities due to their health condition, 39% will see an increase in their travel costs, 37% will see an increase in their medication cost and 24% will see an increase in expenditure on home adaptations consequent on their changed physical needs post getting a serious illness. These statistics come to us from Direct Line Life Insurance.
Being mentally aware is mentally sound Last month featured mental health awareness week – the press was full of angles and initiatives from all quarters addressing the issue. Insurance providers and financial companies in general were all over it focussing on employers a lot of the time – getting them to recognise when staff have mental health issues and how they can help them. You could argue that it’s not for the employer to step in, but you could also argue that if work is impacting on the employee’s mental health then there is a responsibility on the part of the employer. Even if it’s something outside of work that is getting to the employee or it is something inherent, then for no other reason than the bottom line if that employee is not performing or can’t work at all, the employer should do something to help. You yourself, reading this, could also argue that while employers might have
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to do something – as a mortgage broker you are well in the clear. But think again – because mental illness is as debilitating as any physical condition can be. It can stop clients in their tracks as much and in some cases more than a physical condition might. So, while mental health awareness week, for the cynic, was a good opportunity for insurers to tout their wares – there was method in the madness if you will. Insurers offer a lot of features and facilities in and around their insurance products to help businesses and individuals in addressing their mental health needs. It behoves us all to spend a little time assessing what is on offer that we can guide clients – and ourselves frankly – to when we are sideswiped by stress, anxiety, depression – by any configuration of mental ill health.
The problem is we just don’t think we are going to get motor neurone disease or multiple sclerosis or be permanently disabled because that just doesn’t happen to us – only to the other guy. Statistically what are the chances? Ask your client what they think their chances are of having a heart attack or a cancer and determined refusal to anticipate the worst starts to whimper. There’s a chance of that though isn’t there? It is likely that to get to its results Direct Line did ask the other guys – those it has happened to; because it reveals that those that recognise spending more money due to their illness, estimate they spend, on average £35.30 more a week, approximately £1,835.60 a year. And people with a serious illness visit the hospital on average 35 times a year, with 30% going at least once a week, spending about £7.71 on taxis, £5.72 on public transport and £4.69 on parking per visit and then an average £5.54 on food while they are out. Chances are, if and while you are ill you might not be able to drive yourself and so travel costs can go up – the research reveals that people who recognised an increased spend in travel estimated spending an extra £17.28 a week on travel costs: 54% of people say they have started to use public transport or taxis more often. And it’s not older people necessarily – 78% of those aged 18-34 feel they use public transport more often because of their condition. Increased medication costs tot up to £17.57 a week. And then there are all the other costs we referenced above: the mortgage payments, the bills, the food shop. It won’t cost them £2,000 a year to take out critical illness insurance. But it will cost them a lot more than that to live without a CIC payout or for that matter an income protection policy operating. As brokers and intermediaries we should also – even though when we are with clients we are working – make sure that we also are in the right frame of mind, not too tired, relaxed, not focussed on being hungry and getting home for dinner. It works all round. www.mortgageintroducer.com
Review: Protection
Men matter too with mental health When a client talks With Men’s Health about their mental week (10 - 16 June) now health, it’s important passed, it seems like a that we take the time perfect time to draw to understand the imsome focus to the finanpact it might have on a cial protection of men. protection application. Don’t get me wrong And be honest with the work done by WIP Alan Knowles them. Yes we need to (Women in Protection) managing be sensitive, but we and IWF (Insuring director, Cura can’t avoid the fact Women’s Futures) cam- Financial that prices may go up paigns, is excellent and Services and chair of the or exclusions be imabsolutely necessary. posed, and we must But, us men matter Protection Distributors manage expectations too. fully from the start. It’s quite a frighten- Group Considering one in four ing thought to think that just over three in every four suicides of our clients ‘should’ disclose are actually males, yet more a mental health condition (in females are diagnosed with reality only one in seven do), mental health conditions. This we need to consider the difshows that men still aren’t talk- ference between providers ing enough about our mental underwriting to ensure the best outcomes. health. Ideally, this should be considAfter all, we’re men and men shouldn’t cry or get emotional ered before a recommendation [sarcasm intended if not obvi- of provider is made. The good news is that most ous]. When a man talks to us about life and critical illness applicahis health and we ask about his tions will be accepted normal mind, his feelings, is there po- terms. Income protection is a likely tential that we could face some bravado? Not wanting to seem exclusion, if symptoms have been recent. “weak”? Whatever the product So what can we do? We take time to get to know though, remember that some them, male or female. If we insurers underwrite mental sense discomfort discussing health more favourably than certain things, if they seem un- others. Lastly, we have a duty of care, comfortable we can ask if they’d prefer to chat to someone of a especially to those with a mental health history, to be realistic different gender. We make sure clients know with them on what insurances the importance and impact are available. A huge premium increase, of non-disclosure - why do those 2-3% of claims not pay- postponement or a decline, can out? That it’s largely due to trigger a feeling of “not being non-disclosure. When a client normal”. We need to make sure that does open up to us, let’s make sure that we are sensitive, we we manage this in a fair and are empathetic and more than compassionate way, that reanything that we shut up and duces this feeling as much as possible. listen. www.mortgageintroducer.com
Kerry understands
Kerry Bradley understands that you are looking to work with an approachable, adaptable and dependable partner who will look for reasons to say 'Yes' to your proposals. That’s why in uncertain times our book stays open. • Responsive decisions at attractive rates • Flexible funding tailored to individual needs • Loans from the everyday to the extraordinary Kerry is one of UTB's Business Development Managers just one of our growing team of Bridging specialists working closely with broker partners across the UK to help them deliver flexible short term loans. T: 020 3862 1002 E: bridging@utbank.co.uk
we understand specialist banking
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MORTGAGE INTRODUCER
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Review: Protection
Brokers are talking, so why not wealth IFAs? Wealth IFAs are in a great position to talk about investment risk, retirement goals and market opportunities, but are they fully assessing their clients’ true appetite for risk? IFAs forge their client’s investment path by assessing their capacity and tolerance for loss, possibly using psychometric testing and projecting forward with volatility or stochastic based models. However, when assessing a client’s goals, do most IFAs truly look at every aspect of their risk appetite? Risk comes in many forms and shouldn’t be viewed in just one way when assessing a client’s investment future. While risk models help an IFA understand the client’s appetite for investment risk, they don’t look at life events like critical illness, accidents or being out of work for months. This ironically leaves clients open to substantial risk in terms of their investments. When discussing protection with some IFAs, we’ve found that protection sales make up less than 5% of their overall portfolio. So, what’s discouraging them from advising on and selling protection? I believe there are three main reasons. The first is that wealth IFAs are not making protection an integral part of the conversation when assessing a client’s appetite for risk. Mortgage brokers, on the other hand, are now discussing protection and bringing insurance into the start of their mortgage research. The successful broker is able to discuss how best to achieve their client’s goal of buying a house, while at the same time helping them understand how they can keep hold of it over their whole mortgage term. Mortgage brokers are also using data and statistics to help clients understand the likelihood of a serious life event happening to them and the challenges they will face to pay off their debt. By doing so they are selling more protection than
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Stephanie Hydon national account manager, iPipeline
JUNE 2019
ever. And they are not just selling term insurance – income protection sales are also on the rise. iPipeline’s Risk & Mortgage Protection Report shows that for every 10 people like me, five will not be able to work for two months or more over the term of their mortgage. Having this kind of data to hand means that mortgage brokers are well-equipped to introduce protection into the mortgage application process, and it’s one of the reasons they have overtaken IFAs in the number of income protection policies sold. Our Q1 2019 results show that mortgage brokers had a 90% yearon-year increase in protection new business volumes compared to 29% year-on-year growth from IFAs. Income protection is now our fastest growing product line and is predominantly written by mortgage brokers as part of a multi-benefit sale. The second reason for a lack of protection sales is a bit more controversial but needs to be said. The truth is that many IFAs are earning considerable annual fees from investments and therefore don’t see the need to sell protection. In fact, many view it as an unnecessary distraction. I often hear “my clients are self-funding, they don’t need protec-
tion”, but do their clients know they are “self-funding”, why wouldn’t they pay a small premium to protect themselves? This approach is missing a crucial truth that the first thing a client will do if they are unable to work is to stop investing and potentially decumulate investments. The third reason is that it’s just downright awkward talking about illness, care and death. Nevertheless, to truly understand and assess a client’s aspirations and plans for the future, it’s crucial that these subjects are discussed. Octopus Investments recently published some shocking statistics about the massive intergenerational wealth transfer that will be taking place within the next decade. Advisers were asked about where they thought this wealth would be transferred to and the results were alarming: 22% didn’t know who the beneficiaries are and 39% said they hadn’t discussed it with their clients. This is symptomatic of a wider issue around broaching the difficult subjects of death and illness. However, to offer their client the best possible service, IFAs must ensure they look beyond their client’s investment capacity for loss and properly assess their overall appetite for risk. The protection market is growing and there has never been a better time for wealth IFAs to look at the success mortgage brokers are having and join them in protecting their clients’ futures.
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Self-employed dentist aching to move, worried about a sore credit history? Normal.
54% of all rejected mortgage applicants were turned down for not being “normal”.* But we can often accept a variety of unusual circumstances when others can’t, such as 12 months’ trading for self-employment, as well as small credit blips like CCJs or missed bills. Find out how we do things differently.
togethermoney.com/residential or call us on 0372 291 3094 Lending for the new normal. *All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2003 adults. Fieldwork was undertaken between 31st May - 25th June 2018. The survey was carried out online. Subject to lending criteria and affordability assessment. For professional intermediary use only.
Review: General Insurance
Seven ways to grow your business by working smarter Abraham Lincoln is famously quoted to have said: “If I had eight hours to chop down a tree, I’d spend the first six of them sharpening my axe.” He may have given this advice in the early nineteenth century but the concept rings true in today’s frenetic world as much as it did 200 years ago. In the scramble to constantly meet targets and with technology that means you can be on call 24 hours a day, the temptation can be to put your head down and keep grinding away to reach your goal. Sometimes, however, it can be beneficial to take a step back and consider whether there are ways you can work smarter rather than necessarily working harder. In a pressurised environment, like sales, it is difficult to find the time to “sharpen your axe”, but if you are able to make changes that help you to work more effectively, the benefits can more than pay-off the time invested. With this in mind, here are seven things to consider that could help you to grow your sales by working smarter. None of these tips are ground-breaking, they are all largely common sense. But sometimes it is worth reminding ourselves to run through this list to make sure that in the rush to hit target, you haven’t missed any opportunities to work smarter.
James Watson sales director, Paymentshield
Create effective habits
We are all creatures of habit, so focus your efforts on developing effective habits that will help your business. Look at all of the ways in which you can advise your clients, including general insurance and build processes that help you to make the most of every opportunity. Current thinking estimates that it takes 66 days to create a habit. So, identify the processes you need to put in place to give your clients a holistic advice experience and make a concerted effort to stick to these over two months. For example, a very simple objective might be to ensure that, on every case, your process is to either advise on GI or refer the case to a GI specialist. After this period, best practice should become a matter of habit.
Do one thing at a time
Keep learning
Too many people think they will accomplish more if they do as many things as possible at the same time. But the truth is, you are much more productive if you do one single thing at a time. Chart your day, figuring out a to-do list and focus on the most important task first, then go down the list. Decide your priorities based on most effectively meeting your clients’ needs. You may need to re-prioritise throughout the day. It’s common sense, but when there is lots to do it is easy to try to do too much.
The first thing to remember is to always keep learning. Remain curious about new ways of doing things and be open minded to fresh ideas. If you are too blinkered in how you intend to hit your target, there’s a good chance that you might miss out on opportunities to achieve even more. Use the resources available to you You don’t need to have all of the answers yourself. Take advantage of the resources around you, including your regional sales managers and
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telephone business development managers. It’s their job to help you identify the best solutions for your clients, so put them through their paces. Many providers also make free tools and resources available on their websites to help advisers with new ideas to develop the way they work and help to explain products to clients. These resources could prove really useful for your clients and save you time.
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Let technology take the strain
Timing is key when it comes to sales, so make sure that you are making initial contact with your clients, and following up, at the right time by investing time upfront to comprehensively set up your CRM system. Don’t forget to make it easy to incorporate GI into your daily routine by integrating it into your system. This may take a little work at first, but it will pay dividends if it increases your GI sales. Look at partnering with providers that develop technology platforms which give you a better experience and more control over your business, delivering the functionality required to make a powerful difference to performance through greater understanding and insights. If you can leverage a provider’s investment in technology to improve your sales, you are already working smarter.
Work as a team
If you have a number of advisers at your business, consider how you can best work to your strengths. Does it suit your business to have a team of generalists or could you be more effective by establishing sector specialists? GI, protection and specialist finance are areas where many advice businesses choose to have specialist advisers to whom they refer the appropriate cases. So, investigate whether your team would benefit from instating a GI specialist.
Time’s valuable
This might seem obvious, but by understanding the value of your time, you can make sure you put greater focus on activities that are most effective at generating income for your business. However, don’t just consider the allure of large one-off proc fee payments. Some products, like GI and protection, provide recurring revenue as long as the policy remains in place. This can build significantly over time and could ultimately add more value to your business than one-off payment. So, take a longer term view, think about the type of income you want to achieve and how to get it. www.mortgageintroducer.com
Review: General Insurance
Intergenerational advice Since the start of the year we have seen the rise of a new breed of loan, the intergenerational mortgage. The aim of this product is to help families pass down assets to younger generations, by providing parents and grandparents with the ability to use their own property to help their children and grandchildren get on the housing ladder. Today, 50-70 year-olds, who typically bought their first homes in their 20s, are richer than they could have imagined thanks to long-term rising property prices. According to the Office of National Statistics a property purchased for an average of £12-£13,000 in 1976 would be worth approximately £292,000 today. Intergenerational mortgages provide family members with a way to put up the equity in their property as security on the purchase of a home for a younger family member. Parents and grandparents putting up their home as security for the loan are putting not just their property but their entire financial security at risk, a nest egg they have worked for and paid for throughout their lives, therefore for the new breed of intergenerational mortgage clients good protection advice is invaluable. As mentioned previously, later life borrowers are often the ones paying
Paul Thompson founder and chief executive, Cavere Intermediary
too much for protection, so a review could not only help reduce their costs but provide valuable peace of mind from knowing they have the right cover in place before investing in younger family members. For the buyer, protection is the first line of defence for both themselves and their generous benefactors. Whether or not this type of loan becomes a main stream product or simply fills a niche gap in the market, remains to be seen. According to the London School of Economics around 50% of parents now provide money for some or all of their children’s property deposit, while approximately 20% pay for stamp duty or legal costs, and around 10% help with monthly mortgage payments, therefore talking about protection has never been more important. I talk a lot about service, quality and value and about how enlightened brokers are those that take the time to constantly keep in touch with customers, understand their changing requirements and financial concerns. A full protection review may not always result in a sale but it will always result in a deeper relationship, a relationship that could endure from generation to generation.
A hunger for protection education With the retirement gap continuing to widen, over the last few years we’ve seen an increase in the number of later life borrowers, i.e. those turning to their home to boost their income in retirement. Indeed equity release resulted in homes paying out more than £10m a day in 2018, as lending reached a record high of £3.9bn last year (Equity Release Council). Later life borrowers are a growing market for intermediaries. As lending becomes more mainstream the older audience are increasingly looking to brokers and advisers to educate them on their borrowing options. However, it is equally important that they
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be provided with trusted advice around protection. Later Life borrowers tend to shop around less, switch less, and use aggregators less, they are therefore the clients most likely to be paying too much for their home insurance. In our experience when advisers take the time to sit down with older clients to review their current protection solutions they not only save them a great deal of money but also improve the quality of cover provided. Later Life borrowers are hungry for protection education. They value advice, service and peace of mind, playing to your strengths as intermediaries.
Back on the Trail Unfortunately, unfair trail commission practices have once again reared their ugly head, despite the Paymentshield scandal a few years ago. Several brokers have been in touch to tell me that they’ve received letters from their GI provider informing them that their trail commission is being reduced and in some cases cut altogether. This is surely a self-destruct button for a provider to push.
“Why on earth at a time when service and price are at the top of the agenda for the FCA would any GI provider put such pressure on its intermediary partners?” Why on earth at a time when service and price are at the top of the agenda for the FCA would any GI provider put such pressure on its intermediary partners? It is my strongly held belief that great service is not delivered for free. If customers are to be educated and helped to make an informed decision on the right cover for their circumstances, then intermediaries need to be rewarded appropriately. Commission from just one year’s premium on some policies is often not enough to cover this cost, meaning trail commission is very important. If you have received such a letter from your GI provider then my advice is, shop around for a new one.
www.mortgageintroducer.com
Review: General Insurance
No DSS but pets considered MPs have called on landlords to scrap ‘no DSS’ clauses in rental ads, saying it amounts to a “hostile environment” for tenants on benefits. The housing charity Shelter has said the “no DSS” practice breached equality law, in the same way as to discriminate on grounds of race, religion or colour, because it disproportionately affects women and people with disabilities.
Geoff Hall chairman, Berkley Alexander
Renters say it means they have less choice, standards are lower and costs higher. Shelter has about 20 legal cases in progress against landlords and agents who have refused to rent to people on housing benefit. Letting agents and landlords claim they often have no choice but to insert the clauses because mortgage and insurance agreements demand it, but from insurance aspect, 01442 an MI half page advert Smarter
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that’s not the case. Currently ‘tenancy type’ is a key rating factor affecting the underwriting on buy-to-let insurance cover, because of the actuarial evidence that informs insurers on the impact of different tenancy types on claims experience. The rate is set according to the risk and it is true that some insurers won’t offer cover on benefit assisted tenants, whilst others may apply a higher premium or restricted cover terms. However, insurance solutions are available if you know where to look. Regardless of whether ‘no DSS’ is banned from letting advertisements, the tenancy type will still currently be a key factor informing the insurance underwriting. In March 2011, a European Court of Justice ruling that price discrimination 1 stated 15/05/2019 11:53
““No DSS” breached equality law, in the same way as to discriminate on grounds of race, religion or colour, as it disproportionately affects women and people with disabilities” based on gender breaches EU rules on equality. Now all motor policy premiums should be unaffected by the gender of the policyholder. Will something similar happen with buyto-let? It will be interesting to see how this develops.
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paymentshieldadvisers.co.uk/smarter
#alwaysask
For intermediary use only. Paymentshield and the Shield logo are registered trademarks of Paymentshield Limited. Authorised and regulated by the Financial Conduct Authority. © Paymentshield Limited 2019. 01442 05/19
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Review: Equity Release
All options should be on the table for your clients Looking at the furore around the FCA’s recent Mortgages Market Study final report and its subsequent consultation paper on advice, there will be many no doubt within the equity release sector who, while being rather pleased that the changes planned don’t impact on advice on these products, may also be wondering what could be coming over the horizon and whether any readacross is likely. Much of the criticism aimed at the FCA has come from those who believe we are seeing a regulator attempting to somehow downgrade the importance of mortgage advice, preferring to provide more borrowers with access to execution-only tools and technology, based on a belief that large groups of customers simply don’t need advice because they’re perceived not to benefit from it. Or there is an argument running alongside this that suggests the FCA is actually trying to re-engineer the rules around advice in order to fit the current market – a market which has seen a growing amount of execution-only business that it did not anticipate back when it wrote (and introduced) the MMR and which clearly does not fit that particular regulatory picture. The fact that overall this seems a view seemingly predicated on a purely price-based position, in that the FCA has researched the market and come to the conclusion that certain borrowers could have got a cheaper mortgage themselves than they did through an adviser, is perhaps even more worrying. Indeed there will be many like myself, and throughout the advice community, who thought we’d put the ‘price as the sole consideration’ argument to bed about 15 years ago. The fact it has been raised again can only make the sense of confusion, anger and bewilderment even stronger.
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Stuart Wilson group chief executive, Answers in Retirement
JUNE 2019
Indeed, bringing this back to later life lending, given we now appear to have a regulator wanting to go down this route with mainstream mortgages how confident will practitioners and stakeholders be about how it might view later life lending advice in the future? Will it come to a conclusion sometime in the future that later life borrowers are able to sort out such arrangements themselves, even if all evidence points elsewhere? At the moment however, equity release is placed outside this consultation, and quite rightly so, because if there was ever a sector/product that required professional advice – not just from financial advisers but tax experts, solicitors and others – then this is undoubtedly it. The growth in the sector over the past few years is absolutely clear but there is still that nagging doubt that we still do not have the number of qualified, engaged and active advisers we need in order to meet not just today’s demand, but what this might grow into. Let’s be honest here, the fundamental drivers behind equity release, and other types of later life lending need, are not going to change anytime soon. We’re all aware of the interest-only borrowers, those with poor pension provision, those wanting to help family members get on the housing ladder, those who simply need money to maintain a lifestyle, those who have to fund their own longterm care, and those who may not be able to even heat their own home throughout the winter. The number of ‘asset rich, cash poor’ potential equity release customers will grow and, looking at the numbers of advisers we have active to help them, we must question whether we have enough. Official FCA register figures suggest we have 8,000 advisers qualified to advise
clients on equity release but the actual numbers of those doing the job are clearly far removed, and far less, than this. Indeed, looking ahead, one might even wonder whether 8,000 will be enough to cope with demand. Some might suggest that the fact non-specialist, mainstream mortgage advisers can technically service retirement-interest only (RIO) customers as some sort of half-way house, but my view is that this makes the problem worse, not better, and does not provide the holistic advice that later life customers deserve. I’ve been very vocal about the need for advisers to cover off all later
“Let’s be honest here, the fundamental drivers behind equity release, and other types of later life lending need, are not going to change anytime soon” life lending bases, including equity release, and to do that advisers are going to need to get qualified and authorised. They can’t skirt around the edges of the market hoping to pick off a few stray RIO customers, instead they need to ensure that all options are on the table and the most suitable one is offered. The good news of course is that there is no shortage of routes for advisers who wish to offer all the services required of them in this space. I’m not just referring to lending of course, because later life customers have other needs, in areas such as wills or LPAs, care, and the like, that we are able to support them with, provide education on and deliver opportunities to. This is undoubtedly a growth area and those advisers who embrace it and deliver an all-encompassing service, are likely to reap some considerable rewards. If you have not already done so, now is the time to make that move and we can help you do it.
www.mortgageintroducer.com
Review: Conveyancing
Protect yourselves and your clients against fraud When you are part of an industry as complex and diverse as the mortgage market, it can be all too easy to believe you’re part of a broad discussion that includes all key stakeholders, when in fact, you’re sitting in an echo chamber. Particularly when you are part of a business to business community, remembering the consumer – other than in a generic ‘consumer experience’ sense – can come nearer the bottom of the list of priorities than it should. It’s why the latest figures from the Financial Ombudsman Service, which revealed that customer complaints about banking scams and fraud ballooned by 43% last year, made me sit up and think. While these complaints refer to services and products across financial services – from payday loans to insurance, to pension transfers and authorised push payment fraud – the significant uplift in their numbers is telling. As we move to a more digital world, where online banking becomes the norm and customers expect to be able to conduct transactions online without interacting with paper or person from start to finish, the propensity for fraud rises. Scammers have got smarter and smarter, and stories of families and professionals who have signed away their life savings on the false assumption that the transaction was kosher are becoming increasingly frequent in our national media.
www.mortgageintroducer.com
Steve Goodall chief executive, ULS Technology
Technology makes it both easier and harder for scammers, who no longer have to look their marks in the eye as they walk off with their life savings. Digital safeguards may be available to protect individuals, but we are still learning about how to interact with technology – many of us still use one password for every online account we have, for example. Authorised push payment fraud, where a customer authorises the transfer of their funds to a third party, but then the money disappears and the transaction turns out to be a scam, is becoming more sophisticated. And it was this type of fraud that was the driving factor behind last year’s overall rise in complaints. Many people tend to think of payment transfers as relating to investments, but home purchase is typically the single biggest money transfer any of us is ever likely to make in our lifetimes. Fraudsters are already on it – as conveyancers are only too aware of. Email hijacking, where fraudsters assume solicitors’ identities and persuade clients to transfer hundreds of thousands of pounds to accounts that are then closed after the money is removed, has become rampant. Protecting house transactions from fraudsters is an issue of paramount importance. Reassuringly, ULS recently carried out a survey of our partner conveyancers and found that almost half of firms are overwhelmingly thinking about how to protect their clients –
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and their businesses – from fraud. Some 45% of the firms we asked cited fraud as the biggest concern for their business, more than double the number of firms concerned about business volumes in 2019. Within this umbrella term of ‘fraud’ exists a number of concerns: data breaches is a big one, clients’ identities being stolen and used to transact fraudulent purchases, and email and communication hacking. It’s a fact that far too few conveyancing firms have cyber insurance – particularly when we know many firms use email for between 60 and 90% of their day-to-day communications. One wonders what level of encryption they have available to them for client communications via email and whether any of their PI cover mitigates this kind of risk. So what’s the answer? How can we protect both consumers and ourselves – as well as our commercial partners – from the damage wreaked by fraud? There is work being done across the industry, by lenders, mortgage networks and hubs, trade bodies and regulators. We are also doing our part – our work on our mobile digital solution, ‘DigitalMove’ is just one example - and listening to the firms we work with about what they need to see change in the industry to improve cyber security. We are now well into pilot and the benefits of a user-friendly secure platform such as DigitalMove are immediately apparent to those trialling the system. Our research has highlighted there are two big moves conveyancers want to see over the coming months: digital signatures and secure communication platforms. The former should help to reduce ID fraud and increase firms’ risk cover; the latter, should massively cut the risk of email hijacking and clients inadvertently transferring funds to scammers’ bank accounts. While there is still some way to go on delivering digital signatures, rest assured that work is underway to deliver a far more secure environment for conveyancers and clients to interact in the near future. At ULS technology, we’re working tirelessly to deliver this. MORTGAGE INTRODUCER
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Review: Conveyancing
Portfolio landlords need solid advice A recent report by the Shawbrook Bank has discovered that the proportion of buy-to-let mortgages completed by limited companies has doubled over the past four years, with figures rising from 32% for the first six months of 2015 to 64% for the equivalent period of 2018. With portfolio investment models ranging from those that emphasise maximum yields and low capital appreciation to those that favour low yields and maximum capital appreciation, any decision taken regarding incorporation is likely to be predicated by whether a landlord pursues the former or latter course. For those landlords who are looking to expand their portfolios or already pay a high rate of tax, however, the overriding factor in this decision is clear – the ability to access limited company tax benefits and mitigate the recent reductions in mortgage interest tax relief. Although this process will continue to reduce tax liabilities it will not reduce taxable rental incomes and this will push many thousands of landlords into higher tax bands. It’s important to remember though that a limited company status won’t be suitable for all landlords. For example, existing properties cannot simply be transferred to a company but must be ‘sold’ at the current market value, meaning that any ‘purchase’ that is made will be subject to additional costs (such as stamp duty, early repayment charges and possible remortgage fees). Unless a landlord can prove that a property is being run as a ‘business’ they will probably have to pay capital gains tax on each of these purchases as well, while the fees which are charged by brokers, solicitors, accountants and mortgage lenders are invariably higher than for individual landlords. This is due, in no small part, to the legal complications and high workloads that can arise when dealing with incorporated companies. For example,
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David Gilman partner in charge, Blacks Connect
JUNE 2019
limited company conveyancing is a notoriously convoluted and exacting process, with solicitor’s attending to a vast range of issues. These include ensuring that all company directors (and shareholders with more than a 25% capital investment) have provided full ID and that none of them have any adverse entries or prior charges against their name, completing a personal guarantee for each individual and confirming that they have taken independent advice. Solicitor’s will also need to oversee the transfer of any existing properties, ensuring beforehand that the company is entitled to borrow money and hold property (via a SIC code) and that the overall process complies with any special lending conditions. If any CGT or SDLT exemptions are to be applied, meanwhile, the solicitor will need to make sure that all affected properties are transferred at the same time. In addition, they will need to check that each property conforms to current HMO licensing and energy performance requirements and has planning permissions for any reconfiguration work. In short, the kind of work which requires the services of an experienced, specialist conveyancer who won’t skimp on quality; and that doesn’t come cheaply. Indeed, given the considerable costs, many landlords could find that the amounts incurred by multiple transfer purchases ultimately outweigh the benefits of incorporating. Which is why it is so important to take impartial advice from a qualified tax accountant, solicitor or financial adviser before they choose to proceed. And, even if a landlord does manage to summon the financial resources needed to set up as a limited company, there are still a number of day-to-day running costs to consider, including wage bills for staff members, accountancy fees for annual tax returns and account statements and dividend tax liabili-
ties on any sum which is withdrawn from the business – all of which can eat ever further into profits. In short, there’s a lot to take onboard and think about. Nevertheless, as the market for limited company products continues to expand and evolve, so too is it becoming more competitive and cost-effective, with limited company mortgage rates being gradually forced down by a profusion of new. Indeed, in some cases, they are already comparable with individual deals. Which is why brokers will need to employ a degree of fore-knowledge and guile when advising clients about current SPV product options, emphasising personal circumstances and other pertinent factors before passing on their recommendations. For example, is the client clear about what they want to achieve as a landlord and do they have a long-term strategy? Are they looking to achieve maximum capital appreciation or are they looking to max out on rental yields? What is their current tax status and how will this be affected over the longterm by investment decisions? Are they taking advantage of innovative new products to enhance the value of their portfolios, or are they adopting a more ‘static’ approach? What sort of properties are they investing in and what level of experience do they have in this field? We know that affordability, as well as LTV and mortgage loan limits, are invariably dictated by the category of a given property and the variance of lending policies, but what can this tell brokers about the most suitable outcome for clients? These are questions that need to be considered carefully, because the advice that landlords receive at that point will define their futures for a very long time. Landlords who wish to pursue a limited company status will need to avail themselves of the best possible levels of expertise and advice and to prioritise quality of service over just about any other consideration (including cost). This means that they will need to engage the services of a good tax adviser, a good broker and a good legal firm. Because, to compromise on any of these areas is tantamount to inviting failure. www.mortgageintroducer.com
Review: Conveyancing
Don’t let the winds of change topple you over We are effectively at the half-way point of the year, so how might we define six months which – politically at least – were undoubtedly dominated by Brexit and, looking ahead, look likely to be a case of ‘more of the same’, perhaps up until the next EUleaving deadline of the 31 October. These are unquestionably uncertain times for all mortgage and housing market stakeholders and, while I certainly wouldn’t say that the market is ‘bouncing along the bottom’, there is a sense that we are following the recent status quo, almost to the letter. By that I mean the market has continued to perform in 2019 much as it did in 2018 and 2017 – the main foundations of our market remain the remortgage and product transfer sectors, while purchase activity stays at levels which we might wish to be much higher. Lending levels in 2018 held up, indeed they pushed up on the previous year, and the expectation is that they will be almost identical during the course of this 12-month period. But, overall, when you have way over 100 lenders vying for business in an ultra-competitive market, with that business level not rising, then it was always likely that we would see some fall by the wayside. And that is certainly what has happened. Let’s not forget that when it comes to the mortgage market, the big six take in the region of 80% of business, which leaves the rest effectively fighting over what’s left. Those who specialise and those who have successfully diversified away from just offering a mainstream proposition have survived and (dare I say it) thrived, but those whose product range remains decidedly mainstream have not. As I write this, the news has just come through that Tesco Bank is to cease all new mortgage lending – it is not the first to announce this and I suspect it will not be the last, particwww.mortgageintroducer.com
Mark Snape managing director, Broker Conveyancing
ularly over the next 12-18 months. Should we be surprised by such news? Not really – again, look at the market where Tesco was attempting to compete, look at the lenders it was up against, look at the funding lines the big six have and the pricing they can offer. You’ll quickly understand that making the margin it requires without the increase in business levels was almost an impossible job. Other lenders – Secure Trust Bank perhaps being the most highly visible – announced the same earlier in the year and it is perhaps most enlightening to realise that the only lender which has closed its door to new business, only to return to market, has been buy-to-let specialist, Fleet Mortgages. Again, a lender working outside mainstream mortgages with different expertise and a focus on product niches not generally catered for by the high-street players. This is not so much consolidation as competition ‘thinning the field’ for lenders – luckily (at the moment) there are no shortage of lenders to work with and advisers/clients can (in my opinion) still count on some very healthy competition in the months ahead. How Brexit impacts that is still anyone’s guess but with a steady funding and lending situation, the prospects for borrowers still remain good. However, competition is always a constant and it’s certainly the case that advisers must take heed of where that competition could come from. Competition has impacted on lenders, why shouldn’t advisers also be affected? I’ve read with interest the response to the FCA’s Mortgages Market Study Final Report, and the subsequent consultation paper on mortgage advice, and it clearly doesn’t take a genius to work out that the notion of advice as being essential for borrowers is under threat. The JUNE 2019
fact that threat appears to be coming from the regulator is undoubtedly surprising, but one must think that its attempts to level the playing field to allow more execution-only business not only has to be taken seriously, and pushed back against, but also seen as a sign of future competition to come. If we do have an environment where it’s made easier for borrowers to ‘do it themselves’ and that advice ‘trigger’ is taken away, then clearly it’s going to be a worry for advisers. If firms cannot make the case for quality advice strongly enough, they may fall out of the market, or have to look at banding together to make business work. In this situation, having a fullyrounded product and service offering is going to be absolutely vital in terms of providing the client with everything they need – mortgage, GI, protection, conveyancing, legal services, you name it. The whole focus has to be on ensuring the client does not need to go anywhere else, and there are plenty of firms who still have work to do in this area. Perhaps, in that case, joining up with a specialist is not such a bad thing – at least then you can legitimately say you offer these products/ services to the client. This is something that interests me because conveyancing is such pivotal and (often misunderstood) part of the homemoving process. The important point is to recognise where the threats come from, and to understand that even if the market appears to be rattling along quite nicely, that might not always be the case and there are a number of potential spanners in the works that could impact heavily on adviser firms. I maintain that we operate in the most robust of markets and that the end consumer will more than often want to speak to an expert during the process. Make the most of all opportunities and you provide yourself with much firmer foundations on which to tackle what might be coming over the horizon; ignore this and the winds of change could topple you over. MORTGAGE INTRODUCER
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Review: Conveyancing
Time for the best options As many of you will be aware, the issue of leasehold ‘abuse’ and the serious financial implications that this ‘property trap’ continues to exert on homeowners, has become an increasingly contentious topic over recent years, as well as the subject of a wide ranging government review. What you may not know, however, are the circumstances under which these problems have been allowed to escalate and flourish, creating entire regions of the country, such as parts of the North West, where the concentration of leasehold properties has risen to over 80% of all available options. This breathtaking state of affairs can be dated to the turn of the millennium, when property developers began to exploit ‘exemption’ loopholes in existing housing legislation so as to neutralise their legal responsibilities and boost revenues. This was done by selling freeholds directly to third party investment companies (as opposed to leaseholders, on a ‘first refusal’ basis), with tenure of the land and property subsequently being offered to owners at rates which could run into tens of thousands of pounds. Recent research has found that only one in five, or around 22% of newbuilds, was sold as leaseholds in 1996. But, with the growing demand for metropolitan properties and the explosion in high rise urban construction over the past decade or so, the problem has been vastly exacerbated. Indeed, as developers continue to look for new ways to maximise their profits, so too have we seen a parallel shift towards leasehold sales and the provision of contractual clauses that allow ground rents to double every ten years, thereby increasing substantially, as you would expect, over the lifetime of a lease. Moreover, as the years have gone by, the scope of the problem has also grown, with the government estimating that there are currently 4.3 million leasehold houses and flats in England alone. That’s a figure which equates to almost one in five of all national properties.
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Kevin Tunnicliffe chief executive, SortRefer
JUNE 2019
Meanwhile, with an increasing number of mortgage providers refusing to lend against property with these money doubling ground rents, many homes which were bought on these terms have become virtually unsaleable, with the vast expense and difficulty of buying back freeholds merely serving to compound the problem. It is estimated that many thousands of people have homes which are, to all intents and purposes, essentially worthless on the current market, while also diminishing their chances of achieving straightforward refinance options - a thoroughly depressing situation. This is why the quality of advice which prospective buyers receive from their conveyancer is so crucial to reaching the kind of decisions which are reflective of their needs and circumstances and a fundamental component of the house buying process. However, a recent report by the Solicitors Regulation Authority has concluded that many conveyancing practices are falling short of these responsibilities, with 23% of firms neglecting to explain the difference between freehold and leasehold property and 20% of leasehold property buyers saying that they do not remember receiving any information about the length of their lease or the cost of associated fees. Some firms have also been reported as placing an undue reliance upon prior levels of client knowledge, with many assuming that they would have been informed about lease-
holds by their estate agent. This, of course, leaves them open to possible breach of care and/or mis-selling accusations, as well as legal action – a dire outcome. All of which should serve as a pertinent reminder to brokers that sourcing the right kind of conveyancer for clients is paramount. Because, put bluntly, this is an area which simply cannot be trusted to luck or chance, especially given the consequences that a ‘laissez faire’ approach can have on both professional reputations and streams of revenue, as well as customer outcomes. So, what are the options when considering referrals? Well, one thing to consider would be to use the services of an online conveyancing platform – one that provides brokers with access to a hand-picked panel of conveyancers, instant penny accurate quotes, 24/7 real-time updates on each case and expert support from its in house team. Most platforms will also offer competitive prices on products, a commitment to transparency for all of its service costs and an option for customers to leave service reviews, which allows fellow brokers to make better informed recommendations and to take control of every aspect of a transaction. At a time when quality conveyancing services are at something of a premium and transactional lengths continue to fly in the face of consumer expectations, there is a growing argument for brokers to ‘move with the times’ and embrace a future which is driven by speed, technological know-how, product expertise and accountability. Put simply, it’s time to provide a level of service that your clients deserve.
www.mortgageintroducer.com
Review: Specialist Lending
Helping your clients with poor credit The number of people with a poor credit history applying for mortgages is on the rise. Indeed, we increased the number of completions that included this type of credit by 91% last year compared to 2017. And this April alone, there were more than 15,000 searches made for adverse on one of the main sourcing systems. So, what are the most common things giving borrowers poor credit and what types of credit issues will lenders accept?
Defaults
According to sourcing system searches, the most common type of poor credit, accounting for 45% of search volumes, was clients with defaults. A default notice is a formal letter that is sent when a number of payments have been missed on a credit agreement and is usually registered when a borrower has between three and six missed payments. Lenders look at how many defaults a client has on their file, when they were registered, how much they were for and whether they have been satisfied.
CCJs
The second highest number of searches in April, accounting for just over a fifth of search volumes, was CCJs. A County Court Judgment is a type of court order in England, Wales and Northern Ireland that might be registered against a borrower if they fail to repay money that they owe. Unless a CCJ is paid off in full within 30 days of receiving the judgment, it will be entered on the client’s credit record at the Register of Judgments, Orders and Fines and will remain there for six years. Much like Defaults, lenders will look at how many CCJs a client has on their file, when they were regiswww.mortgageintroducer.com
Late Payments and Arrears
tered, how much they were for and whether they have been satisfied.
Debt Management Plans
Paul Adams sales director, Pepper Money
A Debt Management Plan is an agreement between an individual and their creditors to pay debts. It’s typically used when borrowers can only afford to pay less than their contractual repayments each month. With a DMP a borrower should ultimately repay the debts in full, and so this type of arrangement is very different to an IVA, which is a form of insolvency where a percentage of the debt is written off. As such, IVAs are entered on to the insolvency register, but a DMP will only show on a credit file if one of the participating creditors chooses to enter it directly. Borrowers can arrange DMPs themselves, but they will generally approach a debt management company that will arrange a plan with creditors, often for a fee. The debt management company will work with the borrower to understand full details of their income, financial commitments and household expenses to work out a realistic monthly payment. The company will then attempt to agree a reduced monthly payment with each of the creditors. Creditors do not have to agree to the DMP but will often decide that it is better to receive reduced amounts on a regular basis through the DMP, rather than irregular payments direct from the borrower. Each month, the borrower then makes the agreed payments to the debt management company, which in turn shares the money out between the creditors. For borrowers who have successfully maintained payments on a plan for a year or more and have demonstrated a determination to rehabilitate their finances specialist lenders offer a range of products for customers in active DMPs. JUNE 2019
One of the most common things that can impact a borrower’s credit score is a late interest payment on loan or credit commitments. Recent or multiple late payments could result in a case being declined by a lender that makes decisions based on a score, whereas other lenders whose decisions are made by underwriters might be much more accommodating. Arrears are different to late payments. An arrear is a missed payment that remains unpaid for more than one month. Lenders will look at how many arrears a borrower has on their file and how long ago they were registered. Arrears on unsecured debt are sometimes split into fixed term arrears and arrears on revolving credit and are considered to be less serious than arrears on secured debt. Some lenders will even ignore arrears on small unsecured balances where the accounts relate to utilities, communications or mail order providers.
Payday loans
Payday loans may not necessarily be a form of poor credit but a payday loan on a bank statement can indicate to a lender that a borrower has been experiencing a period of severe financial stress, and so, many lenders will only accept applications for clients who have not held a payday loan in the last 12 months.
More serious credit problems
Clients who have been declared bankrupt, held an Individual voluntary arrangement (IVA) or previously had a property repossessed by a lender are less common than other types of poor credit, and there are fewer mortgages to cater for them. But there are options for people who have experienced these serious financial events years in the past and are now back on their financial feet. There are lenders out there that provide suitable and affordable products for your clients’ circumstances. It’s important to know which lender to turn to. But more importantly take a look. MORTGAGE INTRODUCER
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Review: Stamp Duty
It isn’t just first-time buyers that need help The problems first-time buyers face in affording their first home is covered extensively by the press, as many young couples struggle to realise their dream of becoming homeowners because they cannot get a deposit together. But, over recent years, there has been quite a lot done to address the issue – for example, incentives like Help to Buy, and of course the stamp duty freeze. And eventually, these incentives have had a hugely positive impact as first-time buyers are at their highest level in years. Which begs the question…. what about everyone else? Yes, getting onto the housing ladder is tough, but it can be even tougher to move upwards. According to research from Lloyds Bank, 58% of second stepper can’t afford to move without financial support from family and friends. A third of them need an average of £25,450 support from family and friends to help take the next step, and half of these will have already received financial support when buying their first home. And even if second steppers can afford to move, many are struggling
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John Phillips national operations director, Just Mortgages and Spicerhaart
“Most new home developments are aimed at first-time buyers, meaning most second and third steppers are relying on existing housing stock for their next move” to find anywhere to move to. Most new home developments are aimed at first-time buyers, meaning most second and third steppers are relying on existing housing stock for their next move. And with the market fairly static, due to Brexit and other market uncertainties – houses just aren’t coming up for sale. Some critics are quick to blame older people – who in the past would have downsized, either for a more suitable home, to release cash or both – and are no longer doing so, for ‘holding on’ to their family homes. But in reality, many want to move
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but cannot afford to do so due to the fact stamp duty is such a huge cost, even when you are moving to a less ‘valuable’ property. Because, when it costs thousands of pounds to move to a home worth either the same or less than the one you have, many are understandably choosing to stay put, with increasing numbers turning to equity release if cash was their main driver for moving. So, this is bunging up the marker – those who are in their second home and looking to buy their third can’t find suitable properties, and when any do come onto the market, they are relatively expensive due to demand outstripping supply. First-time buyers then face the same problems as the second and third steppers, and again, when they do find a suitable property, due to supply and demand, that move is a bigger jump – financially – than it should be. To me there is one, very simple solution – an overhaul of stamp duty. The minimum change needs to be abolishing stamp duty for downsizers, but ideally, it would be cut completely. Stamp duty brings in around £8bn a year, which sounds like a lot, but there are knock-on costs to consider. For example, the extra pressure on health and social services from older people living in unsuitable homes. Stamp duty is stifling the market and something needs to be done, sooner rather than later.
www.mortgageintroducer.com
Review: Technology
Don’t overestimate short-term tech change In April, The Telegraph published an article analysing the performance of fintech companies and challenger banks. Not a day goes by without the trade and national press releasing stories explaining how technology will overthrow the large established players, and how new brands will dominate the provision of financial services. But contrary to the usual news flow, this article had a very sobering tone and illustrated that the new entrants were some way short of the radical shake-up many were predicting. The number of people switching current accounts is closely researched and shows the propensity of people to move away from established patterns of financial management. The current account is central to many people’s finances and provides a suitable benchmark for people’s attitude and behaviour.
Inertia remains strong
The latest current account switching figures to be released showed that the number of people switching had fallen by 3% between the first quarters of 2018 and 2019. Moreover, the number is falling, and not increasing as many had forecast. In addition, the economic reality and the costs involved in providing new services are beginning to bite. At their launch, some new entrants were promising to offer services more cheaply than the established players. However, there are now signs of repricing as the need for income grows. If customer numbers are below forecast and income is down, the shortfall has to be made up from somewhere. This could be an indicator of just how far technology will change the industry.
Housing and Lending
What will the lenders of the future
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Anita Arch head of mortgage sales, Saffron Building Society
look like? Who will lead and who will lose market share? What will determine success? Is technology the critical driver of change? We have been discussing these questions for some time now at our head office in Saffron Walden, and have concluded that while technology will undoubtedly have a role in shaping the industry’s direction, other factors are more significant. Many of you may have heard this said of technology: “We always overestimate the change that will occur in the short term, and underestimate the change that will occur in the long term.” I think we are at a similar point in the mortgage industry. Technology will have a role to play but I think this will be felt over the long term. In the short term, it will continue to grab headlines but not have as big an impact as other factors.
Speed to market and choice
We believe that the ability to help people with complex requirements will be the biggest driver of change in the market. With macro-economic and political uncertainty likely to continue for the foreseeable future, launching niche products and adapting to unusual circumstances will be more important than innovation in IT. Sound judgement, backed up with experienced underwriting, will be the most valuable assets for lenders and brokers. Recently, we’ve been adapting products in response to analysis of the prevailing conditions and the increase in requests from brokers. For example, we have made several enhancements to our self-build mortgages; we’ve developed an option for self-builders who have less money up front to start their development and we now accept applications with outline plans rather than full planning permission. We’ve also launched a family support mortgage to help simplify intergenerational lending and opened our buy to let Mortgages to limited
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companies. That’s not to say that product alone will be the critical factor. Customer experience and simplicity will be important in any part of the financial services industry. Again, those able to take a fresh look at where the pinch-points are will gain an advantage. We do not force brokers down different distribution channels for self-build, but allow them to deal with us directly to keep the process simple. A refined understanding of customer segments, and the methods of distribution, will have a massive role to play over the next five years. Technology will be able to support this, but it won’t be the silver bullet.
Agile methodologies
One thing we can learn from technology is successful implementation. ‘agile software development’ refers to a group of software launch methodologies based on iterative development, where requirements and solutions evolve through collaboration between cross-functional teams. ‘agile’ generally describes a disciplined project management process that encourages frequent inspection, adaptation, and rapid innovation. While the industry may view the majority of building societies as solid and staid, nothing could be further from the truth. We believe the winners in lending will be those who evolve and adapt the quickest. Identifying the gaps means we can quickly react and launch new products to make sure that we’ve fully covered the breadth and depth of the market. It’s impossible to predict who the top lenders will be in five years’ time but I think the best lenders will have certain characteristics. We believe they will be the ones that can consistently monitor changes in the market and fill the gaps with refined products which are easy to apply for.
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Review: Technology
The digital journey has just begun Lenders and intermediaries are embarking on a digital journey. Some more radical than others. But at a time when borrower circumstances are arguably more diverse than ever, technology solutions are far from meeting the opportunities of nonvanilla lending. Consistency of decision making is one thing. Breadth of execution is another. We should not fall into the trap of homogenising the financial services. It’s a conundrum that has been increasingly on my mind in the past month, particularly as it relates to the mortgage market. So often, we see headlines that describe the whole of the mortgage market as though it were made up of just one sort of lender, one sort of borrower and one sort of property. Mortgage rates have never been lower! For some people mortgage rates have never been lower. If you fall into the super prime borrower category of having masses of equity in your home, a run of the mill standard property in a good location and a perfect credit history, then yes, you are the lucky ones over whom
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Kevin Webb managing director, Legal & General Surveying Services
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the biggest lenders in the market are fighting. If, on the other hand, you’re living in a property that can’t be valued by an Automated Valuation Model but requires a physical valuation, if you’re self-employed, if you have a complex income pattern, or a blip in your credit payment past – you may be left scratching your head when you read that headline. Whether a lender offers the lowest rate ever or accepts or declines an application often has little to do with whether a borrower is a good lending prospect. The question is whether that particular borrower is the right prospect for that lender, based on its existing back book mix, geographical exposure, funding criteria restrictions, capital requirements, its lending appetite and how close or far it is from hitting quarterly and annual targets. Brokers are acutely aware of these factors within lenders – as are valuers when it comes to property types, location and exposure density – the challenge will be how we implement binary technology solutions to understand these issues. If the digital revolution simply recreates current practice in a digital way we will have missed a huge opportunity. It’s an increasingly pressing and relevant consideration for all of us in the market as we move towards a more digital mortgage process – not just making documents digital but creating an interconnected network of relationships via APIs that allow automated underwriting of both borrower and security: automated valuation and title verification, automated affordability and borrower identity assessments in real-time. Recent research from IRESS claimed that a third of lenders either now accept applications via application programming interfaces into their intermediary online digital platforms or are in the process of
implementing access. They surveyed both brokers and lenders and found the vast majority of lenders, 96%, now believe that the open banking infrastructure has the power to improve the application process for consumers over the next two years. I have to agree, but then, that’s a really easy statement to make. That it will improve things for vanilla consumers is overwhelmingly likely; how it will improve things for others is an awful lot less clear. The truth of the matter is that just as we often homogenize markets and consumers, we would be remiss to do so about the organizations in the value chain itself. When we talk about lenders we actually mean many different types of organizations that are different in scale, construction and ambition. These factors have a profound influence on the decisions they make as they become more digital and their ability to do so. Smaller players that are inherently critical to the niche elements of the market are sometimes not able to move as decisively owing to financial elements. Large organisations can by contrast face huge governance issues. It makes commoditizing and digitising the whole borrower journey a very complex task that requires an understanding of nuance. The way to tackle this is to do it in bite size pieces but this should not be an excuse not to have a vision for the final outcome. Agility in the process is crucial but this should not become a synonym for being unfocussed. I expect, in the end, that the variety of consumer types in our modern economy will demand a variety of channels and entry points throughout the process. We may start online and as consumers approach the big events in their mortgage journey, we may need to provide other points of access to reassuring people. Eventually, I have no doubt that this market will move towards greater digitalisation of the mortgage process cradle to grave. It should. It must. However, how each player gets there is going to be very different. That is how it should and must be. www.mortgageintroducer.com
Review: Technology
Take out the insurtech and fintech hype Perhaps all the column inches devoted to insurtech and AI and the like have led to brokers becoming baffled and confused as to what’s right for them, and of course there is the evergreen issue of committing valuable budget to any tech initiative. A recent piece of research carried out by one of the insurance industry trade mags revealed that almost half (44.4%) of the brokers who responded to the survey believe it is difficult to know where to invest in insurtech to get maximum return on investment. Almost one in five (16.7%) said it was too expensive and returns too uncertain to justify investing in insurtech; while 11.6% went as far as describing insurtech as largely hype with little relevance to broking. There’s a clear divide between those who are yet to embrace technology and those who see the benefits even if they’re yet to take the plunge. Over a third of respondents (35.6%) believe that brokers who do invest in insurtech will be the future winners. An industry survey last year seeking views from brokers on digital transformation reported that 87% of respondents agreed that UK brokerages must invest in technology that
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Kevin Patterson managing director, The Source
both their customers and staff expect in today’s digital age. At the annual BIBA conference held in Manchester last month, the BIBA chief executive was blunt in his opening speech – urging brokers to embrace the technological developments such as AI that are already changing the role of the broker, and integrate them into their day to day work. It was refreshing to hear him cut through the hype and talk in clear terms about the benefits that AI can bring to brokers – supporting them to focus efforts in serving the customer better and offer a smoother experience. That’s been very much my view which I’ve expressed on numerous occasions in these pages. Forget about product, the big return is the improved service levels that AI can deliver. The simple truth is that customer expectations have changed dramatically over recent years because of the online experience that the titans of the tech world have delivered. They have got used to pressing the ‘buy now’ button on Amazon and the ‘next episode’ button on Netflix, receiving an instant service. That ease of purchase has changed the game across pretty much every
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industry including insurance and finance. I think the main barrier to intermediaries ‘getting’ insurtech is the very term itself. I’d argue that it has become an overhyped catch-all for any innovation that uses some form of technology, much of which probably doesn’t apply to the day-to-day business of many intermediaries. Perhaps that’s why many have switched off. I think the same is probably true of the term ‘fintech’. It’s time to take out the hype and go back to the roots of either term – technology that accelerates the world of insurance or finance. If you think about insurtech purely as the natural progress and technological innovation in an internet age, investment of time and budget makes sense. However, there is absolutely no point in investing in tech for tech’s sake. Whatever tech a business chooses to invest in has to solve a real business issue, not provide a reason to boast about it on LinkedIn. Some of it may not be headline grabbing, but it may smooth a process that makes the customer’s life easier. Given that cost of implementation is one of the biggest barriers to any digital transformation programme, a business must be able to demonstrate the exponential return of the proposed investment. For example, what would the return be on converting operational staff into more sales focussed roles if the proposed new tech absorbs a lot of the manual heavy lifting previously required? Taking out the human contact at the mundane end of the task list and freeing them up to deliver value-added service to customers can result in improved margins for businesses. That’s a tech proposition that boards can buy into and it’s providing a solution to what is a very real issue. MORTGAGE INTRODUCER
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Review: The The Month Month That That Was Was Review:
Each Each month month The The Outlaw Outlaw draws some tongue-indraws some tongue-incheek cheek parallels parallels between between society at large society at large and and aa mortgage mortgage market market in in flux flux
Ford: factory’s sad demise Countrywide: Doing a Pep
The Outlaw actually met Pardew once. He spent most of the conversation looking over my shoulder into a mirror at himself... former players used to call him Chocolate, as Alan apparently loved ‘Pards’ so much that he’d even lick and eat himself. But well done LSL. Back of the net. Cyril style, RIP. Remaining in the waters of estate agency supertankers, it might now take the management at Countrywide a few aeons to turn around their own vessel. It’s not exactly listing but it’s lost some bouyancy of late. The departure of its CEO could surely not have been a surprise to those within the organisation and LSL are certainly doing to Countrywide right now what Guardiola is doing spate of is fintech darlings which we to Moaninho. Hindsight a facile thing but I take were told wasatgoing to be different, no merit in having remarked the time that the and progressive. In a way, appointment wasedgy a curiously ill-considered one.much likeother the digi-bank Monzo. This is the Executives from sectors such as Healthcare bank which week hadintofinancial explain can indeed sometimes makelast a difference to many itsmore 1.8 million services. Fresh ideas etc. of But often account than not why they hadn’t these “retailing andholders customer-centric” playsreceived don’t their salaries or couldn’t work (Andy Hornby, anyone?). transfers. All this at Estate agency is about a make relentless water-on-aa time when bookstores stone approach. It’s unforgiving, uber-competitive continue toNot prosper and, and pretty much a hormonal sales-fest. a place just as curiously, the for anyone without tenacity and some cutting edges. number of consumers And as is so often the case in these scenarios, buying milk a the individuals who originally annointed thefrom ‘David being Moyes’ styled appointment havehuman long left the on scene a milk has loss of their misjudgement and without any float financial increased by almost to themselves incurred. 30%! team a swift In any event, I wish the Countrywide Andfolk yetinallthat resurgence as there are some talented to stable (Creffield, Curran and Laker Itocontinue name but and readtoo is three) and allowing LSL or any otherhear behemoth that the digital much slack is not healthy for the sector. robo-revolution Turning to the lenders, Santander’s results didn’t transformThey totally sparkle but they nonethelesswill impressed. John Bercow: and enhance may have conceded some miniscule market share narcissist buffoon our day-to-day but 2017 was the year when their January 9 lives, rendering announcement on PT’s domino’d to become interaction the gift that kept on giving, human and then some. obsolete? Nothe It’s quaint isn’t it... how down through mate. years we can recall somethanks epic periods In other news, where two scuffling lenders went head-towe read a lot about B head. from Before buy-to-letwords... becameBrenda mainstream Bristol (bemoaning (and then went needlessly and regulatory likely election), feral under the PRA!)another it was the Birmingham (it’s blatantly his the to Midshires versus TMWBoris slugfest. There was means mutual hara-kiri outcomelose), of theBrexit RBS(Out versus HBOS Out!), Bercow tear-up and we also saw several years of (narcissist Charcol Jon Round: buffoon), clever bloke mixing it with London & Country as aBridgend duopoly (where before
The Good, The Good, the Bad, the Bad, the Boring the Boring & the Vulgar & the Vulgar
Right. Thank ***k that’s outta the way for another year (I speak of course of the Christmas TV snorefest and the subsequent dry January. I don’t know which “Mortgage is one those slightly was the morePrisoners” insipid of the two,ofespecially as I fell emotional of industry soundbite pretty hardpieces from the wagon in the earlywhich hours of 1 for those with over-vivid imaginations (like Sapphire. me!) Feb! A disgraceful overdose on Bombay evokes images of Bruce Willis tied up in a basement Live ‘n learn. property somewhere wearingout, a snooker-balled gimp The evenings are drawing Spring is almost mask! in the air, it’s only six weeks ‘til the US Masters and Theall stark reality however is that treadmill such tenements we’re back on the transaction again, rarely feature list Hollywood actors but moreso evidenced by ‘A’ confident pronouncements from hard working blue collar families who are stuckofon lenders and the first intermediary acquisition a now uncompetitive mortgage ratetwo (which they’ve the year. Which of course featured long time dutifully obliged forinyears but can’t break free industry stalwarts LSL now) and PTFS. from. On the face of it, five million quid appears to be Our distinguished at AMI, Bob Sinclair, is a good deal for LSL titan although of course watchful thankfully all over injustice. punters rarely getthis to see what Especially is actually since under the this needlessly bonnet in dealsthorny of thisissue kind.is much more than just cause celebre opportunistic (and and largely rea For sure, someforregulatory liabilities moaning)provisions politicians might lookingfeature to savebut, their endangered potential seats at the next election. And of course it’s ironic notwithstanding, my hunch is that the team that in the in which the government finally got at LSL will month have recovered their initial outlay repaid UKAR, it’s those very possibly punters who form part in underbythree years and quite of these mortgage that need and our collaborative two. A clever blokeparcels that Jon Round lobbying. whilst it was amusing to read that three Indeed, it’s been afans month for industry several news stories celebrated baggies in the which were a hybrid bothofgood and bad omens. now “controlled overof25% its distribution” Take RBS for example. Its mortgage products (admittedly tongue-in-cheek, I accept!) that via NatWest to resonance thrill. But itsonce large/ shareholding story maycontinue have less if the Lord’s in the pre-paying card Pardew company, Loot,their tookflock a bath Shepherd that is Alan leads into intoChampionship. administration. Loot is (was!) one of the recent the
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they make Ford cars)... into which mix I will add backbone (what the next PM must have), Bounceback (what a post-Brexit world will bring to our sector) and Bollox (hey, if the lily- livered Lib Dems can use that word, then I can too!). Yes. Brexit. The default excuse for any failing business. Just ask that noisy and over-stretched restaurateur Jamie Oliver. Thankfully, and credit to them, Ford did not adopt such a disingenuous and convenient approach when explaining their factory’s sad demise in the valleys. To the Boring. Outwith our sector, is anybody truly still interested in the “Gove did Cocaine” story(line)?! (Which got me thinking actually. He would have been a very handy keynote speaker to have had at numerous overseas mortgage conferences between 2004 and 2008?) And within our own sector, I must confess that I am now roundly exasperated and fatigued by some of the millennial and still-in-nappies journalists at certain Sunday broadsheets. I won’t name and shame these two former trade press hacks. Photo: Rwendland But last weekend’s over-sensationalist bollox included pieces criticising the (much needed and appreciated) growth in the RIO sector and also the fact that 44 lenders now offer 95% LTV loans. It’s all too facile and convenient for these patronising muppets to try to soothsayer the next mis-selling crisis. What you never hear from these alleged experts are any actual solutions or bright ideas. Finally, it’s back again to the B word of all B words, Brexit. And a bloke called Reg Dwight. Bless him. Our Elton is seemingly ashamed of his Britishness and cites us as a colonial and interfering nation of imperialists. Which is of course comedically ironic, as even if a Martian came-down-to-earth they would very quickly see that the greatest imperial construct presently ensconced on this planet is in... you guessed it, bloody Brussells. Diddums… and on the eve of the 75th anniversary of the D-Day landings. Poor old Elton… Bless his poor “I’m a European” soul. And before him, the likes of Sean Connery, Tracey Emin, Lewis Hamilton and Michael Caine etc – who
Barca: a helluva beating
Milk float: comeback
would all do anything for Britain… except live here full time and pay our f**king taxes like the rest of us! So please. Enough Reginald. Before I send you some accoutrements from a shop I occasionally frequent in Soho [see Bruce Willis, top – ed]. There’s actually one item which might limit your ill-considered verbal outbursts at a time when you’re flogging yet another world tour and a movie which appears to leave a lot of events conveniently unrecounted? Just why is it that famous and or extremely talented folk (as he undoubtedly is!) think that their onstage views should carry more weight than Brenda’s from Bristol? You brilliantly sang “The One”. But Reggie... it’s possibly best that you now just go and “Do One”. I’ll be seeing you. Jamie Oliver: blame game
Ball gag: vivid imagination
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The Bigger Issue
The Times editor Patrick Hosking said ‘there’s a whiff of the dotcom
Are fintech firms overvalued In a sense, you could say that we’re back in ‘dotcom bubble’ territory here because the investment numbers are huge, with many businesses being valued on the promise of future returns. Returns which, in all probability, have a very good chance of not materialising. Jonathan If those charged with finding the Burridge mortgage market equivalent of development Google, Amazon and Netflix have director, JLM little idea of which business might Mortgage be the next Tiger Roll, then what Services chance do advisory firms have who are no doubt bombarded with marketing material from these tech ‘thoroughbreds’ suggesting they are the next big thing – and how “Exercise firms would be stupid not to back them? Don’t get caution about me wrong, we’re not a which fintech luddite business – far from it. We have a ‘robo advice’ horse to back” proposition called Virtual Adviser and we can see the real and tangible benefits that come with certain tech offerings, particularly around cutting down on admin, utilising client data and working more closely with lenders. However, as we all know there is no such thing as a ‘sure thing’ and we are likely to find, as time progresses, that those who have backed such ventures might start to get seriously cold feet if it looks like their investment is not going to deliver the return they envisaged. At that point, all bets are off, and those firms who did pin their rosette to that particular nag, might find that they moved too quickly. I’m mixing my metaphors here but there’s an old phrase which says, ‘When the busboy says buy, you sell’ – in other words, the real money has already been made prior to the point when the opportunity seeps into the general consciousness. I would therefore urge advisory firms to exercise caution about which fintech horse they do back – at the moment it’s an incredibly busy field to choose from and the likelihood is that it will only get busier. At this moment no-one truly knows who will win the race and anyone who suggests they do, are not really to be trusted. Make your ‘bet’ from an educated standpoint – it’s more than likely that the best bet today is to go ‘each way’.
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There is no denying fintech as a concept has been marketed to the rafters over the last decade. The hype of all new technologies naturally creates scepticism if new providers or ways of doing things fail to have an immediate impact. However, the technology secRob Thickett, tor takes a different view to this policy perpetual cycle of hubris and manager, nemesis. A law coined by Roy Building Amara, past president of The Societies Institute for the Future goes that Association ‘we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run’. Undoubtedly, just like in every other business, there will be winners and losers as successful fintechs connect with clients and build a customer base. The Department for International Trade’s recent report on UK Fintech highlighted that there are currently 1,600+ fintechs in the UK, with that figure expected to double by 2030. Many building societies are already collaborating with fintechs to improve their systems and innovate. For example, Hinckley & Rugby Building Society has partnered with an AI fintech to transform its mortgage advice process and Nationwide Building Society is partnering with seven “I’d say we are fintechs as part of its Open Banking for Good challenge. at the tip of Mortgage criteria sourcing the innovation fintechs like Knowledge Bank and Criteria Hub have iceberg” transformed how lenders market their mortgage lending criteria and brokers source the best deals for clients. The sale of Criteria Hub to incumbent mortgage sourcing provider Mortgage Brain is one example of how fintechs have been adopted by industry and the value they are generating. So in terms of fintechs in the mortgage market, I’d say we are at the tip of the innovation iceberg. Fintechs and digitisation are bringing much-needed disruption to the entire mortgage journey, from customer on-boarding to advice and retention. Of course there will be fintechs that are overestimated and fail – but the underlying disruption technology is bringing to the mortgage sector should not be underestimated.
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era’ around fintech firms
in the mortgage market? The growth of the fintech sector has been a direct response to traditional financial institutions letting consumers down time and time again. Many people are shut out of mortgages, and the banks have forgotten that they’re here to serve consumers. As people are living Ishaan Malhi longer, working later on in their CEO and founder, Trussle lives, and working more flexible hours, the traditional banks and lenders aren’t keeping pace. Fintechs have moved faster than the legacy financial institutions, and we’re finally seeing some innovation in the mortgage market. A mortgage is one “The real of the biggest emotional winners will be and financial commitments someone will make in their those who put lifetime. Yet the archaic customers first” mortgage system is slow, laborious, and stressful. People deserve better. And fintech firms are quickly improving this by introducing transparent, simple, and faster mortgage processes and products. As with any industry, there are some companies that have or will fail to execute on their plan. Firms being overvalued and then failing is nothing new. However, plenty of success stories remain, including some exceptionally valuable companies that survived the ‘dotcom era’, such as Amazon and eBay. Within the mortgage market, the successful firms will be the ones who redefine what’s one of the most meaningful industries that has a large impact on peoples’ lives. However, these companies who are actively listening to customers and redefining the industry based on consumers’ needs are currently undervalued. The term ‘robo-advice’ is often thrown around to describe fintechs within the mortgage space. But, it devalues the relationship between sophisticated technology and the human element which allows us to provide accurate mortgage advice at scale - while maintaining a high standard of customer service. Over time, the real winners will be those who put customers first and make mortgages fairer across the board - delivering tangible customer value - instead of focusing solely on their revenue models.
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Working in the property market, we should all be very much aware that something is worth what someone is prepared to pay for it. That’s certainly true of a house where prices ebb and flow with demand. The world of sport is another good example, where David footballers seem to attract ever Hollingworth more astronomical transfer fees associate despite often being proclaimed director, L&C to be overvalued and ‘not worth Mortgages the money’. It’s possible to level the same accusation at some of the valuations attached to the funding rounds that tech businesses often seem to attract, whether it’s seeding of a startup or further capital to help expand. The search for the next big thing can bring big investment, designed to fuel the rapid expansion that can be attached to a tech business. Investors are looking for the next Uber moment and there are big fintech operators like Revolut, Monzo and Transferwise that have gained huge customer numbers very quickly. Of course, disrupting a market doesn’t necessarily bring instant profit and that can lead to questions of value. Uber itself has just posted a loss of $1bn, soon after its flotation earlier this month. “There will be The market will ultimately decide whether fintechs winners and are overvalued or not but losers along undoubtedly there will be winners and losers along the way” the way. To dismiss the rise of financial companies with a bias toward new technology-based solutions would clearly be complacent on the part of more traditional players. Those that are not ready and prepared to evolve will be the ones that are likely to face the biggest challenges over time and technology has a lot of benefits to offer to the market. We’ve already seen a very significant level of appetite from our customers to initiate their enquiry online, without losing the option to speak to an adviser about their product recommendation. Rather than worry about whether fintechs are overvalued, the healthier approach is to maintain and evolve a sustainable model that remains relevant to customers, not just now but also looking to the future. JUNE 2019
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Interview Cover
The brains behind Masthaven Bank Ryan Bembridge catches up with managing director Jon Hall to discuss all things Masthaven Bank
While some lenders are playing down expectations this year, Masthaven Bank is eying up increasing its lending. Last year it achieved £450m of lending, which managing director Jon Hall says was part of its plan. He targets increasing that amount this year, though he wouldn’t set a precise lending goal. Masthaven launched in 2004 and was initially a specialist in bridging and second charge. Nowadays however it also offers residential and buy-to-let, as well as development loans to SME housebuilders and self-builders.
Joining Masthaven
Hall joined Masthaven at the end of 2014 from Saffron Building Society, where he was chief executive. He first knew about the lender when Saffron provided Masthaven with a funding line. Hall reflects that he could see the lender had potential due to the quality of its lending and the backing of property management company, William Pears Group. Then he was sold the vision by chief executive Andrew Bloom to develop a retail-funded lender while retaining a personalised approach with manual underwriting.
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“Andrew and I recognised that there is always going to be a tightness in available funding if you didn’t have the access to customers that a bank would provide,” Hall says. “And then fundamentally what we looked at was how banking was being done for both borrowers and savers. “You know what? Given how Masthaven had always looked at things with a very tailored, personalised approach, we thought it was a really strong opportunity to do something in the banking space using that experience that isn’t being done; that nobody else was doing. “We felt that the conditions, both customer behaviour plus the regulatory environment, meant that we could really shake things up and make a difference.”
funded, but nowadays it has a retail funding base of 17,500 savers after being granted a banking licence in 2016. It rebranded to Masthaven Bank after getting the licence. There’s been a significant expansion of both staff and product sets since he joined. The lender has gone from having 35 people working for it in December 2014 to 180 today. Masthaven offers bridging, residential and buy-to-let first and second charge mortgages, development loans to SME housebuilders and self-builders. “I struggle to think when I look around at our marketplace of specialist banks and specialist lenders anybody that’s got a more diverse spread,” Hall sums up.
Five years of change
Hall is not done with growing the business, and with the help of a £60m investment with investment firm Värde Partners in April 2019 there’s a plan to significantly increase lending in the next three to five years. “With the extension of our shareholder group to include Värde it just means that we’ve got all of the building blocks nicely in place,” Hall says.
Since being appointed in December 2014, the lender has become a different beast to the one Hall joined. “We started the journey very much below the radar,” he says. “It’s just our approach. We don’t shout about something until we’ve actually done it.” When he came on board Masthaven was wholesale JUNE 2019
Funding
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And this funding push is likely to continue. “Our model is retail funded but I think it’s always good to have some diversification,” Hall adds. “Over time we will be looking at whether we will start to use warehousing and securitisation.”
Big names
Jon Hall and Andrew Bloom have signed up so many big names in the mortgage industry in the past few years that it’s hard to keep count. In the long-term lending division there’s Matt Andrews, hired as managing director in April 2017, and Rob Barnard as sales director, hired in November 2018. They work alongside head of sales Jon Sturgess. On the short-term lending side there’s James Bloom, who was hired as managing director in November 2017, and Alan Margolis, hired as director of credit and operations in March 2018. They work alongside sales director Richard Deacon. Simon Furnell was also hired as chief operating officer in April 2018. Hall quoted Richard Branson’s mantra when asked about his approach to keeping all these big names engaged: Surround yourself with people that are smarter than you. “The important thing for me is that we back people that have got experience in their markets,” says Hall. “So if you look at short-term lending the three that lead that are James Bloom, Richard Deacon and Alan Margolis, but they all have different skills. It’s up to me to make sure I blend those skills. “There’s a divisional approach with different expertise in their markets. It’s my job to blend that team together. “You empower them to grow their businesses.”
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Sport and music In his spare time Hall enjoys travelling, football, cycling, running, triathlons and music. In the past he’s used his hobbies to raise money for charity, having completed triathlons, wing walks, runs, sleep outs and bike rides for charities like Depaul, the homeless charity. This year Masthaven has started supporting Spread a Smile, a charity which supports critically ill children with entertainers and magicians. And Hall will shortly do his bit for the charity by abseiling and taking part in Ride London, a cycling festival. Outside of sport he says he loves a diverse range of music, whether you’re talking about Artic Monkeys or Stormzy. And lastly, while he doesn’t get to as many games as he’d like, Hall supports Nottingham Forest, the oldest professional football league club in the world.
Buy-to-let
One area Masthaven is looking to tap into is buy-to-let. Hall says the bank has taken the opposite approach to Charter Court Financial Services, parent of Precise Mortgages, and One Savings Bank, parent of Kent Reliance and other brands, by initially focussing on residential lending before supplementing the proposition with buy-to-let. “We still see opportunities in the buy-to-let market,” Hall says. “It’s still got a role to play. “There has been this shift away to single property landlords. “I do think there’s going to be a strong trend even in existing arrangements for landlords to shift towards limited company.” After launching into buy-to-let last year, Masthaven revamped its range in May. The latest range includes a product that enables Airbnb and holiday lets, while there were also rate reductions on its standard range. The lender’s offering is available for individuals, professional landlords and limited companies.
Lending into retirement
Hall says the next area of business to look at is lending into retirement. The lender is looking to launch interest-only products like RIOs, as well as other products for people past retirement. “For Masthaven it’s important that into retirement lending covers what people really are
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looking for,” says Hall. “Which is flexibility of payment structure such as change in basis from full repayment to interest-only, a straightforward RIO product and also looking at allowing other flexible features.”
Other key areas
Intergenerational lending is another area Hall says Masthaven is interested in, given the current market conditions. Indeed, he brings up the issue of having housing equity owned by a certain part of the population and the average age of first-time buyers rising. He is also looking to grow the lender’s SME, housebuilding and development profile.
Technology
On the technology side Masthaven is on the verge of launching a bridging portal. Meanwhile Hall also says he’s looking to do more to link up Masthaven with sourcing systems, to take some of the grunt work out of arranging a mortgage. The lender is also launching a fresh intermediary website.
Hall’s early career
Hall says he’s tried to ensure he’s have as many different experiences as possible in his career. After attending the University of East Anglia he joined PWC, initially spending two years in Bermuda. He then worked in arrears at JUNE 2019
Aviva and used the company to learn about the ins and outs of insurance. He worked at Central Trust for three years and then joined Saffron Building Society in 2004 as chief financial officer. “I guess sadly I am a deeply financial services in terms of all of my experience,” Hall jokes.
Hard times
Hall’s time at Saffron gave him a grounding in managing a business in hard times, as he was faced with the spectre of the global financial crisis while steering the ship as chief executive. “We were growing consistently and doing very well at Saffron,” Hall reflects. “We were innovating, we had a very diverse book; we had buy-to-let, shared ownership, self-build. “It was interesting in 20082009 when you preserve what you’ve got. You make sure the performance of your book is very strong. “But along with all of the other building societies we were the ones that led the recovery of lending in 2010-2011. “We saw that actually there was a return to good fundamentals in the mortgage market. “Borrowers were being starved of money. The banks had disappeared. We saw that there were good returns; competitive returns to be had.” Hall thinks his experience of ups and downs, alongside his Masthaven colleagues, is very valuable. “We’ve gone through a cycle and we’ve lent through different conditions and it means you’ve got that expertise,” he adds.
Role of the specialist
As has been well documented, this year has been a tough one for specialist lenders and challenger banks. The big six lenders are now doing more for the self-employed and light adverse customers than in the past, while the mortgage price war has led to the likes of
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Long-term lending division Transformational change Mortgage lending is currently experiencing a period of enormous transformational change. The substantial growth of specialist lending in recent years has typically been attributed to changing working habits and the self-employed, but it’s now far more diverse than this, Matt Andrews encompassing customer segments managing such as older borrowers, parents and director grandparents looking to help their offspring buy property and new landlords. The sector must therefore evolve and adapt to keep up with these changing customer needs. As lenders become increasingly aware of the diversity of those classed as ‘specialist’ borrowers, product ranges are becoming both larger and more tailored. As such, lenders like Masthaven are increasingly becoming less product-led and more ‘life stage lenders’ – positioned to support borrowers from ‘cradle to grave’ through catering for their lending needs at each specific life moment. This means the sector can continue to effectively bridge the gap between more traditional lenders who may otherwise turn these borrowers away. Whilst the market is holding up well despite ongoing economic uncertainty, lenders must take an active approach to offer flexible assessment models, remain digitally focussed and continue to diversify product ranges. I strongly believe that innovation is key to driving long-term product development and market productivity.
The multitude of opportunity Specialist lending has boomed in recent years, driven by the growth in selfemployed, entrepreneurs and contract workers, which, combined, now account for around 15% of the UK workforce. Furthermore, credit blips are a fact of life for many. As such, the time has come to Rob Barnard demystify the market. Realistically, when sales director you take a closer look at the ‘specialist’ lending sector, it becomes blatantly apparent that this is becoming the ‘new normal’. Lending for the real world requires out-of-the-box thinking and the ability to interpret complexity. There is no single individual in the world that has the same lending needs as another and as such, lenders have had to adapt their propositions to offer not only suitable products but new ways of working to ensure that lending needs are met head on. With such a vast array of borrower circumstances, we must make sure we are able to translate the likes of complex income streams and working patterns to offer competitive, compelling and personalised solutions.
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As an industry, we can raise awareness of the multitude of opportunities that specialist lenders can offer through thought leadership pieces, education seminars and a whole host of events. Heightening awareness of these lending avenues will provide brokers and customers alike with a breadth of additional solutions they might not be aware of when declined by the inflexible lending criteria of more traditional high street banks. Specialist will become mainstream – watch this space.
Seconds are a toolkit essential Long gone are the days when remortgaging was the only viable option for individuals looking to secure additional finance. Second charge lending, for example, increased by a staggering 24% between January and February this year and I expect this trend to continue its Jon Sturgess upward trajectory. head of sales Historically, the second charge market has been met with some stigma. However, the industry is working hard to communicate the benefits and opportunities of these loans to brokers and their clients. As today’s economic and political climate is encouraging more people to ‘improve rather than move’, using seconds to fund home improvements – effectively increasing the value of their home – is becoming a popular method. Just walk down any residential area and you’re likely to see properties undergoing renovations, extensions or roof conversions. Whilst these products are becoming a more accessible and understood area of the market, we still have a little way to go. I am feeling optimistic though and expect to see a substantial amount of interest in this aspect of the sector. One way to achieve this is through educating the broker community. Where once viewed with caution, seconds are increasingly becoming an essential item in a broker’s toolkit and, as lenders, we can really bring their many uses to life via the likes of roadshows and case studies. Networks and clubs also have a duty of care to offer these solutions on their panels too.
“As today’s economic and political climate is encouraging more people to ‘improve rather than move’, using seconds to fund home improvements – increasing the value of their home – is becoming a popular method”
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Secure Trust Bank, Magellan and Tesco Bank pulling out of the mortgage market. However, Hall still maintains that the likes of Masthaven Bank have a role to play, mainly because it has a more consistent approach in how it deals with non-standard customers, like the self-employed, compared to the big six. “To what extent can you be confident a top six bank is going to be considerate to your particular circumstances?” Hall asks. “One day they will be supportive and another day they won’t. If you go to a big six lender with a particular need, how do you confidently know which one of those lenders on any given day will be supportive of you? They are just as likely to tweak their credit score behind the scenes.”
Unlike the big six, Hall says Masthaven isn’t likely to dip into such markets for a couple of months before backing off.
Black Box
Hall says there’s a fear that borrowers won’t have their circumstances properly considered with some other
“We still see opportunities in the buy-to-let market. It’s still got a role to play. There has been this shift away to single property landlords. I do think there’s going to be a strong trend even in existing arrangements for landlords to shift towards limited company”
lenders – instead it will go to a ‘black box’. “We don’t do a credit search, put a score on things you don’t understand and fail you for it,” Hall says. “It’s not a black box. It’s very clear to what’s happening. “I don’t know about you but when I’m looking for a mortgage, I don’t want the vagaries of a black box run by a bank. “Brokers don’t know what’s going through that black box. You’ve got somebody behind a machine setting parameters.” Clearly as he looks to grow Masthaven, Hall doesn’t want it to become like the big six lenders. Instead he wants the bank to maintain its identity as a lender with a manual approach. Hall has clearly put together a team that he’s happy with – and it’s up to them to work together to make the lender a success.
James Bloom, Jon Hall, Matt Andrews, Simon Furnell
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Short-term lending division A technological innovation
Good bridging needs good people
Bridging has firmly earned its place in the mainstream lending world over recent years with annual completions by members of the Association of Short Term Lenders at £3.98bn for 2018. However, breaking into mainstream lending was just the beginning. Now, the sector is James Bloom being met with new challenges. One of managing these being new entrants into the market, director some of which bring little experience and knowledge. Of course, choice is a positive thing – it both drives competition and provides a wider breadth of solutions for intermediaries to offer their clients. However, two key components of the bridging sector are maturity and trust. These are often elements that new entrants lack and can result in poor customer outcomes. Brokers should therefore look for mature, established, short-term lenders who recognise that bridging is specialist and therefore invest in recruiting specialist underwriters to support and develop excellent links with broker partners. Another hurdle is technological innovation, although the market is making strides in this area too.At Masthaven, we are launching a new short-term lending portal which will free up valuable time for our team to spend more time working on individual cases and speaking to brokers. As a sector we must continue momentum and invest in more of this time-saving technology.
Short-term lending differs from mortgage lending in that cases are, by definition, specialist. We see all sorts of interesting cases arrive at our door – indeed, this is what makes my job so enjoyable. But what this means is that the key to success – the secret, if you will, Alan Margolis to approving applications, lies in the director of credit operational support underpinning shortand operations term lending departments. For me this is two things: good processes and intelligent underwriting. Robust, diligent assessment and approval procedures are vital – as are underwriters willing to challenge, think laterally and roll up their sleeves and get involved in cases. In 2019 I believe operations will be fundamental to the success of bridging. For us, this means spending time refining processes, training, developing and supporting colleagues and investing in technology to make things easier. Never at the expense of the human element though – good bridging needs good people, and always will.
Bridging is still an untapped area My message to brokers these days is: get bridging in your locker, because you’ll be surprised at what it can do for you and your clients. Lenders and brokers have made great strides in recent years to demystify bridging finance and bust a few Richard preconceptions: that it’s a ‘cottage Deacon industry’, that it’s ‘last resort’ in some way, sales director that it’s ‘niche’ and ‘complex’. It really isn’t. From helping people buy homes to undertaking home refurbishment – a big growth area – to releasing equity, bridging finance serves everyday need, exactly like other lending products do. We see ourselves as spreading the message about shortterm finance – we estimate only up to 20% of brokers use bridging finance, so it’s clear that for many, it’s something of an untapped area. With competitive rates and stacks of experience in short-term lending, we’re on something of a mission to educate the market.
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Savings division Putting the client back in control The specialist savings arena has an enormous opportunity to win back consumer trust at a time when many savers despair at what’s on offer from high street banks. Whether its lacklustre interest rates, poor service or a lack of the personal touch, loyalty is becoming a Simon Furnell thing of the past. chief operating This is what makes specialist banks officer so well placed to give savers something they aren’t getting from the mainstream providers: good rates, great service, flexible options, innovative features and a friendly person on the other end of the phone if they ever need a hand with something. It sounds simple, which makes it all the more puzzling why traditional banks have yet to wake up and realise it. We’re proud to be a Feefo Gold Trusted bank – meaning we consistently receive great feedback from our savers – and we’re spearheading the provision of flexible savings with our savings slider, allowing our customers to choose their own maturity date. We put savers in control of their money – after all, it’s their money, and it’s their savings goals.
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Tech transformation Our panel discusses how the mortgage process can and has been improved by technology and whether there is a limit to its success Jessica Nangle: How are APIs going to help lenders and brokers in the near future and how has it been adopted so far? Phil Bailey: It’s about connectivity and a seamless journey. There’s a lot of friction in this industry, and rekeying into different systems. APIs are there and have been around for a while. I think the last six to eight months lenders have gone a bit crazy and have started seeing the value in exposing APIs or injecting someone else’s APIs. The issue I have is it is not just brokers and lenders, but systems - CRM systems for example. Not all brokerages and lenders own their own technology. But we are further ahead than we were a year and a half ago. Neal Jannels: I don’t think enough lenders have the capabilities to do APIs - some still use Excel spreadsheets. The ones that have been tried have been successful but there is certainly room for improvement. There is more than just a sourcing system to an API, there are packages, brokers, and different systems trying to interlink what APIs can’t. Carlos Thibaut: APIs won’t replace brokers; they are a means to an end with connectivity and progress. The key is what you choose to connect and where in the business process or model does it give you enhancements? It varies with brokers. I think
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Twenty7Tec are doing a great job, we integrate with them and they are a great solution - raising the bar in terms of debate. There are still brokers who do not communicate with the client and inside their businesses there is no connectivity between pay, accounts, criteria, workflow, self-support and affordability. In the future we need to see a basic humming where we are able to transfer documents, credit reports and tokens to send data directly to underwriting systems. Right now, I think our energy is best spent trying to improve basic productivity and working with people like Twenty7Tec - applying some pressure to get things done. But there are exceptions. I see loads of efficient processes brokers have. With a benign mortgage market, where is the cost and driver of the business? How do you achieve and retain clients? How efficient are your brokers? For me that’s the focus I’d like to see. It needs more joining up. Shaun Church: Do you think that comes to having a more efficient CRM system and then the API can plug into that? CT: I’m on a CRM. Personally, I think it is but we cannot do it alone. The more people that create that and have efficient end-to-end processes, the more likely it is that
we will get some engagement from around the industry. PB: Get your back office in order first and then go for portals, CRM, and GI plug ins. CT: Clients engage with adviser efficiency. Engage with your clients, contact them and keep in touch. This enables your advisers to spend time advising and talking to clients regularly; referring to specialists in the group. Jonathan Burridge: The risk as a business owner is what horse you back. Investing, training and moving to a system is disruptive for a business. As well as cost, you will potentially lose talent, customers and money. A lot of businesses will say ‘if it’s not broke, we won’t fix it’. We need to see what horses are left. CT: I agree it’s a huge investment and choice but what is the track record of that business? If their system is the same as four years ago it is not a horse to back. If it has changed, there is an argument you can say that they are keeping to the times. You’re right, but you cannot wait for the perfect system which is never going to happen. I love my product and business but there are loads of areas where we can improve. We engage with users to try and keep improving.
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(From L to R) Neal Jannels, One Mortgage System; Shaun Church, Private Finance; Phil Bailey, Twenty7Tec; Andrew Montlake, Coreco; Chris Lomas, Foundation Home Loans; Howard Levy, SPF Private Clients; Jonathan Burridge, JLM Mortgage Services; Hemel Shah, Eligible; Michael Speyer, Dynamo; Hans Geberbauer, Foundation Home Loans; Carlos Thibaut, 360 Dot Net; Sarah McCawley, Foundation Home Loans
The danger of not doing something is bigger than using a platform that is used by others. There is more danger in not doing something. JB: I agree, but you have to convince the principals of businesses whose livelihoods are based on the revenues their companies generate. Some lenders are stuck with legacy systems that take ages to change. It is not an intermediary issue. We have too much choice which I think is fantastic. I’m an early adopter and love buying new things, but life has taught me to sometimes keep my hands in my pockets and wait and see. That is where we are with this. CT: I’d say assuming you’re dealing with something other users are happy with is what you’re looking to do better than what you’ve got, not replicating paper processes? Systems
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do it in a better way. If it continues at this pace of not doing anything and instead of implementing improvements to get to that end-to-end digital journey, you will have a massive cliff to try to jump from a poor to integrated digital platform. JB: True but how much longer do we have to wait? How much development has taken place over the last 18 months? You could perhaps sit tight for another 12 and wait and see. Solicitors, surveyors and mortgage companies have all yet to be engaged. Wherever you go to at the moment, you will not have this synergy or frictionless environment where the client can start filling in their own data, you can verify it, and it’ll be checked. All of this is incredible. You will know all the advice is given and there’s a JUNE 2019
small amount of individual personal engagement at the end to reassure the consumer they are making the right decision. The likes of Habito and Trussle still have brokers on the end of the phone which is great. These are all developments, but I don’t see a rush and need. You have to look and be open. CT: A lot of people think technology is robo-advice or the likes of Trussle. I don’t think it is. The value of the adviser is huge, and good advisers and firms contribute to a good society. If you do add value then the more you automate and take away the advice of the broker - be careful what you wish for. There are mortgage integration and mortgage engines being developed with lenders, but they want to get to a solution similar to the aggregators like MoneySupermarket. We MORTGAGE INTRODUCER
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should use technology to support what we do, the advice. It is about the advice process and engaging a relationship with the borrower. It should not just be mortgages too. The consumer needs an integrated solution for protection, buildings and contents, investment and pensions. That is what brokers need to deliver.
added value and selecting the appropriate solution; that data goes to your underwriters. I imagine that saves you a huge amount of time. HG: At the moment specialist lending situations tend to be more complicated, and from a lender’s perspective brokers source clients and give the advice. That is worth a lot as a lender. There is a proportion of people we lent to pre-crisis who think maybe they shouldn’t have got that mortgage loan. And it is the broker’s problem, not ours.
Hans Geberbauer: From a lender’s perspective we have an API that anybody can integrate into and we are in the process of integrating with somebody else’s API. We could have sat on our hands but strategically we have decided that we want to be at the front which is why we’ve organised this and have relationships with people driving things along. And I think some honesty would help as well. For example, I see reports about business flooding in. I know it isn’t. People can start to think that this is people over inflating the state of the market. When they think this they will just sit on their hands and wait. As leading players, we would do well to be a bit more realistic and try and deliver those small steps in functionality which the end user, the broker, picks up. We found as a lender we play the least relevant role in this.
JN: We have artificial intelligence, machine learning and robo-advice. Is this a threat or opportunity for brokers? JB: JLM developed its own intelligent engagement with consumers last year which we rolled out for network members. It is a useful tool which works very well but is only applicable for vanilla clients. Some online brokers can only assist people that fit a very rigid model but where we are seeing the opportunities are complex buy-to-let which some of
Sarah McCawley: Exactly. If it doesn’t work for the broker, it doesn’t matter. As a lender it saves me nothing too, but it will come to a point that if we do not have it, we will lose a lot of business.
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PB: John Charcol were one of the first online mortgage brokers around but that was years ago. The product transfer market is not as advised as you think because half of product transfers are execution-only. The intermediary world currently includes digital advisers, comparison websites and aggregators - so the term intermediary is getting a bit lost. It has always been a broker but is not anymore. The intermediary world will grow but not at the hand of brokers. There are a lot of brokers out there who do not do great things, use the same five lenders and have not embraced tech – they will not be here in a few years. Michael Speyer: We have great lender spread. Some naturally fit certain criteria. We are seeing a shift towards specialist lending. A lot of customers come to us for the advice. If you are looking at AI as an aggregate magic bullet, there is the rather straight and narrow logic numbers-based selection of criteria
CT: The real win for you must be the broker owning the client relationships with the client being enabled with tools to collect the relevant data like credit reports, HMRC data. The broker deals with what they need to do in terms of
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these companies cannot assist with. We will probably lose vanilla customers and will definitely lose remortgages to product transfers, more so thanks to the FCA, so our market is sitting with the people who want true advice. Artificial Intelligence could get there. 100 years ago we did not have a man on the moon. We will get there and there is market share there for everybody. If you are good, you will have a place in the market. A lot of people still want to talk to people so it is a great way of engaging your customer. Engaging and retaining that relationship with the client is important and it is about making that easier. I see it as a great opportunity. Let’s see where it goes.
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before lenders do for product transfers. If you are spending a lot of time in the product transfer market because it is quicker, the chances of you engaging that client in two years’ time when their rate expires is zero. The lender would beat you to it. Unless you are spot on with your relationship and engage with the customer, you’ll never see them again.
which lends itself to aggregators in the market, and certain mortgage products (like execution-only) would be a dream for those things. With deploying machine learning we run the risk of deskilling the advice we’re giving. I don’t think any broker wants to be replaced with a customer. We could probably do it, but tech is palpable and machine learning takes a long time to build up a picture. The more human these systems become the more chances there are of there being an error. If the FCA found a consultant did something by mistake, they would get a slap on the wrist, but if an entire system dealing with hundreds of thousands of mortgages made a mistake, we’d be under the microscope more when it comes to the adoption of technology. So, a little caution would be wise when adopting certain technologies but also embracing the existing tech we have where it fits needs to be done far quicker. I think looking at all the mortgages we have processed, we would have a very good data set there, but I can guarantee looking forward there would be a mortgage that comes along which we have
not done before. Machine learning is only going to be as good as the data it currently has and the scenarios it is setting. CT: On wealth, pure robo-advise firms are closing down all the time. If you look at the way the FCA treats wealth robo-advice, it doesn’t believe there is advice they think it is execution-only. Processes are being used to improve the efficiency of a human being signing off the advice. Artificial Intelligence and machine learning will take time before algorithms take over advice, it suits the aggregators and it will be for vanilla deals. The trick we are missing is engaging on these to improve processes like compliance. Rather than having loads of people checking processes, machine learning and Artificial Intelligence could help spot trends around compliance issues. That is where I think it adds value. PB: There is always a threat to the broker market if you don’t change with the times because interest rates are low. Many are doing well and not trying hard; using their CRM to engage with customers
Howard Levy: Our clients aren’t vanilla, they are specialist like high-net worth individuals. There is no robo-advice which can do what we do and there will never be. They want face-to-face advice and for someone to take care of them with rapport and trust, rather than tick-box lending. Roboadvice or AI can’t do that. MS: I agree there is a human element in everything we do. You need an emotional connection with someone at the end of the phone and if you don’t, there is less confidence in what you’re selling. We have customers coming back because of our rate and having access to the best humans - our advice is very human and we do care. You can’t replace a human with a machine. Hemel Shah: There are changing expectations on the ways you communicate with clients - younger clients are expecting certain things older generations aren’t. MS: I know certain companies have adopted instant messaging and wanting to do mortgages by social media only. That is the way we see consumers move towards. They want it to be quick and easy but want to speak to a human when making a very important lifelong decision.
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PB: I love what Eligible do. I think their engagement pieces have been needed for a long time and it is the right thing to use for broker firms to empower them. Chris Lomas: I think the natural progression is Augmented Intelligence not Artificial Intelligence. It is going to be a tool brokers use which informs them on how to make a better decision and cuts some of the leg room out. AI won’t replace specialist brokers anytime soon. CT: AI and machine learning can be used to engage consumers better, particularly the younger generation, and I suspect that will be the case for years to come with niche and specialist brokers. We need to be careful - whether right or wrong - that the younger generation like to engage like that. We need to as an industry be conscious of that. It is not about making decisions on advice. There are ways of improving processes but it is about client engagement using AI.
HG: Income verification is not a clunky idea and hopefully soon with open banking it will become built more effective and fool proof. It has a real place in what we are doing. In mortgage lending, we are dealing with a high-ticket item, getting one wrong is a huge loss.
CL: I agree but it can also have the opposite affect on client engagement. Google has poor use of Artificial Intelligence for adverts. The consequence for getting that wrong is people get cross, but the consequence of lenders or brokers getting it wrong is significant. JN: Will we be able to see DIPs being completed in minutes? There are various figures on completion times and I wonder how it can improve. NJ: DIPs to completion will never happen in minutes because of solicitors in the way.
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the legal side, that speeds up the entire transaction for remortgages. I can see that happening in the remortgage space within the next few years, not necessarily the purchase space.
JB: Land Registry was not particularly online years ago. I can find information at Companies House which was not available six or seven years ago. I can get title insurance plans online. It is all available for people who have the money, tenacity, and belief to go and do it first. And then everyone will sit back and watch. The principles of it have been around for years but it’s about doing it. People need to instead of arguing about market share, talk about technology collectively so the good will survive and things will move forward.
CT: There are loads of good things happening that will take time, like digitialisation of Land Registry and conveyancing platforms improving, which have to happen for the straightforward processes. But some of the things that could happen today are common standards – for example why do brokers have to check ID in lots of different places? There could be a list of approved providers of ID. The same could happen with credit reports and bank data. The list goes on. These are the basic things that if we could sort as common standards, would improve the process enormously while we wait for the big heavy tech to get in place.
HS: The one piece of tech I think will change it, especially from the lawyers’ side, is blockchain tech. Once distribution led technology comes to the market especially on
PB: I understand that there are valid reasons for lenders not to show their affordability and API. It is your product and risk. There is this black hole of conveyancing
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that takes a while. That is a long way from changing. There are a lot of people who make a lot of money from the status quo. Efficiency will hurt a number of people. I can’t remember the last time lots of lenders worked together, because there is no value in that for them, just value for the market. If you are a top five lender, everything everyone else does is a threat to them. JN: What impact are you seeing so far in regards to open banking? Andrew Montlake: So far none. There hasn’t been any in our market because it is still very new. What it could do is very exciting. It could fundamentally change a whole number of things. Because it is so new a lot of institutions aren’t ready for it, don’t want to be ready for it, or are too scared to be ready. It hasn’t had much of an effect. NJ: From an adviser’s point of view, open banking cuts out the bad cases to good cases. When you see their fact find, your portal, and the open banking bank statements come, you can quickly clear out what their expenditures are and income is to see what matches up.
number of clients on pilot. It is interesting and will take time. For brokers with a good engagement process with clients, we are finding the client is engaging better using PSD2 technology to share bank account data. We also have an encouraging pilot with a major network which is using bank account data via calculations as part of affordability and satisfying client requirements. The uptake and engagement with the consumer is really good because the time saved for the adviser is considerable. The network has a direct access to that in terms of sign off. The process is really fast. It is encouraging but early days. HL: It depends how you work. The way we do things is different in that respect. For myself, going out to see clients would not help very much. I would ask them to bring their passport and bank statements then talk through it. I’ll need the passport for the solicitor as proof of ID too. Until everyone is doing it the same way (which will never happen), I am not sure it can work. PB: There is a handful of technical bureaus and they do not sing from
HG: We put out a product that would have been great but didn’t get much take up. We think it was because brokers were not telling borrowers to click there and were not having those conversations. We’ would love to do more as a lender, but fraud risk is still considerable. Apparently nowadays anyone can make up a bank statement. CT: We have credit report sharing and bank account data on a
the same hymn sheet with their own IPs and stance. CT: Those businesses that engage with the consumer remotely first, being able to send an IDV for them to at least satisfy that and get started on the fact find is an improvement. The common standards are big to me. That is where it needs to get with lenders, but at least for some businesses that’s an improvement for processes. JB: I did not complete fact finds as an adviser. I thought my time was better spent asking them what they want, not their NI number and date of birth. They can upload that in their own time. CT: We give full access to credit reports. You are saying to the consumer here is a function, we need to share your data with the broker. We had an uphill battle with the credit bureaus. It is freestanding at the moment on file. It is the same as saying print off your credit pile and bring it in. It is their data. A broker cannot access it. The broker provides the function and the consumer says ‘I want you to see my data’, and shares it back to the adviser. JB: From a lender’s point of view other than contributing to the data these agencies hold, do they just accept we have the right to request the data? HG: It is on mutuality. We are signed up and give them tapes so they can access and respond to applications we get. JN: What technology should brokers be using and why? MS: There is a huge scattergun
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approach at the moment. Tech innovators are seeing gaps and innovating. We are all under immense pressure to adopt technology thinking it will make things quicker and easier and save time to spend more time advising. Developing these technologies can be incredibly time consuming and you do not necessarily see the reward at the end of it, but I still think it’s a worthwhile exercise. Until we see all the tech available - and I think we have a lot more innovation to come - the industry will not become wiser. We have to apply that knowledge, and we are only starting to do that. A few years ago, we were not really talking about APIs. We had been doing it but now it is a buzz word and is in all our minds that we should be innovating more where we can. Sometimes it works and sometimes it doesn’t. Whichever approach, the fact that we are doing something is eye opening for us all. We need to make sure we adopt everything where we can. It is going to take effort and we need to try.
get to influence that product in a significant manner. We respond and develop to your feedback. It may suit businesses who are early adopters and give feedback. CT: You learn from consumers as well. We’re now looking at phase two of our portal. We know how long clients spend on a page and the chances of completion using an online fact find is higher than if they don’t. Repeat sales are much higher if the consumer engages with the portal and technology at the start because the experience is nicer, more efficient, and modern. Some things they don’t like too. PB: A lot of us weren’t early adopters. We would not be here. We (Twenty7Tec) were the third sourcing system. Early adopters helped shape our product and now 10,000+ brokers use us. If there was not a need for you, you would not be here. I think app submission is the best thing a broker can adopt in an intermediary world. App submission saves the biggest headache in failed DIPs and apps; going back and forth, rekeying data.
HS: By being an early adopter, you
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AM: After looking at MortgageApply, it is something that really excites me and will save a lot of time so advisers can spend more with clients. We have to adopt as much technology as possible because our customers will demand we do. All of this is about making the customer journey smoother. We have to compare ourselves to Amazon and Google and their customer journeys. That is what customers demand. We have to be there to deal with customers whatever way they want to - online with open banking or face-to-face with specialist cases or first-time buyers. If they want to speak to us on the phone and dip in and out with a bit of both, we have to be there to do that. It is about the customer choice and journey; speeding things up with the added tip of advice. We have to be at the forefront of this and shape the broker market to be able to do this swiftly, easily and end-to-end with the added benefit of professional advice. If we can do that, we can compete. JB: It is about the stage at which you get involved. Early adoption is high risk. There is too much competition between firms looking after what they want to generate rather than providing a commonality of platform where people can go and do things and then the best will survive. It is all about customer engagement and you need to keep that channel open because lenders have got better at customer retention, so we need to be in their face as much as possible to get referrals and repeat business. Having a platform to enable you to implement it will be essential.
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Seconds’ growing reach Tim Wheeldon, chief operating officer at Fluent Money, says knowledge of second charge among brokers is growing Second charge lending is expanding. Probably not as fast as many commentators predicted but very much in line with predictions we made after MCD. At the time, when some peers were becoming a little over excited about the ‘land of milk and honey’ they thought would emerge, we always believed there would be a longer road of education to win over hearts and minds. So it has proved. Two years on from MCD, the second charge sector is in good shape with the demand for second charge mortgage products continuing to grow within the UK, with one of the significant features being the nature of this demand, which has begun to evolve and to assume different forms. Apart from its use as an efficient means of consolidating credit and its obvious use to fund home improvements, advisers and their customers have been choosing a second charge option in order to protect low interest mortgages from higher rates or to avoid paying early repayment charges when sourcing loans. Recent research has also revealed a notable rise in the number of people who are taking out second charge loans in order to pay off self-assessment tax bills. From our own experience, we have also seen growth in areas such as buy-to-let refurbishment as well as a surge in interest from customers who have decided to refurbish or extend their current property with the use of a secured loan, rather than take the risk of moving home at a time of uncertainty. Experts have pointed to the
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increasing numbers of property investors using second charge mortgages to raise capital over recent months, with the equity that is released from these loans being used, in turn, to finance deposits for additional purchases or to refurbish existing assets. However, as reductions in tax relief continue to impact on rental profits and the size of HMRC bills, it has become apparent that more and more landlords are now turning to the seconds market in order to meet their financial obligations and to mitigate the crippling rise in costs- a trend that can only grow stronger as the years advance. Moreover, as household debt growth continues to outpace economic conditions in this country, Knowledge Bank’s criteria activity tracker for February revealed that the top five searches for the second charge category were all debt related- a reflection of the way in which the market is beginning to shift its focus from previously ‘traditional’ areas of business and to explore new avenues of activity, as well as of rising demand. It is therefore no surprise that as the industry continues to broaden its reach, it has also seen a corresponding rise in new business. Figures published at the start of the year by the Finance and Leasing Association (FLA), for example, have revealed that second charge lending rose by 4% and by 7% in terms of volume during 2018, with comparative data for January 2019 demonstrating a 12% rise in the value of new business and an 18% increase in volume (as compared to the same month JUNE 2019
for the previous year)- a truly impressive rate of growth.
Maximise opportunities
However, with the implementation of the Mortgage Credit Directive in 2016 and the steady rise in consumer demand helping to improve awareness of these products within the industry at large, brokers are now starting to rethink the ways in which they engage with the second charge distribution process. But, what are the options? Many brokers point to the sharp increases in regulatory demands and the time constraints that these impose as a reason for their frequent inability to consider ‘specialist’ cases more effectively. Which is fine up to a point. But the use of packager/ distributors to access products and lending options which fall outside of recognised areas of expertise, as well as to introduce brokers to a broader range of lenders and deals, has the potential to transform the breadth of services that advisers can offer. While some brokers may worry about the possibility of a loss of day to day ‘control’ over these customers, the right partnership with a packager/distributor like Fluent for Advisers, committed to long-term relationships with the intermediary sector, is a simple but highly effective way of positioning one’s business at the forefront of a burgeoning financial movement, rather than lose ground to competitors altogether. For brokers wishing to offer a broader service without paying for extra infrastructure, it’s time to think again. It’s time to partner up.
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Fingers on the pulse Natalie Thomas caught up with Fiona Hoyle, head of consumer and mortgage finance at the Finance & Leasing Association, to talk shop and seconds The Finance & Leasing Association’s second charge figures have become the monthly bearer of good news to the market, regularly conveying an increase in lending volumes. While lending volumes may currently be up, so too is the regulatory workload for firms and trade bodies, with the FCA recently announcing another investigation into second charge firms. But what can the sector do to ensure lending volumes remain high and what do the FCA’s latest concerns mean for firms?
Second charge lending volumes appear to be performing well this year, why do you think this is?
The sector has seen very brisk trade in Q1 2019, with new business growth of 19% by value and 25% by volume compared with the same period in 2018. Second mortgages are a highly intermediated market, so the sector’s growth is dependent on brokers putting the product in front of customers – and this is obviously happening more and more which is great to see. The current trend towards home improvement, rather than moving, also provides a central role for the second mortgage product. Its flexibility can’t be beaten when customers don’t want to disturb their first charge mortgage due to a good interest rate, or potentially incurring charges.
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Were you surprised when the FCA recently announced a new probe into the second charge sector?
regulated on the same basis as firsts, not least for the credibility and consistency this provides – but thought needs to be given to the cumulative impact of regulation.As most customers will only hear about second mortgages through their financial advisers or brokers - and usually only if it is recommended – the sector is focusing on encouraging more brokers to offer advice on these mortgages. And there are already very encouraging signs this is working, as there has been an increase in the overall number of brokers recommending second mortgages as an alternative to a traditional remortgage.
Do you feel some firms still need to improve their practices?
Do you feel that lenders will always still warrant their own standalone trade body given the continuing alignment with the first charge market?
I think it is for the FCA to explain its concerns to the industry, because a sentence in its business plan, without any context, is far from ideal, especially as second mortgages have been regulated under the same strict regime as first charge mortgages since 2016. We understand that the FCA’s proposed long-term project evaluating firms’ business models will look at a broad range of lending products, but little detail has been published so far.
That question could be applied to any market because there are always some firms that could do better – but it’s important to distinguish between the conduct of a few individual firms and the conduct of the wider industry. Second mortgage firms are constantly reviewing their policies to ensure that they meet the high standards expected. What do you feel are some of the biggest hurdles facing lenders? This is a relatively small market, and since 2014 it’s been bounced from the Office for Fair Trading’s regime into the FCA’s consumer credit regime and then straight into MCOB, the FCA’s Mortgage Conduct of Business regime for first charge lenders. In many respects it makes perfect sense for second mortgages to be JUNE 2019
While there are certain similarities with first charge, second mortgages are a discrete market with its own specific requirements, and it therefore requires a dedicated trade association with expertise in this regard who can work with lenders to promote the interests of the sector.
What is the FLA busy working on at the moment?
On the regulatory front, we have been heavily involved in the FCA’s Mortgage Market Study and will be responding to the recent consultation papers on responsible lending and mortgage advice. Raising the profile of the sector is another important workstream for us. MORTGAGE INTRODUCER
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Mind the gap Natalie Thomas looks at the closing gap between first and second charge mortgage rates If a lender in the second charge market were to have quoted a sub 4% rate 10 years ago, they would have been met with disbelief; as well as a speedy ‘yes’ from the master broker. Fast-forward 10 years and such rates are a reality in the second charge space, with the lowest advertised headline rate currently around 3.57%, with some master brokers reporting deals for rates as low as 2.09%. Rates in the second charge mortgage market will arguably always be higher than those in the first charge market due to the higher level of risk, but the gap is closing. The average 2-year fixed rate mortgage in the first-charge market is currently around 2.49% - just over 1% lower than some second charge rates. Healthy competition among lenders, regulation and a low Bank of England (BoE) base rate, have all helped bring rates down in the second charge sector. So, Loan Introducer asks: “Can rates in the second charge mortgage market go any lower?”
Mike Walters, head of sales, mortgages and bridging, United Trust Bank The quality of products available in the second charge market has never been higher. Through an array of different lender distribution channels and via a best advice mortgage adviser framework, consumers can now access a wide choice of fixed, discount and lifetime BoE tracker products. The market is highly competitive and interest rates in the second charge market have never been lower. Of course, not every customer will be eligible for the lowest rates as a result of either their personal circumstances, credit history, loan-to-value or income. Prime customers however can currently
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access some very competitive deals. In my view, unless the Monetary Policy Committee reduces the base rate, it’s unlikely interest rates for second charges will go lower than they are currently. The pricing reflects the fact that second charges carry an additional element of credit risk for lenders by virtue of holding an attachment point above the first charge.
Alan Cleary, managing director, Precise Mortgages They shouldn’t need to. However, if lenders are unable to relax credit policies, then cutting rates to win more market share is really the only option. Any rate cuts that they make would probably be very marginal.
Harry Landy, managing director, Enterprise Finance Rates have continued to fall, hitting 3.57% in the last month, so it’s possible they could fall further. Offering the best solutions for consumers shouldn’t always be about a ‘race to the bottom’ with pricing however. I would like to see further product innovation from lenders and offering enhanced criteria to support more borrowers.
Tim Wheeldon, chief operating officer, Fluent Money Rates have probably reached the point currently where anything lower would start to move into negative margin territory. Lenders wishing to go lower would only be doing so as a loss
leader but in the end it all depends on cost of funds and that of running the business.
Jo Breeden, managing director, Crystal Mortgages Rates are where they are given the nature of the ranking charge and the average deal size. Current interest rates provide solutions to the large majority of customers’ needs, so I’m not sure a lower rate would necessarily attract more business. The most important work, as per usual in the specialist finance sector, remains the education of the mainstream mortgage broker. Second charge is a viable alternative to a capital raising remortgage or further advance, but is that message out there and understood? That said we always welcome further product innovation if it benefits the customer.
Neil Hoare, commercial director, HLPartnership We are all aware that fixed rates in the first charge market are moving more towards five years and stamp duty costs are clearly an inhibitor to the house move. This means more prime customers will have to look at different lending solutions to fund such things as home improvements, cars and lifestyle choices. Traditionally this has been the rationale for a further advance, but we are seeing more customers looking to second charge loans as a viable alternative. I can see many lenders in the second charge sector moving away from the high risk debt consolidation or credit impaired proposition, to a solution built on short
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term lending built on first charge affordability models. With this in mind you can see rates come down further as second charge lenders look to compete for customers that are less risk, who are simply looking to satisfy a specific short-term lending need.
Scott Thorpe, director/co-owner, London Money We are in a very delicate situation with regard to interest rates. The world feels like it is balanced on a knife edge, politically and financially. A wrong move by central banks either way and we could be plunging in to the unknown. People need to remember that the credit crunch we endured in 2008 hasn’t ended, it is a continual evolving issue. The headwinds for us as an economy do not stop and start with Brexit. The levels of personal and corporate debt continue to grow exponentially. Debt is the new normal and we are backing it with nothing but a degree of hope and bluster. We are endeavouring to make Britain great again at a time when Britain has stopped making things. You cannot build a sustainable economy on just services that scan and email PDFs. So can rates go lower? Yes, they can. If the world slips into recession the last thing we need is rising interest rates. If we fall out of Europe with no deal the last thing we need is rising interest rates. If the London property market, historically the power house of the economy, continues to falter, the last thing we need is a rise in interest rates. The market seems to have forgotten what it promised never to forget – the mistakes that created the mess in 2008. The component parts of the credit crunch remain in place and are coming together again. To me, rates can go lower but is a bad sign to a much wider, more concerning set of circumstances.
Darren Perry, head of second charge mortgages, Brightstar Financial The rate war can only go so far until there comes a point where lenders say, ‘we can’t go any lower’. Some of the current headline rates in the second charge market were seen as very favourable firstcharge mortgage rates not so long ago. There might be some tweaking here and there but I don’t think we will see any big changes to rates. The lowest published rate at the moment is 3.57%, however there are lenders out there that price their offering based on the risk they are going to take. In order to get the best rates you need to run a search on the client and key their details into the lender’s system. The lowest rate we have ever seen when we have done that is 2.09%. Instead of perhaps lower rates I think the market will grow through innovation and lenders need to innovate in products to grow the market.
Steve walker, managing director, Promise Solutions I think second charge rates are broadly as low as they can go at circa 3.5%. There are options occasionally coming up at sub 3% but these are as rare as hens’ teeth and reliant on an exceptional score and low LTV. For lenders, second charges are considerably more risky than first charges and I think current rates reflect this. That said for capital raising borrowers, where their mortgage rate will increase due to LTV or personal circumstances, they will often find it cheaper to keep the existing mortgage rate and borrower extra via a second charge.
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A second for Help to Natalie Thomas explores the options for borrowers considering taking a second charge to repay back the government’s stake in Help to Buy property Thousands of borrowers in the first throes of the government’s Help to Buy (H2B) equity loan scheme will soon start to incur interest on the Government’s slice of their loan – if they have not already. Far from being something to celebrate, when borrowers reach the fifth anniversary of their H2B mortgage, their equity loan incurs a fee of 1.75% per annum, rising annually by any change in the Retail Price Index (RPI) plus 1%. This means it is potentially payback time for the thousands of borrowers who have benefitted from the scheme since its launch in April 2013, so could a second-charge be the answer? The scheme, which allows potential homeowners to buy a newly built house with just a 5% deposit has so far helped over 210,000 onto the housing ladder. The government pays up to 20% of the cost towards the property, (40% in London), meaning the borrower needs only a 5% deposit and a 75% mortgage to make up the rest. This interest (as opposed to any mortgage element) is only paid on the original equity loan amount after five years, however, if the property goes up in value, so will the government’s stake, meaning potentially, the longer a borrower leaves it to pay back their loan, the higher the government’s stake could be.
Growing potential
Figures from the Ministry of Housing, Communities & Local Government show in 2013, 14,023 borrowers took out a H2B equity loan, rising to 28,376 in 2014 and 52,075 in 2018. So could some of these borrowers be potential candidates for a second charge? Darren Perry, head of second charge
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mortgages at Brightstar Financial, thinks so. It has already seen some demand from clients for such loans and expects to see more. “Borrowers will be coming to the end of the initial five-year period and finding there is interest to be paid,” he says. “The interest might be linked to the RPI but is an additional cost nonetheless. Whilst the initial rate at which borrowers pay back the loan is low, they still might not want the government’s 20% stake hanging over them, as it could go up in monetary terms,” he says. “If they paid £100,000 for a property and the government’s stake is 20% or £20,000. If the property doubles in price, the government suddenly owns £40,000 of the equity. We don’t know what’s going to happen with house prices, borrowers might think it best to pay back the loan now; if they can,” he adds. For a £200,000 property, assuming a government equity stake of 20% (£40,000), borrowers would see their payments increase from £1 a month to £59, or £712 annually in year six of the loan. The interest will increase annually in line with any interest in the RPI (currently around 3%) plus 1%. If the RPI reaches 5% by the time the borrower comes to pay back their loan, by year 10 of the scheme, the interest rate will have reached 2.21%, equating to monthly payments of £75 and an annual payment of £896. Tim Wheeldon, chief operating office of Fluent Money, says whilst it has not seen any demand for a second to be used in this way, there is no reason why it shouldn’t be. “In the same way that second charges have been used to help consolidate loans or where clients are facing high Early Repayment Charges and do not want to
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Buy disturb the main mortgage, a second charge could also become an alternative means of dealing with the H2B equity loan,” he says. “That is part of the beauty of a second charge mortgage in that it can be better to use the precision scalpel of a second charge rather than the heavy handed battle-axe of a remortgage,” he says. Harry Landy, managing director of Enterprise Finance is of a similar mindset and says it’s possible to see how it might be a growth area. “After the interest free period of the H2B loan ends, borrowers could use any equity increase in the value of the property to raise the finance through a second charge mortgage, where this couldn’t be done through a first charge mortgage,” he says. “This would enable them to own the property outright and benefit fully from any future growth in the value of the property as the government would no longer have a stake in this,” he adds. Alistair Ewing, managing director of the Lending Channel feels lenders and brokers could do more to make clients aware that a second charge can be used in such a way. “Given that a reported two fifths of new build homes are being supported by H2B, there could well be decent potential here,” he says.
The LTV problem
Figures from the Ministry of Housing, Communities & Local Government show more than half (57%) of all homes purchased using the scheme had a deposit up to 5% of the property purchase price at the point of sale: 22% with a deposit ranging between 5% and 10% and the remaining 21%, a deposit of 10% of the property value or more. Steve Walker, managing director of Promise Solutions, says cases with a high LTV can be challenging to place. “Equity is already tight and new builds don’t have a reputation for going up in value – in fact it’s the opposite,” he says. “Consequently such loans tend to be at
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higher LTV’s which leads to higher rates and repayments and this can impact on affordability. “In practice we can place loans up to 100% LTV, even with a little adverse credit but most H2B applications will be challenging unless there has been an increase in property value and the affordability is strong,” he says. Paul McGonigle, chief executive at Positive Lending agrees that such cases could potentially be tricky to place. “The LTV would be particularly high to start with and house appreciation has not increased in-line since the initiative started to offer value to the borrower; especially as the standard market rates at 85% LTV are above 7%,” he says. “Also, if the borrower purchased a new build, the property naturally depreciates for the first 12 to 24 months and this will probably make that a more difficult proposition to refinance in the first charge market, let alone the second,” he adds. Greg Cunnington, director of lender relationships and new homes at Alexander Hall says while it hasn’t seen demand for seconds to be used to repay the entire loan it is seeing a general demand from clients to staircase, which is where the borrower repays a percentage of the equity loan back. “We would like to see more lenders come into this space, as to remortgage with only a partial staircase still has limited options compared to H2B purchase or remortgaging with complete ownership,” he says. “I can see where a second charge could be helpful here but think it would be a limited market and that is where the loan to income criteria means it is the only option for a client. Ideally a client would remortgage, or take a further advance with their existing lender, as the terms should be more competitive,” he says. However, he says, it could be a situation where the lender is maxing the client at 4.5-5x income, where as they theoretically need to get to 6x income to completely repay the equity loan – so a second could be a viable option. But he says: “Ideally products will evolve allowing similar affordability for help to buy remortgage clients in the firsts market to cover this gap.”
Lender appetite
It is not just demand from borrowers participating in the H2B scheme that is
needed but also that of lenders. Perry says not all lenders are currently happy for a client to use a second charge in such a way. “Maybe this is an area a few lenders will get involved in as it becomes more popular,” he says. Precise Mortgages is one lender which currently does allow for a second charge to be used in order to pay off the H2B equity loan. Alan Cleary, managing director of Precise Mortgages, says whilst it has the ability to do it, it hasn’t actually seen much demand. What it has seen demand for however is where a client is looking to staircase. “The challenges with H2B is the available equity,” he says. “In a slow house price growth environment, coupled with new build house price premium, there won’t necessarily be much for us to work with as our maximum LTV is 85%. However, if there is the equity available, there are income advantages of using a second charge loan.
Growth potential
“As a lender we can use the partner’s income (even if not a co-owner/on the existing mortgage). This is useful where single applicants have bought a house and a partner has since moved in and they want to ‘put their own stamp on a property’ via home improvements. He adds: “We can work to 6x income on a second charge loan, which is more than all high street and most specialist lenders. “This is useful for when the borrower wants to pay off the H2B loan and do home improvements and such and where the income calculations in the remortgage world don’t allow for this,” he adds. While the take-up for loans to buy-out H2B scheme equity might be minimal at present, this demand has the potential to grow, as an increasing number of borrowers reach their all-important fiveyear mark. The much bigger potential however might come from how using a second in this way could open up the second charge market further to mortgage brokers, with the H2B scheme potentially being the catalyst that brings more mortgage brokers into the second charge space.
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SFI: Regulation
Stick or Twist? Decision time for DA firms There’s now less than six months until Christmas and for DA firms everywhere, on 9 December, the Senior Managers and Certification Regime (SM&CR) will come into force but is unlikely to be greeted with the same cheer as the seasonal festivities. Under SM&CR, firms must demonstrate how they integrate the FCA’s prescribed actions and responsibilities into their businesses as well as making sure that their staff are ‘fit and proper’ throughout their career. All of this via a recurring clear, documented policy and procedures in support of complying. The most Senior Manager in a firm is responsible for taking reasonable steps to comply fully with the FCA requirements on SMC&R and the FCA will expect to see the evidence. Also, each individual performing a Senior Manager or Certification role will need to be formally assessed for competence as well as
Shaun Almond group managing director, HL Partnership
assessed for fitness and propriety when they join the firm and then on a regular basis. The amount of work involved cannot be underestimated, particularly if firms have not already started to work towards the due date. The issue for DA firms is not just about becoming compliant, but also the ongoing effort required to remain so and the consequences of not being able to maintain the standards required.
“The issue for DA firms is not just about becoming compliant, but also the ongoing effort required to remain so ”
Every day I speak to DA mortgage and protection firms, considering a move over to AR status. Many are now also looking to see whether their firms would not be better served in a network, in the face of the extra work to comply with the new Senior Managers Regime. These are the questions that every DA firm needs to ask. Are my customers going to receive a poorer service if we opt to become part of a network? Is it worth diverting the time, taking on the inevitable extra costs of setting up and then maintaining a function in terms of extra staff or external support resource, specifically to manage, implement and maintain the new rules to remain DA? If the answer is ‘no’ or ‘not sure’, it is time to talk. However, if you decide to stay as a DA firm, remember, the clock is ticking.
Make your objections felt – the consequences could be serious After the publication of the Mortgages Market Study released by the FCA in March, some of you might have seen an item in the trade press recently where I called for all mortgage brokers to stand together to make sure that the current role of advice, for so long advocated by the regulator, would not be watered down. There is a clear danger that the concept of advice recommendations, based on scoping a lending panel representative of the whole market, could end up being diluted. Admittedly, it is only at the consultation stage, but I would recommend that if you have not read it, I strongly recommend that you do so. OK, it is not exactly a gripping read and will probably do more for insomnia sufferers, but this is our future as bro-
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kers that is being discussed. The direction of travel over the past 10 years, as far as regulation is concerned, has been to fully support the concept of whole of market advice provided by qualified mortgage brokers. The inference to be drawn from the relevant parts of the Review casts doubt over the regulator’s wholehearted support for the process in the future. Yes, the mortgage market is evolving, and it is important that ways and
Clayton Shipton managing director, CLS Money
“It is up to all of us in the adviser community to make our objections known or we give up the right to complain”
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means of working are challenged, particularly as technology is making such an impact on how consumers interact with services. However, it would be a retrograde step to go back to a situation where customers are simply ‘sold’ a product, without recourse to a proper market review. To my way of thinking this is a fishing expedition by the regulator. They want to assess whether there would be significant objections from brokers and if there is not, they would take it as a sign that no one was particularly interested. It is up to all of us in the adviser community to make our objections known or we give up the right to complain if the regulator then decides, due to broker apathy, to water down the role of independent ‘whole of market’ advice. www.mortgageintroducer.com
SFI: Bridging
Producing strong and productive relationships What makes for a strong lasting relationship? Many would say you have to be happy. So, what makes a broker happy in their relationship with a lender? Many brokers would say it is the trust that is established that generates an income stream with the least amount of hassle and greatest amount of support. I often compare how we have established our strong partnerships with the stages a strong marriage goes through over the years. It starts with the first contact at say a pub or club (financial event) then it progresses to the first date (first meeting in brokers office) then a series of dates when the individual personalities find out if they are compatible (a series of exploratory meetings to see if their business synergies are
Sonia Shortland director, Apex Bridging
aligned), before a proposal is made. Courtship is a period for seeing how the initial attraction (enthusiasm for a mutually beneficial relationship) works in reality and if the proposed marriage has sound foundations on which to build a longlasting and loving relationship. In our business the proof of the pudding is in the eating and the courtship period should be seen as the time when proactive communication becomes vital to ensure that what was promised during the get to know you period becomes reality. Get those things right and you draw up your plans for a long and happy marriage, built on trust, mutual understating, common values and support for each other. This is the 21st Century so, with divorce rates at 42% in England and
Keeping up with the Joneses Recognise the song, “birds do it, bees do it, even educated fleas do it, let do it…”. That has become the nature of bridging, if others do it, let’s do it. Many bridging lenders in a crowded market trying to out vie each other, offer terms which make no sense and cannot be sustained. This does not mean there cannot be innovation but in fact, very few of the recent “offers” were innovative, just more keeping up with the Jones’. The chestnut, offered by a long list of lenders, mouth-watering, deeply discounted interest rates but only for loans under 50% LTV and then, restricted to those loans which have no imperfections. How often does that happen – not a question, an exclamation! Sure, all lenders can afford to break even or make the tiniest profit for those deeply buried golden nuggets. It attracts attention, but then, hey-ho, everyone is doing it. www.mortgageintroducer.com
In these Brexit endangered markets, LTVs are under less pressure but even now the 75’s and 80’s are being trotted out to attract brokers’ attention. Are they really available and how tight will the criteria be to qualify? Further, how wise is it for the lenders? Allowing for unpaid interest, the costs of recovery and the possible reduced selling price in distressed circumstances, it is almost guaranteed there will be a loss at 80% and probably so at 75%. So, is it available and do you believe in Santa or fairies? So, what is new? The bridge to term, now being introduced, offers a double whammy. For the borrower, it provides security of finance and avoids double setting up costs, first for the bridge and then the term loan. And for the lender, no need for proof of the exit strategy. It is a win-win situation for borrower and lender alike.
Brian Rubins executive chairman, Alternative Bridging Corporation
Wales (2017) all parties have to work hard. Lenders cannot allow their service standards to fall and brokers must continue to be proactive and supportive. I am not saying lenders and brokers should be adopting 25-year plans but I think you’ll get what I mean. If a long-term relationship is to be established for mutual benefit and happiness, then offspring’s will naturally come along to show what a loving relationship the couple have. In our business if it is a strong relationship those offspring will be the numerous repeat and referral opportunities that will come to both partners resulting in the business marriage being a long and fruitful one. So, the moral of my tale is, be mindful of who you talk to when you are next in a nightclub you never know what it could lead to. Marriages are not made in heaven they are made in environments where collaboration, communication and knowledge are at the core of discussions designed to establish long-term relationships. Then there is the refurbishment bridge. A number of these now on offer, a hybrid of a bridging loan and a development loan as it includes further advances for property improvements and can include a final top-up against end value. It enables the borrower to withdraw equity, against the end value, to invest in the next project. No bridging loan lender dare be without one, but the mechanics must be simple. Finally, a term loan, with similar underwriting criteria and processes to a bridging loan, i.e. swift and simple. Borrowers often need time to establish the property or business income before being able to refinance into the mainstream. Bridging and then rebridging is both costly and does not provide an adequate period, and rebridging a bridging loan is becoming more difficult to achieve, particularly if the initial loan is at a maximum LTV. A term loan underwritten by people for people and not by algorithms is the answer and is now available. The Jones’ stay ahead.
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SFI: FIBA Bridging
Competition and choice bring their own challenges There is no comparison between today’s market and the one that emerged from the credit crunch of 2008, as during the run up to that time we had nearly 100 commercial lenders to call on to help us place business. As the crisis reached its peak, the number had halved to less than 50.
Wide selection
Adam Tyler executive chairman, FIBA
Today the exact opposite is the case. At a conservative count there are over 500 lenders involved in the sectors which make up the wider commercial finance space. Clearly, having such a wide selection of lenders is a huge positive and along with my colleagues in the sector, we have worked hard to champion the widest range of lending options for brokers. But, as we work to add more of the lenders you want to see on the FIBA panel, the growing number of funders coming into the market continues to present another challenge for the industry. Although demand for SME finance is strong, we are fast reaching a point where, with so many new lenders entering, criteria and pricing can only be taken just so far to cre-
ate a point of difference in creating demand. Two things are beginning to happen, which we all need to be careful how we handle. Firstly, procuration fees and commission payments are beginning to edge up. Not a problem in itself if it remains realistic and transparent to the customer. However, those of us who were broking pre-2008, will remember the oversupply of lenders led to procuration fees, particularly in the residential sector, ending up out of control.
Value for money
In 2019, one of the real differences is that we all work in a regulated environment and I would urge you to pay particular attention to this aspect of a lender’s proposition, particularly if they are not on the FIBA panel. I have always been a strong advocate for ensuring brokers are paid a fair sum for introducing business to lenders. However, as fees increase, we need to remain vigilant that the customer is getting value for money and that our lender partners are not increasing their costs too much to pay for any uplift in fees payable at the outset of a loan.
Our regulator is already looking closely at the commissions earned in vehicle finance and this could be the start of a read across into the broader commercial finance sector, which could come under its own scrutiny at some point.
Stringent tests
The second point to make is about lender criteria and underwriting. However, before I do, it is important to point out that in the majority of instances, lenders still carry out stringent tests before any funding takes place. But care needs to be taken if you come across any lenders offering propositions, which require no more than the property as security. Asset only lending is fraught with danger, not only for the customer but also for the adviser recommending it. Ability and intent to repay have, along with suitable security, been the watchwords of responsible lending, and non-regulated or not, we live in a regulated environment and anything that is likely to cause a customer to complain, however long after the event could soon fall under the remit of the Financial Ombudsman Service. There are plenty of lessons that we have learnt from our many years of experience that will mean we can continue to enjoy our industry in its current excellent health for a lot longer to come.
Adding more value with PI Insurance The price of doing business as an adviser is increasing all the time. Regulatory costs, particularly compliance are growing and when this is put together with the need to source reliable and cost effective PI cover, advisers are facing a growing trend of digging deeper into their pockets just to reach the starting line where we can actually talk to potential customers. Commercial finance brokers are not immune to these increasing costs and with PI cover, apart from the cost, the search for a provider that will provide consistent and well researched policies that suit the average commercial finance broker, while representing value for money, are becoming harder to find. Which is why we were delighted to announce the launch of a block PI policy for FIBA members, in partnership with the PI Desk, that fits perfectly in all aspects.
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The new scheme comes with competitive premiums from an ‘A’ rated insurer. Coupled with a simple application process providing same day indicative quotes (subject to underwriting), no administration fees, monthly premium instalments and quick and easy renewals, the new scheme represents a significant milestone for us, in the development of the trade body. Putting in place our own block PI scheme is a major step forward to realising our goal of offering the most comprehensive range of member benefits. For any commercial finance broker out there, an inhouse PI scheme, allied to all of the other benefits that a trade body like FIBA can offer, makes a compelling argument for becoming part of the fastest growing finance trade body in the UK.
www.mortgageintroducer.com
FS1
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Saturday 21st September 7.30pm till late Liverpool Marriott Hotel
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We are holding another big fundraising evening with a welcome drink, 3 course meal, DJ & raffle prizes. Smart dress.
B OOK A C ORP OR AT E TA BL E Only three corporate tables remaining for parties of 10. Tables cost £1,000 Contact Ann Coffey for details: anncoffey@blueyonder.co.uk 07815 619 971
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FS1010-Sunshine-Charity-Ball-BLDad-2019-AW.indd 1
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The Last Word
Get moving with the times Nicola Alvarez, corporate account manager of proposition development, Accord Mortgages talks past acheivements and future offerings Working in an industry which is continually transforming means it’s important to keep abreast of any changes and, more importantly, be able to adapt your offering to meet changing customer needs. Whilst a number of lenders employ specific sales proposition specialists such as new-build, my role – supporting overall proposition development – feels pretty unique in the marketplace. Working with brokers, key lending partners and our own business development managers, I’m responsible for enhancing our existing offerings whilst identifying and delivering new ones. Therefore, the communication between parties is crucial to my success as it’s only by talking to internal and external stakeholders that we can determine what products and services will have the most impact.
Achievements to date
When I joined the team last autumn, it was just as we launched the Accord New Build and Help to Buy proposition. By investing in the creation of dedicated new-build teams, alongside a range of new or enhanced initiatives and improved criteria we could ensure an end-to-end, first-class service to brokers as a new-build lender, not just a lender that does new-build. Eight months after launch, new-build accounts for more than 10% of our total lending. But with something as complex as new-build, we knew we couldn’t do it purely on our own. The sector has so many different parties, all with a vested interest. We are grateful to those firms and partners who helped us to understand the complexities involved and ensure we could deliver our service successfully. By working alongside key
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stakeholders, we can explore future plans and respond to market changes. For example, our close relationship with Barratt Developments means we are better placed to understand the challenges developers face and how we as a lender can improve service and policies, with discussions on key areas such as lease terms and down valuations. And working with Homes England has enabled us to improve its understanding of the intermediary market and support its digital transformation within the broker channel whilst prepare for amendments to the Help to Buy scheme and improve customer outcomes.
Responding to a changing market
Relationships have also been the driver for our common sense approach to lending. Working closely with brokers we recognise the need for increased flexibility when reviewing cases to ensure we can support the clients who may not be considered ‘vanilla’ applicants. By giving brokers direct access to our underwriters, as well as implementing the Accord ‘Principle Based Lending’ methodology, we have been able to offer borrowers specialist
JUNE 2019
lending solutions at high street rates, helping more homeowners into their desired home and supporting brokers to provide a great customer experience. In addition to continually reviewing our criteria and product range to enhance our offering, we know brokers also need to add value to develop their own businesses. As part of our Welcome Box initiative we’ve sent more than 30,000 complimentary hampers to first-time buyers or home movers who complete a mortgage with Accord on behalf of their broker to help them celebrate this exciting milestone and show appreciation for their business. And our growth series content hub gives free access to blogs, podcasts and practical guides.
The future
We’ve recently developed our buy-tolet offering by launching a competitive 80% LTV product range. Accord Buy To Let is focused on supporting brokers and landlords, responding to feedback, implementing significant service improvements, streamlining the online broker journey and being more flexible with our criteria to ensure we can lend to as many landlords as possible. As a result of these changes, Accord Buy To Let saw its intermediary market share increase by 94% between Feb 2018 and Feb 2019, bucking the trend against a market which has fallen by nearly £0.3bn in the same period. And there’s plenty more on the horizon! At Accord, our development is driven by a desire to meet the needs of the brokers we work with and give the best possible solutions and service to their clients. Changes to lending criteria, new products, exploring new markets and the implementation of our new mortgage application system are just some of the opportunities we’re looking at to enhance our offering.
www.mortgageintroducer.com
Who is ďŹ ghting your corner? Join your trade body and enjoy ther beneďŹ ts... Representation and the voice for your industry Regular information, insight and analysis Factsheets and guides on industry issues Technical helpdesk for support and advice Events, networking and professional development
Find out more www.a-m-i.org.uk 01908 847021 info@a-m-i.org.uk
The Hall of Fame
Hat tip for Tipton
Red Carpet Treatment…
Lining up to hang Gove
Lea Karasavvas of Prolific Mortgage Finance fame runs onto the red carpet this month as he trains to take part in the Berlin Marathon to raise cash for charidee Running for Autism. On 29 September later this year Karasavvas will be in Germany to run those 26.2 miles after months of training. And that months of training is no mean feat. Come the end of September that will have been no beer or lager for four months and a strict training regime for four months to complete what the City of London-based broker describes as “what will easily be the greatest physical achievement of my life”. “Autism is something I have come to understand immensely over the last few years and I want to help in anyway I can,” Karasavvas told The HoF. “On 11 May I opened my sponsorship page for Running For Autism. We are not even a month in, and thanks to the kindness and generosity of friends, family and a hell of a lot of people in the mortgage industry, I am delighted to say that we have exceeded our target and now smashed through $2,500! “I have been totally moved by not just the sponsors, but the stories many of you have shared with me regarding Autism and how it has affected the lives of so many. Autism is a difficult condition to understand and to identify. “A normal day for most with this condition, can be full of nerves, anxiety and fear.” [Much like being a mortgage broker then – ed] Karasavvas, The HoF salutes you. To donate visit the link here: https://bit.ly/2WHzwJN
The Tipton’s Charitable Foundation has awarded cheques collectively worth over £7,500 to fifteen local charities! Twice a year a panel of Society staff and members of the local community come together to allocate funds to health and education charities based in the West Midlands. The latest round of beneficiaries included Employability UK, Christians Against Poverty, Jubilee Park Academy, The Honeypot Children’s Charity, Silvertrees Academy Trust, NICE, Acorns Children’s hospice, The Giving Hands Mission, Sandwell Citizen Advocacy, Tipton Youth Project, BUDS Sandwell, Birmingham St. Mary’s Hospice, and three local schools. Tipton, The HoF salutes you!
Meanwhile over at the Tory leadership race hacks have been lining up to hang contender Michael Gove out to dry after his admission of taking cocaine while working as a journalist at The Times newspaper in his 30’s. Stupid and illthought out behaviour. The HoF can’t imagine the consequences had he worked in the mortgage industry circa 2001-2007. #justsaying
Bye bye Benson
Sad news from the Association of Short Term Lenders this month as it was announced that Benson Hersch, the bridging industry’s favourite grandad, was stepping down as chief executive. “Unfortunately, nothing is forever and I feel that now is the time to hand over to someone who can continue the task,” Hersch, 75, told The HoF. “I will, of course, assist in any way my successor may require in order to ensure a smooth transition.” Executive committee member James Bloom was amongst many to lavish the praise. “On behalf of the Directors, we would like to formally place on record our enormous thanks to Benson for his many years of hard work and dedication to the ASTL.” Benson, The HoF salutes you.
MORTGAGE INTRODUCER
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Run, Lea, run, run, run!
The Mighty Reds
Madrid was turned white and red [mostly red – ed] at the start of the month for the Champions League final clash between Spurs and Liverpool. With dozens and dozens of rival brokers out in the Spanish capital celebrating the all England clash it was bound to end in tears for some. Yet as my exclusive snap shows, despite Liverpool’s 2-0 victory, at the end of the day it was easy to put rivalries apart. Boys, The HoF salutes you. www.mortgageintroducer.com
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What our team of experts could do for you: 1
The scenario An urgent short-term lending solution for £185,250 for a 3-bed semi-detached property in Dorset. The challenge The client had fronted the valuation fee and required a quick turnaround over the Christmas period. The outcome The valuation was immediately actioned, with InterBay Commercial providing a formal bridging offer at 75% LTV. After the client completed a refurbishment of the property and immediately received an offer, a second bridging loan application was made to fund their next development.
2
The scenario Bridging finance on three new high-end properties in Marylebone, London. The challenge Due to regulatory complexities, the developer’s needs fell outside mainstream lenders’ standard policies. The outcome InterBay Commercial was able to arrange a quick decision by exception, including a corporate guarantee. The combined value of the properties was almost £20 million – an initial loan of nearly £13 million was agreed over a term of 12 months. Within two months, two of the three properties had been sold. The third sold shortly after.
Got a case in mind? Get in touch today by calling 01634 835006 or visit interbay.co.uk This material is for professional intermediaries only 8676_InterBay_Mortgage_Introducer_Cover_Wrap_AW2.indd 3
05/06/2019 18:47
WE G T THIS
Working with us could be the answer to solving your next bridging case. Looking to find out more? Get in touch today by calling 01634 835006 or visit interbay.co.uk This material is for professional intermediaries only 8676_InterBay_Mortgage_Introducer_Cover_Wrap_AW2.indd 4
05/06/2019 18:47