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October 2019 Issue 135
WeWork c/o Mortgage Introducer, 41 Corsham St, London, N1 6DR Published by CEDAC Media Limited Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Limited
Supermarkets have been swept away So the powerhouses that are Tesco and Sainsbury’s have decided to cut their loses and leave the UK mortgage space. The pair have decided to call time on their mortgage odysseys and concentrate stick to flogging beans. It was an unsurprising move in what has become an ever more crowded market which is facing ever decreasing margins. As with other sectors the grass can always look greener but when it comes to actually doing the business it is often a different matter altogether. The question now is if we will see other lenders on the periphery of the market pack up and focus on other sectors. A number of firms must be asking themselves if the time is right to follow suit. It will be interesting to see what happens. We’ve also seen the new Financial Ombudsman Service (FOS) funding proposals come out of late. As things stand FOS is 85% funded by fees paid by firms for each complaint that is elevated to them. The remaining 15% is funded by a levy on all firms based on their market presence. However the FOS’s Our Future Funding consultation has called for a 50/50 split between case fees and the ‘all-firm’ levy. The proposals mean only 82% of firms who have complaints referred to it won’t pay case fees as opposed to the current arrangement of 90% of firms. The Building Societies Association (BSA) has been leading the charge on this and has urged FOS to drop the proposals. Much like the BSA Mortgage Introducer has massive respect for what FOS does but we agree that it is unfair that firms which generate fewer complaints will be forced to subsidise firms which create the most. The BSA has suggested a number of alternatives which may help the FOS’s funding situation without such a radical shake-up. Here’s hoping that the FOS takes the advice onboard and finds a solution that works for everyone. Elsewhere the mess that is UK politics continues to rumble on. The Conservative Party conference has at least laid out a plan for the exit of the UK from the EU on 31 October. By the next issue of Mortgage Introducer we will know if that was the case for not. We await the answer eagerly.
5 AMI Review 6 Market Review 12 Marketing Review 13 Adverse Review 14 Relationship Review 16 Education Review 18 Buy-to-let Review 25 Protection Review 30 General Insurance Review 34 Equity Release Review 38 Conveyancing Review 41 Surveying Review 43 Technology Review 46 The Outlaw
Taking away dreams
48 The Bigger Issue
What needs to be done to replace Help to Buy?
50 Cover - Spotlight on regulation Ryan Bembridge looks back on 15 years of mortgage market regulation to find out what has changed and what the future might hold
60 Loan Introducer
The latest from the second charge market including interviews with First 4 Bridging and a closer look at the lessons to be drawn from the PPI scandal
Jessica Nangle speaks to Jamie Pritchard of Precise Mortgages to find out the importance of the correct training
69 Specialist Finance Introducer Development finance, bridging and FIBA
74 The Hall of Fame
Hitting the gym with the abdominable slowman
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The bigger ticking bombs The market appears stable, with forecasts suggesting that transactions will reach 1.2 million in 2019, in line with the long-term average. However, according to analysis by Zoopla and Hometrack, activity in the market is not evenly spread geographically. Sales volumes in the South East and London, where house prices are high and stamp duty bills large, have plummeted by between 15% and 25% between 2014 and 2018. Transactions in the North East, Wales and Northern Ireland have risen, largely as a result of better affordability. This is positive for those looking to get on the ladder in these regions, but there remains a severe and widening wealth gap between the North and South. This is evident when considering the average value of equity held in the homes of those over the age of 65. Hometrack and Zoopla figures put this at £363,000 per home in London but just £76,000 in the North East. There has been much political rhetoric about investing in the North of England, less actual delivery. Decommisioning heavy industries in the late 1970s and all through the 1980s has left a lasting legacy in regional economies, with long-term
Robert Sinclair chief executive, Association of Mortgage Intermediaries
unemployment, abandoned high streets and few career opportunities. In spite of repeated promises to invest in infrastructure in these areas, to support better mobility and encourage more employers to move out of London and further North, the economic reality remains bleak for much of the country. Perhaps this has contributed to the social and political differences evident between those in the North and those in the South and partially responsible for the political mess that is Brexit. These divisions are likely only to get worse over the coming decades as so much of an individual’s ability to scale the social ladder depends increasingly on inherited wealth built up by generations in their homes. Looking more deeply at recent data, the latest government statistics show that in Quarter 1 2019, district level planning authorities in England received 111,300 applications for planning permission, down 5% on the corresponding quarter of 2018. They granted 81,500 decisions, down 7% from the same quarter in 2018; this is equivalent to 88% of decisions, unchanged from the same quarter of 2018. The statistics also showed that local authorities decided 88% of major applications within
13 weeks or the agreed time. Anecdotal evidence suggests that new builds are selling off-plan within four weeks of listing, up to a full 12 months ahead of completion. Developers put this down to accelerated demand from buyers, combined with a lag on planning application approvals from local authorities for new residential developments. ONS figures for Q1 2019 bear this out in England. District level planning authorities granted 11,200 residential applications, down 6% on a year earlier, including 1,600 for major developments and 9,600 for minor ones. However, we are hearing that the ratio of planning applications applied for to be granted has tightened, with the logjam in the delivery of homes now sitting squarely with developers. Restricting the volume of new build starts to the degree that offplan sales are selling a year ahead of completion and within a month of listing, coupled with stories in the media revealing the aggressive sales tactics being used by some developers should not be misconstrued. This looks like developers controlling the supply of new homes to maintain unit values. Indeed, the latest results season saw builders post another round of record profits. The last time we saw this offer to completion gap was back in 1988, a year ahead of the 1989 crash. Food for thought?
Picking the right remedies The FCA is due to deliver final remedies from its Mortgages Market Study in Q4, unanticipated events notwithstanding. AMI has already been vocal about a wholesale move to allow executiononly sales to re-enter the mainstream market. It is a mistake, and one that risks the FCA’s own MMR on advice being gamed. AMI has identified worrying potential unintended outcomes from a shift towards execution-only sales. The first is that there is likely to be increased pressure on both intermediaries and lenders to generate volume sales through the execution-only channel,
particularly as it is lower cost for lenders and brokers to sell and would seem to present lower ongoing risk of inappropriate advice claims. This could create a reason for mortgage product manufacturers to design up front offers that look attractive to customers, but which may include penalty clauses that bite at the tail end of the deal period. PRA rules requiring residential affordability stresstesting would not rule out this type of abuse, particularly where deal terms are longer. At a time of very low interest rates and comparatively high house prices making longer mortgage
repayment terms increasingly normal, the additional expense incurred by customers could be significant. The question AMI would ask is whether it could result in customer harm? There is a real challenge here, reliant on whether regulators in the future are likely to consider a scenario such as this worthy of customer compensation. Much will depend on whether the FCA and/or FOS deem lenders and/ or intermediaries to be deliberately generating volumes on an executiononly basis to keep costs low and whether the bulk of this volume should have been advised.
Consumers need brokers more than ever We talk a lot in the industry about how the mortgage market has evolved though tech advances, product innovation and criteria enhancements (to name just a few factors) but we sometimes neglect to highlight that the advice process has also had to evolve alongside this. The financial burdens and requirements of all age ranges are coming under increased scrutiny in the wake of political and economic uncertainty. Changing social demographics and attitudes to borrowing are also placing an increased emphasis on the need for a more holistic advice process across all areas of financial services. When you add increased regulatory and market complexity into the mix, its little wonder that consumers, lenders and service providers are more reliant than ever on intermediary channels to provide both support and volume for their offerings.
professional advice is, in terms of offering access to the right levels of information and range of options throughout a borrower’s lifecycle as circumstances, both financial and personal, will continue to change. Let’s start from the beginning.
Craig Calder director of intermediaries, Barclays Mortgages
Later life financial management
One of the major challenges facing the intermediary market is later life financial management. Now you might think this is beyond the realms of the average mortgage adviser, but this area leads to repercussions along the advice chain. Average life expectancy in the UK is now 87 years, yet the average adult expects to retire at 65 and live to just 82. This data was included in research from Scottish Widows which also found that the majority (80%) of advisers said their clients underestimate how much they need to save in retirement. In addition, more than half (56%) often see clients underestimating how long they’ll live for. As a result, advisers said they are regularly having conversations with their clients to discuss the potential for running out of assets and agree on plans to mitigate this. This data highlights the challenges facing the intermediary market. And how important good quality
MORTGAGE INTRODUCER OCTOBER 2019
First-time buyers will always be the bedrock of the mortgage market and the foundation on which many advisory processes are built. Thankfully, first-time buyer demand is rising. The latest figures released by UK Finance showed that there was strong growth in first-time buyer numbers over the summer - with year-onyear figures up 5.8%. According to the data, 32,640 new first-time buyer mortgages and 32,710 homemover mortgages completed in July 2019 yearly rises of 5.8% and 1.4% respectively. Of course, the outlook is more challenging in certain areas of the UK, but first-time buyer growth is being experienced across many regional markets where affordability is less of a burden and is supported by some highly competitive mortgage rates, even at the higher end of the LTV scale. The increased support of family members in helping first-time buyers onto the property ladder is also evident, a trend which is putting further weight onto the shoulders of parents which may also be impacting their financial well-being and potential retirement plans.
The hotel of Mum and Dad
The latest ‘hotel of Mum and Dad’ report from MoneySuperMarket revealed that a quarter of the nation’s millennials and young professionals are moving back home to save money for a deposit. It suggested that children who move back home to save money cost their parents over £1,600 during their stay, a year-onyear increase of 83%. The findings showed that returning children are
staying with their parents for longer at an average of 10.3 months, enabling them to save £6,829 overall. While the average rent contribution is £212, nearly half of children (48%) don’t offer to pay anything during their stay. The cost of housing and catering for a returning child is increasingly having an impact on parents’ finances, with over twice as many parents cutting back on lifestyle choices.
Fund first-time buyer’s?
Moving further along the lending scale, it was also interesting to see research from Key reveal that retired homeowners are increasingly considering cashing in buy-to-lets, acting as guarantors, as well as remortgaging or taking out new mortgages (including equity release) to help children and grandchildren onto the property ladder. While parents and grandparents continue to use both savings (95%) and pension funds (21%) to give the younger generation a step onto the housing ladder, they are increasingly also looking at their own property assets to meet this need. According to the study of 150 mortgage advisers, 19% have had enquiries from older customers about selling buy-to-lets and holiday homes, while 32% have been asked about acting as guarantors to help their children or grandchildren onto the property ladder. That is on top of 28% who are investigating the option of remortgaging and 21% taking out new mortgages as the pressure builds on over-55s to share property wealth with the younger generations. Intermediary respondents estimated that 47% of first-time buyers are partially helped with their deposit by grandparents or parents, with only a third managing to go it alone without any financial support. This BOMAD boost means that brokers are confident in the market with 60% of brokers expecting a rise in first-time buyer enquiries this year. In many ways, the gap between the older and younger generations appears larger than ever but when it comes to financial support this appears to be closing. www.mortgageintroducer.com
The B-word is still impacting activity The latest UK Finance Mortgage Trends Report revealed that, after propping up the market for some time, remortgaging fell for the first time in months. The report showed that there were 23.9% fewer poundfor-pound remortgages in June 2019 compared to June 2018. I know lots of people are determined to say it is all about Brexit, and a lot of the trends we have seen recently within the housing market can be blamed on uncertainty - but this latest drop in remortgaging is more to do with remortgage behaviour over the past few years than fears about the future. That is because remortgage rates are dependent on the maturing of fixed-term deals, which means new remortgages are dependent on what happened two, three and five years ago. Because we have had such low-
John Phillips national operations director, Just Mortgages and Spicerhaart
interest rates for so long now, people have been slowly but surely favouring longer-term fixes. We have seen people going for 5-year deals over two and three, which means remortgages are not going to be coming up as often as they used too. In fact, UK Finance figures show that the number of 5-year fixed-rate mortgages overtook the number of two-year deals for the first time in June 2018. So, while it may be bad news now for those brokers who have been relying on remortgage business, they will see them all come around again in a few years! Another interesting statistic that has come out of the UK Finance report is that new remortgages with additional borrowing were 8.3% higher than a year ago. We know that people are reluctant to move at the moment, but that
does not change the fact that many do want bigger homes, so the alternative is to improve what they have already got. But, with the first-time buyer, home mover and pound-forpound remortgage all down, brokers will be finding it tough at the moment. Those who start to put a greater focus on protection and other products will do well, as they will find there will continue to be fewer mortgages and remortgages propping up their businesses. However, it won’t – and can’t – last forever. The third Brexit deadline is looming, and while we don’t know if we are leaving this time either, if we do, we will certainly see a change after October 31. I think there will be a couple of months of ‘getting used to’ the new situation, but soon enough, people will begin to realise that the end of the world is not nigh.
Refreshing. Remortgages. When remortgaging to Barclays, your Help to Buy Equity clients can select a suitable product from our standard range. Thereâ€™s much more to learn about our remortgage proposition. Contact your Barclays support team or visit barclays.co.uk/intermediaries Letâ€™s go forward
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We all need to do more for our intermediaries Earlier this month we welcomed John Truswell as our new head of intermediary mortgages. John has more than 30 years’ experience in the mortgage intermediary market, with previous roles at Virgin Money, CHL, and more recently Together, where he was head of national accounts. He’s now heading up a team of seven BDM and key account managers that support our broker partners across the country. At Newcastle, we’ve long been committed to the broker market. We understand that intermediaries are key when it comes to helping us grow our business. That commitment has rewarded us, with our half year results showing that we saw a massive 88% increase in mortgage applications over the previous 12 months. We want to say thank you to our broker partners – without you, we couldn’t have done it.
Stuart Miller customer director, Newcastle Building Society
But while we’re enormously pleased with the success we’ve enjoyed over the past year, there’s a lot more work to be done. Especially, because the mortgage market is going through a lot of rapid change at the moment. There is regulation and the prospect of wider access to the execution-only route still on the table, and coupled with the development of technology systems that are increasingly competent at sourcing deals based on pre-qualified affordability using lender criteria (in the buy-to-let market at least) we’re only going to see more need for intermediaries to support customers. Slicker online services for those choosing to remortgage through the product transfer route are contributing to a noticeable shift in distribution channels already. The latest data from UK Finance, showed there were 20,760 new remortgages with additional borrowing in July 2019, 7.1% fewer than in the same month in 2018. For these remortgages, the average additional amount borrowed in July was £55,500. There were 20,380 new pound-for-pound remortgages (with no additional borrowing) in July 2019, 12.9% fewer than in July 2018. UK Finance said this has been driven in part by a fall in the number of fixed-rate mortgages coming to an end and the growing popularity of product transfers. While choice for borrowers is always a good thing, the mortgage landscape is getting harder for them to navigate effectively. Practical tools are being developed that reduce friction in the remortgage process, and for many borrowers there is a strong case that a full fact find and advised sale at this stage is totally unnecessary. However, there’s always the danger of unintended consequences. It’s perhaps unfortunate that the ease of customer experience offered
by online applications is becoming more dominant at a time when individuals’ finances are becoming more complex. The shape of the workforce is changing – more people are working flexibly, part-time, on contracts, freelance and earning multiple and fluctuating incomes. People are working longer and later into life. They’re also living longer and at the same time we have a state pension that is increasingly insufficient to support retired lives. Retirement incomes are under a triple whammy of pressures thanks to low interest rates, feeding into poor state pension rises, uncompetitive annuity rates and savings rates that struggle to beat inflation. Brokers don’t need to be told how these trends are affecting the mortgage market. They see it every day. They know, as do we, that this part of the market is just going to get bigger and bigger. Servicing it meanwhile remains a niche, filled largely by the smaller challenger banks and us, the building societies. At Newcastle, we’re fully committed to remaining a goto lender for the self-employed, for those with slightly complex mortgage needs, those who need a leg up onto the property ladder in the first place and more advice and support than the veteran homeowners who have almost repaid their mortgage, who we’re also happy to deal with! It’s an interesting time to be a broker at the moment, with all this talk of open banking and online money management. Of APIs and pre-application affordability assessments. There are those in the market who would have you believe that the rise of technology spells the end of the intermediary market, but I disagree. Buying a home is a huge financial decision, it’s exciting but also overwhelming for most people, certainly the first time you do it. Brokers fulfil a hugely important social function in helping to overcome the fear and confusion that many borrowers experience when applying for a mortgage. We intend to continue to support them in that purpose for a long time to come. www.mortgageintroducer.com
Adapting to the latest market challenges Saffron Building Society celebrates its 170th birthday this year. At the start of the year, our chief executive Colin Field talked about the changes in the market and how we are adapting as a building society rich in heritage but also forward looking. I joined as the chief commercial officer in February and have noticed a number of emerging trends which I believe will shape the industry and continue to be a significant influence into 2020.
The state of the nation
There are a number of dynamics currently at work in the mortgage market. The first is the growing demand for later life lending and intergenerational mortgages. According to a report by the BSA, 70% of the public see homeownership as one of the biggest issues we face as a nation. Back in November last year, John Glen MP, the Economic Secretary to the Treasury, said that “intergenerational mortgage lending is a market which will continue to go from strength to strength in years to come.” From my experience at Saffron Building Society I would certainly agree, and we have seen growing numbers of enquiries in this market segment. People who have experienced several house moves are still comfortable looking at lending options in their 50s and 60s, either because they themselves want another move, or because they wish to help family members onto the property ladder.
Government policy is going to have a big impact on the industry. Whichever party is in power will need to present a clear strategy and ensure there is a larger supply of affordable housing. This won’t be easy. However, one thing that will help is the increasing adoption of modern construction methods, which are more efficient and can reduce the costs of new housing. www.mortgageintroducer.com
Simon Taylor chief commercial officer, Saffron Building Society
This will require greater expertise from mortgage providers as they look to lend against an increasingly diverse property portfolio. We most commonly see new construction methods in self-build properties and those of small developers. Self-build has been growing in popularity and we expect to see this interest increase.
The outlook for product development in the mortgage industry is starting to polarise and lenders will need to be clear where their specialism lies. Will they be a vanilla lender or a specialist? There is currently little margin in the ‘vanilla owner-occupier’ category, but the big banks will continue to battle one another in that space if the low interest rate environment continues. Rates won’t fall much further so those with scale will occupy this fierce hunting ground for new business. I expect that regional building societies will find it hard to compete, and this is driving innovation and the targeting of niche segments. Increasingly, we’ll see more innovation. At Saffron we are trying to lead the way and have already launched four new specialist mortgages, targeting specific niches such as intergenerational mortgages, later life lending, self-build and buy-to-let. We expect to launch more products towards the end of the year and have restructured our business to make sure we can rapidly react to the needs of the industry.
In an increasingly dynamic environment, the ability to adapt and deal with complexity is going to be more important than ever before. Brokers will continue to play an important role in the industry. The added complexity in the market brought about by changes in employment patterns, along with political and economic volatility, will OCTOBER 2019
see a growing need for good quality advice. Open Banking will change the way that mortgages are researched and sourced. Rather than brokers and customers going to lender portals, there will be more integration. Lenders will be clearer about which customer segments they are looking to service, which will mean great access and flexibility in specific segments. This will control and direct efficiency and value in the industry. A major research report released earlier this year by the Manifest Growth Architects, entitled ‘Consumer Priorities for Open Banking’, estimated that people could gain between £72 and £287 from Open Banking-enabled services over the course of a year.
170 years and counting
How are we adapting to this changing landscape? We have continued to implement the plans that Colin set out at the start of the year. This strategy centres on being able to launch new products rapidly in response to changes we see in the market. We have also focused on expanding our distribution and have signed up several new mortgage club relationships. Already this year we have launched new propositions for intergenerational lending, lending into retirement, additional buy-tolet products for landlords with specialists needs, enhanced options for self-builders and those who are selfemployed.
Our aim is to become one of the leaders in niche lending. We know that to achieve this we will need to respond quickly to brokers’ requests and have a highly flexible approach. However, with the investment and strategy we have in place we believe we will be able to continue to build on our long history and nimbly adapt to the volatile conditions in which we are all operating. MORTGAGE INTRODUCER
Maintaining the value of advice With a shrinking UK mortgage market, those of us in the intermediary sector should be looking at how we can ensure the value of advice is understood by consumers before it’s too late. Is this the role of trade bodies like AMI or IMLA or should media partners who straddle both direct and broker channels do more to champion the cause? It’s probably a combination of all the above, but we should all do our bit. This takes me on to this month’s One on One, as I am pleased to say that both firms highlighted are clear about the value they place on brokers and advice in their respective stories. First up are OpenMoney, who state on their website that they believe in ‘Financial Advice for all’ and having been founded by Duncan Cameron, who was co-founder of Moneysupermarket (and Mortgage 2000 for those of you old enough). It’s encouraging that despite the success of Moneysupermarket and its aggregator model, this proposition is very much predicated in providing advice and they are launching into mortgages in early 2020. They’ve also hired an experienced head of mortgages, who has worked for two major lenders as an adviser, so knows what it takes to be one and the experience is recent. This can only help the development of their advice model. I’m always a little sceptical when the word unique is used and so my scores on innovation and game changer factor are relatively low, as until we see what they develop, it’s impossible to assess. However, the newsworthiness is high due to what the business has achieved so far in the world outside of mortgages, plus the fact that Cameron is involved and is getting back into mortgages is very interesting in itself. In terms of customer benefit, again it’s difficult to assess until we see their plans, but from what they’ve done so far, it seems encouraging and the news definitely supports brokers, as they are so clear on the value of
Paul Hunt owner, Paul Hunt Marketing
advice. It will be very interesting to see how their mortgage proposition develops, I wish them well and look forward to their eventual launch. Facing OpenMoney are UTB, who have announced their launch of an electronic ‘facial recognition’ ID verification service through a smartphone app that is aimed at saving its mortgage introducers and customers time and money. I’ve watched the UTB journey with interest in recent years and it’s obvious that they have a real appetite to improve all aspects of a sometimes frustrating process whether that’s in the 1st charge mortgage world or in more specialist finance sectors. I’ve also noticed that they are taking an active interest in technology and
the various solutions offered both in mortgages and in other sectors that could apply to their model. For innovation and game changer scores, I’ve marked them very highly as I appreciate that such technology is widely used in other areas of banking, but use in the specialist mortgage sector is more scarce. Undoubtedly, the customer benefit is significant and all through the release, Buster Tolfree makes it clear that this solution has been built to benefit brokers too. It’s also very newsworthy and I look forward to seeing what will be coming next from this relatively new challenger. The clear winner this week then is United Trust Bank, but in Q1 next year we may schedule a rematch.
O p e n M o n e y v s U n i t e d Tr u s t B a n k OPENMONEY
Newsworthiness Customer Benefit Supporting Brokers Innovation r Game Changer Facto
U N IT E D T R U S T BANK
H G H F G
Newsworthiness Customer Benefit Supporting Brokers
I J J Innovation J Game Changer Facto r J
Laying the foundations to your new opportunity How much do we know and understand about the changing trends and demographics of your potential clients and why is this important to your business? The requirements of people looking for a mortgage seems to be shifting fast as more people experience debt. Understanding this shift and the changing trends enables you to ensure that your business is wellequipped to grow in the future. A current trend that is hard to ignore is the increase in unsecured debt, missed payments and credit issues that are feeding the growth in demand for mortgages for people who have adverse credit recorded on their credit file. So, what are some of the key indicators?
According to the Bank of England, at the end of June, total outstanding consumer credit, excluding student loans, peaked at £218.23bn. This is a very large number, and to put it into some context, exactly 10 years ago the Bank reported outstanding consumer credit, excluding student loans, to be £185.85bn. That’s an increase of more than 17% over the last decade. A government briefing paper published at the end of last year, said that around half (51%) of UK adults has used some form of consumer credit in the past 12 months, excluding those who use credit products (mainly credit cards) but pay them off in full every month. According to the paper, those aged 25-44 are most likely to hold consumer credit, with 71% of 25-34 year olds doing so, compared with only 20% of those aged 65 and over. On average, UK adults have outstanding non-mortgage debt of £4,960 including student loans (£3,320 without). However, by including only those people who do have debt in the calculation, the average debt rises to £12,500 per person, including stuwww.mortgageintroducer.com
Paul Adams sales director, Pepper Money
The Bank said it this high level of defaults is expected to remain throughout Q3.
Debt Management Plans
dent loans and £9,600 without. According to the Paper, average debt levels excluding student loans peaks in middle age, with an average debt of £11,500 per person among 45-54 year olds. There are clear consequences to this level of consumer credit. The average credit card interest in June was 19.99%, and Citizens Advice dealt with 2,566 debt issues every day in the first half of this year.
County Court Judgements
According to Registry Trust, the number of County Court judgments (CCJs) issued against consumers in England and Wales in the first half of 2019 increased to 586,765 - a rise of 3% on the same period last year. First half-year judgment numbers were rising every year since 2012’s record low of 242,965 until 2017’s record high of 592,522. Though there was a slight dip in numbers in the first half of 2018, this year’s figure is close to 2017’s record levels.
According to the Bank of England, default rates for total unsecured lending increased significantly in Q2 of this year, driven by a significant increase in defaults on credit cards.
An FCA thematic review of the debt management sector published in March of this year found that 3% of UK adults had used a debt advice or debt management service in the last 12 months. Based on the latest ONS estimate for the UK adult population, this would equate to an estimation of nearly 1.6 million people. All of these statistics paint a picture of a population of people who have complications on their credit record. However, it doesn’t tell us about the intentions of those people. How many of those people, who have struggled with credit issues in the recent past, have intentions to buy a property in the near future? What are their expectations and where do they turn for advice? These are just some of the questions we have been asking at Pepper Money in our new research, in partnership with YouGov, to help us get to the bottom of the potential for the adverse credit mortgage market and the hurdles that stand in the way of meeting that potential. The findings are fascinating and have enabled us to put a figure on the size of potential for the adverse credit mortgage market and the opportunity for mortgage brokers. We will be releasing our findings of the research soon – so make sure you keep an eye out to learn more.
Review: Client Relationships
Delivering value is more important than ever All businesses know that establishing strong, long relationships with their clients is good for the bottom line. It doesn’t matter if you’re a broker, lender, surveyor or estate agent, longevity is the goal we’re all aspiring to. Acquisition costs may well reduce as ‘word of mouth and referral’ become a predominant method of acquisition while conversion rates and profitability per customer all improve. But what do clients value in a businesses that makes them come back to us time and again? Expertise, experience, market knowledge, diligence and care within your service and for your client’s outcomes. While all of us should be attempting to deliver exceptional service in all of these areas, the day-to-day pressures of managing a property transaction can sometimes trump concern for the long-term future of the relationship.
Robin Johnson managing director, Kinleigh Folkard & Hayward Professional Services
“When it comes to building value in our own businesses, it pays to think long-term” It comes down to understanding what is urgent, and what’s important. In 1954, US President Dwight D. Eisenhower delivered a speech to the Second Assembly of the World Council of Churches. He said: “I have two kinds of problems: the urgent and the important. The urgent are not important, and the important are never urgent.” Understanding the distinction boils down to a basic question: does this thing help me achieve my goals or someone else’s? Important activities are long-term and usually don’t seem urgent. Urgent activities are short-term and have immediate consequences if we fail to deal with them, usually for someone else’s benefit. In a busi-
ness that operates in a market that is apt to produce natural pressure to be transactional, urgency takes precedence. But putting long-term objectives further down the priority list has a cost. So what can you do to get the balance right?
Be part of something bigger
The property sector was historically dominated by small, independently run businesses – often with just one or two employees. That has shifted considerably over the past 20 years, with most businesses part of a network, club or in many cases a much larger group organisation. This offers clients the best of many worlds – the personal service afforded by those running a lifestyle business with the economies that come from scale. Consistency is also key to this: customers value having their transaction taken care of for them and being part of a group that offers the full range of services from estate agent, to surveying and valuation, to getting the mortgage sorted can take a lot of the headache out of the experience. Landlords too benefit from working with a firm that can provide advice on purchase opportunities and where to invest to block and portfolio management on an ongoing basis to supporting repeated remortgages within those portfolios. Big isn’t always better but having access to a broad range of services within the scope of your own business is increasingly important to drive value for customers. Of course, it is very possible that people during their lifetimes gravitate from one products set to another. Tenants become owners who become landlords – you get the picture.
Buying and selling property can come with considerable emotional OCTOBER 2019
anxiety and worry – even if the entire experience is managed seamlessly. Where transactions are residential, particularly, we’re talking about most people’s entire wealth tied up into the experience. They want reassurance from their broker, estate agent, solicitor and lender and delivering that comes down to understanding the market we’re in and how to navigate it. At different times in the property cycle, priorities will change. When price inflation is high and gazumping rampant, a different approach may be needed from the one that dominates in a buyers’ market where offers come in 10% to 15% below asking price. Ultimately, the goal is the same in both markets: to sell the property. But how that’s achieved and how clients feel about it will make or break the opportunity for a future relationship.
Communication is key
Getting the job done is paramount when dealing with any aspect of a purchase or remortgage transaction. Dealing with instructions, paperwork and chasing other parties to keep them on the ball matters. But if you don’t tell the client what you’re doing to support their sale or purchase, they won’t know. And if they don’t know, they can’t value it. In my experience, many of the frustrations experienced by clients going through a house purchase comes down to feeling they’ve been left in the dark about what’s going on by any of the many parties involved in making these complex transactions occur. Taking the time to explain processes and to listen to how clients are feeling can make all the difference and turn a one-off customer into one who’ll be recommending your services to friends and coming back to you the next time they need help. This is a model we follow. When it comes to building value in our own businesses, it pays to think long-term and remind ourselves that it’s not always just about the transaction we’re working on today. www.mortgageintroducer.com
Need a straightforward approach to Limited Company cases? Solution Found.
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ÂŠ2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of ÂŁ3 million with Foundation Home Loans. Calls may be monitored and recorded.
For intermediaries only
Should smaller firms pool their resources? The recent Financial Conduct Authority (FCA) Consultation on mortgage advice and selling standards appeared to roll back on its own 2014 regulations. One of the key suggestions was that the previous FCA rules discouraged innovation and led to some consumers overpaying for mortgage advice. There has been speculation that the rules on what constitutes giving mortgage advice will be amended. It is thought they may no longer include simply providing factual information or forms of initial communication. But we will have to wait for a policy statement later in the year before we know exactly what the new regulations will entail. In the meantime, let’s consider one of the most interesting findings of the FCA Consultation – at least as far mortgage advisers are concerned. That is, the suggestion that a significant percentage of customers who are looking for an executiononly mortgage, are currently being diverted to advice. Why? Because execution-only sales channels are not always easy to use and potential customers end up making a phone call anyway. Regardless of conjecture that the FCA may be trying to accommodate online mortgage providers, the most striking thing about the new proposals is the drive to increase take-up of execution-only mortgages. This in turn could lead to a glut of market comparison websites to encourage borrowers to go for execution only. Obviously, another consequence is likely to be less business for mortgage brokers, and for the sector as a whole, that inevitably means that it will be a case of survival of the fittest.
The first hurdle is the competition. Market comparison websites are already well established. If the current status quo is to be disrupted by new innovations, it’s unlikely to be from
Michael Nicholls relationship director, LIBF
smaller mortgage advice firms. This may sound harsh, but a comparison can be seen in other industries. The disrupters – in banking, travel, take-aways and more – have been new entrants to the market, armed with tech skills rather than existing providers with knowledge and experience of their industry. The second problem in a highly fragmented market with so many small firms, is size matters. Small firms may not have the budget to invest in developing new web-based business models and slick comparison websites, or the PR and advertising they would need to bring them to the consumer’s attention. These problems are compounded by the transactional relationship that mortgage brokers usually have with their customers. Once a mortgage has completed, customers don’t usually have to return to the broker for at least two years. No matter how well the broker has performed in
“IFAs are facing challenges in their industry too, which could provide some options for mortgage brokers looking to expand what they do” OCTOBER 2019
obtaining a mortgage for the client, the customer may well switch to an execution only online service next time. While banks, insurers and pension providers can rely on the reputations of their brands, mortgage brokers are not as well known as the providers whose products they sell. If the customer has lost the details of the broker who arranged their mortgage a few years back, there’s a danger they may not even remember the name of the brokerage firm either. So how will the smaller mortgage brokers survive in this new market?
One answer could be for mortgage brokerage firms to band together and pool resources to take on the competition. Another could be to merge with independent financial advisers (IFA). The value of an IFA business is in its funds under management which generates an ongoing income. IFAs are facing challenges in their industry too, which could provide some options for mortgage brokers looking to expand what they do. In June this year, the strategy and acquisitions director at Quilter Private Client Advisers, Dominic Rose, cited a shortage of qualified advisers and paraplanners, coupled with a rise in demand for services. Around the same time, research from IFA firm Succession Wealth found IFAs and wealth managers are increasingly looking to leave the industry, with 51% saying that increased regulation was a factor. It seems many small IFAs are selling to the bigger players. There are many IFAs and mortgage brokers who already enjoy good relationships. Mergers would not only formalise any existing introducer arrangements, they could provide better opportunities for both sides of the new business. One of those opportunities is in later life planning, which brings together mortgage and equity release advice with pensions, investments and savings. In a rapidly changing market, IFAs and mortgage brokers could do well to work together. www.mortgageintroducer.com
An invitation to nominate a cause that you actively support for a ‘Community Giving’ donation. Community Giving is an initiative run by Skipton Intermediaries designed to support causes that have a focus on housing or homelessness. It’s exclusive to brokers and employees of intermediary firms and gives you a chance to nominate a UK-based charity or community group to receive a £1,000 donation.
40 lots of
£1,000 to give away
The deadline for nominations is 5pm on 31 October. For more information, including terms & conditions and eligibility criteria, and to make your nomination
Visit skipton-intermediaries.co.uk/community-giving Community Giving. Real Life Lending. Real Life Support. Skipton Intermediaries is part of Skipton Building Society. Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under registration number 153706, for accepting deposits, advising on and arranging mortgages and providing Restricted financial advice. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN. Ref: 184_314899_01/10/19
A brighter future for buy-to-let After what feels like many months of negative press on the buy-to-let market, the most recent lending figures from UK Finance demonstrate that lending on house purchases has stabilised within the last 12 months and buy-to-let remortgages, whilst fluctuating slightly, remains the greater share of transactions in this sector, suggesting landlords are not changing behaviour too dramatically. Whilst our political world gets even more uncertain, it seems like landlords are pushing ahead with growing their businesses. So, why the shift?
One reason could be the wealth of new products now available. A raft of innovation from lenders means there are now more options, so landlords can take advantage of reduced rates, longer-term fixes and improved benefits. Given the changes in the buy-tolet market over the last few years, lenders providing additional support for landlords is a welcome relief. Higher LTV products offer landlords greater choice when looking to purchase or remortgage. We’ve had a positive response to the Accord Buy to Let 80% LTV product range which launched in May this year and have recently extended the range with 28 new products across two, three and 5-year fixed terms. This includes a selection of no-fee products to meet demand for shorter-term products with no upfront cost. We’ve also been able to differentiate our affordability criteria based on the applicant’s income and tax banding with a new Income Cover Ratio (ICR) which will reduce the level of rent required by a landlord to meet the affordability requirements. Criteria changes such as the broadening of age brackets supports both new landlords entering the buy-to-let sector and those who want to use their property or portfolio to provide an income into retirement. Accord Buy to Let has recently www.mortgageintroducer.com
Chris Maggs senior commercial manager, Accord Buy To Let
reduced its minimum age from 25 years old to 18 years old and increased maximum application age from 70 years old to 75 years old.
clients on topics such as tax as well as more general advice on how to attract more customers through SEO, social media and marketing.
And it’s not just enhancing the product range. Ensuring the application process is dealt with in a timely manner and the customer journey is positive is crucial to both the landlord and their broker. Since January Accord Buy to Let has made a number of significant changes including updating our online rental calculator and making improvements to the broker portal to enhance the user experience. We’ve also simplified our processes, such as replacing signed declarations with a tick box, to help brokers submit successful applications and reduced our offer turnaround from 23 days to 13 days.
Role of the adviser
Clearly, the intermediary world has a huge part to play in supporting landlords, both in terms of directing clients to the right products, but also in encouraging landlords to instigate a regular review of their portfolio borrowing. This not only supports client retention, but ensures they can secure the best interest rates, either by remortgaging or through a product transfer from their existing lender and safeguard maximum rental surplus to cover property running costs and ideally achieve an income. Having a more holistic approach to client retention means you can keep in touch on an ongoing basis, sharing valuable market insight through newsletters for example. Clients value support with regulatory changes, so being first to send through the latest information and any implications on their portfolio can be a sure way to build a lasting client relationship. The Accord Growth Series has a number of ready-made guides which can be shared directly with OCTOBER 2019
What changes will be made in Parliament over the next few months is anyone’s guess, but whilst I don’t anticipate Boris Johnson reversing any changes to landlord’s personal taxation, there is hope that stamp duty rules could change and some landlords may wait to see if that benefits them and reduces the cost of acquiring property.
“A raft of innovation from lenders means there are now more options, so landlords can take advantage of reduced rates, longer-term fixes and improved benefits” As a lender, we will continue to review and improve our own proposition to ensure we offer the best value and service to brokers and their clients. The changes we’ve made in the last year are a good start and our net promoter score (NPS) has gone from 38 to 76 in just 12 months which shows we’re on the right track. But there’s still more to come as we adapt to the competitive and increasingly complex market. Changes need to be made to improve affordability for landlords which could include the use of earned income in lenders affordability calculations. Buy-to-let plays a hugely important role within the housing sector and we will continue to develop the types of products and services that landlords, and brokers, need to nurture and grow their businesses. MORTGAGE INTRODUCER
Learning from the changes In order to look forward, it’s also prudent to sometimes look back. Understanding how the buy-to-let sector has been reshaped and re-engineered over the past two to three years will help advisers in their targeting of landlord clients, because while the amateur landlord remains, there are many more professional and portfolio landlords with both purchase and refinance needs, often within a limited company vehicle. In the times prior to stamp duty and mortgage interest relief tax changes, limited company lending only made up a small part of the overall buy-to-let market, but times have changed, and the advice process also needs to adapt to mirror these market shifts. Looking forward, what can we learn from the past few years and what can we expect from the Buyto-let sector over the next 12 to 18 months? There is no getting away from the fact that landlord confidence is currently at a relatively low ebb. The latest BVA BDRC Landlords Panel for the second quarter of this year showed that only 29% of landlords had positive expectations for their letting business over the next three months, down from 44% at the same time last year. However, the proportion of landlords making a profit fell by just 1% in Q2 from Q1 2019, with only 4% of landlords saying they are making a loss. And being a landlord remained a strong proposition with a third of landlords able to make a full-time living off their lettings, and 53% able to supplement their day job. Despite understandable uncertainly within some landlord’s minds – which I believe can largely be put down to economic and political turmoil rather than any huge confidence breach in the private rented sector – current activity levels remain strong and indicators around future demand are high. 2020 will inevitably prove to be a tricky year for the Buy-to-let sector,
Jeff Knight director of marketing, Foundation Home Loans
and let’s be honest who knows what implications Brexit may or may not have, but what we do know is that opportunities will continue to emerge for intermediaries who are fully tuned in to the finer points of Buy-to-let, especially at the more specialist end of this lending spectrum. What will these opportunities look like and where will they come from; I hear you cry? Let’s take a brief look.
The most obvious, and possibly simplest, route is via the remortgage market. With far fewer landlords leaving the market than many of the more negative industry commentators
“Despite understandable uncertainly within some landlord’s minds, current activity levels remain strong and indicators around future demand are high” predicted, it stands to reason that there are still huge numbers of landlords out there who will need to refinance. With this process taking place in a far more complex market than when many first dipped their toe in the buy-to-let waters, it stands to reason that the need for advice will be greater than ever. Which means that, just like in the residential market, advisers need to be fully aware of when any buy-tolet deal on their books runs out and the requirements of their landlord clients moving forward. Some may need to upgrade their properties in a bid to secure better quality longerterm tenants, others may need to raise capital to expand their portfolio or use it for other purposes.
Limited company lending
This is without doubt the largest OCTOBER 2019
growth area within Buy-to-let over the past few years and particularly in 2019. This is not a panacea for all, but it does have the ability to benefit many landlord clients in a variety of ways. And a wealth of recent data suggests that a growing number of landlords are likely to buy their next property or remortgage an existing investment into a limited company structure.
As the definition of a portfolio landlord starts at four properties or more, we should see more buy-to-let clients becoming portfolio landlords in the future. Given that underwriting requirements are different from lender to lender, it’s also fair to say that a greater proportion of clients will seek your advice to help them through these extra processes. Many portfolio landlords are seeing the current market as an opportunity to expand their portfolios, especially if house prices remain stable or decline further. Some will look towards alternative property types; others will seek geographic diversification to spread portfolio risks. All factors which equal opportunity for the intermediary market
Property and expats
HMOs are becoming increasingly appealing for landlords, and shortterm lets are also expected to grow in popularity.There are obvious currency considerations to consider as the pound continues to fluctuate, but a robust housing market is generating strong enquiry levels from expats and this will offer good value and great potential for overseas investors in the year ahead.
Referrals and partnerships
The need for tax advice is essential for portfolio/professional landlords, and if you forge a strong relationship with a tax adviser, not only can you introduce clients to them, but you could also benefit from a reciprocal arrangement. So, get to know your landlord clients better, as this may pave the way to stronger relationships and ancillary revenue streams. www.mortgageintroducer.com
The continued rise of portfolio buy-to-let It doesn’t surprise me to read that, for the first time, more than half of lenders are now offering limited company buy-to-let mortgages. According to a recent article in Mortgage Introducer, 59% of all buyto-let lenders offered products to landlords running their buy-to-let business as a limited company in the second quarter of the year. It’s all part of a resetting of the market which has seen growing numbers of casual landlords exiting the sector and the arrival of more professional landlords who are in it for the long-term, investing in the right strategies, in the right properties, in the right areas. It’s easy to understand why more borrowers are now operating as limited companies. They’re not affected by the phased reduction in mortgage tax relief, so all interest can be offset against profits from rental income. Furthermore, applications are stress tested at an interest coverage ratio (ICR) of 125% instead of the 145% ICR most lenders apply to individual landlord applications. The rise in limited company landlords is reflected in our own research which found that 55% of landlords intend to purchase their next buyto-let property within a limited company structure (up from 53% in Q1). The figure rises to more than
Alan Cleary managing director, Precise Mortgages
70% for landlords with 11 or more properties. In this changing market, it’s crucial that landlords can explore new areas that are opening up. Here at Precise Mortgages, we’re always trying to think of new ways to help more landlords get the buyto-let mortgage they need to optimise their investment opportunities. To help this growing demographic of landlords develop their buy-to-let business, we’ve extended our top slicing offering across our entire buy-to-let range, including
“It’s easy to understand why more borrowers are now operating as limited companies. They’re not affected by the phased reduction in mortgage tax relief, so all interest can be offset against profits from rental income” limited companies, portfolio landlords, Houses in Multiple Occupations (HMOs), and holiday let and student let applications, as well as personal ownership landlords (firsttime buyers are excluded). By making top slicing avail-
able across our entire range, we’re opening up more options to more customers, particularly those who might have been restricted by ICR requirements in the past. As long as the landlord’s rental income meets a minimum 110% of the product pay rate, landlords can now use their surplus income to demonstrate they can meet any financial stresses on their new property application, rather than through the rental income of that property alone. They can achieve this using the rental income of the property (the historical method), the rental income from their wider portfolio, their personal earned disposable income or a combination of the different methods. We’ve also made it easier to access top slicing via our online mortgage system. At the end of the process, you’ll be shown the products and loan size available using rental income alone, as well as top slicing. With more landlords choosing to run their buy-to-let business as a limited company, it’s important that they’re given the choice to enable them to pursue their goals – a choice of products, the choice to explore new opportunities and a choice to manage their portfolio in the way they want.
Labour’s plans could open a can of worms The political situation is moving so quickly that it seems slightly pointless to speculate on the policies and measures that have been announced during party conference season. Indeed, at the time of writing, the Supreme Court has just announced that the government’s decision to prorogue Parliament was unlawful, and therefore we’re currently unaware of whether the Conservative Party conference will actually go ahead. Especially as MPs are now back in Westminster. Again, at the time of writing, it seems obvious that there will have to be a General Election at some point in the near future. When that might come is anyone’s guess, because it’s clear that the Opposition parties do not want a trip to the polls until it’s clear that a no-deal Brexit has been ruled out on 31 October. By the time you read this, we’ll be just days away from this date and perhaps things might be clearer – although I wouldn’t count on it. Given that an Election is coming, then it makes sense that the various political parties are beginning to announce their potential manifesto policies and, while we might not be able to review the Conservative’s housing market plans, we are in a position to look, in some depth, at what the Labour Party have recently announced. From my perspective, it’s not pretty at all, and if we felt that the private rental sector/landlords have been in the government’s cross-hairs over the past few years, this appears nothing to what could be coming down the line, should Jeremy Corbyn – or perhaps, more importantly, John McDonnell – make it into Number 10 and 11 respectively. There is much to chew upon and so let’s start with McDonnell’s proposed focus on the PRS, and how Labour plans to approach it. Certainly, and landlords will be unsurprised by this, one might not expect
Bob Young chief executive officer, Fleet Mortgages
them to be on Labour’s Christmas Card list should they make it into government. For a start, we might all prepare ourselves for rental caps, which – in my view – will utterly decimate the PRS, much like they did back in 1974 when the government of the day introduced the Rent Act. This was not just about capping rents of course, but introducing a ‘fair rent’, however what it did was utterly destroy the sector for a generation, because those caps made it pretty much impossible for landlords to make any sort of profit, and we saw a huge shift away from the provision of private rental homes because of this. The fact this idea is being renewed again, perhaps shows a number of things. The Labour Party does not know its history and neither does it truly care about tenants, because in all likelihood history will repeat itself. The market sets the level of rents and if you take away the market’s ability to do this, then you make the attraction of property investment, pretty much, non-existent. Supply will drop drastically. Allied to this, is a policy idea which is effectively giving private tenants the ‘Right to Buy’ – in other words, those tenants who have been living in a private rental property for a certain duration of time will be
given the option to buy that property from their landlord at a reduced priced. Read that back. It’s truly as bonkers as it sounds, and if Labour are lucky enough not to destroy the PRS with their rental cap idea, then they’ll certainly do it with this proposal. So many questions arise from it, that I’m not quite sure where to start. However, let’s just say that if you take away the market’s ability to set rents and then you take away the landlord’s ability to sell their property when they wish, and receive the market value for it, then you are left with an asset which simply isn’t worth purchasing in the first place. There are also other measures which appear to be trouble waiting to happen – one major one is providing councils with the ability to purchase ‘empty homes’. How long these homes have to be empty for is another matter? I’m told it’s six months, but this might be open to interpretation. The point is, who is going to set the value of these properties and how will this work in practice? Do councils even have the money to be able to purchase in the first place? Would they even want to? There’s no doubting that we have some serious, endemic problems within the UK housing market, however in an age where supply remains low, one can’t help but wince at the thought of more private rental properties being taken off the market, simply because there’s an assumption that every single tenant is being ‘ripped off ’ and they would rather be owner-occupiers than tenants. That’s not the case anyway. Indeed, I saw some research recently which said only 42% of tenants are actually interested in buying in the near future. On hearing about these proposed measures, I said they would open up a can of worms but the more I think about this, the more I think it could be far worse than that. This is not the joined-up thinking that the housing market needs – it’s far from it – and one can’t help but fear for our sector should these sorts of policies ever make it to the statue book. We have all been warned. www.mortgageintroducer.com
Don’t underestimate the value of advice We’re all at the coalface of the advice process and used to seeking answers to some difficult questions – whether these are from clients, lenders or solicitors. When it comes to the buy-to-let sector, landlords are being asked tough questions on a consistent basis and access to finance remains only part of the buy-to-let puzzle. Landlords have, and will always have, different needs at different times within the lending cycle. As such, the value attached to the advice process should never be underestimated, and neither should the importance of intermediaries getting to grips with the varying challenges facing landlords and the potential solutions on offer.Before digging a little deeper into the factors affecting landlords, it’s important to point out the continued buy-to-let appetite from a cross-section of the landlord community and strong tenant demand for quality properties. Although it’s inevitable that some concerns remain around the current economic climate and what might happen in a post-Brexit world. When it comes to the details, according to a recent report from Howsy, here’s just a taste of current landlord conditions:
The average landlord is left with £2,000 from an annual return of £13,000 once the hidden costs of being a landlord are paid for. The initial start-up costs of stamp duty (£6,663) and agency fees to find a tenant (£811) cost the average landlord £7,474, before any ongoing costs are considered. Some 73% of landlords buying with a mortgage will see £6,921 paid out in interest as a result.
Based on an average annual rental income of £8,112 divided by the average buy-to-let property cost of £183,278, the average yield available is 4.4%. Over the last decade, the capital appreciation of bricks and morwww.mortgageintroducer.com
tar has also averaged an increase of 2.85% a year, £5,223 in monetary terms meaning buy-to-let landlords are seeing a return of £13,343 on their investment.
Ying Tan founder and chief executive, Dynamo
The effect on tenants
Results from the August 2019 RICS Residential Market Survey showed that tenant demand increased for an eighth consecutive month, as a net balance of 23% of contributors cited a pick-up (non-seasonally adjusted figures). Set against this, landlord instructions remained in decline, an ongoing trend stretching all the way back to 2016. As a result of the consistent imbalance between rising demand and falling supply, it was suggested that we will see rents increasing over the next three months. These factors highlight the need for the implementation of additional measures to help boost the supply of homes for private rental purposes. If this doesn’t happen, then it’s likely that even more tenants will face less choice and potentially higher rents
Strength in numbers?
In a bid to present a unified voice to the government, both nationally and locally, around the importance of supporting landlords, The National Landlords Association (NLA) and the Residential Landlords Association (RLA) will unite to form the National Residential Landlords Association (NRLA). This will result in a combined membership of more than 80,000 landlords making it the largest organisation in the sector. The merger has been endorsed by both boards and will be put to a vote of their respective members in September. The new organisation is planned to launch officially on 1 January 2020. This represents a positive step – if one, fully cohesive, association can prove to be a louder voice and influencing factor for the landlord community. There are always technological advances and innovative new concepts being launched which are OCTOBER 2019
aimed at making our lives – whether business or personal – more efficient or to save/make us some money.
Landlords are big business, so it’s little wonder that they are often at the epicentre of new tech offerings, and there is a constant flurry of new trends, systems and solutions which may (or may not) impact the buy-tolet market. For example, there is a new age of platforms being developed which can offer landlords alternative methods for letting, managing and squeezing the various costs associated with being a landlord, some of which can also benefit the intermediary community. Looking at the bigger picture, changing tenant demographics also need to be considered which, according to recent comments from Tenant Shop, means that letting agents and landlords could benefit from adapting the service they offer to cater for a growing number of family renters and older tenants living in the private rented sector. According to the most recent English Housing Survey (EHS), the proportion of private renters aged 55–64 was 9% between 2017 and 2018 which represents a rise of 5% over the past 10 years. The previous year’s EHS documented a rise of 1.8 million in the number of family tenants over a decade. With renting now either the preferred or necessary choice of tenure for a wider cross-section of the population – as opposed to young professionals saving for their first home – these are trends which landlords should be closely monitoring. There are many more factors for landlords to consider in a constantly evolving sector. But one thing is clear, most landlords would certainly benefit from working with buy-to-let specialists who incorporate a more holistic advice process which keeps pace with the ever-shifting needs of tenants, lenders and the regulator to maximise their portfolios. MORTGAGE INTRODUCER
Limited company buy-to-let At TBMC, we have seen a significant rise in the number of limited company buy-to-let applications being submitted. Since the beginning of 2019, over 25% of new business each month has been in the name of a Special Purpose Vehicle or trading company. This comes as no surprise as there are several benefits to using a corporate structure for running a buy-to-let property business. Many landlords opt to use an SPV as it can be financially advantageous and tax efficient. Since the government announced the phasing out of mortgage interest tax relief by 2020, there are now more reasons to consider the limited company route to reduce
Jane Simpson managing director, TBMC
“Stamp duty costs may be a deterrent to large portfolio landlords, but there are circumstances where incorporation relief may be granted by the Inland Revenue if it can be demonstrated that the portfolio is run as a business partnership”
tax liabilities. In terms of buy-to-let mortgage options, limited company products can also provide advantages to landlords as the PRA regulations relating to rent stress tests are not applicable. This means that the rental calculations can be more achievable for SPVs – typically at 125% at 5% or at the pay rate for 5-year fixed rates – which may allow applicants to borrow more through a corporate structure. There is growing competition in the limited company buy-to-let space - TBMC has around 30 different lenders on its panel - which means that there are some keenly priced rates available. Historically,
limited company mortgages were considerably more expensive than personal name rates, but the gap is closing with some lenders now offering the same rates for both applicant types. Setting up an SPV is a simple, cheap process which can be completed online within 24 hours via Companies House. Most lenders will lend to newly established SPVs providing they are set up for the sole purpose of letting and managing property. For this reason, it is important that the limited company is registered with the correct SIC code – normally 68100, 68209, 68320 or 68201. Some buy-to-let clients choose to apply via a company that trades in some other business besides property. There are options for trading company mortgages, but the choice of lenders is reduced for this scenario. For existing landlords who are considering transferring their properties to an SPV it is always recommended that they seek professional tax advice before proceeding. Moving properties from a personal name to a corporate entity involves a sale and purchase transaction which means that stamp duty land tax and capital gains tax is payable. Stamp duty costs may be a deterrent to large portfolio landlords, but there are circumstances where incorporation relief may be granted by the Inland Revenue if it can be demonstrated that the portfolio is run as a business partnership – again tax advice is recommended in this scenario. It is possible that the proportion of buy-to-let mortgages arranged via SPVs and trading companies will continue to grow over the next 12 months as landlords realise the financial ramifications of the changes to mortgage interest tax relief once it is phased out completely in 2020. This area of buy-to-let presents a good opportunity for brokers to help their landlord clients and doesn’t need to be complicated. Limited company mortgages are processed in the same way as personal name mortgages and may provide advantages for buy-to-let investors. www.mortgageintroducer.com
Searching for simplicity In a bid to breathe simplification into the ever-complex world of protection, whilst also supporting the regulator’s client reporting requirements, research consultancies are busy designing and launching new and innovative ways for advisers to compare products and providers. Earlier this year, the Finance Technology Research Centre (FTRC) launched Protection Guru, an independent protection information and education hub. It provides advisers with free access to product analysis and comparisons, policy condition changes, and policy upgrades, across the full range of protection contracts, including: life; mortgage protection; critical illness; income protection; business protection; and relevant life. It also explores areas such as the different types of conditions that are more prevalent among adults and children at different ages. This data can then be used by advisers to determine the most appropriate protection cover and policy for clients. Alan Knowles, managing director at Cura, says: “It’s great to see so much product innovation, particularly where changes are of real
Kevin Carr chief executive, Protection Review and managing director of Carr Consulting & Communications
benefit to consumers. I’m certainly intending to use the new hub to keep my advisers and myself up to date.” Meanwhile, CIExpert – the critical illness (CI) comparison site – has rolled out a free upgrade for advisers who subscribe to the service, which is designed to help advisers compare plans, make quicker decisions and provide proof of value to clients. The launch of the Personalised Predictive Analysis (PPA) tool allows for personalised details, such as exact family information, to be taken into account. Predictions are based on this information to assess the likelihood of a future claim and payment level. All of this is analysed to interpret the value of the plan, taking into account every condition. This comes at a time when CI plans now use more than 140 conditions and with vastly different insurer wording around claiming for each. Peter Chadborn, director, Plan Money, comments: “The upgrade makes CI recommendations even more relevant and meaningful for clients and this helps us promote the value of advice over non-advice.”
Data interrogation Nearly half of all British Friendly’s income protection (IP) claims were made within a year of taking out cover. This represents just one aspect of the findings from the mutual’s recently launched – and inaugural – Claims Report, offering analysis of its claims data as well as case studies from over a 13-year period. The report also found that 11% of all its claimants are under 30, highlighting that IP isn’t just for the middle aged. That said, the overall average age of all members claiming is 46, while those who claimed for cancer (52), heart attack (52) or a stroke (55) were, on average, in their early – mid 50s. The average duration between taking out a policy and making a claim is 252
days and the average length of a claim is 110 days, indicating how limited term benefit IP is relevant to customers who may not be able to afford cover to retirement.
News in brief • LV= has added a 12-month claim period to its ‘budget income protection’ offering, which is aimed at budget conscious clients looking to protect their income. It can be claimed on a number of times during the life of the plan and has no standard exclusions. • AIG Life has added a virtual GP and health service to its individual and group protection offerings, offering support on demand and at no extra cost to customers via their smartphone, tablet or PC. • Research by TUC shows unsecured debt per household rose to £15,880 in the first quarter of 2019, up £1,160 on a year earlier. The most common form is credit card debt (60%), overdraft (28%), personal loans (25%) and car finance (25%). • Pippa Keefe, former head of business development, partnerships, at AIG has succeeded Phil Jeynes as head of sales & marketing at UnderwriteMe. • From October, high street pharmacies will begin rolling out a ‘rapid detection service’, which includes mobile electrocardiograms to spot irregular heartbeats, as well as checks on blood pressure and cholesterol levels. This forms part of a pan to expand the role of pharmacies and offer earlier detection of diseases. • The total amount of funeral debt in the UK has risen to £147m, a 12% increase from last year, according to the 2019 Royal London National Funeral Cost Index. Bereaved families who struggle with funeral costs are taking on an average of £1,990 in debt to pay for a funeral.
Unlocking protection potential I was recently shown an advert online for a homemade canoe. The description read: ‘I built this canoe in 2009 using marine ply, tape and epoxy resin…It has been used once only, we decided it was inherently unstable and not fit for purpose… If you are braver than me or fancy a project this could provide hours of fun. Be sure to wear a life jacket!’. The craftsman behind this homemade monstrosity and the man that wrote this unusual advert is my Dad. I also had the dubious privilege of witnessing the canoe being built as well as seeing its first, last and only launch. Once I had finished laughing at his sales pitch, I pointed out that no one would ever buy something with this description. I was wrong. It sold, and incredibly went for over sixty pounds, not bad for something that is advertised exactly as is. No embellishments, nothing hidden. The thing I found interesting about this was the way my dad’s absolute honesty clearly worked. Someone still bought it, they weren’t put off by what the product didn’t do. Maybe they appreciated and trusted such an honest product portrayal and it completely managed their expectations on what they would be getting. The buyer knows they should wear a life jacket. Whenever you buy a product, from small purchases such as clothing and food to large items such as a car or house you really want to know exactly what you are buying. You want to know that you aren’t being mis-sold and that your purchase is fit for purpose. It’s why I paid for a survey when I bought my house, check the ingredients in food products and head to review sites before I book a holiday. I think this mindset applies to everything a consumer purchases. No one likes to end up with the wrong product; a house with subsidence, a lasagne containing horse meat or a dodgy hotel under a flight path. We want to be able to read, understand and trust what’s on the label.
Charlotte Harrison product manager, iPipeline
For me this is particularly applicable to the life insurance industry, where ending up with the wrong product can have a massively detrimental impact on both your long term financial and emotional wellbeing. We know that as an industry we still have a long way to go to build consumer trust. Recent surveys have highlighted that 55% of insured and 68% of uninsured consumers believe that providers will actively try to avoid paying claims. That’s not a great reputation to have. some 73% of that 55% (insured consumers) have actually gone through the claims process and still don’t trust that providers will payout. What’s going wrong and why don’t consumers trust the insurance industry? To have trust you need to have clarity. I think a large part of the disconnect comes down to the simple issue of poor communication. Consumers don’t always know what they are purchasing, and not fully understanding your purchase is a great way to have your confidence eroded. This is supported by the fact that a large proportion of claims not being paid out were due to customers claiming for a condition that wasn’t covered, as well as pre-existing conditions not being adequately de-
clared. As an industry we didn’t get that all important labelling right. So, what can we do to ensure customers know exactly what they are purchasing? The good news is we have already made a start with a movement towards simpler and clearer policy wordings. This is a great step forward in solving the problem, but there’s still more progress to be made. Advisers are also key to addressing the issue of consumer trust. Having the wrong cover can be avoided by getting the right advice at the right time. Advisers have the knowledge to understand policy wordings and make sure the product is suitable for their client. Maybe their client has specific medical conditions or an unusual hobby that isn’t covered as standard. Advisers are in a great position to explain the importance of disclosure to their client and the impact this can have on their claim being paid out. So, whilst as an industry we often focus on claims statistics to build trust and prove to consumers that their policy will pay out (I think I can probably quote a lot of these by heart now), this misses the bigger picture. I don’t think statistics in isolation are the way to a consumer’s heart. As a consumer I want an open and honest dialogue. I want to know that nothing is going to be hidden. I want to know that my policy is covering what I need. It’s frustrating if some things aren’t covered, but it’s far better to have this knowledge up front than at point of claim. Let me make an informed decision based on all the facts. If paddling in an ‘inherently unstable’ canoe isn’t covered then maybe I will find a different hobby, look for a policy that can accommodate me or accept that at claim stage I won’t be covered. At least I’ll know what I’m signing up for. As an industry let’s keep making policies easier to understand, and even if a consumer has heard it all before, there’s no harm in walking them through exactly what their policy covers… again. www.mortgageintroducer.com
Firms go extra mile on mental health There has been much discussion recently about access to insurance for people with mental health difficulties and there is still a perception that the insurance industry could do more when it comes to assessing and understanding mental health risks. Recent information released from the Office for National Statistics (ONS) show that the suicide rate in Britain is at its highest level since 2002. Tragically, the 11.8% rise in suicides was in part driven by an increase in young people - aged 10 to 24 – taking their own lives, with the overall rate for that age group reaching a 19-year high. Suicide has been a prickly subject for the life insurance industry, with the topic having previously been regarded as something of a taboo. Understandably, insurers have traditionally eyed those with a history of poor mental health as a potential risk, and have typically placed oneor two-year clauses on policies to avoid suicidal people taking out life cover with questionable intentions (something to still consider when re-broking a life case). However, in recent years the conversation has been changing. Industry initiatives have highlighted the need to widen the access to insurance and underwrite individuals who have taken responsibility for their mental health - often by seeking professional help - more fairly. Indeed insurers such as The Exeter are even prepared in certain circumstances to offer cover to those who have previously attempted suicide. This, combined with the evolution of life and protection propositions to include mental health support, has put insurance providers in a position where they can, in theory, help prevent suicide or at least detect early-warning signs. Examples of such support include a wide range of counselling, bereavement support services, therapy and GP access. All of these are particularly valuable given budget cuts and staff www.mortgageintroducer.com
Mike Allison head of protection, Paradigm Mortgage Services
shortages which are affecting NHS services. Mental health remains a very personal and sensitive subject, although there has been a societal shift in the right direction when it comes to removing any perceived stigma. While life companies are doing many positive things to offer support for those with stress and anxiety, there is still much to be done. If ‘early intervention is key’ – and I think we all believe it is - those insurers being proactive in offering support for people at the early onset of stress are to be applauded. However, it is often the case that the services offered are not welladvertised to those who have access to them. Many will be fortunate enough to have cover provided under a group arrangement, or indeed may have been one of the many taking up the unique arrangements Paradigm Protect have with UNUM, for example, but does everybody within those schemes know what added benefits are available? Often, individuals are unaware of these services as the detail does not always get cascaded down to scheme members; a pretty sad fact given that these arrangements are usually established as a true employee benefit.
The other issue of course is that those that are the most vulnerable to suicide and self-harm, for example, are the very people who do not have open access to this kind of support or - as highlighted earlier - are of an age where they are not in a position to seek help from external sources such as those provided by insurers. However, the good news is that the industry is truly doing more now than it has ever done to support clients through stress. Many would say that such attitudes in effectively driving a ‘consumer champion’-like approach to the sales of life assurance are likely to be much more effective than simply pointing out the need for cover. Winning the ‘hearts and minds’ of consumers especially through reallife stories where people have been supported in their hours of need will drive greater consumer demand for life cover. Information like this which is more relevant to people’s everyday lives will surely help to ensure greater growth in our market. Increasingly therefore, the ‘prevention is better than cure’ maxim has been heeded by many insurers in their pursuit of excellence and in their ability to treat customers more fairly than ever before.
Helping out safely The difficulties young people are facing getting on the housing market ladder are well documented. The disparity between earnings and house prices will not change any time soon – certainly not in the higher priced localities around the country – and are there any areas not highly priced? The Bank of Mum and Dad and of the grandparents has also been open for some time. New figures reveal that increasingly advisers are being approached by the over 55s for options to help children and grandchildren get onto the property ladder. According to equity release adviser Key, 47% of first-time buyers are partially funded by grandparents or parents and retired homeowners are increasingly considering cashing in buy-to-lets, acting as guarantors as well as remortgaging or taking out new mortgages (including equity release) to help children and grandchildren on to the property ladder. We can see why this is happening – and it maybe when discussing with younger clients as to their finances that mortgage brokers ask the question whether there are other sources of funding for a deposit, ie can the parents help? But should we step lightly going down this route? Because once those funds have gone over it is wise to assume that they won’t be coming back again. And on that assumption is the giver protected? Key says 95% of parental funding comes from savings and 21% from pension funds (there’s a tax consideration right there). According to the mortgage advisers Key spoke to 19% had enquiries from older customers about selling buy-to-lets and holiday homes (another tax implication), 32% have been asked about acting as guarantors (where is the protection there?); 28% of clients are investigating the option of remortgaging and 21% taking out new mortgages. Now this is good business for mortgage brokers and the pres-
Steve Ellis head of risk and protection, Premier Choice Group
sure is on to find the right solutions for all parties – the funder and the funded. But as ever there are protection considerations: insurances need to be in place to cover the mortgage payments – and assuming the children are the ones making those at least they should be putting income protection or critical illness in place. And what of the parents or grandparents making the gift – depending on their age it might be possible to review and extend protection insurances they already have. Certainly, some life insurance could be considered – to protect their partner and the children if it is the case that the money handed over is considered a loan. We all want to help the younger ones into their first home if we can – let’s help our clients do it in such as way as it won’t create problems down the line.
The problems down the line with any form of gifting or funding of family members is debt if something befalls the one who has made the gift – it really does have to be money they are sure they can do without. But debt is of course an issue at any age and time and debt charity StepChange has published some new statistics: 331,337 people contacted StepChange for help with their debts in the first six months of 2019. Unsecured personal debt is rising: of the 190,484 new StepChange clients who received full debt advice, the average level of unsecured personal debt was £13,799, up 2% in the past six months and 6% since 2016. Some 31% of new clients’ outgoings were more than their incomes - the average monthly shortfall for clients with deficit budgets is £365. It’s all enough to mean that if they have a mortgage, paying it might be a problem. And of course, the figures show that unexpected life events are the three biggest causes of problem debt: 18% of those seeking help had had a OCTOBER 2019
reduction in income, 16% an injury or illness and 16% had been hit by unemployment or redundancy. We can’t prevent any of these events but what we can do as professional intermediaries is to stress the need to budget – before and after taking out a mortgage and to if at all possible have a margin of funds to act as a contingency if things get tight. And to shore up that budget plan and that contingency pot to factor in whatever protection insurances are most appropriate and affordable. Even a little, that won’t debilitate the day-to-day finances could make a real difference when finances are hit by events beyond the client’s control.
Positives all round
It may or may not be related to the Bank of Mum or Dad or the Grandparents but statistics from the Department of Work and Pensions show that employment rates for older workers are growing. In the 50-64 age group employment rates have risen to 72.5% in 2019 from 55.8% in 1984. And in the 65+ age group employment rates have gone up from 11.4% from 4.9%. The number of workers overall is up 369,000 on last year and encouraging again all round wages for UK workers have continued to grow with wages rising faster than inflation, up by 1.9% in real terms on last year. Whether any of this amounts to new businesses for any of us; mortgage brokers or healthcare and protection intermediaries is not self-evident. But if more people are working and more older people are still working there is potential for business all round – people might venture into the housing market with more security or remortgage to size up. And it means that if there are those working later who might have paid off their mortgage or still have mortgage to pay off it is still income which needs protecting and more income means clients can afford to give themselves that protection. www.mortgageintroducer.com
Should mortgage protection be mandatory? There’s a long-running debate about whether it should be compulsory for people to buy protection when taking out a mortgage. Some compelling arguments are made for this, the main one being that a mortgage is probably the biggest investment someone will make, so it’s crucially important they and their families are protected if the worst should happen because the state will only provide minimal support. After all the law forces us to insure our vehicles and buildings insurance is usually required to get a mortgage, so why shouldn’t we be compelled to use an insurance product to keep a roof over our head if something unfortunate occurs? Additionally, from a lender’s point of view it’s understandable that they would want borrowers to have some form of protection, particularly for high loan-to-value mortgages. According to research by Compare
Andy Philo director strategic partnerships and employee distribution, Vitality
the Market last year, nearly three million households with mortgages don’t have life insurance despite many lenders recommending it to borrowers. So, isn’t it time the government forced people to take out protection when they buy a house? Actually, no, I don’t think it should. First off, because it’s impossible for a compulsory protection product to be suitable for every consumer, there would be an increased risk of misselling. A standard benchmark would have to be enforced, which would undoubtedly provide cover that simply isn’t right for certain individuals. Also, many people have existing insurance policies in place. Forcing everyone to purchase mortgage protection would increase the risk of needlessly – and expensively - doubling up cover. There’s also something rather ‘nanny state’ about the whole debate. It’s been proven that people tend to
switch off when financial choice is taken away from them. For example, while pension auto-enrolment has generally been lauded as a success, recent research from Portafina revealed that more than a third of workers (35%) are unaware of how much they are paying into their pension each month, while 47% said they don’t understand how autoenrolment works. Finally, it’s possible that the role of the adviser would be undermined if mortgage protection became compulsory. Advisers are best placed to explain and sell protection, ensuring customers understand the products and level of cover they may need. Although there’s still work to do to encourage some advisers to sell protection, it’s heartening to see statistics such as iPipeline’s 2019 Q2 data which shows new business up 39% year-on-year, with mortgage brokers increasing protection sales by 102%.
Review: General Insurance
Objects of desire It is important to keep jewellery valuations on GI policies up to date. Diamond prices in particular saw spikes between 2005 and 2010 and again recently since 2018, especially in larger carat weights. Watches too are highly collectable, take up little space and incur no capital gains tax, so it’s not surprising that they too are an increasingly popular investment option. Take a typical HNW individual’s Rolex collection for example. This lively appreciation in values is not just at the high end of the spectrum, it is impacting even the most basic models too. Gentleman’s steel Oyster perpetual Submariner: was £1,450 in 2000. It was valued at £1970 five years later and by 2015 was worth £4,500. Today it is worth £5,750 – that’s a 296% increase in value.
Gentleman’s 18 carat yellow gold Oyster bracelet watch ref 116528: was £10,500 in 2000; today the same watch is worth £27,650 – a 163% increase. The message is clear – encourage your clients to review their sums insured and seek professional valuations at regular intervals, particularly on these high growth areas where values are soaring.
Recent research commissioned by a leading premium finance company last month revealed that over a third of UK businesses have cancelled one or more insurance policies, including compulsory insurance such as Employers’ Liability, over the past three years, with the numbers still rising. The research blamed a combination of falling incomes and rising premiums for the spike in OCTOBER 2019
Geoff Hall chairman, Berkeley Alexander
cancellations. It is a problem that is worsening as almost half of these cancellations occurred over the past 12 months. Whatever the reasons, commercial clients continue to play Russian Roulette with their businesses either by being underinsured or not insured at all. Frustratingly this has even been against the back-drop of a soft market. As markets begin to harden and premiums rise this is a risk that can only increase. The broker plays a huge role in educating clients and stemming the tide of underinsurance. If it is about saving money, then businesses should look at how to save money within the business, not how to leave a business exposed. Also, it is not just about price. There are all sorts of value-added services that insurers and brokers offer as part of their policy or services, such as risk management tools. Clients should be encouraged to make the most of these. www.mortgageintroducer.com
Review: General Insurance
Now is the time to futureproof your business How do you choose the right GI partner to work with? Traditionally, the key considerations have been risk footprint, breadth of cover, the number and quality of the insurers underwriting the policy and, of course, value for money. While these remain important, they are no longer the only considerations. Technology has been important for years, but it is now fundamental. It’s become one of the main considerations for advisers and networks when it comes to selecting the businesses with whom they work. Why? Good technology applied well has the power to transform processes, productivity and profitability, so it shouldn’t be a surprise and it isn’t going to change. But this comes with a new problem – the mass of companies claiming to be the next big thing, the digital disruptor transforming the market. You have probably seen marketing from a provider that claims to be in sole possession of the technological breakthrough that will singlehandedly cure all your problem. So, how can you make sure that you are choosing the right partner to benefit your business now and in the future? It might be obvious, you must do your homework. Start with what is important to you and your clients. Look at the whole proposition to make an informed choice. For example, a supplier that is offering amazing sales process and unbelievable prices may have terrible technology and service. You may sell lots of GI, but your customers won’t renew the policy and they may not come back to you again. So, evaluating all aspects of the proposition against what you and your clients need has to be the right answer. At the moment there is huge focus in GI on the quote stage of the sales process and a desire to deliver a client quote based on as little information as possible. ‘Quick quote’ www.mortgageintroducer.com
Rob Evans CEO, Paymentshield
solutions use external data sources and/or customer information that is pulled across from the CRM system and some of them are great. I’m so convinced these solutions are here to stay that we’ve dedicated huge development effort on building a new suite of APIs and other ‘quick quote’ options. However, in other cases ‘instant quote’ is just a headline. But then ‘put in a few details to get a number that is probably someway nearly vaguely right, then validate all the bits of data we’ve bought and assumptions we’ve made and then get a quote’ may be more honest but isn’t quite as catchy. Looking beyond the marketing and really understanding the totality of what each supplier is offering will mean you make a better choice.
Future proof your decision
History is littered with groundbreaking companies that were miles ahead of their competitors, at least for a while. For every Google, there are a thousand Ask Jeeves’. Or put it another way: I grew up in Liverpool in the 1980s – a period when both my local football teams were quite good. I picked Everton – we won the league a couple of times, the FA cup, even a European competition. But in the decades since, one FA cup in 1995 is all I have to show for that brilliant decision. My Liverpool supporting brother on the other hand is probably happier with the choice he made. By picking a supplier that you believe has the experience, ethos and resources to evolve, innovate and adapt means you’ll probably have a great supplier for the long-term. As your needs change, they’ll change. But also, as the market, customer behaviour and technology changes and opens up new possibilities, a good supplier will bring ideas and innovations to you. Not all small companies lack the means and not all large companies lack the creativOCTOBER 2019
ity, so digging into the track record and capability of partners and forming a good view over their future is important. Of course, you can always change your supplier if the one you have falls behind, disappears or every time the next big thing comes along, but that is very time consuming and expensive.
In a more connected future, the role of a GI platform will extend well beyond just delivering a faster quote – that will very quickly become a hygiene factor. Better, faster data integrations, flexible APIs and wider adoption of smart technology will open new possibilities. This is not a long way off in the future, the technology is available now. Those advances could ultimately take us well beyond the quote and purchase of GI – enabling an enhanced customer experience throughout the life of the policy. For example, the data exists to warn of a spree of break-ins at a postcode level, or of a severe storm that might hit a particular part of the country. Insurers have access to this information as they use it for their own risk decisions. But, in a more connected world, a sophisticated platform could use this information to create personalised, proactive alerts for clients – enabling them to prepare for the potential risk and hopefully avoid or reduce a claim. Creating more frequent and more valuable touchpoints with customers builds positive engagement, which will encourage stronger and longer relationships between clients and their advisers. The right choice for your business will ultimately be a solution that understands different customers, advisers, firms or networks want different approaches and these needs might also change over time. So, look for a GI solution that combines technology and proposition with insight and flexibility to create the right long-term option for you and your customers. By opening your mind to the possibilities, you can take decisions now to future-proof your business. MORTGAGE INTRODUCER
It’s now time to sell GI! Uinsure now gives you:
1. A quote in ‘Zero’ questions
We do this via our API integration currently with Twenty7Tec, 360DotNet, EKeeper, iPipeline, Intelligent Office, MAB Midas, Toolbox plus many more to come.
2. Two question quote
Simply come to www.uinsure.co.uk and enter date of birth and address to get a binding quote in less than 10 seconds.
That is simples! To find out more visit www.uinsure.co.uk or call 0344 844 3844
Review: General Insurance
Should brokers subscribe to the subscription model? I’ll admit I was sceptical when the first subscription insurance product launched last year. If I’m honest I struggled to see how it genuinely offered something new. I also had concerns around lack of provision for no claims discount, the fact that premiums could go up at any time, and most importantly that if a policyholder missed a payment they could potentially be left instantly uninsured. However, in light of recent events such as a rise in the practice of fees being added to GI sales by brokers, and a worrying return to the bad old days of brokers seeing a reduction in trail commission, I am starting to think that the subscription model could offer a solution. Firstly, it’s a very attractive proposition for brokers/advisors not to re-broker every year but run a subscription model and keep receiving trail commission payments (as you’ll have read previously I believe that intermediary service must be remunerated appropriately). Secondly, as a subscription model prohibits brokers from adding fees, brokers are not being remunerated in ways that conflict with their customer’s best interests. Win, win. However, Andy Thornley, BIBA’s head of corporate affairs raised an interesting point in August when he said that in order for brokers to successfully offer subscription policies software houses need to up their game. He said the majority cannot currently offer the services brokers need to run subscription products. This highlights once again that the industry is not keeping up with demand. Customers are demanding more flexible products, but brokers are unable to flex their offerings to keep pace with emerging InsurTech subscription insurance providers. I think GI providers could offer intermediaries a solution. Don’t wait for software houses to play catch up. If your GI provider www.mortgageintroducer.com
Paul Thompson founder and CEO, Cavere Intermediary
has strong enough insurer relationships they should be able to flex for you, whether that be in terms of increasing/decreasing levels of cover or cover limits to find the right solution for your customers. If they can find the right cover at the right price then premiums should not go up each year (except perhaps for inflation) inviting the same level of customer loyalty as a subscription approach. Get this right then you no longer need to re-broker every year, but instead invite renewals and focus your time on selling, or perhaps even diversifying your offering to drive even greater customer retention. Talking of which…
Diversify or die
The rise of the subscription model highlights perfectly how the market is changing and how evolving customer demands require intermediaries to diversify in order to remain relevant. Looking wider, whilst I hate to use the dreaded ‘B’ word, persistent political and economic uncertainty could potentially wreak havoc on the property market and the pockets of your customers in the coming months, and perhaps even years (depending on what happens on 31 October). You must start thinking outside of the box. There are emerging markets out there – young first-time buyers looking for flexible home insurance options, landlords looking to move towards short term (Airbnb type) lettings rather than traditional buyto-let portfolios, older customers releasing equity in their properties to improve their homes, travel the world or perhaps help their younger family members get on the property ladder. Adding in new products, services or technology driven solutions are among the actions you must take to remain competitive. On the product/service front, let me give you a personal example. I
was shocked earlier this year when Cavere launched an up to 75 year old annual travel insurance product with Age Partnership. This story received no pick up in the press (other than in Mortgage Introducer), and when I questioned why, I was told that brokers and advisors aren’t interested in selling travel insurance. Why? Surely this is a perfect example of the need to diversify to meet changing customer needs. Equity release is a fast growing market, of course you can help these customers remortgage, and perhaps even reinsure their homes, but shouldn’t
“The use of more sophisticated technology is resulting in more accurate assessments of risk and your ability to get the right product as well as streamline quotations and administration”
you also question why customers are looking to release equity and help them with that too? As for technology, I often see GI providers telling brokers and advisors that technology cannot replace sound advice. Whilst I agree trusted counsel is a fundamental USP, embracing technology offers the best way to future-proof your business and make your proposition more relevant. The use of more sophisticated technology is resulting in more accurate assessments of risk and your ability to get the right product, at the right price, as well as streamline quotations and policy administration, and importantly improve experiences at every touch point throughout the customer journey. A broker or adviser who can offer technological efficiency combined with knowledgeable advice will be the best placed to capitalise on changing market conditions and evolving customer needs. Diversify (and evolve) or die. MORTGAGE INTRODUCER
Review: Equity Release
The risks of Retirement Interest-Only At the National Later Life Adviser Conference in June, former FCA mortgage policy manager, Lynda Blackwell questioned the residential approach that the regulator had chosen to take towards RIO mortgages and of the problems that this silo approach had caused for markets. She also spoke of the intense lobbying which the FCA had received from banks and brokers to implement this policy, while asserting that “many older people will have no chance of meeting the affordability requirements in this area”. But, what are the risks associated with these types of later life mortgage? RIO mortgages allow borrowers to remortgage existing interestonly deals or to release equity capital as a long-term loan against the value of their property, with the outstanding capital debt deducted from the proceeds of the sale once the mortgage holder dies or moves into longterm care. They are often seen as a similar proposition to lifetime mortgages, although RIO customers are obliged to repay the interest that has accrued against their loan on a monthly basis, while lifetime mortgages roll up interest payments against the value of the loan. Under the terms of the 2015 Mortgage Credit Directive, for example, both RIO and equity release products were classified as lifetime mortgages, although many lenders had stopped offering RIOs to customers by this time because of the lack of professional qualifications needed to sell them. However, as wave upon wave of interest-only mortgage deals came to maturity in the ensuing years, the FCA came under increasing pressure to remove the barriers to RIO sales and promote their use as a salvation for those existing interestonly customers with no repayment plan beyond the terms of their deal. Consequently, the FCA decided to reclassify RIOs as standard mortgages in March of last year. Yet, many observers and experts regard the re-introduction of RIOs
Claire Barker managing director, Equilaw
as little more than a false dawn for interest-only borrowers, with recent research by the insurance company, Royal London, warning that “very few (RIO customers) will be able to afford the cost of servicing a mortgage debt” or of maintaining postretirement living costs over the term of a loan. According to official figures, up to 12 million people in this country are failing to save enough money to cover even basic retirement living costs. And with hundreds of thousands of interest-only borrowers coming to the end of their loans over the next five years, Royal London has warned that around 275,000 RIO applicants could fail the affordability tests applied by lenders as a result. Which means that we are left with a set of circumstances which ultimately precludes the very people that RIOs are designed to help, leaving vast constituencies of borrowers with little choice but to carry on working beyond their retirement age or to downsize to a smaller property. And for those customers who do manage to pass criteria tests, the threat of repossession or of tumbling living standards could prove to be an ever-present drain.
Pros and cons
However, there are other, substantial risks to take into consideration when looking at the pros and cons of a RIO mortgage, not least the lack of underlying legal advice or support for these products. For example, under Equity Release Council guidelines, prospective ER customers are obliged to seek independent legal guidance and to consider a range of alternative lending options before they are allowed to proceed with a loan, thereby offering clients the security and protection of impartial third party assistance in addition to the advice given by advisers throughout the application process; advice which is, itself, dependent upon the attainment of specialist equity release qualifications. However, there OCTOBER 2019
are no such requirements for RIO customers under mainstream mortgage rules, with borrowers merely having to prove that they are able to afford interest payments. Yet, given the omnipresent threat of repossession or of vulnerable clients being pressurised into releasing equity via RIOs by family members or other parties, the absence of a process or mechanism by which to evaluate whether customers have the mental capacity to understand the long-term nature of their contracts or the possible consequences has raised particular concern. Indeed, Blackwell has pointed to “the same need for advice and support with a RIO as there is with equity release” and highlighted the problems which the FCA has created. This, in turn, has led many people within the mortgage industry to call upon the regulator to introduce mandatory legal advice for customers considering RIO mortgage products and to help mitigate the risks that products such as these can pose. Moreover, with large numbers of RIO advisers lacking the qualifications needed to advise customers on equity release products, many experts feel that the introduction of an obligatory legal process would help to reduce the chance of clients choosing unsuitable mortgage options. It is a matter of some incredulity to suggest that lifetime mortgages offer a higher than average level of risk to financial customers when a product which is largely unaffordable, offers no legal advice, supports a high risk repayment structure and increases the likelihood of repossessions is allowed to operate in the same market as ER and is offered to the same types of customer. And with RIO mortgages accounting for a paltry 353 sales between March of last year and April 2019 (according to official FCA figures obtained by This is Money), it would appear that many property consumers feel the same way. Long may it last. www.mortgageintroducer.com
Review: Equity Release
Supporting advisers is key to growth that enable advisers to Whether it’s relationships, assimilate market data, a job offer or selecting the available products and right home finance prodthe client’s financial situuct, expert and trusted adation in order to explain vice helps us make the best their options to them in decisions. And while finana simple and informative cial advice is a prerequisite manner. for taking out a lifetime Alice Watson And the proof is in the mortgage, consumers rely head of pudding: £1.85bn of eqon advisers to give them marketing and clear and quality guidance. communications, uity was released in the first half of this year; and That is why Canada Life Canada Life at the end of Q2 2019, we has invested its resources in Home Finance found that there’s some running workshops that are designed to help advisers become £382bn worth of equity contained experts in later-life lending, ensure within UK homes. This represents a significant consumers receive the best home finance product, and ultimately trove of wealth that some homeowners aged 55 and over can draw fuel market growth. As many in the industry are on for a range of reasons – whethacutely aware, the future of longterm care in the UK is anything but certain. The government green “£1.85bn of equity was paper on social care is yet to see the light of day, and data from the released in the first World Economic Forum finds that half of this year” the average retiree in the UK will outlive their savings by about 11 er it’s easing the financial burden years. But recent research by Canada of later-life care, renovating their Life finds that a quarter of people home or paying for the holiday of in the UK would rather unlock eq- a lifetime. Given that the second half of uity from their property than use their pension pot to pay for care the year often sees an uptick in costs in later life, an increase from completions, it’s not unreasonable to think that 2019 might be an2016. This is a real vote of confidence other record-breaking year for the in the industry, with more con- equity release market. And this is sumers clearly viewing their wealth where advisers are crucial for reholistically and identifying how alising this potential expansion in their property can be used to fund the equity release market. But, of course, advisers don’t their later life. At a time of political and eco- operate in a vacuum. Research we nomic turbulence, it’s reassuring carried out earlier this year found that advisers will bring an air of advisers ranked getting more supcalm to conversations with their port as the number one thing clients, explaining how releasing needed to make equity release their property equity can give them more attractive and accessible in 2019. peace of mind in retirement. Without this help, advisers While we like to think of lifetime mortgages as relatively acces- would struggle to meet customer sible home finance products, we demands, which will have a negashouldn’t underestimate the skills tive impact on the industry. www.mortgageintroducer.com
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Review: Equity Release
Seasonal slowdown is in swing Equity release lending slowed by 12% from £2.1bn in the second half of 2018 to £1.85bn in the first six months of this year, the latest figures from the Equity Release Council reveal. Lending volumes in the equity release market are typically higher in the second half of the year, so this drop in activity mirrors a the seasonal slowdown seen in previous years. The amount borrowers released in the first half of 2019 was broadly stable compared to the first half of last year when the total was £1.84bn, but the total number of new customers increased by 6% year on year to 41,263. There was more choice for borrowers as the number of product options more than doubled from 126 to 287 over the past year.
Stuart Wilson group chief executive, Answers in Retirement
Average interest rates on equity release mortgages dropped below 5% for the first time on record, falling to 4.91% in July. There was growth in the number of products available for borrowers looking to live in sheltered or agerestricted accommodation and an increase in the range of products offering protection against early repayment penalties when downsizing, inheritance guarantees and drawdown. Borrowers wishing to make regular interest payments to stop their debt building up have nearly four times as many products to choose from now as they did a year ago, at 81 compared to 22. Equity Release Council chairman David Burrowes says: “Older homeowners considering equity release have never before had more choice
and flexibility to meet their changing needs and their families’, with average rates also at record lows. “A broader range of products means equity release can play an important part of advisers’ toolkit when considering clients’ requirements in later life. “It’s vital that advisers across a host of areas – including pensions and wealth management – can identify when equity release may or may not be suitable based on today’s product range and can refer a client for specialist advice where appropriate.” Key chief executive Will Hale says: “Equity release rates have fallen steadily with more than half of plans sold now boasting rates below 5% and some low LTV options offering rates well below 3% – all fixed for the term of the product.
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Getting the simple things right It is customary when judging the relative merits or deficiencies of modern conveyancing practices, or of evaluating standards of service within the industry, to do so from the perspective of consumers. Which, readers will be readily forgiven for thinking a perfectly natural state of affairs. Yet, as the demand for a clearer, fairer and (above all) faster transactional journey continues to grow, and the desirability of a streamlined process which links each working component becomes increasingly apparent, so too has the wisdom of establishing closer relationships with individual elements within the chain; a chance to strengthen the underlying procedural ‘fabric’ of our industry and create a stronger footing for future improvements or innovations.
David Gilman partner in charge, Blacks Connect
Given our position at the latter stages of the transaction process, therefore, establishing a clear insight into what constitutes good conveyancing practice from the perspective of brokers has become a hugely significant issue for all those in the sector to contend with - a barometer, if you will, of where we need to go and what we need to do to improve existing services. Last month, therefore, Blacks Connect hosted a broker forum in Leeds on this very subject, with representatives from both local and national firms being asked to identify aspects of the conveyancing process which they found to be frustrating (or otherwise) and offer suggestions for what could be considered as the best possible practice going forward. The conclusions were, to say the least, illuminating. Firstly, there was a widespread recognition of the many examples of good conveyancing to be found across the general market, with firms encompassing a variety of commercial models (from small high street firms to larger conveyancing ‘factories’) being singled out for praise.
However, as you would also expect, the distinction between what represented good and bad working practice was hotly debated, with examples of poor communication and a perceived lack of pro-activity in terms of delivering acceptable completion times (often resulting in aborted sales or other complications) being regarded as amongst the most prominent examples of bad conveyancing. So, no surprises there! Yet, incidences of transactions with no dedicated case handler, of solicitors actioning vital parts of the process at the last possible moment (thereby incurring frustration and emotional stress to brokers/clients) and of a general lack of understanding for the implications of bad service to both advisers and consumers present a stark reminder of the pitfalls which our industry needs to address and improve upon if we wish to discard our reputation as being cumbersome or downright obstructive, irrespective of the pardonable hold ups, niggles and archaic transfer issues that are routinely referenced by solicitors to counter unwarranted criticisms. Indeed, the examples of good conveyancing practice which were highlighted by the forum should all be regarded as perfectly achievable targets for the conveyancing sector to achieve and as a ‘bare minimum’ of service to both custom bases and brokers. These include personalising the terms of engagement with each client and of getting the ‘basics’ (such as names, addresses, property, lender etc) correct so that every element is made to feel an integral part of the overall process, while also maintaining a respectful level of dialogue and keeping all parties informed of progress- a simple case of good manners and good communication skills (is there really any need to legislate for this type of behaviour?!). In addition, taking ownership of a case and delivering on expectations in a time orderly manner, while
adopting a pro-active stance and chasing up all aspects of a transaction, even if they are perceived as being outside of a firms control (such as local searches, documents, ID, proof of deposit etc), was identified as a sure-fire means of maintaining both confidence and satisfaction amongst clients and brokers - simple things, in other words, that count for a lot.
End to end
And lastly, recognising that a broker is on the same side as the conveyancer and tailoring an approach which reflects this fact also scored highly; could there be a better way of improving relationships and enhancing ‘end to end’ services? The forum also concluded that further improvements could be made to the conveyancing process by focussing on the use of technology and by using timelines or simple flowcharts to educate clients (who often have little or no idea of what the transfer of property entails) as to their likely post-offer journey. In addition, conveyancers were urged to contact all parties in advance of completion in order to inform them of any shortfalls incurred by the inclusion of ERCs or building insurance, while actively involving brokers in the ‘education process’ so as to minimise confusion or disorientation during the completion process and to remind clients that good conveyancing is not always just about price or speed at all costs. Because, when all is said and done, the key to offering a level of service which corresponds with 21st century consumer expectations isn’t rocket science. Instead, it’s about realistically managing these expectations via strong and consistent communications, pro-actively dealing with each stage of the completion process and personalising the journey for clients in a way which makes them feel valued and part of the process; remembering, in short, that relationships and people still matter. www.mortgageintroducer.com
Now isn’t the time to rest on your laurels Over a decade on from the Credit Crunch, it’s clear to see that we are a long way down the road from that period in terms of the competitive elements of the mortgage lending market. In that immediate period, postCrunch, advisers were able to count on their fingers and toes the number of ‘active lenders’; now you would need to utilise a fair few of your colleagues to be able to do likewise. Competition is clearly a positive element of today’s market but, from recent announcements, it is obvious that competition can be unforgiving, especially when it comes to the lending sector. Then again, with more lenders ‘active’ now than in the period pre-Crunch, it always appeared likely that a pinch point was coming and something had to give. As I write, that pinch point has obviously come for Sainsbury’s Bank which has announced its decision not to take any further mortgage business and is actively looking at sale options for its mortgage book. The human cost of this, in terms of employees of Sainsbury’s Bank, is as yet unknown but I think we might all agree that it is never nice to see a lender leave the market and we hope all those impacted are able to find positions quickly elsewhere. What can we make of this decision though? Is it a coincidence that this is the second supermarket, after Tesco Bank, which has left the lending space this year? What might be the reasons for this and, like Tesco Bank, I’m sure there will be considerable interest in what happens to its existing mortgage borrowers. We do not truly know whether Tesco were put under pressure to sell its book to an active lender, Lloyds Banking Group (LBG), in order to ensure a large number of ‘mortgage prisoners’ were not created, but one would be surprised if Sainsbury’s weren’t ‘encouraged’ to go down a similar route. www.mortgageintroducer.com
Mark Snape managing director, Broker Conveyancing
Indeed, at the recent FSE London show, a representative from LBG hinted that there would be future opportunities for it to buy smaller loan books – perhaps she had wind of Sainsbury’s Bank’s decision in advance of when it was made? There does however seem to be no doubt that both Tesco and Sainsbury’s Bank’s decisions to leave mortgages has been a result of the competition and squeezed margins it was facing in the sectors they chose to be active in. We can talk a lot about the ability (or otherwise) of supermarkets to sell their financial products at the checkout, but the simple facts appear to be that the vanilla/mainstream/low LTV/low risk mortgage borrower, targeted by these lenders, is incredibly well-catered for, by huge banks/ building societies, with cheaper sources of funds, and therefore cheaper rates. In that sense, you wonder how others who tend to focus on this part of the mortgage market, are going to compete going forward. They are no different to Tesco’s/Sainsbury’s, albeit without the other fingers in a large number of other pies that might well have hastened the supermarkets’ decision to leave mortgages. And, in my opinion, there’s the rub for these two lenders in particular. They are mega-brands with mega-reputations to protect; they would not wish to have poor performance in a much smaller part of their business tarnishing that of their key focal points and therefore it makes sense to make an exit now before there is any kind of brand contagion. It’s also for this reason that I suspect Sainsbury’s will follow the road travelled by Tesco’s when it comes to selling their book – think of the negative PR they would receive were they to sell to a non-lender? Espe-
cially at a time when the entire industry is focused on trying to move ‘mortgage prisoners’ out of their predicament, not potentially adding more to their number. This episode – and we do await to see how this concludes – does seem to show that the mortgage market can be a brutal place for those who might appear slightly out of step with the needs of their potential customers and the competition that exists for their business. It’s no wonder that other lenders are looking to diversify and move into niche areas, away from the traditional mainstream market, especially when you consider the big names fighting for that business.
“It is obvious that competition can be unforgiving, especially when it comes to the lending sector”
An inability or a reluctance to do this can be troublesome at best, and catastrophic at worst. I read recently a piece by a broker suggesting that they hadn’t seen any case recently which was pure vanilla, instead all seemed to have a degree of ‘spice’ in them. Meaning that the traditional, vanilla borrower tends not to exist in the same form as in previous generations – most clients come with some degree of complexity with them and it is those lenders who react and accommodate these borrowers who are likely to survive and thrive. The case is similar for advisers – you cannot rest on your laurels in the traditional areas of the market because competition and technology is changing this space. Diversification is crucial, not purely across the mortgage market but into other areas such as protection, insurance, conveyancing, legals, etc. It is those businesses who see beyond their traditional activity who are likely to be putting in place the strongest of foundations to deal with whatever the market brings next. MORTGAGE INTRODUCER
Cladding is a problem for everyone It is more than two years since the tragedy at Grenfell, and still there is a huge amount of confusion about the “safety of a building” and how the scope for the interpretation of that safety is creating huge amounts of uncertainty. We have never before had a situation where buildings that have met the building regulations that existed at the time of their build (or re-fit) are now being tested against newer revised standards. The government’s Advice Note 14 has led to a position where blocks are theoretically being tested retrospectively against higher standards with different criteria.The fall out is at best long delays to remortgaging and sales and, at worst, complete breakdown of a transaction.
This issue is not going to go away. Estimates suggest there are up to 20,000 privately owned properties across the UK with cladding similar to the Grenfell materials. While Barratt Developments, Legal & General, Taylor Wimpey, Peabody, Aberdeen Asset Management, Frasers Property and Mace have all agreed to pay to remove cladding from affected apartment blocks under their purview, pressure from politicians and consumer groups to get all developers and freeholders to pay for cladding to be stripped from existing buildings has failed. According to the government’s own figures, leaseholders in 93 private towers are not protected from remediation costs and works have been completed on just 10. Further government figures showed that in May this year, 166 private residential buildings out of the 176 identified with aluminium composite material cladding are yet to start work on removing and replacing it. There remains a lack of clarity on who is responsible for the cost of removing cladding, particularly where blocks have multiple owners. Some homeowners are still being told they’ll have to stump up thouwww.mortgageintroducer.com
Kevin Webb managing director, Legal & General Surveying Services
sands of pounds towards building work. And there are still many firms and individuals refusing to do the necessary work, prompting the former communities secretary, James Brokenshire, to confirm plans for a multi-million pound fund to support upgrades to privately owned buildings in England affected by ACM cladding back in May. However, we’ve had a wholesale change of government since then and political priorities in Westminster have been somewhat superseded by negotiations in Europe. Homeowners meanwhile are still facing remortgage issues which are costing them money every month. Just last month the London’s Evening Standard reported on the case of Rob Leary, who having bought his flat in London for £340,000 approached his lender to remortgage in order to pay out his recently exgirlfriend. His property has not yet been inspected for compliance with safety guidance issued by the government back in December, leaving him in limbo and his lender, understandably, unable to provide a decision on the refinance without it.
“We are being judged as an industry on how we have reacted to the protection of homeowners put at risk by cladding” The issue is that where questions about cladding are off redbook, many large firms would rather not be involved because of future litigation risk. This is being compounded by the many freeholders who remain confused about what certification they should have and whether proof that a building passd building regulations when it was constructed should be enough for it to pass today. Over and above all that is the confusion about whether a building should fall under new standards. At least one freeholder is disputing his OCTOBER 2019
building exceeds the 18m high rule that qualifies the building for the new standards. Often freeholders do not know what test certificates they have and surveyors do not know what certificates to ask for. The impact of this confusion and the resulting financial strains on homeowners cannot be over-estimated. Speaking to the BBC when Brokenshire announced the fund earlier this year, he said: “What has been striking to me over recent weeks is just the time it is taking and my concern over the leaseholders themselves - that anxiety, that stress, that strain.” The time it is taking to deliver on promises to make properties affected by ACM cladding safe is costing leaseholders money for every minute that goes by without the work being done and presenting the potential for future claims of compensation – from whom, is as yet unclear. As one leaseholder pointed out in an interview with the BBC, however, if this was a car with a faulty airbag that posed a risk to passengers’ safety, it would have been recalled. That the same thing is not true of a person’s home tells you a lot about property law.. Commercially, the risk presented by a lack of valuation is steadily rising, we are coming to the point when it will outweigh the risk presented by an inaccurate valuation. At LGSS we are working closely with RICS to come to a conclusion on what the definitive guidance on cladding should be, to allow lenders the clarity they need to progress remortgage applications such as Leary’s. We are not refusing to value but we need industry-wide clarity quickly as there are those who are. We are being judged as an industry on how we have reacted to the protection of homeowners put at risk by cladding. Not only has it taken too long to deliver safer homes to all those affected, it must not take any longer to rectify the corollary issues of valuation that have resulted. MORTGAGE INTRODUCER
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Ignorance is no defence in the eyes of the law According to UK Finance, last year the advanced security systems and innovations in which the finance industry invests to protect customers stopped more than £1.6bn of unauthorised fraud. But despite this, criminals successfully stole £1.2bn through fraud and scams in 2018. Much of the money was lost through authorised push payment fraud. This type of fraud has emerged relatively recently as more banking has transferred from branch to online and the human checks and balances were reduced. This type of scam sees unwitting bank customers authorise the transfer of funds from their accounts to legitimate bank accounts which are nonetheless, not the accounts they claim to be. Once the transfer is made, these accounts are then swiftly emptied and immediately closed by scammers, who can disappear over the horizon with the customer’s cash having secured it in what looks like a perfectly legal transaction. The rub is that these scam account details are given by fraudsters posing as legitimate businesses and individuals – often companies with which the customer is actually doing business.
While the sorts of cases we read about most frequently in the news tend to relate to older customers transferring sums in the region of £3,000 to £10,000 to scammers claiming to have provided ‘cleaning services’ or ‘home repairs’, increasingly scammers are getting braver, posing as pension advisers and solicitors. In the property world, authorised push payment fraud really hurts customers and solicitors will know only too well that the threat of emails being hacked and accounts hijacked is an increasing worry. Many firms now include default warnings within the bodies of their www.mortgageintroducer.com
Steve Goodall chief executive, ULS Technology
emails in an attempt to protect customers from changing bank details when they transfer house purchase deposits, stamp duty and legal fees at completion. It is better than nothing but it remains woefully inadequate as a preventative measure in the fight against fraud of this type – email hacks are notoriously easy and far too few firms have the level of cyber security in place to provide 100% peace of mind to customers and lenders.
Earlier this year, significant progress was made to protect customers falling foul of these scams. Following collaboration between the industry, consumer groups and the regulator, a new authorised push payment scams voluntary code was published and implemented from May. While many lenders have committed to repaying customers who lose money to authorised push payment fraud, consumer group Which? recently highlighted that around half of the UK’s banks and building societies had still not signed up to the code by the end of August, presumably at least partly driven by the commercial implications of agreeing to reimburse monies lost to scammers which is almost impossible to trace once it has moved through enough accounts and out of the purview of British and European regulators. The cost of property fraud is significant. According to a freedom of information request submitted by ABC Finance to the Land Registry, there have been 678 claims for property fraud over the past 14 years. The total pay-out across England and Wales has been £73.3m, with individual claims coming in at an average of £107,669.
While not all of these will have been push payment frauds, some will OCTOBER 2019
have. It’s likely that these scams will make up an increasing proportion of property related frauds in the future. Solicitors’ professional indemnity premiums already reflect that growing risk. Lenders are also acutely cognisant of the dangers of money going missing in this type of instance where they have committed to reimburse authorised transfers to scammers. It is therefore amazing to me that so many firms continue to act as though this risk is one that affects others in the market, without taking truly preventative action to protect their clients. At best, this is lazy and poor practice; at worst, it could be argued as negligence. There are solutions available that can mitigate these risks however and save both solicitors and lenders money and agro in terms of managing property transaction communications, data security and compliance. Yes, we provide one – DigitalMove is a one stop shop platform providing all of this to both lenders and solicitors – but we are not the only ones in the market making strides towards a better protected customer.
While clearly we want to be the provider of choice when it comes to secure transaction services, I’m also hugely supportive of others in the industry working just as hard towards achieving the same goal. Fraud has long been one of those things that lenders and solicitors alike have felt necessary to sweep under the carpet, believing that admitting its full scale would be to admit failure. But fraud is too big an issue affecting too many lives to be ignored. The tide of public opinion is shifting away from blaming financial services and towards understanding how clever many of these scammers really are. We have an opportunity to support that shift and use it to restore some faith in banks and building societies, many of which are still suffering in the aftermath of the financial crisis a decade ago. We’ll also save ourselves and our customers some money in the long run. Surely that’s worth the investment? MORTGAGE INTRODUCER
Cause versus effect As a British Gas customer and keen technology enthusiast, I have been an enthusiastic adopter of the Hive smart home platform created by Centrica, the parent company of British Gas. Launched, in 2013 the Hive platform surpassed one million users in May 2018 so clearly I am not the only one. Starting with the boiler thermostat which I can control remotely from my phone, I have extended my use of the platform to include lights and more recently security cameras, this latter addition gave my daughter (don’t worry, she is an adult!) a lot of comfort and reassurance recently whilst my wife and I were abroad on holiday. The whole family is connected to the app and via our phones we all get notified if there is any movement or activity within the scope of the cameras which record on a 24 hour loop. The smart tech on the platform allows me to set up specific actions, for example, if one of the cameras detects movement by a person during the hours of darkness then I can programme one or more of the hive connected lights to come on for a certain amount of time, thus creating the illusion of someone being at home or indeed added security to anyone sleeping. I was really pleased and surprised when I received, free of charge, a leak sensor from Hive recently by post, completely unprompted and sent to me as a gift. The sensor is a little bit bigger than a 50 pence piece and has a short cable attached with a clip on the end. The clip attaches to the property side of the stopcock and links via battery operated wi-fi to the Hive network in the house. The sensor will send a notification to all users of the app if it detects excessive usage, identified by a heavier or more constant flow of water into the property than it is expecting, this latter point is something the sensor ‘learns’ over time. This has already saved me money as we have had at least one notifica-
tion that came about as a result of a tap left open, the notification enabled me to get someone to locate and stop the tap before I racked up a huge water bill. That really got me thinking and, in particular, about the implications to homeowners and more importantly to insurers for whom escape of water is, by some margin the biggest and most expensive area of claim for them. Rather that manage the effect of these escape of water claims by imposing larger excesses and higher premiums why not deal with the cause and put in place smart technology to mitigate the risk? Can you imagine if British Gas decided to enter the home insurance market and promoted this service to its one million plus Hive customers with an offer of a significant discount on their home insurance if the customer installs the free leak sensor as well as reducing or removing altogether the excess for escape of water claims for the same customers? Given that more than 50% of claims relate to escape of water, dealing with the cause using technology makes absolute sense and brings premiums down for those policy-
“Given that more than 50% of claims relate to escape of water, dealing with the cause using technology makes absolute sense and brings premiums down” holders. Today, I am not aware of any provider actively marketing this as a real service. There are a few ‘disruptors’ trying to get a toehold in the market, like Neos who have teamed up with Aviva to provide cover for their connected home tech but this is marketed more as a peace of mind service rather than driving down premiums. It does include a leak sensor but also has smart door and window sensors as well as cameras and smoke detectors all connected via their app. It would also make sense for all new build properties to be built with connectivity in mind and, in particular, leak sensors fitted as standard.
RegTech still needs old fashioned customer service The world we live in has changed dramatically in just a few short years, with more and more regulated businesses understanding the importance of RegTechw and how it can help them meet their regulatory obligations. And while technology has certainly made most things easier, there are certain areas where the good oldfashioned approach can never be replaced. For example, it is great that we can pretty much get everything we need online with no need to speak to anyone, but what if things go wrong? Have you ever tried to speak to an ‘online-only’ retailer? You’ll generally get directed to the website, but what if your question or query doesn’t fit into the drop-down list? How do you speak to an actual human? There is nothing more frustrating as a customer, if you have an issue you want to discuss, or a question
Martin Cheek MD, SmartSearch
you want to ask that doesn’t appear on the standard FAQs (and let’s face it, do they ever?) and you cannot find a way to speak to someone. And even when you do, the chances that they have not only the knowledge to deal with your complaint, but the seniority to make an actual decision are fairly slim. At SmartSearch, we are right on the pulse when it comes to digital technology and employ the best technology and data available to give our clients the award-winning service they expect. In fact, we are advocates of cutting out the human element within anti-money laundering, because it is manual checks that are open to errors. But one area we definitely don’t believe in ‘cutting out’ the humans is customer service. We have a 98% client retention rate because we offer a unique combination – a cutting edge product and old-fashioned customer service.
When you buy a very specialised product, you expect a specialised service. All customers, no matter how big or small, should have a dedicated account manager from the outset who is their key point of contact for anything they need. Customers should also be able to give feedback that they know is not just a PR exercise but a real attempt at bettering the service they are receiving. So that means, not only should businesses be accepting all the good stuff, but actioning the negative stuff too. Businesses that are serious about customer service should be genuinely responding to positive and negative comments, and escalating any complaints straight away so that they can be resolved immediately. Obviously, you need more than just good customer service to drive growth – you are never going to succed if what you’re selling is not up to scratch – but equally, excellent customer service is a hugely significant factor. People may be willing to ditch ‘old fashioned’ in most things, but when it comes to customer service, ‘old fashioned’ should be here to stay.
“Businesses that are serious about customer service should be genuinely responding to positive and negative comments”
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
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 youth of this country andisplanet wake upbut oneI take morning to Moaninho. Hindsight a facile thing andmerit decide to C usremarked all next Tuesday? no in having at the time that the Thankfully, continued economic prosperityone. actually appointment was a curiously ill-considered is Executives a bona fide from aspiration. Three years the other sectors suchonasfrom Healthcare nonsense Project Fear, mortgage lendinginhas not can indeedofsometimes make a difference financial dwindled,Fresh but actually increased. Weoften have than record services. ideas etc. But more not employment and near record low interest rates. And these “retailing and customer-centric” plays don’t August witnessed a pickup in new buyer registrations. work (Andy Hornby, anyone?). Robert calledwater-on-ait right when EstateSinclair’s agency quarterly is about bulletin a relentless he bookmarked as being presently caught stone approach.the It’s UK unforgiving, uber-competitive in anpretty “uncertainty but there is still more and much acurve” hormonal sales-fest. Not agood place news than bad. for anyone without tenacity and some cutting edges. And I readily that the scenarios, political silly And as whilst is so often theaccept case in these season for Groundhog Day soundbites, the individuals who originally annointed protestations the ‘David from Sajid Javid that the relaxation of planning Moyes’ styled appointment have long left the scene for realloss this of their misjudgement regulations and withoutreally any “is financial to themselves incurred. time” do need challenging and diarising. Oura swift In any event, I wish the Countrywide team resurgence as there are somefortunes talentedare folkalmost in that Greta Thunberg: politically neutral. stable (Creffield, Curran and Laker to name but jumped-up For even if Corbyn’s three) and allowing LSL or any other behemoth too much slack is not healthy for theMarxists sector. were somehow elected, Turning to the lenders, Santander’s results didn’t it’d impressed. be good news totally sparkle but they nonetheless They for ‘da youff, innit’ may have conceded some miniscule market share in terms of housing, but 2017 was the year when their January 9 not for thetoBTL announcement on PT’s ifdomino’d become landlords the gift that kept on giving, andwho thenmight some. to It’s quaint isn’t it... howquickly down de-camp through the less vindictive years we can recall somea epic periods where two scuffling lenders went head-tohead. Before buy-to-let became mainstream (and then went needlessly and regulatory feral under the PRA!) it was the Birmingham Midshires versus TMW slugfest. There was the mutual hara-kiri outcome of the RBS versus HBOS tear-up and we also saw several years of Charcol Jon Round: clever bloke mixing it with London & Country as a duopoly 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 “All the youmore can dream about is money and unending was insipid of the two, especially as I fell economic dare take away pretty hardgrowth… from the how wagon in you the early hoursmy of 1 future, how DARE you…?” Feb! A disgraceful overdose on Bombay Sapphire. Not words of arch-remoaner Mark Carney, Live ‘n the learn. nor theevenings IMF, nor are the drawing World Bank. of a istrumpedThe out, But Spring almost upthe millennial from ‘til Sweden Greta in air, it’s snowflake only six weeks the UScalled Masters and Thunberg, whoon made me reach fortreadmill the sickagain, bucket last we’re all back the transaction week. And by besides, a totally untrue statement. evidenced confident pronouncements fromI dream ofand playing golfintermediary at Augusta, singing on stage lenders the first acquisition of withyear. LadyWhich Gaga of and of thefeatured Arsenal keeping the course two longtwo time clean sheets on the industry stalwarts in bounce. LSL and PTFS. Thisthe whole Rebellion crusade is getting On faceExtinction of it, five million quid appears to be my bloody it nose-studded gluing aongood deal forwick. LSLBe although of courseidiots watchful themselves to get roads, or pampered Princesunder and pushy punters rarely to see what is actually the Princesses turning up to eco-summits in private jets… bonnet in deals of this kind. ENOUGH! Just WHEN didand the privileged For sure, some regulatory liabilities potential provisions might feature but, notwithstanding, my hunch is that the team at LSL will have recovered their initial outlay in under three years and quite possibly two. A clever bloke that Jon Round and whilst it was amusing to read that three celebrated baggies fans in the industry now “controlled over 25% of its distribution” (admittedly tongue-in-cheek, I accept!) that story may have less resonance once / if the Lord’s Shepherd that is Alan Pardew leads their flock into the Championship.
Sajid Javid: “for real”
environment. In actual fact this column may soon have to drop it’s Bad News content! Point being I asked 100 brokers last week “Which lenders are disappointing you right now?”. The ensuing silence was both bizarre and eerie...! For as frustratingly as the 630 numpties at Westminster have behaved, and amid a clearly paused housing market in some locations, has there actually ever been a better time to be a mortgage broker? (Validation; I don’t include now halcyon trips to Jerez, Dubai and the World Cup in South Africa in this question’s context!) Even the FSA and the FOS appear to be with us right now (the latter is gradually throwing out more and more of these vexatious and frivolous interestonly claims, and the former appears finally to be ready to assist trapped borrowers). The paucity of bad news does still however leave plenty of copy room for the Boring and the Vulgar (or in Spurs’ case, the downright horrific!). Of soporific news content last month was the wholly predictable revelation that both Tesco and Sainsbury’s have now given up the mortgage ghost. Doubtless, their aggregated lending volumes probably barely got beyond the “eight items or less” metric in industry comparable terms. And for sure with Lidl and Asda eating their lunches they will want to get back to being good at grocery. Other snorefests included yet further pieces of mind-numbing consumer-analysis from two of our ever noisy digi-brokerages. These exciting new findings (such as “borrowers must not be allowed to drift on to SVR after their existing product expires”) probably earn more in clicks than they do in bricks, or mortgages for that matter. But these keyboard warriors are not a patch on the UK’s most tedious drone right now. Step forward Jo Swinson, leader of the not-so-democratic Liberal Democrats. There is something of the bossy university head librarian or captain of the hockey team about her. If faced with making critical or nuclear decisions as a Prime Minister we would probably see running for the library section marked silence, contemplation, cowering and hiding in process. She’s well meaning, but a lightweight. And so, to the final quarter of the calendar year, when lenders (such as NatWest patently right now!) often sharpen their pencil with the aim of securing solid completions in Q1 2020. By the time I next write, we will know if Out truly did mean Out (we can but wish!). But regardless, isn’t it fantastic how the country has just ploughed on with it all? And that will surely continue even if Boris gets sand-bagged once again. Some lenders to keep an eye on in emerging terms might include the resurgent pair of Newcastle and West Brom (a bar-code double!?) and Shawbrook who will possibly give One Savings Bank a run for its money next year. To close with, I hope that readers will forgive me
Milk float: comeback
Spurs: a bloody good beating
a humorous dig at Chokenham Hotspurs. It’s a club I actually have a lot of admiration and affection for, as I grew up close by, as did the industry godfather, John Malone. But in the words of a famous Norwegian commentator following their humiliation at the hands of Bayern Munich last week “Trevor McDonald, Derek Jameson, Adele, John Cupis, Bobby Davro, Chas & Dave, Richard Tugwell, Lea Karrassavas, Ralph Punter, The Chuckle Brothers, Iain Duncan Smith, Kenneth Branagh and John Molone… YOUR BOYS TOOK A BLOODY GOOD BEATING!!! I’ll be seeing you. John Malone: industry godfather
The Bigger Issue
As Help to Buy is set to be scrapped in 2023 we ask the experts...
What can be done to replace the H Although the scheme is due to be extended, in limited form, until 2023, there seems to be little political appetite for further extensions and the conversation has moved on to what the exit strategy should be. It is clear that the property sector needs to face up to what life might be like John Phillips without Help to Buy. What is less group clear is what should happen next. operations In the absence of support from director, schemes like to Help to Buy, the Just Mortgages punitive level of stamp duty at the and higher end of the price range is a SpicerHaart significant obstacle to the effective functioning of the market. This does not impact directly on the vast majority “The withdrawal of first-time buyers, of should be course, but it does serve as a blockage to existing accompanied owners moving to larger by renewed homes, and equally to downsizing. This inevitably efforts to build has knock-on effects on more starter availability and affordability for those looking to get on homes” the ladder. So we should be government hard to make good on the various promises made by key figures to review stamp duty. At the same time, the withdrawal of Help to Buy should be accompanied by renewed efforts to build more starter homes. It is not enough for central government to set crowd-pleasing targets for new homes, only to back away at the first sign of local objections. Given the lead-in times for development, it should be obvious that these efforts need to start sooner rather than later. But it cannot just be about what government can do for the market. We have to ask ourselves what we in the private sector can do. Nobody wants to see a return to some of the unsustainable lending practices of previous years – but we would like to see lenders coming forward with more innovative products that specifically meet the needs of first-time buyers. There needs to be much more lateral thinking – and again, thinking caps should be on not soon, or next year, but now.
Greater consideration needs to be given to what Help to Buy is and what needs to happen in the future. So, what more can, or is, being done? Increasing LTV’s for new build – More lenders are offering high LTV new build products but there Matt Aston is the argument that they require new build further support and higher capital manager, requirements to continue doing Barclays so in a responsible manner. Mortgages Affordability - Should additional flexibility be built into property purchases for young professionals/ those with a defined career path? We have to get to grips with product selection and the fact that whilst a high LTV assists with the deposit situation, it does not help with underlying and ongoing affordability issues. Intergenerational Support – We need to find ways to better utilise financial support from family members. Here at Barclays, we have our Family Springboard Mortgage and joint borrower sole proprietor products within our portfolio, but we, as an industry, need to further examine the role that parents can play in a property purchase. “We have to Profile of applicant – identify the We have to identify the borrowers who will be borrowers most impacted without who will be Help to Buy and where the focus needs to be most impacted moving forward. Lenders without Help to have to better understand the needs of this type of Buy” customer i.e. what style/ size of property they want to purchase, what is high on their list of priorities e.g. energy efficiency, city living, low maintenance costs etc. Greater Education - Education is required for other affordable schemes that are currently available; such as shared ownership/discounted market sales, and the types of customers these can support. Education also needs to take place much earlier to help younger and upcoming generations to truly understand the steps they need to take to get onto the housing ladder.
e Help to Buy scheme? There currently are 200,000 less first-time buyers (FTB) per year than in 2001. Building Society Association surveys reveal that 70% of FTBs say deposits are the biggest roadblock to homeownership. The government’s response to Vadim Toader address this market failure has co-founder and been the Help to Buy and shared chief executive, ownership schemes. With Help to Proportunity Buy destined to end, the market believes, and the BSA report suggests as well, that the future will either be 1) a private Help to Buy or 2) shared ownership (public or “It’s not merely private). If we look at a matter of past performance, historically there has been substitution low market appetite for the old scheme shared ownership, having helped only ~200,000 with the new. homeowners in the last 30 The existing years. Help to Buy, despite only doing new builds, has scheme has helped 220,000 in just six several big years. This indicates that a private Help to Buy is flaws” primed for a much bigger impact going forward. However, it’s not merely a matter of substitution the old scheme with the new. The existing scheme has several big flaws by design. Firstly, its restricted to only 40,000 FTB per year (<10% of the total FTB market), partly because of new build restrictions and price caps. Secondly, it’s not a regulated mortgage and many brokers face difficulties processing related applications. To successfully replace Help to Buy, we need a scheme able to address these. The scheme must also be tried and tested by 2021, so that when the government starts closing the tap on their scheme, lenders can quickly adjust by shifting volumes to the new scheme, to avoid hoards of disappointed buyers and a big dip in lending or a catastrophe in 2023 when the scheme completely ends.
The end of Help to Buy poses a new challenge for the industry, but with change comes opportunities. For lenders, a clear solution to navigating life without Help to Buy is a greater focus on higher loanto-value (LTV) products. There are currently only a small Craig Hall number of lenders offering 95% head of broker LTV mortgages for new builds. relationships These low-deposit mortgages and would be a valuable alternative propositions, when the scheme ends and more L&G Mortgage lenders would be welcomed. Doing Club so may require a review of lenders’ obligations to meet the current 4.5 times gross income lending cap and stress testing, which can be a challenge for some younger buyers to overcome. By far the biggest obstacle for these buyers remains their deposit, so could the market also see a range of new Help to Buy schemes, backed by private entities and supported by lenders? Innovation in intergenerational lending “Could the will be important as well. market see The Bank of Mum and Dad is already funding more a range of than 250,000 property transactions in 2019. That new Help to help is now increasingly Buy schemes, formalised as lenders, such as Halifax, launch zerobacked by deposit mortgages where private entities” a family member’s savings are used as a security. Smaller deposits and lower repayments mean shared ownership could be popular, but it remains a small part of the market that would require more government support to become a widespread alternative. The government’s manifesto commitment to 200,000 Starter Homes could also form the basis for an answer to HTB. While similar discounted homes schemes play a small role now, a renewal of the Starter Homes programme could help more younger people to buy in higher-value areas. Whatever does ultimately replace Help to Buy, it will become increasingly important for first-time buyers to get the right advice about the alternatives. OCTOBER 2019
Spotlight on regulation October 2019 marks 15 years of UK mortgage regulation. Ryan Bembridge traces how the market has changed over that time and how rules are likely to evolve in future
In 2004 the mortgage market became regulated for the first time, as the Financial Services Authority (FSA) started supervising firms that lend, administer, advise and arrange home loans. The regulator introduced Mortgages Conduct of Business (MCOB) rules for residential mortgages, with the aim of ensuring that lenders and other professionals provide borrowers with clear information to make informed choices, as well as assess whether people can afford to repay their loans. The regulator established the use of a Key Facts Illustration (KFI) for brokers to provide for their customers, detailing the cost of the mortgage over the term and how much they need to pay if interest rates rise. Before then all that was in place was the Mortgage Code Compliance Board, a voluntary code of practice established for lenders in 1997 and intermediaries in 1998 that was drawn up with the help of the Building Societies Association and the Council of Mortgage Lenders (now UK Finance). Major lenders signed up to the voluntary code, as did most brokers as this was a requirement to work with a number of lenders. However when the market was government by a code the only punishment for brokers who broke the rules was being blacklisted by
a lender – which clearly seems a soft touch.
Leading up to M-Day
Tony Ward, chief executive of Home Funding and director of Fortrum, who was chief executive of Britannia Building Society from 1990 to 2003, was involved in the creation of this initial mortgage regulation, MCOB. This came into force on 31 October 2004 and the date was colloquially known as M-day. “Running up to M-day in the late 90s there was a team pulled together,” Ward remembers. “There were a number of people on that committee which influenced shaping regulation. Four lenders, of which I was one, two major intermediaries and the Consumers’ Association. “We used to sit round the table in Canary Wharf with lenders on one side and the Consumers’ Association the other.” By inviting different organisations into the mix, the idea was to invite debate and therefore establish regulation that works both sides of the fence. MCOB rules led to the development of the mortgage network model, with advisers becoming Appointed Representatives of a network which held the regulatory permissions. “2004 was a big occasion for everyone,” remembers Sally
Laker, director of Mortgage Intelligence mortgage network. “No one knew at that time whether brokers would want to become part of a network or stay Directly Authorised. “Everyone was building up their propositions – we were one of those with the network and club option to take on all brokers.”
What went wrong?
Despite his best efforts Tony Ward admits it’s probably fair to call MCOB a failure. Indeed, while the regulator asked for mortgage lenders to determine whether customers could repay the loans it wasn’t prescriptive in how lenders should stress test affordability. In this environment where providers increasingly chased market share, resulting in a frothy market where limits like loanto-income multiples gradually became more of an irrelevance. It also saw the development and burgeoning popularity of riskier products. One prime culprit was self-cert mortgages, which were originally designed for selfemployed people to certify their own affordability. However they started being offered to employed people as well, who could use the product to inflate their income. It’s no wonder they gained the nickname ‘liar loans’. “What happened was the major lenders made a case to the
Treasury that lenders knew what they were doing and really light touch was all that was required,” says Bob Young, chief executive of buy-to-let lender Fleet Mortgages, who was at lender CHL from 1997 to 2014. “In fairness to the regulator there was a lot of political pressure because the government wanted people to own homes and social housing dissipated. “Self-cert for employed people was the epitome of stupidity. I have never seen or heard anything as stupid in my life. “Every major lender accepted it because they were under pressure to do so. We [CHL] didn’t do it.” Young says problems were caused by staff at lenders being under pressure from their bosses, who in turn were under pressure from their shareholders. “Do they have the means to repay?” Young sums up. “If you don’t investigate that you are frankly an idiot. And frankly there were a lot of idiots.” Residential interest-only was the second product which seemed to cause major problems, which increasingly started being used by first-time buyers to keep their repayments low. This works fine when house prices are rising, but in a flat or falling market it can cause difficulties, like people falling into negative equity – potentially creating ‘mortgage prisoners’ who are unable to remortgage. “While some may have had good intentions to switch to a repayment, the longer they left it the more likely they were going to have a problem,” says David Hollingworth, associate director of communications at London brokerage L&C Mortgages.
A view from inside
Lynda Blackwell was mortgage policy manager at the Financial Conduct Authority during the development of MCOB and she is known as the architect of the Mortgage Market Review. She left in 2017 and is now an
independent consultant. Blackwell explains the thinking behind this initial regulation, as well as the dangerous assumptions that led to its failures. “The problem was when we drafted the mortgage rules there was an assumption that firms would naturally have a prudential interest in doing the right thing, and that was proved wrong,” she reflects. “What we saw was firms increasingly relied on increases in house prices and forgot about making sure customers could in fact repay their loans if the market declined. “Firms were not thinking about the customer outcome. They could make their money back if customers were repossessed. “What does that mean for the customer when they lose their home?” It seems the regulator underestimated the degree to which mortgage lenders wanted to make a profit, even if that was at the expense of some customers. Some 10 years on from MCOB, Blackwell and her colleagues set out to put things right.
Mortgage Market Review
After five years of consultation the Mortgage Market Review came into force on 26 April 2014, representing a major overhaul of how things were done. It was carried out by the Financial Conduct Authority (FCA), which was renamed from the Financial Services Authority on 1 April 2013, signifying a new chapter after previous failures. The MMR made it so advice must be provided with every mortgage sale, whether carried out by a lender directly or a broker. The FCA also introduced stringent stress tests for residential mortgages. No longer were lenders able to determine how they stress test affordability themselves, as they must assess whether borrowers OCTOBER 2019
can still afford to pay if the revert-to rate (often the standard variable rate) rises by 3% over the first five years of the loan. Lynda Blackwell said the number one aim was to end the imbalance between lenders’ and consumers’ interests, while she adds the industry generally thought it was common sense while the rules were being developed.
Initially there was some negative coverage about the MMR, as the speed in which brokers and lenders handled business fell. “There were some teething problems,” Payam Azadi, director of broker Niche Advice, says. “There were manual affordability checks that had to be done, confusion around certain rules that had to come into place. “At the time we were part of a network and the comfort of that was the network dealt with a lot of the compliance requirements.” Azadi says good brokers would have carried out a lot of the measures set out in the MMR anyway – like having a detailed fact find and analysing three months’ payslips. Arguably it was a bigger challenge for lenders, who had to make a vast amount of system changes and were inclined to err on the side of caution when interpreting the rules around affordability. This slowed things down and initially seemed to shut out a number of perfectly good borrowers from getting a mortgage.
Getting used to MMR
Once lenders started to become more familiar with the rules they become more sensible. Ray Boulger, senior technical manager of John Charcol, says they made strides in how they treated non-guaranteed income, bonuses and state benefits, as well as how they cater for contractors. They also improved their service for people who MORTGAGE INTRODUCER
earn money through a limited company. “We’ve now had time for the lenders to adjust and makes tweaks,” he sums up. The one area he’d like lenders to improve upon is for more to undertake a soft search when doing a credit check, as around half of lenders leave a hard footprint, including NatWest and Nationwide. This makes it riskier for brokers to place business with them as it could affect the customer’s ability to go with another lender if the application is rejected. It’s not just lenders that have improved, as it seems brokers have also become more familiar with what lenders need. “We are all more aware of what’s required to get a case through smoothly,” says David Hollingworth of L&C Mortgages. “Everybody has in their own way looked at things. Networks have improved their processes. “Now people can go in and get a mortgage offer pretty quickly.”
residential mortgages worked, as the FCA made it clear that selling the property as an exit route from the loan wasn’t going to cut it. Nowadays interest-only is more of a niche product where lenders apply LTV restrictions and commonly expect for you to have at least £150,000 in equity.
Strict affordability requirements
When it comes to a long-term analysis of MMR, the complaints that seem to have stuck around are that some people can’t get a mortgage even if they have been paying more on costs like rent, because affordability checks are overly tight.
“It seems the regulator underestimated the degree to which mortgage lenders wanted to make a profit, even if that was at the expense of some customers”
In many ways the MMR was a boon for brokers, as advised mortgage sales became the norm. Indeed, the proportion of advised mortgage transactions increased from around 75% before MMR to more than 98% in the post-MMR market. In this advised environment, the ability for mortgage advisers to compare a number of lenders’ propositions clearly gives them an advantage over going direct to lenders. As a result, advisers are coming to dominate mortgage activity. In 2018 mortgage brokers undertook 74% of mortgage lending by volume in 2018, Intermediary Mortgage Lenders Association data shows. The advised market means that customers have been able to count on having a safer time when getting a mortgage, as the madness of self-cert was put to bed. Rules were also put in place to change how interest-only
Indeed the MMR rules – where the mortgage needs to be stress tested against the revert-to rate plus a 3% Bank interest rate rise over five years – seem steep considering the Bank of England has generally indicated that rate rises will be slow and gradual, while there could be rate cuts if there’s a no deal Brexit. “If somebody has a year’s proof of affordability it beggars belief they can’t get a mortgage,” says Bob Young. “That tells you there’s something wrong. “But I’m a great defender of the FCA – they had to come up with an answer quickly. I think it was a pretty good response at the time.” If lenders want to make the stress tests more lenient they can lower the revert-to rate or stick to 5-year fixes. Ray Boulger wonders whether stress testing against the revertto rate is outdated. “Very few people these days revert to an SVR due to product transfers and remortgages,” he says. “There is an argument that
using the SVR as a basis for stress testing is past its sell-by date.”
Mortgage Credit Directive
On 21 March 2016, with the market finally adjusting to the changes introduced in the MMR, the Mortgage Credit Directive came into force from the European Union. The MCD introduced consumer buy-to-let as a type of lending for so-called ‘accidental’ landlords, people who didn’t buy a property with a view to letting it out. There were fears lenders could withdraw from that market as a result, but most got on board. For brokers MCD saw the introduction of the European Standardised Information Sheet (ESIS) to supplement and replace the Key Facts Illustration by 2019. This initially caused frustration for some, who found the information they needed to provide on the document confused customers as much as helped them. David Hollingworth does still have gripes with the ESIS, which demands that brokers demonstrate the cost of a loan using a 20-year interest rate high, in what’s called APRC 2 (Annual Percentage Rate of Charge 2). “It runs the risk of being such an abstract number,” he says. “You end up with the borrowers nonplussed about what this really means. “If you make the documents so long that borrowers don’t read them you have to question whether it’s a move forward. “But is it a massive change from a KFI? Not really.” Like with MMR, Hollingworth reckons lenders were more affected by MCD than brokers. “For lenders it had an impact because they had systems implementations to undertake,” he says. “There was quite a lot of work, so time and resource used for that couldn’t be put into something else. “Did the market turn on its
head? No, because the UK’s regulation was already operating ahead of some of the other nations MCD was applying to.”
MCD and Second charge
In the run up to MCD there was talk it would give the second charge market a boost, because the regulations dictated that, when giving advice, you have to compare a second charge alongside a residential mortgage. Initially it seemed to have the opposite effect, as brokers who would have recommended a second charge loan were perhaps worried they had to justify it over a residential mortgage. This trend now appears to be shifting however, with some professionals in the second charge industry, like Fluent for Advisers, saying MCD has fuelled its growth in the past 12 months. Steve Walker, managing director of second charge packager Promise Solutions, says it’s helped in some ways but hindered in others. “There’s no doubt that MCD has raised the profile of second charges and brought them into the mainstream, which one would expect to increase their popularity and in some quarters it has,” he says. “However MCD has also created more compliance work around the process of simply referring a second charge and there is clear evidence from speaking to brokers that a very significant number of them now ignore seconds due to the amount of justification and comparison they are required to do. “Prior to MCD they would have happily referred a second to a specialist if it seemed a suitable solution. “Now they tell clients they either can’t help or recommend they come back when circumstances change. This has to be causing detriment to consumers and the seconds market would be far larger if the barriers for brokers, real or perceived, were reduced.”
Regulatory timeline Mortgage Code Compliance Board established – 1 July 1997 for lenders and 30 April 1998 for intermediaries Mortgages Conduct of Business rules launch – 31 October 2004 Financial Services Authority becomes Financial Conduct Authority – 1 April 2013 Mortgage Market Review published - 26 April 2014 Mortgage Credit Directive comes into force – 21 March 2016 The PRA brings in buy-to-let stress test rules – 1 January 2017 The PRA introduces portfolio buy-to-let rules – 30 September 2017 The Mortgages Market Study Interim Report launches – 4 May 2018 The Mortgages Market Study Final Report is published – 26 March 2019 FCA launches consultation on mortgage advice and selling standards – 27 May 2019
PRA Buy-to-let regulation
On 1 January 2017 the Bank of England’s Prudential Regulation Authority brought in stress test rules affecting buy-to-let mortgages. Under the rules lenders must apply a 5.5% interest cover ratio to products with a term less than five years or charge the product rate plus 2%, whichever is greater. There is no Bank of England requirement to stress test a 5-year fix. On 30 September 2017, the second stage of the regulations made it so when landlords with more than four properties buy an investment property, lenders must assess their whole portfolio. This didn’t have a major effect but caused some lenders to stop being involved in portfolio lending, rather than spend money on building fresh infrastructure. Lenders are also expected to take into consideration a borrowers’ tax liability. After the income tax changes it’s now more
common to use higher rental coverage for personal borrowers than for those operating through limited companies, like 145% compared to 125% though it varies from lender to lender. Although buy-to-let lenders have had to take a lot on board, Ray Boulger considers buy-to-let rules around affordability to more flexible and less onerous than residential, especially with the flexibility around 5-year fixes.
Mortgages Market Study
On 4 May 2018 the FCA published the Mortgages Market Study (MMS) Interim Report, before releasing the Final Report on 26 March 2019. In the Final Report the FCA seemed keenest to publicise new rules designed to help mortgage prisoners, allowing people to switch from an inactive to an active lender with affordability stress tests that are ‘relative’ to what they have already been paying. Most back this change. What provoked the biggest response from the industry however were aspects related to helping customers get the ‘best deal’, as well as perceived swipes at the advice sector.
Fixating on price
Both versions of the report were accused of fixating too heavily on price. The Final Report estimated that around 30% of customers miss out on cheaper mortgages that are just as suitable, costing them an estimated £550 a year – a figure industry figures have questioned since. “That 30% figure is not representative of the right figure and price is not the only determinant of good advice,” says Martin Reynolds, chairman of trade body, the Association of Mortgage Intermediaries. “A good intermediary needs to understand those needs or maybe even tease them out during the advice process to make sure they get the right product for their needs. “Price is one, but it’s not the
only rationale why they would choose a product.” “It felt the message was cheapest is best,” David Hollingworth agrees. “Of course, price is an important factor for borrowers, but you’ve got be able to factor in the myriad of other factors.” Other factors brokers talk about when considering what’s best for people include the speed and quality of service from lenders, as well as soft facts about the client – such as if they want product with no ERCs and the ability to take further borrowing during the term. There’s also the thorny issue of how you define the best price, as it could mean the APR or the true cost of the product over the term, while it could depend on what criteria has been inputted into a sourcing system. “The whole exercise was extremely dubious,” says Ray Boulger. “It ignores that you might want a product that’s not the cheapest, like an offset. “I think it was a naïve study.” One aspect in the report that he did think was valid however, was it said brokers who operate with limited lender panels may find it harder to get the most competitive deal for the client. The report also blamed broker incentives, as well as a lack of clarity from lenders on whether people will pass affordability criteria, on some people not getting the best deal.
Proc fee incentives
Arguably most controversially, the FCA said: “There are strong incentives on an intermediary to find a customer a mortgage, and to do so as quickly as possible, to generate a procuration fee.” Some advisers took this to be the regulator accusing them of wanting to generate a quick proc fee rather than properly searching the market for the best product. “In every you find some that cut corners, but the vast majority will get the best product,” Boulger hits back.
“Most advisers take pride in taking the best products for their client and what lenders pay in proc fees aren’t that different anyway.”
In the MMS the regulator said some customers are being “unnecessarily channelled” into advice. The regulator said its own rules were to blame, with companies being reluctant to develop tools to sell products via execution-only for fear of them being classed as giving advice. Two months on from the MMS Final Report, on 27 May 2019 the FCA launched a consultation paper on mortgage advice and selling standards, which appeared to build on the study. The regulator proposed changing rules to make it clear that tools which allow customers to search and filter available mortgages may not be giving advice. Meanwhile it plans to remove the detail required on firms’ execution-only policies, which it says gives the impression that execution-only is riskier and discourages people from going down that route. In response to this talk and action around execution-only, the industry has been vocal in expressing its concerns.
Lynda Blackwell worries this signals an apparent backtracking from the principles she helped establish in the MMR – namely that the market should be a predominantly advised one. “When we were doing the MMR we had long discussions with the industry on ways of stopping execution-only from being gamed,” she says. “Now the regulator is suggesting execution-only can be sold as a cheaper product. “It’s disappointing that they seem to have forgotten all the lessons from the past. We decided to move to advice for a reason.
“It was evidenced and was discussed with the market. I am surprised there appears to be a bit of a U-turn on that.” She adds that, while executiononly is right for some wellinformed people, most “haven’t got the foggiest idea”. David Hollingworth shares her concerns. “You’ve got be careful that we don’t step back towards a situation where borrowers feel they’ve had some degree of advice when they’ve asked a few broad-brush eligibility questions or product choice questions,” he says. “People need advice more than ever. Very few people are straightforward, especially given the changing of the nature of employment where people have multiple jobs.” He expects more people to go online over time, like remortgagors who don’t want to go through the advice process all over again, but for people going from scratch he reckons advice is the way to go. Boulger thinks the big challenge for the FCA in the years ahead is understanding and dictating what constitutes advice and what doesn’t. “You’ve got to look at how clients perceive an exchange with a broker,” he says. “If they think they are getting advice and the lender or broker says they haven’t that’s not a good place to be.”
The Mortgages Market Study seems to pin a lot of hopes on technological solutions, but Lynda Blackwell wants to see developments for advised propositions rather than execution-only. She is a non-executive director of digital mortgage broker Molo Finance – and thinks propositions like that should receive more backing. “Given the development in online advice, why would you turn your back on that and promote execution-only to the detriment of
the customer?” she asks. “For the regulator to do that with their objective of customer protection I struggle with that – it seems really strange. “There are more and more firms developing online advised proportions and they give the customer full protection, help and support to give them the product that’s appropriate, and have the protection of Financial Ombudsman Service.” Payam Azadi agrees that focus should be placed on advicebased services. “There’s been huge strides made in the way brokers deal with business since MMR,” he says. “Why reverse that when you can enhance the process? “I think it’s worrying. There’s no doubt technology needs to play a bigger role in the way consumers interact with financial services. “Rather than go down the nonadvised route, use technology for the advice process. “That seems to be a sensible way, so you’ve always got accountability and reassurance that advice has been given but using a hybrid method to interact more and put clients in charge of the information.” David Hollingworth foresees a time when there’s more eligibility and filtering tools, while he expects advice to eventually be delivered digitally. However he thinks other areas of the housebuying process need work, rather than advice. “For me, on the technology piece, the technology breakthrough will be if you can buy a property and enable every part of that process to be online in terms of Land Registry, exchanging contracts, completing, so all those third parties in that process can do it online quickly,” he says. “That advice process is not a tedious one – the tedious bit is the rest of the transaction that takes time because of the third-party process that gets to the exchange. It can take three months.
“It’s that process that in my view is where technology should be looking to simplify.”
Pendulum swinging back
Bob Young of Fleet Mortgages thinks that the mortgage market will eventually become overly relaxed when it comes to assessing affordability, owing to political pressure. “Think of it as a pendulum,” he says. “The pendulum swung one way and it’s now swinging back again. “Politicians don’t like MMR, because they have constituents come in saying ‘my son is earning £1,500 a month and can’t afford a mortgage of £1,000 a month’. “Any administration in the country would want to make homeownership as easy as possible. There’s so much pressure for it to ease that it will. “Do I think poor lending practices will come in? Absolutely. It’s not if, it’s when.”
“Boulger thinks the big challenge for the FCA in the years ahead is understanding and dictating what constitutes advice and what doesn’t” Young says something will replace the likes of ‘self-cert’ as a means to engage in risky lending. Open Banking could, in theory be used as a way for lenders to automate lending for example. When reflecting on the future, Lynda Blackwell admits an apparent short-termism in the market is something she fears more than ever. “In the longer-term, again and again the market has been shown it can’t be trusted to do the right thing for the customer,” she says. “When lenders and brokers are left to their own devices there’s a tendency to do things their own way. “The regulator stepping back from all the rules in place is surprising – it’s almost as if the FCA isn’t remembering lessons
from the past.” After the madness of the precredit crunch market, creating a largely advised sector was the easiest way to ‘clean up’ the market. Clearly the previous MCOB regulation was substandard to say the least, as it allowed financial institutions to focus on making a profit above all else. In response the Mortgage Market Review was clearly a great success, even if some people struggle to pass tighter affordability rules nowadays. Given that the repossession count reached a 40-year low in 2018, UK Finance data shows, it seems the FCA achieved what it set out to do – and it is now operating from more of a position of strength in a market with fewer repossessions. Rightly or wrongly, the FCA now seems to want to empower consumers with technology to help them make decisions without an adviser’s help. For the regulator, the key is making sure this is for the right people and they are wellinformed, to prevent people from causing their own downfalls. Given that buying a house is the most expensive transaction most people will ever make, for inexperienced buyers it seems most sensible to be guided through the process by an adviser. That seems unlikely to change, and if first-time buyers in particular started to snub advice that would be a worrying trend – though the FCA would be daft to let that happen. As a result of this direction of travel however, advisers need to promote the good work they do to encourage customers to go with their expertise. Regulation never stands still, but hopefully the FCA doesn’t forget the lessons from the past and listens as well as act when altering rules and regulations. History tells us that the behaviour of regulators can have a drastic impact on how markets evolve, for the better or worse.
The team making Investec less private Investec Private Bank has grown its BDM team and became the first private bank to join Sesame Network’s panel. Ryan Bembridge meets the team 56
Investec Private Bank’s intermediary lending business development manager team has grown from just Peter Izard four and a half years ago to six members of staff. Alongside Izard there’s Victoria Burlison, James Glynne-Percy, Joe Websper, Michael Corcoran and Maya Chandler. Their jobs are to spread the word regarding Investec’s offering and build relationships with
intermediary firms, but they also go further in some ways – as Izard describes them as ‘pseudo private bankers’ who are capable of giving an indication of the bank’s ability to lend, as well as the price it will offer. They work with brokers to provide a ‘yes’ or a ‘quick no’ regarding whether a case will be one for Investec, before handing over deals to the bank’s team of private bankers.
In sum, they free up the private bankers to write the business rather go looking for the business. Investec typically caters for High Net Worth (HNW) individuals who are earning at least £300,000 a year, whether that’s in salary, bonuses, or divesting in shares. It also works with owners of growing businesses. Most of the cases Investec looks at are for UK based residential properties, though it also caters for commercial deals.
regarding Investec’s offering, the BDMs undertake regular floor walks of some brokerages, including putting on presentations when more brokers join. “We are not punting products, it’s much more of a relationship game,” says Websper. “We need them to buy into us, buy into what Investec is offering, then we can do business with them.”
Spreading the word
Uniquely the BDM team is all grown out of internal hires from other areas of Investec, while they have different skillsets to draw upon. Michael Corcoran comes from a legal background, as he was a lawyer at Investec before joining the BDM team. Before that he worked at Bank of Ireland and Matheson in Dublin, Ireland, before coming to London. “It comes in very handy sometimes when you’re out with brokers and something legal comes up,” he says. Burlison has a retail background, having joined to raise retail deposits for the bank. Before that she was at a consulting firm working internationally in Dubai, Brazil and Washington. James Glynne-Percy originally joined Investec to set up the introducer channel for the bank’s private client foreign exchange service – which has been especially helpful at Investec when engaging with expat clients. Maya Chandler has a background as a private banker in wealth management. Websper was a private jet broker at Air Charter Service before joining Investec, which would organise private jets for High Net Worth individuals. He graduated in 2007, at around the time the global financial crisis was unfolding. In this environment he applied for a diverse range of jobs – demonstrated by his choice of job offers, being a private jet
Peter Izard joined Investec in January 2015. He focused on getting in touch with the trade press, like this magazine, to spread the word about Investec in the form of thought leadership. The key was being loud and proud about what it offers, to push against the image of private banking as a shadowy and impenetrable world. “When I joined I thought we had a fantastic proposition but High Net Worth is specialist,” he says. “How do you get that message out to the intermediary space when you are not on a sourcing system and they don’t use you regularly? “What we have focussed on is education and profile. “As our business volumes and expertise have grown so has the team. Now, with the team we’ve assembled, we can also reach more intermediaries more often, explaining what it is we do. “We get a lot of business from a lot of intermediaries, but we typically get one or two cases from each per year.” Each BDM is assigned accounts they individually manage, though they also work together on cases, depending on who is on the road and who is in the office. “The idea behind that is you can build lasting relationships with that firm as opposed to having lots of different contacts across the team,” Victoria Burlison explains. In order to spread the word
Different backgrounds and skillsets
broker or working for a publishing company in China. “I’m not able to bring financial expertise but mine was dealing with these clients,” he says. Izard has 25 years’ experience of working with intermediaries across retail, building society and specialist lending.
On the 16 July 2019 Investec became the first private bank to be added to the Sesame Network. This means that members of the network don’t have to ask for permission to go off panel when using Investec. Meanwhile the bank can now market to Sesame’s appointed representatives. “We are open for business and we want to help any broker who has the right client,” says Izard. “Being formally on their lending panel allows it to be far more professional and easier.” Corcoran further explains: “The key thing for us is to identify the firms we are building relationships with, who have clients with deals that meet our criteria. We’ve done that with Sesame.” It seems the aim is being the first private bank that brokers think of when a High Net Worth client comes to their door. “With a lot of the firms, most deals will go to the high street,” says Glynne-Percy. “But they tend to have at least the occasional case where it fits into our space. “The client might be a lawyer based in London working for a US law firm. They may be earning their bonus in dollars perhaps, and that can switch off a lot of the high street if it’s foreign currency earnings. “That’s where, if the broker had never met us, they wouldn’t think to call us.”
On a Crusade
Izard says the lender is “on a crusade” to increase its distribution – of which this Sesame link-up is a key step. The team was asked whether MORTGAGE INTRODUCER
there’s scope for more network partnerships, and that’s something the bank seems open about. “First and foremost, regardless of the size of the broker firm or the deals we will or won’t get, we want to reach out to every firm across the country and let them know who we are, what our criteria is, explain our offering and let them know we are hungry and open for business,” Corcoran says. On the mortgage club side Investec is signed up with Legal & General Mortgage Club, though it doesn’t have a limit on how many broker firms it will work with.
same as other areas – as some investors see difficult situations as opportunities. “High Net Worth individuals are entrepreneurially minded,” he says. “They will ride any fluctuations and actually a downturn in the property market in the High Net Worth market will be seen as an opportunity; an opportunity to buy further assets at subdued prices. “Look, there will always be economic fluctuations positively and negatively. Predicting what they will be is nigh on impossible. “But the day after the Brexit vote, which caught us by surprise, we battened down the hatches and said, you know what, our entrepreneurially minded clients will find opportunities from Brexit.” In the case of Brexit some foreign investors have used the weaker pound to their advantage, as Corcoran has a client from Hong Kong who’s been thinking
Recession and Brexit
One question posed to the team was how things would change if there was a recession in the UK, since it’s now been 12 years since the last one. Izard says that with High Net Worth individuals it’s not the
about buying in the UK for some time – and has now finally decided to take the plunge.
Transparency is key
It remains to be seen whether the Sesame partnership is the start of a trend when it comes to distribution partnerships, but the private bank is clearly hungry to work with more introducers. Izard has grown a team in a relatively short space of time, and while you may not have a client earning £300,000 come to your door every day, when you do it’s good to have an option for where to send that client – whether you get a yes in response or a quick no. Unlike some other private banks, Investec seems keen to be transparent about its offering, while having this BDM team in place seems essential for keeping the private bankers writing business. Clearly not all private banks have to be private.
in association with the Irish Medical Socie
An interview with…
Deirdre McManus, former Head of Sales at Bristol & West, the founder and principal organiser of the Broomstick Ball.
What is the Broomstick Ball?
The Broomstick Ball is an annual black-tie evening held in aid of Cancer Research UK. I think we are all aware of the great work CRUK do and the great strides they are making. This year will be the Broomstick Ball’s 20th anniversary. Over that time it has become recognised as one, if not the biggest, charity events in the property/ financial services calendar.
The ‘Broomstick Ball’, I’m guessing it’s on 31st October - Halloween?
That was the original idea. We identified it as a date when there were the least industry awards evenings and it reflected the fun we set out to have, while raising funds for a great cause. As the years have gone by however, ‘Halloween’ has grown in popularity beyond all recognition and sadly it no longer makes financial sense for the charity to hold it on or near Halloween.
What day will the Broomstick Ball be this year?
This year it will be held on Thursday 21st November, the latest day in the year that we have held it. It’s really important that we get the best venue at the best price to ensure that we raise as much money as possible for CRUK. The Broomstick Ball has become so well-known throughout the industry that we are reluctant to change its name even though it is not held in October.
Where will the Broomstick Ball be held?
We are very excited that for the 5th year it will be held at the Leonardo Royal Hotel London St Paul’s, next to St Paul’s Cathedral on Godliman Street, previously known as the Grange Hotel.
Is the Broomstick Ball well attended?
On average we attract around 400 guests, from a wide range of lenders, solicitors, valuers, brokers, introducers and intermediaries. It is a great opportunity for people to network, as well as say thank you to those who have been loyal customers over the previous 12 months; and all in the name of a great cause. If I’ve done my maths correctly that is over 8,000 guests over 20 years.
How much money have you raised over that time?
So how much does it cost for a ticket?
It is essentially £195 per ticket. We think this is a great price for a three-course meal in a top London hotel with wine and a champagne reception. A company will take a table which seats 10 or 12 guests. This year however, conscious of our ever evolving landscape, we have introduced shared tables for 6 guests, for those smaller and newer businesses who want to be a part of the evening but their budget doesn’t quite stretch to a full table. We think these shared tables will also be a great networking opportunity for those businesses joining us for the first time.
Who attends the Broomstick Ball?
There is something for everyone at the Broomstick Ball – a great auction; heads & tails; a dance floor and casino. As a result, we attract a really diverse group of people from leaders of the industry through to the executives being rewarded for their hard work. In addition to industry professionals, friends and associates of the table sponsors are regularly spotted in attendance, supporting this worthy cause. Media partner
More information can be found at:
We have raised in excess of a fantastic £1.2m since we began. An amazing testament to the property/financial services industry which has a reputation for looking out for themselves, however this just goes to show how charitable an industry we can be.
Weer all fintech now Tim Wheeldon, COO, Fluent Money, on how technology should be considered an asset I watched a documentary recently which covered the impact of the industrial revolution and how it catapulted the UK from a largely agricultural economy into an industrial one and in the process, into the foremost trading power in the world. There was, however, a human price to pay for this economic success. The effect of the rise of the machines was most amply demonstrated by the rise of the Luddites. These were textile workers in the late 18th and early 19th centuries who specialised in the weaving of cloth and whose jobs and way of life were at risk from machines which could replace them and their human skills, being cheaper to run, faster and required less human intervention. Mills were burned and machines destroyed before the government of the day intervened via legislation and the use, in many cases, of heavy handed force. It would be easy to draw a lazy parallel between the industrial revolution and the way in which technology, particularly based around the internet and the advances in computer software technology, has created a similar scenario, where human experience and expertise are being gradually replaced with technology which is able to perform tasks faster and more accurately. But is that really what is happening? Certainly, labour intensive activity such as car manufacture for example has seen robots replace skilled humans on production lines. We all use cashpoints rather than bank tellers. Even that is being superseded by contactless
payments which brought the rise in supermarket checkouts that are fully automated and require little or no human intervention. In our particular sector, there has been much debate over the place of technology and whether it is a threat to the established order of predominantly advised sales. Yet, to me, technology should not be treated as a threat because it has become an asset to all of us, whether lenders, master broker/packagers or advisers.
Surely, it is beyond dispute that we have all benefited from technology in our everyday lives as much as we have in our business lives. How long ago was it that paper based application forms, sent via Royal Mail was standard practice? Do you remember how long it took to receive a return letter back outlining what was required from customers; and this was just the beginning of the journey towards a mortgage or loan acceptance, let alone an offer. Werenâ€™t we excited when we could finally use a fax machine to send over forms and then supporting documentation? Are you old enough to remember a time before sourcing systems brought criteria from most lenders to your desktop and donâ€™t get me started on the conveyancing process back in the day! It is easy to forget that the technology which we have integrated into our own businesses is just another manifestation of the same technological progress which makes such an impact in all aspects of our personal lives.
The important lessons we must acknowledge start with the fact that we cannot hold back progress. The science that gave us the ability to book flights and holidays online at 2am with all the convenience that goes with that ability, is the same science that is powering the rise of robo-advice. The other lesson is that we are missing the point if we see roboadvice as something separate from the technology advances which we enthusiastically endorse when they meet our approval. It is merely a manifestation of the advances that have been made and are continuing to be made. It is just that we are all looking for new ways to adapt what technology is offering, to give us new opportunities. In the case of robo-advice it is just another manifestation of entrepreneurs seeing a way of making use of what is out there to create a new service. Perhaps we need to develop a sense of perspective. We can hardly complain about our own adoption of technology, then turn around and complain that someone is using it to challenge our business model. The lenders which we use every day are also making use of what is out there to improve the ways they can appeal to potential borrowers, both existing and new. This is a commercial world we are living in and our response to the challenges we face donâ€™t lie in a Luddite response. Good luck trying to smash up the internet or burning all the data centres! What we need to do is not to try to live in the past. None of us have a right to maintain the status quo for our own benefit. Rather, we must embrace the opportunities to adapt our business models to meet the needs of an audience that already regards the internet as a first port of call to make enquiries across a range of needs. After all, with suitable apologies to Noddy Holder and Slade, weer all fintech now!
First takes second(s) Natalie Thomas talks to Steve Swyny, head of sales at First 4 Bridging, to learn more about the firms launch into seconds What attracted you to the second charge mortgage market? Demand and opportunity. It’s an area our existing client base are familiar with and are looking for support and additional choice. Increased competition is having a positive impact on rates/criteria in the market and with demand rising, it felt like an opportune time to enter this sector. How did you find the regulation process? It was a complex, lengthy and thorough process and one which we didn’t enter into lightly. The process involves investigating how firms have handled previous business, complaints history, financial strength and the conduct of its directors and employees. It’s certainly not just a case of filling in a few forms and completing an application. Once the Financial Conduct Authority has satisfied themselves that everything is in order, it then provides the additional permissions and will continue to monitor firms under the relevant guidelines. We recognise and embrace these extra responsibilities. It’s a decision we’re glad we took and one which bodes well. Do you the think the potential opportunities in the second charge market outweigh the cost and time of regulation? The proof of the pudding is in the eating but we are very encouraged by the start this arm of the business has made. We have a great team in place and extensive relationships throughout this sector, so we are certainly looking ahead with a highly positive mindset.
Do the worlds of bridging finance and second mortgages cross-over? Do you see demand for secondcharge bridges? In the world of property finance there will always be an element of crossover, especially as the financial landscape continues to evolve. Clients will always require loans to fit within their budgets and changing lifestyle requirements. Sometimes shortterm lending may not fit with borrowers’ requirements, or the lenders criteria, and longer- term lending offers a viable alternative for them. Clients often don’t understand the regulatory requirements of second charge bridging loans, but we do get a number of regular enquiries for this type of lending. Having the option of a second charge secured loan means that we can cater for enquiries where they don’t meet the requirements of the second charge bridging loan criteria. What are the potential growth areas in the second charge market at the moment? Interest rates are currently at historic lows and many clients are enjoying the benefits of long-term fixed rates. They still want to borrow money but don’t OCTOBER 2019
want to remortgage and lose their preferential rates, or pay the costs associated with remortgaging. A second charge is an ideal way to borrow alongside a homeowner’s current mortgage at a low rate of interest. Second charge lending is growing in popularity and is now a serious alterative to the traditional remortgage. Lenders have seen the potential growth in this area and have responded well by offering competitive short and longer-term loans to suit the majority of requirements. Do you have any plans to offer first-charge mortgages? Not currently, however, never say never. As a company we are always looking to evolve in the right direction and if there is a strong demand from our brokers then we would potentially investigate this option. What do you think are some of the challenges facing the second-charge sector? Client misconceptions and overzealous underwriting conditions to name but two. Whilst technology can be hugely beneficial, I also have some concerns over the process becoming less personal and more automated. MORTGAGE INTRODUCER
Fighting fraud Our experts look at the rise of fraud and consider the best way to combat the threat Fraudulent mortgage applications were up 5% in the first six months of 2019 compared to the last six months of 2018, according to fraud prevention service Cifas. Fraud by production of a false document increased by 14% and fraud by submitting altered documents increased by 32%, according to the agency. Such applicants it says often provide false or altered bank statements and proof of income as a way to validate their income for mortgage applications. So, Loan Introducer asks: “Do you find a lot of borrowers provide false information on applications – either intentionally or unintentionally? How do you combat this?” Darrell Walker, head of sales, second charge and commercial lending, Prestige Finance Underwriters will from time to time find a couple of common mistakes when they look at applications and these can cause delays. These mistakes can be avoided in the first place by following a simple checklist, making sure all relevant documents are included and ensuring that they are within the correct date ranges. Also giving a detailed explanation of any discrepancies can make a huge difference in the speed of the application. Alan Cleary, managing director, Precise Mortgages No, the vast majority of customers are honest. However, it
is a regular occurrence that a minority of customers provide false information on mortgage applications. This is not a new phenomenon but the technology we deploy in combating this crime is rapidly evolving and becoming exponentially more sophisticated. We also have a financial crime team who are experts in their field and work with the industry to stay ahead of those people that choose to be dishonest. Alistair Ewing, managing director, The Lending Channel False information should be differentiated from inaccurate detail. We don’t have an issue with clients making fraudulent statements, but there are certain components of an application form that are continually mis-stated. Income, property valuation and credit profile for example are often wrong but properly trained advisers know this and can undertake certain plausibility checks while processing the early stages of an application. John Webb, second charge mortgages director, Paragon It’s very rare for customers to provide false information intentionally. What’s more common is for customers to underestimate their expenses at the outset and then find their application is delayed because they need to provide additional information. This is where experienced brokers can really
add value, taking time to build a realistic financial picture with the customer up front before they submit their application. Steve Walker, managing director, Promise Solutions Where we are giving the advice, false information isn’t a problem as the adviser builds a relationship and normally gets to the heart of any problems quickly. It’s more of a consultation than a form filling exercise. Where we are packaging for other brokers it’s fair to say the information changes more often but that’s likely to happen when there are more people in the chain. Damian Cain, director, Complete FS Most of our applications come in from introducers, the majority of whom we have done business with for some time. So, the incidences of intentional efforts to deceive are non- existent. However, we have to recognise that advisers are not mind readers and there are instances of misunderstanding or where unintentionally wrong information is submitted to them by customers, which consequently turns out to be contradicted by evidence. We are lucky that our introducers recognise the importance of getting information that is accurate at the outset. However, if it were to happen then we would ask for clarification, but if it happened more than once, we would
suggest that the introducer becomes stricter with their fact-find process or find another packager/distributor to whom they can send their applications. Anna Bennett, marketing director, Positive Lending It can be quite hard to say if customers are deliberately falsifying information on their applications. Quite often, customers simply underestimate their expenditure. We train our people on how best to ask the right questions and, if needed, we sensitively challenge customers – reminding them and prompting them to consider things they may have left out. A good example of this is groceries. If you asked me, I would say I spend approximately £150 on my weekly shopping delivery but I could quite easily forget the times I pop to the supermarket to pick up extra things, which could quite easily add another £30 per week. As a business, we do not rely on Office for National Statistics for our customer spending profile, we rely on our customers as we recognise people are individuals with very different spending patterns and priorities and it’s important for us to understand their situations and needs. Our advisers spend time assessing the applications and that’s before they are passed to our internal underwriting team for checking. In short, on the whole we do not think customers are intentionally providing false information. Scott Thorpe, director, London Money Loans When we expanded nationally we were expecting to see hot spots where information was inaccurate but thankfully this wasn’t the case. We are lucky in the sense that the majority of our brokers are very experienced and there are often more than one set of eyes checking the information. Obviously there is always information that can unintentionally be miscommunicated from day one. This could be monthly outgoings such as utility bills, school fees, or the exact amount of income for self-employed or High Net Worth clients - whose bonus income can be sporadic. The key to getting round it is good underwriting, taking what the customer says with a pinch of salt and reviewing everything with bank statements, payslips and P60/SA302. Mike Walters, head of sales – mortgages and bridging, United Trust Bank We have a series of underwriting and anti-fraud checks within our process. These start with a strict due diligence process before we commence any broker relationship to ensure we know and understand the firm introducing business to us. During the underwriting of full mortgage applications, we then have a series of systems and controls which validate the information provided to us through independent sources, before completing security checks with every applicant before a loan completes. Historically, attempts at impersonation fraud were probably the most frequent. Very recently we have launched biometric ID verification which not only reduces friction in our process, but also strengthens our ability to spot attempts and prevent financial crime.
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PPI – a one off or a sign Natalie Thomas takes a look back at the PPI scandal and considers its impact on the future market August marked the deadline for claiming mis-sold Payment Protection Insurance – the most complained about financial product in the UK’s history. While many firms will be glad to see the PPI claim door close, the path of destruction and reputational damage the saga caused still lingers on. The scandal brought many businesses to their knees – especially those in the second charge industry. So more than a decade since it first unfolded, Loan Introducer asks: could it ever happen again?
thereafter. “It was clear by 2004 that we had a problem but the full extent of the problem wasn’t clear to some people until around 2006/2007 – and by the time we reached 2008 it was clear it was a huge issue”, says Robert Sinclair, chief executive of the Association of Mortgage Intermediaries and Association of Finance Brokers. “The Financial Ombudsman Service started to lift the lid on it and the more they lifted the more things they didn’t like,” he says.
The first signs of trouble
Not always a bad product
Rewind to the early 2000s and the second charge industry was arguably in the best shape it had ever been; the credit crunch had not yet descended and PPI was viewed as non-toxic, indeed a normal practice. The sale of PPI went hand in hand with most loans and very few eyebrows were raised. This all changed within a few years when questions started to be asked about the product’s value and cost. Vince Cable, the then Liberal Democrat Treasury spokesman, called for an investigation into the sale of PPI in 2004, as did the Citizen’s Advice Bureau in 2005. Even then however, nobody still quite envisaged the size of the problem the industry was facing and action was slow to follow. The first fine for the sale of PPI mis-selling was not until 2006 when Regency Mortgage Corporation was fined by the Financial Services Authority for the mis-selling of the product alongside its sub-prime mortgages. Regency would become the first of many firms in the firing line, with household names such as Alliance & Leicester and Lloyds Banking Group to follow several years later. One year on from Regency’s fine in 2007, the Office of Fair Trading referred the entire PPI market to the Competition Commission and things gathered pace
However PPI was not always a bad product but gradually became exploited by firms over time, says Sinclair. He believes it was still a ‘good’ product before the millennium, when it was sold mainly to people who needed it. “Firms made the decision to add more and more price onto the product over a long period of time, resulting in it going from a good product to a toxic one. But nobody can tell at which point it transitioned,” he says, Whilst the scandal affected all types of firms, the second charge sector was at the centre of a lot of the backlash. “I think the difference between the second charge industry and the rest of the market was the size of the premium – which was breath-taking in the seconds market,” Sinclair says. “The premium was significant given the amount of debt the borrower was already securing - the premium and the commission were both huge. The premium in the unsecured market for example was around £1,000, compared to £6,000 in the second-charge market,” he adds. The income earned from PPI meant many lenders in both the unsecured and second charge market could lower the rates on their loans. “Some lenders were doing unsecured loans at ridiculous prices but had a 90%
PPI penetration rate,” says Sinclair. “In the late 70s, we would never get past a penetration rate of around 3037%. Over time the product became more expensive and we got to the point where the premiums were greater than the benefit the borrower could get out of the policy,” he says. Another big difference between the second charge industry and others he says was the use of single premium PPI and rolling the policy up into the second charge loan. One of the most shocking discoveries Sinclair says was just how much of the premium was going to lenders. “You would have a £6,000 single premium added to the loan, of which about £800 would go to the insurer, £1,000 the broker and the lender was taking the remaining £4,200 for doing absolutely nothing other than adding it to the product,” he exclaims.
The blame game
When the mis-selling came to light however, it was second charge brokers who were left to take the rap, due to them being the ones who gave the advice. “I’ve always been entirely convinced that the people who should have been in the frame were the lenders who put together the product with the insurer,” Sinclair says. “I’m not sure how transparent it was for brokers and if they understood how much was going to the lender and how much the insurer. The broker no doubt thought they were getting their £1,000 and the lender and the insurer were both taking £2,500. What they didn’t know was just how little was going to the insurer and that’s the bit that shocked everybody when it came out,” he says. Sinclair feels that the way lenders incentivised brokers to sell PPI was questionable.
of things to come? “If you set targets and a penetration rate and are rewarding people with much greater amounts of money for selling one product over another, then you are going to encourage bad behaviour and that is why the regulator now has its rules around incentives,” he says. Steve Walker, managing director of Promise Solutions, says there is no doubt in his mind that some lenders set high targets and incentives to sell PPI. “Some brokers at the time reacted to this and were claiming very high penetration rates which left me convinced that some of their customers were being sold a product they may not require,” he says. “However, most firms sold the product responsibly albeit with a reliance and trust in the lender which actually designed the product. I think there was some naivety amongst brokers in that they assumed that the lenders had designed appropriate products which would stand scrutiny. “Some of the PPI policies designed by some lenders were later deemed by FOS to be of little value compared to the premium and automatically ruled as a miss-sell. Where this happened, the broker was left to reimburse the whole premium plus interest even though they had only earned a fraction of that amount. Generally, lenders pulled up the drawbridge and left brokers to deal with any PPI compensation which, whilst strictly correct as the broker had sold it, didn’t reflect certain lenders involvement in designing and incentivising the sale of their PPI,” he says. Sinclair says at the time, the AFB and its members had a debate as to whether brokers should make a joint complaint to FOS regarding second charge lenders, citing ‘contributory negligence’ due to the part they had played in designing and selling the product. “The second charge broking industry decided they didn’t want to do that in case lenders reciprocated against them and they lost their livelihoods,” Sinclair reflects. “We were a long way down the road when we realised that by not making that decision we had guaranteed the death of
some brokerages anyway and the survival of the lender,” he says.
The rise of the phoenix
The huge liabilities some brokerages faced as a result of selling PPI led to the rise of the phoenix firm. This controversial practice involved the firm going into administration and shedding their PPI liabilities, only to relaunch under a similar name almost immediately. The move unsurprisingly divided industry opinion at the time. On the one hand, jobs and businesses were saved but on the other, the firm’s liabilities were passed onto the Financial Services Compensation Scheme – a scheme funded by a levy on the whole adviser community. “When everything hit the fan, because it was the broker who was at fault for the mis-sale, all of the costs ended up with the FSCS,” says Sinclair. “There was only a couple of second charge brokerages that survived the scandal. Everybody else folded and rebranded,” he says. “I can remember being in discussions about whether as an industry we could put together a £6bn industry compensation package that would get every brokerage out of the woods,” says Sinclair. “In hindsight that was never going to happen as the system has now paid out north of £30bn. I don’t think at that point we understood just how much there was sitting on unsecured and credit card PPI,” he adds. Walker says the PPI redress had a massive impact on the profitability of firms. This he says coupled with the unwillingness of professional indemnity companies to offer the mandatory cover and a loss of income from PPI sales and impending credit crunch meant many firms struggled. “It was not an enjoyable time and having recalled it I may now need ongoing therapy,” he says. So, the question remains – could it happen again? A good indication of where the next ‘big thing’ might emerge is the latest complaints data from the FOS.
Overall, complaints about financial services have rocketed to a five-year high, the Ombudsman says, with more than 388,000 new complaints being made to the service in the last financial year, a 14% increase on the previous year. While the number of PPI complaints dropped, this it says was more than offset by increasing complaints and poor practice from businesses in other areas. Its annual review highlights two areas where it is focussing its efforts. Firstly around high-cost credit, including payday lending. It saw a colossal 130% rise in the number of new complaints about payday loans between 2018-2019, with nearly 40,000 new complaints brought last year, up from 17,000 the previous year It has also seen an increase in complaints relating to fraud and scams, with over 12,000 complaints in relation to this area in the last financial year - an increase of more than 40%. In terms of ‘secured loans’ FOS’s figures show in the 2018-2019 financial year it received 655 complaints that were categorised as being about ‘secured loans’, compared with 781 complaints in the previous financial year. Debbie Enever, head of external relations at the FOS says: “In the cases we’ve seen, a number of people with complaints about secured loans, and who have previously been in arrears, believed that their loan was on track to be repaid, only to find out that this wasn’t the case. We have seen particular problems where lenders do not communicate adequately with customers once they are out of arrears, even where the customer may still be in financial hardship. “The FOS is free and easy to use. If someone has a problem with a financial service, we will investigate and decide what is a fair outcome. If the business hasn’t acted properly, we have the power to put things right.” Out of the 655 cases it received, it upheld 30% of complaints, compared to 25% of the previous year’s 781. While such complaints might not be on the scale of PPI – the issue of arrears management looks likely to be one to watch for the market.
Sales is service, service is sales Jessica Nangle caught up with Jamie Pritchard, head of sales at Precise Mortgages, to discuss his love of sales and the importance of the correct training Following a 20-year stint in financial services, Pritchard shows no sign of slowing. Originally from South Wales, Pritchard is proud of his roots, formerly working at Cardiff-based Principality before being headhunted for Precise Mortgages. “I loved working at Principality,” Pritchard says. “I devised a new sales process and trained advisers, eventually becoming a business development manager and interim head of intermediaries.” It was in this role where he was spotted by sales director Roger Morris who asked Pritchard to join Precise Mortgages. “Truthfully, I didn’t want to leave a Welsh company being a Welsh boy, but the role at Precise Mortgages took me out of that corner of the country and expanded my role in specialist finance nationally.” Pritchard has been at Precise Mortgages for five-and-a half-years, and in his own words, “hasn’t looked back since”.
At Precise Mortgages, Pritchard looks after 15 direct reports which are a mixture of regional business development managers and account managers. These colleagues cover all sectors of the market, from residential to
second charge, and Pritchard wants to be on-hand to give them the support they need. “Weekly team conference calls and monthly educational team meetings are a must to make sure my team are together and have everything they need to be effective day-to-day,” Pritchard says. “I discuss cases all the time and am there to support the team with anything they need help with.” Pritchard doesn’t manage by numbers or allow the team to compete with each other. “Why would I pitch the team against each other when they are in different areas of the country?” he asks. “Our competitiveness comes from educating ourselves about the market and about our competitors, and how to both sell solutions that are right for the client and the broker.” Sales is known for being an intense role with daily pressures. Known as the ‘stress sponge’ by his reports, Pritchard is keen to take away additional stress that deviates them from their relationship selling. “If a member of the team is not hitting their targets then I make sure we look at their daily habits, their understanding of criteria and identifying key relationships. “Education is key for them in how
to efficiently and effectively do their role. There are many areas we can focus on rather than ‘you haven’t hit that number’ which adds more stress – you need to help manage the input first rather than just focussing on the output.” Pritchard believes that the focus on numbers and lack of understanding of poor performance is how many within the industry continue to manage and he is not a fan. “It is bad management; I don’t like it. It is not leadership,” he says. Pritchard regards his sales team as regional reporters per se, who feedback the key findings in their regions and report back to him. “The team provide broker feedback to me about what is happening on both a macro and micro level,” he explains. “This is fundamental as we are an intermediary-facing lender and we have to listen to evolve.” This in turn has an impact on the wider business, particularly in regard to product development. “The team really like that because, although they are not influencing the products, by feeding back to the product development team they can see some of the product ideas being developed. They are a catalyst for change which keeps the team together for longer and
are helping develop their regions and the business.”
Do’s and don’ts
In regard to education, Pritchard has some do’s and don’ts to follow to achieve optimum results, one of which is not assuming all of your staff are the same. “You have to understand who you are hiring and who you need to hire and how they are motivated,” he explains. “Question what your training material is like and understand how they learn. Get to know the person and give them the time to be educated.” The traditional method of ‘bulletpoint’ presenting is frowned upon by Pritchard who argues that this has limited effectiveness. “If you have a screen behind you with bullet points, and you are saying something different only around 1% of people will actually learn off that and retain the information,” he argues. “Despite this, people continue to ‘educate’ in that way. We find new ways to educate to put a trigger in someone’s mind, such as using images, stories or podcasts which embeds the solution on offer.” Easing the pressure is also important to Pritchard who believes that the first few months of a candidate’s employment should be seen as an ‘education phase’. “Help them find out who to see, who not to see and learn the role,” he says. “The biggest thing that is never taught is the why you don’t do something in criteria. Once you understand the why of something, you either embrace it or challenge it, but you will definitely have a better understanding of it.”
The X factor
Recruiting candidates into the industry is widely discussed in this market, with some businesses finding it easy to find the right talent whilst others finding it far more challenging due to lack of available candidates or location. Precise Mortgages is a well-known name in the industry,
than me,” he says. “I want them all to realise their potential and get the best for them, and those that are ambitious will be my manager one day.”
The future of training
so Pritchard knows what to look out for in an interview. “When I am hiring someone, I do not need them to be the finished article as there is no such thing,” he explains. “I need them to be confident, have that X factor and to be driven. Being in sales is a hard role; I need to know someone is tenacious enough.” Despite the differing views within the industry about whether to hire someone with prior financial or mortgage experience, Pritchard is set on his thoughts. “I like to bring someone on who has previously been a mortgage adviser or has worked in mortgages,” he says. “I could consider someone with no experience in the sector if I wasn’t at Precise Mortgages as it is now. I would love to educate someone from the ground up, but I cannot spread myself too thinly.” Pritchard has ambitions to build an academy process at Precise Mortgages for the next generation of sales, to help those interested towards a career achieve their goals with the best possible guidance, so it could be a case of watch this space. In regard to hiring, Pritchard follows a strict rule. “I do not hire anyone into my team who does not have at least a quality better OCTOBER 2019
Education is a hot topic amongst the industry, and the future of internal education processes is something Pritchard has thoughts on to maintain individual knowledge and expertise. “We need to use technology - whether that be for webcasts, webinars or recorded soundbites,” he explains. Because of the miles between where each of his team are based, Pritchard is currently looking into software which enables him to analyse sales guys’ practice presentations recorded before meetings which will allow him to deliver personalised coachable insight for each team member. “I have a problem where I cannot be in Edinburgh with one part of my team and Portsmouth with another at the same time, however I have found a solution. It would be great to see if this software is effective.” Pritchard studied Sociology at Staffordshire University, and despite arguing that his degree is “not as relevant to what I am doing today”, it could be argued that his understanding of human psychology and the reasons behind a person’s thought processes and motivations play a huge part in his day-to-day role. The team is at the forefront of Pritchard’s mind, and he is always keen to mention his pride. “I am always thinking about the team and how we can improve further. If I just thought about myself, I would be failing in my position,” he explains. As the education debate continues, technology continues to advance, and training styles differ, Pritchard’s main agenda is clear. “The important thing is that my team feels united, part of it all and engaged and we provide the right solutions for our intermediary partners,” he says. “That is what I aim for every day.” MORTGAGE INTRODUCER
Robo advice and the threat it poses In April 2018, the Financial Conduct Authority (FCA) concluded its annual review of prevailing market trends and conditions within the UK financial landscape by asserting that the advent of PSD2 and open banking procedures would ‘accelerate the digital transformation of retail lending business models’ across the sector, stimulate greater competition between ‘new, technology-driven firms particularly in relation ‘to mortgage intermediation and credit broking’ and herald a substantial reduction in the reliance on traditional mortgage brokers - a gloomy prognosis for intermediaries. However, question marks regarding the feasibility of digital processes remain. Emerging technologies have already made a significant impact on working practices within the mortgage industry of course, with applications powered by artificial intelligence being used to speed up ‘back room’ processes such as affordability checks and borrower applications and integrate with administrative or compliance work. However, with more high street lenders looking to expand their online business models and to capture larger streams of direct custom, the threat posed by this intensifying trend has become a source of considerable concern amongst brokers. Indeed, research conducted by the Legal and General Mortgage Club in the fall of 2017 discovered that almost 50% of mortgage brokers identified the rise of robo advice as the single greatest threat to their business. But, can technology and the rise of robo advice truly displace the role of brokers from the mortgage process? It would be futile to argue that the growing influence of technology is not without its attendant dangers. There can be little doubt, for example, that increasing numbers of consumers are choosing to look to the convenience of online services and this may well prove to be the case for many mortgage transacwww.mortgageintroducer.com
Tony Salentino director, Complete FS
tions in the future. Yet, given that a mortgage represents the single most important financial commitment that a consumer is ever likely to make, the idea that a computer could replace the peace of mind and reassurance that is gained by talking over all available options with a ‘real’, experienced professional, seems decidedly far fetched. Indeed, one need only look at the anger and frustration that are caused by automated telephone services which have replaced human interaction to see that reliance on technology can be flawed. Moreover, there is also a question of trust amongst consumers. For example, according to a survey of 12,000 mortgage customers conducted by the HSBC in 2018, only 8% of respondents said that they would trust robo advice in relation to a mortgage. On the other hand, one in two said that they would trust a broker, emphasising the inherent value of human interaction to consumers. Furthermore, many experts believe that the sheer volume and complexity of available mortgage products precludes an exclusively digital approach to transactions, especially given that shifting economic and social landscapes are continuing to open up new demand for ‘unconventional’ or specialist loans. Indeed, while ‘vanilla’ requirements can arguably be adequately accommodated by existing online services, the same is unlikely to be true for customers with more ‘niche’ demands (such as the self-employed, the elderly, BTL investors or people with debt issues etc). This is where an extensive knowledge and experience of the whole market and underwriting criteria really comes to the fore. There remains a strong argument for the kind of level headed consideration of individual circumstances which typifies the broker model as opposed to a rigid, ‘computer says no’- type approach which attempts to fit applications into neat little cat-
egories; a question of emphasising real life factors and situations over an ‘open and shut’ digital analysis of credit scores. Moreover, this approach also allows for a wider ability to appeal decisions and achieve higher conversion rates. In 2019, advisers have access to the widest range of lending options catering for the growing number of customers who do not conform to a particular ideal template. They also have professional packagers, which specialise in having those options under one roof with the added value of intimate knowledge of the lenders’ criteria and close relationships with the lenders themselves, boosted by having lender underwriters embedded in their offices. Research from the Netherlands concluded that only around 5% of robo-advice customers currently complete the mortgage process without speaking to a broker as well. In this country, I believe that the vast majority of consumers would agree. That is not to say that digital services are not without their benefits. Many brokers attest to the time saving advantages gleaned by performing quick, online criteria searches, while lending portals which offer real time information on the status of individual cases, online applications, AVM’s and online anti-money laundering services obviously speak for themselves. Which is why so many experts point to a hybrid model which combines technological efficiency and speed of service with expert, bespoke advice as the most appropriate means of conducting mortgage business- a system which offers the ‘best of both worlds’. In conclusion, technology is a tool to be adapted and used, rather than feared by advisers. We also believe that the role of brokers remains key to the mortgage process by ensuring that the most suitable recommendations are made from the widest and most representative of lending options.
OCTOBER 2019 MORTGAGE INTRODUCER
SFI: Development Bridging Finance
What is today’s mortgage adviser for? Rolled out at the start of the 201718 tax year, the percentage of mortgage interest payments that can be deducted from rental income has decreased by 25% year-on-year and the portion of those interest payments that qualify for the new tax credit has increased by 25% over the annual same period. Since the changes came into force our records show that current buyto-let demand is mostly from experienced investors who have already adapted to the changing market conditions. Gone are the new entrants looking for a nest-egg, skilled landlords are looking at properties with development potential. This is reflected in the different property types that are becoming more prominent. There is little focus on traditional housing stock – which also takes into account the ongoing Brexit uncertainty – there
Jo Breeden managing director, Crystal Specialist Finance
is a definite move towards semicommercial properties and House of Multiple Occupation (HMOs), with many considering development and conversion works. One area proving of particular interest is conversions of commercial units, with many redundant buildings being converted into multiple unit residential schemes. Typically, the developer is then looking to retain these units and release the max loan-to-value (LTV) with enhancement of the property. This allows the client to take out the money that has been invested into the property and jump into the next scheme. We are also seeing more-enquiries for regulated development finance. The typical scenario starts with the client being put off with the option of self-build mortgages, they tend to be expensive over the term of the finance and the client needs to put
circa 40% of the total costs upfront. A regulated development finance product means the client could in theory achieve up to 60% gross/50% net of the purchase price of the land and 100% of the development costs thereafter. So in practice 40% of the purchase price alone is more affordable, and once the build has finished the client can refinance into a regular residential mortgage. The fact remains that in a market that is now far more financially complicated and far-reaching than ever before, and that professional advice should be sought to ensure the right solution in every individual application. This can even go beyond the knowledge of the lender and the specialist adviser, for instance with largescale limited company buy-tolets the right accountants and solicitors need to be involved to ensure the solution meets all long-term financial targets while minimising tax implications. For every broker development finance offers a very real and accessible solution for landlords but bring the right professionals onboard immediately to ensure the right result.
Surveys can lead to wrong conclusions I see that a recent survey headline claimed that the majority of people currently renting do not intend to buy their own property. It seemed like something you would read in a tabloid newspaper, as although I can only speak personally, but owning my own property was a goal ever since I was old enough to go out to work and I am pretty sure that if renters were given the right conditions, they would in fact be enthusiastic buyers. So, is there any value in the survey headline that on closer inspection shows that 64% of millennials like me were in favour of buying but only 13% of renters over 55 would want to buy? I don’t think the evidence supports the headline although it does highlight how different age groups view the prospect of buying. In any survey, a lot depends on the size of the sample but leaving that
aside, the underlying truism, however well hidden, is that aspiring to own a property is still alive and kicking in younger age groups, even with the obstacles of runaway house price inflation and the ability to afford to buy in this day and age. I have a friend who is paying £1400 per month for renting a three bedroom house for him, his girlfriend and dog and has done successfully for two years. Yet what he can ‘afford’, according to the lenders he has approached, means he either has to live in a shoe box and pay a mortgage of c. £1000 per month, or stay renting. It is hardly surprising that he chooses to rent. Do lenders take past history of successful rental payments into account? Some are considering it, but in the main the majority are hamstrung by their interpretation of the affordability guidelines. Frankly, although it is OCTOBER 2019
Clayton Shipton managing director, CLS Money
absurd, as some lenders have told me, no one wants to defend lending outside the rules and attract unnecessary attention from the PRA or the FCA. This survey, instead of purporting to show that property buying might be waning, simply highlights that aspiring to buy your own place remains a goal for the majority of younger renters, just as it has always done. The other 36% of millennials who were marked as not wishing to buy, would provide a different answer if affordability rules were not so rigid and property prices not so stratospheric. I think we mortgage brokers are going to be in business for a while yet and when you get past the gloomy headline, the desire, on the part of the younger demographic, to be homeowners is still as strong as ever. www.mortgageintroducer.com
Humans remain the important factor During the silly season for news back in July, the press took interest in a survey by online mortgage broker, Trussle, claiming that three out of four people questioned did not know what a remortgage was. I have to admit to being a little sceptical at the time, as to my way of thinking the clue really does lie in the word itself. However, just because the industry has its own terminology, it does not necessarily follow that the average customer is going to be as clear on the vocabulary which we use on a daily basis, even if it is to describe moving a mortgage to a new deal. So, does the industry come up with a simpler phrase to describe this particular activity, which might be difficult given that the word ‘remortgage’ is shorter than ‘mortgage shifter’ or ‘avoid an SVR’, for example, or do we engage in com-
Shaun Almond managing director, HLPartnership
municating with customers better? Personally, I would subscribe to the latter, for the simple reason that the vocabulary just needs to be explained clearly rather than changed and who better to provide that information than professional human mortgage brokers? I think Trussle has done us a favour by inadvertently reminding us why human advisers are so important in ensuring that our customers have a clear understanding of mortgage terminology. In the wider scheme of things, this might not seem like a priority and yet it goes to the very heart of the role that we occupy as professional advisers. Customers might be able to access a mortgage on the internet, but if they have not really understood the terminology being used, what are the chances that other parts of the borrowing process or
even the product chosen have not been fully understood too? Unlike robo-advice brokers and lenders, as advisers, we are in the best position to ensure that not only is the product chosen the right one because we can engage in face to face discussion as to the reasons why we reached our recommendation, but also that we can field any questions that a customer might have, which would include an explanation of mortgage terminology. It is worth reminding ourselves that if 75% of people do not understand what the word ‘remortgage’ means, they definitely need the services of a human adviser, who can provide human answers to human questions. Questions that robo-advice can only cover in a glossary or FAQ section, and also a full advice service accessing the whole market. No contest!
Compromise is bringing results Most (82%) of the respondents to the first Apex Bridging broker survey believed that, the speed of client’s solicitors in progressing a case to completion was the single major cause of delays in the bridging process. I am writing this piece on the day I witnessed the most shambolic day I have ever seen in the House of Commons. At a time when all I talk about to my team is let’s get the internal communication right and usually only good things follow. We as a nation have to tolerate the rantings and outwardly aggressive behaviour on both sides of the house of individuals (I won’t mention names!) who are supposed to be working together despite their opposing views to find a solution, through compromise, to the biggest challenge this nation has faced since World War 2. How refreshing to know that in the bridging sector more opposing www.mortgageintroducer.com
views are being debated and considered with a positive purpose that would embarrass the majority of waring MPs. The broker fraternity has not had the easiest of rides since 2008 but those of us who have survived, I think, have done so because we Sonia have been open to listening to other Shortland voices in our specialist sectors. director, In my earlier days I was a mort- Apex Bridging gage broker and I often found that I generated the best relationships with those I needed to work closely with to get a case to completion, by regularly seeking a mutual agreed compromise. At Apex Bridging, like many other smaller lenders we know we will not grow our book without the help of others, just like the government will not get what it wants without other party support, but their egos are too big and collaboration seems out of the question because it appears toMedia be partner Boris’ way or no-way. The art of compromise is not an
easy one to acquire. It is a talent not given to all but increasingly it is a major quality that is sought when recruiting into the specialist market. The House of Commons just like a grafting lender, knows what it needs to do to achieve the demands of the people (clients), it just does not have the talent and the discipline, that talent delivers, to achieve its objectives. Increasingly smaller lenders are acquiring those talents and as a result are getting better at understanding the needs of all their stakeholders and with that comes the compromise brokers moving into the sector are expecting. So my message to brokers looking to grow their business is to seek out a lender who working with valuers and solicitors is willing to compromise and together we will all come up with a solution... it may not always be what some originally wanted, but after all that is what compromise is all about. If only our MP’s understood!!
SFI: Bridging SFI: FIBA FIBA
What really makes a lending decision? I am a great believer in getting the fundamentals right and nowhere is that more true than in property funding. We have lived through times in the past when the basic tenets of successful underwriting had been abandoned or at the least changed in the pursuit of new business volumes and have then had to live with the consequences. However, while we should not dwell on historical events, it is wise to keep in mind that our future success as an industry does rely in part on not repeating the mistakes of the past! To that end, I wanted to reiterate some of the elements that lead to successful property funding which do not change, regardless of ‘new’ thinking or technological wizardry. For advisers, our purpose is to find the most effective means of funding our customers’ requirements. For lenders, their role is to lend within their risk model and harvest as much intermediary business as they feel comfortable completing. For lenders, regardless of any
credit scoring that might or might not be part of their profiling, the following should be at the heart of their process in reaching the right lending decisions and for advisers these points are equally relevant.
Adam Tyler executive chairman, FIBA
The quality of the security – Does the property offer sufficient collateral for lenders? The business plan – is it robust enough to stand up to scrutiny and make sense? Ability to repay – does the customer have the means? Intent to repay – is there anything in the applicant’s past history or current financial activity which would cast doubt on being inclined to keep up repayments? Exit plan – does the story stack up and is it achievable within the right timescales? For those of you as long in the tooth as I am, you might think this is really basic stuff, but it is worth revisiting from time to time the most basic of underwriting rules, as we are in a different period for a vari-
Leverage external assets to build your business FIBA’s lender panel is expanding rapidly covering a wide range of funding scenarios and includes lenders, some of which are very selective about which advisers with which they want to deal with directly. I speak to a lot of broker firms and one of the biggest issues for them is getting access to these lenders in order to be able to offer a really representative choice of funding options. However, some larger lenders do adopt a selective process, which favours those with a longer track record in specialist property finance. This is an understandable position given the cost of maintaining a facility to
deal with enquiries which come in from every introducer. For advisers, by becoming part of a trade body like FIBA, one of the many benefits for members is access to lenders through our panel. Not only are they fully vetted and have agreed to our requirements on important issues such as fee transparency, but they are keen to hear from FIBA members. If your lender panel is restricted by your size or ability to produce a minimum amount of business in a particular finance area, joining a trade body like FIBA allows you to sit at the top table and enjoy the benefits that some of your competitors take for granted.
ety of reasons. We know that today’s lenders have the mechanisms in place to ensure that risk assessment is not compromised, but whilst we are still seeing the volume of enquiries, we need to ensure the standards remain the same. A point I would like to make is the importance of the relationship between lender and broker. Of course, lenders need to satisfy themselves as to the suitability of the customer and the soundness of the proposition, but the process is made much smoother if trust has been built by the introducing broker. While an adviser’s role is to work for their customer, the reality is that advisers who work closely with their lenders in a mutually respectful partnership are more likely to see their business complete faster and with greater frequency. From the adviser’s side, we should be looking for: Certainty of funding – how certain are the resources in the lender’s background? Reasonable fee structure – re the fees transparent and in line with market practice? Communication – has the lender made 2 way communication easy? Pipeline issues - turnaround times can be critical to being able to complete on time Cascading – product cascading can be detrimental to customers, if on examination, a lender decides that the application does not fit the headline product, leaving you with less time to source a suitable alternative. There are other points that could be included, but lending decisions are not the sole province of the lender in today’s market. Good lending decisions depend on introducer, customer and lender working together. Lenders are not there to deal with incomplete forms or lack of supporting evidence to back the application. It should come as no surprise why lenders are keen to be in receipt of all the evidence before making a decision. Transparency on both sides is the key to better and faster decisioning. www.mortgageintroducer.com
SFI: People Development
Is flexible working the answer to better results? An increasing number of workers are asking their bosses for flexible working hours as they feel they would be more productive if offered earlier finishing times. With 73% of UK businesses stating they are finding it hard to find the right staff, could flexible working be a simple solution to solving this recruitment problem and increasing productivity? I would argue that ‘9-5’ is not the way most people want to work and also that less conventional approaches to the working day can (and in my experience do) bring fantastic results. Furthermore, I am a firm believer in the benefits of a flexible approach to working and thus, also an advocate of the ‘output’ argument versus working a set number of hours within a regimented structure to prove your worth and ‘get the job done’.
Therefore, I was both hugely encouraged and very interested by the findings of a recent piece of research which has presented some illuminating findings surrounding people’s attitudes to flexible working. The study was conducted via the Totaljobs database to over 2,400 adults aged 18-65 between April and May 2019. According to Totaljobs, a huge 84% of workers are asking their employers to consider flexible work, with 62% stating they feel they would be more productive and get more done during the day if they could leave earlier. This view seems to be held by middle managers as well as almost three quarters (73%) think that their team would be more productive if they were offered an earlier finish. If you’re interested in the findings and want to pilot a scheme, then now could be the moment to take the plunge. This is because the research also www.mortgageintroducer.com
Claire Jupp people development director, Brightstar
that it’s all about results and output, not hours spent sitting in the office, without necessarily achieving good things.
showed that more than a fifth (21%) of workers think they are more productive during the summer months and so Totaljobs believe this is the best time to implement flexible working. With 73% of UK businesses stating they are finding it hard to find the right staff, flexible working could be the answer to this problem. If retention is an issue for your organisation, then perhaps a change in work pattern could help to reduce your staff turnover. Indeed, 80% of respondents said they would be less likely to leave their current position if they were offered flexible working hours. From experience, I know that we have not only ‘scooped’ some amazing employees as a result of offering flexible working, we’ve also kept a great many too. Why on Earth would you deny a great team member a slightly different structure to their working week just for the sake of convention? Despite the clear desire for flexible working however, the research revealed that there may be some barriers to overcome within organisations so as to create the right business culture for flexible working to actually work. Furthermore, 44% of workers said they would be worried about leaving early as they think their colleagues would judge them. More than two fifths (42%) admitted to feeling guilty even when their manager has allowed them to leave work earlier. This is regrettable but somewhat inevitable as it is probably the case that many organisations aren’t quite ‘culturally’ ready for the shift from conventional working to flexible working. If this is the case, then my advice here would be for organisations to ‘lead from the front’ when it comes to flexible working; to set the tone, to make the exception become a perfectly acceptable norm and to prove
Our executive team and management team are both diverse in so many ways, but we share some commonality: most of us are parents, some of us are carers and all of us have strong priorities out of work that are respected and valued by the rest of us. Our approach is simple. If we deny ourselves and our colleagues the opportunity to do these things that are so important to us, what effect and impact could that have on mindset, mental health and productivity whilst in work? We appreciate the opportunity to work differently when required and we work hard to make everything work. Championing the flexible approach to work has really helped Brightstar to achieve greater gender balance, especially as it is something that we have afforded to whomever ever has needed it, regardless of gender. Indeed, it is my opinion, working is something that organisations should offer to all employees of required: it’s not just women who want it or indeed whom have to balance responsibilities and commitments. By making it a ‘privilege’ available only to women, you simultaneously label it as a problem; as something women have got to do because they need ‘special help’ to fulfil their life responsibilities. Men are parents and carers too. If flexible working arrangements were applied equally and accepted by the entire team as part of the business ethos, there would be no ‘shuffling backwards’ out of meeting rooms or ‘feeling bad’ for needing to be in half an hour later. There would, in fact, be a shared understanding that people have lives and commitments beyond work and a shared belief that everyone can achieve everything well rather than doing a half-baked job of everything. Achieving a healthy balance of responsibilities and activities in life is something that I believe organisations should actively encourage.
OCTOBER 2019 MORTGAGE INTRODUCER
The Hall of Fame
Abdominal slowman Arnie, Van Damme and the Rock need to watch their step ‘cause there could be a new muscle man in town. Sick of the bullying, hiccup maestro and MI wordsmith Michael Lloyd has announced his plans to hit the gym and hone his physique. Renowned for his slow walking pace the wannabe man mountain hopes to change his image from around the office from Robin Reliant to Ford Mustang. However, his earnest efforts have been met with scepticism by some members of the team. One (the ginger one who looks like he’s never seen a gym) was quick to pour scorn on his colleague’s efforts. He told The HoF: “There’s more chance of Oscar Pistorius catching athletes foot than Magic Mike becoming a ripped muscleman. I’m just not having it. “The day Michael Lloyd comes in with a six pack is the day I’ll pack in the pork pies.” The HoF has more faith however. To help him with his motivation we’ve knocked up this shot of what he could look like in the near future. Pin that to your locker Lloydy! The HoF has faith in you.
And the winner is...
Some one will need a Druce tomorrow! This month’s winner is: Mark Heritage, Heritage Financial Services
Red Carpet Treatment…
Muddy mayhem Sliding onto the red carpet this month are the ‘Pretty Muddy’ team from Leek United who ‘fought dirty’ against cancer last month. As part of a national fun day of fundraising eight members of Leek United Staff joined hundreds of other women to jog and slide around a challenging 5k course in the Race for Life ‘Pretty Muddy’ event. The team tackled a series of obstacles on the park’s paths, tracks and grass, all aimed at raising as funds for Cancer Research UK. The Leek United ‘Pretty Muddy’ team included (pictured below): Debbie Evans, Louise Gibbs, Angela Lawson, Danielle Platt, Hannah Sargeant, Emily Simpson, Katie Swindell and Gillian Trafford; also joining them are former Society employees Gemma Lawson and Rose Trafford. Louise, a mortgage underwriter with Leek United, told The HoF: “Several of us have taken part in ‘Pretty Muddy’ before – it’s a fun few hours, “Every one of us knows someone whose life has been touched by cancer in some way, and this is just one of the ways that we can raise much-needed funds for a vital, ongoing battle against the disease.” Great effort team! The HoF salutes you.
This month’s caption competition
Win a Pimms Summer Pack, courtesy of the kind people over at Brightstar Financial! Simply email your witty caption to Ryan@mortgageintroducer.com with the subject line CAPTION. Every month the best will be published
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