Mortgage Introducer April 2021

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Champion of the Mortgage Professional



April 2021


 Robert Sinclair  The Outlaw  Loan Introducer

CONNECTING THE MORTGAGE MARKET Steve Carruthers talks mortgage tech

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Market continues to hit highs


he past few weeks has seen the regular deluge of data from those who issue house price indices. The figures suggest that government measures to support the property market are continuing to drive interest and fuel demand. House prices hit a record high of £254,606 on average in March and were up 1.1% month-on-month, according to Halifax. Prices have been increasing by an average of £1k per month over the past year. Russell Galley, managing director of Halifax, said: “Casting our minds back 12 months, few could have predicted quite how well the housing market would ride out the impact of the pandemic so far, let alone post growth of more than £1,000 per month on average.” Galley is right. I doubt anyone would have dared make such a bold prediction. But there are still many potential

pitfalls ahead for the market over the coming months and years. The stamp duty holiday “cliffedge” that many warned of before the extension sill looms - albeit a little bit further down the road now. And the same issues still plague the market that were there before the pandemic. Rising rents, pay freezes and a lack of affordable homes are all making the homeownership dream impossible to turn in to a reality. The hope has to be that there is serious thought being put in to planning by the government. The 5% deposit mortgage scheme is a start but in some areas that still isn’t enough. People earning healthy salaries in some areas of the UK still can’t get to a position where they can build that 5% deposit. The Treasury and the Ministry of Housing, Communities and Local Government needs to work together to make sure to ensure that the market remains stable and accessible. M I

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APRIL 2021



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Contents 7 9 13 15 16 17 18 19 20 21 22 26 30 33 35 37

AMI Review Market Review Education Review London Review Networks Review High Net Worth Review Recruitment Review Service Review Technology Review Remortgaging Review Buy-to-let Review Protection Review General Insurance Review Equity Release Review Surveying Review Conveyancing Review

38 The Outlaw The latest from our resident outlaw 42 Cover: Connecting the mortgage market Steve Carruthers, principal mortgage consultant at IRESS, discusses the key role technology has to play in the mortgage market






46 Loan Introducer The latest from the second charge market 48 Specialist Finance Introducer Development finance, bridging finance and FIBA and more from the specialist market 54 Spotlight: Makayla Everitt Makayla Everitt, head of mortgages at SimplyBiz, talks business



APRIL 2021



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A bit too close to the edge? Robert Sinclair chief executive officer, AMI


have been hearing a new clamour from the world of equity release that consumers need to be made aware of all the products they might be eligible for and an impetus towards the need for holistic advice. Approaching this from the consumer perspective this appears eminently sensible, however I would ask all involved to think it through. The world of mortgage related lending is a regulated one. The government has tasked the FCA to authorise and monitor lenders and advisers and to provide the framework to protect consumers. In doing that job, the FCA has applied different rules and standards to the worlds of equity release, retirement interest only (RIOs) and conventional mortgages that may be repaid way past retirement ages. The rules set by the FCA permit lenders to select the types of products they offer. They allow advice firms to restrict their service offering by initial

disclosure. They set out where advice is mandatory or where consumers can have choice in how they interact. They permit lenders to set their own rules about who they want to lend to and who they allow to advise on and recommend their products. Individual lenders can prescribe additional controls over advice partners where they choose not to distribute direct. All participants in the market are governed by a set of FCA rules that have been consulted on, agreed and deliver a level playing field that allows open competition and no barriers to entry. More importantly in broad terms where the customer has affordability, then a conventional mortgage or a RIO is appropriate and can be advised on by all mortgage advisers. Where there is equity in a property, a need for borrowing and insufficient income to evidence affordability of repayment then equity release might be best. This brings with it additional FCA defined examination and authorisation requirements for those who advise on its suitability. Most advisers know how to have those discussions and get the consumer to the most appropriate outcome. My concern here is that we risk layering in cost and

complexity to the majority of relatively straightforward conversations to give wider options to what is a very small number with genuine needs. I am concerned that the issues raised last year by the FCA about advice standards in the equity release market have been lost. Much of the industry debate has been about widening the scope and extent of the consumer factfind, assessment of suitability and more product solutions. However, my analysis of the findings was that advisers should go deeper into identifying why the solution identified met the identified needs. Few firms have the ability or desire to move to that model and the FCA rules legitimately afford protection where firms chose to limit their scope. Moving too quickly runs significant risk. Lenders in these markets might be better served looking at the findings of the commercial lending case of Woods v Commercial First and considering if this has implication for them rather than challenging the quality of the advice being provided by firms that they agree to have on their lending panel. If they have concerns, the solution is already in their individual hands. M I

Still no new clothes


he Financial Guidance and Claims Act 2018 transferred the regulation of Claims Management Companies (CMCs) to the Financial Conduct Authority (FCA) and gave it a duty to make rules about CMC fees for claims relating to financial products and services. The FCA’s research found that conditions in the market allow CMCs to charge fees well above the value they provide to individual consumers. CMC fees are usually calculated as a percentage of the redress paid on a claim, charged on a no-win-no-fee basis. The FCA wants to protect consumers who have suffered harm and are owed redress from paying too much money for claims management services.

The FCA is currently consulting on the introduction of a cap to fee charges, for non-payment protection insurance (PPI) claims, based upon the amount of redress a customer receives for a single claim. The ceiling is to be set at £10,000, or lower for smaller claims. The cap will apply to all claims that could be taken through the statutory redress system, which includes the Financial Ombudsman Service and the Financial Services Compensation Scheme, even if they are pursued some other way, such as through court. The new rules will come into force three months after they are made, for contracts that are entered into both prior to and after the rules come into force, for all fees charged

after that date, but should be this autumn. CMCs will be required to ensure that customers understand the other methods through which they can make a claim. A standalone signed statement from customers, giving their reasons for choosing to claim through a CMC, will be required. These changes will help to ensure that customers who claim for redress through a CMC receive good value. We only hope that the Solicitors Regulation Authority, which regulates many of the firms responsible for the data subject access requests in the mortgage sector, will follow suit to ensure that the differences in the two regimes do not lead to consumer detriment.

APRIL 2021





Sing advice’s value from the rooftops Xxxxxxxxxx Craig Calder xxxxxxxxxxxxxxxx, director of mortgages, xxxxxxxxxxxxxxxx Barclays


hile writing last month’s article, speculation was building around a potential extension to the stamp duty deadline. It was no shock to see this come into force, but the announcement of a new Mortgage Guarantee Scheme did come as a welcome surprise to many. Inevitably, this will generate additional demand in an already busy residential market, business volumes will remain high, and forward momentum will be maintained throughout the lending community. A ROBUST LENDING PLATFORM

Figures leading into 2021 already outlined a robust and dynamic lending platform. The latest Mortgage Lenders and Administrators Statistics from the Bank of England revealed that the value of new mortgage commitments in Q4 2020 was 24.2% higher than a year earlier at £87.7bn, the highest level since Q3 2007. However, new lending commitments for 2020 in total was £268bn, down 4.7% on 2019. Interestingly, the share of new mortgage lending with loan-to-values (LTVs) over 90% was 1.2% in Q4, 4.5pp lower than a year earlier, and the lowest since the data began in 2007. The proportion of lending to borrowers with a high loan-to-income (LTI) ratio increased by 2.0pp on the quarter to 50.2%, the highest since the series began. The bank defines high LTI borrowers as those with a single income with an LTI ratio of four or above – which accounted for 11.3% of gross mortgage lending in Q4 – or borrowers with a joint income and an

LTI of three or above, which accounted for 38.9% of gross lending. The latest data from UK Finance shows house purchase lending in Q4 2020 grew to the highest quarterly levels since 2007, led by December, which was 31% higher than in 2019. The figures also highlighted that mortgage lending was lower in 2020 than in 2019 as a result of the decline in Q2, but higher than expected due to high Q4 activity. Remortgages with equity withdrawn became more popular in Q4, with the average value withdrawn increasing, driven by use for deposits for second homes, buy-to-let properties, or to assist with children’s deposits. THE REMORTGAGE MARKET

On the topic of remortgaging – a sector which continues to be overshadowed by the purchase market – it was interesting to see data from Legal & General Mortgage Club outline that an estimated 32% of borrowers who have been negatively financially impacted by COVID-19 intend to stay on their lender’s standard variable rate (SVR). This could impact more than 700,000 borrowers reaching the end of their 2 and 5-year residential fixed-rate mortgages in 2021. The survey suggested that more than half (52%) of borrowers who have seen their income reduced during the crisis are concerned that lenders will scrutinise their finances in more depth compared to pre-COVID levels. In addition, half of borrowers are concerned that a payment holiday will affect their future mortgage options, and 67% believe it will be harder to get a mortgage due to being furloughed. Looking to those who have seen their incomes negatively impacted by the pandemic, 14% are more likely to feel ‘not confident’ about remortgaging, compared to 3% of those who have remained stable.

According to Legal & General Mortgage Club, moving onto a lender’s SVR could increase annual mortgage repayments by over £2,500. Among those who do not plan to revert, 52% intend to stick with their current lender, with 37% doing so because they believe this will be the easiest way to secure a new deal. At this juncture, it’s important to point out that we are currently operating in a highly competitive remortgaging arena, and a variety of solutions are available and accessible to a host of homeowners. This might be through the mainstream or more specialist lending channels, and this really does emphasise how important it is for both first-time buyers and existing homeowners to seek professional advice during a time when circumstances are changing so quickly and borrowing scenarios are becoming more complex. THE VALUE OF ADVICE

Research from Prudential suggests that 53% of UK adults have been prompted to seek advice due to financial implications arising from COVID-19. Of these, a third (33%) had already sought such advice, while 20% were planning to. Even of those who said they aren’t intending to seek financial advice now, 15% might in the future. The report also revealed that the need for financial advice was felt most among the younger generations, with 74% of Millennials saying they had seen or were going to see an adviser, and 58% of Gen Z, driven by ‘getting into financial difficulty’ and ‘wanting to start their investment journey’. While still pronounced, the need for advice decreased slightly with age, with 32% of Gen X, 21% of Boomers and 24% of the 75-plus. It’s hugely encouraging to see the younger generation appreciating the need for financial advice; this kind of demographic shift should be on every intermediary’s radar. The rest of 2021 will prove equally challenging for all generations, and there is a huge opportunity for the intermediary community to really extol the virtue of its expertise and value to a whole new audience. M I APRIL 2021   MORTGAGE INTRODUCER


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#FSCSFairForAll Martin Reynolds CEO, SimplyBiz Mortgages


his month I want to pick up on a debate that has been discussed many times over the years. Whilst the issue was improved a few years ago, it is still not perfect. As you may have guessed, I’m referring to the Financial Services Compensation Scheme (FSCS) and the levy it puts on firms. This bounded back onto the radar with a bang in January, when the FSCS requested an additional levy of £1bn for 2021 – an increase of 48% on 2020 – reopening the debate about both its fairness and the transparency of the charge. Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), who spearheaded the last that moved mortgage advisers out of the pension pool, was very much to the point in his comments: “In announcing that the [FSCS] needs to raise in excess of £1bn to make compensation claims we have reached a new low in the story of financial regulation in the UK.” He followed this up with a clarion call: “On behalf of ordinary advisers who will have to find this money at a time when doing their job could not be harder, AMI requests that the review of future regulatory framework is expanded to look at how we develop a new approach that gives proper scrutiny of how firms are able to operate within the UK regulatory framework.” We have challenged for change regularly and only received it partially, but it seems that the Financial Conduct Authority (FCA) could be in agreement this time. At a recent PIMFA Virtual Fest, Debbie Gupta, director of life insurance and financial advice at the FCA, was quoted saying the current situation was

“unsustainable” and that the FCA wanted “to see this come down.” So, will this happen? And, if so, when? The short answer is not anytime soon, unless we challenge it. Simply put, there are two questions that need answering: is the system inherently unfair, and does it penalise the quality firms that are in the market giving good advice? No, it is not fair, and yes, it does penalise. On 10 December 2020, Caroline Wayman, the then chief executive of the Financial Ombudsman Service (FOS), sent a letter to Mel Stride, MP and chair of the Treasury Select Committee, as part of an exchange of letters relating to case numbers within FOS. As at 26 November 2020, there were 37,689 cases that had yet to be allocated to a case handler over eight weeks after receipt. There were 53,348 open cases which were more than six months old, and 23,625 cases that were more than two years old. Admittedly, more than 18,600 of these were related to payment protection insurance (PPI), but this still leaves 5,000 over two years old with no resolution. How many could cause additional recourse on the FSCS of which we are not aware? To use an analogy, if three people leave a restaurant without paying their

Fair for the consumer, adviser and manufacturer

bill, do the other people who eat there that night share the loss on their bills? No, so why do we have to do this as an advice community? The end consumer quite rightly must be protected, and where appropriate, compensated for poor advice. That is not under debate or scrutiny, and all advisers that I speak to would agree. The method of this payment is the challenge. There must be a better way, and below are a couple of suggestions:  A product levy across the whole financial services industry, ensuring that a small additional payment is made and pooled to cover compensation;  A change of government policy that allows fines levied by the regulator on the industry to be recycled back into the FSCS pool. The reasons why it was taken away after the 2008 financial crisis are understood, but a review of this is long overdue. It would also be a positive move from both government and the regulator, as well as an acknowledgement that the good advisers left in the market don’t have to pay for the issues of those that have left. I genuinely feel that this would also provide the consumer with greater confidence in the quality of advice moving forward. How do we raise this issue better? I know that all trade bodies will play a positive role in this debate. Last year, as we left the first lockdown, there was confusion in the non-league football community about what levels of league could allow spectators. This dragged on too long, causing financial issues for some clubs. A twitter campaign was launched by clubs and fans alike under the hashtag #letfansin, which was very effective. Do we need to follow a similar campaign ourselves, better utilising social media? It feels like the country has become more politicised over the last few years, and campaigning has become more sophisticated. Maybe a new hashtag is needed: #FSCSFairForAll – fair for the consumer, fair for the adviser and fair for the manufacturer. M I APRIL 2021





It’s time to rebuild the market Tim Hague managing partner, Sagis


’ve written before about the dramatic redrawing of the economy at large. Last month’s Budget gave us a bit more room to do the thinking that’s urgently needed if the market is going to deal with those changes and continue providing the service that our customers need. It’s interesting now to think back just a few years, to when our greatest fear for the mortgage market was the arrival of newly automated brokers. The conversation then was about artificial intelligence (AI), automating advice, and so on. That’s gone quieter. Real-life advisers are even more valuable to borrowers today than they were five years ago. The industry is being driven by the levers of the state. The issue for lenders and brokers alike is having an infrastructure and proposition that can react and take advantage of interventions – and the ebbs and flows of business – as they occur. We are all only too aware of how the journey from application to completion has changed already. There are borrowers in the pipeline, stuck in stasis until others in their chains can move. Landlords still can’t evict or give fewer than six months’ notice to sitting tenants, jamming up the entire transaction network. Conveyancers are swamped, surveyors are drowning, and underwriters are in the unenviable position of having to decide whether to take a risk on a borrower who may not have a job by the end of the year, or just say no. It’s reasonably easy to see that most compliance teams are going to err on the side of caution and go with the decision the scorecards spit out. Add to this quagmire the fact that advisers are already sourcing furlough-



friendly mortgages more than any other criteria, with more than 1,000 searches logged on Legal & General’s SmartrCriteria in February. At the same time, search volumes continued to rise at L&G – by 8% between January and February, following a 69% increase in January – suggesting that activity in the mortgage market has remained strong in the opening months of 2021. While lockdown restrictions are set to be eased, around 4.7 million individuals remain reliant on the government’s furlough scheme. Advisers’ continued focus on mortgages for furloughed borrowers follows a dramatic 230% rise in searches for these products between December 2020 and January 2021.

“Conveyancers are swamped, surveyors are drowning and underwriters are in the unenviable position of having to decide whether to take a risk on a borrower who may not have a job by the end of the year, or just say no. It’s reasonably easy to see that most compliance teams are going to go with the decision the scorecards spit out” Legal & General’s data also showed a 27% increase in searches relating to borrowers who had missed a mortgage repayment, reflecting the growing cohort who have seen their finances negatively impacted by the crisis. Also from Legal & General comes research that indicates that more than one in three of those whose finances have been negatively impacted by the pandemic are planning to revert to their lender’s standard variable rate (SVR) rather than seek a new deal. We may be on the cusp of seeing a seismic shift in the scale of demand for specialist lending, among borrowers

that would previously have fit within the vanilla mainstream. We need to get ahead of this, fast. Moneyfacts has already highlighted how this may cost thousands of pounds in higher monthly repayments to those who can potentially afford it the least. With today’s average SVR sitting at a low of 4.41% following last year’s cuts to base rate, those coming to the end of a 2-year fixed rate deal taken in March 2019 – when the average rate was 2.49% – could face a hike of nearly 2% if they revert. Therefore, they could potentially save over £3,500 if they were to secure a new 2-year fixed rate deal today, based on an outstanding mortgage balance of £150,000 over a 25-year term. While our affordability models remain rooted in the pre-pandemic past, they cannot account for the reallife changes so many borrowers are encountering in the shape of furlough or unemployment. The old model of recycling mortgages onto cheaper loans may be coming to an end for now for some borrowers, but the broker’s role remains even more crucial in understanding the value of criteria. The market today is largely focused on a volume play in vanilla, or a value play in a niche area. This might work for a while longer, but there is not enough vanilla lending to make risk decisions with a ‘light touch’ across an entire business. If there is not enough low risk business it will impact smaller lenders’ ability to offset higher risk lending, with consequences for the overall supply of lending for the entire market. The answer was once manual underwriting; this was the preserve of smaller organisations, but larger ones are joining the fray. The challenge is now one of scale and capacity to cope with the increase in demand. Technology has to deal with the granularity of the increasingly complex financial affairs of the nation’s workforce – for lenders, sourcing systems and brokers alike. M I



Emerging from the lockdown John Somerville

head of regulatory relationships, corporate Xxxxxxxxxx and professional learning, xxxxxxxxxxxxxxxx, The London Institute of xxxxxxxxxxxxxxxx Banking & Finance


he financial fallout from the pandemic means that, for many, now’s the time to rebalance their finances, review their financial situations and rethink their retirement plans. Fluctuating markets have hit pension incomes and lockdown has prompted some people to readjust their financial priorities and life goals. All these factors contribute to the rise in demand for equity release reported in this publication in November 2020. In addition, according to research carried out by Canada Life, the age of clients looking to unlock cash in their properties is getting younger, with 58% citing their main driver as the impact of COVID-19 on family finances. So, whether it’s remortgaging to make up for loss of income or releasing equity to bolster retirement income, clients need comprehensive, professional advice. As we emerge from lockdown, this raises an important question: what is the best way to approach meetings with customers right now? Gone are the days when you could just gather up the brochures and application forms, sit with your clients over a cup of tea and talk them through their options. As mortgage brokers, we need to give serious thought to how to meet clients safely. Bearing in mind that we haven’t all had our vaccine yet, that some clients have underlying health conditions, and that some may be nervous about house visits, every broker and firm should be considering practical strategies around how to ‘meet’ customers.

The likelihood is that your clients will have different needs and varying appetites for meeting in person. Some will feel more vulnerable and might prefer stick to online meetings and phone calls. In February, Anxiety UK reported increasing levels of what it terms ‘post-lockdown anxiety’. Of those who responded to the charity’s survey, 54.4% said they’d become so used to being at home that they worried about getting back into a pre-pandemic routine. Others expressed a fear of using public transport, going shopping and using public spaces.

“By doing the right thing – prioritising safety in your meetings and assessing needs and vulnerability – you won’t just be pleasing the FCA” In short, some of us are going to be more ready for face-to-face meetings than others. So, what can you offer clients who – whether they’ve had the vaccination or not – are uneasy about welcoming visitors? Will you continue to offer online appointments or only meet customers face-to-face? Can you offer a combination of online and in-person meetings? Will you be able to give clients a choice? If so, how long do you plan to offer them that choice? Another issue, and one that is particularly pertinent for those advising on equity release, is vulnerability. As an equity release adviser, more often than not you’re speaking to older people who, especially if they’ve been very isolated over the last year, could be extremely vulnerable postpandemic. Another consideration is that they may be under pressure to

release cash for family members who are in financial difficulties. The Financial Conduct Authority (FCA) has quite rightly been vocal about its concerns for vulnerable customers. In its review into equity release last summer, it highlighted how vital good communication is between advisers and customers. The FCA also highlighted a tendency for advisers to follow customers’ instructions without questioning them. As we emerge from lockdown, that seems like a bigger potential danger than ever. Don’t take it for granted that your clients will open up. You must look out for warning signs – physical and verbal clues as well as changes in behaviour, decision-making and comprehension. If there’s a red flag and you want to assess the situation better, you might drop questions about wellbeing into the conversation. Ask after your clients’ health and that of their families. Have they had to shield? Did they suffer from coronavirus? Might they still have long COVID-19? Of course you’ll be asking them about their reasons for considering equity release, but it’s also your responsibility as an adviser to refuse to broker a transaction if a product is not in the best interests of your client. To assess that, you need context. If you have doubts about your client’s ability to make the right decision, consider inviting a trusted family member or professional – such as a solicitor – to give them support. That way, you can avoid them taking a major financial step they’ll regret later. This might be the person named as having lasting power of attorney, or a designated executor of a will. In any case you will need to validate them. Finally, you can always advise the client to postpone the decision, especially where someone has suffered a major life event, such as the loss of a partner. By doing the right thing – prioritising safety in your meetings and assessing needs and vulnerability – you won’t just be pleasing the FCA. You’ll be helping your customers emerge from the lockdown to a brighter financial future. M I APRIL 2021   MORTGAGE INTRODUCER




Home working – here to stay? Craig Middleton head of mortgage sales Xxxxxxxxxx and distribution, xxxxxxxxxxxxxxxx, Harpenden Building Society xxxxxxxxxxxxxxxx


s you read this latest edition of Mortgage Introducer, the chances are you’ll be doing so from a workstation at home. The last few weeks have been filled with COVID-related anniversaries, including one year on since the Prime Minister told us that people should work from home where possible as part of a range of unique, rigorous measures designed to fight the pandemic. Those early days of using the kitchen or spare bedroom as a makeshift work area are now a distant memory, as many have created a dedicated office space, or are looking to do so, to more effectively meet the challenges of working from home. Residential extensions, funded through a standard mortgage or a specialist self-build product, are becoming part of the ‘new norm’, providing an ongoing business development opportunity for brokers. Harpenden provides mortgages for projects costing in excess of £75,000 for more significant home office projects. We’ve never seen such interest as we have in the last year for this type of development and predict this trend will continue. BUSINESSES ARE CHANGING

As the pandemic recedes, some companies will say goodbye to large, entral office spaces. According to The Guardian, HSBC revealed in Q1 that it was taking advantage of the booming popularity of home working by cutting its global office space by 40%. Over the last year, businesses large and small have successfully embraced new working practices, adopting a flexible blend of remote and hubstyle working. Significant advances in technology and its adoption have enabled effective home working.



Employees benefit from increased flexibility and the lack of a commute, and employers benefit through reduced costs, a decreased carbon footprint, and happy employees, to name just a few. THE FUTURE

Times are changing, with businesses throughout the UK planning their next operational move to more permanent working arrangements as the vaccine rolls out and infection rates drop. In the coming weeks, following close consultation relating to safe working and the latest government guidelines, businesses will either return to the office, continue to embrace an environment led by home working, or perhaps more likely, a mixture of both. Whatever the outcome, home working has become accepted and is relatively easy to accommodate. Tony Claytor, a non-executive director from Hertford, told us about his own experiences developing the ‘perfect’ home working environment: “Constructing a home office outbuilding at the end of my garden has been life changing. My office is timber built with a power supply and broadband connection. “It was ordered and built in the early months of the pandemic – lockdown really showed me how much I needed to create an additional, dedicated working space. Many examples I’ve seen combine an office with a leisure area; for me it was more about creating the best possible working environment, with added storage space to house years of filing which I need to keep. “Although I got a specialist firm to do the construction, I was able to project manage many of the finer points from my house metres away. I can see how some would undertake a self-build project, it would be a great way to potentially save money and be able to oversee operations, particularly if you didn’t move out during building works. “Some key points I’d pass on to anyone considering this type of construction would be:   Secure financing from a specialist

lender if you’re not paying for the project outright;   Be thorough about gaining the right planning permissions;   Keep your neighbours up to speed with your plans, even if permissions aren’t required;   Look at heating and furnishing options well in advance so you’re ready to go from day one of completion;   Consider your insurance options – your needs may change if expensive office equipment is housed away from the main property. “There are many more, but these are points that could easily be overlooked at the critical moment. “With so many now working from home, and to some degree continuing to do so, I can only see that construction of home offices will increase in popularity.” SELF-BUILD OPTIONS

Some go down a standard mortgage route to expand living space and start home office development, but others are looking at self-build solutions and need a provider which is experienced in this area, like ourselves. Self-build is a growing segment of the market, with its potential to save costs and create a more personalised outcome. We continue to be on hand to support customers with our expertise and solutions in this specialist area. Like all of our mortgage products, we taking an individual approach to assessing each mortgage application, however complex. If you are looking at a self-build option for a customer, whether it’s for a home office extension or a complete self-build housing project, reach out to a specialist lender which can guide you through the opportunities that lie ahead. When it comes to home working, it looks as though it’s here to stay. A specialist lender will support you with a range of standard and self-build opportunities to enable you to fulfil customer demand for an improved home working environment. M I



The market that marches on Robin Johnson Xxxxxxxxxx managing director, Kinleigh, Folkard and Hayward xxxxxxxxxxxxxxxx, Professional Services xxxxxxxxxxxxxxxx


ast month the Chancellor did what everyone in the housing market was telling him he must: avoid a cliff edge on stamp duty. His decision to also taper tax relief, first extending the holiday for purchases up to £500,000 until the end of June, and then reducing this to £250,000 until the end of September, wasn’t quite what most of the industry was expecting. It’s certainly easier to deliver than a proper taper would be – I mean, where are the lines drawn when it comes to ascertaining which transactions are already in progress and ought to qualify for the tax holiday even after the deadline passes? And how do you police that? It must be at least partly down to the near impossible task of navigating these complexities that the Treasury opted for a simpler approach. The downside is that instead of one big cliff-edge, we now have two, half-sized ones. Surveyors and conveyancers across England and Wales – Scotland opted out of extending its moratoriu – are audibly groaning at the inevitable onslaught of work they face over the coming six months. It will be relentless, and in all probability it will not stop on 30 September. There will be transactions that fall over on 1 October, scuppering the best laid plans of all in their chains. And yet, it is a reprieve. The Chancellor has given us breathing room to work out how to deal with unavoidable cliff-edges in a somewhat more orderly fashion than a dead stop on 31 March would have meant. That is welcome, and will support the

housing market through what is still a very uncertain time. At the time of writing, Europe is buckling under a third wave of coronavirus infections, with Denmark, Italy, Ireland, Germany, France, the Netherlands, Spain and Portugal all either under pressure or about to impose further lockdowns after the World Health Organisation said the more infectious variant first discovered

“The Chancellor has given us breathing room to work out how to deal with unavoidable cliff edges in a reasonably more orderly fashion than a dead stop on 31 March would have meant.” in the UK was spreading significantly in these countries, specifically. While the UK vaccination programme is more than half way to the point of the entire adult population having had their first dose, we are not out of the woods yet. Recognising this, Rishi Sunak has extended the furlough scheme until the end of September at least. All this has repercussions for the housing market. Research published by Legal & General Mortgage Club in late March showed advisers were sourcing furlough-friendly mortgages more than any other criteria in February, with more than 1,000 searches logged on the firm’s SmartrCriteria. This tells us two things: that people want and need to move home, and that everyone is hamstrung by financial uncertainty, which is nevertheless not impeding that desire. The analysis also found that search volumes continued to rise, increasing by 8% between January and February,

following an enormous 69% increase in January. Even before the Chancellor’s extension to the stamp duty holiday, demand was soaring. It has supported house prices visibly, with UK house price growth in the year to February up 6.9%, according to Nationwide. Knight Frank is of the view that house prices will increase on average by 5% more this year. But Legal & General’s data also showed a 27% increase in searches for lenders that would consider borrowers who had missed a mortgage repayment, reflecting the growing cohort of mortgage borrowers who have seen their finances negatively impacted by the crisis. Furthermore, the findings revealed that rising house prices, stoked by strong market demand, could also be placing pressure on buyers to seek out more affordable routes onto the ladder. SmartrCriteria tracked a 60% increase in searches for joint borrower, sole proprietor mortgages. This is particularly interesting in the context of the London housing market, where affordability has been stretched for at least two decades, if not more. The idea of being able to afford to buy in the capital is very much premised on access to parental or grandparental support towards a deposit, even where first-time buyers are earning six figure sums. WHAT DOES THIS TELL US ABOUT THE COMING YEAR?

In spite of the economic and social uncertainty we face in 2021 – and it is great – there are still human, familial and practical reasons for people to want to move home. There’s been no shortage of media stories about those in the city seeking out the peace of the countryside. Far from being a dreaded exodus, leaving town centres ghostly, in reality what this means is that, for would-be first-time buyers embarking on or in the midst of the first decade of their careers who desperately want to be based in city centres, there are homes to buy. At last! 2021 is set to be a year of change. But perhaps that’s a good thing. M I APRIL 2021   MORTGAGE INTRODUCER




Ignore technology at your peril Shaun Almond Xxxxxxxxxx managing director, xxxxxxxxxxxxxxxx, HL Partnership xxxxxxxxxxxxxxxx


n the mortgage market, I was brought up with a completely manual process, physical application forms, sending and receiving supporting documents by post – and don’t let me bore you about how we went about sourcing mortgages! The amount of real paperwork was staggering. Many advisers practicing today have no concept of working without a computer, its associated applications, and access to broadband to do the heavy lifting. The reason for my ‘you don’t know you’re born’ routine, apart from showing my age, is simple enough: technology has made possible the sector we have now. Without listing the innovations we all take for granted, it seems a good moment to issue a word of caution. Just because we have all of this technology, it is worth remembering that there is no such thing as optimum ‘tech’, and not any single provider has a 100% solution. It should be required reading for everyone in the financial services market, be they adviser or any part of the supply chain, to know what innovations are happening in the technology sector, and which will directly impact our industry and the way we embed them in our businesses. I am not suggesting we blindly buy into every new innovation, like so called ‘early adopters’ who feel they must have the latest mobile phone or tablet. However, look at how the public has adapted to buying products and services online. It is clear that advisers must acknowledge that we no longer have the right to expect our customers to come to us when they want or need financial advice. We have all had to spend time and money ensuring that we take care to



APRIL 2021

look after those customers who have already done business with us in the shape of the customer relationship management (CRM) systems we have turned to, enabling us to manage our existing client banks as well as our new business opportunities. Members of forward-thinking networks like HL Partnership (HLP) are already enjoying access to tech that helps in the daily business of writing mortgages and protection policies, as well as keeping customers up to date with money management ideas which also serve to keep you, the adviser, fresh in their minds.

“When all is said and done, if you strip away the jargon, this is really about being able to capture customer data, make use of it in a way that helps your clients achieve their aims, keep them engaged with you over the longer-term and maintain GDPR compliance” But technology never sleeps. Today’s cutting edge systems can become blunted over time as new services and ways to employ technology are developed. It is therefore vital to review your technology regularly. Whether it is a sourcing system or CRM software, just because it was the best at one point does not mean it has not been superceded by something else. Let’s face it, being a mortgage broker in today’s market is all about demonstrating to new and existing clients that you can consistently deliver a first-class service, however they choose to engage with you, or risk losing them either now or in the future. It is interesting to note that some networks have adopted systems that were never designed to cater for the very different needs of brokers

specialising in the pensions and investment advice sector, and those of their mortgage broker cousins. Experience tells us that adaptation can work, but unless there is a real understanding of the specific needs of the those who actually have to use the system, inevitably it can end up as something that pleases no one. At HLP, having put in place a coordinated technology platform, we are constantly striving to ensure that it delivers what our members need. We have an integrated data capture system at the front end, linked to mortgage sourcing and protection suites, a compliance module and a sophisticated customer management back end which can be linked to our marketing engine, and which can deliver brokerpersonalised material every month. Our most recent enhancement, which has just been added, is the link to Legal & General Mortgage Club’s SmartrCriteria search facility and SmartrFit affordability calculator, which seamlessly integrates with our core system and streamlines the mortgage journey for all our members. This illustrates two things. Firstly, the importance of having a base that allows you to integrate new technologies like this and improve the overall experience, and secondly that you are future-proofing your choice of base system design, so you don’t have to start from scratch when something new arrives. When all is said and done, and if you strip away the jargon, this is really about being able to capture customer data, make use of it in a way that helps your clients achieve their aims, keep them engaged with you over the longer-term and help to maintain General Data Protection Regulation (GDPR) compliance. But most important of all, whatever suppliers you use, the net result should be that it helps your business be the very best it can be, so that your customers achieve the best outcomes, whatever the situation they find themselves in. M I



The state of BTL property in 2021 Peter Izard business development manager, Investec Private Bank


ver the past five years, the buy-to-let (BTL) market has been subject to harsher taxation and significant regulatory changes, which have eaten into the profitability of landlords’ investments across the country. Most significantly, a 3% stamp duty surcharge introduced on second home purchases in 2016 saw the growth of the private rented sector (PRS) slow against a backdrop of weaker house price inflation. Over the past year at Investec, however, we’ve seen sentiment in the buy-to-let landscape take a positive turn as investor confidence returns to the market. To understand why this is the case, I have been examining some of the trends and considerations in the buy-to-let market that buyers should be aware of. STAMP DUTY DRIVING DEMAND

The stamp duty holiday introduced in July 2020 has helped to incentivise investor interest in the buy-to-let market, in spite of the pandemic. For those who may have been waiting to buy a property, the prospect of saving an extra £15,000 has made many bring forward their decision, offering a significant saving in terms of the yield for their investment. According to Hamptons’ recent buy-to-let research, the final months of 2020 saw around 15% of homes bought by an investor seeking to complete before the original stamp duty holiday deadline at the end of March. From speaking with my colleagues on the private banking team, poor interest rates on cash sitting in savings

accounts and volatile stock markets are also highlighting the attractiveness of buy-to-let properties as an investment. Most significantly, they emphasise its attractiveness in terms of store of value, return and the fact that bricks and mortar is a tangible asset that investors can feel and touch.

For those investors seeking to achieve favourable yield on their buy-to-let investments, however, it may be time to consider looking beyond the capital. Hamptons’ research in particular highlights the performance of buyto-let properties in the North East of England. In this region, nine in 10 landlords achieve yields of 5%, compared with half of landlords in the South East and a third in London. For investors seeking to supplement their salary with rental income, or build their investment portfolio, the low entry costs and high yields in this region could be attractive.


With the government having now laid out its roadmap for the lifting of coronavirus restrictions, experts suggest we could see a resurgence of rental interest in the capital. As lockdown restrictions were implemented, the opportunity to work more flexibly saw many inner-London renters move out of cities to either save money, or live somewhere with more outdoor space. Hamptons notes that this saw rents outside the capital soar, while London had a ‘double-dip’ in rent prices in February, with the average in innerLondon falling 17.7% year-on-year. With Hamptons also reprting a doubling of rental homes being marketed in parts of London, and cheaper rents across the capital, this could see many renters return to the capital once restrictions are lifted. OPPORTUNITIES FOR INVESTORS

The investment opportunities for BTL investors are varied, and highly dependent on what one hopes to achieve, particularly considering varied performance across regions. For example, given the significant rise of London house prices over the last 10 years, much of the return on investment here is coming from capital appreciation, rather than rental yields. Many of Investec’s clients are seeing this as an opportunity to invest in property as long-term planning – achieving capital growth and some yield, before having the property for their kids to move into in future.


When investing in buy-to-let property in the coming months, it will be important for investors to consider their target tenant, and how their needs may have changed. Many investors make the mistake of not thinking about who they are planning to let a property to. For example, if buying in Central London, the shift to home working may mean that buyers prioritise flats with a balcony or outdoor space. If buying with a view for shared property, however, bedroom space and communal areas will be important. But perhaps the most important considerations for investors will lie in how they decide to make their buy-tolet purchases. Experts have pointed to a shift from people owning buy-to-lets as an individual to owning them under a limited company. There are a number of significant tax-related benefits associated with this – such as being offset all of your costs before being taxed – and landlords should certainly be considering this if seeking an investment soon. Most importantly, it’s crucial that investors seek a reliable financial partner when making these significant investment decisions. Having someone that fully understands your financial situation and your specific needs – and who can act on your behalf – can be a significant game changer when seeking a worthwhile property investment. M I APRIL 2021   MORTGAGE INTRODUCER




Awake (woke) or asleep Pete Gwilliam director, Virtus Search


he Financial Conduct Authority (FCA) has pledged to get tough on firms that fail to have diverse management teams, but admits that it has “work to do” within its own senior ranks. Nikhil Rathi, chief executive of the FCA, indicated that the regulator is considering adding to its conduct risk questions for managers, and is looking towards supervisory powers to sharpen the focus. It is clear that diversity reduces conduct risk, and that firms must reflect society to ensure they serve diverse communities. The FCA is also considering using a similar approach to the Nasdaq, which requires all companies listed to have, or explain why they do not have, at least two diverse directors. Of course, it is morally and socially right for us all to be more equitable and inclusive in both business and our communities alike, but undoubtedly the added weight of potential regulatory sanctions will propel this further onto the agenda. Many studies also suggest business leaders and shareholders should view this subject with the performance of their business in mind. Increasing evidence shows that those companies with greater gender and ethnic diversity were likely to be more profitable than their peers. Moreover, we need to realise that by the year 2025, 75% of the global workforce will be made up of millennials and by 2050 one third of the UK will have black or ethnic origins. Diversity and inclusion cannot be just a campaign. Promoting diversity in the workplace has to be maintained, nurtured and ultimately measured to be effective. Whilst some inevitably decry focus in this area – and it’s unhelpful that the mainstream media clearly has



an ‘anti-woke’ agenda – I’m certain it is better to be ‘woke’ than ‘asleep’, since the scrutiny on inclusive practices is rightly here to stay. Legal & General Group Plc’s investment arm stated early this year that it will vote against certain senior appointments at FTSE 100 and S&P 500 companies if they fail to include ethnic minorities on their board by 1 January 2022. L&G, which owns around 2% to 3% of each FTSE 100 constituent, is believed to be the first firm to issue an explicit warning that it will block the re-election of the firm’s nomination committee chairmen if they fail to act. Currently, 47 companies in the FTSE 100 still have no black, Asian and minority ethnic (BAME) people at board and executive director level – just 14 fewer than in 2014. Ethnic diversity will be given the same level of boardroom focus that finally led to increasing female representation on boards, which has really improved in recent years. For instance, the Women in Finance Charter has seen firms commit to set internal targets to increase the number of women in senior roles, and publish progress annually on their websites. In the five years since the charter was launched, 35% of the 209 signatories that committed before September 2019 have met their targets, and a further 36% are on track to meet them. We need to design processes that are more inclusive of everyone, and

this should not be a subject we wait to consider when we have a bit of time. We naturally have different opinions, but we grow by considering other perspectives and not by feeling threatened by them. For those who maintain that they trust their ‘gut instinct’ to recruit and have always appointed on merit, you are more likely to appoint on merit if: 1. You broaden your talent pool in the first place to increase choice – for example, requesting diverse shortlists from third-party recruitment partners is becoming more normal; 2. You use a range of assessment tools that do not just test what someone has done, but evaluates what they are capable of doing in the future; 3. You ensure that a diverse range of views are considered when evaluating the merits of candidates and reaching a hiring decision. However, what is clear is that changing recruitment practices are not the silver bullet that fixes the diversity mix of firms. They are one part of a whole programme of initiatives that foster a more inclusive and equitable culture, which does address recruitment, but importantly goes much deeper and wider in its approach. This includes practices across onboarding, training, performance management, employee engagement, internal talent development, and mentoring programmes. M I

Potential regulatory sanctions will propel diversity further onto the agenda



Budget will focus minds on innovation Xxxxxxxxxx Stuart Miller xxxxxxxxxxxxxxxx, customer director, xxxxxxxxxxxxxxxx Newcastle Building Society


ost-Budget, it’s already becoming clear that change in the market will come thick and fast. The government’s support for the housing market has generated not only an increase in product sourcing activity, but has also stimulated product development. Product ranges have already been repriced, and the advent of the Mortgage Guarantee Scheme will spur lenders on to either consider joining the scheme or deliver their own higher loan-to-value (LTV) solutions. Chancellor Rishi Sunak unveiled plans for the scheme last month, trailing it just ahead of his much anticipated Budget statement on 3 March. The Treasury’s stated intention is to “mirror the successful scheme that operated along similar lines between 2013 and 2016, and that reinvigorated the market for lending at up to 95% LTV until the pandemic.” While other announcements attracted some less favourable comments, including the decision to reduce the funding available for the Green Homes Grant from April, I’m not sure anyone is decrying the idea of restarting mortgage guarantee support. We are all too aware of the dramatic drop in the number of small deposit mortgages witnessed over the past 12 months. Any measures designed to tackle that must be welcomed by all lenders. However, they must be part of a suite of wider innovations. Although the scheme is yet to launch, it looks likely that the loans funded by it will be unsuitable for securitisation, which will preclude a number of lenders.

Similarly, lenders accessing the guarantee may choose to apply the scheme to existing housing stock as opposed to new-build and a differential approach taken in the market. Whilst the guarantee scheme lends itself more naturally to lenders with a more traditional funding model, it is with no degree of certainty that the guarantee scheme will be used by all. We have already seen lenders introduce 95% LTV products outside of the guarantee and it is highly likely the innovation will continue, providing cross-market support at higher LTVs through several channels, and ultimately wider choice for consumers. THE BEST OUTCOME

Whilst the government’s approach to opening up higher LTVs has to be applauded, it only solves one part of the equation. The need for good quality advice is ever more relevant to help applicants find the right lender and the best outcome. Brokers know only too well that where a borrower’s income pattern looks even a little bit less than vanilla, lenders offering a more nuanced approach to case assessment offer a potentially better outcome. The manual approach to underwriting that many building societies still take may seem old fashioned when compared to the apps and platforms now prevalent, but in some ways it’s the best thing for borrowers in our modern times. This is especially true at the moment. Millions of people with mortgages and hopeful first-time buyers have been furloughed for all or part of the past 12 months. As we approach the end of lockdown and the vaccination programme continues, we are going to see considerable change in the economy and society. The rise of home working and need for social distancing mean every

business is reassessing itself. Part of this will necessarily reshape employment. There have been numerous redundancies, but more positively, one hopes, lots of new jobs created by virtue of the pandemic’s impact on how and where we live and work. With this comes complicated ramifications for borrowers’ incomes. The risk that a person poses when it comes time to underwrite a mortgage application is now even less likely to fit into a neat algorithm. Those with the resources already in place in underwriting departments will be best placed to offer these loans from the off. WILL THE SCHEME MAKE A DIFFERENCE?

I am an optimist and I think its contribution will be two-fold. First, it will increase people’s collective confidence, with the barriers to home ownership reduced significantly in terms of required deposits. Second, it provides stimulus and brings innovation to the market, with lenders re-entering higher LTV lending either as part of the scheme or under their own steam. We all know just how incredibly busy the market is at the moment. With this scheme and the extension of the moratorium on stamp duty, it’s likely that 2021 will be a pretty positive year. With any boost like this there is always caution needed, given that any rise in the supply of finance invariably pushes up demand, consequently fuelling price growth. House prices are likely to stay relatively buoyant whist government support for the mortgage market continues and base rates stay at low levels. While frustrating for firsttime buyers, this is doubly beneficial at this time. Stability in both the market and house prices is essential in the medium-term. With furlough set to end in September and uncertainty about the impact on employment rates, the government will not want to amplify the economic fallout for either individuals or households. For the moment, things are set for real market innovation, but we must also consider now how we respond as a collective at the point financial support begins to wind down. M I APRIL 2021   MORTGAGE INTRODUCER




Efficiency is crucial in a top-down market Steve Carruthers principal mortgage consultant, Iress


f the Budget proved one thing, it is that the housing market remains central to our national economic sense of security. Homeowners and buyers are voters, and so the Chancellor was careful not to do any short-term harm to our collective economic wellbeing. His measures were designed to support demand – and homeowners – through an extension of the stamp duty holiday until June and the introduction of a 95% loan-to-value (LTV) government guarantee mortgage, allowing first-time buyers access to new homes and current owners to accelerate plans to trade up. Of course there was little in this to address the supply of new housing, and so prices and affordability will remain an issue, and no plan for lending in the post-furlough era. There are plenty of economic challenges, like unemployment, to address in the future. THE SAME ISSUES

What these changes will do in the short-term is support demand, meaning process efficiency remains crucial if we are to get the right loans to people and support the homebuying process. From this point of view, there is no change. Lenders still have the same issues – namely, post-offer blockages as they and the conveyancers that buyers and sellers are employing struggle to manage volumes. Some of the delays are considerable, and in keeping with the fractured nature of the process, not within the gift of those trying to help. Local authorities have reported that the surge in transactions as a



result of the stamp duty holiday is coinciding with pandemic-related staff shortages, and mortgage advisers across the country were reported recently to be preparing to contact hopeful homebuyers to warn that unless their mortgage application was in by 31 January, it’s unlikely they’ll complete by the end of June. FRONT-END INVESTMENT

Efficiency in the mortgage process is sporadic. The delays are often at the back end, and yet – as our 2020 Mortgage Efficiency Survey found – the majority of investment in technology solutions or automation over the last five years has been at the front end of the process. New business acquisition continues to get the attention right up until the stage of issuing the offer, at which point everyone from the purchaser, broker and vendor to the builder breathe a collective sigh of relief. Meanwhile, lenders and solicitors are still paddling hard. Maybe it’s because at this point the customer becomes an interest paying borrower that interest in them wanes. There is typically very little investment at the back end of the offer and completion process, which continues to be – in many instances – a very manual process. We know from our own experience that, while our own solutions provide functionality for electronic certificate of title, few lenders have taken advantage of that. The front end continues to receive all the attention, but in a market where demand and price are effectively set by the government through fiscal policy, is distribution always the biggest issue? Service matters, not because it is a ‘nice to have’, but – over and above risk appetite – because it is increasingly important to ride the ebbs and flows of market demand, created not by

lenders but by government decisions influencing market behaviour. If demand is stoked for six months and it’s the kind of business you want to write, then it is important that you can fill your boots with the right profile of business then and there. Efficient underwriting and signoff of the many moving parts is crucial – especially if this buoyant market is sustained by government intervention over the longer-term. Lenders will point to lockdowns, the move to remote working and socially

“Efficiency affects every part of the process, but investment in its entirety is not a linear process” distanced valuation practices, along with boosted demand from borrowers keen to save up to £15,000 on their purchase via the stamp duty holiday. Elsewhere, delays to conveyancing – already often founded on old processes – are being exacerbated by local authorities so under-resourced they’re taking months to return the land and property searches needed for transactions to complete. Systems and processes cannot resolve all the disjointed parts of a problem, but they can significantly inject pace in some instances. Making small, incremental improvements to the links between lenders and conveyancers will ultimately have a huge impact on the consumer experience. Efficiency affects every part of the process, but investment in its entirety is not a linear process. Some parts are way ahead of the others, which is why completion times take the same amount of time – or worse, more – as they did a decade ago. Some parts of the mortgage journey are easier to speed up than others, but the pieces that have been left are having a disproportionate impact on the borrower and lender experience. The technology solutions exist to support a step-change – we should lean on all the protagonists involved in the process to embrace it. M I



No ‘no platforming’ for second charge Tony Marshall managing director, Equifinance


he remortgage versus second charge debate continues to divide opinion. Fortunately, it is still relatively civilised. Cancel culture and Twitter extremists have not yet tried to shut down debate or issued social media fatwas against one or the other point of view. Apart from the fact that different types of mortgage are unlikely to raise the collective blood pressure enough to bring that about, I like to think the reason is that extremism has no place in our industry. Most advisers with an interest in the topic are even-handed enough to concede that each proposition has its plus points, whether they use both methods of capital raising or stick rigidly to one or the other. Of course, I would like to see more advisers overcoming any historical antipathy to second charge borrowing, and I have to believe that the further we progress, the less resistance there will be.

As second charge lending has been under FCA purview for some time, I would like to see the need to have separate permissions to provide advice on first and second charge mortgages abandoned, or at least streamlined. Both products are similar and fall within the same regulatory framework, and often complement each other. A GOOD FIT FOR THE DIY SURGE

With the sun beginning to shine more, Spring is officially being met with a rush to DIY stores. In fact, one of the few bright sparks during lockdown has been the DIY market, and second charge mortgages have traditionally played an important role in funding home improvements. As not everyone has been on the trail of a second home in Cornwall, adding value to principal residences by extending property or putting in new kitchens, for example, will grow – as will demand for simple additional finance to pay for changes.

Interestingly, the success of longer fixed-rate terms on first charge mortgages has made remortgaging in the face of early repayment charges (ERCs) much less attractive, whilst a second charge loan can provide a simpler, more elegant solution. SAME DAY OFFER FOR A QUIRKY CASE

Lastly, a reminder of what second charge lending is particularly good at. When the need for finance is acute and the client and introducer work with us closely, second charge lending provides solutions that cannot be matched. Our introducer was approached by a family wanting to raise capital to pay for their mother’s funeral. She had taken ill and died from COVID-19, and there had been no provision made as it was completely unexpected. In the current climate, understandably, the funeral home required expedient payment up front. Having had no luck from their bank, the family approached our introducer. With a very short period of time to secure funding, we were then approached. Due to the substantial equity in the property, the immediate availability of income verification, and an automated valuation model (AVM), we were able to issue an immediate offer. M I


I am hopeful that the upcoming results of the Financial Conduct Authority (FCA) review will be positive. It is likely there will be more consultation over fees and charges and the appropriateness of advice. The resulting report might also look at distribution methods of second charge products and give increased attention to credit consolidation and its justification. I believe that it can only be beneficial to have some of these issues aired, as it will provide greater clarity and might also remove some of the myths that prevent advisers from engaging.

Second charge deserves its place on the lending stage





A new chapter for buy-to-let Bob Young chief executive officer, Fleet Mortgages


pend any time within the buy-to-let (BTL) market or private rental sector (PRS) and you’ll soon learn there is always an underlying agenda from certain quarters against investment in residential property. From those who believe that landlords are somehow responsible for all the ills of the UK housing market, to shares-focused websites and publications which continually write pieces announcing the ‘death of BTL’, the agenda is there if you have any interest in looking for it. Recently, I’ve seen a couple of pieces which suggest buy-to-let might be losing its ‘allure’, when the reality of the situation is the complete opposite. A recent report from Capital Economics into the future of the UK housing market post-Budget makes this very clear. While the pandemic has been very difficult and has hit many people’s incomes, for others it has actually left them with more residual income at the end of the working month than ever before. Not having to spend money on travel to work, or by simply not being able to go on holiday or go out as much, means many households have either been able to save more or pay back debt. Back in November last year, the Bank of England highlighted that this was most pertinent for ‘high-income households’, which have saved more during the pandemic, as have retirees. It said that the number of households reporting more savings was 45% higher on average than the number for whom the pandemic had served to decrease their savings.



The next big question is around where those lockdown savings are going. Capital Economics suggests that a large amount is being invested into existing properties and the housing market in general. Indeed, interest in property investment from those who have never done it before is growing. The latest criteria search data from Knowledge Bank reveals that not only is the BTL sector receiving a lot of interest from advisers, but ‘first-time landlords’ was the most searched for buy-to-let criteria term in February, and it has not been out of the top five for the past 10 months. That is interesting in itself, and certainly from a buy-to-let lender point of view we are seeing a greater degree of interest from those first-time landlords who want to begin their investment property journey. Looking at what is on offer for investors, that makes complete sense. How many would be comfortable investing in stocks and shares during this period? How many would be happy with the return, or rather the lack thereof, they currently get in the

Buy-to-let: Bestselling blockbuster

savings market? Why wouldn’t you look at bricks and mortar as a longterm investment, one that can give you a small amount of monthly income, but can also deliver in terms of capital gains over a 10, 15 or 20-year horizon? Last year, house prices rose on average across the UK by approximately 6.5%. The suggestion is that, with the government’s Budget interventions, we are likely to see increases of 3% this year and 2.5% in 2022. Who knows, prices might once again outperform expectations as they did last year. Certainly, the environment seems particularly positive at the moment, with demand being maintained – specifically helped by the stamp duty holiday extension – and the fact that we are, however slowly, moving out of lockdown during the Spring, a season which tends to produce a very strong period for the housing market. No one can underestimate how much confidence this might give to both vendors and buyers alike, with the former likely to be more at ease with opening their homes to viewings, and the latter having a potential incentive to get their transactions through between now and the end of September. I know many were fearful of a post-March cliff-edge, but to a very large extent that fear should now have dissipated. I know of no housing market stakeholder who is expecting anything less than a very busy six-month period and beyond. Investing in property is not losing its allure, buy-to-let is about as far from being dead as it is possible to be, and we are seeing a new breed and generation of investors about to embark on their first investments. That’s a key client demographic for advisers – if you can get them early, with an excellent service you should be able to call them a client for many years to come. As a lender, we’re here to support these new landlords, to ensure they get the best products for their needs, and that advisers get the service they deserve. This feels like a new chapter for the buy-to-let sector – in a book that should be a page-turner for the foreseeable future. M I



Adaptability is key to fulfilling demand Xxxxxxxxxx George Gee xxxxxxxxxxxxxxxx, commercial director, xxxxxxxxxxxxxxxx Foundation Home Loans


s I write this, we are approaching the end of a quarter which was largely expected to be the busiest on record for lenders and intermediaries. Although the welcomed extension to the stamp duty deadline has helped to alleviate a little of the pressure faced by lenders, conveyancers, intermediaries and borrowers in recent weeks, activity levels have remained high. As outlined in research carried out between December and January, we expected landlords to continue purchasing rental property long after the stamp duty holiday deadline, even if it had finished – as planned – at the end of March. At the time, our data revealed that of the 16% of landlords who said they were going to purchase over the next 12 months, 48% said they would do so in Q1, 41% in Q2, 28% in Q3, and 29% in Q4. It should be noted that landlords were able to pick more than one quarter if they were unsure when they might complete.

inevitably stimulate further activity from a variety of borrowers across the residential arena. We know the effect that increased demand can have on service levels, a fact which is further emphasised when facing lingering operational and logistical challenges. Ensuring we have the necessary resources to support our intermediary partners, and to help us move forward as a lender, has proven to be a key focus over the past 12 months. Adaptability has also been an integral component in meeting rising volumes and maintaining robust service levels throughout this period. In preparation for the original March deadline, our new business team grew by 45% in Q4 2020, with many staff recruited remotely and working across the UK to support the ongoing demand that advisers were experiencing across the specialist residential and buy-to-let (BTL) sectors. With the stamp duty deadline moving we, like all lenders, are constantly reviewing how these existing and future resources are being allocated to support advisers and their clients as best we can. It will be interesting to see what trends emerge in Q2 across the BTL marketplace. Ongoing opportunities are likely to emerge for advisers active

in the landlord borrower space, and all the signals point to significant activity taking place in both the purchase and remortgage sectors. FIRST-TIMERS

Whilst we have experienced increased demand from portfolio landlords in recent times, interest from new investors also appears to be on the rise. According to Knowledge Bank’s latest tracker results, the analysis of brokers’ searches in February found that intermediaries are working with potential new landlords, and the furlough scheme is still of interest in the residential market. For the 10th month in a row, buy-to-let brokers reported interest from ‘first-time landlords’, with these criteria terms reaching the top five. In February, this was the most-searched term by brokers. Knowledge Bank believes this demonstrates the interest in the rental market from investors who would normally look to deal in stocks and shares, but are now shifting their attention to buy-to-let. Alongside this, an increasing number of BTL mortgages have become available for first-time landlords. According to Moneyfacts, around 65% of buy-to-let mortgage deals – or 1,311 products – are now accessible to novice investors, compared to a year ago when around 61% of the market was catering to first-time landlords. This data demonstrates the breadth of offerings available to all types of landlords, and how crucial a role the BTL market will continue to play over the course of 2021 and beyond. M I


The question we now face is: how have these figures changed since, and how are lenders coping with the stamp duty extension? It’s a little too early to say, but from our perspective, we are certainly gearing up for a busy Q2, Q3 and Q4. All lenders will have their own individual targets in mind for these periods, and will also have been aware of the probability and potential impact of further government intervention. Additional initiatives – such as the Mortgage Guarantee Scheme – will

Buy-to-let will continue to play an important role in the market





Value of advice remains evident Ying Tan founder and chief executive, Dynamo


he stamp duty extension has maintained a national spotlight on the residential market, while the buy-to-let (BTL) sector continues to go about its business with little fuss or fanfare. It’s actually quite refreshing for the focus not to be squarely on this market after a host of regulatory, policy and tax changes, but landlords need to keep one eye on the prize and the other on what might be round the corner. I say this after seeing research from Benham and Reeves estimate that BTL landlords and second homeowners could see the Capital Gains Tax (CGT) owed increase by as much as £24,000 if they choose to sell. CGT LANDLORD IMPACT

Such a hike may apply if recommendations by the Office of Tax Simplification (OTS) to change the tax threshold are introduced. Currently, the rate is 18% for basic rate taxpayers and 28% for those in the higher rate threshold, with exemptions on an initial £12,300. However, the OTS has called for CGT to increase in line with income tax rates – to 20% at the basic rate and 40% at the higher rate – while also lowering the initial exemption limit to £2,000. The research found that in the last decade, the average UK house price has increased from £168,703 to £251,500, meaning the capital gain of a second home or BTL investment during that time equates to £82,798. Based on this example timeframe, and when removing the exempt sum, selling in the current market would see a lower rate taxpayer pay £12,690



in CGT, while a higher rate taxpayer would pay £19,739. Should these changes come into play, the tax owed would rise to £14,100 for a basic tax rate payer, while those in the higher threshold would see it increase to £28,199, a rise of £8,460. On a regional basis, landlords in London would be the greatest affected. The data goes on to outline that a rise in CGT would see basic rate taxpayers paying close to £4,000 more when they come to sell, rising by £23,810 for those at the higher rate threshold. Those paying a higher rate of tax in the South East and East of England could also see the cost of CGT owed on their investment increase by £13,206 and £12,958, respectively. To date, the Chancellor has not implemented the recommendations, but this is certainly an area to keep an eye on. RENTAL GROWTH

Such a move would prove to be yet another low blow for landlords, but there are many reasons to be cheerful. Research by Hamptons showed that rental growth outside London hit the highest figure on record since the index began in 2012. The average rent of a newly let property outside the capital stands 8.0% – or £68 per month – higher than it did in February 2020. February 2021 also marked the first time that the South East recorded double-digit growth. Across Great Britain, rents rose 5.6%, the fastest rate of growth since February 2015. Rental stock levels have been hit by the onset of the pandemic, causing investors to hold back and tenants to stay put. Rental growth nationally has been fuelled by this lack of stock – 300,000 fewer properties have come onto the market since the onset of the pandemic, nearly a fifth less than during the preceding 12 months.

Would-be tenants are now faced with significantly less choice, which in turn is pushing up rents. The lack of rental homes on the market has meant that so far this year 50% of landlords letting a property were able to secure a higher rent than they had previously achieved. This is the highest proportion since 2016, with an average increase of £60 per month. In line with weak rental growth in the capital, fewer London landlords (37%) were able to secure higher rents – marking the lowest proportion recorded in any region. In contrast, 62% of landlords in the South West were able to achieve higher rents on their properties. This research reinforces the importance of location, and shows how an ongoing lack of housing supply will ensure that the importance attached to the private rented sector (PRS) will only increase. Opportunities will continue to emerge for proactive landlords, although challenges do remain in an increasingly complex marketplace. BUY-TO-LET AFFORDABILITY GAP

According to Mortgage Broker Tools, the gap between the maximum and minimum loan available to buy-tolet mortgage applicants has reached £214,466. For buy-to-let customers, the average maximum loan was £346,153, while the average minimum was £131,687. In comparison, the gap between the maximum and minimum loan available to residential borrowers is £99,475. The maximum loan available to residential applicants was £235,475, and the minimum loan was noted at £136,000 Analysis of cases processed through the firm’s platform found that, whilst the residential market is subject to frequent changes in the affordability landscape, buy-to-let affordability has remained relatively stable. However, the large spread between the average maximum and minimum available loans puts greater emphasis on choosing the right lender to match a client’s loan requirements. This fact underlines the value attached to a good, professional advice process. This value will only increase in the coming weeks and months. M I



Portfolio landlord finance Jane Simpson managing director, TBMC


t is approaching five years since the Prudential Regulatory Authority (PRA) regulations relating to rent stress tests and portfolio landlords came into effect in 2017. The significant changes to rent stress tests across the buy-to-let (BTL) mortgage market meant that many landlords were unable to meet the new calculations for short-term fixed rates, such as 2 or 3-year products. The regulations do not apply for fixed rates of five or more years, so landlords were often obliged to take out a longer-term mortgage product. For this reason, the popularity of 5-year fixed rates has rocketed in recent years. For portfolio landlords, defined as having four or more mortgaged BTL properties, additional underwriting requirements were also introduced in 2017. Lenders are now required to stress test the applicant’s entire buy-tolet portfolio as part of the underwriting process, to ensure that it is not too highly leveraged. Portfolio customers may also be asked to provide business plans and cashflow forecasts to support their applications. Due to the increasing regulations and tax changes applied to buy-to-let over the last five years or so, there has been talk in the sector – supported by research evidence – that some landlords have considered exiting the buy-to-let investment market, or reducing the size of their portfolios. However, for many professional portfolio landlords, buy-to-let still makes sense, and for those with 5-year fixed rates that are approaching maturity, now could be a good time to look at refinancing options. Portfolio landlords have a diverse range of mortgage needs depending on the property type, loan-to-value (LTV) requirements, age range, tax bracket,

limited company status and a whole host of specific criteria points that lenders will use to assess a case. There are lenders in the market which have opted out of the portfolio landlord space, preferring to focus on more ‘vanilla’ customers. This means that professional property investors will often find themselves using more specialist BTL mortgage providers, possibly with a lengthier application process and slower decision-making as lenders now have more information to take into consideration. Some lenders have a limit on how many mortgages they will provide to customers, or will only lend to landlords with a portfolio up to a certain size. Other lenders – such as Paragon, Foundation and Landbay – have large aggregate lending policies or no limit on the total number of properties in the applicant’s portfolio. BTL lending policies vary enormously, with no two lenders taking exactly the same approach. Some cases can be complex, and broad technical knowledge is required for a specialist broker to find the best solution.

For portfolio landlords looking to remortgage one or more properties there are some excellent rates available, and there are usually solutions for all scenarios, even the most complex. Like-for-like remortgages – where no capital raising is required – are normally a straightforward option, provided the portfolio application meets lender underwriting criteria. If the client is looking to release equity from their property, it is worth checking buy-to-let lending policies to ensure that the reason for capital raising is acceptable to the lender. Lenders normally allow capital raising for a further property purchase, but some may not accept paying tax bills or debt consolidation, while others will provide capital raising for any legal purpose. Handling large portfolio cases can be more time consuming and it may take considerable effort to find the right provider for the client, but it can also be rewarding, especially if multiple properties are being remortgaged at one time. Perseverance and patience are key with these clients. M I

Handling large portfolio cases can be rewarding





Research to support recommendations Neil McCarthy chief commercial officer, LifeQuote


ou could argue that critical illness (CI) and income protection (IP) products have become more complex over the years, as insurers have developed products and services to help differentiate their offerings and create additional value for consumers. But is the increasing complexity making it harder for the customer to understand, and for the adviser to sell? For years I have been a great believer in protection portfolios. Life insurance is an important and simple foundation product, but it’s the ‘living benefits’, critical illness and income protection that are typically more likely to result in a claim, and deliver additional valuable benefits that can be used whilst the policyholder is alive. Structuring the benefits and product options takes real skill in interpreting the liabilities, incomes, attitude to risk, existing benefits and budgets before you even get to a product choice. It can be time consuming to research the products, particularly if protection isn’t a regular recommendation. At LifeQuote, we’ve developed an insurer comparison tool to help advisers get factual product information whilst comparing insurer features. From a philosophical position we wanted to provide a factual, fair and impartial comparison across insurer products, in a clear format that could be understood by both adviser and client. We thought it important to provide this consistently across term, critical illness, income protection, family income benefit and whole of life, giving advisers access to data across all protection products in one place.



Insurers differ in their approaches to covering CI, so we developed a simple way to allow comparison between insurers that group benefits and those that list them separately. We check insurer documentation independently, whilst also working closely with the insurers to show accurate and up to date information. Using SmartCompare in conjunction with LifeQuote delivers the insurer premiums alongside the product comparison research. The data output can be shared on-screen with clients

whilst discussing the features that are important to either a client or an adviser, and can be presented to evidence research, or simply saved on the client files. What we haven’t done is evaluate product features by giving them a score, or try to assess the likelihood of a claim or payout. Instead, we have focused on comparing what you get for your premium. Making it efficient for an adviser to research and demonstrate their recommendations across all protection products will facilitate an increase in volumes of IP and CI sales written. Clients will understand and be confident with a greater range of protection, giving them and their families greater financial resilience and access to support services that can make a real difference. M I

Understanding products and features is vital to the success of the adviser



Good times, bad times Charlie Gray learning and development specialist, LifeSearch


his year has been one of struggle and triumph for the protection industry. The pandemic has helped consumers understand the need for protection more than ever, and in a time of uncertainty our industry has had a chance to really prove its worth. Income protection is finally having the opportunity to shine, and this is demonstrated by rising numbers and increasing awareness, with the Income Protection Taskforce at the forefront of getting the word out to advisers. A key challenge was the halt in mortgages, however, which saw people weighing up the need for cover.

Nevertheless, good advisers would have been able to overcome this reluctance. Even without a set date for mortgage completion, clients should could still fall ill or pass away and the need for their family to be able to purchase that property doesn’t disappear. As always, having a good, honest and open conversation about the risks involved has been essential to helping people get protected. Despite our industry staying strong during uncertain times, protection underwriting has been a sticking point. The pandemic saw stricter underwriting rules, harsher ratings and lower acceptance rates from most insurers, which made it harder to get people protected in the right way. We’ve seen more mental health exclusions, clients with diabetes struggling to get life cover, and those needing high levels of cover not being able to have their screenings.

This resulted in advisers having to evolve their approach and move out of their comfort zone. Many had to go back to the drawing board and build their knowledge of the ever-changing COVID-19 rules with insurers they weren’t used to dealing with. Those who were willing to adapt played a huge part in ensuring families were protected despite the challenges. The need for protection remains the same, so thankfully we are slowly starting to see more mortgages being agreed, screenings have been adapted to a virtual world, and underwriting is starting to revert to the way it was. We all need financial protection and a roof over our heads in case the worst happens. As an industry, it is our responsibility to continue going above and beyond to make sure our clients have the best cover in place to safeguard against a future that still holds so much uncertainty. M I



I used to be a mortgage adviser… Kevin Carr chief executive, Protection Review; MD, Carr Consulting & Communications; co-chair, Income Protection Task Force


was 18 when I walked into various banks and building societies in the City with a bunch of CVs. My mum had driven me to Moorgate, parked somewhere nearby and said: “Off you go then – good luck!” I wore a slightly ill-fitting suit – a little baggy, of course, which was all the rage back in the early 90s – and walked into three branches, RBS, Halifax and Nationwide. I was lucky enough to be offered positions by all three, and took the job with Nationwide, even though the salary was £500 a year less. I soon found myself working on the till in the Victoria branch, where my biggest achievement was naming the branch ‘horse’ for the Central London sales competition that year – ‘Victoria Concordia Crescit’, which loosely translates as ‘victory through harmony’, and can be found on the badge of a certain North London football club. It got me noticed and I received a letter in the internal mail from the area manager saying how smart it was. I don’t think she was a football fan. In the branch itself there was a ‘financial adviser’, a lovely chap called Gino, who I’d often play pool with until very late, and who didn’t seem to be in the office very often. There was also a ‘customer adviser’ who opened new accounts, spent time in the banking hall talking to customers, and went by the name of Dean Mason. Many years later he started his own mortgage advice firm, and sadly passed away from COVID-19 last April. We both wanted to be Gino. It was the only ‘cool’ job I could see in the



company. Gino was fun, very good at sales, and seemed to run his own day as he liked. He was probably stuck in area meetings and compliance training most of the time, but to me it looked like he had freedom to come and go, which was very empowering. The fact that he wasn’t in the branch very often gave me an idea – I learned the mortgage products and the systems in my own time and waited until a walk-in customer wanted to discuss a mortgage. I was 19 and (very) spotty, with a habit of doodling Blur and Oasis logos and lyrics when bored, which was often. But the day came when the branch manager was told: “There’s someone in the banking hall who wants to talk about a mortgage.” I waited for the usual: “There’s no one available, so they’ll need to book an appointment” response, and that’s when my life changed. “Or I could do it?” I piped up to a largely bemused group of colleagues. “I know the products; I know the systems, and otherwise they might walk out any minute.” I waited, about as nervous as I’d ever been before, until the reply came: “OK,

go on then. Don’t mess it up.” Following that meeting, the customer booked an appointment with Gino and went on to buy a house through Nationwide. I’d only done the first 20 minutes, but I was elated. Before too long I was fast-tracked and advising customers on their mortgages back in Moorgate. The moral of this little trip down memory lane – and readers I do appreciate your kind eyes if you’ve reached this far – is that along with investments and retirement, protection sat with the financial adviser, not the mortgage adviser. It was, in essence, a simple and effective signposting arrangement – from the till up. Keep it simple, do what you’re good at, and let someone else deal with what they are good at in turn. Many mortgage brokers are good at both mortgages and protection. But let’s face it, some just don’t want to bother. If the current crisis has reaffirmed anything in financial services, it is that protection needs to be at the base of all financial planning. So, find yourself a Gino and signpost to a protection expert who can get everything done and leave everyone feeling as happy as a young me in a baggy 90s suit. You never know, Gino might start referring protection clients back to you for mortgage advice. If he’s ever in the office, that is. M I

Where it all began...



Underwriting changes help brokers Mike Allison head of protection, Paradigm Mortgage Services


or as long as I’ve been in the industry there have been perceived barriers to mortgage advisory firms writing protection to sit alongside mortgages. In the endowment world, life cover was, in the main, a condition of the policy and lenders generally held the policy document as part of the security. Many moons have passed since that was the case, and nowadays many factions of the life industry try to persuade mortgage advisers – sometimes a bit too vociferously in my view – to match protection sales to the number of mortgage sales. Indeed, it is a ratio often used to herald success. If we look a little deeper, rather than just blaming them for not doing so, it can open the debate towards a solution, as some insurers are now finding to their benefit. Let me be clear, quality advisers have their clients’ best interest at heart in every sale, and in the main those same advisers would want to see clients fully protected if it were feasible to do so. Aside from the main issues of time and affordability, it is useful to look at two of these perceived barriers – not only to see if they still exist in abundance, but to consider what the industry in general is doing to break them down, to help achieve the perfect solution where some form of life cover equals the amount of debt. By far the biggest area of concern has always been underwriting speed. If the underwriting might be tricky, the adviser may spend a lot of time on the life policy research and recommendations, only ultimately for the client not to proceed with the policy once they firmly housed in their new property. In my experience this is one of the greatest real barriers. Consciously or

sub-consciously, we all live our lives in an ‘effort versus reward’ bubble. Reasons for the delays could be numerous – we all have been frustrated by the time taken to obtain medical evidence via a doctor’s report, or even worse the frustrations in arranging medicals to suit all of the stakeholders. Once the evidence is obtained, we then just have the underwriting to complete, but sometimes the process has been too long to convince the buyer they still need it. Something less of a barrier, but nonetheless often heard about, is the claw-back of commission. There often seems to be the view that with proc fees you ‘know where you are’ financially, but with life insurance sales they can come back to hurt you at a later date. Again, many have felt the downside of this through no perceived fault of their own. Clearly there are genuine circumstances where clients will lapse policies in the earnings period due to life events. To give insurers their due, they have listened to concerns and are working on breaking these barriers down. Taking the commission issue first, most insurers are pretty adept at letting advisers know when policies have lapsed – often within 24 hours of the direct debit failing, thereby giving the chance for the adviser to reinstate. More innovation has come in the form of commission flexibility. Instead of the ‘all or nothing’ approach of indemnity or non-indemnity, some now offer a mix. In Guardian’s case, this can be done at 1% stages, thereby helping to cover the cost of the sale using indemnity, but offsetting future risk via the non-indemnity element. Insurer MI systems are, for the most part, better than they were years ago, and advisers can help identify which cases are more likely to stay on the books through their own research, acting accordingly in terms of the commission choice. While commendable, these advancements are not as significant as those made in the underwriting field.

Here, insurers can be commended for their work, not least in the pace of change required as a result of the pandemic, where they too have had operational challenges. There are two areas where these advancements are real efforts to break down the barriers. Pre-underwriting tools have been significant in helping advisers assess potential underwriting delays and manage client expectations, as well as providing indications of problems in getting cases from application to acceptance – effectively helping them to gauge effort versus reward. Royal London, Scottish Widows, and Zurich are among those that have been instrumental in developing these tools, and more recently Vitality is working to give insight into re-assurer engines to help in decision-making. Another area of development are the medical examinations themselves. We have been used to nurse paramedic screenings for some time, but actual online medicals have pushed the boundaries even further. Insurers can now send a blood pressure monitor, along with other items, to those applicants who choose a virtual screening. Where required, a biochemistry blood test can enable checks for diabetes risk. In a recent discussion with AIG, I learned that it can now offer the following for those who choose this:   Up to £1.5m life cover – previously £1m maximum   Up to age 64 – previously 49   Up to £1m critical illness – previously not available at all AIG isn’t the only one to have adopted this approach, showing the willingness of insurers to help break down the perceived barriers and open up the ability to do this to a much wider audience. My understanding is these facilities have been brought forward almost two years in order to support the market. Hopefully this can genuinely help advisers reduce the liability gap. M I APRIL 2021   MORTGAGE INTRODUCER




Embedded Insurance – risk or opportunity? Xxxxxxxxxx Geoff Hall xxxxxxxxxxxxxxxx, chairman, xxxxxxxxxxxxxxxx Berkeley Alexander


mbedded Insurance is the seamless integration of insurance directly within the products and services of non-financial service businesses. The obvious example is banking; think bancassurance, but in the digital age. Big data and better mobile connectivity make it easier for insurers to connect cover directly to an item being purchased. In retail, Amazon has partnered with ProtectYourBubble which offers accidental damage insurance on electrical goods bought on Amazon at the point of sale. Bundling insurance in this way

is nothing new – many large retails have been doing it for years with warranty cover, but this is taking a new digital approach, which presents new possibilities. The theory is that in time these insurtechs will offer a seamless customer experience, with the whole insurance process imbedded within the core brand purchase, as part of a wider ecosystem. Regulation will be a key consideration to its development here in the UK. The regulator won’t allow products bundled ‘free of charge’ if the costs are hidden elsewhere, and the regulator is clear that the “selling” firm will be responsible for regulation. For instance, there must be an assessment of the customers “demands & needs”; they must issue the necessary documentation (statement of insurer & price, policy summary, Terms of Business, etc), the product

Sage advice – take heed


hanks to the stamp duty holiday, UK prices rose last year by 8.5% against a backdrop of an economy that has taken a severe hit. Other costs aren’t going up anywhere near as fast. The stamp duty holiday was introduced to prevent stagnation in the property market from damaging the wider economy and has been broadly welcomed. It looks like stagnation has been successfully averted! The stamp duty holiday has clearly been a boon for the mortgage market which is under huge pressure right now to get approvals through before the window closes. But what happens once the stamp duty window has closed? Even after the extension, we should expect leaner times ahead. If the current level of activity is down to



people bringing their plans forward because of the stamp duty window, will this create a massive lull in core mortgage business once the window has closed? As I touched on last month, whilst brokers and advisers are flat out with mortgage approvals it’s sometimes hard to pay attention to the smaller ticket revenues to be made from general insurance, but be under no illusion, when leaner times hit, those recurring renewals will provide much welcome income. You might be busy, but take time now to secure the GI, or simply refer it – but don’t ignore it. I’ve been in the market more than 30 years. I’ve seen good times and lean times in the mortgage market come and go, and I know that history will repeat itself. Don’t say I didn’t warn you! M I

must be suitable for that specific customer, and does the customer already have adequate cover in place (as it is the selling firm’s responsibility to know what cover the client has to avoid creating duplicate cover)? Can all of this be satisfied by the click of a button? I see a multitude of potential regulatory risks. It promises to create a better customer experience, close the protection gap, drive higher conversion rates and promote customer loyalty, while at the same time creating new revenue opportunities at very low marginal cost. However, as I’ve often said, insurance is complex, requiring professional financial services advice. It is an interesting concept and one which we’ll be watching closely. M I



here have been a number of programs on the TV recently touching on mental health, not least the Duke & Duchess of Sussex. However, the stress isn’t just felt by those in the public eye. Lockdown has undoubtedly been an immense burden on many people. Whether for health reasons, childcare or other socio-economic demands, the impact has taken its toll. We all have cause to pause and consider our own position and state of mind, but just as importantly the impact our actions can have on other people. In any dealings I have with others, whether it be colleagues, agents, customers, suppliers or the person I pass whilst out walking the dogs, I always try and treat them the way I would want to be treated. I ask how they are, but I don’t just say the words, I mean it and I listen and then respond appropriately if I detect an issue. The “I’m ok” response has a multitude of meanings depending on how its delivered. If it comes with a smile and is upbeat, then they probably are ok. However, if it’s done with a sigh, or a normally bubbly person is quiet, then clearly they aren’t. At this time, in an unprecedented situation, we should all be showing consideration to everyone. Mental health is so important, and people need to think about how they respond in any situation. Time to be kind.



Changing with the remo seasons Rob Evans CEO, Paymentshield


ur homes have taken on a purpose unimaginable only a year ago. It’s not just that we’re spending more time indoors; lockdown after lockdown, the nation’s mindset around the home has completely changed. Kitchens have become offices, living rooms schools, bedrooms gyms. Home is no longer just a physical location, but our social hub, place of leisure and professional “headquarters” all at once. There’s a seeming, and perhaps surprising, reluctance for this to change too much too soon. According to a recent Paymentshield survey, 73% of employees wanted to remain working from home in some form – whether that be full time or with the flexibility of coming into the office a few days a week. This renewed appreciation of the home has spurred homeowners to see their property in a new light, with many opting to renovate their existing indoor and outdoor spaces rather than move up the property ladder. Indeed, over a quarter of the 2100+ participants in the YouGov survey we commissioned at Paymentshield said that they’ve carried out garden makeovers or “substantial home improvements”, including loft extensions and kitchen installations, since coronavirus restrictions first began in March 2020. RESILIENT REMO MARKET

As a result of this, there’s a rising appetite in the remortgage market. While remortgage instruction volumes fell by a third last August following

the announcement of the stamp duty holiday, December 2020 saw a rise of 7.7%. The reasons behind remortgaging have also shifted. Compared to prepandemic levels, when only one in five remortgage applications were made by homeowners seeking to carry out home improvements, recent data from NatWest suggests that 62% of people – 3x more – would now consider remortgaging their property for the same reason. In an otherwise unstable housing market, the remortgage market has remained a largely reliable option for advisers throughout the pandemic, and these stats suggest that this is unlikely to stop soon. GI - AN OVERLOOKED OPPORTUNITY

There’s a clear opportunity for advisers here. They should be incorporating General Insurance (GI) into the remortgage and product transfer process and proactively offering a GI quote in each conversation they have with those clients. Offering to review GI when discussing a remortgage or product transfer with a client is arguably more relevant than ever – as we know, customers’ use of their houses has very likely changed, but how likely is it that they have reviewed their needs recently? Our YouGov survey found that home insurance policyholders would be receptive to a financial review when remortgaging, and yet the opportunity continues to be overlooked by advisers. On the last occasion that homeowners remortgaged or did a product transfer, 32% did not review their home insurance policy, but 34% expressed that they’d be happy for an adviser to do so, even if they didn’t expect them to. It is by identifying points like this in

A holistic service can ensure long-term relationships

the customer journey where advisers can add value that will future-proof their business. Time and again, GI has proven itself a resilient revenue stream that can successfully supplement an adviser’s core offering. Weaving GI into client conversations means that advisers can offer a much more holistic service, maximising the value customers get from having an adviser and hence increasing client loyalty and retention in the long-term. A LONG-TERM SUSTAINABLE APPROACH

It may be that the extension of the stamp duty holiday will see activity resurge temporarily in the purchase market, but for their businesses to flourish, advisers must look beyond the here and now. The key takeaway as I see it, is that solely reacting to market trends is not a sustainable adviser business model. There’s a need for a more long-term approach. For advisers, this means making the most of not only the remortgage market in itself – a market that shows signs of lasting fitness as large volumes of fixed-rate deals mature in mid-2021 – but also using a remortgage or product transfer as an opportunity to speak to clients about GI. Together, these two approaches will enable advisers to help their customers to protect and enjoy the homes that we’ve all come to appreciate that little bit more. M I APRIL 2021   MORTGAGE INTRODUCER




Too busy to earn lifetime policy income Claire Fletcher PR, Safe&Secure


o you want to commit to earning a lifetime of building and contents renewal income, so each month you receive a commission and that just keeps building? Many people do not want this income. They feel it is a step too far after organising the mortgage and the life, but really it should be approached as a free service not a sale and then clients can benefit from the help, advice and support of a specialist insurance iroker. The amount of monthly building and contents commission lost on average for one single case is just £3. Big deal I hear you say! But for the year you have lost £36. Still not a big deal? What if that client stayed with you for three years that’s £108 or even five years that’s £180 building and contents income lost from just one policy. Now most brokers write an average of two mortgages a week which equals 104 a year. But you’re not going to get every one so let’s say 90 for the year. With an average annual building and contents referral commission of £36 you would now be losing out on just over £3,000 building and contents policy income for the first year. Do I have your attention now? With fixed term mortgages your clients will probably stay with you for that period, so if those 90 clients keep the home insurance for three years you will now have lost out on £9,000 of building and contents policy income, and if it was for the five years then you potentially could have lost out on £15,000. Now that’s the ongoing income that



kept many brokers afloat during the pandemic shut down last year when the housing market came to a full stop for three months. In the current climate many home owners are reviewing their bills and outgoings and tightening their belts and are much more likely to cut some costs. It is therefore the brokers role to educate their clients and provide them with the knowledge and tools to make good decisions. Without having a conversation about it they may not be aware of

large excesses and the low ratings of some cheap online policies. If the conversation is had early enough it is an easy additional sale and by using a reliable company there is no additional compliance By not looking after your clients home insurance needs you are losing income. In addition, the clients who are left to search for policies themselves will be offered life cover – they may not review it straight away having just set one up but in their 14 days cooling off period could easily be swayed to a cheaper online policy. In the future they may even do their mortgage online so that you lost all income from the customer. By offering a complete financial protection service you are not only protecting your clients but also your lifetime income. M I

The figures stack up: buildings and contents policies can earn significant ongoing income



A path to growth Stuart Wilson CEO, Air Group


ast year, according to the official Equity Release Council figures, total lending to both new and existing customers was £3.89bn which, when you consider that in a pre-pandemic 2019 it was £3.92bn, gives an idea of the underlying strength of the sector. I’ve absolutely no doubt that, if 2020 had run along ‘normal’ lines, we would have seen well over £4bn of lending, perhaps even touching the £5bn mark. However, as the statistics reveal, that wasn’t the case and we have to accept the impact COVID-19 played in all our worlds last year, and of course, the ongoing effects that continue to be played out. Nothing would please me more to see the government’s roadmap destinations being hit in the coming weeks and I hope, by the time you read this, that process will already be set in train. But, even with all the disruption we saw last year, to come close to the previous 12-month period in terms of lending is not to be sniffed at. In that regard, it will be interesting to see how the first three months of the year have played out, especially when we have been placed in a lockdown situation for pretty much all of that period. For what it’s worth, my view is that 2021 (as a whole) should be in the region of £4.75-£5bn, with the anticipation that the second half of the year will see a significant amount of demand, and advisers are likely to be seeing a growing consumer need not just for equity release products, but right across the later life lending range. We can’t truly know what the medium- to long-term financial impact of the pandemic/lockdown, etc, will be but it seems safe to assume that the need for later life lending can only be increased by what many people have

been through, and what they anticipate their later life needs will be in the future. We’ve already seen a notable increase in parents/grandparents accessing the equity in their homes in order to help children/grandchildren with deposits, but there are also likely to be more fundamental needs at play. For instance, we are effectively coming to the end of final salary pension schemes, and the next generation of pensioners will be relying on money purchase schemes which, for the most part, are underfunded. How might these pensioners supplement their pension income in the future, especially if they are carrying debt – both secured and unsecured – into their retirement years?

“In areas like RIO, there’s been a willingness from more traditional lenders to offer products which have not always been abundantly in supply” The prize asset they will have is their home and, from our perspective, the reasons to access the equity in the property are only likely to grow as the months and years progress. The big question is then perhaps – how do we position the later life lending market for growth so it can support the diverse range of customers that will be looking for answers? We talk a lot in our part of the market about ‘punching above our weight’ and, of course when it comes to equity release, there has been a notable increase in activity and business levels. But, we mustn’t forget the very low base this has come from – we have not been working off a base of £10bn, for example. It’s been more like £1bn, and in the not too distant past, it was less than £1bn. A move up to £5bn would be notable but it’s not going to set the hares

running for the many other lenders in the wider mortgage market who, like the supermodels of old, are not going to get out of bed for anything less than a considerable increase on that. Of course, the lenders we have in this space are excellent and they’ve shown over the past few years their increased appetite for more lending, and in areas like RIO, there’s been a willingness from more traditional lenders to offer products which have not always been abundantly in supply. But, as a sector, we certainly need to prick up the ears of those lenders who still consider the market too small to make a move. To my mind, we need to be motoring past £7/8/9bn in the next year or so in order to show lenders who are looking to diversify what they might be missing by not offering later life lending. Let’s make no bones about, there will be senior people at mainstream mortgage lenders looking at the later life sector and weighing up what they need to do in order to provide solutions to a customer base which is growing. Does anyone believe that having a mortgage in later life, and then into retirement, isn’t going to become far more prevalent? It’s happening right now and lenders I suspect are looking at what they can do in terms of a one-stop/one product generational offer, which takes the client through a traditional mortgage, through perhaps into a RIO, and then onto a lifetime mortgage option in order to cater for that need. This will, however, need the later life space to show further how it is growing, how advice is an absolutely central part of this, and how we are supporting more and more customers to achieve their financial goals. It’s already happening but progressing the scale of activity and outcomes will bring in more lenders, heighten competition and give us more product options to offer to a wider base. This is no longer a long-term goal but one that can be achieved in the here and now. M I APRIL 2021   MORTGAGE INTRODUCER




Communication is key to success Alice Watson head of marketing and Xxxxxxxxxx communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx


’m afraid we’ve come up against unexpected delays”, is the last thing anyone wants to hear, and the last thing advisers want to explain to their clients. We know that when clients approach equity release, particularly when using it for a property purchase, they tend to want the money as soon as possible. It is therefore essential that advisers provide early, realistic communication about the process ahead, flagging any aspects which may potentially cause delays during the legal process. This doesn’t mean it has to be a painful experience. Strong co-operation and communication between the adviser, client and both sets of solicitors will ensure that any potential obstacles are identified and prepared for early in the process. This realistic management of expectations is fundamental to success and achieving good outcomes.

Solicitors with a specialism in equity release, and those who are members of the Equity Release Council (ERC), will be confident in taking on a range of cases, and crucially, will understand the information they will need and the boxes that need to be ticked. Less experienced solicitor teams may simply be less aware of what is required, risking delays and slow progress for your client. The last 12 months have obviously presented new challenges, as COVID-19 halted proceedings across the country for months at a time. While the industry has responded admirably, this has inevitably led to delays. This combination of delayed cases and a spike in demand caused by government incentives around stamp duty has led to a bottleneck in cases, which in turn has led to increased waiting times for clients.

Advisers should take care to explain these issues carefully and with consideration. This is a difficult time for many and clients, understandably, will be seeking reassurance. Of course, there are still steps advisers can take to make sure the process is as smooth as possible. Early engagement with the provider’s underwriting team will ensure that any concerns or complications are flagged early and factored in to the process, saving confusion and last minute administration down the line. Perform simple checks with your client, such as checking the name on the Land Registry is correct, that the location of the property deeds is known, and if the property is a leasehold or freehold agreement. Asking these questions and more at the beginning can save headaches later on. Ultimately, everyone involved in the process is trying their best and working hard in what have been incredibly difficult circumstances. Advisers who understand the need for early and clear communication with all parties, will continue to enjoy higher client satisfaction and deliver the best customer outcomes. M I


Equity release cases have evolved considerably over the last decade or so. The more ‘vanilla’ cases of before are now commonly replaced by complex scenarios, either due to the property or family situations. Complexities can emerge in a number of ways – for example, if the property is held in trust or an informal separation agreement with a partner is in place. By understanding these aspects, advisers can provide realistic timescales to their clients early on in the process. Recommending the right solicitor for your client is essential to ensuring a case starts off on the right foot.



APRIL 2021

Everyone involved in the process is working hard in what have been incredibly difficult circumstances



It’s good to be back – now for some change Steve Goodall managing director, e.surv Chartered Surveyors


’ve been away from surveying for a few years and I don’t know whether to be comforted or concerned that upon returning – with the exception of a pandemic – it’s pretty much exactly where I left it. On one level this is unsurprising, as some rather big global themes have affected our lives over the past 15 years and consequently left their mark on our housing market. The pandemic has accelerated change that was already in play as a result of these major trends. The first is an enduring lack of housing stock, which along with sustained low interest rates and fiscal support for buyers in the shape of stamp duty holidays and Help to Buy initiatives, continues to help with property price stability. There is general consensus around the long-term under-supply of housing and the need to address this, but there is less agreement within the industry about how best to achieve the necessary step-change. The total housing stock in England in 2019/2020 increased by around 244,000 homes, around 1% higher than the year before. While the volume of new homes supplied annually has been growing for several years, it remains stubbornly lower than estimated need. The second theme is the number of housing transactions. People are living longer and staying put for longer. The arrival of products such as equity release and retirement interest-only underlines the shifting dynamics of our population, and its impact on our housing market. Less supply means less affordability. On average, homeowners in the UK

now stay in their properties for around 20 years before moving – in stark contrast with the 1980s, when people moved home on average every eight years – and the number of owners between 35 and 44 has plunged. The Office for National Statistics (ONS) found that a third of 35 to 44-year-olds in England were renting from a private landlord in 2017, up from fewer than one in 10 in 1997. The third theme refers to our economy. The employment market of the 1980s is a distant dream, and the exponentially growing gig economy

“Equity release and buy-to-let are two examples where the condition of the property is integral to the underwritten risk. But for vanilla lending at lower LTVs, a physical inspection is less necessary for many than it used to be” for every age group means that underwriting is more complex and, in many cases, beyond most lenders. Add to that furlough and mortgage deferral schemes, and you can see how far we have moved from the markets of yesteryear. Affordability will not get easier. Property may need to play a more important role in mortgage product development. The fourth theme is the rapid rise of technology and data in our lives. It has removed the geographical constraints that once meant locality was key to getting something done. Risk judgements and general advice can be made from afar rather than onsite. This has prompted growth in the use of automated valuation models (AVMs) and desktop valuations, and it’s a change in methodology that shows no signs of abating.

This is not true of all markets, of course. Equity release and buy-to-let are two examples where the condition of the property is integral to the underwritten risk. Nevertheless, for vanilla lending at lower loan-to-vales (LTVs), a physical inspection is less necessary for many than it used to be. Last, but certainly not least, is climate change. Understanding lenders’ property portfolio risk means understanding its impact. Whether it’s about the property or the funding obligations, environmental considerations are important. Moody’s is just one example of an agency that is introducing a rating system for issuers and transactions against environmental, social and corporate governance (ESG) criteria, as well as credit impact scores. We must all address the impact of climate change on property and how it is valued in the future by markets and consumers alike. Charles Darwin said: “It is not the strongest of the species that survives, it is the one that is most adaptable to change.” Data and technology are part of the answer to our collective problems, but in the risk business, as in policymaking, the right judgements will need human expertise, too – it is understanding how and when to apply it that is the key to our collective future. As property risk partners, we scan the horizon for opportunities and challenges, whether we are facilitating business as usual or informing clients’ decisions and policies on areas like cladding, leasehold, equity release, climate change risk or new-builds. Being ahead of the curve means we will add more value where it is needed. We are already developing solutions to help lenders understand the impact of climate change on their back books. There are many areas in which the information we have – and will have going forward – can be combined with our expertise, and appropriately applied to many markets and properties. Our know-how is our unique selling point, and we will apply it in ever more sophisticated ways to support transactions and protect lenders and consumers. There is a lot to do. M I APRIL 2021   MORTGAGE INTRODUCER




New survey standards offer opportunity Karen Rodrigues sales director, eConveyancer


uyers have a host of additional costs to consider, besides the money they are paying for the property itself. But there are few outlays which can prove quite as important as the property survey. Surveys can uncover all sorts of issues that might not otherwise have become apparent until much later on, perhaps during the conveyancing stage, which can then put the purchase itself at risk. Those hidden problems might even reveal themselves much later on, when the buyer has long since moved in and finds themselves faced with the prospect of paying a large sum in order to put things right. Uncovering these issues at an early stage can be hugely beneficial for your clients. It may be that they are able to negotiate a lower purchase price, push for the seller to put the problem right before the transaction takes place, or simply walk away from a purchase that no longer makes sense. This is why it’s somewhat surprising that for so many buyers, surveys are seen as something of a ‘nice to have’, rather than a fundamental part of the homebuying process. After all, buying a property is the most expensive thing most of us will ever do; it makes sense to take the additional step that ensures you understand exactly what you are paying for. So, it’s worth noting that the new Royal Institution of Chartered Surveyors (RICS) Home Survey Standard is now up and running, having come into effect at the start of March with the aim of improving the consistency and transparency of residential surveys.



There is an implicit acceptance here that the old surveys perhaps weren’t clear enough, that too many buyers didn’t understand why they might need a survey, or what the report actually told them about the property. Indeed, this lack of clarity may have contributed to the lower take-up. This new standard should address those issues, with a greater onus on surveyors to provide more clarity about what they have observed and the recommendations being made. RICS argues that the new standard will help buyers better understand exactly what is included within the different types of survey, making it more straightforward for them to determine which is most appropriate for their property purchase. It’s not uncommon for borrowers to broach the subject of surveys with their

Clients trust the expertise of mortgage brokers

brokers and look for their guidance as to whether it’s money well spent, or around which sort of survey they should go for. But it’s a subject worth being raised by brokers too. Brokers are trusted allies, and by highlighting how a survey could potentially lead to the client saving money down the line, you are providing an important service. It’s also something that clients will remember, should they go through with a survey and the report uncovers an important issue that needs rectifying. We are keenly aware of just how important a survey can be in a property transaction. That’s why brokers who use eConveyancer can tap into a network of more than 300 RICSqualified surveyors across the country, and help their clients to ensure they are fully up to speed and informed on precisely what they are buying. By assisting with the booking of that surveyor, rather than leaving the client to find one themselves, brokers can deliver a more comprehensive service and reinforce the fact that they can help with all financial matters, and not simply the next mortgage. Of course, there will inevitably be times when something goes wrong with a purchase and a case falls through. That doesn’t just cause distress – there can also be a significant financial impact, due to the money lost on aspects like the mortgage application fee, valuations and indeed surveys. This is why last year we partnered with Surewise to offer a homebuyer protection product, which gives clients the peace of mind that they won’t lose out should their dream move fail to go ahead. Clients trust the expertise of their mortgage brokers, not only in helping them to find the most appropriate mortgage product, but also in making sure they avoid some of the common – and indeed costly – pitfalls that can scupper a move. By highlighting how crucial a survey is, and flagging up ways to protect the money spent should the move fall through at a later date, brokers can build stronger relationships with their clients and secure their business for life – and not just the next remortgage. M I



Remortgage message is always pertinent Mark Snape chief executive officer, Broker Conveyancing


ere it not for the Budget, you would have been reading this during a period when the stamp duty holiday was over. The end of March has been and gone, and without that further government intervention – the threemonth extension to the end of June, and the further taper period to the end of September – we would all be looking at the weeks ahead and perhaps wondering just what the housing market ‘comedown’ might be. While the extension was clearly necessary, and the taper does ensure there is no cliff-edge in terms of activity, part of me wonders what it would have been like to go back to a pre-July 2020 position, especially given the easing of lockdown and the anticipated boost this will give to demand, just as it did in May and June last year. Certainly, for all stakeholders – but particularly conveyancing firms – there will be no easing of workload. I saw a recent webinar with Robert Sinclair of the Association of Mortgage Intermediaries (AMI) who pointed out that the government has effectively introduced two new deadlines instead of one, and you can obviously see a situation where new purchasers will be tempted into the market now, in the belief they can complete at least before the end of September. As mentioned, this next six months should be busy. Were it not for that boost to potential purchasing, I suspect the market would be firmly looking at the opportunities in the remortgage space. This has been

the bedrock of the market for many years, and the amount of deals due to renew this year is substantial. This is bread and butter work for advisers, but looking at some recent research from L&G Mortgage Club, it also appears that a significant number of borrowers who might be eligible for remortgage are likely to sit on their hands because they are worried about their finances due to COVID-19. The data estimates that as many as 32% of borrowers who have been ‘negatively impacted’ by the pandemic are going to stay on their lender’s standard variable rate (SVR). That could be as many as 700,00 borrowers whose two or 5-year deal comes to an end this year. FINANCIAL REVIEW

To say that’s a significant amount of potential business is an understatement, and I fully anticipate that advisers who count those borrowers amongst their clients will be doing all they can to convince them that, at the very least, a review of their current situation and financials should be the way to go. If they don’t engage with their adviser, the likelihood they’ll sit on their hands will only rise, although some might be convinced by product transfer offers from their lenders. But what if those offers are not forthcoming? The likelihood is that those borrowers coming to the end of their special rates will see a significant increase in their mortgage payments if they simply move onto the SVR. There might be a belief that – given their circumstances over the last year and the potential financial hit they could have taken – getting any mortgage is something to be thankful for. Howevr, as we all know, there may well be far more options out there than they think. Understandably, it is those borrowers who have seen their income cut during

the last year – or who took a payment holiday during that period – who appear most worried about what they might or might not be able to do. Of these, 14% said they did not ‘feel confident’ about remortgaging, but the important point is to get them in front of an adviser, to work through their case and give them options they might not know are available. In a sense it’s a real false economy for borrowers to think like this. L&G Mortgage Club estimates that moving onto a lender’s SVR could in fact add to overall mortgage payments by upwards of £2,500. Given that they may still be facing a financial hit, how can it be better to have to pay more for their mortgage? Especially if they have managed to keep up repayments during the last year, or have successfully moved back to paying after taking a holiday. This might be construed as a sidebranch of the much talked about ‘mortgage prisoner’ situation – we certainly don’t want large numbers of borrowers who are eligible for a remortgage or product transfer doing nothing, and moving to a far more expensive rate as a result. For advisers, the business opportunity of engaging with these borrowers is obvious, not just in terms of the mortgage savings or stability they can provide, but also in terms of reviewing the client’s protection needs. Perhaps they can put any saved money into protection, given what has happened in the last year? And of course, there is also the income generated in terms of the remortgage conveyancing. The opportunity to access cashback on the remortgage to pay for quality conveyancing, rather than rely on free legals which could slow the whole process down, is another obvious income stream to look at. Overall, the remortgage message is always pertinent, but perhaps more so in 2021 when many borrowers might – incorrectly – think there are no alternative mortgage options for them. Securing these clients will help them to cope better with the ongoing financial impact of the pandemic, and should add plenty to the bottom line for advisers. M I APRIL 2021   MORTGAGE INTRODUCER





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




he outrageous but delicious irony of it, eh? That precisely 365 days after the first lockdown we have a property market recording its busy day in over 10 years! You know, curiously some pundits had been previously saying that the UK market was now almost impervious to shocks (a chronic under-supply of stock coupled with generationally low rates was the perfect storm for brokers, possibly lasting a decade). But in all honesty, who amongst us that sat in our sunlit gardens in April 2020 would have dared to forecast that COVID would actually give an uncertain post-Brexit property market its biggest shot of adrenalin since the abolition of MIRAS was announced back in 1988? (younger readers will need to look that one up!) This good news was proliferated by a spate of new 95% LTV products for the beleaguered first-time buyers and lender service levels which are now much repaired from last year



BBC: Change, finally?

(with the exception of just Barclays and a few other outliers). As if to frank that form in our mortgage world, April has also witnessed some inroads being made in other realms, not least at the BBC where the new gaffer has finally set about dismantling the wokist and self-righteous agenda set by his predecessors. I’m referring principally to the canning of that nasty and preening “comedy” show The Mash Report. Our disgracefully biased national broadcaster also had to report that (and contrary to what the likes of our snowflake statue defilers and Meghan Markle the body snatcher has emoted), the UK is most definitely not a

racist country. Indeed, the Commission on Race and Ethnic Disparities went so far as to say that the success of ethnic minority Brits should set an example to the world. But more on that later... I referenced Barclays above. This is a lender which swapped its market share position during COVID with a lender in HSBC which has hardly put a step wrong since the pandemic commenced. These two are pretty much going in divergent directions now, so much so that one industry lifer dryly remarked to me that the recent battering of Barclays’ offices by Extinction Rebellionists was probably due as much to delayed offer times for Swampy’s overdue mortgage on a treehouse just as much to the bank’s colonialist ties! Elsewhere, lenders who are continuing to impress include Accord, Coventry, Halifax and of course HSBC. And Santander is definitely in better shape than six weeks ago for having tidied up its self-employed proposition. In fact, it is almost becoming boring now to hear brokers complaining so little about service standards across the industry, such has been the widespread improvements. Equally monotone and uninspiring have been certain events in the lives of our over-hyped celebrities. Take Thierry Henry for instance. For sure, a talented player. But lest we forget that this narcissist was also the dullest Sky pundit ever, a failure as a manger, and a hand-ball cheat which denied Ireland a world cup place. Two million followers... errm, why? His latest “Please notice me, I’m still relevant” gesture has been his quitting Twitter in protest at how little the social media giants such as Facebook

David Cameron: Nobel prize? Not likely

Stamp out racism on social media: Follow the Aussies

are doing to stamp out racist postings. There can no doubt that Facebook and its → comparables are banged to rights on this. It’s despicable. But why aren’t governments (such as bold Australia’s has) doing more on this? Furthermore, the BLM movement itself is possibly not the vehicle to be venting opposition through. If the likes of the Premier League and countless broadcasters had not been such lazy researchers, they would have realised that the BLM movement is mired in other political agendas which are not raceexclusive. The questions should also be asked... why aren’t broadcasters and celebrities giving equal exposure to the oppressed in Myanmar and Hong Kong, or the despicable treatment of the Uighur Muslims in China? It’s all become too tokenist and cosmetic and one sports show I tuned in to last week actually had all FOUR guests drawn from minority groupings... that is actually nothing but patronising to their causes? As for the imbalance in news stories covered by broadcasters, perhaps with huge and conflicted revenue streams in certain countries, some →   MORTGAGE INTRODUCER




Thierry Henry: Bore off

lives matter more conveniently than others. It all stinks. Which brings us on penultimately to similar themes of stench and odour. Words often used to describe something which is decaying or listless, in this case the FCA’s waning credibility. Did the reader know that the Treasury has just completed consulting on the future regulatory framework for financial services!? If the new FCA boss (Nikhil Rathi) is half as constructive as his own boss (Rishi Sunak) then we might finally see a regulator which is a more vigilant supervisor than of late (Woodford/London Capital & Finance refers), and also one which doesn’t dump so much of its negligence and costs at the door of the compensation scheme (and ergo, us!). I don’t think many of us are holding our breath, however. Never mind the prospect of hell freezing over, any one of the following parallel - world occurrences are more likely before we see a genuine and sustainable change at the FCA; A) David Cameron will win a Nobel Prize for transparency in business dealings. B) Liverpool City Council will make commercial decisions independent of the trade union, Unite.



Swampy: Still waiting for his offer

C) Alan Shearer will say anything remotely insightful or enlightening. D) The ever-greedy Harry Kane will pass to another player. E) BT’s Jake Humphrey will stop being a self-absorbed name-dropper. F) London mayor Sadiq Kahn will stop bankrupting the capital city. G) Prince Harry will grow a pair. F) Scotland will produce a political leader with integrity and a joined-up plan on how an independent Scotland can possibly even pay its own way in the world. Or lastly, Sky Sports will put their woeful golf pundits out to pasture. The Masters from Augusta, brought to you in full technicolour. But ruined each year now by the cretinous mutterings of Wayne Riley, the fawning by all of Butch Harmon (why, exactly?) and now adorned with the studio anchoring of the cliche- machine that is Nick ‘Figjam’ Dougherty. < FIGJAM...F*ck I’m Gorgeous, Just Ask Me >. I know what The Duke Of Edinburgh would have made all these clowns. But this is a publication that sometimes sits on coffee tables amid kids and grannies in family homes!! You get mine and Phil’s drift, I’m sure... I ‘ll be seeing you. M I










CONNECTING THE MORTGAGE MARKET Mortgage Introducer speaks with Steve Carruthers, principal mortgage consultant at IRESS, on the key role technology has to play in the mortgage market


he past year has shown the mortgage industry that preparing for the unexpected can be the difference between success and failure. Almost all businesses have needed to embrace a different way of working, using technologies and methods that ordinarily did not have a part in their processes. The importance of technology has been highlighted in these difficult times, with endless Zoom calls replacing face-to-face meetings and new systems being introduced to maintain service levels. Steve Carruthers, principal consultant at technology company Iress, is at the forefront of innovating the industry, keen for lenders to embrace well thought out technology and understand what it can bring to their business. Mortgage Introducer spoke to Carruthers about his background at mortgage lenders and how that helps in his current role, Iress’ latest Mortgage Efficiency Survey, and how technology can enhance many lenders’ offerings in 2021. CATERING TO A CHANGING MARKETPLACE Iress is an Australian company, but have head offices in Cheltenham and London, offering a variety of solutions for the mortgage market in the UK. Along with the mortgage sales and originations (MSO) software that Carruthers works primarily on, Iress offers Trigold mortgage sourcing software and Xplan Mortgage which aims to streamline the mortgage experience. Lenders are Iress’ client base for their MSO offering, and Carruthers’ 30 years financial services experience, most of which was working at lenders, helps him in his current role which he says was a big career change. “Technology has always interested me,” he says. “I have always had a keen eye on innovation and what is coming next. “I could see a shifting change in the mortgage market



in regard to technology, and a large amount of fintechs coming into the market offering a variety of different solutions. I was really excited by these changes, and when the opportunity came to work with Iress, I thought it was a really interesting proposition.” Everyone within the industry will have used or know of Trigold, however Carruthers does not work directly with that part of the business. “My role is around the MSO software,” says Carruthers. “My day-to-day involves facing off into the marketplace, predominantly looking at lenders and the needs that they have for their mortgage sales and originations processes.” Carruthers talks with lenders across the spectrum of different sizes and areas in which they operate, from high street lenders to regional building societies. In a consultative capacity, Carruthers will discuss their needs from their technologies and processes. Carruthers describes himself as the ‘intel provider’ at Iress, providing updates internally on the marketplace from a product, market and regulatory perspective. He works closely with the regulators and trade bodies to stay up to date with key issues and future implementations. Technology is the focus, and Carruthers explains that this facet is a key part of his role. “I’m looking at what new technology is coming down the line, researching potential disruptors by looking at the wider markets and industries,” he says. Most lenders in the country use Iress’ software through the Trigold platform, meaning the business has a relationship with most UK lenders. In terms of their MSO platform, there are five lenders in the marketplace using the software, Atom Bank, TSB, Accord, Leeds Building Society and Principality Building Scoiety, with two more lenders set to go live imminently. “We are really proud of that,” Carruthers says. “We are proud that we have that number of lenders who are supporting the UK mortgage market.” Feedback of Iress’ MSO platform has been very positive according to Carruthers, pointing to recent feedback by Accord Mortgages who are one of the



Steve Carruthers

active users. “Accord have been a real supporter over the past 12 months, even whilst the market has gone through a degree of turmoil,” Carruthers says. “Accord have been processing record volumes, including at high LTVs, and they put a lot of that down to the fact that they are using our MSO software which has enabled them to achieve such numbers and efficiency.” The MSO software promises lenders the ability to manage volumes and risks in an efficient manner and allow collaboration between all parts of the process. It is these promises and the encouraging feedback which is allowing Carruthers and his team to discuss opportunities with several lenders in the marketplace, with plans to expand their client base in 2021. THE DRIVE TO DIGITAL Iress have published an annual Mortgage Efficiency Survey since 2012, which has tracked the impact of technology on the UK mortgage market. Iress say

that market trends have emerged through this data, with those who embrace technology best placed to improve the consumer experience and those who don’t risk being left behind. In their 2020 report, Iress conducted in-depth interviews with 36 lenders to obtain their views to form the basis of their research. With the COVID-19 crisis having a profound impact on the mortgage industry, the report highlights an accelerating move to digital and catalyses the drive to self-service. The findings also showed an “opportunity for change” according to Iress, with lenders placing a focus on how they want to interact with their customers following these challenging times. The next report in the series is set to be released in September. “The report highlighted to us that lenders are all at very different stages of their technology journey,” explains Carruthers. “No two lenders are the same. Many lenders are hamstrung by legacy systems and that point was really exacerbated by COVID.” The pandemic led to lenders having to very quickly implement a new operational structure to manage their business and to keep the mortgage market “alive” according to Carruthers. This revealed significant pressures on systems and processes, and the research showed how many lenders had invested heavily in the front-end of the mortgage journey but not so much on the back-end. “We often see a lot of media and trade commentary about new tech solutions for affordability calculators and the Decision in Principle (DiPs),” says Carruthers. “That is all at the front-end; how you bring in the business. But once the business is in the system, it is incredible how manual and how much paper is still being utilised across lenders. “Everyone is keen to get an offer through as quickly as possible, but post-offer is when a lot of the ground-work is done with solicitors and land registry work.” Carruthers points to several examples of solicitors who remain to be insistent on using fax machines, which is outdated technology. “If you look at it from a lenders perspective, it is blocking them from trying innovative solutions when they are having to use fax-based technology as part of the process,” Carruthers continues. “This isn’t the case all of the time, but it happens.” Despite this, there have been positive technological steps taken by more lenders according to Carruthers, such as the move to e-signatures and digital desktop valuations. Iress’ survey highlighted that lenders are beginning to question whether to incorporate these technological features internally or partner with third party software providers to implement new technology additions. “I have had numerous conversations with lenders who chose to outsource their technological development,” Carruthers says. “That is a big decision for a lender to make and it is happening far more often.” Whilst lenders are looking at technological advances, Carruthers argues that it is also brokers, networks → APRIL 2021   MORTGAGE INTRODUCER



COVER benefit,” says Carruthers. “Equally we are seeing our competition doing the same, so it is all good news for the marketplace. Everyone is becoming much more connected.” Carruthers hopes that in the next 12 months, this evidence of increased connectivity continues to develop, particularly given the current circumstances. In addition, more digital engagement with consumers is on the horizon for 2021 according to Carruthers. With plans to expand and hopes for the future, the next Mortgage Efficiency Survey will highlight key points for the industry to learn and develop from, identifying how lenders have changed following the pandemic and what their key focuses are. However, it appears that technology is being embraced by more of the market in order to provide the best outcome for customers, which is the ultimate aim for everyone in the industry. M I

and clubs who have to think about advancing their technology offerings and how they integrate it into their daily businesses. “I have spoken to a number of brokers who are at a really pivotal point,” says Carruthers. “Those who still do paper-based fact finds and stand by face-to-face meetings. If they don’t move into the 21st century, they will be left behind, as their clients will be demanding a more convenient approach. Brokers need to have fit for purpose CRM systems and include operational features that will allow them to engage digitally with their clients and lenders across the marketplace.” A YEAR OF CONNECTIVITY Carruthers reflects on the past 12 months as being “challenging, fascinating, difficult and rewarding” but that the business has been able operate efficiently in pandemic conditions. “Over the past year, we have been able to operate and support both our existing lender clients as well as bring on new ones,” says Carruthers. “We have not missed any major milestones and we have not had to change or cancel anything. We have managed to transition and move on.” 2021 is set to be an exciting time at Iress as an evolving new norm is set to begin in the UK this year. Carruthers hopes for even more lenders to understand the need for optimal solutions to help their businesses, and whilst technology isn’t the ultimate solution, it has a key part to play. In a recent article for Mortgage Introducer, Carruthers wrote about ‘Appropriate Intelligence’ which highlighted the importance of humans and technology working together in harmony, which he says is the way it should be. “Technology isn’t the ultimate solution, it is an enabler,” says Carruthers. “It is a tool to support a business, which in our case is the lenders themselves, and offers efficiencies to allow for better, more informed decisions. A good technological solution allows people to spend more time to engage with their customers and their brokers. Technology can be, and is used, to take a lot of heavy lifting out of the journey.” Along with a new Mortgage Efficiency Survey on the agenda this year, Carruthers is striving to see more connectivity in the marketplace through use of one of Iress’ key solutions ‘Lender Connect’. Described as an “agnostic piece of technology” by Carruthers, it can be used by anyone, whether they are an Iress customer or not. The technology allows broker CRM systems to connect directly to the lender to submit DiPs and applications. Three of Iress’ clients are using the technology currently, but also a number of lenders who are not clients such as Aldermore and London & Country are also using Lender Connect. “What we are starting to see now is more of the industry starting to utilise that software to allow for a much smoother and more efficient journey of connectivity, and ultimately the end customer will



APRIL 2021


Steve Carruthers

WE’RE BACK! Leeds | The Armouries 8th July 2021

Mortgage Business Expo has grown to become the biggest and most essential meeting place for the financial intermediary market. MBE is a dedicated event for mortgage practitioners and professionals providing opportunities, forecasts and trends for the UK mortgage and specialist lending markets.

Why do visitors attend MBE: • • • • • • •

78% of visitors establish new business contacts at MBE 79% want to expand upon the services that they offer their clients 56% want to talk to their existing suppliers 87% of attendees surveyed are looking for new avenues for their business 67% are looking to network 45% seek new partners for hard to place cases 42% state that MBE is the only event of its type they visit

‘The key benefit to MBE is that you see more mortgage brokers here than you would do at any other exhibition in the UK’

‘…great opportunity to speak to lenders and make some new contacts’ Neil Bates, Mortgage Hunters Financial Services

Charlie Palmer, IFAC | +44 (0)7785 755087



Evolve and grow Loan Introducer chats to Steve Brilus, chief executive officer of Manchester-based second charge lender Evolution Money, about some of the challenges of lending in a COVID-hit market Tell us about Evolution Money Evolution works with advisers and brokers to offer their clients subsequent mortgages, in the form of second or third charge, which are protected by way of a unilateral notice, avoiding the need for consent from the first charge lender. We provide the advice and take on all the regulatory processes. You recently launched a 140% LTV second charge, up to £50,000. Are you seeing a lot of demand for this? I think we would say there’s an increase in demand for second charges right across the board, but certainly in this new normal we believe there will be a greater number of potential borrowers for whom these types of products will be required. Borrowers, for example, might have missed mortgage payments, or seen a change in the way they work or the jobs they do. As 2021 moves on, we anticipate these types of borrowers will want to access the equity in their homes and a second charge might be the right option for them. How hard is it to vet ‘bad credit’ borrowers? Separating out the genuine borrowers who may have had a temporary blip in their history, as opposed to those we, or indeed anyone, should not lend to is not easy, especially with the recent Credit Bureau reporting requirements for deferred COVID-19 payments. However, that’s what we do as a business and it’s a hugely important part of our work. It’s why we speak to every one of those potential customers and thoroughly explore all their individual circumstances, so as to understand why they may have those credit markers. The positive of such a thorough review is that we quite often say yes to customers that other lenders might decline, and advisers should certainly consider that when they’re looking for lending options for clients with this type of credit profile.

Steve Brilus



“We would say there’s an increase in demand for second charges right across the board, but certainly in this new normal we believe there will be a greater number of potential borrowers for whom these types of products will be required” What do you feel is holding the second charge market back? Somewhat ironically – given the benefits that technology can bring – it can also make it harder to understand customer’s individual circumstances if you’re relying on tech metrics and algorithms to make your lending decisions. We prefer to have a much more manual underwriting approach, which allows us to delve far deeper into a potential customer’s financial circumstances, wants and needs. It means that we’re not rejecting out of hand credible and risk-worthy borrowers. Second charges are not the most understood of products, and if we can educate consumers and advisers on the benefits, where they fit, the options they provide, the flexibility of pricing, criteria, etcetera, then we’re going to go a long way to building growth in the market. M I

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APRIL 2021





Developers get a taste for ESG Brian West consultant, PIVOT


believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives,” those are the words of Larry Fink, chairman and CEO of BlackRock Investment Management. BlackRock, with over $7.5trn of assets under management, have developed a strong reputation for sustainable investing through ESG (environmental, social and governance) principles. Fink firmly believes that climate transition presents a historic investment opportunity and the excellent performance of sustainable investments since the pandemic struck backs up his thinking. It seems that now, more than ever, there is good reason for property developers and funders alike to look beyond COVID-19 and focus on the UK’s exacting net-zero carbon target for 2050. Housing and the built environment account for a massive 40% of UK emissions with the average house costing 50 tons of CO2 to build. With investors increasingly refusing to put their money into projects that are harmful to the environment, the building sector literally needs to get its house in order if it’s to continue attracting investment from broad capital pools. What was once seen as something of a fad is now becoming the new normal and on top of investors, developers are faced with further top-down pressure



from government, lenders and insurers as well. Little wonder then that developers are turning to eco technologies for house builds to ensure a low carbon, more environmentally friendly format in the future. As a result, eco homes have rapidly progressed from one-off anomalies to far more widely available options. Of course, it takes time for new technologies to filter down, but the UK is now seeing many larger house builders embracing greener building techniques and sustainability. Many are now doing so much more than simply meeting new build homes criteria on boiler performance, insulation, water storage and modern lighting. They are looking way beyond energy efficiency and in some cases building zero carbon homes and the fact that they are doing so is not purely a response to the top-down pressure already mentioned. A KEY FACTOR

Potential buyers and renters, particularly amongst younger demographics, are also citing sustainability as a key factor in the new homes they are looking to move into. Adherence by developers to eco principles and a green philosophy clearly aligns with these values and of course lower utility bills are a very tangible reward for residents in new, sustainably designed homes! Young property hunters are increasingly critical of developers who they believe are merely paying lip service to sustainability with the term “greenwash” coming into more common use! So, with pressure from above and demand from below, it’s clear that developers have ample incentive to become more eco focused and progress is certainly being made, but there is still

much more that can be done. Many developers will argue that if they can’t secure funding, they can’t build these homes and therein lies the biggest barrier to hitting emissions targets. Whilst there is clear appetite to drive the green agenda from all parties involved there is still a very significant log jam in the system, namely the lack of available funding. Development lenders are all too often governed by restrictive covenants that have been designed around houses being built in situ over several months, as opposed to being delivered off the back of a lorry and erected in days! To break the log jam developers and lenders need to get ahead of the curve. This is a tough challenge and one which may well require more proactive government intervention. Of course, government have been making moves in this area already, as demonstrated by the recently announced partnership between Homes England and UTB Bank. More partnerships are in the pipeline, but it’s questionable whether the focus is strong enough in terms of promoting eco homes. Perhaps it’s time for a more radical approach such as the game changing intervention inspired by COVID-19 of the Coronavirus Business Interruption Loan Scheme (CBILS). What better time than now for a CBILS inspired ‘Eco Homes Loan Guarantee Scheme’ to galvanise a market, drive structural change in lending models and massively accelerate the drive towards our 2050 net zero carbon target? Building vastly increased numbers of stylish, insulated, airtight eco homes and then filling them with a diverse range of technology to further reduce the carbon footprint is entirely possible. Doing so on sites close to public transport links that pro-actively preserve biodiversity and nature and provide healthy amounts of green and communal space will build new communities that really enjoy where they live. Yes, in the short-term these new homes will be potentially more expensive but curbside appeal and long-term savings are already driving demand. M I



Simple innovation, clever uses Rob Oliver sales director, Castle Trust Bank


he most influential innovations often come from simply combining two already-popular products – adding a camera to a mobile phone, for example. So, it’s little surprise that at Castle Trust Bank we have seen such strong demand for our Bridge to Let product. Bridging can provide property investors with a lot of freedom. It can be fast and flexible, and deployed where it may be difficult, or impossible, to secure a standard term mortgage. However, it can also be uncertain, as the underwriting of a bridging loan is dependent on the exit route and, in the current environment, investors may have concerns about their ability to refinance a bridging loan onto a buy-to-let (BTL) mortgage in six to 12 months. Bridge to Let removes this uncertainty by combining bridging finance with a BTL mortgage, which means that the exit route is underwritten and pre-approved upfront. This can provide clients with more peace of mind than separately sourcing a bridging loan and then a BTL mortgage. It can also deliver a great deal of efficiency to the process as both the short-term and longer-term funding are both secured at the outset, so there is no need to go through the full application again. By combining bridging finance with a ready-made exit, Bridge to Let is a simple innovation that can be used in some very clever ways. Here are two examples where brokers can use it to make a difference for their clients. HOLIDAY LET

A client, who was an experienced landlord operating through a limited company, wanted a loan to purchase a holiday let property located in a

popular holiday region. They were looking to raise 80% loan-to-value (LTV) to purchase the property and make some improvements to increase marketability and rental yield. However, the COVID-19 restrictions severely restricted the

Bridge to Let: Innovative products for buy-to-let

client’s ability to take on bookings, which would have made it difficult to service a loan whilst the lockdown was in place. Given the potential of a large property in a popular holiday location, we were able to provide an 80% Bridge to Let loan with a term of nine months at a rate of 0.67% pcm on an interest roll up basis. This allowed the client to purchase the property and build up bookings without the need to service the interest during that period, ready for when restrictions were eased, when the client could switch onto a longer-term product using the uplifted valuation, at a lower interest rate. HMO CONVERSION

The clients were two married investors, a British national and a foreign national, with properties in the UK, Japan and Malaysia. They wanted to purchase a three-bed terraced house valued at £300,000 and convert it into a six-bed house in multiple occupation (HMO). As part of the HMO conversion, they

planned to undertake a loft conversion, a refit and a refurbishment, all of which fall under permitted development. The clients wanted a short-term loan to cover 80% of the purchase price and were able to fund the works separately. Using Bridge to Let, we provided an 80% gross day one bridging loan of £240,000 at 0.67% pcm on an interest roll up basis. The client had nine months of interest roll up available, during which there were no payments due, to allow for any overruns and to allow time for letting or sale. The works were completed quickly and after three months, the client opted to switch to a Buy to Let loan, fixed at 5.29% for the first five years, which they were able to do without incurring any early repayment charge. The gross loan of £318,000 was for 75% LTV of the now higher property value of £425,000. This enabled the client to replenish the cash they spent on the refurbishment and facilitate their next purchase. MANY USES

Another popular use for Bridge to Let includes light refurbishment, where investors can increase rental and capital value by making renovations that require no planning permission and where there is no change of use to the property – changes such as a new bathroom, new kitchen, redecoration, rewiring or new windows. Bridge to Let can also be used as a development exit loan, enabling developers to refinance a scheme that is completed or nearing completion, and then switch onto longer term finance once the properties are ready to be let to tenants. There are many practical ways in which combining flexible short-term finance with the certainty of a preapproved exit can prove the ideal solution for investors who want to grow their return but manage their risk. As such, it’s becoming an ever-more important tool for brokers active in the buy-to-let market. M I APRIL 2021





The final nail in the coffin for BTL? Jamie Johnson CEO, FJP Investment


here’s no denying the complexities involved in managing a rental property. Since 2016, landlords have been confronted with ongoing changes to the rules and regulations governing the private rental sector (PRS). Staying on top of these regulations and ensuring a buy-to-let (BTL) property complies with these standards can prove difficult and expensive for landlords. As a result, there has been a progressive decline in the number of landlords in the UK. Figures from HMRC revealed that the number of buy-to-let landlords with multiple properties fell in 2017-18 to 157,000, from 159,000 in the previous year. This was the first time the number of landlords had declined since the financial crisis. While landlords have been coming to terms with the new rules affecting the BTL market, the COVID-19 pandemic has also posed its own set of challenges. According to recent BDRC research, more than 80% of landlords feel they have been negatively impacted by the pandemic. What’s more, with more tenants willing to consider properties outside of major cities as a result of flexible working patterns, it has been reported that private rents in cities have fallen as much as 15% in 2020. The above situation highlights the complexities facing landlords at the moment. As such, it leads to a natural question – could we being seen a dramatic decrease in the number of landlords in the UK over the coming year? FJP Investment recently commissioned a survey of UK-based



property investors and landlords. Taking place at the beginning of the year, the research sought to uncover just how sentiment towards the BTL market has changed. As expected, it seems more landlords have become dissatisfied with the market. Just under seven in 10 (68%) said that buy-to-let has become far less attractive investment prospect in the last five years. Looking into the reasons as to why this is the case, 71% of landlords feel they have been unfairly targeted by new tax reforms and regulations since 2016. LANDLORDS REASSESSING

Based on their experiences, 44% of landlords told FJP Investment that they plan on selling one or more of their properties in 2021. Interestingly, the same number also said they plan on investing more in real estate. The research shows that the BTL market has reached a critical turning point. General dissatisfaction has been simmering amongst landlords who are reassessing their position. The concern is whether the additional complications raised by COVID-19 will in fact be the catalysing event that will lead to mass exodus of landlords. This will become

more apparent in the next year. However, it is important to recognise that property as an investment class still remains an attractive asset. Traditionally, buy-to-let has served as an attractive way for investors to benefit from regular income in the form of rental yields, as well as the potential long-term capital growth on offer from owning a property. The fact that the rate of annual house price growth is currently sitting above 5% demonstrates there is clear demand for bricks and mortar. Two-thirds (67%) of landlords said they would consider other forms of property investment that do not incur the same taxation and complexity as buy-to-let and second home purchases. What this demonstrates is that investors want to consider new property opportunities that are easily manageable, instead of having to worry about complex rules and regulations. Overall, it is clear that the property market is set to undergo a profound transformation as the UK slowly transitions out of lockdown. As revealed by the FJP Investment research, landlords are clearly reconsidering the advantages of being a buy-to-let investor. Yet despite these challenges, real estate still remains a popular asset class for investors. That is why we should see investors considering new ways of accessing property investment opportunities beyond traditional models, like buy-to-let, in the future. M I

Bricks and mortar: still a popular asset class for investors



A new industry initiative Adam Tyler executive chairman, FIBA


hen it comes down to it, a financial intermediary is wholly reliant on the number of funders that they have available at any one time. The wider the range, the higher likelihood of success; the fewer they have access to, the more limited the opportunities become for them and their customer. This also applies to sectors of operation. Working as a broker in just one part of the financial world, albeit one with which you are very familiar, will leave you without any viable alternatives when it contracts. Being more holistic in your approach creates more opportunities, not only to reach an extended group of customers, but also to grow the range of products you offer to your existing customer base. GROWING CONFIDENCE

There has been a strong demand for more information and access to specialist property funding products over the last couple of years, highlighted by the substantial growth in the amount lent in this market. There has been a growing confidence in the use of, for example, short-term lending to satisfy a customer’s immediate expectations. It is on this basis that a new initiative has come to market to provide more exposure for those funders who are reliant on intermediated business as their regular source of new business acquisition. The Financial Intermediary and Broker Association (FIBA) has partnered with our sister company, SimplyBiz Mortgages, the third largest mortgage club in the UK, to launch a brand new industry initiative. SimplyBiz Mortgages’ ‘Specialist Property Finance Club’, powered

by FIBA, offers advisers and brokers access to a full range of commercial lending products. From the outset this will include bridging loans, development finance, commercial mortgages and specialist buy-to-let (BTL), from a select number of lender partners at FIBA. NEW INITIATIVE

Our membership doubled in 2020, and following the addition of Barclays as a lender partner in February, we now have a number of new lender and professional partners joining FIBA over the coming weeks and months, who will be able to benefit from this new initiative through 2021. The ‘Specialist Property Finance Club’ aims to enable easier access to specialist products for both SimplyBiz Mortgages and FIBA members. It will offer the opportunity to benefit from exclusive arrangements and enhanced procuration fees, alongside exclusive access to specialist lenders and their products, where for the members of SimplyBiz Mortgages, these lenders and their products have not previously has been available. The launch took place initially with 12 lenders from the FIBA partner panel, all of which have undertaken the relevant due-diligence process and been selected to provide the full range of commercial property finance. The club will be welcoming further FIBA lender partners onboard over the next 12 months to expand the opportunities available. The interest in specialist property finance has been one of the main drivers in the association’s membership doubling in 2020. The demand across the SimplyBiz Mortgages membership for access to lender partners at FIBA has meant that the creation of the Specialist Property Finance Club was important at a time when there has been such a growing interest in the sector. This new partnership innovation has been embraced by the launch lenders, with the ability for a wider

intermediary community to introduce new customers supported by specialists in the commercial sector. There has been a huge amount of investment in time and resources at FIBA over a number of months. Whilst creating this additional innovative method of accessing the commercial lender and funder community, we can see that there is the opportunity to benefit from broker enhancements alongside the ability to access some of the lender partners, that previously may have been not possible directly. ADDING STRENGTH

Martin Reynolds, chief executive of SimplyBiz Mortgages, added his thoughts, saying: “Many firms have taken the opportunity to diversify over the past 12 momentous months, we are excited to bring a unique opportunity to market. SimplyBiz Mortgages members now having the ability to access to a number of lenders specialising in this highly defined lender area, who can offer a variety of solutions for their client requirements will add another strength to their proposition. “Whilst some of the lenders who are part of the launch of the club will be familiar to our members, others could potentially be new and therefore offer new and innovative solutions for client requirements.” This is just one example of how innovation is going to be a major part of the interaction between all groups involved in commercial finance over the upcoming years. We have seen the wide range of new lenders come to the market since 2009 and how they have benefitted UK small to medium enterprises (SMEs). There are a number of new SME banks, both already with licences granted and also those already with applications in with the Prudential Regulation Authority (PRA). The more help we can give to the customer in sourcing our broker and funder community, the greater help we can give to a recovering economy. M I APRIL 2021   MORTGAGE INTRODUCER




Reversing the decline of small housebuilders Roxana MohammadianMolina chief strategy officer, Blend Network


he UK has seen its small housebuilder demographic fall by 80% in a single generation. Funding, or rather the lack of it, has been and remains one of the key reasons for the drop. Alternative lenders, with their flexible structure and dynamic approach to lending, can help reverse the ill-fated decline of small housebuilders.

UK today compared with 40% in the 1980s, with lack of funding for SME property developers one of the key reasons. According to this report, the availability and terms of financing for residential development has become extremely difficult for small housebuilding companies over the past decade or so. Lenders have drastically changed their attitudes to the construction sector since the 2008-09 financial crisis, and while small sites are consistently efficient in their delivery of new homes across multiple market areas, these are often the ones which struggle most to unlock funding. PART OF THE SOLUTION


Small and medium-sized (SME) housebuilders, defined as firms that produce 100 units or less every year, have fallen in number from over 12,000 in the mid-1980s to approximately 2,400 today. According to a 2017 report by the Home Builders Federation titled ‘Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes’, small builders are responsible for just 12% of homes being built in the

Can alternative lenders help small housebuilders?



How can the UK reverse the decline in number of small housebuilders? More specifically, can alternative lenders help? The answer, in my opinion, is that alternantive lenders can and must be part of the solution to the UK’s deep housing crisis that is causing so many people unable to get their foot on the property ladder. The core role of alternative lenders in channeling muchneeded finance to the construction sector was evidenced throughout 2020,

when the pandemic meant that many traditional lenders were busy trying to administer the Coronavirus Business Interruption Loan Scheme (CBILS). Since then, the case for alternative finance has become increasingly compelling at a time when banks have continued to tighten their credit criteria and had to face increased regulations and capital adequacy ratios restricting their lending capabilities. With their nimble set-up, dynamic lending criteria and sharp use of technology, alternantive lenders are able to serve borrowers who have grown acostumed to faster, better and simpler processes. SPEED AND FLEXIBILITY

In a market where time is money and winning a deal may depend on the lender’s ability to move quickly, speed is one of alternantive lenders’ key selling points. Their online processes and technology bandwidth help speed everything up. For example, at Blend Network we recently funded a £1,700,000 loan in just six minutes, and the money was in the borrower’s account within the next few days. Alternative lenders’ ability to provide higher gearing compared to traditional institutions is another major selling point. Blend Network currently offers up to 68% loan-to-gross-developmentvalue (LTGDV) finance. This is especially important in the property sector, where developers are often asset-rich and cash-poor, looking to borrow as much as possible against their assets. Furthermore, alternative lenders’ flexible and individual approach to lending means they are often happy to fund querky, non-off-the-shelf deals that traditional lenders wouldn’t typically fund. In other words, alternative lenders do not go through a box-ticking exercise. The case for alternative finance has become increasingly compelling, and I strongly believe the time is ripe for the government to bring alternantive lenders into the fold to solve the housing supply crisis and help achieve its 300,000 unit annual housebuilding targets. M I



Finding the opportunities Brian Rubins executive chairman, Alternative Bridging


ntroducers and lenders alike can choose to compete in a crowded marketplace or seek out new opportunities. Because almost every bridging lender will lend on a buy-to-let or other residential investment, competition for these assets is rife, and the main ways to increase market share are to reduce interest rates or increase loan-to-values (LTVs). One gap in the residential market – albeit a narrow one – is regulated bridging. This applies to first charge mortgages on private dwellings that are, have been, or will be occupied by the owner. The loans can be complicated to process and limited in size, but

for those with the authorisation and relevant skills, it is less competitive. So, where is there a wider gap in the market? One place is commercial bridging and term loans from £500,000 to £5m. There are fewer lenders active in this area, and even less know how to underwrite beyond ticking boxes. Real commercial lending applies to offices, retail, industrial and distribution, and then, of course, residential investment. Each has its own merits or challenges, particularly after the recent impact of both Brexit and COVID-19. Experience has shown that retail units, secondary industrial and warehousing – have survived, and some occupiers have prospered during the pandemic. These are attractive assets to lend against. It is also important to be clear on what is on the ‘no’ list. After all, why waste time trying to push a square peg into a round hole?

Except for a few specialist lenders, assets which are valued by a capitalisation of their trading income will be hard to fund. For example, filling stations, hotels, cinemas, night clubs, bars and restaurants. Further, trading in most of these has been affected by COVID-19 and many are closed. Even those which are investments, let on long leases, are unlikely to be receiving rents during the lockdown and will be unpopular. Also on the ‘hard to finance’ list are farms, equestrian centres, smallholdings, and the like, as well as hospitality and care homes, all because they are specialist assets and most lenders will not have the expertise to assess them. Term loans may have their own challenges – particularly proving a borrower’s ability to service the monthly interest – but this provides an opportunity. M I

SMEs lead the UK’s recovery Chris Biggs partner, Theta Global


ver the past year and a half, individuals and economies the world over have felt the gruelling effects of COVID-19. With unemployment in the UK soaring as businesses struggled to adapt, small to medium enterprises (SMEs) led the way placing themselves at the centre of the economic recovery. In these first few months of 2021, we have seen unemployment rates in the UK fall for the first time since the pandemic began. Government statistics show employment increasing by 8%, with 68,000 more people on payroll, and the REC has reported 146,000 new jobs posted. This, no

doubt, is due to the success SMEs have seen throughout lockdown. SMEs are responsible for three-fifths of UK employment, and pre-COVID they were hiring at three times the rate of other businesses. At Theta Global Advisors, our research shows that the agility and resilience of SMEs has paid off: 19% won previously inaccessible clients over the course of the pandemic. Now, 22% of decision-makers in this sphere are looking to hire more employees and consultants this year in order to keep up with and continue the rapid growth trajectories they have seen. This SME growth, occurring in conjunction with the drop we have seen in unemployment rates in the UK, highlights yet again the vital role small businesses play in supporting Brits, and the positive ripple effect their success has on wider economic recovery. Following this line of reasoning, the

government has set corporation taxes on a sliding scale, as well as providing Help to Grow schemes in order to support SMEs going forward. This support, however, must extend further in order for the British economy to get back on track. Large businesses can facilitate this financially by going to small businesses and service providers, utilising their innovative methods as opposed to previous major corporate providers with arguably unnecessary overheads. Nevertheless, placing this burden on businesses themselves may be unreasonable. As such, government incentives such as reduced taxation on projects utilising small businesses and service providers may be an ideal way in which we can financially support their continued success, growth, and resulting positive impact on employment and the UK’s wider economic recovery. M I APRIL 2021   MORTGAGE INTRODUCER




An eye on the future Makayla Everitt, head of SimplyBiz Mortgages, talks to Mortgage Introducer about the pandemic and plans for the future How has COVID impacted SimplyBiz Mortgages? We made numerous enhancements throughout lockdown and launched additional support including our care and support packages plus our summer of learning education plan. To support all of our members we have worked extremely hard to ensure we enabled them to be as successful as possible. What are the challenges that lockdown has presented for the business? Face-to-face member contact was our biggest challenge, as we pride ourselves on our training, educational and support programme. We had planned to do over 90 events last year and we did carry out nearly 20 prior to lockdown but having moved into lockdown we made the swift decision to run a new virtual events system ensuring we continued to deliver a valuable CDP educational programme for our members. Over 6,000 members registered for our virtual events. What parts of the business have performed well during lockdown? As we have been focusing on diversifying our members businesses for a number of years, many members were already able to focus on other key areas of their businesses when the mortgage market tightened. They quickly focussed on protection and general insurance as well as pivoting very successfully towards Product Transfers and the remortgage market. Overall, we have had a strong year and due to the commitment and focus of both our members and our team who have truly worked in partnership. What are SimplyBiz Mortgages ambitions for 2021? We have some really exciting new launches planned across a number of distinct product areas, so watch this space. Our number one focus is always to ensure we build and grow our Mortgage Club around the needs of our members, and we want to continue to be market leading in education, support and service. We’ve seen the rebrand of SimplyBiz Group to Fintel. What does this mean for the mortgage business? The launch of Fintel represents our expanding role in simplifying and improving the market as we help product providers, lenders, intermediaries and consumers navigate the increasingly complex world of retail financial services. However, our core purpose remains the same,



and as we continue to work in the best interests of the market to inspire better outcomes for everyone, we are confident that we will deliver even more for the firms who use our services. I believe the recent launch of the Fintel brand ultimately strengthens not only position of business as a whole, but each of the individual divisions within the group, including – of course – SimplyBiz Makayla Everitt Mortgages. As you have seen, the visual imagery of the Fintel brand is very digital, signalling our direction of travel, and I believe that’s a strong message for our market. Digitising the mortgage process to help advisers and members operate a slicker process is extremely valuable, and it is an area in which we want to lead the field. More than all of this though, I think Fintel represents the journey we are on, and it is very exciting time for SimplyBiz Mortgages, our members and our partners. When you were young, what job did you aspire to have as an adult? I always wanted to solve crimes and become a forensic investigator. Is there something about yourself that people would be surprised to learn? I am a bit of an open book, but I did make the Phantom of the Opera costume for Jonathan Stinton at our Charity event in 2019. What music do you listen to? Anything I can sing along to, I love to sing and the mortgage team have had to listen to me whilst we work in the evenings setting up for events, for which I normally apologise for. What is the best bit of advice you have been given? Sleep on an important decision and always ensure you are being fair.


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