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Stating the obvious
ates keep on falling as the interest rate war continues to heat up. HSBC and TSB are both now oﬀering 2-year fixes at 0.94% – undercutting the previous best rate of 0.95% oﬀered by Platform. Several lenders have also recently launched deals with rates sitting just below 1% as competition has ramped up. But these great headline rates also show why advice remains crucial. It’s all too easy to be drawn in by the tempting rate, but a lot can happen in two years. That’s before you even look at some of the fees involved in cheaper rate deals. Don’t get me wrong, competitive pricing is great and these lenders are oﬀering excellent deals, but clients need to be sure that they are getting the right deal for their circumstances. That’s why the broker is essential. Elsewhere, house prices dipped by 0.5% in June as the stamp duty holiday began to taper out, according to the latest figures from Halifax.
The drop came on the back of a 8.8% yearly increase, though and prices are still up an average of £21,000 on a year ago. This decline looks likely to be a short one, as the same issues plague the market that have for decades. More homes need building, and they need building sharpish. However, talking to people in the development market it appears that they are plagued by sharply rising material costs, delays and shortages. The materials shortage is a global one, with raw material shortages, stemming from global demand and external factors such as factory closures, continuing to constrain production of essential materials for building homes. It looks unlikely that this will change in the next 12 months and that, coupled with the other factors currently fueling house price growth, should keep pushing house prices up. Long-term planning is needed before the first step on the ladder becomes too big to take. M I
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Contents 7 AMI Review 9 Market Review 13 Education Review 14 Networks Review 15 London Review 16 Self-build Review 17 High Net Worth Review 18 Recruitment Review 19 New-build Review 20 Technology Review 21 Service Review 22 Second Charge Review 24 Buy-to-let Review 29 Protection Review 35 General Insurance Review 38 Equity Release Review 43 Surveying Review 45 Conveyancing Review
46 The Outlaw The latest from our resident outlaw 50 Cover: Coming Home Mortgage Introducer caught up with CHL Mortgages to discuss the lender’s return to the market 54 Loan Introducer The latest from the second charge market 58 Specialist Finance Introducer Development, bridging, a spotlight on Pivot, and more from the specialist market 62 Last Word: National Trust Marcus Dussard, sales director at Hampshire Trust Bank, considers the state of buy-to-let
SPECIALIST FINANCE INTRODUCER
JULY 2021 MORTGAGE INTRODUCER
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What is the point of AMI? Robert Sinclair chief executive oﬃcer, AMI
hilst the Association of Mortgage Intermediaries (AMI) has a good representation of smaller directly authorised (DA) firms within its membership, there are still a number who have yet to discover us. In reality, it is these firms that need AMI most. You need us to argue for what you do for customers with the Treasury, the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS), and to ensure that lenders see the benefit of your advice. We also provide help, guidance and simple explanations of what the FCA
wants you to be doing. The big firms predominantly pay for this advice and support, but small firms somehow do not appear to see the benefit – perverse, as they still benefit from the lobbying work we do, and would derive the most benefit from our factsheets, guidance and newsletters. The FCA has never been busier taking on new subjects and consulting on changes that will deeply impact all firms. These are issues that are quite removed from what most advisers see as being within their job. There are new consultations on diversity and inclusivity, a stronger consumer duty, the need to better deal with and evidence vulnerability, an expansion of the concept of fair value in products, and major changes to the pricing of general insurance (GI) products that will all have much wider implications.
A step away from the wild side Stacy Reeve senior policy adviser, AMI
t is felt that the regulatory regime for online financial promotions is not fit for purpose, and some have even called it the ‘Wild West’. However, last month Google announced a significant change to its policy on financial services adverts. From 30 August 2021, financial services advertisers will, as part of Google verification, need to demonstrate that they are authorised by the FCA or qualify for one of the exemptions. Mortgage intermediary firms may be impacted by this if they advertise on Google or accept leads from advertisers or aggregators that have been acquired this way. These firms should read Google’s update
to assess whether they will need to apply for Google verification. Advertisers such as lead generation firms, to avoid having to become FCA regulated, may seek to become an appointed representative (AR) or introducer AR (IAR) of a mortgage intermediary firm, and let them approve their financial promotions. As regulated entities, principal firms should carefully consider any risks with this approach, as they are responsible for the actions of the AR or IAR. Google’s policy update is a step in the right direction, and coupled with the Treasury’s confirmed plans to proceed with a financial promotions regulatory gateway, this shows clear intent to make life more diﬃcult for those that do not have the correct consumer outcomes in mind. One missing piece of the puzzle is the inclusion of financial scams in the Online Harms Bill, although we await the government’s consultation on online advertising regulation, promised later this year.
This is in addition to the work firms are still doing to embed the Senior Managers Regime, get their directory entries right and fully train in the conduct rules. All of these areas do not really impact on the daily routine of getting the customer the best mortgage. However, at a firm level it will be important to grasp these initiatives and work out how firms are going to demonstrate how they embrace, monitor and measures these issues. It is AMI’s role to run workshops and work with firms to ensure we keep the mortgage intermediary world in a safe and productive place. CONTINUING DEBATE
We do this more complex policy type work in addition to the day job of helping firms with renewing their professional indemnity insurance, debating with the FCA how the ‘cheapest rule’ does not work well in practice, and supporting firms on how to deal with legal cases resulting from historical interest-only advice. In the last year, we have had discussions with the Treasury on such wide-ranging subjects as longterm fixed rates, stamp duty, Help to Buy, mortgage prisoners, the impact of COVID-19 financial support on mortgage eligibility, particularly for the self-employed, and the lifetime mortgage and retirement interest-only (RIO) markets. This is all done to help ensure that the mortgage advisory profession is seen as core and relevant in policy creation, and that your part in this is understood. We deliver our unique insights on what customers really need and want, working every day to promote and protect the importance of the every adviser. This helps firms to stay in a safer place. Being inside our tent and supporting the cause should make sense, but many see it as unnecessary. The next few years will see FCA intervention at an unprecedented level, driving product manufacturers to exercise more control over distribution. AMI membership might be the best insurance policy you ever have. M I JULY 2021
F1511_NFI_Helping Hand Campaign_MI_205x270_AW.indd 1
Time will tell on government schemes Xxxxxxxxxx Craig Calder xxxxxxxxxxxxxxxx, director of mortgages, xxxxxxxxxxxxxxxx Barclays
n last month’s article I briefly reflected on how the housing market has progressed in such a positive fashion since its ‘reopening’ following the initial lockdown, and how vital various government schemes and initiatives have been throughout this period. Let’s now look at this in a little more detail, as we approach the end of H1 2021 and the subsequent tapering of the stamp duty holiday. The early stages of Q1 were particularly manic, and to a slightly lesser extent, Q2 continued to experience a whirlwind of activity across the purchase market, following the announcement of the stamp duty holiday extension. This resulted in a significant uplift in new buyer enquiries and agreed sales throughout H1, with house prices rising as new listings failed to keep up with the number of interested buyers. HOUSING SUPPLY AND DEMAND
To support this, data from the latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for May outlined that 32% more respondents noted an increase from prospective buyers. However, supply could not keep up with this increased demand, with the net balance of new instructions coming in at -23%, down from -4% in April. The disparity between new buyer enquires and new instructions was the widest seen since November 2013. However, the data did suggest that sales instructions could improve over the coming months, as survey participants reported that the number www.mortgageintroducer.com
of market appraisals being undertaken was up on a 12-month comparison. As the market sees the impact of people trying to beat the stamp duty holiday, newly agreed sales have risen once again, with +30% of respondents reporting an increase, although this was said to be down from +47% in April. Looking further ahead, whilst respondents expect sales to rise in the coming three months, they expect this to be at a lesser rate than reported in previous surveys. RECORD HIGHS
The price of property coming to market rose by a “relatively modest” 0.8% in May, although this still represented the largest rise at this time of year since 2015, according to the latest Rightmove house price index. The data showed that prices are now at a new record high in all countries and regions of Britain. The number of sales agreed on properties worth over £500,000 in May was 49% above the same period in 2019, despite buyers knowing they will miss the maximum stamp duty saving, which came to an end in June. However, Rightmove says high prices, combined with an all-time low in the number of available properties on agents’ books, are “starting to slow the market’s frenetic pace.” Sales agreed in May were 17% ahead of same period in 2019, down from 45% in April. These statistics demonstrate the initial impact of the stamp duty holiday for all borrowers, and the sustained confidence being experienced around the housing market moving forward. THE DEPOSIT BARRIER
Personal finances and job security have ebbed and flowed over the past 12 to 18 months. The latest research from the Building Societies Association (BSA) has highlighted the impact of this on the housing and mortgage markets.
The research suggested that, for the first time in nine months, raising a deposit returned as the biggest barrier to buying a property (59%). JOB SECURITY
During the pandemic, a lack of job security became the greatest concern, but this has steadily declined to less than half of respondents (45%), down from 68% in September 2020. Whilst this is a positive trend, it does show that there are still a considerable number of people who do not feel confident about their long-term employment prospects. There’s also a growing expectation that house prices will continue to rise, with half of respondents (50%) expecting further price increases in the next 12 months. This compares to just a quarter of people (25%) in December, and is in stark contrast to this time last year, when 45% of people thought prices would fall. Three in 10 people (30%) think now is a good time to buy a property, less than the 37% who thought so in March, which is likely to be a reflection of the looming stamp duty holiday deadline and an ongoing increase in house prices. As commented in the research, it’s hardly surprising that raising a deposit has returned as the biggest challenge for those people looking to get onto the property ladder. AFFORDABLE SOLUTIONS
What this does demonstrate is how vital it is for both the government and lenders to continue providing potential homeowners and existing homeowners with responsible and affordable solutions at the higher loan-to-value (LTV) bands. With this in mind, moving forward it will be interesting to see the impact of the Mortgage Guarantee Scheme and the First Homes initiative. This is just one of many challenges facing lenders, but with the housing market showing few signs of slowing down anytime soon, it is an area of great importance in terms of meeting the growing homeownership aspirations of the UK population. M I JULY 2021 MORTGAGE INTRODUCER
Behind the headlines of rate reductions Martin Reynolds CEO, SimplyBiz Mortgages
e are now comfortably into July, and hopefully the start of people taking a well-earned holiday, not just staying at home but also travelling both abroad and across this beautiful island of ours. It also means that we have all survived the second stamp duty cliff edge. I hope everyone’s nerves stayed intact and all your clients got their homes in time. We did start to see service crack with some lenders, and I can only hope that this was another short-term blip rather than the start of a trend. What we have seen over the past few weeks is a plethora of rate cuts, and not just by a few basis points, but headlines of 50 to 70 basis points. There is either some pipeline building needed, nervousness around year-end targets being missed, or the products were overpriced previously. Looking at the money markets, it seems that SWAP rates for two, three and five years have been steadily rising since February, but mortgage rates are falling. Maybe one for a lender to write an article on, or The Outlaw to comment upon? What is interesting behind the headlines is where the price cuts are. Are they in the right areas? It’s great headlines are at 0.99%, but at 60% loan-to-value (LTV) it’s not like clients weren’t already getting a great deal. Yes, rates are dropping the higher up the LTV curve you go, but not usually at the same percentage. I fully understand pricing for risk, and yes, statistically there is greater risk the higher up the curve you go, but it would be interesting to see the return www.mortgageintroducer.com
“What is interesting behind the headlines is where the price cuts are. Are they in the right areas? It’s great headlines at 0.99%, but at 60% LTV it’s not like clients weren’t already getting a great deal”
of paying a higher monthly payment cannot be used with enough weighting as it should when assessing a mortgage. This needs to be reviewed, and if changes to regulation are needed to allow lenders to utilise it better, then let’s campaign for it. A recent survey by Aldermore of both potential homeowners and those who have just bought found that 26% considered affordability to be the biggest obstacle to them buying. In total, and more worryingly, 72% felt that home ownership was outside of their reach. Knocking 10 basis points off a rate, whilst welcome, will not solve the problem. Kensington issued a fantastic piece of research at the end of 2020 with Cebr about the benefits of a permanent adjustment of stamp duty limits to the industry and the wider economy. The key points that caught my eye were: A permanent extension of the stamp duty threshold could provide a fiscal surplus of £139m per year, generated by revenues based on higher consumption and increased housing market activity; Approximately 37,000 more property transactions will take place each year; Maintaining the stamp duty threshold would provide a boost to the economy, mobility, and downsizing.
We need to look more widely, and address how we can change the current models, challenge how regulation and government policy is set, and provide lenders with a clear view of how they can help the market for the long-term, without needing the ‘bat phone’ to the Treasury. Affordability has been a problem for many years, and the more house prices rise faster than the cost of living, the longer it will continue. The Bank of England recently released a report concluding that firsttime buyers were likely to experience price discrimination. Whilst I admit that the sample data used was probably too old, I think the point is still valid. We have seen many headlines about how monthly mortgage payments are cheaper than renting, yet this history
Finally, we have the challenge of the deposit. Again using the Aldermore research, we can see that 18% felt that raising a deposit was their biggest challenge, with comments such as “I can’t afford to pay the rent and save for a deposit.” Whilst it should not be an easy transition to homeownership, and people should understand the risks and challenges faced, we do need to ensure we do not keep putting more and more barriers in their way. Yes, the ‘Bank of Mum and Dad’ (and Nan and Grandad) will help, but that process is not as easy as it should be either. Where next? Let’s not get distracted by the great headline rates from ensuring we provide a long-term, sustainable housing market for all who want to take on the challenge. M I
on capital models for the low LTV deals currently. In my opinion, pricing is far too onedimensional to fully address the issue of how to we get more people on the housing ladder. We seem to be on the merry-goround of government support with the variety of Help to Buy schemes, and whilst they all have their place, these are really introduced to encourage lenders and builders to play in that particular market, rather than addressing the constraints causing the interventions in the first place.
JULY 2021 MORTGAGE INTRODUCER
Robotics presents a workable alternative year, found that eight in 10 financial institutions in the UK were planning to invest in new technology over the next Tim Hague 12 months. director, For lenders, the dominant Sagis conversation about how to improve digital services over the past four or fter surviving COVID-19 five years has been about the use of and its aftermath effects on integrated Application Programming the economy and Interfaces (APIs) – effectively a digital individuals’ finances, priority code that allows data to be exchanged number two for many lenders is how to in both directions between two deliver the best digital service they can. institutions safely and securely. It’s a daunting prospect for the vast majority of lenders. “Open banking laid the Lloyds Banking Group may have foundation for a fundamental invested £4bn in technology since 2018, leading to its declaration in shift in the way financial data February’s results that it is the UK’s is shared and accessed” “largest digital bank,” but for the many small building societies and intermediary lenders in the UK, The idea ultimately being that, working out how to embrace a digital for example, a borrower applying for future is more nuanced. a mortgage with Halifax through a In a hugely fragmented mortgage broker online can grant temporary market, the value chain is complex secure access to their banking data with and presents some real challenges to Santander, to allow Halifax to digitally automation. The number of parties underwrite their affordability without involved is bewildering – borrower, any human being having to see the data estate agent, broker, lender, credit at all. Accuracy is greatly enhanced, as reference bureau, Office for National is security. Statistics (ONS), valuer, solicitor, If you’re Halifax or Santander, this vendor – there are manifold number of is a no-brainer. Indeed, we have seen crunch points where data risk spikes, many lenders create API links with a even when managed well. variety of other players, including the There’s also the cost of investing in credit reference agencies for example. tech. The options are so numerous that The downside is that you need a new they demand careful consideration. API for every institution you partner Most lenders accept that, to survive, with, meaning massive amounts of they have to improve their technology. development work and cost. They also Open banking laid the foundation have to be reviewed and potentially for a fundamental shift in the way amended every time you make financial data is shared and accessed; a change to your data and digital ecothe pandemic, with its stay-at-home system to make sure they still work. imperative, has accelerated that shift at For smaller lenders, it might make a rate of knots. sense to build an API to exchange At a time of economic and social data with relevant credit agencies, crisis, Lloyds Bank’s fifth annual but probably not with all other banks, Financial Institutions Sentiment sourcing system providers, mortgage Survey, published in September last networks, etcetera.
MORTGAGE INTRODUCER JULY 2021
The cost is simply too great to justify, even when the money is there to be spent. The return isn’t worth it. So, where does that leave lenders in this position? They know they need to improve digitally, but it’s a cost that would cripple their business rather than improve it. There is another way. Let me revisit a movie character most of us will recall with fondness: C3PO. The humanoid droid of the Star Wars films was a translator of many droid dialects. Or, if Douglas Adams’ The Hitchhiker’s Guide to the Galaxy is more your thing, picture the babel fish.Both offer useful analogies to better understand the potential of robotics. All brokers know that re-keying is annoying. There are other elements too, such as eID, that can prove even more frustrating. Robotics can be used by lenders to listen, interpret and solve this type of problem. Think of this technology as a C3PO into which all your partners feed their data in all its formats, and it comes out the other side to you in the format you need. This takes the headache of building separate APIs out of the equation. By employing robotics, automation can emulate the human endeavour of inputting data into a lender’s application system. Rather than needing multiple expensive API integrations, lenders could, for example, simply scrape data from a PDF of a broker’s fact-find to digitally populate the application form, dramatically reducing the amount of keying and reducing potential errors for every party. Clearly there are nuances, and robots are improving in performance and their ability to complete complex tasks almost daily. Robotics now offer a viable workable alternative that should figure in the thinking of any institution grappling with the issue of building a digital ecosystem that works for them, is agile, and can evolve over time along with the market. Any lender wondering how to solve the tech question might seriously consider this approach in addition to more conventional thinking. M I www.mortgageintroducer.com
Ensuring long-term success as an adviser Gordon Reid business development Xxxxxxxxxx manager, learning and xxxxxxxxxxxxxxxx, development, LIBF xxxxxxxxxxxxxxxx
ith a buoyant housing market and government policies designed to encourage and enable homeownership, a mortgage advice career continues to offer opportunities. However, despite changes in working practices and how many mortgage interviews are conducted, there also continue to be significant shortages in qualified, skilled advisers. So, once you have completed your initial qualification studies and secured a position, what are the steps you can take to give yourself the best opportunity for long-term success? CONTINUE TO DEVELOP YOUR SKILLS AND KNOWLEDGE
Anyone trading as a mortgage adviser must complete CeMAP, but once you’ve done this there’s no requirement to complete additional studies, unless you wish to specialise in an area such as equity release. There are also very limited requirements for continuous professional development (CPD), despite this being an industry where there are so many changes – to products, processes, systems, regulations – and where there are so many ways for customers to secure their mortgage. This means that if you, as an adviser, do not continue to develop your skills, you’ll be quickly left behind. You should be spending at least half an hour every day reading about what’s happening in the mortgage world. The fact that you’re reading this article is an indication that you’re the kind of mortgage adviser who www.mortgageintroducer.com
takes a professional attitude to keeping updated and developing your skills. Fortunately, there’s plenty of material available through publications like this one, on the internet and through professional bodies. BUILD AND MAINTAIN CUSTOMER RELATIONSHIPS
For some mortgage advisers, primary interactions with clients all take place within a period of less than one month. Having found the ‘best deal’ for the customer and supported them in completing the application paperwork, they may not speak to them for months, or even years. However, as is evident in many professions, the most successful advisers are the ones who see the benefits of an effective long-term contact strategy. This shows you genuinely care about your customer and are not simply looking for further opportunities to sell them something. Yes, this must include meeting them when their products are due for renewal or upgrading. Equally, the customer needs to feel that they can turn to you when they simply need additional reassurance or information, such as when they receive their annual statement. LISTEN AND TRULY UNDERSTAND YOUR CUSTOMER
Any learning programme worth its salt will include a module on listening skills. There remains, however, a significant difference in the ability of advisers to listen to their customers effectively. The key to your success in this area is to enable them to talk, so you can understand what they are saying, and indeed what they are not saying. Through summarising and questioning you can check and test your understanding. You should also make it clear to the customer that it’s always your
responsibility, not theirs, if you have misunderstood something they’ve said. CONSIDER WHETHER YOUR CUSTOMER COULD BE VULNERABLE
In recent years the subject of vulnerability has really come to the fore, in part because more people recognise vulnerability as something which can affect any one of us, no matter where we are in our lives. For mortgage advisers, this is particularly significant – you have a responsibility to recognise vulnerability in your customers. Many of the triggers for needing advice – including moving home, getting a divorce, illness, or the loss of a partner – can create stress, which is one of the biggest causes of vulnerability. You need to be alert to signs of poor financial capability or resilience, which are also significant factors. Given what I said earlier about creating long-term relationships with your customers, being alert to signs of vulnerability is a key skill. It also fits with the need to listen to them and understand their mindset, as well as their situation. PROVIDE A SERVICE WHICH SETS YOU APART – FOCUS ON ‘DOING THE RIGHT THING’
What do I mean by the right thing? In simple terms, I mean doing what’s best for the customer, even if that means recommending that they ultimately do nothing. Sometimes, doing the right thing will create a lot of work for little, if any, monetary gain. However, being able to demonstrate that you are prepared to do a little bit more is something customers will remember and appreciate. To be truly successful, you need advocates – customers who tell their family, friends and colleagues about the great service they’ve received. After internet searching, this is still the most common way for customers to find a mortgage adviser. You only become an advocate if you’re truly wowed, made to feel special, and know the adviser has done the right thing for you. M I JULY 2021 MORTGAGE INTRODUCER
The COVID eﬀect on network membership Shaun Almond managing director, HL Partnership
L Partnership continues to attract mortgage firms, with the network enjoying organic growth over the past 12 to 18 months. Like our peers, we constantly check how our proposition stacks up against the competition. It is these market forces that ensure mortgage broker firms which are exploring their network options are considering the best propositions that are available to them. However, networks also need to measure themselves against the directly authorised (DA) experience, and be able to oﬀer strong evidence that the appointed representative (AR) option is not only viable, but also preferable. Whilst a major part of my role is the proactive encouragement of intermediaries to join us as an AR firm, I do understand the mindset of those who prefer the DA route. The desire to be totally responsible for one’s own business is very strong, and with the right financial and regulatory resources, it can be a satisfactory choice for many. That said – and I can only speak for my network’s mortgage and protection specialisms – the advantages of membership can demonstrate a powerful argument for the majority of adviser firms, probably more so in the wake of the pandemic. COMPLIANCE
As regulatory demands increase, we know the cost of compliance is rising. DA firms either have to employ staﬀ to interpret and build systems that prove to the Financial Conduct Authority (FCA) that they are
delivering great customer outcomes, engage outside help in the form of a contracted consultancy firm, or make use of services provided by DA mortgage clubs, amongst others. Working with an outside specialist in no way abrogates the DA firm’s responsibility for ensuring its own compliance, and on top of the cost of outside support, resource has to be allocated in-house to instigate external advice and recommendations.
“The advantages of network membership can demonstrate a powerful argument for the majority of adviser firms, probably more so in the wake of the pandemic” On top of that, the responsibilities on the DA owner or CEO and senior team under the Senior Managers and Certification Regime means that extra time is taken away from business development and strategic planning. PI INSURANCE
It cannot have escaped the notice of every firm contemplating their future as DA that professional indemnity (PI) insurance alternatives are becoming fewer. Renewal is no longer a certainty with an existing insurer, excesses are increasing, and premiums are rising as the number of providers shrinks. Those PI firms which are left are becoming more discriminatory in what they will accept and inevitably that will put greater pressure on adviser firms looking to run successful businesses. TECHNOLOGY
Keeping current with the latest technology advances can be an expensive business, but those adviser firms that do not review their
technology needs on a regular basis will struggle. All brokers face increasing competition, not only for new business but also to keep hold of their existing clients in the face of online brokers, lender direct deals and comparison sites. So, making use of up to date systems can help brokerages run more eﬃciently in this modern market, by simplifying customer management from enquiry to completion, enabling and tracking compliant data capture, and seamlessly connecting with lender and protection provider hubs. These objectives are no longer a wish, but a necessity. Being independent is an understandable aspiration, and many still believe that the costs are worth paying for the cachet that independence represents. Yet the world has changed, and the pandemic and lockdown have taught us, both personally and professionally, how lonely and exposed we can feel when family, friends or like-minded peers are not accessible. The real life diﬀerences between a DA and AR proposition are, in reality, very few. In the mortgage and protection sector, both provide a service that is representative of a whole of market oﬀering to customers, and both sides are just as free to promote their own brand and – certainly in our case – maintain individual business identities. Where they diﬀer is that membership of a good mortgage and protection network takes the legwork away from having to evaluate latest technology, reduces the risk of missing vital FCA updates, and mitigates the worry about whether a complaint will result in a PI insurance premium hike. Members typically still enjoy representative whole of market access and ongoing marketing to help support existing customers. Lastly, there is the added value of being part of a community when external factors make life and business anything but certain. As the costs of independence mount and the real world diﬀerences between AR and DA status continue to narrow, the decision to remain directly authorised is no longer a simple one. M I www.mortgageintroducer.com
This run will continue Robin Johnson Xxxxxxxxxx managing director, Kinleigh, Folkard and Hayward xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Professional Services
eople are moving, and that’s not about to change any time soon. By the time you read this, we’ll be past the June cliff edge on stamp duty and have a much clearer idea of the potential for transactions to reflect the higher stamp duty costs involved in moving house. In reality, it has become obvious that the maximum £15,000 saving under the scheme has made its way into the value of homes. This obviously has not been consistent across the country or for all property types, but on average, buyer confidence and sellers being aware that prospective purchasers have improved affordability have together resulted in a rise in asking prices. Indeed, the Office for National Statistics (ONS) shows staggering growth in values across England, with prices up by 8.9% in the year to April 2021, down from 9.8% in March 2021. England’s house prices were growing the same as the UK rate of 8.9% in the year to April 2021, with the North East the fastest growing region with annual growth of 16.9%. The lowest annual growth was in London, where prices rose 3.3% over the year to April 2021. This entirely makes sense: values in the North East are pretty affordable and a £15,000 price hike represents a significant proportion of that, compared to properties in London valued much higher, where £15,000 off the purchase price doesn’t make a dent. Nevertheless, the scheme illustrates just how important confidence is in setting the direction of the market. Transaction data published in late June by HMRC shows there were 102,100 homes sold in May, not seasonally adjusted, down around 10,000 from April and around 71,000 since March. www.mortgageintroducer.com
This bodes well for anyone fretting about a chaotic transition to the second phase of the stamp duty holiday between July and 30 September, when the tax will be payable above a £250,000 threshold rather than the £500,000 which applied between August 2020 and 30 June. The slowdown in transaction volumes suggests that the market is managing expectations better this time around than was possible in March. Brokers will have done their utmost to factor in missing any deadlines into affordability calculations, and I think we can expect that the lack of supply of property will deter any appetite to renegotiate prices – especially in London and the South East, where the tax subsidy has really not impacted price growth as it has elsewhere. It wouldn’t be my monthly column without reference to the London market, particularly, but I have been encouraged in the past month or so by data coming out from various sources. First, Knight Frank analysis showed prices in prime Central London grew by 0.3% in the year to May, compared to 3.1% in prime outer London. This increase in prime Central London is the first rise in five years, since May 2016, the month before
Richmond: Growing demand in prime outer London
the EU referendum, and Knight Frank argues that this “underlines how the recovery of the property market in prime Central London is not reliant on the reopening of international travel.” They also noted that in prime outer London, growing demand for space and greenery after three national lockdowns has led to annual price growth in excess of 6% in markets like Richmond, Dulwich, Wandsworth and Belsize Park. Wimbledon experienced price growth of 9.4% in the year to May, which was the strongest of all London markets. Second, research from Nationwide Building Society indicates that fears over remote working and the future of the office may have been overblown, and that Londoners still pay a significant premium to live near a tube or train station. Andrew Harvey, senior economist at Nationwide, says: “Our research indicates that homebuyers in the capital continue to pay a significant premium to be close to a station. “A property located 500m from a station attracts a 9.7% price premium – approximately £46,800 based on average prices in London – over an otherwise identical property 1,500m from a station. “A property located 1km away commands a 4.3% premium, at 750m this increases to 6.8%, while a property 500m from a station attracts a 9.7% premium.” Add to this the fact that Harvey’s analysis suggests that there has actually been a slight increase in station premiums in London compared with pre-pandemic levels – possibly influenced by price inflation driven by the stamp duty holiday – and the market is looking pretty healthy as we come to end of the first half of the year. How the second half performs has been fodder for much speculation, but my gut tells me that the state of flux that the pandemic has triggered runs far deeper than a tax break. People are moving, and that’s not about to change any time soon. M I JULY 2021 MORTGAGE INTRODUCER
Self-build in a post-pandemic era Craig Middleton, mortgage sales manager, Harpenden Building Society
s we navigate new ways of living through these COVID-19 times, there’s a lot for lenders, mortgage brokers and their customers to consider. We’re in a very different world compared to just a couple of years ago, so what’s changed when it comes to housing and the way we finance property? MORTGAGE ENQUIRIES
As a specialist lender we’ve seen unprecedented interest in certain mortgage products – self-build is one. In the conversations the Harpenden team are having with many brokers, two distinct themes regularly come up amongst the more general enquiries. Customers wanting to create a dream, bespoke home is one ongoing topic following the recent lockdowns. Achieving this in the most costeffective way is the second. A selfbuild mortgage is a strong option to accommodate both requirements. CREATING A DREAM HOME IN THE PERFECT LOCATION
Lockdown life has given us plenty of time to assess how and where we live and to consider what our dream home option would look like. TV shows like Grand Designs, shown on an almost daily basis during the pandemic, have also provided further inspiration to all. Since early 2020 there has been a shift in what is a considered to be a desirable location to live, thousands have been moving away from densely populated areas where COVID-19 can be more easily transmitted. Earlier this year a report from PricewaterhouseCoopers stated that London’s population would fall by more than 300,000 in 2021, the first such decline in more than 30 years,
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as people literally, to name another popular property show, Escape to the Country and look to create a better life in a post-pandemic Britain. Gregory Stanworth, managing director at Greenacre Financial Services, an independent mortgage services company, takes up the story: “We’ve seen a noticeable increase in customers wanting to move out of a city environment and to enjoy all that is good about rural living. “Not only has the preferred location changed but so too has the property spec. Gone are the days when you had to report in-person to the office five days a week. “As a result, the home office, enabled by high speed internet connections, is becoming a ‘must have’ for many, as is larger entertaining space, a nursery, gym and even a wine cellar! “Modern living is becoming far more self-contained and ideal for leading a full life in a healthier, rural setting where land for property development can often be acquired cheaper than in city centre locations.” Stanworth adds: “The mortgage applications we administer for our customers not only accommodate more rural locations now, but often include requests to fund a complete reconfiguration of existing properties to accommodate the latest 21st Century living. Interiors are being redesigned and made more open plan to fulfil a modern need, with outside space being utilised more effectively too. “If such wide-scale reconfiguration isn’t possible within an existing property, then it’s not uncommon for dated, ‘unsuitable’ homes to be demolished and for a new property to be built on a prime site. A self-build project lends itself to personalising the build and explains to some degree the interest in self-build financing.” SAVINGS WITH SELF-BUILD
Building properties of this nature doesn’t come cheap, but delivering projects in the most cost-effective way has never been more important
in these uncertain times. As reported by the National Custom & Self Build Association, those choosing a self-build option are able to save between 20% and 40% in comparison to purchasing a comparable house on the open market. Such savings naturally create significant interest among customers, but can a self-build project be daunting for a novice? The answer in most cases is yes! Stanworth continues: “We strive to offer every client, whether self-build or not, the highest quality service – it’s an ethos that drives our company. “In the context of a self-build project, customers can quite naturally be fearful; it’s a big undertaking and a steep learning curve throughout. “As an experienced mortgage broker in this sector, we’re available for our customers throughout the financing process to answer any questions they may have. “What is also important is to ensure we partner with a specialist lender who also has a strong track record in financing this type of project. Harpenden Building Society is one.” SELF-BUILD OPTIONS
Although some customers go down a standard mortgage route to expand living space, self-build solutions and the benefits they bring are proving beneficial to a whole new segment wishing to create their dream property. As a specialist lender, the Harpenden team continues to be on hand to support its broker partners and their customers with expertise and solutions in this niche area of financing. As with all of our mortgage products, we undertake personal underwriting, 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 in order to breathe new life into an existing property or to create a complete new self-build housing project – we’d be pleased to speak with you. M I www.mortgageintroducer.com
HIGH NET WORTH
Why HNW mortgage cases are unique Peter Izard business development manager, Investec Private Bank
hen working on a mortgage case for a high net worth (HNW) individual, there are various considerations that brokers must take into account to ensure they find the best possible solution. Like any client, high net worth individuals want to secure their ideal home as quickly as possible when they find it. But more often than not, these clients can have complex income structures and unique lending requirements, meaning their ability to secure a mortgage can be challenging. Understanding these requirements and providing a tailored solution is essential. If you’re sourcing a mortgage for a HNW individual, here are five principles to apply.
For this reason, it’s vital for brokers to work with a mortgage provider that can take a holistic approach to their clients’ wealth and form a true picture of affordability. BUILD A ‘BIOGRAPHY’, AND KNOW IT INTIMATELY
While understanding a HNW client’s entire financial picture is vital, it’s just as important to understand the background of who they are as an individual. Brokers should seek to build an in-depth summary of their client’s background, including their career history and business ventures, as well as their investments. This not only helps build a better relationship with clients, but will also help them when sourcing the right mortgage for their specific needs. By giving a lender an entire picture of their client, it can help them better understand their track record, and
APPLICATIONS CANNOT BE A TICK-BOX EXERCISE
Typically, when applying for a mortgage through a retail or highstreet lender, a bank will calculate the maximum loan-to-value (LTV) of a mortgage as a multiple of an individual’s annual salary. For HNW individuals, however, this can lead to problems in the application process, as many wealthy individuals can have complex income structures that high-street lenders cannot take into consideration. For example, at Investec, many of our HNW clients tend to work in sectors such as private equity, investment banking or entrepreneurship. This means their income can consist of stocks, bonuses or dividends, which may also be deferred. www.mortgageintroducer.com
identify if there are any risks to take into consideration. DEBT IS NOT A DIRTY WORD
For many HNW individuals, borrowing funds to buy a new property isn’t simply about moving house. For the average homebuyer, a mortgage is seen as a significant debt that should be reduced. For HNW individuals, however, a mortgage can allow them to free up capital for investment elsewhere. This is particularly true in a low interest rate environment. It’s common for HNW mortgage applicants to have other assets or to want to preserve their liquidity, and this is not necessarily detrimental. In fact, it should be recognised as part of a growth mindset and taken into account when sourcing the right lender for their needs. FLEXIBLE REPAYMENT SCHEDULES ARE AS IMPORTANT AS INTEREST RATES
If a HNW client has a complex or irregular income stream, a flexible repayment plan may be a higher priority for them than a low interest rate or arrangement fee, because it allows them to repay the mortgage in a way that suits them best. A mortgage could allow them to make capital reductions to coincide with their cashflow and leave other investments untouched, and this could mean lower monthly repayments on an interest-only basis. SAVING TIME IS SAVING MONEY
Understanding the entire financial picture is vital
We can all find that there is never enough time to deal with our priorities, so perhaps the most important consideration for HNW mortgage cases is the ability to act quickly. These individuals are often time poor, so providing an efficient service can demonstrate a broker’s value. It’s therefore vital to work with a lender that can meet your client’s need for speed. At Investec we work on a number of cases for HNW individuals, and are familiar with many of the challenges in this space. Please do reach out if we can help in any way. M I JULY 2021 MORTGAGE INTRODUCER
The future of working practices Pete Gwilliam director, Virtus Search
here was a time when the boundaries between work and home were fairly clear; however, the pivot required by firms as a result of the pandemic has created lots of debate about future working practices. There is no doubt that working from home has thrown up lots of different challenges, leading to individuals redefining how they focus on the core deliverables within their role whilst balancing the needs of their family. We don’t yet know the extent of the shift to hybrid working models, but my discussions over the last six months have highlighted that every home and family situation is unique to that individual, and ultimately people have had to find the rhythm to their life that suits their personal situation. So, more than ever, understanding how someone balances their work and life is a massive factor in ensuring that a candidate is a good fit for a role once the view of future working arrangements has been outlined by the hiring firm. Exploring how someone has managed their responsibilities through the COVID-19 era, and how they feel their skills have adapted alongside their family circumstances, can create a better understanding of their capacity for a move. Most roles include competencies such as planning, organisational skills and the ability to prioritise, but there is a danger of bias being applied when discussions move into how sustainably someone can adjust to new working practices given their home dynamics. By understanding where people have
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relished the change in working models and where they have found things more difficult, it is possible to evaluate their capacity to move into the next phase of their career, and indeed what they might have to sacrifice in their personal situation if the new role requires a different approach. My experience of recruiting since the pandemic arrived would suggest that the candidates who are sure they have adapted and balanced the changing demands from their remote working environment are those that feel most ready to progress onto the next challenge in their career. There are lots of stories that suggest that this balance has not been easy to find for all. Home schooling has given many parents big challenges, which along with the additional pressures of supporting someone shielding in a family bubble, has added a greater time commitment to family within a working week. Of course, some of this has been recouped by spending less time commuting or being away from the home on business, which has led to many finding they need to work unconventional hours to move their workloads along. There are anecdotes that indicate a wide variance in how firms have
managed their teams remotely and whilst not in the physical form. Monitoring has meant for some a greater sense of being ‘micromanaged’, whilst for others they have felt more empowered being away from the office and trusted to focus on the outputs required from them with minimal supervision. As people go back to face-to-face meetings, there are roles in our world that will need the patterns of family life established in the last 15 months or so to be reimagined. For firms, there will be lots of discussion about employment contracts and hybrid working models, and having benefited from considerable savings on travel and hotel costs, whilst also reducing their carbon footprint, this undoubtedly for brokers and lenders creates many reasons not to return back to the pre-COVID model. I personally cannot wait to return to interviewing, conducting negotiations and meetings in a non-virtual world, and in particular allowing placements the chance to be onboarded in person. I am sure these activities have lost some effectiveness when done remotely. Whilst there’s plenty of discussions about the geography of work, as both individuals and companies shift out of large cities into suburbs, the pandemic has given many the chance to reflect on what is important, and in particular to assess how their mindset, wellbeing and working effectiveness have evolved – this is what will define the best ways to progress a career plan, which I sense people have put on hold whilst dealing with the more immediate business continuity challenges. M I
The non-virtual world beckons, but with changes to the pre-pandemic model
New-build innovation unlocked Xxxxxxxxxx Stuart Miller customer director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Newcastle Building Society
t Newcastle Building Society, core to our purpose is helping people to own their own home. Whilst we have a national presence and strong reputation as a UK-wide mortgage lender, it is our heartland customers in the North East, Cumbria and North Yorkshire that depend on us most to provide a pathway to a better financial future. While the past year has been incredibly difficult for everyone, in countless different ways, for first-time buyers it has been particularly tough. Understandably, given the huge economic uncertainty posed by the pandemic, lenders scaled back higher loan-to-values (LTVs) until they better understood the risks posed by the pandemic and the economic uncertainty that inevitably followed. These new dynamics posed additional challenges for first-time buyers, who in many cases required parents to delve ever deeper into their pockets to support their attempts to access the property market. For would-be buyers for whom this wasn’t an option, things came to an abrupt halt. Things have since eased, but in fits and starts. The wide range of stimulus and support provided by the government has created much-needed and welcome support for many areas of the economy. The Stamp Duty Land Tax (SDLT) holiday has been particularly well received by the housing sector although it has come with some unintended consequences. The impact of releasing the pent-up demand of a closed market has meant that prices have sky rocketed in the rush to benefit from the tax break. Figures published by the Office for National Statistics (ONS) in midwww.mortgageintroducer.com
June showed housing transactions had grown significantly – the increased demand for properties, coupled with a dwindling supply, consequently pushing prices upwards. Comparing February 2020 with February 2021, the volume of transactions increased by 29.9%. As a consequence, house prices in England grew by 8.9% in the year to April 2021. Of particular resonance for us was the impact of these rising prices on firsttime buyers in our regional community. The North East was the fastest growing region with annual price growth of 11.2% in the second quarter of 2021. The lowest annual growth was in London, where prices increased by 3.3% over the year to April 2021.
“Our product serves to illustrate the importance of innovation in the mortgage market if we are to ensure that we continue to fulfil people’s dreams and aspirations to own their own home” This in turn has created further pressure for first-time buyers who, already reliant on the ‘Bank of Mum and Dad’ to find large deposits, were faced with finding even larger sums as a consequence of rampant price inflation. The introduction of the government’s 95% Mortgage Guarantee Scheme in spring provided much needed support for first-time buyers, enabling access to borrowing with lower deposits. Several lenders have not accessed the scheme, instead bringing their own products to market using their existing mortgage guarantee arrangements. However, whilst this has been great news for first-time buyers and the wider market seeking to buy existing housing stock, the availability of high LTV products on new-build homes remains restricted.
With the government’s changed approach to Help to Buy ushering in the imposition of price caps for support and other limitations to firsttime buyers also impacting on the sector, a new approach was required to support this vital component of the housing market. The Home Builders Federation. working with major developers and reinsurance specialists Gallagher Re, sought to develop an alternative solution to Help to Buy which would enable high LTV lending for new-build homes, utilising an innovative mortgage indemnity scheme. Importantly, access to the scheme would be enabled for all borrowers seeking to purchase a new-build home, not just first-time buyers. After a significant amount of work from all parties to deliver the scheme, I am very proud that Newcastle Building Society was the first lender to launch Deposit Unlock on the 23 June, particularly because we were able to do this in our North East heartland as part of the initial phase, which will subsequently roll out nationally. Initially, Deposit Unlock will support borrowers buying a new-build home up to a value of £330,000 with a deposit of between 5% and 9.99%. With a range of 2 and 5-year fixed rate product options available at very competitive rates and no product or valuation fees, the scheme offers a compelling alternative to Help to Buy. Early repayment charges (ERCs) apply during the initial product period. You might see this as a shameless plug for our product – and it is – but it also serves to illustrate the importance of innovation in the mortgage market if we are to ensure that we continue to fulfil people’s dreams and aspirations to own their own home. I’ve written many times about the need for cross-industry collaboration and the creation of new opportunities for borrowers, lenders and intermediaries, and we are delighted to have brought one of the first of these innovations to market. M I JULY 2021 MORTGAGE INTRODUCER
The evolving nature of efficiency Steve Carruthers principal mortgage consultant, Iress
e passed the end of Q1 and, astonishing as it may seem, are nearly through H1. These have been good months for mortgage lenders and the end of the year – for most – is likely to be benign in terms of volumes. There are informal reports of softening pipelines among estate agents – buyer registrations are normalising – but even this is only to the extent of numbers approaching something considered more normal. The market threw challenges at the lending industry, and by and large it has coped much better than many feared all those months ago. What we have learned, if we needed reminding, is that the market is generally driven by the supply side, and government holds the levers that drive the market. This year’s stellar volumes to-date have been underpinned by confidence generated by fiscal aid in the shape of the mortgage deferral scheme, furlough and, of course, the tapered end of the stamp duty holiday. All these things have kept people in homes and enabled them to move. Indeed, the continued support for higher loan-to-value (LTV) lending,
as well as the self-build and new-build sectors, means that many markets are set to continue with state support in the coming months and years. There is the knock-on effect of non-fiscal measures too. The successful vaccination programme, which is effectively the UK’s economic policy, has underpinned the recovery. For their part, lenders have adapted to these dynamics, but not all this has been achieved without considerable costs to service. Application times have extended as the self-employed applicants that make up so much of the UK’s growing gig economy have been impacted by the time and length of underwriting assessments. Lending criteria have changed, documentation requirements have grown in some markets, and confidence needs to be rebuilt. This will not happen overnight, as many still have an eye on the closure of the furlough scheme. It would be naive to assume, too, that only operational efforts were soaking up resources. Projects roll on; the transition of back books to LIBOR, proving how you implement negative interest rates, developing or purchasing new platforms, application programe interfaces (APIs) and robotics all figure on the to-do list. This last point probably tells us where the area of focus is for efficiency. We might have assumed that, as a result of the pandemic, investment would be targeted at dealing with
Technology will continue to evolve and prove invaluable as we move beyond the pandemic
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lending as it comes into the business. Yet already origination has begun to dominate thinking. There are some good reasons for this. House purchases will decline over the coming months, and you need only see the impact of the end of the Land & Buildings Transaction Tax holiday to understand how that has affected transactions north of the border. While it is by no means imminent, or even desirable politically, the spectre of inflation looms. If interest rates rise, the remortgage and product transfer markets will undoubtedly grow as stretched borrowers seek to refinance. Declining transactions and the presence of so many lenders will mean a smaller cake will need to feed just as many mouths. Differentiation then will have to be in service if it is not a pure price or risk play. Capital remains a constraint for many smaller lenders, even if retail and wholesale mortgage funding is not, and so moving up the risk curve does not appear to be the smart play. Technology, applied intelligently, is about freeing up people to focus on the right things. This is not just about digitising bad processes, but about moving the business on with the right digital processes. We need to ask ourselves, are the processes we digitise the right ones in the first place? Do we need to ask these questions of brokers if we are using external data feeds? Do external data feeds help or hinder our decision making? Are our interfaces with third parties the right ones, and are they the right third parties? Two years ago, few would have imagined we would be where we are now – or that so much would go so well in terms of coping with the pandemic – but lenders are already eyeing the future, and it’s clear that tech is the service differentiator. The trend of technology – and our growing reliance on it – pre-dates the pandemic, but it was a key part of helping get us through it, and will play a massive part in what happens next. M I www.mortgageintroducer.com
The six crimes of call handling Louise Wilson head of finance sector, Moneypenny
imple mistakes in call handling can have serious financial ramifications for businesses to the tune of thousands of pounds per annum, so here’s where your business could be going wrong: ENDLESS RINGS AND SLOW RESPONSE TIMES
We typically use the phone to speed up information gathering, decision making or the buying process – which is why endless rings and slow response times are a serious consumer gripe. Data reveals that 69% of callers won’t leave a voicemail, so tardy call answering and unavailable staff will quickly turn into lost opportunities and disenfranchised, frustrated customers. In our experience you should answer calls swiftly and don’t leave callers waiting on hold or stuck in a loop system. Avoid putting calls through to voicemail if you know someone is away from the office, and instead take a message so that they’ve spoken to a person and feel confident their enquiry is valued and logged. DISINTERESTED AND ROBOTIC RECEPTIONISTS
The culture that you’ve spent years perfecting and instilling in your team should shine through in your employees’ telephone manner. It all comes down to personality, yet too many agencies’ front line call handlers sound painfully scripted, unprofessional or even bored, which can be an immediate consumer turn-off. It may sound silly, but simple things like smiling when answering the phone can make a real difference, it really www.mortgageintroducer.com
comes across and makes you more engaging and friendly. It can also help to make pleasant conversation with callers and use first names if it feels appropriate. As they say, ‘people buy from people’, so being personable is memorable and puts clients and prospects at ease. POOR ORGANISATIONAL KNOWLEDGE
Most companies understand the importance of investing in regular skills training, but few include telephone answering. Call handlers that don’t know how to put calls through, who’s in the office or when they’ll be back, or even if someone has left, are all common consumer gripes about poor phone etiquette. Call handling should be part of the induction process and cover manner as well as the technical side of things. Call handlers also need to be supported with shared diaries, organisational charts, holiday rotas and up to date employee lists to ensure that they have the information they need to be effective and helpful. HIT AND MISS SERVICE
When it comes to call handling, consistency is key, yet for many businesses a ‘pool’ approach to answering calls when reception is busy can mean the quality of service is hit and miss and highly dependent on who answers. When calls are redirected to other people during busy times, it can result in less than professional, curt and illinformed call handling, as people are interrupted during their work. It’s wise to put guidelines in place around company standards and what’s expected, but better still it really pays to have an overflow call handling service to ensure consistent quality customer care when front of house teams are busy.
UNRETURNED CALLS MEAN LOST GOODWILL AND LOST LEADS
Taking messages is one thing, but making sure they make it to the recipient is quite another, and it can really erode goodwill – as well as new business opportunities – when it doesn’t happen properly. If you leave a message, you expect it to be returned, and rightly so. When calls are cascaded to other departments, message-taking is often compromised – they might be taken but not passed on, or just not taken at all. Messages should be captured accurately and passed to employees efficiently. ANSWERING MACHINES AT 5.30 ON THE DOT
With voicemail proving a turn-off for customers, it’s no surprise that office switchboards being directed to the answering machine as soon as the clock hits 5.31pm is a major source of frustration. We know that 10% of business calls take place outside working hours, and in an 24/7 age it’s particularly frustrating for consumers if they can’t reach organisations when it suits them. By investing in telephone answering support, businesses can rest assured that every enquiry and lead will be captured, whatever time of day. Whether the service is used to deal with overflow calls that front of house staff aren’t able to answer, out of hours enquiries, or the entire telephone function, the possible return on investment is huge, with a third more enquires handled in some cases. For brokers trying to make improvements to their operations, efficiency and customer care, the benefits of sharpening up internal systems, setting standards, maximising the use of technology and investing in extra support are compelling. By mastering the art of call handling, agents can maximise their calls and boost their bottom line in the process. With the right support, telephone communication can be transformed into a vital tool to improve the customer experience, drive revenue and get ahead of the competition. M I JULY 2021 MORTGAGE INTRODUCER
Second charge adaptability in action Tony Marshall managing director, Equifinance
aving been in this sector for longer than I care to remember, even I am still surprised at how adaptable the second charge mortgage is, and the many roles it can play in today’s property market. Back in the mists of time – OK, the mid ‘80s – in the days when Bank of England (BoE) interest rates were regularly above 10%, lenders were not too keen to lend up to 100% loan-tovalue (LTV). To meet the demand for a facility to help bridge the gap, specialist lenders were happy to oblige with what we then called ‘top up’ mortgages. Effectively, these were second charge loans – this at a time when secured loans, as we know them now, were still in their infancy. These top up mortgages served a valuable purpose, by getting many people onto the ladder who would normally have been locked out of homeownership. In today’s market the situation is the same, even if circumstances are different. Today, we are not suffering the high interest rates that were the norm then, but our present is dominated by formal affordability tests. In the past – just after the death of the dinosaurs, for our younger readers – lenders had still not abandoned their own effective internal risk assessments in favour of chasing market share at any cost. We all know how that ended 20 years later – the feeding frenzy caused by out of control lending, which was a contributory factor leading to the Credit Crunch and the consequent
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move to more regulatory oversight and the compulsory affordability testing we have today. So, although the circumstances are different, the problems for first-time buyers (FTBs) and others trying to get on the housing ladder are the same. Even with increasing numbers of 95% LTV products and the government’s own scheme incentivising lenders to underwrite 95% mortgages, for many, there is still a gap. Also, don’t forget that back when top up mortgages were available, property prices were much lower, which in turn meant that the gap between 95% and 100% was more manageable. Back to today, we talk a lot about the ‘Bank of Mum and Dad’ – or increasingly even Grandpa and Grandma – helping youngsters with deposits, a demographic which was not so noticeable 40 years ago. Innovative lenders have also come up with schemes to help families effectively stand as guarantors for youngsters on higher than usual LTV mortgages. But a second charge mortgage can be a simple way for parents to raise funds quickly without having to put up a lump sum or place hard fought savings into a lender’s deposit accounts with poor returns. Covering the shortfall in this way comes with the implicit understanding that it is a gifted deposit, and that they carry the ultimate responsibility. This is very much a niche product, and its longevity as an option will depend on two things: will first charge lenders widely accept this proposition as a gifted deposit, and – with the increase in the number of 95% products over the past few months – will the demand for second charge loans be blunted? Personally, I am delighted to see our sector stepping up in this way and providing potential solutions to today’s funding challenges. M I
Thanks for the support from distributors and brokers
s you know, I have had a few digs at the press in the last few months for its reporting on the second charge sector and its ‘glass half empty’ coverage on business volumes. Despite plenty of evidence of underlying month-on-month volume increases, the failure to look beyond producing a gloomy headline has been very frustrating. So, I believe that we owe a debt of gratitude, or at least a large drink, to those distribution champions of the sector, who have pointed out how vibrant the sector has been this year since origination came back on stream. In addition, recent figures from the Finance and Leasing Association (FLA) showed another monthly step upwards, which Fiona Hoyle summed up in the following statement: “The second charge mortgage market reported a second consecutive month of growth in May, and new business volumes increased by 12% in the first five months of 2021. “The improvement in consumer confidence means the market expects to see the recovery in new business continue during the second half of 2021.” M I
Second charge: Glass half full
R E - L I V E E V E RY F U N - F I L L E D M I N U T E . WAT C H T H E 2 0 2 1 S F I AWA R D S O N D E M A N D AT www.sﬁawards.co.uk
WITH THANKS TO
Keeping on top of the opportunities Xxxxxxxxxx Bob Young chief executive officer, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Fleet Mortgages
t present we are all involved in something of a prediction game in terms of what the long-term impacts of the pandemic and lockdown will be on the fundamentals of the UK housing and mortgage market. There’s no question that we’ve already seen some notable remifications, but perhaps the bigger question is around how pervasive these will be? Are they merely short-term reactions, or will they reshape the market once and for all? It’s a little bit too early for me to go out on a limb here, but I’m of the opinion that the norms we saw prior to the pandemic are likely to remain undimmed. Others might well disagree. UK Finance recently talked about a ‘rebalancing’ of the housing market, with the stamp duty holiday benefiting home movers and landlords far more than first-time buyers. You might also argue that first-time buyers have had a significant number of incentives over time, and they will maintain their stamp duty holiday postSeptember, so I’m not sure they are being done a disservice here, certainly not in the long run. The fundamentals of the market, however, are likely to remain the same for all stakeholders – one of the most powerful being the lack of supply, both new-build and second-hand. Demand has always been a powerful driver, and it will not take an economist to work out that with supply levels as they are, prices are unlikely to crash, or indeed fall back at all. Property therefore remains a longterm, attractive proposition, and
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landlords – who have had much to contend with – remain a very resilient bunch and fully aware of the benefits of ongoing investment in the sector. Many have expressed worry for landlords in the current environment, predicated on a number of beliefs about the private rental sector (PRS), rental payments, urban living, and the like, which are unlikely to come true. For instance, it’s clearly a positive that first-time buyers – and other homeowners – now have a greater number of high loan-to-value (LTV) products to choose from. GOVERNMENT CATALYST
The government’s guarantee scheme has certainly acted as a catalyst here, but the fundamental issues and obstacles for first-timers remain – a lack of housing supply, house price increases necessitating a requirement for greater deposit levels, affordability requirements, competition from other would-be purchasers, etcetera. Plus, there is also the location issue to overcome. Where do younger individuals want to live? Can they afford to buy in those areas? Do they have the support of the ‘Bank of Mum and Dad’ to do this? If not, what are their options if they don’t want to live with family? Well, their option is renting. So, while we’ve heard a lot about homeowners vacating the cities in a ‘race for space’, the reality for lots of people is that they want to live in these areas, they need to live close to work even if they might spend more time working from home in the future, and they – on the whole – are not going to be able to afford to buy in many areas, or live in the types of properties they want to. Hence, the PRS remains the only option for them. Now, landlords might also look at the areas they are invested in and decide – if they are too city-based – to look at
opportunities elsewhere. Many people might ‘try before they buy’, renting in an area before deciding if it’s right for them. Some might do this, decide it’s not for them, and return to the city. Regardless of the reason, the fact remains that rental properties will be required in all those areas. Underpinning much of this is the growth in the number of individual households. Here’s a statistic which will bring home just how important the PRS, and private landlords, are going to be over the long-term. The Office for National Statistics (ONS) projects that by 2028 there will be 1.6 million more households in the UK than there were in 2018, and 95% of that growth is likely to be either oneperson or multiple adult households without dependent children. In other words, people choosing to live on their own, or people choosing to live together. Both need to be catered for, and the likelihood is that it will be the PRS which is required to do most of the catering. Again, you might then understand why many are utterly confident about the importance of the PRS to the UK housing mix, and why landlords will continue to enter the sector and add to their portfolios. The stamp duty holiday was nice, in so much as landlords could save some cash which would otherwise have gone to the taxman, but as that period comes to an end, there is not likely to be a letup in the number of landlords looking to purchase. They understand that tenant demand will remain strong, yield levels will be achievable, and capital values over time are also likely to go up. For them it’s a case of, ‘what’s not to like?’ In a sense, that has been the outlook for some time. As mentioned, these are not fundamentals that have been developed or changed due to the pandemic – you might even argue they have been strengthened by it. That being the case, it certainly makes sense for advisers to keep targeting the buy-to-let market and to ensure they are fully on top of all the product opportunities available to their landlord clients. This isn’t going to change any time soon. M I www.mortgageintroducer.com
No such thing as a level playing field George Gee commercial director, Foundation Home Loans
s the Formula 1 season races by, there’s no doubting large numbers of motorsport fans would have been thrilled to watch the British Grand Prix at Silverstone this month. I’ll be honest, Formula 1 can often bemuse and enthrall in equal measure depending on the quality of the driver and the car. There is a long-held debate over the impact of the car versus the driver, and whether – if all drivers had access to the type of technology and infrastructure available to the top teams – the results might be very different. Indeed, there’s the notion that everyone should essentially drive exactly the same car and level the playing field; however, it’s still obvious that there’s no such thing as an ‘identical’ car, and there are always likely to be ways and means by which some people get an advantage. In the world of mortgages, there is often the same type of thinking. Perhaps in an ideal world there would be a level playing field between first-time buyers, homeowners and landlords, for example, but how you get there is another thing entirely. The government, for instance, has introduced a variety of measures for first-time buyers to mitigate the disadvantages of the prevailing housing environment – these schemes and taxation changes are designed to help them get on the ladder. For instance, stamp duty levels have been set in first-timers’ favour, and will be again after the end of June, as the relief applied to properties up to £300,000 for first-time buyers comes out from behind the whole of market www.mortgageintroducer.com
£500,000 relief applied to all properties in the wake of the national lockdowns. However, according to recent UK Finance data, the stamp duty holiday which has run from last July has actually been used more heavily by homeowners and landlords, as they have been able to access their existing equity in order to move, plus of course, we’ve seen house prices rise through the last 12 months, which will have been in part due to the activity generated by the holiday. Where does this leave first-time buyers? Well, at the moment there is good news, but it may be tempered by a fast-moving environment. For instance, even though first-timers will still benefit from stamp duty savings post-September, the average house price rises mean they are likely to need more in terms of a deposit going forward. We’ve seen a growth in the number of lenders offering higher loan-to-value (LTV) products, both as a direct result of government intervention with its Mortgage Guarantee Scheme and lenders’ appetite, relieving the need for larger deposits. However, this does not address affordability requirements.
On top of this, younger people are more likely to have been financially impacted by the pandemic over the last 12 to 18 months – they are more likely to have changed jobs, needed to work multiple jobs, paid more in rent, or struggled with certain credit payments, at the same time as trying to save for that deposit. It can be a very complicated picture for the average first-time buyer these days. To that end, we have felt it important to open up as much of our range to first-time buyers as possible. They can now access 90% LTV mortgages as part of our F1 – no relation – range, for those borrowers who just miss out on the mainstream, which come with competitive rates and products with discounted fees, all to help those new to homeownership who are likely to be spending a significant amount to get on the ladder. Let’s be frank, much like in Formula 1, there’s no such thing as a level playing field in the housing market. Certain borrowers will always have an advantage, but we should do as much as we can to provide access to the finance first-time buyers need, even if they may have a minor credit blip or not be first cab off the rank for highstreet lenders. Everyone deserves a shot at buying their own home – it’s unlikely to be easy, but it’s important that specialist lenders like ourselves take the matter seriously and offer all the support we can to help people take that house purchase chequered flag. M I
Much like in Formula 1, there’s no such thing as a level playing field in the housing market
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Cheaper to rent than buy? Xxxxxxxxxx Jane Simpson managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx TBMC
t was interesting to read about the recent report by the estate agents Hamptons, which indicated that in the UK it is currently cheaper to rent than buy a property, making for some eye-catching headlines. The research showed that prior to the pandemic in March 2020, buyers purchasing with a 10% deposit were better off on average by £102 per month, but in last month’s report private sector renters were better off by £71 per month. According to Hamptons, in early 2020 it was cheaper to buy than rent in every region of the UK, but now it is only cheaper to buy in four areas – the North East, North West, Yorkshire and the Humber, and Scotland. What is most impressive about these findings by Hamptons is that it is cheaper to rent despite the 7.1% increase in average rents over the last 12 months. This is mainly because there has been strong growth in house prices, while the availability of more expensive higher loan-to-value (LTV) mortgages has contributed to the cost of buying a residential property. Unsurprisingly, there are regional variations in the disparity between buying and renting. For example, the report found it was £108 cheaper per month to rent in the South West, £117 cheaper in the East of England and £251 cheaper in London. London has been most significantly affected, exacerbated by the fall in tenant demand and rents during the course of the pandemic. During the lockdown periods many university students moved back in with their parents, and the increasing number of people now working from home means they are less tied to the daily commute to an inner-city office. Some have now moved out of the www.mortgageintroducer.com
capital either temporarily or for the long-term. Another factor to consider has been the availability of mortgages for first time buyers. During the early days of the pandemic, lenders either increased prices or withdrew higher LTV mortgages, making it difficult for those looking to buy their first home without a large deposit. A year later and the mortgage market is recovering, with more low deposit residential mortgages now available. According to Moneyfacts, 80 new products up to 95% LTV were launched in May 2021. However, there is still less choice, and the average interest rate for 2 and 5-year fixed rates is higher than before the pandemic. Some applicants, even those with higher deposits, may also find it difficult to obtain a residential
mortgage if they have been furloughed or experienced any credit issues during the pandemic. Although the cost of getting a residential mortgage may return to pre-COVID levels at some point in the future, the current market conditions are beneficial for buy-to-let property investors in most areas of the UK, as tenant demand remains strong. There have also been reported increases in the levels of savings during the pandemic, so with interest rates on savings at an historic low, now could be an excellent time to consider investing in bricks and mortar. This may result in renewed interest from amateur landlords or an expansion of portfolios for seasoned investors. With plenty of lender and product options for landlord clients, 2021 could be a productive year for intermediaries in the buy-to-let sector. M I
Bullish on buy-to-let as tenant demand stays strong
JULY 2021 MORTGAGE INTRODUCER
The beginning of the end Richard Rowntree managing director of mortgages, Paragon
t’s the beginning of the end. Although we’ve known this day has been coming for some time, it’s difficult to talk about the current buy-to-let (BTL) mortgage market without discussing the tapering of the stamp duty holiday, because its impact on the entire property industry has been quite significant. Announced around this time last year as part of the Chancellor’s Summer Statement, the scheme aimed to stimulate the property market, which had all but ground to a halt as a result of what we naively thought would be the first and last coronavirus lockdown. It has certainly done that – Bank of England figures published in June this year revealed that the value of gross mortgage advances in the first quarter of 2021 was £83.3bn, which represented a 26.5% increase on the same period a year ago, and the highest level since 2007. This increase in activity came as little surprise to the sector; with delays in processing applications across all sections of the industry, advisers urged borrowers to get their application in early to avoid missing out on the stamp duty savings on offer – our estimates revealed that almost two-thirds of buyers were relying on another party in a chain to complete their purchase before the original 31 March deadline. With a boost to the economy worth billions at stake, and under increasing pressure from the property industry, MPs changed the original ‘cliff edge’ to what is now a tapered wind down finishing at the end of September 2021. If we look at industry figures, we see that lending for UK-wide buy-to-let purchases has started to drop off, with £1.3bn in April, down from the peak of £2bn in March. In addition, there are some early indications that buyers and
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sellers are renegotiating terms under an impression that they have missed the boat on any stamp duty savings. So, does this point to a substantial drop purchase activity after the initiative ends in the Autumn, similar to the fall from £4.3bn in March 2016 to £0.6bn the following month, coinciding with the introduction of the 3% surcharge on the purchase of second residential properties. While I imagine the elevated levels of purchase activity we have seen of late will drop off, I don’t think we’ll witness such a steep decline as we saw five years ago. This is because, while the stamp duty holiday has undeniably provided the property market with a significant stimulus, it hasn’t been the only driver of demand. For the past year we have sought to understand how COVID-19 would change how and where we live. The surge in demand seen across both owner-occupied and the private rented markets show that the pandemic has had an almost immediate influence on our housing preferences, but there
will also be a lasting legacy. Some of the most recent research on the subject comes from Santander’s ‘Life after lockdown’ report, through which researchers found that the number of UK adults working from home has risen from 1.4 million before the pandemic to almost 24 million today. Nearly half (47%) hope to continue working from home to some degree, and we’ve seen more companies signal that they will adopt some form of office-home hybrid working model long-term. For me, this is an example of the type of shift that will mean demand continues for some time after the stamp duty holiday ends, albeit at a lower level, as we will continue to see people looking for properties with home office space in locations they previously might not have considered. So, whilst it’s the beginning of the end of the stamp duty holiday, the flexibility of privately rented housing means landlords – supported by lenders – will continue to have a role in responding to the changing needs of renters for the foreseeable future. M I
The end of the stamp duty holiday won’t signal a disappearance of demand from landlords
Whose chores are they anyway? A further one in 10 (11%) men believe if you earn more money, you shouldn’t have to do as much housework, compared with 6% of women, while a fifth of all men (21%) are on the fence on this topic, as are 15% of women. However, the LifeSearch study still found that among working women, half (50%) still say they do the majority of household chores, versus just one in four (25%) of all working men, spending an average of 7.6 hours on housework per week – almost equivalent to a typical working day – on top of their paid job.
Kevin Carr chief executive, Protection Review; MD, Carr Consulting & Communications
ccording to new research from LifeSearch, 61% of women living with their partners claim to do the greatest share of household chores. The Health Wealth & Happiness Report found that over the last 12 months, during the pandemic and subsequent lockdowns, Brits spent an average of 7.3 hours each week on household chores, including cleaning, cooking, childcare and gardening. People in Wales spent the most time across the UK on housework, totting up 431 hours in the last year, versus London where an average of 343 hours was spent on chores. However, women spent 34% more time on chores than men – 8.3 hours each week compared with just 6.2, rising to 10.4 hours among women who live with their partner and children. This means the average woman spent 109 hours more in the last year on chores than men, equating to an additional 4.5 days. In fact, research from UN Women* revealed that 25 years of progress towards gender equality could be
Brits spend 7.3 hours per week on household chores
completely wiped out in a year due to the pandemic, as the aftermath sees women absorb the lion’s share of domestic chores and family care on top of paid employment responsibilities. Before coronavirus, UK women did 1.8 times more unpaid work than men – a greater disparity than in the US, Canada, Germany, and France. SHOULD INCOME DICTATE YOUR SHARE OF HOUSEHOLD CHORES?
Only 68% of men, compared to 79% of women, believe that household chores should be divided equally regardless of how much income someone brings in.
WHAT DOES THIS MEAN FOR PROTECTION?
Commenting on the research, Roy Mcloughlin, associate director at Cavendish Ware, said: “Protecting your health and livelihoods and loved ones is arguably more important now than ever. The crisis at its very core has questioned our indestructible resolve that many previously believed in. “Who and how they are covered is a completely agnostic concept, as misfortune does not generally discriminate. “Thus, the requirement for protection is relevant to all as opposed to the outdated and inappropriate view that only the main breadwinner should be covered.” M I
IPTF announces new awareness week #LetsTalkIP
he IPTF has announced plans for an income protection awareness campaign, with events running from 20 to 24 September this year. The campaign will aim to increase awareness of the need for income protection, and will use the hashtag #LetsTalkIP to draw attention. Jo Miller, co-chair of the IPTF, said: “The fall in income protection sales in 2020 was disappointing, but perhaps understandable in the context www.mortgageintroducer.com
of a pandemic. The need to protect incomes in the face of unexpected events has never been easier to demonstrate to clients and we believe that it is vital that we seize the opportunity we have now and share expertise and views on the best way to get the message out to customers.” REFRESHED OUTLOOK
Co-chair Katie Crook-Davies added: “The time to act is now and we hope
that this week, dedicated to income protection, will provide a refreshed outlook and new energy around income protection. “Our aim is that the campaign will encourage everyone in the industry to think about what they can do to sell more income protection and give advisers the tools they need to put ideas into action.” All events will be free to view and the IPTF will be releasing more details in the run up to the event. M I JULY 2021 MORTGAGE INTRODUCER
Shaping the future of protection Emma Thomson head of protection and GI propositions, Sesame Bankhall Group
glass half empty or half full is still a glass that needs topping up in my view, but when it comes to the pandemic, I’m definitely a glass half full person. There have been many positives which will shape the future of protection for the better. We’ve shown we can adapt quickly when we need to – working from home, switching from paper to digital processes, virtual nurse screenings
replacing physical ones, changing terms and conditions to support those in financial difficulties, and much more. There were of course challenges, such as stricter underwriting, but given the circumstances, our industry has done brilliantly well. Many face-to-face advisers have seen real benefits in engaging with clients via video chat, one of which has been that they’ve been able to speak to more women than usual through advising couples together, ensuring both parties take an active role in decision-making. Advisers and consumers often underestimate the value of the primary carer, who is still typically female; last year’s Insuring Women’s Futures report shows women undertake double
Video chat has meant that advisers have spoken with more women than usual
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the childcare and 1.5 times elderly care compared to men. When a primary carer dies or becomes ill, paying someone to undertake those duties is costly; historically, Legal & General have estimated the ‘value of a Mum’ as around £30,000 a year. If tragedy strikes, there’s no guarantee the breadwinner will want to continue as before, either – they may, for example, want to spend more time with their children. Press coverage and debates in Parliament on inadequate Statutory Sick Pay and Universal Credit, together with furlough and SelfEmployment Income Support Scheme payments, has increased consumer awareness of financial vulnerability. We have a real opportunity to build on this shift, and advisers have a duty of care to ensure clients know the protection options available. SBG is a member of the Protection Distributors Group, which is calling 2021 the ‘Year of the Signpost’. The key message is write it or refer it – don’t ignore it. Pressures on the NHS and a focus on mental wellbeing have also highlighted the importance of added value benefits, such as virtual GP services and counselling. The Exeter reported that usage of their Healthwise services more than doubled in 2020. Virtual events have made things more inclusive. Travelling to an all-day conference could be prohibitive, but virtual events have made professional learning more accessible and organisers are keen to retain this new audience. Out of this crisis has come both improvements and opportunities. Most importantly of all, thousands of claims have been paid, including a significant number for COVID-19. In 2020, according to the Association of British Insurers, UK insurers paid out £202m of COVID-related life insurance, and the Association of Financial Mutuals reported that 25% of its members’ claims were COVIDrelated. When it comes to protection, it’s always all about the claim. M I www.mortgageintroducer.com
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The engagement conundrum Mike Allison Xxxxxxxxxx head of protection, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Paradigm Mortgage Services
ccording to an article in The Guardian last year the majority of children own a mobile phone by the age of seven. The devices have become a fundamental part of life for most young people. The article goes on to say that overall, children spend about three hours and 20 minutes each day messaging, playing games and being online, according to research by Childwise, which said: “Mobiles are the device that youngsters are most likely to use to access the internet.” By the age of eleven, 90% had their own device, and phone ownership was almost universal once children were in secondary school. At the age of 24, a staggering 96% of us will have upgraded to a smartphone in the UK. What has this got to do with protection sales, you may ask? Owning a mobile is a financial commitment, and with it comes the responsibility to regularly make payments for that device – possibly the first such commitment a youngster has. Asking them to make other financial commitments is extremely tough, but these are likely to be habit-forming. For years, the financial services industry has had the job of trying to get children to commit to making some sort of savingsor purchase a product, and in the main it has not been successful in doing so, certainly in the post-home service era, when the man from the Pru could spot an opportunity when he visited houses where children were present, and try to get them to regularly save from the day they got their first pay packets. As the average age of a first-time buyer continues to rise – it is now around 35 – the chance of meeting someone who may give financial advice
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at less than that age is relatively slim. Yet forming good habits should be the bedrock of financial advice. So, why is it so difficult to target the under-35s to buy life assurance, or at least income protection (IP)? They will be just as vulnerable as anyone else to missing payments if they are ill and unable to work, and are unlikely at that age to have built up any sort of emergency fund to rely on.
“The target audience is a generation who want to take control of their finances and be financially independent” With so few advisers targeting 20-somethings as a specific demographic – for a variety of reasons, including commercial viability – we are at risk of being stuck with the status quo, especially without the education piece taking place. The answer could lie in creating awareness of their financial vulnerability and educating them to do something about it. Step forward the Income Protection Task Force (IPTF), which has been working extremely hard to devise a solution for the lack of knowledge in this area. Not only that, but also delivering the message in a way that will clearly appeal to the younger generation – using their mobile phones. The focus for the campaign will be four characters who share a house, and it’s hoped they will create awareness of IP, the need for protection and how to buy cover. The messages will be highly social media-focused, with Instagram being the main medium for getting the message across. The target audience is a generation who want to take control of their finances and be independent. The content will cover topics young people really care about, and will move away from the traditional marketing associated with income protection. For example, the IPTF believes the 18 to 35 age group isn’t as worried
about falling ill and being unable to work, because they’re young and ‘invincible’, but what they are worried about is saving for a house deposit, covering their expensive car insurance premiums and keeping up with their Netflix subscription – it will therefore position income protection as a solution to support them in doing this. Clearly they cannot do this on their own, and they are attempting to enlist the help of distributors such as Paradigm, as well as advisers themselves, to help raise awareness. The key will be driving as many people to Instagram as possible under the banner of ‘Ziggy’s Money Moves’. As well as this, the website will deliver regular blogs around the key topics. In a recent survey commissioned by MetLife, we are told that the onset of the COVID-19 pandemic has resulted in around one-third of UK adults’ financial situations worsening, of which almost one in 10 (8%) say it has done so significantly. A further one in four (25%) said they have no disposable income to fall back on should they need it for paying bills, making a mortgage payment or rent. This is just as relevant to younger people as they plot their way through an increasingly uncertain career path. In February this year, the Financial Conduct Authority (FCA) published its Financial Lives Survey, which benchmarks the nation’s financial resilience, showing more than half (52%) of UK adults are in some sense considered vulnerable (27.7 million). Again, many will be in the under-35 age bracket, and the work being undertaken by the IPTF is to be applauded in focusing on an area that has been traditionally passed over by the intermediary market. As the saying goes, give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime. Or, give a seven-year old a mobile phone and hopefully it will go some way to help feed the knowledge required to look after their finances for their lifetime. M I www.mortgageintroducer.com
Let’s have a quality conversation Rob Evans CEO, Paymentshield
ast month, alongside partners like Defaqto, Samaritans and Goodlord, we spearheaded National Conversation Week 2021 – a week-long, UK-wide campaign encouraging people to talk, and really listen, to one another about what the home has come to mean to us since COVID-19. I’ve found myself reflecting since then on the power of conversation, and what it is that makes the difference between a chat that’s first-class, and one that’s merely cursory. A large part of that, I think, has to do with empathy. Having quality conversations with clients makes them feel valued, listened to and cared for. Approaching clients as mere transactions, however, rather than as individuals with unique needs and circumstances, makes it practically impossible to build lasting relationships. Instead, with one quality conversation a client can begin to recognise the value of expert financial advice, making them more likely to return to service a broader range of needs, until ultimately that adviser becomes their go-to one-stop shop for their home journey. Having a finger on the pulse in terms of industry developments, market dynamics and future regulatory changes also helps advisers showcase the value of their services by enabling them to truly understand the impact of these shifts on the customer. The greater understanding an adviser can display, the stronger the trust between them and their client becomes. At Paymentshield, we’ve been speaking for a while about the value of quality conversations for advisers, but
it’s become a particular focus for us in recent months. We’ve been developing enhanced customer empathy training and a Quality Conversation framework, with the aim of educating staff about taking accountability and why putting yourself in the customer’s shoes benefits not just them, but advisers and their businesses. We’ve done this because it’s the right thing to do. Customers are the cornerstone of our industry – neither Paymentshield nor the adviser businesses we work with would be here without them. It is, of course, important for businesses in any sector to look after their customers, but particularly in the mortgage space. We are responsible for
“Each time an adviser speaks to a client it’s crucial to ask questions, to find out if their insurance needs have changed, and to proactively offer a GI review” somebody’s most prized possession – their home. It’s fair to say that over the past 15 months, many of us have come to appreciate this space more. Protecting it, then, is all the more important. Our 2021 Adviser Survey suggests that advisers are increasingly recognising the opportunities that protection and general insuarance (GI) presents, with 99.1% agreeing that it’s best practice to discuss GI with clients. Its benefits become even clearer given the end of the stamp duty holiday. As mortgage transactions threaten to lapse, advisers would do well to lean on GI as a robust and resilient revenue stream. YouGov data we commissioned at the beginning of 2021 hints that the GI
opportunity remains largely untapped, but not because clients aren’t happy to discuss it. Indeed, more than a third (34%) of the 2,139 consumers surveyed said that while they wouldn’t expect an adviser to review their home insurance during the remortgage or product transfer process, they “would be happy if they did.” This is why each time an adviser speaks to a client it’s crucial to ask questions, to find out if their insurance needs have changed, and to proactively offer a GI review to ensure their cover still fits the bill. ENHANCING SERVICE
Embedding this customer-centric, proactive ethos into business practice so that it becomes second nature will be a key differentiator between expert advisers and price-driven aggregators. It will always take work to build and refine a trusting and enduring client relationship, but it’s also worth remembering that technology can help facilitate that by enhancing the service that advisers can offer. Without face-to-face meetings, advisers have had to adapt to engaging with clients remotely. At first glance, the digital transformation we’ve witnessed as an industry throughout COVID-19 may seem an obstacle to establishing personal customer relationships, but it can support them. For example, when we introduced adviser chatbot technology earlier this year, we did it so that advisers could cater for how their clients prefer to engage with them. At Paymentshield, more than 20% of our customer interactions now come into us through our online chat facility, which has meant that our experienced call centre staff are now free to deal with more complex queries, often from more vulnerable customers. So what is the lesson for advisers? To engage with policyholders on their level, offering compassionate service that adapts with their needs. Many people think empathy is just rapport-building; in reality, it’s about genuinely understanding your customer’s situation. This is the key to unlocking quality conversations, and with it, customer loyalty. M I JULY 2021 MORTGAGE INTRODUCER
Echoes of football and fax machines James O’Hara commercial director, Ceta Insurance
ootball fever has taken over the last few weeks thanks to the European Championships. Now you may well be wondering why I am talking about football in a column for mortgage brokers, well it is all about perception. Football is a global sport, and in
General insurance technology has moved with the times
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many areas, it’s also one of the most technologically advanced. So, when Real Madrid failed to sign Spain and Manchester United goalkeeper David De Gea because the paperwork wasn’t submitted in time due to a tech failure, it made headlines. De Gea was literally moments away from moving to Real Madrid, but it all fell through because a fax machine failed to get the forms through before the transfer deadline. The perception of football is that it is at the cutting edge, yet it is still depending on ‘80s technology. The
reverse is true of the general insurance (GI) industry – it’s more advanced than you may think. The perception is that getting cover for clients requires dealing over several days with a person in a dusty room with a fax machine and several ring binders with paper quotes in them – and that you can multiply that process if it’s a non-standard application. While this may have been the case in the past, it’s not the reality now. NON-STANDARD ACCESS
Some mortgage brokers I speak to remain sceptical, assuming that even if they are able to find their client nonstandard cover, the admin associated with it will be so time consuming that it will either be a loss leader, or the premiums will be so high that their client won’t want to go ahead. Yet, for those brokers who are prepared to venture into the world of non-standard insurance, there is a huge opportunity to be had. Firstly, almost a third of all properties in the UK are classed as non-standard – that’s nine million homes, and a pretty sizeable market. Secondly, accessing non-standard cover has never been easier for advisers. Thanks to the latest digital platforms and non-standard insurance portals, you can now compare non-standard general insurance for your clients, and it won’t involve fax machines, phone calls and three day waiting periods for quotes. You can access leading specialist insurers, manage non-standard risks, and retrieve a quote in less than two minutes. You don’t need multiple logins on multiple platforms with multiple agencies, either. It can all be done digitally in one place, accessing dozens of products. You can then monitor everything on a live dashboard. Non-standard portals like ours are adding new products and new insurers all the time to increase digital comprehensiveness. So, my advice to mortgage brokers is not to assume general insurance is a time vacuum that will suck your attention into its antiquated processes. Unlike the Premier League, you don’t need to rely on a fax machine. M I www.mortgageintroducer.com
A renewed approach to GI pricing Lee Denton associate sales director, Source Insurance
ith ironically perfect timing, the Financial Conduct Authority (FCA) released its new general insurance (GI) rules on the Friday before an unusually sunny bank holiday weekend in May. There is a lot of good news for brokers. The headlines were made by the fact that dual-pricing – which has long been the source of frustration for many brokers – has now been effectively banned. The subheadings were the introduction of fair value assessments, changes to auto-renewals and more reporting for insurers, which we’ll discuss in this article. BIG CHANGES TO RENEWALS
As mentioned, the biggest change in pricing practices is that customers renewing their policy won’t be able to get a better deal from their existing insurer by resubmitting their proposal as new business – which is a ludicrous situation in anybody’s mind. Renewing customers won’t see their prices steadily increased over time, so loyal customers will no longer be penalised with higher prices than their new business equivalents. It should also mean that the heavy new business discounting, relied upon by many price comparison websites (PCWs), appears to be at an end. In its preamble to the main parts of the paper, the FCA stated that it expects to see a reduction in switching as a result of these new rules. It also recognised that the new rules could lead to price increases for those who regularly shop around at each renewal. If anything, we could over time see the emergence of a model where renewing customers are offered discounted prices – an approach which is not forbidden by the new rules. www.mortgageintroducer.com
Both of these points place further pressure on the business model employed by many PCWs – which is good news for many brokers. The FCA also said it expects more firms to compete on things like service and long-term value – as opposed to price – because of the new rules, which further plays to the strengths of the broker market.
“We could over time see the emergence of a model where renewing customers are offered discounted prices” The FCA has also introduced new rules which require firms to offer the option to opt out of auto-renewals at any point in the insurance life cycle. Whether there is a large appetite for this amongst customers remains to be seen. Auto-renewal offers a huge amount of certainty and comfort, and vastly reduces the risk of becoming accidentally uninsured. Whilst this now has to be mentioned at point of sale by intermediaries, whether this particular remedy will have much impact is uncertain. FAIR VALUE ASSESSMENTS
In addition to the fairly blunt rules implemented on GI pricing and autorenewals, the FCA has also introduced new rules on ‘fair value’. These requirements have the potential to be more profound than the other rules, as they encourage everybody in the distribution chain to think about the value that the product offers to customers. Again, the FCA expects this to shift the conversation away from simply focusing on price. Insurers and manufacturers now need to conduct annual fair value assessments. The FCA doesn’t actually define what ‘fair value’ is, so firms have some flexibility about how they interpret its meaning. The downside to this is that it also gives the FCA
flexibility to interpret this term, which means it can decide what is and what isn’t fair value whenever it wants to. As part of these assessments, brokers should expect to be asked more questions about their remuneration for GI, which includes both fees and commission. The rules make insurers and product manufacturers responsible for collecting remuneration information for the whole distribution chain. This shouldn’t be any issue for most brokers, but it’s worth being aware that these questions will be asked to varying degrees of detail by different providers. Every firm – including brokers – needs to conduct annual reviews of the products that they offer, if they don’t already do this. There is no fixed format for these reviews, although the industry is likely to develop some sort of best practice approach to these fairly quickly. There are also some new reporting obligations for every firm, although these shouldn’t prove too onerous for the majority of brokers. WHEN DOES THIS ALL COME INTO EFFECT?
The key dates coming out of the FCA’s paper are as follows: 1 October 2021 – product governance (fair value assessments), premium finance and systems and controls come into effect. 1 January 2022 – pricing, autorenewal and reporting come into effect. There is a transition period to 17 January, but all customer benefits must be backdated to 1 January. 31 March 2022 – where a firm has price setting responsibilities, a senior manager under the Senior Managers and Certification Regime (SMCR) needs to submit the first attestation that the firm is complying with the pricing remedies. September 2022 – the first pricing/fair value report is due, covering the period January to June 2022. Reporting moves to an annual cycle thereafter. M I JULY 2021
Keep the innovation coming Hattie Fancourt national account manager, Pure Retirement
s the world has begun to open up again and people take stock of the past 18 months, and their priorities, it’s safe to say that as part of that process they’ll be evaluating their financial situation and their willingness to engage in major financial decisions once again. Similarly, the later life lending sphere will undoubtedly be taking stock of its position and its ability to continue providing effective retirement solutions to meet the needs of a demographic that will see a comprehensive change in mindset as a result of the pandemic and its associated effects on their lives. The market’s development, even during recent trying times, has been a remarkable testament to the culture of innovation that has become increasingly prominent. From a total of 66 in April 2016 to 510 at the time of writing, the number of available plans in the market has risen rapidly, with that figure also representing a year-on-year increase from 423 available deals. Additionally, the market’s growing competitiveness has also greatly affected interest rates, with the average sitting at 6.15% in April 2016, but reducing to 4.07% at the time of writing, itself a slight rise from the low of 3.86% seen in March of this year. However, while the rising numbers of plans and falling average market rates are undoubtedly impressive, it’s similarly important that those in the later life lending sector don’t lose sight of the importance of creating flexible plans that can evolve and accommodate customers’ changing circumstances. For many, the past 18 months or so have only served to underline the changeability of life.
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A culture of innovation has become increasingly prominent in the equity release sector
Consequently, a vast proportion of those seeking retirement solutions will be entering the market not only with a potential sense of cautiousness, but also with the strong desire to find a solution that can adapt to their changing needs over time. Thankfully, the market is arguably at a point of unparalleled innovation and customer-focused development. The Equity Release Council’s Spring Report highlighted a 10% year-onyear increase in the proportion of plans offering early repayment charge (ERC) free voluntary capital repayments (64% versus 54%), at a time when there’s also a huge variety in annual ERC-free repayment thresholds to suit a variety of situations, right up to the 40% being offered by our own Heritage Freedom 40 product. Furthermore, 48% of products are now potentially available to those living in sheltered accommodation, subject to individual lender criteria, 45% have downsizing repayment options, and 56% offer fixed ERCs. PRODUCT INNOVATION
It’s with this understanding that customers are increasingly seeking not only flexible product solutions, but also those that they feel have been tailored to their individual circumstances, that we – in keeping with our longstanding culture of product innovation that has continued regardless of the pandemic – have improved the pricing structure of our Classic lifetime mortgage range.
The range now offers flexible pricing options, and by extension provides personalised interest rates and a streamlined adviser experience by reducing the 12 loan-to-values (LTVs) into four product variants. Under the new initiative, customers will benefit from a unique and personalised quote that is contingent on several factors, including age, loan amount, property type and postcode – ultimately allowing for more competitive pricing and lower cost of borrowing for customers. Additionally, the range encourages responsible borrowing by promoting the option to borrow for specific amounts rather than the maximum available within their LTV bracket or property value. As with every other facet of society, the past 18 months will have made an indelible impact on the mindset of those either in, or fast approaching, later life. As a consequence, they will be approaching any decision-making regarding the future with a different set of priorities and an especially deeprooted need for both flexibility and solutions that they feel can be tailored to their needs, not only now but in the future. As a sector, we have a responsibility to ensure that these needs are met, and to continue the spirit of development and innovation that has enabled the sector to demonstrate extraordinary resilience in challenging times. M I www.mortgageintroducer.com
Age is just a number – should we forget it? Xxxxxxxxxx Andrea Rozario xxxxxxxxxxxxxxxx, chief corporate officer, xxxxxxxxxxxxxxxx Bower
ow old do you feel? For me, it depends on when you ask me. There’s certainly some days where I feel older than my prescribed ‘true age’, and then other moments where I am sure I’m far younger. But that’s the point, isn’t it? The time elapsed from our original birthday to now doesn’t define us. Some days we feel fresh, vibrant and shocked that 50 or 60 have been and gone, and then others we feel the polar opposite. So, with this in mind, is there such a thing as retirement age? There seems to be an instinct in humans where we think things are worse than they actually are. I recently read a terrific book by a World Health Organization professor and statistician called ‘Factfulness’, which really shines a light on something the authors call the ‘negativity instinct’. Most people assume things like crime, health, poverty and just general life is getting worse year-on-year. In reality, things are far better than they used to be. Crime is way down, extreme poverty has halved since the ‘60s, and life expectancy has grown in every country. Now, most people will know that life expectancy in the UK has grown enormously over the last few decades, and on average, a person born here today will live to over 80 years old. But did you know that the global average is not too far behind? I certainly didn’t. On average, in all the countries of the world combined, the global life expectancy is now over 70. But most people get this wrong. In the book, the professor analysed responses from thousands of people across www.mortgageintroducer.com
the world and found that the most popular answer was that the global life expectancy was about 60 years old, which would have been accurate if it was 1973. This negativity instinct informs everything we think and do. For retirement planning, and the retirement finance sector as a whole, we need to have a rethink about what really defines old age. The number 65 has been embedded in the consciousness of retirement planning for quite some time, but is it time to move on? The Office for National Statistics (ONS) reports that in 2018, a man aged 65 could expect to live for another 18.6 years, while a woman could expect to live for 21 more years. On average, at age 65, women still have a quarter of their lives left, and men just over a fifth. The medical advancements and improvements in later life health have also meant that many more people continue working past the traditional retirement age. Since 1993, employment rates for the over-65s in the UK have doubled, and even the slightly younger cohort of 50 to 64-year-olds have seen their employment rate increase by a third. So is 65 really 65 any more? Ultimately, there needs to be a seachange in the way we see old age.
We are still stuck in a 1970s headspace, and it will have negative consequences for the industry, and most critically for our customers if we, and others such as the media, have a false view of our customer base. Whilst product innovation has come on leaps and bounds, we need to be able to market to and advise our customers with a true understanding of how they see themselves, and the mainstream media also needs to understand this. Today’s 70-year-olds do not feel 70. It is this ‘subjective age’ that will become ever more important as we continue to develop retirement planning and finance. We need to understand, and react accordingly, to people’s subjective ages. Studies have shown that most people actually feel about eight years younger than their ‘chronological age’ – so what does that mean for our industry? Does it mean we are nearly a decade out of step? Perhaps. What is definite is that we need to be aware that looking at someone’s age, and making a judgement based solely on that, needs to change. We need to be hyper-aware that our customers may be all over the spectrum when it comes to their subjective age, and we need to consider this more when we plan our approach. It may sound like a new minefield of complications – understanding the subjective age of one 70-year-old versus another – but if we can master this it will only help us understand, help and care for our clients in smarter, more effective ways. In essence, age is just a number and we’re better off forgetting it. M I
We need to rethink what really defines old age
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Bridging the middle class surge Claire Barker managing director, Equilaw
s the stamp duty holiday continues to push UK house prices to record highs, recent data from later life broker Adviser Responsible Life and the Key Equity Release Market Monitor have identified a dramatic rise in middle class homeowners using lifetime mortgages. This ‘middle class surge’ might be to access increases in equity wealth, or to exploit falling loan-tovalues (LTVs) to secure better rates. More than £1.1bn was released by property owners in the three months to April 2021 according to recent figures from the Equity Release Council, with overall loan amounts representing a 7% annual rise on the first quarter of 2020. Yet, the figures from Key suggest that this growth has been overwhelmingly driven by increases in house prices over the past few months, with average loans rising by a whopping 25%, from £83,000 in Q1 2020 to £103,710. Moreover, data from Responsible Life revealed that the sums released by its own customers have exceeded even these amounts, with average totals rising from £86,000 in April 2020 to £112,700 in April of this year – a dramatic 31% boost. In addition, the data also found that the average value of homes used to secure lifetime mortgages has grown by a colossal 19.4% since April of last year, to a current total of £487,000 – almost double the value of average house prices in the UK, while average LTVs have risen by a mere 2%, despite the overall decline in sold plans. This means that the growth in average property values amongst equity release (ER) customers has been more than 8% higher than for the UK as a whole (10%). This has prompted Responsible Life, in turn, to conclude that the ER sector is experiencing a
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major shift towards homeowners with high value properties. This makes perfect sense when one considers that people with homes that fall within the data’s average valuations could conceivably have received equity windfalls of around £40,000 to 50,000 over the past 12 months – an incredible, life changing sum. FINANCIAL BALM
However, while it is natural for lenders, brokers and financial analysts to seize upon consumer trends of this kind as a means of identifying avenues of potential growth, arguably the most interesting feature of the current data is what it can tell us – in a roundabout fashion – about the attitudes of retirees to property wealth at a time of economic uncertainty, and the plausibility or desirability of ER as a financial balm. Firstly, it tells us that, in an age defined by rock bottom savings rates and unprecedented financial instability, releasing the equity tied up in a home is increasingly regarded as a safe and effective means of boosting retirement incomes, as opposed to representing a static investment amount which is reserved as a legacy for dependants. Secondly, as awareness of ER continues to dovetail with increasingly professional service standards and safeguards across the sector, the reputational growth which this promotes has facilitated a wide acceptance of ER as a financial norm, as opposed to a risky, last ditch option. Thirdly, in a marketplace that is overwhelmingly defined by consumer expectations of service and value, the availability of wider product choices and the incentive of low rate options has become a recognised component of confidence and growth. Indeed, according to recent analysis by Moneyfacts, the current availability of ER options has risen to an all-time high of 500-plus plans, with more than 100 launched in the last year alone. Likewise, average product rates have positively tumbled over the past two
years, falling from 5.20% in February 2019 to around 4% now, with many deals continuing to offer rates in the region of 3.5%. So in short, we have never been as relevant or as ready to meet the challenges of an uncertain world as we are at the present time. Nevertheless, while an identifiable shift towards wealthy clients may be seen as encouraging in some respects – if only because the financial decisions taken by people at the top of the property chain often trickle down to those with lower value properties – we should be wary of losing sight of those who have experienced income losses or other financial reverses during the course of the pandemic. Indeed, official research has confirmed that the proportion of UK residents who have suffered significant financial harm as a result of COVID-19 continue to outweigh those who have witnessed rises in income or savings amounts, and this has led many within the industry to call upon brokers and lenders to reach out to those who have been left behind, encouraging the use of equity increases to compensate for shortfalls experienced elsewhere. After all, ER is a uniquely flexible and inclusive financial product that can be successfully applied to a wide variety of needs and circumstances. So, it would be deeply unfortunate if this market came to be perceived as the preserve of a wealthy elite of customers looking to fund home improvements or provide deposit amounts for children, for example, particularly given the near total absence of viable financial alternatives for those who have struggled to make ends meet during the pandemic. So, let’s double down on our commitment to property owners from across the social spectrum, and ensure that our message is heard and understood by all. Now more than ever, we have it within our ability to transform lives for the better, irrespective of the circumstances. M I www.mortgageintroducer.com
Drawdown: The key is communication Xxxxxxxxxx Stuart Wilson xxxxxxxxxxxxxxxx, CEO, xxxxxxxxxxxxxxxx Air Group
here are so many different moving parts to the provision of equity release advice, and so many potential complexities within it, that it’s no wonder that keeping to the process is so important. This is also why, at every single stage of that process, advisers need to ensure they are comfortable and happy with what they are doing, and ultra-comfortable that the client is in the same frame of mind. Of course, those complexities mean this can be easier said than done. We’re also not just talking about the client themselves, but their partners and their wider family. There are also issues to be covered in terms of client age, the way the regulator looks at those customers, and issues of potential vulnerability, which may be more prevalent given the demographic we are dealing with. On top of this, we’re not just talking about ‘standard’ products, but as the equity release market has grown, developed and innovated, we’re covering a far wider range of options that all need consideration. This is no longer a market where the client, for instance, gets their money in one lump sum, as drawdown options now form the vast majority of cases. While the facility is agreed upfront based on the specialist advice the client has been provided, there are potential complexities that these type of products bring with them. Namely, how clients take this money over the longer term, the advice they may or may not take around that, and the position of both adviser and provider within such a situation. www.mortgageintroducer.com
Drawdown is one of the key areas for advisers to be focusing on, because it does present the potential for issues, as has been seen most recently with a complaint upheld by the Financial Ombudsman Service (FOS). Off the top of my head, what might these potential problems be? Well, there are clearly capacity issues that may come into play. Following the initial drawdown, what if the client isn’t able to make a decision themselves to take a further one? What if there is no power of attorney to allow others to make that decision for them?
“Equity release advisers actively encourage family engagement as they are well aware that expectations around inheritance need to be managed. However, with drawdown, is the family always aware and comfortable with how their relative is accessing the funds?” What about advice beyond the initial recommendation? From my perspective, decisions on future drawdowns should be accompanied by advice, but we know that isn’t always the case, and certainly in the early years of a plan it can sometimes make sense. The client can always deal direct with the lender, bypassing the adviser. What if the reasons for wanting the drawdown money have now changed compared to those initial reasons? Lenders will be reviewing them and making a decision on whether a further drawdown is justifiable. Plus, there are simple issues around the adviser and client engagement –
I’ve spoken to advisers who recognise the need for ongoing advice, but are concerned their fee-charging structure is too much for the work involved. To which I say, quite simply, change it to a more relevant level. Then we might find clients are more willing to take that advice when they are considering their next drawdown. And what about family involvement? Unlike some other product ranges, equity release advisers actively encourage family engagement, as they are well aware that expectations around inheritance need to be managed. However, with drawdown, is the family always aware of – and comfortable with – how their relative is accessing the funds? Finally, we need to consider the role the product providers play. I would not be surprised to see them tightening their own processes and systems around drawdowns, especially with regards to vulnerability and the longer-term uses of the funds – potentially even refusing drawdowns as a result. The proposals outlined in the Financial Conduct Authority’s (FCA) ‘Consumer Duty’ consultation are also only likely to encourage lenders to think more carefully about this issue. Some of these issues have certainly been highlighted by the recent FOS case, so it is worth availing yourself of the details to better understand what these issues may look like in real life. Of particular interest is the adjudged culpability of the adviser, who even though they did not advise on the drawdowns, did recommend the total amount that could be drawn down through the life of the product, and is therefore deemed to be responsible. In other words, just because you don’t advise the client when taking out those subsequent drawdowns, it does not mean you do not hold some responsibility for them. In that sense, it would certainly be worth reviewing the initial amounts you are recommending clients to drawdown, and it would be very fair to suggest that you need to communicate with all clients on an ongoing basis and make it very clear you recommend they come back to you whenever they are considering this. M I JULY 2021 MORTGAGE INTRODUCER
Changing retirement plans Alice Watson Xxxxxxxxxx head of marketing and communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx
s people start to live longer, while also retiring with less generous pension provisions, it is clear that few of us will experience the same retirements as the previous generation. One element is the increase of state pension age from 66 to 67, scheduled to take place between 2026 and 2028. This will increase again to 68 between 2044 and 2046, affecting those now in their 40s. Our research found that 18% of over-40s feel this will affect retirement planning, with 24% saying they will wait to retire at this new age.
While the main sources of wealth over-40s plan to access for their retirement are their pensions, either workplace (45%) or state (28%), equity release is becoming an increasingly popular source of income. Our research found that 12% of UK homeowners aged 40 and above planned on using this to supplement their retirement income. The average age they would consider releasing equity now stands at 66. We already know the over-60s market is set to grow by a third over the next 15 years, and that retirement is becoming more complicated. More people are now following new financial paths in their later years, either as a result of more complex family units or by achieving financial stability later. Analysis shows that these groups are likely to overtake the more traditional
routes to retirement in the next 15 years. These changes appear to be driven by societal changes such as people joining the housing ladder later in life or a rise in divorce. Alongside this, the wealth tied up in property is growing, and is increasingly being used as a part of effective retirement planning. While releasing equity from property is a long-term decision that should include discussions with wider family, with the right advice it has a valuable role to play. It not only allows people to unlock wealth stored in their property in a flexible and safe way, but also helps to support retirement lifestyle choices. It is likely that these groups will need a different approach from advisers to meet their changing lifestyles, so advisers should take the time to really understand them and adapt. M I
A game of two halves Steve Goodall managing director, e.surv
fter months of seemingly inexorable house price increases, our April Scottish House Price Index saw the impact of the end of the Land Building Transaction Tax (LBTT) holiday in March this year. In April, Scottish transactions were down 35%, and 25 local authorities saw average price falls. At first sight this might be considered a warning shot, but upon further examination it is important to see this in context. Average prices in Scotland remain 10% higher than this time 12 months ago. Even so, prices broadly ceased to deliver as they had done in previous months. Why did this happen, and is there any reason to expect similar patterns in England and Wales? One reason the monthly growth rate in Scottish house prices fell by 1.5% was that a good proportion of higher value sales had been completed in March, so as to meet the LBTT holiday deadline. PSYCHOLOGICAL IMPACT
This meant that mainly lower-value sales were being completed in April – the end of the tax holiday distorted the pattern of sales. But there is a psychological impact, too. The downturn in the growth of average prices also felt significant because it contrasted so starkly with the 10 months of almost uninterrupted price growth that took place from May 2020 onward. The impact of government decisions on markets should never be underestimated – particularly in housing. For evidence of that, we can compare the Scottish experience in e.surv’s April House Price Index with that detailed in our England and Wales Index in the same month, which www.mortgageintroducer.com
continued to enjoy the effects of the extended stamp duty holiday. In England and Wales, buyers were still striving to complete purchases in time to benefit from the maximum tax break ahead of the change in June to a tapered deadline. At the time of writing in mid-June, some lenders are warning that deals not ready for completion are unlikely to make the cut. As a result in England and Wales, completion prices for transactions funded by both mortgages and cash grew by a startling 13.4% annually in May, and at a national level, prices in England and Wales in May rose on a monthly basis by some £1,800. The tale of these two geographies is of note, because in England and Wales,
“It may be premature to call the impact of the end of the stamp duty holiday in England and Wales, but my sense is that confidence in the market remains high and that it is not misplaced” the government employed different tactics in order to avoid a cliff-edge in favour of a tapered end to the scheme. Any softening of price increases is being baked into the system gradually. It is notable that the monthly price increases over the last three months are the lowest since June 2020, probably a reflection of the rapidly approaching end of the stamp duty holiday, but this is already in play. Most of the rhetoric for the market in England and Wales post-September has remained broadly positive. A combination of factors, including the shortage of homes for sale, increases in average household savings during the pandemic, homebuyers’ reassessment of what they want from their homes, and continued fiscal support from the government, means that there is enough for most commentators – including this one – to continue their
‘glass half full’ assessment of the UK’s housing market. Further out into 2022, there is little agreement on the market outlook. On the ground, the reports are that agents may have seen buyer registrations returning to more sensible levels than in recent months, but these are in keeping with the kind of numbers we were used to in the ‘good years’ before the pandemic – not a seismic drop off. A period of economic growth and falling unemployment, combined with the usual issues around lack of supply, could bolster values. COMMITTED INCENTIVES
There are other reasons why England and Wales might not share Scotland’s fate. Interest rates remain at historic lows, and the government has committed further support to affordability through its scheme for 95% loan-to-value (LTV) lending. This has had the effect of not only supporting high street lenders, but it has brought other lenders back to the high LTV market. Government support can be seen elsewhere, too. There are committed incentives for self-build, and in the private sector, the many new ‘deposit unlocked’ products available to support the Help to Buy market will underpin confidence. But this is undoubtedly a game of two halves. Lenders may have had a great first half of the year, but competition will be keen in the second. It may be premature to call the impact of the end of the stamp duty holiday in England and Wales, but my sense is that confidence in the market remains high and that it is not misplaced. The return to more normal business practices will mean another period of adjustment for all involved, and that may include the housing market itself. But if we have learned anything during the last two years, it is that with the right support, the UK’s housing market has a proven track record of outperforming other asset groups. M I JULY 2021 MORTGAGE INTRODUCER
Brokers should promote surveys Karen Rodrigues sales director, eConveyancer
nyone working in the property industry is well aware of what extraordinary shape it is in today. Even with the challenges presented by the pandemic, the desire to get out and buy or sell property has never been stronger. Rightmove recently reported a new record-setting day for the property portal, with more than nine million visits in a single day. That works out at 6,320 visits every second – a frankly astonishing figure. That demand – boosted by the first looming stamp duty deadline – has translated into very healthy transaction figures. According to the latest stats from HM Revenue & Customs (HMRC), there were 117,860 residential transactions in April, up by an amazing 179.5% on last year. Clearly, would-be buyers are engaged in something of a bun fight, trying to nab those properties that can deliver a better standard of life ahead of the competition. However, that competition is driving prices up rapidly, meaning that some of those borrowers find they are required to stretch themselves more financially than they might have hoped. Brokers are obviously a key ally for these borrowers, helping them understand precisely what sort of product they are signing up for, as well as identifying the most budgetfriendly deals. What’s more, brokers are perfectly placed to highlight the importance of getting a survey. If a borrower is already pushing themselves financially to afford a property, then the additional outlay
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on a property survey can seem counterintuitive. After all, that money could go towards covering the mortgage payments for the first couple of months, or on one of the myriad other costs that accompany a property purchase, such as hiring a removals firm or paying for decorating. However, that money has to be viewed in rather different terms, as an investment which ensures that they truly understand what they are buying, beyond the mere bricks and mortar. The reality is that getting it wrong and purchasing a property, without truly grasping what flaws may be lurking beneath the surface, can be extraordinarily expensive. INFORMED EXPENDITURE
A study a couple of years ago by the Royal Institution of Chartered Surveyors (RICS) found that homebuyers ended up forking out £5,750 on repairs to their property after getting hold of the keys, once the issues became apparent. That initial expenditure on a survey will put your clients in a far more informed position. It may be that the survey turns up nothing out of the ordinary, meaning they can continue with the purchase, buoyed by the peace of mind that there are no skeletons lurking in the closet. Equally, getting an accurate indication of what work is needed means that the client is best placed to decide whether they still want to continue with the transaction, whether there’s room to negotiate down the purchase price, or even provide the details needed to justify walking away entirely. Brokers have a big part to play, particularly for first-time buyers who have never been through a purchase before, and who probably view surveys as somewhere they can cut corners in order to save a few pounds.
Outlining to your client why it’s important to get a property survey is the right thing to do for their future financial health, and what’s more it’s something that clients will remember. If the survey ends up saving them money in the long run, then it only improves their experience of your service, making it more likely that they will come back to you for their future financial needs. KEY PARTNERSHIPS
At eConveyancer, we’ve partnered with The Moving Portal so that brokers can organise a range of different surveys for their clients buying property in England, Wales and Northern Ireland, stretching from the basic Homebuyer Report all the way up to full structural surveys when necessary. There are other forms of protection against the possibility of a sale going wrong that are also worth flagging to your clients. At eConveyancer, we’ve partnered with Surewise, an insurance provider which offers a homebuyer’s insurance product, which delivers payouts in the event that a sale collapses, and covers the money spent on legal and valuation costs up to a cap of £2,250. With policies costing just £65, it means that for a small outlay at the outset your clients can enjoy tangible peace of mind and a financial safety net should the worst happen. These additional services have been added based on feedback from our intermediary partners, since they are best placed to recognise the ways that advisers can demonstrate to their clients that they can do far more than simply identify the best home loan and help them build a long-lasting relationship with those clients for the decades ahead. For any business which works with intermediaries, it is crucial to listen and take on board their actual needs, in order to provide services that meet those requirements. Pointing out the benefits of a survey and the potential safety nets provided by insurance are not only the right things to do for your client, they can help you build sturdier foundations for your future business too. M I www.mortgageintroducer.com
Removing the stress Mark Snape managing director, Broker Conveyancing
y the time you read this, it will be the middle of July, and at least for the most part, one of the busiest periods in the UK housing market will have partially come to an end – albeit with the significant caveat that there remains a huge amount of demand still to be worked through. That caveat is very relevant, not just in the context of the partial stamp duty holiday which will be available until the end of September, but also in terms
“Existing clients retain their importance in any environment, but I hope advisers have been maintaining communication with them, specifically those who are coming to the end of their special deals soon” of the general non-stamp duty holiday related business which is out there, and becoming ever more prevalent. That is the business which has not been influenced in any way, shape or form by the potential tax saving incentive provided by the government, and instead is being ‘naturally’ generated in the market. Now, you might suggest that nothing truly feels ‘natural’ at present, and you could be right. We have approximately two and a half months of this partial stamp duty holiday left, which is clearly not a normal environment, and of course while we continue to live with the pandemic we will see market differences to the pre-lockdown norms, many of which will shift and reshape housing for the next decade, perhaps even longer. www.mortgageintroducer.com
This might well present mortgage advisers with an unparalleled ongoing opportunity – purchase activity will drop off from its pre-June highs, but demand will remain strong, particularly amongst existing homeowners looking to utilise the equity they have stored up via house price increases and move to bigger properties with more amenities relevant to the new work-life balance we are seeing. We have new purchase entrants able to access higher loan-to-value (LTV) mortgages that have simply not been available over the last 18 months, plus of course, first-timers will still be able to access a stamp duty saving after the holiday closes in September. In addition, we have another set of existing homeowners who for whatever reason may not be able – or willing – to move to another property, so instead may access their equity via remortgage or product transfer, and potentially other products, in order that they can renovate their homes, such as to put in a home office, extend or make more of their outside space. That latter opportunity should become more visible in a market which has traditionally seen purchase business playing catch-up to remortgaging. Indeed, it’s pretty fair to say that, over the last 10 years, except for a few periods like we’ve had in the last year, it has been remortgaging or product transfer that has been the bedrock of most of our businesses. That norm might well begin to reassert itself, perhaps more slowly than we would expect, because of the pandemic and lockdowns, and the so-called ‘race for space’, which I anticipate will go on for some time – but still, we are already starting to see remo business beginning to creep up. Of course, those existing clients retain their importance in any environment, but I hope advisers have been maintaining communication with them, specifically those who are coming to the end of their special deals soon. We’re all acutely aware of the threat that lenders pose direct to these
clients, and that is certainly not going to change anytime soon. What will also be important for remortgage clients, particularly when so many property professionals continue to be incredibly busy, is the conveyancing route they take. It will not need me to point out what the last 12 months has been like in the market, the unprecedented levels of work conveyancers have had to deal with, and to a great extent are continuing to work through. We will see a drop off from those highs, but no one knows by quite how much. STRESSES AND STRAINS
It could be easy for advisers to think, when it comes to remortgage business, that a return to free legals is now justified for clients – after all, the major stamp duty deadline has passed and therefore capacity should be freed up. There are a number of dangers inherent in this, in my opinion. First is that growing level of remortgage activity, second is the fact that purchase demand will still be high and conveyancers have significant amounts of work to still complete before the end of September. Add in the ‘natural’ workload returning, and the fact that most firms have the vast majority of people still working remotely, and resource remains an issue. Of course, there are also the traditional arguments against free legals – the conveyancer works on behalf of the lender, not the client, the potential for delay, etcetera. Therefore, the option of using cashback to fund specific remortgage conveyancing for your client always remains a very strong one to take, particularly when you are ensuring they have specialist conveyancing support, and they don’t go into a potential family or high street firm black hole. Overall, there is much to be positive about, but the stresses and strains brought about by huge levels of activity are likely to remain for some time. Make sure you are taking those away for your client as best you can. M I JULY 2021 MORTGAGE INTRODUCER
THE MONTH THAT WAS
Southgate: Kindly hesitator
Every month, The Outlaw draws some tongue-in-cheek parallels between society at large and a mortgage market in flux
t still feels like a family bereavement, doesn’t it? Even now, weeks after it all came to an end. So many wonderful moments and memories, and far too many to recount here. But there we go, nothing lasts forever. Later in my piece I’ll come to the lesser matter of Ingerlun’s inglorious journey at the Euros, but for now I’m still coming to terms with the emotional news that the industry legend that is OSB’s Alan Cleary is retiring. Parallels with Gareth Southgate are actually quite appropriate here. Both are kindly souls who’d help another human in distress, and
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each is also sartorially accomplished. Both of them also did a lot of their finest work in and around the M42 nexus. The comparisons could end there, however, because where our Gareth was a hesitator and a man consumed by risk-aversion, Alan thankfully wasn’t so hamstrung by negative thinking. Quite the opposite, in fact. His work at Charter Savings, and prior to that at Birmingham Midshires, sets him apart from so many peers in his field. Unafraid to do the unconventional, and often delivering guerrilla-style marketing initiatives and product innovations in that understated and charming way of his. A second generation Irishman – those fellas often take some beating, and he’ll be sorely missed from our industry. Arise, Lord Cleary of Highgate. One of Cleary’s last salvos this year was his position regarding staff returning to the office. OSB was bold and vocal in suggesting that white-collar staff across the land could www.mortgageintroducer.com
become less efficient, less accountable and less accessible to us brokers if they remained at home any longer. Too few lenders have followed this example, and Cleary Alan Cleary: will doubtless have Will be missed been wincing when reading last week that civil servants – and ergo, those at the FCA? – have been urged to return to the office for just four days a month! I mean…just WTF is going on at Whitehall? This is where Cummings’ departure has been bad news for us all, by the way! And get this, some lily-livered civil servants will not even be asked back until spring of 2022! Alan won’t be missing these indolent and over-bureaucratic sloths one bit, will he? Anyhow, the recovery goes on thankfully, and whilst some lenders could be faulted for their work from home mandates, most have done a sterling job this year. Service levels have outperformed expectations, and there has been a gradual creep upwards occurring on loan-to-values (LTVs) and criteria cards. Fleet being back at 80% is a fillip, as it is a very useful lender in this environment, where houses in multiple occupation (HMOs) and portfolio lending is even more relevant post-pandemic. Other lenders which have excelled include Coventry, Accord, Landbay, and – in what’s been a distinguished month for the Cleary clan of Sligo & Monaghan – MT Finance, which is the sector’s more progressive lender. Lloyds – and more to the point Halifax – has also performed well throughout this period. However, what’s of less acclaim has been the decision to award a knighthood to its now departed gaffer, Antonio Horta-Osorio. In fact, why do so many consummately paid bank executives receive such honours when there are so many other and far worthier recipients of awards prescient in our modern day – COVID-fighting – society. These top bankers are already well paid for what they do – in Horta-Osorio’s case an
aggregate of £60m during his tenure at Lloyds. With us now in to – a quieter?! – July, it’s time to play soothsayer on H2. For instance, amid the latest price war, will Barclays wrestle back their lost market share from HSBC? Not a chance. Might brokerages in the North and Midlands fare better with a stamp duty threshold of £250,000 until September? Probably. And most critically, might underwriters already be running their forensics on many self-employed occupations where Bounce Back Loan repayments commence soon? Most definitely. All of this is conjecture, unlike the fantastic support we’ve generally had from lenders this calendar year. Which brings us finally on to the whole panacea of matters relating to competency, →
Halifax: Credit where credit is due
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THE MONTH THAT WAS praise, credit and so on. The Euros and all that jazz. First up, Sir Gareth. I probably would award him a knighthood. But not for what was (non)accomplished on the pitch. Where he has succeeded is in dragging the perception of our national sport up out of the gutter in which it resided in for so long. He espouses virtues of decency and inclusivity, which make him a far more impressive role model and leader than any of our elected politicians – who nauseatingly populated the Royal Box bandwagon at Wembley, gladragging with Hollywood stars who wouldn’t know a penalty box from a centre circle, and I include the ever vainglorious Beckham in that, too. As for Gareth’s limitations. Well for sure, nobody likes a smart ass. But The Outlaw did actually call this – and Italy’s latent value – four weeks ago, as illustrated in the below excerpt from the June edition. As impressive as Southgate is as a human being, he is flawed and under-qualified as a soccer strategist, and to retain him for Qatar would be an error – not that the imageobsessed FA will see it that way!! After all, he has made them gazillions in fresh revenues to waste on God knows how many more ills an amine plu s – and f y thought out projects. g e t a r e st
FCA: FOUR DAYS A MONTH!
ly, a ce do Converse earth of confiden ng Er Lun’s gd nd I increasin uld! – exist arou o ingly indeed sh t now. t exceed soft o h g ig r e t a ie t g o h t fo o, with a e it, Sou Let’s fac sia three years ag Rus . lucky in low expectations as been scant h t d e draw an ears on and ther Sterling couldn’ Three y t. Rashford and en of improvem g version s in p p a . d fl ack trap win is our vain and ur right b o f e d r h t o f h k Pic arly nd wit ncock, a , Southgate is cle tch a H t t a d M lu the squa making c named in hen it comes to favourable. w ’t a bottler The omens aren e Euro’s: . h s n decisio nal thoughts on t r price? Wales d u fi Three e twice o t plucky Scotlan b ly a t I How can this time too, bu -prepared der gle will strug be playing an un . ll could we t the perfect time b a England avoiding wee Bo e b if I will t all costs ted. a ir la c in c McS is re-ena Called it n r u b k c Banno 48
TIMI MORTGAGE O O R INTRODUCER P
JULYin 2021 g and im t , e im t f Talking o ekeeping, we im t even back ltimately
Up on the TV gantries at Wembley we also have some honours to bestow. Congratulations to the following ‘experts’ who all performed excellently: Lampard, Klinnsman, Fabregas, Dixon, McCoist and Murphy. Rotten fruit, however, can be chucked at the following for various reasons; Shearer, for being dull as ditchwater, Ferdinand, for kissin’ Sterling’s backside at every opportunity and grossly overdoing it with the street drill rap lingo, and Hartson and Savage from Wales, woeful as match analysts. On the commentators, the BBC’s two Steves – Bower and Wilson – were like the peerless Barry Davies in his prime, understated and simply doing their jobs. The same could not be said for the verbose Clive Tildsley over on ITV and his heirapparent Sam Chatterface, who did not shut up the whole bloody time – hence he missed Denmark having 10 men for 20 minutes! Shocking. Whilst in the roles of anchor, Pougatch shaded Lineker, who still thinks he’s there to virtue-signal and crack irrelevant and lame jokes at the licence payer’s expense. I guess a final reflection might be whether there are lessons for mortgage brokers from Euro 2021. There’s probably a multitude of them, but one definitely comes to mind via Gareth’s defining last 20 minutes versus Italy… Put simply, you have to ask for and even demand the business, don’t you!? Be bold and get in clients’ or introducers’ faces, because excellence is rarely achieved by simply sitting back and hoping it happens. Can you imagine what the likes of Leeds’ Bielsa could do with this squad…here’s dreamin’, sadly! M I www.mortgageintroducer.com
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Home again Mortgage Introducer caught up with Matthew Kimber, managing director, and Ross Turrell, commercial director of CHL Mortgages, to discuss the lender’s return to the buy-to-let market Why re-enter the market now? Matthew Kimber (MK): Buy-to-let (BTL) has long been an established sector in the mortgage market. As it has demonstrated time and time again, it’s importance will only grow for the rising number of renters who continue to rely on the private rented sector (PRS) due to a combination of choice, necessity, rising house prices plus a widening affordability and supply gap. In particular, the growth trajectory of the specialist buy-to-let market has provided us with an additional layer of confidence regarding the opportunities available for lenders, intermediaries and landlords. Ross Turrell (RT): Our re-entry has been carefully plotted, and as a business, we have spent a significant amount of time and resource ensuring that we have the infrastructure in place to support a return to lending.
still outstripping supply and increased pressure is being placed on the current housing stock. With the knock-on effect of remote working and greater demands when it comes to requirements for that extra room with a desk or more outside space, landlords are having to adjust to shifting tenant demands. This means they are constantly looking for ways to restructure, diversify and refinance portfolios, and specialist buyto-let lenders remain in prime position to support them on this journey.
How is the complex BTL market looking post pandemic – what, if anything, has changed?
What do you feel makes CHL Mortgages diﬀerent?
RT: It almost goes without saying that the pandemic has created huge levels of uncertainty for many people, especially when it comes to employment opportunities. As previously alluded to, demand for accommodation is
MK: We are currently servicing around 30,000 mortgage loans across a number of asset classes, including buyto-let and residential owner-occupied loans. This has enabled us to closely follow the market and help shape
Matthew Kimber, managing director, and Ross Turrell, commercial director of CHL Mortgages
our proposition. This continued exposure to the wider lending market, alongside the formation of a highly knowledgeable senior management team with a wealth of experience in the UK mortgage, banking and capital market sectors means we can position our offering to make a real difference. We are not trying to reinvent the wheel; our proposition is all about competitive pricing and broad criteria, aligned with a modern digital infrastructure to create a positive experience and deliver tangible benefits for our intermediary partners. As our proposition grows over the coming months, we want to be known as the go to specialist BTL lender offering a broad range of products built on our experience and market knowledge. RT: We are working from a very solid base in terms of investment and infrastructure, plus our funding position www.mortgageintroducer.com
gives us the opportunity to develop our proposition further and quickly, where needed. Delivering a consistent and reliable service is something we see as a differentiator, as we know certainty for brokers means everything in terms of them delivering a firstclass service to their landlord customers. How important will technology be to your proposition? MK: To deliver a successful proposition in the modern mortgage market, all products must be backed with the highest service standards, which are further supported by a range of robust, effective, and innovative technology solutions. We have partnered with BEP Systems and its Apprivo2 platform, and look forward to establishing a strong working relationship which will provide our → JULY 2021
CHL MORTGAGES intermediary partners with access to solutions which help meet the needs of their landlord clients swiftly and effectively. Why have you decided not to take a margin from valuation fees, and to choose Lender Exchange? RT: As a lender we want to promote transparency throughout our proposition, and by not adding a margin to these fees it further demonstrates both our transparency as a lender and our commitment to landlords. In relation to Lender Exchange, the portal has been adopted by a significant number of our peers and the wider market. In offering this solution, we hope to provide an easy-to-use service to our brokers and landlords whose legal partners are already using this system. Where is the company today compared with where you want it to be in the next five years? MK: From the late 1990s through to 2008, we were one of the largest buy-to-let providers, with a well-earned reputation for providing borrowers with competitive mortgage products matching their specific needs. The company has continued to act as a servicer on both our own and third-party assets, with the core of the business focusing on providing a best-in-class service to our existing customers. Re-entering the market now as a specialist buy-tolet lender is the start of our new proposition, and we have significant growth plans over the next five years to support our intermediary partners and their clients. Will green mortgages be further adopted in the specialist buy-to-let sector, and what benefits can they provide to landlords and tenants?
MK: It has also quickly become evident that brokers are looking for efficient systems and great service, aligned with competitive criteria and products. We like to think that we are already ticking many of those boxes, but at the same time we are always striving to improve and evolve our proposition and will be listening to our distribution partners to understand their clients’ needs. What excites you about the business and the specialist buy-to-let sector? MK: The opportunity to enter the specialist buy-to-let market at a time of continued growth and being able to assist the landlord community with a range of products to support their needs and demands. RT: Having the ability to work closely with our broker partners and understand what their customers need and building strong relationships to meet these needs is really exciting for us as a business. There are also many opportunities and product areas for us to potentially expand into – as Matt has already mentioned – over the coming months, and we feel there are many areas where we can add value to intermediaries and landlords in addition to the existing offerings available, so watch this space. What challenges do you see coming ahead? MK: Inevitably, there will be continued uncertainty created by the pandemic, and landlords could face lingering challenges with some tenants struggling to pay their rent. House prices have been running hot in some areas, and there is likely to be a slight softening after the stamp duty holiday ends; however, this will no doubt present further opportunities for landlords in Q4 2021 and beyond. What will success look like for CHL Mortgages?
MK: Green solutions will become more prevalent over the coming years, and we are already seeing lenders in both the prime and specialist markets offering products to improve their customers green credentials. It’s certainly an area that we as a lender will consider as our proposition grows, as we are constantly evaluating how and where we can better support landlords in improving their housing stock whilst considering the obvious benefits to the wider environment. What have you learned in the first 30 days after going live? RT: In all honesty, not a huge amount that we didn’t already know, as this wasn’t something we rushed into. What has become increasingly clear is that we are operating in a hugely competitive marketplace, and that demand for specialist buy-to-let borrowing is maybe even stronger than we initially thought.
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MK: Hopefully it’s been clear throughout this interview how important delivering consistent best-in-class service constitutes success. However, it’s also very important that the CHL Mortgages brand is known and trusted by intermediaries, and this is something we do not take for granted having been out of the market for a few years. Success for me will be continuing to develop and grow the strong team I have working with me to deliver this best-in-class proposition to our intermediary partners and their clients over the coming years. RT: I agree that it’s vital for us to be recognised for first-class service, plus I would add flexible criteria and competitive products. This is an ongoing challenge which will continue to test the business and the individuals within it. However, we are certainly up for the challenge and we are looking ahead with great enthusiasm and optimism for the future. M I www.mortgageintroducer.com
CONTACT A MEMBER OF THE TEAM TODAY TO FIND OUT MORE MATT BOND 07525 456 869 firstname.lastname@example.org
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Heading for the exit? Loan Introducer asks the experts if the market can expect more lenders to leave following Paragon’s departure
aragon shocked the second charge sector in May, when the lender announced it would be withdrawing from the market.
Loan Introducer asks: “Are you worried that more lenders might exit the second charge market following Paragon’s departure?”
Paul Stringer director, Norton Finance
Whilst the timing of Paragon’s departure came as a surprise, it wasn’t completely unexpected as second charges were such a small part of the Paragon group revenue. Its struggle to grow market share I suspect was a major factor. The vast majority of lenders in the second charge market are fully committed and are actively improving criteria and rates, this makes it very unlikely we will see more lenders exit.
Stewart Simpson second charge mortgage specialist, Brightstar Financial
It’s important not to conflate one lender’s appetite for second charge lending with the strength of the overall market. According to the latest figures from the Finance & Leasing Association (FLA), the second charge market returned to growth in April and is expected to record a strong recovery in new business levels during the second half of 2021.
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We are also seeing more brokers engaging with the second charge market, driven by increased consumer demand for purposes like home improvements and debt consolidation. We are therefore positive about the continued growth of the second charge mortgage market, and as it grows we would expect the number of lenders active in the sector to grow rather than reduce.
Joseph Aston national sales manager, Vantage Finance
The second charge market is actually enjoying a relative renaissance since a drop in lending through the bulk of the pandemic. The flexibility and nature of a second charge mortgage means it is a product that will always be of interest to a large portion of responsible borrowers, and when paired with expert and thorough packaging I can see no reason why there wouldn’t be a hungry lending market on hand to support this space. Paragon may have departed, but others have strengthened their offering in recent months and long may that continue.
choice of lenders. I am not concerned about any serious shift in players offering seconds.
Steve Brilus, chief executive office, Evolution Money
No – this is valuable area of lending that supports consumer needs and spending requirements and will continue to go from strength to strength as advisers and consumers gain greater understanding of the nature and use of the product. Lenders continually evaluate their position in the market, and if seconds are not perceived as a core part of the offering, or not a specialism, or funding is required elsewhere, then they may decide to remove themselves. We could not be further from this stance however, having just celebrated our 10th anniversary in this product space. Specialist second charge lenders like ourselves are here for the long-term and we’ll continue to support advisers to maximise their second charge business proposition.
Matt Tristram Alistair Ewing managing director, The Lending Channel
While any lender exiting the market is never good news, Paragon had become a very niche lender focusing on low volume, high quality business. I don’t see its departure having much of an impact on the second charge market, which is very well served by a wide
co-founder, Loans Warehouse
Paragon’s departure is an isolated incident and should not be seen as a reflection on the buoyant second charge market, more as a resource issue at Paragon due to greater success in other sectors. Paragon has been a second charge lender for the majority of my career, but this market has changed considerably over the last www.mortgageintroducer.com
Tired of tick box lending? decade, and the influx of challenger banks has increased competition. Paragon simply didn’t have the appetite to grow in the way others have. I would like to take the opportunity to thank John Webb, Stan Matheou, Sally Burley and Nick Aylward at Paragon on behalf of everyone at Loans Warehouse for years of support and friendship.
Barney Drake chief executive officer, Specialist Mortgage Group
We never dealt with Paragon, so I can’t comment on its rationale for exiting. The message from the lenders on our panel is they are very much committed to the market for the long-term, evidenced by their constant refinements to their product and service offering to win more business. In turn, this strengthens the reasoning and relevance of recommending a second charge mortgage to those needing to raise capital M I .
Norton Home Loans oﬀers a common sense approach.
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Every customer is treated as an individual and not a number. We pride ourselves on Real Life Lending. Want to work with us? Marie Grundy
01709 441926 sales director, West One Loans www.nortonhomeloans.co.uk
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JULY 2021 MORTGAGE INTRODUCER
Expectations need to be raised Barney Drake chief executive officer, Specialist Mortgage Group
ach month a significant amount of interest is taken in the latest second charge mortgage data, published by the Finance & Leasing Association (FLA). Quite rightly too, as this provides all stakeholders with a clear idea of the level of seconds business being written in any given month, and gives us an idea of the trajectory of the sector. Indeed, by the time you read this, we will have received the latest figures for May, and I fully expect to see a positive reading. The latest stats I have to hand cover April this year, and show the value of new business for the month at £81m and the number of new agreements at 1,890. That’s a significant 154% increase on April 2020 for the former, and a 176% increase for the latter. Now of course, the rather large caveat for these figures is the months we are comparing – last April can best be described as the nadir for the sector, when we were fully immersed in the first lockdown with no anticipation of when we might come out of it. It is perhaps little wonder, therefore, that we have seen such a substantial shift upwards in volume and applications – you would expect little else. Indeed, if we had not seen the 100%-plus increases, we might well have cause to worry about where we are as a sector. Which leads me to question where we actually are. There will be some who might well suggest £81m is a cause for celebration, but if you compare this with the billions of first charge lending that takes place every single month it’s very much minnow territory
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when looking at the ‘big fish’ of the mainstream lending space. In this regard, while we can certainly evidence the growth in second charge activity, and the underlying conditions and foundations suggest there is a growing market for the products, if you’re a specialist broker then I very much doubt you are a specialist in second charges alone. In all likelihood – like us – you’re working in an array of sectors, including bridging, commercial, and others.
“We potentially have a large disenfranchised borrower demographic now with highstreet lenders less interested in their business, for reasons as flimsy as the customer having three credit cards” Seconds account for approximately 40% of what we do as a business, but the potential is clearly there to conduct considerably more, and for the whole second charge market to be working at run-rates far in advance of the business that’s being completed. Personally, I like to sign off the advice for every mortgage application that flows through our business. Analysing the adviser’s notes on the fact-find and their advice rationale, ensuring the whole story is present, and confirming that all vulnerabilities have been documented, and that our service has been adapted accordingly, allows me to keep a finger on the pulse and to sleep soundly knowing that we have provided sound advice each and every time. Each case must have an incredibly strong set of reasons why the advised product fits the bill for the client, but on looking at these cases, I often ponder just how many more potential second
charge customers are out there, who would undoubtedly benefit from this advice and product. Let’s be frank here, £81m is proverbial chickenfeed, and clearly while it’s much better than we might all have expected to be achieving when we consider our position last year, there’s still a great deal the industry should be doing to encourage more activity. Even if we simply consider the current market position for so many existing homeowners, we add in the potential difficulty they might well have remortgaging at the moment, the need to pay off debt or make home improvements, coupled with the problems many people would have in getting a remortgage case completed within the required timescale, and you can see a world of possibilities in the seconds marketplace. What about those borrowers with changed circumstances over the course of the past 18 months? Perhaps they have accumulated some adverse credit, are still on furlough, have gone self-employed, had to take a payment holiday, or are now working in a completely different role in a completely different business. For these borrowers, the first charge market may be out of reach for some time, and yet the need for funding has perhaps never been greater. We potentially have a very large disenfranchised borrower demographic now, with high street lenders less interested in their business for reasons as flimsy as having three credit cards. The Financial Conduct Authority (FCA) talks about there being 27 million vulnerable individuals in this country, millions of whom urgently require finance and have needs that excellent and sensitive advisers could ensure are met, many by means of a second charge. The potential of the seconds market is clear, but it is going to require greater marketing and education from all stakeholders to ensure we are catching as many of those customers as possible. Let’s be thankful that we are not in the same position as last April, but let’s not consider £81m as the height of our ambitions – we have to be aiming much higher than this. M I www.mortgageintroducer.com
Second charge versatility Steve Brilus chief executive officer, Evolution Money
nderstanding your client base and, crucially, how their circumstances might have changed – or be about to – is always going to be an important part of keeping up to date with trends and having the products and services in your toolkit to be able to deal with client requirements. Certainly, there has been a lot of noise recently about how people’s finances might have been impacted by the pandemic, and what they will look like when furlough comes to an end, but also in terms of what that means
“It’s quite likely that many homeowners will have seen the value of their property rise and they can now access that equity via a second charge mortgage to pay off debt” when looking to access future credit, especially home finance. There is an assumption that there will be a sizeable growth in the number of borrowers who have picked up adverse credit over the past year or so, and that this might represent a strong adviser focus in the short-term, as those clients have to potentially move into different areas to find new finance, or refinance what they currently have. For what it’s worth, we are not seeing a significant number of new customers with adverse credit coming to us, but that is not to say this isn’t a trend that may grow slowly in the months ahead. Indeed, if we look at recent research from Pepper Money, there appears to have been an increase in the number of people who’ve had a County Court www.mortgageintroducer.com
Judgment (CCJ) registered against them in the past three years – up from 18% to 22%. The most common reasons for having adverse credit were listed as: 1) A simple missed credit payment. 2) Missing several credit payments. 3) A Debt Management Plan. 4) Unsecured arrears.
potentially positive aspects of this most recent period is the continuing increase in house prices and how that might be used to their advantage. It’s quite likely that many homeowners will have seen the value of their property rise, and they can now access that equity via a second charge mortgage to pay off debt which is far more expensive.
Now, given what many homeowners might well have been through over the past year, it’s safe to surmise that the proportion with adverse credit on file could rise, from its current six million figure to, well, who knows what level. During the pandemic there has been a period of grace given to borrowers on certain credit payments, but that has all but ended, and we know that while this might not appear officially on credit files, lenders – particularly in the first charge space – are taking these factors into account by virtue of seeing those missed payments via open banking data, bank statements, and the like. This means that existing borrowers who might well have previously been seen as ‘vanilla’ could now have to move down a different path, and that could be particularly pertinent to the second charge mortgage sector, especially if they require finance but are unable to remortgage to a similar type of deal because of the adverse credit they have picked up. In a very true sense, there may also be a large number of potential customers who have picked up debt throughout the past 18 months and now want to pay it off. Perhaps it was short-term debt to tide them over through a period when they couldn’t work, or a requirement for the extra 20% of salary furlough didn’t cover, perhaps they borrowed via an unsecured loan or credit card, or indeed went to a family member in order to borrow over a short period. Most people will not want to have this type of acquired debt hanging over them for long, and one of the
SECOND CHARGE GROWTH
Our most recent Evolution Money Second Charge Mortgage Tracker reveals that the average loan amount for what we term ‘debt consolidation’ borrowers has increased to close to £21,300, while the average loan-tovalue (LTV) has dipped to 72.4%, and those customers are consolidating on average five debts at a value just below £14,400. We’ve seen an increase in those customers who are paying off retail credit – up to 17% from 8% – while the same percentage as our last iteration of the tracker – 48% – have been using their second charge mortgage to pay off a loan provider. Of course, a second charge is likely to be just as relevant for a prime borrower, and the reasons for taking out a loan, specifically debt consolidation, tend to be just as important to them as others. Add to all this the increase in those using a second charge to fund home renovations, and you can see a growing borrower demographic that advisers should be able to capture and service. If they don’t wish to be active here, they can simply Hot Key the case across to us where we look after everything. For a large number of people, the pandemic and subsequent lockdowns required some short-term quick finance fixes, while for others, there was a raised risk of missing credit payments. Hopefully that period has now ended, and the good news is that there are still plenty of finance options available, and a second charge mortgage is able to work on many different levels for many different types of customers. M I JULY 2021 MORTGAGE INTRODUCER
SPECIALIST FINANCE INTRODUCER
A new incarnation Jessica Bird talks to Shahil Kotecha about Pivot’s return post-pandemic, with new funding lines, a fresh approach, and almost a decade of experience to back it up
ivot was incorporated in 2012, originally with a focus on bridging loans in London. In the almost 10 years since then, much has changed, from the scope of its lending – offering more complex refurbishment and development loans – to the nature of its funding lines, and the operating model of the business itself. According to Shahil Kotecha, chief executive officer and principal of Pivot, there have been three main incarnations of the business in that time. Following its initial focus on bridging and high net worth (HNW) funders, Kotecha joined in 2015 and set about broadening out its lending remit and making the business more scalable, including shifting focus towards institutional funding. When COVID-19 hit, the firm stepped back from new lending and focused on supporting its existing clients. After a period of reflection – and having secured a £15m investment from Quilam Capital – in January 2021 the third iteration emerged, with institutional funding now fully replacing HNW backers, supporting a focus on larger ticket loans. There are some tenets, however, that have remained since the beginning, says Kotecha: “There’s a vision of being a very approachable but uber professional lender. That’s what we’ve tried to do since the beginning. We’ve also always adopted the ethos of using the best capabilities available, be it technology, data or people.”
APPROACH AND VALUES Pivot is now more strongly focused than ever on providing certainty, working collaboratively and demonstrating credibility.
MORTGAGE INTRODUCER JULY 2021
Kotecha says: “I’m sure all the top non-bank lenders would say speed and flexibility are key features of their offering, but I feel those are a given if you work in this market, and you can only go as fast as the transaction warrants. We want to provide certainty. “We aim to have open communication with all of our stakeholders, and we do a lot of credit analysis up front, getting as much information as possible at the beginning of the process. “This can feel daunting, but we feel this approach reduces rework later on in the process. It’s a classic lean approach, and our view is that our end-to-end process time will be the same, if not shorter.” Collaboration is also part of Pivot’s approach to its funding relationships. Although Kotecha points out that institutional lines can risk being more restrictive when it comes to creativity and entrepreneurialism, this is where choosing the right partner, one which will provide checks and balances but will also get on board when innovation is the right move, is key. “We truly are collaborative with our brokers, borrowers and network of third parties – whether the deal happens or not,” he says. This careful, collaborative ethos spreads to other elements of the business, such as its approach to technology, Kotecha explains: “You can have all the data under the sun, but how do you use that to drive better decision-making? We’ve tried to really hone that recently. “We use third-party software that gives us all kinds of information, but we’ve also built our own tools that use data to help us determine liquidity, which we can then use to provide bespoke leverage to each deal. www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER
SPOTLIGHT “The third incarnation of Pivot brings the lessons of the past decade together – and we’ve really thought about where we fit in the market as well. It’s about aligning our capabilities as best we can with our offering. CAPITAL IN A CRISIS One of the fundamental lessons Kotecha points to from the last year and half is the importance of secure, reliable funding. “You need to have the right capital behind you in order to weather any kind of storm, whether that’s changing regulation or wider macroeconomic factors, such as Brexit or COVID-19,” he explains. “This is why we were very happy to continue our relationship with our existing funders as well as partnering with Quilam; it’s a matching of minds – if another serious crisis hits, we are now well equipped to lend through this.” The ability to deal with such crises is not just about secure funding, but also past experience, which Kotecha adds is something Pivot has in abundance. “There’s something to be said for having the war wounds,” he continues. “You can have all the theory, but until a particular scenario has happened, you may not know what to do.” To this end, Kotecha points to the importance of hiring people with diverse areas of expertise with which to bolster the collective knowledge and experience within the business. FUTURE OF THE BUSINESS Looking to the future, Kotecha sees the residential market remaining buoyant, while the development sector will face a number of interesting changes, such as an upsurge in post-COVID permitted development (PD) schemes, converting commercial premises into residential. In the longer-term, this market will likely be shaped by increasing use of air rights, which Kotecha marks as having huge potential to unlock the residential space, while ethical, social and governance (ESG) concerns will gather momentum across the market. This will likely tie in with increased use of modern methods of construction (MMC). “Even now I think for a lot of people ESG is a nice to have, but I believe it will go a lot further,” he adds. “Which lenders are actually looking at the governance part? How are developers governing their build, what procedures have they got in place? “We’re already starting to see a lot more emphasis, understanding and assessment of those methods. “For the lending market, the minute one says the capital is for an ESG loan, the cost of that money is cheaper, which will precipitate into cheaper onward lending. That will naturally force developers to think about ESG on their schemes.” Against the backdrop of the strong residential market, Pivot is now lending up to 75% loan-to-value (LTV) on www.mortgageintroducer.com
bridging loans and 70% loan-to-gross-developmentvalue (LTGDV) on its development facilities. In addition, the business plans to further enhance its use of data internally, as well as using technology to ease processes and increase accessibility. “We’ve always tried to use technology, it’s just that there are more readily available proptech solutions now available that fit our vision,” says Kotecha. At present, Pivot has no concrete plans to grow its team, instead taking the approach that it will add people as and when needed. This fits with what Kotecha describes as a nimble, flat structure with minimal hierarchy, helping to create its collaborative culture. Finally, Kotecha says there are a few messages it is important to get out to the market. “A lot of people know us as development finance specialists,” he explains. “The first thing is, we’re more than that. We look at residential and commercial bridges; portfolio refinances and even look at planning risk, for example.” Kotecha concludes: “Why might you want to work with us? There’s the collaboration and certainty that we’ve discussed, but also you will get a very professional output from us. It’s shiny, well put together – that’s how we are, we take pride in how we present our output. “We have one voice at Pivot and we get things right, but that doesn’t mean we’re stuffy and unapproachable, it’s very easy to work with us. We enjoy working together for the right output, we’re keen to lend, and open to all kinds of innovative projects.” M I JULY 2021 MORTGAGE INTRODUCER
SPECIALIST FINANCE INTRODUCER
Gearing is your friend Roxana MohammadianMolina chief strategy officer, Blend Network
ver the past decade, a new generation of specialist development finance lenders have emerged that have sped up and simplified the borrowing process for property developers and investors. But gearing – often overlooked – is specialist lenders’ strength. It is one of the reasons why specialist development finance lenders have gained a competitive edge over traditional banks and non-specialist lenders. Gearing is the term used in the financial lending industry to describe the debt-to-equity ratio in a specific deal. In the case of property lending, gearing is normally calculated as the proportion of debt versus equity over the asset’s total value. It is used by most lenders to effectively decide whether a particular deal is worth lending on, and to be able to appropriately price the risk associated with that deal. If the level of debt versus the equity in the deal is high, it is considered ‘highly geared’ and if the debt versus the equity is low, then it is considered ‘low gearing’. The specific level of gearing offered by lenders at any moment in time will depend on many considerations, and will also change over time, depending on factors such as the economic outlook, the market activity and the lender’s appetite towards risk. Generally, a development finance lender would want to ensure that – in case the value of the property declines – the borrower is not over-leveraged and can afford to service the debt. While cash is king, many developers will agree that gearing is your friend. Indeed, from a developer’s point of view, using leverage to expand a property portfolio is an extremely useful tool when used correctly.
MORTGAGE INTRODUCER JULY 2021
This means that, for example, instead of investing £1m into a single deal, the developer could spread the equity across several deals by using debt. This also lessens the property developer’s risk, by lowering their exposure to one single deal and spreading it across several. On the other hand, lenders will calculate the suitable level of gearing that mitigates their risk should the market turn and the value of properties decline. This is a delicate exercise undertaken in order to offer a good deal to the borrower and minimum risk to the lender. KICKING INTO HIGH GEAR
Higher levels of gearing are also one of the key reasons specialist development finance lenders have been able to gain a competitive edge. Due to their flexible structure and better understanding of the development finance market, the new generation of tech-powered regulated lenders are able and willing to lend on loans that non-specialist lenders would not dream of taking on, let alone offering high levels of gearing.
As a specialist development finance lender, at Blend Network we have funded many fantastic property projects where the borrower was unable to get funding from traditional lenders, but we offered over 70% gearing post-COVID, when most other lenders were lending at 60% to 65%. For example, we recently funded a £2.6m facility which blended senior and mezzanine debt and geared it to close to 75% as a loan-to-grossdevelopment-value (LTGDV). Pre-COVID, specialist lenders would regularly offer 70% to 75% gearing in development finance. Even though that has been drastically reduced to around 60% to 65% due to the pandemic, the deep market understanding that some specialist lenders have allows them to offer tailored solutions which effectively blend senior and mezzanine debt, pushing up gearing to above 75% even now. This, in a nutshell, explains why the new generation of tech-powered, regulated specialist development finance lenders have been able to win over the hearts and minds of borrowers. M I
Gearing is the term used to describe the debt-to-equity ratio in a specific deal
SPECIALIST FINANCE INTRODUCER
What next for specialist property finance? Adam Tyler executive chairman, FIBA
s we all collect our thoughts and take stock following 30 June, I am sure there will be many lines in the press dedicated to the residential market – but what about the commercial space? How is this going to react for the remainder of 2021? There have been some record numbers delivered over the last 18 months from our lender partners. This is not only about enquiry levels, but completions in bridging, development and structured finance from a variety of different lenders. It seems as though those that were serving the market throughout this period have had the ability to build their loan books very well. FUTURE OPPORTUNITIES
There have been a number of new additions to the lender community, as well as some we have lost and others that have restructured, but the capacity is there and still growing to cope with future opportunities. What can we expect from the specialist property finance market for the remainder of the year? We have seen a real increase in FIBA membership, and also strategic growth in the number of lender partners throughout 2020 and in the first half of 2021, so we know there is more interest in our sector than ever before. Therefore, we must make the most of the number of enquiries we expect to continue to receive on behalf of all our customers. The lender community is well funded and there is confidence from the investor base, so we need to ensure that introductions and completions are maintained. www.mortgageintroducer.com
This will, of course, be determined by the market – the need for housing must remain strong to fuel the need for development finance. The much talked about repurposing of retail units to other uses is another factor that could drive the need for short-term or development finance.
“The early predicted V-shape recovery may not be present after all, but the indicators are that any decrease in values may not present too much of an issue over the short to medium-term” SME DEVELOPERS
All of this will depend on the confidence of our small to medium (SME) developers, some of which have only recently emerged from the financial crisis, where others – who felt they had been treated so badly – never came back. We are in a very different market this time around, but nurturing and caring for these clients is just as important. In particular, the plethora of lenders is greater, therefore the choices faced by those very same SME developers are now much wider, as they look to find the right funding partner for their projects. These developers can only be served correctly by the broker community, as we are the ones who have sufficient access to – and knowledge of – the market to be able to provide the advice and guidance needed in choosing the right lender partner. Whilst we have all the components in place, the question remains for the secon half of 2021 and beyond: what will our market look like, and is there enough business for the growing
number of brokers, packagers and lenders already operating? COMMERCIAL DOWNTURN
If we look to the US for early signs, according to Moody’s, US commercial real estate values are projected to decline by 7.2% nationally from their pre-pandemic levels, bottoming out by the end of this year. The hardest-hit categories are expected to be the office and retail sectors, with values declining for a broad swath of reasons, but the pain is unevenly distributed. In some cases, rising residential real estate values will make up for the commercial property downturn, and some segments have been doing well, such as warehouses, as online shopping lifts demand for distribution centres. These indicators are familiar, as both the UK and the US have faced the same challenges over the last 16 months, and we know from past experience that our market changes generally lag behind theirs by a quarter or two. The early predicted V-shape recovery may not be present after all, but the indicators are that any decrease in values may not present too much of an issue over the short to medium-term. In addition, the feedback being received from UK property investors is that from September onwards it will be a good time to enter the market, and this will be reflected also in the commercial space. There are a number of positive factors to be considered, and the opportunities that will come for developers and landlords from commercial premises will continue to drive enquiries into our broker community, and subsequently towards our lenders. In conclusion, there is a thriving market for specialist property finance. It will require innovation and knowledge by brokers and lenders to shape the right deal for the right project within the right property for the customer, but this is how our industry has adapted and grown over the last 20 years, and how it will continue to do so in the future. M I JULY 2021 MORTGAGE INTRODUCER
THE LAST WORD
National trust Mortgage Introducer speaks with Marcus Dussard, sales director at Hampshire Trust Bank (HTB) As we sit on the verge of further lockdown
restrictions being raised, what impact has the pandemic had on the buy-to-let (BTL) sector? The main impact has been on landlords and tenants who have struggled financially through no fault of their own. It’s been a tough 12 to 18 months for many people from a health – physical and mental – and financial perspective. We’ve seen many stories around how tenants have received protection via government support Marcus Dussard packages, and thankfully we are emerging from this period with some much-needed positivity around stronger landlord and tenant relationships. Looking forward, despite heightened activity across the residential purchase market, the importance attached to the private rented sector (PRS) continues to grow for a greater proportion of the UK population. It’s evident that the pandemic has resulted in some increased activity within certain areas of the BTL and specialist markets. Speaking from an HTB standpoint, we’ve experienced record levels of lending across our semi-commercial business, and this is a trend we expect to continue for a few reasons. Primarily, this is due to the strong yields being generated, good cashflow, and asset values seem to be holding up well. Our ongoing campaign to put the power back into the hands of intermediaries by freeing clients from assured shorthold tenancies (ASTs) has also helped us gain more traction when it comes to short-term lets and holiday lets, areas which continue to experience increased demand and activity levels. What are you doing as a lender to support investors and landlords in these areas? Firstly, it’s important to demonstrate our ongoing commitment, flexibility and confidence across the specialist lending marketplace, whilst introducing some fresh thinking towards the less ‘vanilla’ asset classes where we can. When it comes to semi-commercial oﬀerings, it’s all about being agile and identifying the opportunities as they present themselves. It has been tricky to assess what a strong commercial oﬀering looks like during such highly turbulent times. This is a factor which really underlines the importance of evaluating every semi-commercial transaction on a case-by-case basis, and making informed decisions on the back of a robust – yet sensible – manual underwriting process.
For landlords in the short-term let market, it’s all about providing tailored solutions which can power up aﬀordability levels and improve returns where possible. When located in the right place at an optimal time of year, a short-term let can earn four or five times the amount a standard BTL property on an AST can make in a month. This makes it a highly attractive proposition when funded and managed correctly. How have short-term lets evolved in recent times? There have been many additional scenarios for landlords and intermediaries to take into account during the course of the pandemic and in a post-pandemic world – however that might look. For example, contractors working at nearby sites for extended periods, or families needing a short-term base for a couple of months through a property licence. These are just two instances which we as a lender can consider, and it’s these types of common-sense criteria tweaks which are leading to more and more landlords appreciating the flexibility and yield of short-term lets. When you add to the mix existing homeowners who are taking advantage of rising house prices by selling without immediately looking to purchase, plus a growing number of buyers who are waiting for new-build properties to be finished, then it’s fair to say that demand for this product type has become stronger and more diverse. And how about holiday lets? This is a market which has clearly benefitted from the sheer number of people holidaying within the UK, and it’s one which is seeing an increased lending appetite. A recent report from Moneyfacts highlighted that the number of available products has almost reached pre-pandemic levels, which illustrates just how far this sector has come and the opportunities emerging for landlords and intermediaries. So how does your holiday let proposition stand out? Location, flexibility to adapt and change, experience and income are all considerations which we take into account when lending on a short-term or holiday let. In addition, we work with local lettings agents on a property by property and region by region basis to assess occupancy rates and seasonality, to ensure that each transaction is working as hard as possible for landlord borrowers. M I www.mortgageintroducer.com