Mortgage Introducer October 2020

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INTRODUCER www.mortgageintroducer.com

October 2020

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ONLY FOR USE BY MORTGAGE INTERMEDIARIES

The transfer window deadline that gives you plenty of time to get the deal done When it comes to product transfers, you don’t need to be doing last minute deals on the stroke of midnight. That’s why we’ll give your customers a full 110 days notice when their NatWest mortgage deals are coming to an end.

So, if you’d like all your deals done without any last-minute panics, use our product transfer process.

For more information go to LiveTALK or log on to

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NatWest Intermediary Solutions

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No additional underwriting, no valuation necessary, speedy processing. What’s not to like about our product transfer process?

Our enhanced product transfer process gives you the best opportunity to arrange a new NatWest deal for your existing NatWest customers quickly and efficiently.

We’ll write to your customers 110 days before their deal expires advising them to contact you to arrange a new deal No additional underwriting required No valuation required if your customers opt for a current House Price Index (HPI) or original valuation figure

Application to completion processing will be quicker than standard mortgages Additional borrowing can be applied for at the same time up to a maximum of 80% LTV. The additional amount will be subject to underwriting.

So, if you like what you see, why not use our product transfer process?

For more information go to or log on to LiveTALK

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NatWest Intermediary Solutions

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

October 2020

 Robert Sinclair  The Outlaw  Specialist Review

SPECIALIST FOCUS The fundamental role of technology in changing times

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EDITORIAL

COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Associate Editor Jessica Bird Jessicab@sfintroducer.com

Ryan Fowler

Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com

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Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Campaign Manager Victoria Hubbard joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk Mortgage Introducer, CEDAC Media Ltd 23 Austin Friars, London, EC2N 2QP

Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.

And so it begins...

A

s we enter the final few months of 2020, COVID is now once more rearing its ugly head.

The latest quarter (Jun-Aug 2020) saw a drop in the employment rate compared to the same period last year (down from 75.9% to 75.6%) and a rise in the unemployment rate (up from 3.9% to 4.5%).

It is also predicted that the UK’s unemployment rate will soar further once Rishi Sunak’s furlough scheme ends this month.

Unlike in the US, furloughed workers in the UK who receive support via the government’s Coronavirus Jobs Retention Scheme (CJRS) are still classed as employed.

This has led to some pundits predicting that the unemployment rate could rise temporarily above 8.0% during Q4 2020, before eventually falling in line with the economic rebound after that.

Unfortunately the worst may well still be ahead of us.

With that in mind, it was extemeley dissapointing to hear allegations that some firms have been profiteering during these difficult times.

The heads of four leading brokerages have written an open letter to our Outlaw claiming that some lenders are “now blatantly profiteering from the near unique opportunity which the COVID-19 pandemic has given them.”

The Outlaw gives their take on this on Page 44. Should this be the case, some businesses need to take a long hard look at themselves.

The property market remains open for now, and luckily governement seems to have picked up on the key role it plays in the economy, but with a difficult few months (at least) ahead, there is no room for bad practice.

As a whole, the market needs to ensure both that it maintains its reputation and that as many businesses as possible make it through this intact.

There looks to be a tough few months ahead for the economy.

Now is the time to pull together. M I

Your home for specialist lending 01966 (1)

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OCTOBER 2020

MORTGAGE INTRODUCER

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MAGAZINE

WHAT’S INSIDE

Contents 7 9 11 12 13 14 15 16 18 24 31 35 39

AMI Review Market Review Holiday Lets Review Lending Review Education Review High Net Worth Review Recruitment Review Networks Review Buy-to-let Review Protection Review General Insurance Review Equity Release Review Conveyancing Review

44 The Outlaw The latest from our resident outlaw

40

INTERVIEW

40 Interview: Coventry Building Society Jonathan Stinton, head of intermediary relationships, Coventry Building Society, on the post-lockdown market

33

NON-STANDARD

42 Interview: Shawbrook Bank Claire Rankin of Shawbrook Bank reflects on the role of technology in the new mortgage market 48 Cover: Technology and the specialist market The fundamental role played by tech in the specialist market over the course of the year so far 54 Loan Introducer The latest from the second charge market 66 Specialist Finance Introducer Development, bridging and FIBA

www.mortgageintroducer.com

18

BUY-TO-LET

42

INTERVIEW

OCTOBER 2020 MORTGAGE INTRODUCER

5

ONLY FOR USE BY MORTGAGE INTERMEDIARIES

The transfer window deadline that gives you plenty of time to get the deal done When it comes to product transfers, you don’t need to be doing last minute deals on the stroke of midnight. That’s why we’ll give your customers a full 110 days notice when their NatWest mortgage deals are coming to an end.

We’ll write to your customers 110 days before their deal expires advising them to contact you to arrange a new deal No additional underwriting required No valuation required if your customers opt for a current House Price Index (HPI) or original valuation figure

Application to completion processing will be quicker than standard mortgages Additional borrowing can be applied for at the same time up to a maximum of 80% LTV. The additional amount will be subject to underwriting.

So, if you’d like all your deals done without any last-minute panics, use our product transfer process.

For more information go to LiveTALK or log on to

intermediary.natwest.com

NatWest Intermediary Solutions

REVIEW

AMI

Fighting for justice Robert Sinclair chief executive officer, AMI

I

n October I spent an hour creating a podcast with the UK Mortgage Prisoners Action Group.

What this brought home to me was the sheer variety of mortgages caught, the different circumstances of the consumers, and the complexity of events that had conspired to bring these people to the place they were now in.

Much of this was created in the heady days of 2005 to 2007, when the industry was in a crescendo of ‘anything you can do, I can do bigger’.

The hour was spent answering very direct questions about people’s circumstances and if they could be helped. For technical detail I was assisted by Andrew Montlake.

What was obvious was that people were very transparent about their issues. However, behind all of these cases there was not just a mortgage, but a family struggling to understand what their options might be, having to cope

with costs they see as unfair, bringing up while families paying more than they should, and in some cases failing to put quality food on the table in order to keep the roof over their heads.

It was the Financial Conduct Authority’s (FCA) Mortgage Market

“The challenge for brokers is to do what you can to help find these mortgage prisoners a better lender” Review (MMR) affordability rules that limited many of these people’s ability to move to a new lender.

The FCA’s decisions to shut down self certification, for a period demonise interest-only, and encourage detailed assessment of incomes and costs has tied these people up.

With the additional need for lenders to adhere to stress testing, this only compounded the position.

The great elephant in the room is the historical action of UK Treasury.

Having acquired the mortgage book of failed lenders, the decision to sell them back to the market through UK Asset

Resolution (UKAR), rather than keep them, was the Treasury’s.

It made the decision to sell to unregulated asset managers, and to optimise the price paid by the new owner for those on higher interest rates, without fully considering what this might mean for customers in the longer-term.

The Treasury therefore optimised the value for the UK tax-payer at the price of the individual.

The FCA has produced modified affordability rules and lenders are now coming to market with propositions which will help some of those individuals, who will be written to over the next six weeks.

However, even best estimates indicate that this might help about 10% of the mortgage prisoner population.

While the government is spraying money at people like confetti, there are some who deserve a better fate than that delivered when they were sold to unregulated identities as a commodity.

The challenge for brokers is to do what you can to help find these mortgage prisoners a better lender, and the question to government: surely there is something you can do? M I

Pushing water uphill

T

he last seven months have been turbulent, with more challenging times to come. This is uncharted territory as there are no experts in government at attempting mass population control in a pandemic.

We see money being thrown at problems in a way never imagined. However, demand for houses and mortgages has never been stronger. House prices are robust, people are moving and builders are open for business.

The housing market is open. Brokers are as busy as at any time in their lives.

However, the lending industry appears to be hiding behind the curtains. Lenders are limiting market capacity by avoiding higher loan-to-value (LTV) lending.

The service levels of some appear robust, but to call many atrocious would be kind, and

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their sudden product withdrawals continue to cause difficulty. AMI is engaged with UK Finance, BSA, IMLA and in direct discussions with lenders to voice these concerns.

There is little sign of sudden improvements, as too many appear to want to accept that they are doing all they can. But the roof is starting to leak.

The consumer press has spotted the falling base rates, lower swap rates and rising mortgage rates – not consumer friendly.

No low deposit loans are available for firsttime buyers. Criteria are being hardened to limit approvals, but demand is still there.

Brokers are just moving to the next lender on the list, but it is more expensive.

At a time of national emergency, lenders again risk looking like the villains of the piece.

These are firms under immense stress due to having to deliver remote working, but I am not sure that their most senior execs have their eye on this ball.

Both the Treasury and the FCA are aware and monitoring at this point, so action might be forced.

Intermediaries have been delivering great volumes of business, more of which needs individual underwriting due to changes in the economy. Lenders have funds to lend, but are having to limit volumes as they cannot process the amount of business available for them. Overall, not a great position.

For brokers, most days it feels like pushing water uphill – but that is what they do.

Some lenders need to fix their houses and get with the programme.

OCTOBER 2020 MORTGAGE INTRODUCER

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REVIEW

MARKET

Time to take stock David Lownds head of marketing and Xxxxxxxxxx business development, xxxxxxxxxxxxxxxx, Hanley Economic xxxxxxxxxxxxxxxx Building Society

A

nd...breathe. Q3 has been a whirlwind of activity. Pentup demand and a race to benefit from the raised stamp duty threshold has accelerated demand and house prices across the UK. HOUSE PRICES

According to the Land Registry’s House Price Index, we have seen a house price increase of 3.4%, to £237,834, in the year to June 2020.

This is a significant increase on the 1.1% recorded in the year to May. Looking at the data on a nonseasonally adjusted basis, average house prices across the UK rose by 2.7% between May 2020 and June 2020.

In comparison, house prices rose by 0.4% during the same period in 2019.

House price growth was strongest in England, rising by 3.5% in the year to June 2020.

On a regional basis, the East Midlands recorded the greatest house price growth at 4.5%. The lowest annual growth was in the North East, where prices increased by 1.7%.

Furthermore, London noted a 4.2% rise year-on-year.

These figures highlight the pent up demand, and how quickly the industry sprang back into action when it came to transactions which had been delayed due to lockdown.

When you add the subsequent stamp duty stampede into the mix, we can only expect to see these figures rise when we analyse the Q3 data in earnest. Nevertheless, challenges do remain for many potential buyers, lenders and intermediaries.

security, cited by 68% of respondents.

This is compared to March 2020, when just 35% said the same.

However, overall market confidence has risen; 37% of respondents in September 2020 outlined now as a good time to buy. This figure stood at 25% in June.

Moreover, 32% believe house prices will rise over the proceeding 12 months, despite the stamp duty holiday being set to conclude in March 2021.

Inevitably, uncertainly around job security and the ability of some selfemployed residents to generate robust income streams is causing concern within lenders’ risk and compliance departments, too.

This is resulting in additional caution at the higher end of the loan-tovalue (LTV) scale, and the limited availability of such products is atrend which will remain evident for lenders and borrowers in Q4, amidst lingering trepidation around the subjects of health and the economy.

On a more positive note, one of the greatest obstacles for many borrowers – raising a sufficient deposit – appears to have been helped.

Research from Trussle suggested that first-time buyers who would normally commute to London could have saved, on average, over £1,600 towards their housing deposit by working from home.

Milton Keynes came out on top; here, commuters could have saved £2,573, equating to 12.14% of the deposit of £211,946 needed to purchase a two-bed property.

Other towns that offered top savings on the commute include Bedford (11.83%) and Didcot (10.96%).

This does offer some form of consolation for those looking to step onto, or up, the property ladder, and those who will be spending more time working more from home in the future could also benefit from an affordability perspective moving forward.

RESIDENTIAL

The Building Societies Association found that the greatest obstacle to homeownership is fear over job www.mortgageintroducer.com

REMORTGAGE

Focusing on the remortgage market, the latest figures from LMS show that

instruction volumes fell by nearly a third (31%) between July and August.

Month-on-month, completion volumes were said to have fallen by 14%, with pipeline volumes decreasing by 18% as volumes dropped off.

The cancellation rate stayed steady between July and August, falling by just 0.3%. Of those who did remortgage, 42% were suggested to have increased their loan size in August.

When delving a little deeper into borrowing habits, it was promising to see that around half of borrowers who chose to remortgage in August saw a significant decrease – of just over £200 – in their monthly payments.

This highlights that low interest rate deals remain available, and how sustained competition across the lending community continues to support those homeowners who are in a position to reduce their outgoings.

And there are many homeowners who stand to benefit from good, professional advice in this area.

Recent data from Experian has highlighted that the estimated number of mortgage holders on a standard variable rate (SVR) mortgage increased to 46% during the UK lockdown.

This is a rise of 2% when compared to March figures.

However, when commenting on this story via the Mortgage Introducer website, Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said: “AMI does not recognise this type of percentage as being realistic; we consider that less than 25% of mortgage holders will be on an SVR.” I tend to side with AMI on this, but even then, at 25% this still represents a large chunk of homeowners who could – with the support of the intermediary market – benefit from low rates and competitive remortgage products.

This further outlines the potential opportunities on offer for intermediaries who are successfully analysing the needs of their existing client banks, to bolster their remortgage business as we enter Q4. M I

OCTOBER 2020 MORTGAGE INTRODUCER

9

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28/09/2020 12:07

REVIEW

HOLIDAY LETS

Potential of annexes as holiday lets Jean Errington business development manager, Harpenden Building Society

T

his year has brought a summer like no other.

With holidays postponed, quarantines introduced and removed with no warning, and decreased or non-existent protection from travel insurance, many have eschewed a trip abroad in favour of holidaying in the UK. While the world is still focused on the global pandemic, there is a reluctance to entertain the idea of overseas travel both now and continuing into 2021.

The trend has not gone unnoticed by the property industry.

This has dramatically driven demand for UK holiday accommodation, and Harpenden Building Society has noticed a steep increase into enquiries for holiday lets.

While independent properties are still very popular, there has also been renewed interest in primary residences that feature outbuildings or annexes, which can be used as holiday lets on the main owner’s property.

INCREASED DEMAND

Earlier this year, we wrote about the sharp increase in inquiries for UK holiday accommodation.

After months of lockdown, the prospect of a summer escape was at the forefront of most people’s minds.

While many were still reticent about booking travel abroad, bookings for UK holidays soared as the hospitality industry was given the green light back in June.

Popular holiday website Cottages. com reported a record one-day sales period, with bookings coming through at one every 11 seconds. www.mortgageintroducer.com

12:07

The BBC reported the likelihood that supply could not catch up with demand. For example, many properties opted to leave gaps between guest bookings to enable them to deep clean, leading to reduced availability.

This, alongside an overall increase in domestic travellers looking for longer term self-catering options, meant demand for the UK holiday-let market dramatically increased.

There is also strong evidence to suggest this trend will remain into 2021 and beyond. Research by The Guardian shows that holiday cottages and camping pitches are already getting booked up for 2021, with holidaymakers inspired to book ahead to avoid missing out.

ANNEXES AND OUTBUILDINGS

Although some potential investors may be deterred by the prospect of managing a second or multiple properties, at Harpenden we’ve noticed an increase in inquiries for primary residences with annexes that can be used as holiday lets.

We spoke to Charles Pears from Withiel, North Cornwall, to understand his perspective.

“We first moved to Cornwall for the lifestyle, the beautiful countryside, beaches and the unique culture.

“These same things attract visitors, and it was a natural extension to provide holiday accommodation on a short-term let basis.

“The benefits are numerous.

Economically, we secure an income from accommodation that would otherwise be unoccupied while covering the costs of keeping these to a really high standard. Socially, we get to meet some really interesting people.

“COVID-19 has transformed the profile of our guests. Previously, the majority were from Europe, but this year the surge in staycations means it’s been almost exclusively British.

“A complete lockdown at the start of the year has given way to a surplus of bookings and if anything we are applying the brakes by requiring gaps to enable a deeper clean.

“It’s good income, tax is very easy, and – provided you are disciplined in keeping records – it’s a simple extension to the usual self-assessment submission.”

HARPENDEN’S EXPERIENCE

We recently acted as lender to a couple who purchased a Late Georgian manor house, sitting in 30 acres of farmland, orchards and woodland.

The estate benefitted from a threebedroom coachhouse, equipped with a games room, office and courtyard, which the couple were intending to rent out at £20,000 per annum.

As the majority of this property was to be used as the owner’s primary residence, this qualified as a residential mortgage. Applications like this often come to us as many lenders would rule out a residential property that will partially be used as a holiday let.

At Harpenden, all of our applications are manually underwritten and we aim to operate flexibly and collaboratively with brokers to find solutions to complex applications.

Of course, not all properties are lucky enough to offer such large or exclusive holiday cottages on site.

Here at Harpenden Building Society we have seen properties that have converted cellars, barns or what was previously a granny flat into beautiful imaginative short-term lets.

The additional unit can be attached to the house or detached and situated within the grounds of the property.

Don’t forget that the main house must be at least 50% of the overall footprint.

With the staycation trend looking set to continue well into 2021, there are some prime opportunities in the holiday lets market.

Annexes attached to primary residences can provide a great source of additional income, without the need to manage an entirely separate property.

Specialist lenders can carefully review an application’s unique circumstances and determine a solution for everyone involved. M I

OCTOBER 2020 MORTGAGE INTRODUCER

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REVIEW

POLITICS

Make the most of the current conditions Mark Snape managing director, Broker Conveyancing

B

y the time you read this, we will be just a mere two months away from the end of what has been, without doubt, one of the most tumultuous years in living memory.

It seems somewhat odd to be writing about the end of the year and what Winter is likely to bring during a balmy Indian Summer period, but there’s no doubting that these next couple of months are going to be incredibly important and may well determine the performance, not just of the housing and mortgage markets, but the whole of the UK economy.

GOVERNMENT SUPPORT

That’s because over the course of the next six weeks, as it stands, a range of government-backed support is going to come to an end, and the result of that – while it might not be felt for some months to come – is eventually going to be felt, even by a housing market which has (so far) seemed somewhat immune to what has been going on in the wider economy.

So, not only do we have the furlough scheme drawing to a close at the end of October, but also borrowers’ last chance to secure a mortgage payment holiday – with effectively no questions asked – coincides with that date, and at the start of November businesses will lose the chance to secure a Bounce Back Loan, although I’m certain that support will continue in many other guises.

This is not exactly a ‘perfect storm’ because as mentioned the anticipation has to be that, where individuals/ businesses need more support, that

12

is likely to be looked on favourably, however it is the end of more formal State-backed intervention, at a time when many might suggest we are nowhere near being out of this particular COVID-19-induced environment and situation.

Indeed, as I write, we have seen a ramping up of localised lockdowns – albeit spread across bigger and bigger geographical areas – and the Health Secretary, Matt Hancock, has not ruled out returning to a national lockdown if cases continue to spike as they have done in recent weeks.

Again, I’m conscious that by the time you read this, things may have changed significantly, but it won’t need me to point out the serious implications for our sector and livelihoods if we need to return to the more stringent measures that were in place during March through May. No-one in their right mind would want to have to ‘work’ through such a similar period again.

So, while a lot of this is clearly out of our own hands, we are going to feel the effects at some point. As mentioned, we’ve been fortunate to have a very buoyant housing market over the last few months, and I know advisers have been taking full advantage of the increased demand for mortgages, and (I hope) ensuring that all other product needs and services are covered off.

Certainly, from our perspective, we’ve seen a significant increase in instructions following the release of pent-up demand and a desire to take advantage of the stamp duty holiday.

Advisers appear to know, only too well, that they should be securing as much business as possible during this period, because – quite frankly – we cannot be sure about how the future will look, especially when it comes to the impact on jobs.

At present, with the furlough scheme ongoing, the redundancies we might have expected to see have yet to come

MORTGAGE INTRODUCER OCTOBER 2020

through, although unemployment has risen significantly. Next month, that may begin to change, and further loss of employment clearly impacts incomes, the ability to pay regular bills like mortgages, and we may start to see a sharp rise in arrears.

This is why lenders are currently being cautious at higher LTV levels because they are uncertain about what is coming down the economic track.

House prices have stayed incredibly strong post-lockdown, but in any ‘normal’ period a recession would impact significantly on prices. Lenders do not want to be lending at higher LTVs if, in the months and years to come, those assets begin to lose their value by 10% per annum.

LENDER CAUTION

The point however should be made that this is a very different situation to most ‘normal’ recessions and we might well see big short-term drops but they could be followed by that much talked-about V-shape return in a very small time period. The truth is, we just don’t know as yet and, in such circumstances, it’s perhaps not surprising that many lenders are erring on the side of caution.

For what it’s worth, my view is that government support and intervention is likely to be needed beyond the current timeframes. An extension to the furlough scheme would be welcomed, as would a further stamp duty holiday period beyond the end of next March.

The housing market is so important to the overall UK economy that the Government could go beyond what it might normally be willing to do.

Keeping transactions at current levels for as long as possible would be an excellent avenue to pursue, simply because of what it can do for the overall economy.

Certainly, advisers must do all they can to make the most of these current conditions, with the expectation that access to such business levels could change quickly. Make the most of all product/service opportunities, cover all client needs and generate as much income as possible from every existing or would-be borrower that crosses your path. M I www.mortgageintroducer.com

REVIEW

EDUCATION

Time for everyone to work smarter Michael Nicholls relationship manager, LIBF

M

ost mortgage brokers will be celebrating the fact that the market is booming again. Rishi Sunak’s stamp duty holiday has given homebuyers – many of whom found their plans disrupted by the lockdown – fresh impetus to move.

Prices have shot up to an all-time high and we’re hearing stories of gazumping, which hasn’t happened for years. In the rush to meet the March 2021 deadline, people are squabbling over houses.

For the industry, this sounds like good news – at least at first sight.

The other side of the coin is that lending criteria have suddenly become more complicated.

Lenders are asking furlough-led questions with practically every application: have you been affected by furlough? If not, why not? If you have, what’s happening with your job? Have you taken government assistance?

In fairness to lenders, their reputation was badly burned by the 2008–09 financial crisis.

Faced with a deluge of mortgage applications as the economy plummets into recession, it’s understandable that they don’t want to overstretch.

They’re right to be cautious about customers’ ability to repay their mortgages. The furlough scheme is, after all, drawing to a close and many jobs are expected to go.

The Bank of England has forecast that unemployment will hit between 7.5% and 12% when the various government support schemes come to an end. And what’s going to happen in March if the Chancellor does take the

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stamp duty holiday away as promised?

The likelihood is that the market will fall significantly.

For mortgage brokers, that means we don’t really know what’s waiting for us further down the line.

For many, the best course of action currently is to take advantage of the thriving market while it lasts and build up cash reserves in the business to ride out any downturn. In practice, that means working long hours to keep up with demand.

But no one can work 13-hour days indefinitely, especially as winter’s coming, and with it the likelihood of a second wave of coronavirus.

It’s time for you, and your business, to work smarter.

“Training staff to be able to handle complicated lending criteria and borrowers with unusual circumstances will benefit your business in today’s environment” A good place to start is with a review of the skills and competencies within your firm. Yes, everyone’s working hard at the moment and learning and development may not seem like a priority, but upskilling staff will save time and will help your business run more smoothly in the future.

Most mortgage applications are less straightforward than they were this time last year. So, training staff to be able to handle complicated lending criteria and borrowers with unusual circumstances will benefit your business in today’s environment.

Anyone who’s CeMAP qualified only needs to take one more module to get a CeMAP Diploma.

The knowledge and skills gained will help an adviser tackle more complex

cases, as well as enabling them to think more strategically.

Equity release is another area where your mortgage firm may require specialist skills. Perhaps you can free up your more experienced brokers by training someone more junior to advise on protection – an area where demand has been steadily rising because of the effects of COVID-19.

Our new Certificate in Protection (CertPRO) will teach them about products and the relevant regulations they need to be aware of. It will also count towards CeMAP, should they decide to train as a mortgage adviser later down the line.

By supporting staff to upskill and specialise, you’ll help them get more done in less time, giving them more capacity to focus on client relationships.

These will always be key to a firm’s reputation, and have only grown in importance during the pandemic.

Ours is an industry where word of mouth truly is the best form of advertising. When you look back at previous economic crises, you’ll see the brokers who survived were the ones with a reputation for excellent service and customer care.

Thinking ahead, if the stamp duty holiday ends in March 2021 your firm may come to rely on this reputation.

So, you need to do everything possible to reinforce it.

That’s why continuing professional development (CPD) is essential, especially as you can apply for CeMAP Professional if you keep it up.

CeMAP Professional and CeMAP Advanced Professional now come with the option of a digital badge that can be added to emails, as well as websites and social media.

Clients can click on this digital badge to see the skills, knowledge and ethos your qualifications demonstrate.

Perhaps the best thing about CPD at the moment is that there’s no shortage of interesting webinars, podcasts, videos and other online resources to choose from.

At only 15 hours a month – or just over two hours a week – CPD is easy to fit into busy schedules. Apart from which, it’s useful and will keep you, and your firm, ahead of the rest. M I

OCTOBER 2020 MORTGAGE INTRODUCER

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REVIEW

PLANNING

Planning for changing needs Peter Izard business development manager, Investec Private Bank

I

n early August, Boris Johnson unveiled what he described as “once in a generation” planning reforms.

Designed to restrict the power of local councils to oppose new developments, thus simplifying and accelerating the planning process, housing secretary Robert Jenrick called the changes “radical and necessary.”

However, ambition notwithstanding, the reforms have not drawn a unanimously warm welcome. RIBA has cautioned that the changes will do little to guarantee the delivery of affordable, sustainable homes, warning that “there’s every chance they could also lead to the creation of the next generation of slum housing.”

The government has long been signalling its plans to make changes to the planning system; however, the proposals come at a particularly interesting time, when the pandemic is forcing a mass reckoning with our relationship to bricks and mortar.

With lockdown requiring people to spend more time at home than perhaps ever before, the ability of our homes to adapt to meet our changing needs has been brought into sharp focus - not least for those living in poor-quality housing without access to green outdoor space.

How, then, will the government’s proposed reforms set out to evolve the planning system to meet our changing needs when it comes to property? And what will this mean for the industry at large?

THE RURAL RENAISSANCE

Since the early stages of the pandemic, property experts have indicated a possible surge in home buyers seeking rural homes.

Recent data backs this up:

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Rightmove reported that the UK housing market saw £37bn worth of sales in July, with “unseasonal” highs for new-seller asking prices in regions including Devon and Cornwall.

This, of course, is somewhat unsurprising. Despite growing calls from the government for businesses to begin ushering their staff back to the office, more and more employers are allowing their employees to work flexibly, and in doing so gifting them the freedom to live wherever they like.

Notably, this is not just the preserve of tech companies such as Twitter and Facebook – other, more ‘traditional’ businesses are making the move too.

Coupled with a shifting of social values which has seen many of us craving deeper connection with nature, many buyers are taking advantage of becoming untethered from their city jobs and choosing to move further afield. This shift is one of the many trends being accelerated by COVID-19. Earlier this year Investec partnered with global futures foresight consultancy, The Future Laboratory, to understand the key macro trends that will define the decade ahead.

The forming of new regional ‘hotspots’ was one of the trends to emerge from our report.

With the planning reforms there is an opportunity to drive economic growth in the suburbs and rural areas.

But – although crucial – housing alone does not pose the solution. The right infrastructure will be vital to facilitate this growth, particularly when it comes to digital connectivity.

Sustainable development is also a strong focus of the proposed overhaul.

The proposals include, for instance, the commitment that all new streets be tree-lined, and that Local Plans be assessed against a “statutory sustainable development test,” along with ambitious targets for improving energy efficiency standards for buildings.

However, there is question over whether the plans go far enough to prioritise sustainable building; RIBA argues that the commitment to make

MORTGAGE INTRODUCER OCTOBER 2020

all new homes carbon neutral by 2050 “needs to be brought forward radically.” For the the many for whom sustainable living has become a priority, it will be important that the new system gets this right. In our report, The Future Laboratory’s findings identify sustainability, responsibility and regeneration as a fundamental purchase consideration by 2030, describing a society in which “there will no longer be ‘unconscious consumers.’”

THE FUTURE OF COMMERCIAL

There are implications from a commercial property standpoint, too.

The proposals aim to speed up the process for businesses who want to extend or build new premises, an ambition which the FSB has described as “hugely welcome.” The hope, for groups such as the FSB, is that deregulating the process will enable small businesses to access land in order to take advantage of opportunities for economic growth far more quickly.

Done right, the new system must also be able to support the areas of the economy hit hardest by the pandemic.

Will the reforms allow the UK’s town centres and high streets to truly bounce back, for example?

WHAT HAPPENS NEXT?

Currently, the reforms are in consultation stage, with the consultation due to close at the end of October.

While it remains to be seen what the response to the consultation will reveal, there is no question that the plans will be a topic of hot debate over the coming month - both for buyers and those working at every point in the property transaction journey.

In the meantime, the pandemic will continue to drive enormous shifts in the way we live, and what that means for our country’s buildings. The role of the new planning system, if it is to be future-proofed for decades to come, must be to acknowledge these changes, and meet them head-on. M I www.mortgageintroducer.com

REVIEW

RECRUITMENT

The growing need for support Pete Gwilliam director, Virtus Search

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t has been pleasing to see that in a number of instances within the mortgage sector, individuals have returned to full-time roles following periods of furlough.

The sector has not seen the widescale redundances announced in other sectors; however, as political, economic and health issues all collide this autumn, even if liquidity remains, a contraction in demand will surely lead to downsizing in the New Year.

Redundancy is an emotionally challenging time for an individual, and no matter how many times you are told that it doesn’t reflect on you and it’s the role that has been redundant, it doesn’t change the fact that you may really need to be earning again reasonably soon. Approaching a job search without a strategy can often feel pretty overwhelming.

Of course, both recruitment firms and job boards may have opportunities to apply directly for roles, but without support this can mean an individual isn’t as well prepared as they might be for a gilt edge opening.

It can then be difficult to know where to start searching for the next opportunity once current live vacancies have been applied for.

For a relatively small investment, though, employers can offer extended support to those who suffer redundancy, through access to an outplacement coach.

Typically, through various mediums, the outplacement programme will build confidence and insight, encourage and inspire. Job searching can create a fair amount of anxiety, and helping someone deal with the emotions of www.mortgageintroducer.com

rejection is an important influence on how they feel about the road ahead.

Traditional outplacement programmes concentrated on building a CV and cover letter, and offering interview advice. However, the most progressive outplacement firms now spend as much time on building social media presence, using available contact networks, and advising on how to build a campaign.

Having a clear plan to approach the job market helps turn a job hunt into a more calm, better organised process, focusing on those areas most likely to deliver results.

In a job-short market there are a higher number of applicants than would normally be the case, so every advantage gained is essential.

Working with a specialist career coach over a series of meetings can make a significant contribution to optimising skills and experience.

A career coach knows the best strategies to adopt – empowering, skilling and preparing job seekers for their search, whilst also being there to motivate, track progress, and check in to ensure energy is being applied in the right ways Of course, there is a lot of self-help advice out there, but job seeking in a contracting recruitment market is challenging, and whilst recruiters are naturally a good resource to understand

what is happening in the areas they specialise in, there is an inherent challenge that they face: namely how much time can be offered to job seekers who do not meet the criteria for roles they are currently engaged on.

I know first-hand the difference between the time, levels and duration of support that can be offered when it is part of a paid for outplacement programme versus what is possible on an ad hoc basis.

Obviously, redundancies indicate a firm needs to cut costs and there might be a temptation to wish those departing well and signpost them to the government-supported jobhelp. campaign.gov.uk.

How an employer chooses to approach redundancies can have a huge impact on how both retained and displaced employees react, and how they feel about the organisation in the long-term.

By providing support, this sends out a positive message to those employees that remain within the company, fostering trust in the workplace.

Outplacement support cannot take away the emotions that will be stirred by redundancy, but it is a positive form of support that helps affected employees move forward with their job search, supporting confidence levels in particular through the highs and lows of applying for jobs.

Mental health and wellbeing is quite rightly a big conversation, particularly now, and I am of the passionate belief that the employer’s responsibility in these areas extends into the period following redundancy, which for some might be the most testing time of their career to date. M I

Approaching a job search without a strategy can often feel overwhelming

OCTOBER 2020 MORTGAGE INTRODUCER

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NETWORKS

Be careful what you wish for Shaun Almond managing director, HL Partnership

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ith its commitment to create Generation Buy, the government aims to make it easier for first-time buyers (FTBs), in particular, to access mortgages with a minimum deposit. The idea being circulated is to ask lenders to provide longer-term

regulators’ stance will now be easier to implement. In principle, making 95% LTVs a reality again for FTBs would be a positive, especially with the impending changes to Help to Buy. The fact that many applicants who successfully pay high rents would be refused a mortgage with an equivalent or lower monthly payment shows that affordability modelling can be confusing. However, like many initiatives, the devil will be in the detail. We don’t want to see the creation of a new generation of mortgage prisoners.

lockdown. The opening of the valuation market saw this rise to 2,400, and the stamp duty holiday took it to 3,400. In the first half of September, daily searches were running at 4,100.

Of course, criteria and price changes fluctuating wildly has increased mortgage sourcing use, but this is also translating into applications, which have outperformed 2019 levels in every month, despite lockdown.

For many of our firms, the ability to send online factfinds, alongside the ease with which remortgage and product transfer customers could be identified,

We’re ranked #1* for common-sense lending... *Savanta MV:MI Sept-Dec 2019 Base: 351

fixed rate deals which only require a 5% deposit. Interestingly, the government is looking to offer some kind of indemnity guarantee to offset the risk of lending at higher loan-tovalues (LTVs).

Making it a reality, however, would also mean rolling back affordability and stress testing rules. Many will remember the lack of control that contributed to the Credit Crunch.

‘Never again’ was the phrase in the minds of government and regulators.

Leaving the EU will have encouraged the PM that changes to the

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There must also be concern that by relaxing borrowing rules and providing a blank cheque guarantee to cover lender exposure, we could open the floodgates to what is quoted as two million new homeowners, and a rerun of the 2008 boom and crash.

PROOF OF THE PUDDING

The stamp duty holiday and pent up demand have led to a bounce.

Looking at data supplied by Twenty7Tec, in Q1 HLP advisers performed on average 3,100 searches a day, dropping to 1,400 during

OCTOBER 2020

has proven incredibly valuable.

Our search data and factfind analysis demonstrates how resilient the adviser market has been, and the management information shows no sign of slowdown as yet, despite predictions of house price falls around the end of furlough.

However, we aren’t predicting an end to the challenges, and we continue to support members with marketing initiatives and developments to our technology platform.

The ability to adapt quickly to changing circumstances will be key to survival and future success. M I www.mortgageintroducer.com

REVIEW

NETWORKS

No. 10 intervention creates risks Bob Hunt chief executive, Paradigm Mortgage Services

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overnment intervention in the housing market is pretty much constant these days, especially in a COVIDshaped recession, when there is a belief that a highly-stimulated sector delivers plenty of positives for UK plc . That’s certainly the belief system from which

Johnson’s speech at the Conservative Party Conference it could mean less stringent affordability measures, backed by a ‘State guarantee’ which he hopes will cut the risk for lenders.

To say this appears risky might be an understatement; while I am loath to criticise until I see the full details, there appear to be some glaring problems.

For a start, I’m unconvinced whether a State guarantee gets past a situation where lenders are accepting borrowers they would not ordinarily. This doesn’t seem to smack of responsible lending.

I’ve been on the record recently

at. Again, has the government truly thought about the risk to the money they are using to underwrite such loans, should they start to go bad?

Johnson says this policy would create two million more owner-occupiers. Do we even have the necessary housing supply? Are we simply engineering further price increases on an already depleted supply?

There has also been a suggestion that government wants to see these new buyers doing so via long-term fixedrate mortgages. There is a well-worn argument about the viability of such

...and have the ability to individually assess cases…

MI

the stamp duty holiday came. Based on transactions figures increasing in July and August, the government is claiming success in this area, suggesting that it has already supported 750,000 jobs.

Clearly, a fully-functioning, and indeed ‘mini-booming’, housing market is good news. However, the government is now concentrating on areas which may not be working as well, such as access to low-deposit mortgages for ‘Generation Rent’ to become ‘Generation Buy’.

Its method of doing this remains unclear at present, but judging by www.mortgageintroducer.com

talking about the tightrope that lenders currently have to walk, especially when it comes to the provision of high loan-to-value (LTV) mortgages, their attitude to the inherent risk, and whether now is the right time to be writing large amounts of this business.

My view remains that this has to be a lender’s decision. To ask lenders to jettison their normal criteria and affordability measures seems risky.

Plus, of course, a State guarantee would mean using taxpayers’ money to underwrite the part of the mortgage lenders are not comfortable lending

products, the early repayment charges (ERCs) that come with them, how tied up these borrowers would be, and whether there is even any demand.

The fact that we do not have a market awash with these products perhaps tells the government all it needs to know.

So, while I’m all for getting more high LTV mortgages into the market, I’m wary about this solution. Does it do anything to confront the issue of creating more affordable housing?

I’m not so sure it does, and am unconvinced that asking lenders to take greater risks is the right approach.

OCTOBER 2020

MORTGAGE INTRODUCER

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REVIEW

BUY-TO-LET

The changing face of tenant demand Bob Young chief executive officer, Fleet Mortgages

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any will be hoping that the last months of 2020 are uneventful. Unfortunately, local lockdowns and

have also benefited from the further catalyst of the stamp duty holiday.

Through this, all manner of societal and demographic changes have resulted in people reviewing whether what they believed to be important to them preCOVID has changed.

Landlords may have encountered issues with tenants finding it difficult to pay through lockdown, furlough or unemployment, but those same tenants

their portfolios, and reconsider what properties they purchase in the future.

Even with a vaccine we are likely to see the importance of certain factors change for individuals, especially if working arrangements remain changed.

So we come back to that word again: flexibility. Landlord clients will be aware that demand for rental property is likely to remain strong, but the question will be around what type of properties, and where that demand is going to appear.

Landlords may well need to have a much more diversified portfolio in order to cover all bases. The good news is that, with their adviser’s help and a well though-out plan of action, access to mortgage funding is available.

...with our experienced team of manual underwriters. stricter measures are coming in across the UK as COVID-19 cases rise.We are not back to a point of national lockdown, but we can’t rule it out, and we must all maintain the flexibility and resolve that has got us through so far.

‘Flexibility’ is a key word here.

We find ourselves in an odd situation whereby government support has effectively done its job, and the housing and mortgage market has not been as adversely impacted as it might have been, and certainly not as much as other sectors. The end of lockdown unleashed pent-up demand, and we

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are likely to be changing their thinking in the same way as homeowners.

CHANGING TIMES

Do I need to be in a city centre if I can work remotely? Do I need to be close to a train station? Am I in the right type of rental property for remote working?

Given the restrictions, is a house of multiple occupancy (HMO) the right choice? Do I want to live closer to family or other ‘support bubbles’?

Private rented sector landlords may well have to react to how these changing housing needs impact

OCTOBER 2020

As lenders we are also showing a greater level of flexibility, encouraged by landlord appetite but also responding to the changing circumstances of landlords and their tenants. Our appetite to lend in this sector is undiminished, and we are here to respond to landlords’, and in turn tenants’, changing needs. We will work together to find the necessary solutions that create profitable portfolios.

Advisers who can support clients effectively in this environment will make significant strides. We will be there to help them at every step. M I www.mortgageintroducer.com

THATS WHY WE’RE

In the current climate, flexibility, initiative and understanding are arguably more important than ever for your clients.

With our common-sense decisions, experienced underwriters and individual case assessments, we could be saying

‘yes’ to your next odd case.

For help placing your ODD cases call 01634 888260 or visit krfi.co.uk For intermediaries only

REVIEW

BUY-TO-LET

Successful sourcing in buy-to-let Jane Simpson managing director, TBMC

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eing able to accurately source buy-to-let (BTL) mortgages is one of the challenges of successfully placing cases for landlord clients.

The marketplace for buy-to-let finance has always been very dynamic, with daily changes occurring to lending criteria and product options. It requires skill and resourcefulness to determine the best solutions for each scenario presented to an intermediary.

Some ‘vanilla’ cases are straightforward, with few criteria issues to resolve, so finding suitable mortgage products comes down to the cheapest rate currently available and the preference of the client for the rate type and term.

Things get trickier, though, when presented with a more complex case where an in-depth knowledge of lending criteria is required to identify the best providers.

Experience counts for a lot with buyto-let mortgages, and being familiar with which lenders do what can save huge amounts of time when first assessing an enquiry.

Learning shortcuts is a key element of successful sourcing, especially when dealing with specialist lenders and more complicated scenarios.

For example, at TBMC we get a lot of enquiries for houses of multiple occupancy (HMOs). As such, establishing the number of bedrooms and whether a licence has been obtained can quickly eliminate certain lenders and give a more manageable shortlist to consider.

Likewise, with expat cases; finding out which countries a lender will

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accept and establishing the applicant’s income are always key facts, as they can rule out many providers at the outset, saving time and effort.

TBMC has had a surge in holiday let enquiries since the onset of the coronavirus pandemic, due to the rise in popularity of UK staycations.

Again, asking pertinent questions at the start can speed up the process – for example, where is the property located, what is the rental income during high and low seasons, and are there any restrictive covenants?

Of course, most brokers have a range of tools at their disposal, including sourcing systems, criteria databases and a range of different calculators to help them find solutions, although the reliability of information can sometimes be a concern.

The dynamic nature of the buy-tolet mortgage market means that the providers of product data are constantly having to update their systems to present an accurate picture.

At TBMC, we use our own bespoke buy-to-let mortgage sourcing system and criteria database, so we know how reliable our own data is and have a team dedicated to keeping it updated on a daily basis.

With any sourcing system, having an intelligent way of narrowing down your search according to specific client requirements can be a huge time saver.

TBMC’s Sourcing and Quotation system has numerous filters – such as for HMOs, limited companies, expats, age, tax status and portfolio size – which can help to quickly identify suitable providers.

However, we do not rely solely on the system when dealing with complex cases, and instead place a lot of value in maintaining relationships with the many supportive business development managers (BDMs) working in the buyto-let sector.

BDMs can be an excellent resource and sounding board for checking whether a case is likely to be accepted by a lender, and it is good practice to make use of their knowledge.

Although sourcing buy-to-let mortgages can be challenging, it makes the work varied and interesting as no two cases are exactly the same. It certainly keeps us on our toes! M I

Experience counts for a lot when sourcing buy-to-let mortgages

MORTGAGE INTRODUCER OCTOBER 2020

www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Landlords are part of the supply solution Richard Rowntree managing director of mortgages, Paragon

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he stamp duty holiday has certainly helped stimulate the housing market, but it has also put lenders under pressure to service the spike in applications. Approaching the March 31 deadline, this pressure may well get more intense.

After the introduction of the scheme as part of the Chancellor’s Summer Statement, we’ve seen evidence of increased activity. Bank of England figures showed a month-on-month increase of 6.2% in mortgage lending throughout August – to £18.8bn – whilst house purchase approvals hit a 13-year high.

During July, 66,300 purchases were approved; this rose by 31%, with 84,700 approvals recorded in August.

For pre-lockdown comparison, this August activity was around 21% above February levels.

Sunak’s plan has clearly worked, because at first glance it would seem that the Treasury won’t see money raised from stamp Dduty, but the tax take might actually increase; current demand is being driven by movers, some of whom have used lockdown as an opportunity to reassess what they want from a home, while spending less.

This has translated to an uptick in the purchase of properties above the £500,000 threshold, on which stamp duty is paid. In addition, the move will inject money into the economy as a welcome side-effect of homemoving – legal fees, decorating and furniture buying being just a few examples.

This steep increase in approvals is an important finding because, while further evidence of a V-shaped www.mortgageintroducer.com

recovery, the lag between approvals and completions means that it looks like the system will be extremely busy over the coming months.

While a buoyant market is clearly a good thing, we need to consider the wider implications.

While many of us have adapted well to working from home, it would not be unreasonable to suspect that there are some sections of the industry that are not currently capable of operating at full capacity.

“Flexible housing is an important aspect of the housing shortage solution” With reports of backlogs across many of the sector’s separate but interdependent sections, such as Land Registry and conveyancing, the current upward trend in activity poses a potential problem for those hoping to take advantage.

I’m sure brokers are well aware of this and are working hard to navigate the frequent product and criteria changes as lenders balance operational constraints, but they have a key role to play here.

By advising clients to act now, allowing for the extra time it may take to complete, they can help minimise a pre-deadline surge in demand that would be difficult for the system to process, potentially leaving would-be purchasers feeling let down that they missed out on a saving.

This saving – expected to be around £4,500 on average – along with low interest rates could be a gift and a curse, however. There are examples highlighting how the perception of bagging a bargain is actually leading to some buyers entering bidding wars that result in inflated prices.

This does not appear to be driven by buy-to-let investors, who are said to be conservative and reluctant to enter bidding wars. Instead, they are waiting for properties that require renovation so offer more value in the longer term.

While some may argue that investors are opportunistic – you may remember calls for them to be exempt from the scheme – it demonstrates how the increasingly professional landlord base is working with specialist lenders whose prudent approach helps to drive up standards This is something that should be welcomed, because the reality is that the private rented sector (PRS) is an essential aspect of housing. The stamp duty holiday has helped many step onto the first rung of the property ladder, but for others it has brought the difficulty into sharp focus.

Despite the saving, Zoopla data has concluded that there is a widening gap between existing homeowners and first-time buyers (FTBs).

FTB demand peaked when lockdown was lifted, but this has now waned. With some of the sectors that employ large numbers of younger adults being hardest hit by the pandemic, it has not been possible for some to save for the larger deposits now needed due to the reduced availability of higher loan-to-value (LTV) mortgages.

Meanwhile, some of those turning to the bank of mum and dad for help are being told that reserves aren’t what they once were; the Institute of Fiscal Studies has warned that falling share prices could result in significant numbers of over-55s being worse off than planned in retirement.

While we await further details of Johnson’s ‘Generation Buy’ scheme, all of this supports the notion that landlord investment – resulting in an increase in decent quality, flexible housing – is an important aspect of the housing shortage solution.

The PRS offers an alternative option for FTBs currently unable to get on the property ladder, as well as those unwilling to commit during such times of uncertainty.

An often overlooked viewpoint is that it is also a longer-term preference for many across the UK. M I

OCTOBER 2020 MORTGAGE INTRODUCER

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BUY-TO-LET

Getting set for Q4 Ying Tan founder and chief executive, Dynamo

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o get a better feel for the buy-to-let (BTL) sector, you sometimes have to step back and take a wider look at some of the factors influencing this market.

The mass of activity across the housing market has generated huge amounts of press coverage in recent weeks, and will continue to do so as we speed towards 2021 and the stamp duty deadline. This might still be six months away, but with widespread reports of backlogs in the chain, Q4 is crucial for those homebuyers and landlords looking to take advantage of this particular tax break.

THE FTB IMPACT

First-time buyers (FTBs) will always play a key role when it comes to assessing demand within the private rented sector.

According to Halifax, property prices for first-time buyers have increased by 69% in the past decade, with the average price rising from £142,473 in 2010 to a current level of £241,025.

When comparing this year to 2019, first-time buyer properties are reported to have seen a 7% rise, with Wales experiencing the highest increase at 9%, closely followed by the North East, and Yorkshire and the Humber, both up 8% to £140,114 and £161,933 respectively. Properties in London and the South East have seen the smallest annual increase of 3%.

Meanwhile, the number of FTBs has fallen by almost a third (29%), since last year. In the first six months of 2020 there were 116,843, compared to 164,800 over the same period in 2019.

The fall comes despite first-time buyers making up 52% of the property market, up from 38% in 2009. The share has steadily risen since the introduction of Help to Buy in 2013,

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which has helped more than 270,000 buyers take their first step onto the housing ladder.

Of course, when assessing these figures, we have to take the lockdown into account; FTB numbers will inevitably rise over the second half of 2020. However, challenges around deposits, affordability and access to higher loan-to-value (LTV) products will continue to limit these numbers.

When you also consider long-term fears over job security and future earning, the balancing act of rental or homeownership has become even more precarious for many UK residents.

This was highlighted in the latest consumer survey from the Building Societies Association (BSA), which discovered that uncertainty over employment was a considered major hurdle for 68% of respondents.

This is compared to just 37% of respondents who cited job security as a barrier this time last year, and 35% in March, prior to the lockdown.

A RENTAL FREEZE IN THE CAPITAL?

The current crisis has placed huge financial pressure on many homeowners, tenants and landlords, and they continue to look towards the government for additional support.

Mayor of London Sadiq Khan has called for a two-year freeze on rent in the capital.

Data collected by YouGov showed that a quarter of London’s 2.2 million private renters have fallen behind on rent, or are likely to do so as a direct result of the pandemic.

More than a third of the private renters said coronavirus has had a ‘large impact’ on their personal finances.

The government’s extension to the eviction ban is nearing its end, and the mayor has warned of a “tsunami of evictions,” proposing that during the two-year freeze, rents would be allowed to fall, but not rise. He would also like to see the option to extend the freeze further if the economic outlook for renters does not improve.

MORTGAGE INTRODUCER OCTOBER 2020

It’s clear that many tenants in the capital are facing an uncertain future.

Is a blanket ban on the raising of rents the answer? Additional support would obviously be welcome for those who are struggling to meet their rental requirements, but I’m not sure that such a move is the answer.

This will potentially have a major impact on landlords, and a rental market which is not only key to the housing market, but also the economy and a growing number of UK residents.

IMPACT ON LANDLORDS

It’s not only tenants who are struggling.

Research conducted by YouGov for the National Residential Landlords Association (NRLA), calculated that 22% of private landlords have suffered reduced rent as a result of the COVID-19 crisis. The average median loss was between £751 and £1,000.

Applied across the sector as a whole, this suggests that the total rental income lost by private landlords with properties in England has been between £328m and £437m.

The same survey showed that 9% of landlords say they plan to leave the market altogether, with 7% planning to sell some of their properties over the next 12 months.

The NRLA says this would choke off the supply of available properties for those unable to afford a home of their own, those struggling to access social rented housing, and those who prefer the flexibility that the private rented sector provides.

These figures outline just how difficult this period has been for landlords as well as tenants. The vast majority are not property tycoons with huge portfolios who are able to easily overcome such losses.

Herein lie the difficulties facing the government around how best to support the many different facets of the residential and rental markets.

How the government reacts will make for an interesting fourth quarter for everyone operating in and around the BTL sector. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Finding certainty in uncertain times Adrian Maloney group sales director, One Savings Bank

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t’s said that the only certain thing in life is uncertainty itself. As a lifelong Liverpool fan, the recent defeat handed out to us by Aston Villa as a perfect example.

A team which avoided relegation by the skin of its teeth on the final day of last season put in the most unexpected performance many football fans will have ever seen.

During these strange times, it’s not just Liverpool supporters who are looking for reassurance and confidence.

Take landlords, for instance. If they’re renting out a property, they want to know they’ll be getting some return on their investment and that they’ll be able to make their mortgage repayments each month.

The latest research from BVA BDRC shows that Houses in Multiple Occupation (HMOs) are currently commanding an average rental yield of 6.9% – more than a full percentage point above the average rental yield of 5.8%. This potential for higher yields has proven attractive to investors in recent years.

Together with the peace of mind that comes with knowing you’re receiving rent from multiple tenants – so if one tenant moves out you are able to mitigate risk and less likely to fall behind with monthly mortgage payments – it’s clear to see why HMOs have become such a popular option.

The sector also looks set for further growth over the next year, with the research showing that nearly a fifth of landlords plan to buy an HMO property in the next 12 months. By contrast, just 8% of existing HMO landlords say they plan to sell. www.mortgageintroducer.com

For existing HMO landlords, or for those experienced landlords who are looking to explore the sector for the first time, the stamp duty holiday could provide an ideal opportunity.

The holiday, which runs until 31 March 2021, means they won’t have to pay tax on the first £500,000 of property purchases. They’ll still have to pay the 3% surcharge on second property purchases, but the holiday could still help them save thousands of pounds in stamp duty.

HMO landlords who have been thinking of incorporating their buy-tolet business could benefit too. Many might have been put off becoming a limited company in the past because the process involves ‘selling’ their properties to the business, which would normally incur a stamp duty charge.

The holiday means they’ll now pay considerably less tax if they do it before the end of next March.

As always, though, you should ensure your customer has spoken with

a qualified tax accountant and taken independent legal advice before setting up as a limited company.

What the research shows is that there is real appetite among landlords looking for alternative ways to boost their profits.

It also demonstrates the opportunity for brokers to work with specialist lenders that have expertise across the widest product set to support customers who are in the process of reassessing their portfolios.

Here at InterBay Commercial, experienced landlords will be able to find a range of mortgages designed to help them develop their portfolios.

We’re experienced at dealing with high value cases as well as complex ownership structures.

For larger HMOs with between seven and 20 bedrooms, we are able to consider applications up to 70% loanto-value (LTV) on loans up to £1.5m for both purchases and remortgages, and we’ll go to 75% LTV on HMO properties with up to six bedrooms.

As the buy-to-let market becomes increasingly professionalised, and as an increasing number of landlords look at HMOs as a way of trying to find certainty in uncertain times, it’s vital these landlords are given the support they need. M I

It’s vital landlords receive support during these times

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PROTECTION

Take some interest in protection Claire Ginnelly managing director, Premier Choice Group

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ood news for borrowers, though not savers: the Bank of England’s Monetary Policy Committee voted unanimously to maintain Bank Rate at 0.1%. This is part of the bank’s plan to support the economy as the country battles on in the midst of the coronavirus pandemic.

However, the bank acknowledges the effect that health concerns have on economic activity, and concedes that: “The unemployment rate was projected to rise markedly, consistent with a material degree of spare capacity, before declining gradually.”

We can’t delude ourselves that times aren’t going to continue to be uncertain and troublesome for many.

There are opportunities for those wanting to move or buy, who have steady income, good deposits and some

surety of employment. Low interest rates coupled with the stamp duty holiday, while it continues, can make this a good time to be selling.

Whether the stamp duty holiday has held prices (and whether they will fall once it ends in March), or whether the prices reflect a slower market, is not easy to gauge. Nevertheless, we should encourage those benefiting from low interest rates – and who don’t have to cover income falls – to use surplus cash to look after their finances.

Relatively small amounts could increase life cover. If COVID-19 has reminded us of anything, it is that income can cease. So, it is timely to discuss how your clients can protect that income. Insurer LV= recorded a fall in critical illness claims earlier in the year – at first sight a good thing, but actually the result of paused screenings and referrals.

Critical illnesses respect no one.

Time, then, for us to unashamedly use clients’ heightened sensitivity to ensure they have cover in place to look after themselves and their dependants should the worst happen.

No work and not much play

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e make no apologies for continuing the doom, in that it is evident that unemployment is likely to rise before the government jobs support scheme ends.

Notwithstanding the consideration of measures to offer support for those whose income falls, the Resolution Foundation says workers are set to face a tough autumn.

It highlights Office for National Statistics data showing that headline unemployment picked up in the three months to July – from 3.9 to 4.1%. This figure largely referenced the fall in young people being employed, with the number of under-25s in work falling by 156,000 in May to July.

This age group may not be the best catchment for mortgages, but for healthcare intermediaries it reminds us that no one is too young to protect their income.

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For many young people there may not be a lot left over at the end of the month, but we should still be having the conversation with them about insuring what they have, from a job and a health perspective.

Insurance won’t be high on the list of priorities for this demographic, and we understand that – which is why we need to be making sure it rises a little higher on their agendas.

Of course, there is little point in having the conversation now with those who have lost their jobs – but we are making note to keep in touch with our clients and the young adults they have in the family, to let them know what support they can put in place for themselves, once they are back in employment.

Let us hope it won’t be long before many of them are.

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It won’t be easy

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oth the mortgage and protection insurance industries will face challenges, even if clients get back into employment. Individuals are realistic, as revealed by the latest HIS Markit UK Household Finance Index (HFI).

The report signalled a sharp deterioration in the financial situation of UK households – less severe than at the height of the pandemic in April and May, but nevertheless ‘highly pessimistic’ with regards to household finances over the coming year.

Lewis Cooper, economist at IHS Markit said: “With just over a month to go until the end of the government furlough scheme, the survey measure of job security perceptions dipped further into negative territory, reflecting households’ unease about their jobs, whilst incomes from employment fell for the sixth month in a row.

“September data also signalled reductions in household spending, savings and cash availability, all of which highlight the crunch on finances at present. As a result, UK households were the most pessimistic since May with regards to their financial wellbeing in 12 months’ time.

“Given the latest figures and the recession the UK is facing during the pandemic, there is undoubtedly a long and uncertain road ahead for UK households to recover financially.”

So, none of us can be complacent that protection will be foremost in clients’ minds, even if uncertainty could lead them to consider just how they can look after their finances and keep the roof over their heads when the unexpected happens. And nothing could have been more unexpected than COVID-19. All we can do as brokers and intermediaries is offer advice and support to clients if they are struggling, find solutions for them where we can and be on hand for when they are in positions to move on, whether to new homes or a new organisation of their insurance and protection needs. M I www.mortgageintroducer.com

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PROTECTION

Mortgage protection for FTBs Ben Burgess senior adviser and protection specialist, LifeSearch

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hinking about our own mortality coupled with how injury or illness could alter our quality of life is not particularly pleasant. Imagining how these scenarios could impact the people we love most is often even worse.

If thinking about it is difficult, talking about it with a stranger can be exponentially harder. Even if you were to remove the emotional element from the equation, most would agree that

successfully navigating the protection market can be daunting.

There are a significant number of providers out there that offer a variety of products at a wide range of price points. But how well can an unexperienced adviser, let alone member of the public, sift through it all and reach an appropriate outcome?

It is easy for first-time buyers (FTBs) to go online and get a quote. Often,

“Anybody can punch numbers into a calculator online – but that’s not protection advice”

they won’t fully understand the options and will be largely motivated by price.

As advisers, it is our duty provide insight and tailor advice to the individual’s specific needs. We are providing customers with a safety net that they or their families will depend upon in their time of absolute need.

There are two fundamental pillars to adhere to when working out the most comprehensive, cost-effective, and time efficient options for protection.

Anybody can punch numbers into a calculator online – but that’s not protection advice.

KNOW YOUR CLIENT

A little bit of trust goes a long way.

The more you can match your recommendation to the client’s individual circumstances, the more it will mean to them, and the longer that family will stay a client.

In a role where the adviser generally steers the conversation, it is important to remain a good listener, too, and to probe deeper on areas of importance – especially around sick pay, savings, pensions, sources of alternative income, work benefits, and health disclosures.

EMPATHY

The more tailored the advice, the longer that family will remain a client

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MORTGAGE INTRODUCER OCTOBER 2020

Protection advisers spend all day talking about death, injury, and serious illness. After a while, you can become a little desensitised. Your client, on the other hand, may well be talking, and even thinking, about these things for the first time in their lives.

Clients need someone who is able to get them talking comfortably, who is ready to listen, and who cares about providing the appropriate advice, which is especially true when discussing sensitive health issues with vulnerable clients or for those people who may have recently lost someone close to them.

Now, more than ever, empathy is important. Protection advice isn’t simple, and getting it right can be incredibly important.

So, get it right or partner with a firm which can help. M I www.mortgageintroducer.com

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PROTECTION

Simpler products, same expert advice Andy Philo director of strategic partnerships, Vitality

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or some, the most memorable life events may be getting married, the arrival of a new child or purchasing a property and taking out a mortgage.

Such events can be very exciting, but they can also be complicated and stressful. These are also often the moments when clients consider their longer-term plan, and whether they would like some kind of protection.

Organising insurance can seem like a daunting task with a number of

suppliers and products, giving rise to questions on whether to opt for whole or term life insurance, critical illness cover or income protection. People also have different needs, and there are myriad options to cater to them.

With COVID-19 we have seen greater uncertainty, and that has brought with it questions on our own mortality. The pandemic has become a life event that makes people think about what insurance they may need, alongside how they can prioritise their health and wellbeing. It has also caused people to look at whether their current insurance offers the right protection, showing the importance of being able to understand what they have.

Recently, we have seen a move in the industry to simplify protection

offerings, to make them easier to understand, access and explain to clients. Within Vitality, our approach has been to provide people with products that are easy to understand, yet remain comprehensive, in what we have termed simpler, better and easier.

When these changes are coupled with the role of the adviser to explain, guide the person through the process, and to find the right and comprehensive product tailored to each person, protection is demystified.

The past six months have been a time of significant change, restrictions and unpredictability, which has made many of us think about insurance and protection in different ways.

The challenge for both providers and advisers is to build on the strides that have been made to simplify protection, making understanding and accessing insurance easier than ever before.

By doing this, we can give people the information they need in order to make informed decisions, whether in response to the pandemic or for any other reason. M I

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PROTECTION

SMEs and the self-employed Mike Allison head of protection, Paradigm Mortgage Services

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t the minute it is difficult for many mortgage advisers to see beyond the virtual in-tray of new enquiries, or – perhaps more pressing – the need to get existing ones placed with satisfactory outcomes, with the challenges of higher deposits and tighter underwriting being at the top of most lists.

It is easy to get somewhat frustrated by these issues, and of course mortgage advisers and their staff are not immune to the challenges of stress and potential wellbeing issues.

As we approach the sunset of the existing furlough scheme and digest the workings of the new job support scheme announced by the Chancellor towards the end of September, it’s worth remembering that the sector in which we work is, in relative terms, healthier than many.

When a different norm is established, there will continue to be opportunities in our sector as many more clients in the small business arena will continue to seek help from advisers in finding their mortgage, especially those in relatively newly established businesses.

There is good news from the small business sector, too. According to the Office for National Statistics (ONS), the number of businesses removed from the Inter-Departmental Business Register (IDBR) in the UK in Q2 2020 was slightly lower than the Q2 average of the past three years.

So, despite the pandemic, business closures do not appear to have yet increased; of course, the support given to them by the government may have had an effect, but we’ll take any semblance of good news at present.

Given that some 99% of all UK businesses are ‘small’ or ‘micro’ sized (0-49 employees) there has to be a possibility that many of these will

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survive and continue to widen the ‘births vs deaths’ gap of British firms.

Logically, therefore, our sector will be called on to help many more people working in small businesses (SMEs) acquire their mortgages.

In taking a broader look at the SME sector, Legal & General’s latest research finds there’s a direct correlation between size of company and trust – the smaller the company the more trust the employee has in their employer. All advisers, mortgage or otherwise, have opportunities to help support that trust by helping them to support their employees. But how?

WELLBEING

Nine out of 10 CEOs believe wellbeing initiatives are key to driving long-term changes to their business model, and crucially, from an advice perspective, the insurance industry can help.

Nearly three quarters (74%) of workers in micro-businesses trust their employer to look after their wellbeing, compared to only 42% in mediumsized businesses, according to Legal & General’s research.

CEOs are increasingly recognising the need to keep their people feeling not just safe but connected, engaged and productive and – more than ever – physically and mentally healthy.

The challenge is how to physically support employees at a time when thousands have been taken out of their normal working environment and may be struggling to cope as a result, especially given the secondary wave of actions recently announced by the government, forcing many to return to home working.

The message is clear: employees in small businesses are stressed and need support in varying degrees. Clearly there are the physical impacts, with more than half of employees reporting new aches and pains during lockdown, but it is the psychological element that is of the greatest concern.

A recent survey by Totaljobs found that seven in 10 said the loneliness they experienced during lockdown

MORTGAGE INTRODUCER OCTOBER 2020

was having a negative effect on their wellbeing. A quarter said it was impacting their productivity.

According to the L&G research, 77% of medium-sized companies had a wellbeing strategy, in contrast to 39% of micro employers.

At the same time, though, employees within medium-sized companies expressed the most uncertainty about their employer’s communication around benefits.

So the strategy might be in place, but thanks to ineffective communication, it is failing to win hearts and minds with real actions.

All advisers working within our sector have access to wellbeing programmes which, at very little cost to employers, can deliver hands-on support to employees. Firms such as UNUM offer specific wellbeing checks as an element of group schemes.

A wellbeing check provides expert guidance and self-management techniques for employees who may be struggling – helping them to make realistic changes that can help to improve their performance, mood, energy and productivity.

Trained professionals will consider all aspects of wellbeing – mental, physical, social and financial – and follow it up with a report with recommendations to help employees get connected with the right tools and resources.

The everyday pressures that are affecting the majority of us at present – such as workload, dealing with change, the impact of COVID-19, working from home or returning to the office, and many other aspects of our new daily lives – are all covered.

Paradigm Protect has been working closely with UNUM when it comes to beating the drum about these messages for a while now, but it is more relevant than ever to help small businesses look after the health of their employees – even a few small mortgage advisers have purchased schemes to include their own employees, at a time when there are plenty of reasons to focus on relieving the stress. M I www.mortgageintroducer.com

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PROTECTION

Tech to tackle industry threats Rob Evans CEO, Paymentshield

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he global pandemic has caused upheaval across every sector, and the mortgage industry has had to learn to adapt, support one another and strategise recovery.

Last month, Paymentshield assembled industry experts in the mortgage, fintech, estate agency and general insurance (GI) markets for its first ever live virtual conference to discuss how advisers can tackle the economic impact of COVID-19 and return to growth.

The conference, entitled ‘Our Changing World’, opened with a poll to ask the hundreds of delegates: What do you think poses the biggest threat to the financial adviser industry?

Perhaps unsurprisingly, recession (29%) and a second lockdown (28%) took the top spots, closely followed by price comparison sites (20%).

In comparison, regulation and compliance (11%), Brexit (8%) and the rise of automation or new technology (3%) were perceived as the lowest threats.

Indeed, one of the key tactics to tackle those three leading threats is the leveraging of technology.

The pandemic has accelerated its adoption; video calls between advisers and clients are now commonplace.

From December 2019 to April 2020 – only a four-month period – daily Zoom meetings boomed in number from 10 million to more than 300 million.

Interestingly, among the top three threats, one is within the control of advisers: competing against price comparison sites. This is a threat that has existed for years, yet advisers

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continue to struggle to effectively compete against aggregators.

With most mortgage networks typically only registering a 20% penetration rate of GI sales against mortgage applications, the scale of this loss is obvious.

On a panel on the changing perceptions of the family home, Jeff Woods, campaigns and proposition director at Sesame Bankhall Group, highlighted the wider implications of this on the retention of customer data.

Jeff made the point that when advisers miss out on advising clients on GI, it’s not just the loss of income that is impacted; advisers are also losing data to aggregators – aggregators which will chip away at their customer base and deprive advisers of their competitive advantage.

Importantly, however, advisers can differentiate themselves from aggregators by offering personalised and tailored advice that helps clients find the right policy for their own needs and priorities.

To be able to cater in this way requires advisers not just to hold reams of customer data, but to store, organise, and utilise it effectively.

The client information advisers can glean from advising on GI is invaluable: it helps them to understand the customer better and learn about

significant life changes – such as new births – all while solidifying the relationship between the two.

Ultimately, the more we know about our clients, the better service we are able to offer.

During the conference, this point was hammered home by Lucian Morris, CIO at Mortgage Advice Bureau, who said: “What makes [advisers] stand out is our personality.”

Lucian explained how the use of technology and data increases the transparency of the advice process and therefore boosts customer engagement, making advice increasingly relevant to clients as a result.

The global pandemic has afforded a lot of people the opportunity to sit back and reflect.

For many, that reflection has been about changing priorities, re-evaluating what’s important in life and looking after those closest to them.

Paul Shearman, mortgage proposition director at Openwork, spoke at the conference about the effects of lockdown on our relationships with the home, saying: “There has never been a time where the family home has been so important.”

In our changing world, advisers must grasp every opportunity to move from a transactional relationship with customers to becoming a trusted financial adviser to clients, encompassing a greater range of financial products, rather than just mortgage applications.

Leveraging technology and datadriven advice will help drive that interaction, enabling advisers to truly compete against aggregators. M I

Brokers must grasp every opportunity to become a trusted financial adviser to clients

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GENERAL INSURANCE

Understand fair value obligations Jeff Woods campaigns and propositions director, Sesame Bankhall Group

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he Financial Conduct Authority (FCA) recently published its final report following its study into the pricing of general insurance (GI), again highlighting concerns that this market is not working well for consumers.

Significant regulatory reform is expected to take place, with the aim of improving competition and ensuring that customers receive fair value.

Whilst proposed changes in the GI market have been well publicised, what’s perhaps less well known is the fair value impact on protection, and the obligations on advisers.

In April 2019, the FCA published the results of its thematic review into the distribution chains of GI products.

This was followed by Finalised Guidance, which was issued in November 2019.

The guidance makes clear that those firms involved in the distribution of pure protection and GI products must ensure that they:  Consider the value that customers ultimately receive from their products and services;  Consider the impact of their distribution strategy (including the distribution method and the level of remuneration they receive) on the overall value of the product for their customers on an ongoing basis;  Maintain appropriate systems and controls over the remuneration they receive;  Maintain appropriate systems and controls (including the production and use of appropriate management information) over their pure protection and GI products and services;  Consider their remuneration to ensure this doesn’t conflict with the requirement to act in the best interests of the customer. www.mortgageintroducer.com

The FCA’s guidance on GI distribution focuses on fair value for customers

This means that all advisory firms offering protection and GI have a regulatory obligation to undertake product governance to ensure the products they distribute are right for their customers.

However, some firms – particularly those that are directly authorised (DA) – struggle with this, due to limited resources and confusion as to how it can be demonstrated in practice.

Support is available to assist advisory firms. PMS Mortgage Club is one such example, with the recent launch of its Fair Value Framework.

The aim of initiatives such as this is to ensure that the products advisers offer to their customers adhere to the latest regulatory guidance and offer true ongoing value to the customer.

This involves gathering regular information from product providers to ensure ongoing monitoring and oversight, which highlights the challenge facing advisers when they are trying to do this themselves.

However, it’s important to ensure the products offered remain appropriate for advisers’ needs and continue to provide fair value to customers.

After all, the more that customers value their cover, the more likely they are to retain it.

Having this information will help advisers to demonstrate how the products they have sourced and recommended to their customers have undergone thorough due diligence and been assessed in line with the FCA’s latest guidance on value within protection and GI distribution chains.

Importantly, it will assist advisers and their firms if at some point in the future they are asked to evidence what they have done to embed the FCA’s protection and general insurance product governance requirements.

It’s imperative that advisers understand their obligations, so that they can satisfy themselves that the products they distribute represent fair value to customers. M I

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GENERAL INSURANCE

Loyalty counts in a hard market Geoff Hall chairman, Berkeley Alexander

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fter an uncommonly long ‘soft’ market, the insurance market has hardened.

Principally driven by the London insurance market but heavily influenced by global market conditions and of course the current global pandemic, the impact of this on brokers and clients is profound.

Many insurers are tightening up their underwriting criteria and becoming more selective on the risks they will accept, while some carriers have exited

certain classes and markets entirely.

As capacity gets squeezed, clients may find they are not able to secure the same levels of coverage as previously.

Premiums increase, wordings are tighter, and renewals will take longer.

These are all conditions traditionally synonymous with a hard market, and brokers need to know how to navigate this in the best interests of their clients.

Professional indemnity insurance (PII), for example, has proved particularly difficult for brokers recently, with premium increases of 50% not unusual. Capacity has more or less halved in the last 18 months.

Those brokers that have maintained strong, collaborative ties with their general insurance (GI) providers during softer market conditions and,

in turn, those providers which have strong relationships with insurers, are now better placed to weather the hard market.

Loyalty and long-term relationships count for a lot.

To help, clients should start the renewal process early and – working with their broker or adviser – ensure they have a clear strategy for what they want to achieve in terms of the premium costs, policy coverage and risk management.

Be ready to answer more in-depth questions from insurers. Work with your clients and your GI provider up front to go through all the options well ahead of key renewal dates to ensure an acceptable outcome for the client, in terms of both cover and price. M I

Bad DIY and home insurance

Underinsurance

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nderinsurance becomes a bigger issue in a hard market when premiums rise.

There are three main reasons for underinsurance. The first, deliberate action that may unwittingly lead to underinsurance, is perhaps the most common as premiums rise; clients reduce cover in an effort to manage the rising cost of insurance premiums, but may not appreciate the potential impact on claims.

The second is accidental: despite all best efforts to insure correct levels, values are set too low. For example, a claim coinciding with a large stock delivery at a warehouse, a customer not regularly reviewing their buildings or contents sum, or forgetting they’ve bought an expensive item.

The third is inadequate advice; if the right questions aren’t asked, then underinsurance is likely. Brokers should be having in-depth conversations with clients around sums insured and the consequences of underinsurance.

Whilst the hard market presents difficulties, broker advice is ever more valuable. This is undoubtedly the time that good brokers rise to the top. M I

recent survey by the insurer Admiral highlighted that many people are unaware that failing to keep a property in good order can impact home insurance, with 14% believing that maintenance and insurance were unconnected, and 40% confessing they’d never even considered it.

Meanwhile, 44% admitted that they had never completed – or had a professional do – an electrical safety check, 39% hadn’t checked their downpipes, 36% hadn’t checked roof tiles, and more than a fifth (22%) confessed they had never cleared their gutters and drains.

ACCIDENTAL DAMAGE Most policies don’t cover accidental damage to your home or belongings unless you have specifically added cover.

A review of home buildings and contents insurance policies by GoCompare last month found that only 17% of buildings and 16% of contents policies included cover for accidental damage as standard.

Most policies (81% of buildings and 82% of contents) offer accidental damage cover as an optional extra, while 2% exclude cover altogether.

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Wate r d a m a g e , fo r ex a m p l e , i s among the most common household claim. However, most policies exclude damage which has occurred gradually or which could have been avoided as a result of regular maintenance.

But irrespective of all this, in the medical world “prevention is better than cure”, and insurance is no different.

LACK OF UNDERSTANDING If the results of the survey are to be believed, then this shows a shocking lack of understanding among homeowners about maintenance responsibilities and the knock-on impact on home insurance cover.

The same research also went on to highlight the lack of awareness around the insurance risks of DIY. Only 43% of homeowners would employ a professional tradesman to undertake home maintenance jobs.

Most (58%) would try to do the jobs themselves or get help from friends or family, despite the fact that tackling jobs you’re not qualified for could also invalidate a home insurance policy, leaving clients liable for the cost of repairing any subsequent damage.

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NON-STANDARD

Non-standard is the new black Kevin Paterson director of sales and marketing, Ceta Insurance

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ost of us assume nonstandard is someone else’s problem, but this catch-all descriptive term is slowly going mainstream – something that has only been hastened by the pandemic.

Typically categorised as people or circumstances that don’t conform to the perceived norm – and I say perceived because this view is rapidly becoming outdated – the number of individuals falling into the nonstandard category was already steadily increasing prior to lockdown.

Since the lockdown, the number of people who have lost their job or suffered financial loss has increased, resulting in yet more people with impaired credit.

The thing is, non-standard can mean different things to different people, and the lines are becoming blurred when it comes to lending and insurance.

The historic association with non-standard lending was typically categorised with terms such as ‘near prime’ and ‘sub prime’, plus a myriad of variations on the same, but following the banking crisis in 2008, terms like this all but disappeared.

For a while these forms of lending remained under the radar, being serviced to some extent by the second charge market. More recently, though, there has been a re-emergence of this type of lending, today typically described as non-standard.

In insurance terms, non-standard was a term typically used to describe a property risk that did not conform to the normal type of construction, such as thatched roofs, or properties susceptible to flooding or subsidence. However, as

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the data available to insurers continues to evolve, an increasing number of property types – and indeed individual policyholder profiles and lifestyles – are also being swept up under the nonstandard banner.

Again, the pandemic will force more people into the non-standard category, whether due to financial circumstances or simply changes in the way they work; for example, it is estimated that working from home will remain a much more popular option long after the pandemic has passed, and this is something traditional household policies have struggled to cover.

So why is this important? There are two main layers to the answer to this question.

Firstly, as professional advisers you need to know where to go in order to access the products and services that will enable you to give your non-standard clients the right advice, especially as this is not going to make up an increasingly large segment of the community.

The second layer is making sure these people are not left behind as the open finance initiative becomes ever

more popular. The Financial Conduct Authority (FCA) is looking at the implications of broadening the open finance initiative to a wider range of financial services and products. This quiet revolution – created by open banking a couple of years ago, which allowed individuals to authorise third party providers access to their bank accounts in order to extend the range of services available – included new entrants like Monzo, Revolut and Starling, much of which early adopters like me now take for granted.

Progress is now leaning towards extending this functionality to all sorts of financial products, like savings, mortgages and insurance. Following the success of open banking, this feels nothing short of a major revolution in the way individuals will be able to manage their financial needs.

However, this has the potential to leave a significant number of customers behind – the more vulnerable in society and in particular those who fall into the non-standard category. This is something we all need to be aware of.

Bluestone Mortgages was recently quoted as saying: “Any move to help borrowers understand the financial options available to them is a good thing, and ensuring the interests of nonstandard consumers at placed at the forefront of open finance’s development will go a long way towards improving financial inclusion for all in the UK”.

Something we should all support. M I

Non-standard is slowly going mainstream

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TECHNOLOGY

Growing AML threat from cryptocurrency John Dobson CEO, SmartSearch

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oney launderers are getting ever more sophisticated, and regulators are responding with tighter regulations and penalties.

It increasingly resembles a game of catch-up, with would-be money launderers coming up with new methods, which the regulators then move to close off.

One relatively recent development has been the rise in popularity of cryptocurrencies.

This has led regulators to respond by bringing crypto services into the fold of ‘obliged entities’ which are required to play an active part in countering money laundering and terrorist financing.

The EU’s Fifth Money Laundering Directive (5MLD) explicitly includes crypto exchanges and wallet services.

As of January this year, the UK’s Money Laundering Regulations (MLR) have been brought into line with this.

In fact, as is often the case, the UK regulations use a wider definition of crypto assets, meaning that more entities are likely to be in scope.

The UK has also amended its antimoney laundering (AML) measures to reflect recommendations from the Financial Action Task Force (FATF), which go beyond 5MLD to include activities such as initial coin offerings.

More recently, the Financial Conduct Authority (FCA) announced that it was looking to bring crypto exchanges and wallet services into scope for its financial crime reporting regime, which can be seen as a precursor to increased supervisory activity in this sector. All this seems

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like a sensible response to a growing threat: regulators should at least try to stay one step ahead of the game.

Nonetheless, crypto remains very much a minority sport for moneylaunderers. When it comes to washing the proceeds of crime through the financial system, cash is still king.

A report for the Society for Worldwide Interbank Financial Telecommunication (SWIFT) recently concluded that despite the perception that crypto assets are a preferred haven for illegally acquired funds, criminals

generally prefer to launder proceeds through mules and front companies.

The new regulatory focus on crypto is welcome, but they should not lose sight of the fact that the vast majority of money laundering is conducted through more traditional routes.

In fact, the FATF has warned that this is on the rise in the wake of the COVID-19 pandemic, and that the UK property market continues to be a prime target.

Firms involved in the property market – lenders, brokers, estate agents and conveyancers – all need to be alive to the growing risk posed by crypto, and take steps to ensure they are protected against that threat.

But these firms also need to be sure they are not taking their eyes off the ball when it comes to ‘regular’ money laundering activity. M I

Cryptocurrencies such as Bitcoin and “privacy coin” Monero are increasingly being used by money launderers

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EQUITY RELEASE

Helping the new generation of retirees Alice Watson head of marketing and communications, Canada Life

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hrough unprecedented times for advisers and customers alike, the equity release market has proven resilient.

In the first half of 2020, the Equity Release Council revealed that £1.76bn of property wealth had been accessed by older homeowners.

By introducing measures such as desktop property valuations and remote legal advice, the industry navigated the initial lockdown, ensuring that an important source of later life finance

continues to be available in what are challenging financial times for families across the country.

Given this market resilience, and the popularity of products with consumers, it is surprising that it remains underserved by the adviser community.

Many advisers are qualified to sell lifetime mortgage products. As we start to gear up for 2021, perhaps advisers should re-engage with an industry that’s demonstrated its resilience in uncertain times.

THE FUTURE OF RETIREMENT

Retirement is changing, and so too are the needs of retirees. Homeowners are looking for flexibility and certainty when it comes to planning for retirement, and for many a large

proportion of their wealth is tied up in their home. A joined-up approach to financial planning, assessing all accumulated assets and across multiple products, is needed more than ever.

Our latest research found that the over-60s market is set to grow by a third over the next 15 years, and retirement experiences are fragmenting, either as a result of people having more complex family units or by achieving financial stability later in life.

These groups are likely to overtake the more traditional routes to retirement. Societal changes – such as the rise in individualism and the declining relevance of social norms – have an impact on the way we live in retirement, changing the advice needs of clients.

These mounting issues facing consumers in later life show little sign of easing. Recognising that property wealth can form part of the solution, advisers should consider their part to play in helping the new generation of retirees take a more holistic approach to retirement planning. M I

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REVIEW

EQUITY RELEASE

BOMADIC living on the rise Stuart Wilson CEO, Air Group

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n a very basic sense, it might be possible to break down potential later life lending clients into three distinct categories: those who might want or need to access the equity in their homes or borrow in order to help themselves, those who might need to do this to help others, and those who wish to do both.

Many later life clients have numerous plans for the money they release or borrow, and ultimately end up doing much more with the cash than they might have first anticipated.

That sense of helping others out, however, can be a strong one for clients, and especially when it comes to acting as the much talked about ‘Bank of Mum and Dad’ (BOMAD).

There has been a notable increase in the numbers wishing to access equity in order to help children, and others, onto the housing ladder.

Of course, recent history tells us how increasingly difficult it has been for potential first-timers to make that initial purchase, with deposit requirements increasing along with house prices, wage levels generally staying subdued, a lack of housing supply, the costs of rent, and more factors acting as obstacles that need to be overcome.

Now these would-be homeowners also have a lack of high loan-to-value (LTV) mortgage products to cope with.

Many generations of first-time buyers have been able to purchase with low deposits, but currently that is not the case. Maximum LTVs have dropped to a norm of 85%, and access to 90% loans are limited.

Those who thought they had enough money saved may now be looking at BOMAD to top up these deposits, or to help them via the growing number of mortgage products which require parental guarantees or financial

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support. It’s perhaps no wonder that recent research from Legal & General shows that BOMAD is being called upon like never before.

This research suggests that, in a COVID-19 environment, nearly one in four (23%) housing transactions will be backed by the ‘bank’, and 24% are reliant on financial support from family and friends to get them to that point.

It means that BOMAD is likely to ‘lend’ £3.5bn, which given the lockdown and the closing of the housing market from March through to May, is still a significant amount.

Of course, at this time it may not be for housing reasons that BOMAD is being called upon. The economic situation for many is tough, and likely to get tougher with the ending of the furlough scheme this month.

“If it looks like equity release or later life lending could be utilised at the top of the family to help the other generations, do you as an adviser feel that you are in the best shape possible to make this happen?”

Even with the government’s next level of support, unemployment is likely to rise, and business owners may feel that the need to look closer to home for support during this period.

In this uncertain economic period, the reliance on parents or family members might grow ever greater, and one of the key parts of working with older clients is to make sure there is no sign they are being placed under pressure or duress in order to help out their offspring.

What we can say, however, is that older homeowners with good levels of equity may not only want to fund their own retirement needs, but help out their children or family members in as many areas as they feel able to.

MORTGAGE INTRODUCER OCTOBER 2020

Mortgage advisers are likely to see the children and grandchildren, but potentially not have the authorisation, training, resources or product access to help the parents or grandparents to facilitate such activity.

If it looks like equity release or later life lending could be utilised at the top of the family to help the other generations, do you as an adviser feel that you are in the best shape possible to make this happen?

DELIVERING ADVICE

Some firms will have introducer arrangements and strong ties with equity release specialists. Others will not. A number might sense the opportunity that exists to carry out all the work involved, but feel they do not have the necessary market knowledge or be conscious that working with older customers is different to the ‘day job’.

Certainly, as a business active in the later life space, we recognise it is not always easy to move from the recognition of a growing sector with growing demand to actually delivering that advice to those clients, who in turn can help out their family members that you’ll also be able to advise.

It’s a perfect advice situation and business opportunity, but requires some joined-up thinking and choosing an approach that is going to work for the vast majority of cases.

Part of what we want to do as a business is help advisers move into this space as quickly – but carefully – as possible, which is especially important when you may be dealing with vulnerable customers and there are greater compliance requirements and responsibilities.

That said, that opportunity should be open to all those who want to deliver on it. Our proposition needs to evolve in order to help advisers do exactly the same with theirs.

With demand for later life advice only likely to grow upwards, now is the time for firms to add this string to their bow and to find a path to the delivery of multi-generational advice. M I www.mortgageintroducer.com

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REVIEW

EQUITY RELEASE

The need for better education Claire Barker managing director, Equilaw

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esearch by Age Partnership discovered that significant numbers of people within the UK lack a clear understanding of the features involved with equity release (ER) products.

The research found that 66% of over55s do not know what a no-negative equity guarantee is, and 70% do not understand the difference between tied versus whole-of-market advice.

The survey also revealed a worrying lack of awareness regarding the impact of interest rates on equity loans, with 54% of respondents saying that they do not understand the implications of this crucial factor, and 15% saying that taking out an ER plan would mean that they no longer owned their house.

DISPELLING FALSEHOODS

This is a glaring example of the need for better education amongst clients, and of the vital role that advisers must continue to play in dispelling the falsehoods and assumptions highlighted by the report.

Indeed, it is vital that customers continue to receive a steady flow of information and expertise that enhances the reputation of our sector and broadens popular appeal accordingly. Ultimately, quality of advice underpins all that we strive to achieve as an industry.

Yet, as economic conditions continue to deteriorate across the UK and demand for alternative finance options intensifies as a consequence, the need to ensure that working practices are maintained to a high order and that customers are protected from the risk of financial harm is as important as ever.

In practice, this means working hard to isolate and root out practices which fall short of the standards needed to safeguard client interests at a time of

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financial loss and uncertainty, with the Financial Conduct Authority’s (FCA) recent report into the ER sector highlighting some woeful (albeit isolated) examples of advisers pursuing a box-ticking approach to cases in order to assess personal criteria, or of rubberstamping customer preferences without challenge or supporting evidence, regardless of suitability; practices that are entirely at odds with where we need to be.

Instead, advisers should look to prioritise a holistic approach to transactions that considers each case according to the individual needs and circumstances of customers, while also investigating the suitability of alternate lending options, even if these do not necessarily accord with the wishes of clients in the short-term.

Moreover, they should ensure that recommendations are supported by sufficient evidence, and that key features (such as the impact of compound interest levels or restructuring of legal ownership on loans and properties) are explained clearly. This is something that I am sure we can all agree on.

Nevertheless, while maintaining standards of service and advice are of obvious significance, the means by which customers receive this advice in the first instance should be regarded as of equal importance, particularly given the long-term nature of ER contracts.

So, while the ability to advise customers via video conference or other remote channels has been crucial over the lockdown period, we should be wary of assuming that technology is suitable or capable of replacing one-to-one meetings in the long-term, especially considering the scope for mistakes or oversights.

The ability to make eye contact or observe body language first-hand is indispensable when assessing whether a customer is vulnerable or has the mental capacity to understand what they are being told, while the information that can be gleaned from a face-to-face legal meeting is often vital

MORTGAGE INTRODUCER OCTOBER 2020

when discerning hidden circumstances or the suitability of products.

Many of these subtle nuances are lost altogether when meetings are conducted via video-link (let alone telephone or email), thereby running the risk of leaving clients at the mercy of a process that can lack a necessary attention to detail.

FRAUD AND COERCION

As the number of people losing jobs – and the pressure on elderly property owners to provide for children or other dependants – begins to grow, the probability of cases involving fraud, duress or coercion is likely to rise accordingly. This increases the need for financial and legal advisers to be ever more carefully on guard.

In cases where meetings are conducted via remote platforms it can be virtually impossible to ascertain who is in a room at any given point, or to judge whether the client is being unduly influenced by a third party, thereby raising the possibility of an upturn in complaints, claims and reputational damage.

Paying closer attention to the things that are not being said by clients is vital, and this simply cannot be accommodated by a single-minded reliance on digital advice platforms.

In fact, it smacks of exactly the kind of perfunctory, box-ticking approach that we need to eradicate if we wish to protect the best interests of clients, irrespective of whether the advice is being offered at the legal end of a transaction or at an earlier stage.

In a market environment which, as Age Concern found, is defined by low consumer product knowledge, any focus that emphasises the role of technology at the expense of more traditional means of contact is likely to represent a step too far for many clients, and in turn increase the likelihood of expensive mistakes.

Regardless of its merits, technology is no substitute for face-to-face financial or legal advice and least of all under our current economic conditions. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

Tech must deliver benefits at scale Jameel Lalani digital director, ULS Technology

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he phrase ‘disruption’ has become a buzzword for the global tech industry, describing an ambition to sweep aside the status quo and bring about fundamental transformation.

There are pockets of true disruption, but are the plethora of examples being hyped in recent times actually disruptive, or are these just incremental advances yet to be proven beyond a niche audience?

If we look back at major technological revolutions that have been highly disruptive, a common thread is that the new technology in question was flexible enough to scale and become pervasive.

For example, the first automobiles were available in the late 19th Century, but the demand for horse-drawn vehicles essentially remained intact until the debut of the low-priced Ford Model T. This mass-produced automobile was a truly disruptive innovation, it changed the transportation market and gained scale. The first 30 years of automobiles, whilst giving rise to innovative products, did not achieve a level of true disruption.

Another common attribute of innovative disruptions has been the value added, which aided their adoption. That said, there has often been a reluctance to change and to adapt to new technology.

The Luddites of the early 19th Century tried to destroy machines that rendered their weaving skills obsolete.

Looking at the bigger picture, these machines added value and ushered in new skills and jobs – but in different

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areas. Many benefits come not simply from adopting technology, but from adapting to the technology.

Currently, the likes of Amazon rely on the ubiquity of computers, mobile phones and the technical backbone of the internet. Part of their success has come from the ability to adapt to this situation, utilising this technology to deliver their service, whilst fundamentally rewiring the retail industry’s processes behind the scenes.

As someone new to the conveyancing industry, an open question I see is whether technology will truly ‘disrupt’ parts of the home moving process, and whether that will happen en masse?

“Many benefits come not simply from adopting technology, but from adapting to the technology” Property law has proven to be a service that is not easily rewired. From the outside it appears to be a sector that has traditionally been less willing to embrace technological possibilities.

For example, the need for wet signatures on contracts and other documents has remained stubbornly in place, even as digital signatures became more common and more secure across other industries.

But the extreme scenario of the pandemic and lockdown has forced the industry to adapt and utilise the technology around us. Working from home would not have been possible at the scale it is today even a couple of years ago. The progress made in digital communications, security and transactions in that time has been enormous, and the ability for portions of the economy to power up and continue remotely is remarkable.

Many have realised the changes that have occurred as a result of lockdown offer as much in opportunity as they do in challenge. Companies are not only deploying technology to carry on with what they were doing before, they are using the time to plan and create new processes that will need new technological support.

We see lenders continuing to digitise manual processes, but many of them are also reforming their processes entirely using digital technology.

Turning to ULS Technology, and our own contribution to better home moving: DigitalMove includes electronic signatures, IDV and digital forms, and it is available through both our panel manager platform, eConveyancer, and increasingly to solicitors for their direct cases.

This allows our innovation to scale and be adopted with minimal effort to enable the maximum gain to brokers, conveyancers and movers.

The value added by technology is often speed and consistency.

DigitalMove has now seen in excess of 16,000 property transactions pass through its technology, with each case, on average, taking 20% less time to complete than transactions not carried out through the system.

Not only does that improve a mover’s experience, but this efficiency takes out a tangible cost for all firms involved.

At a time when business cashflows are increasingly important, that reduction in transaction time enables improved cashflow.

Likewise, our Rapid Remortgage product offers brokers a much needed cashflow ‘shot in the arm’ by giving a point of certainty to the mover and speeding up transactions.

This financial impact is keenly felt by the many cash-driven businesses along the home moving value chain.

From estate agents to brokers, from conveyancers to valuers, many businesses are dependent on transactions – and the speed of those transactions – in order to thrive.

On a personal note, I am very excited to be entering a new industry (and to be doing so with ULS), and to be at the forefront of helping the industry adapt at scale to the technology available. M I

OCTOBER 2020

MORTGAGE INTRODUCER

39

SPOTLIGHT

COVENTRY BUILDING SOCIETY

Staying strong in u Mortgage Introducer speaks to Jonathan Stinton, head of intermediary relationships at Coventry Building Society, to discuss the market following lockdown and predictions for the next 12 months How has the Coventry been finding the return to the market following lockdown?

At CBS we were in a position where we didn’t need to leave the marketplace during lockdown. We were quickly able to deploy staff to home working very early in the process by supplying the required technology and moving people out of the office a week before lockdown. We were also able to flex staff from other parts of the business to help with mortgage payment deferrals, which meant these didn’t impact our ability to service our broker partners.

Our phonelines remained open and efficient, answering calls within an average daily wait time of 52 seconds in March, returning to 34 seconds in April.

Our BDMs have also remained open and available for case enquiries and are continuing to proactively support businesses via telephone and Zoom.

Since lockdown eased, we have also launched CFI Chat, an online complementary service to our telephone offering. For us it is about giving a breadth of communication choice for brokers, not forcing them down one option, so if a broker wants to contact the centre, they can do so either on the phone or through CFI Chat. If they want to speak to their BDM, the option is there as well.

We’ve also recently been able to launch new products, such as our interest-only offering, and relaunch some of our more unique products, such as our Flexx fixed range. This type of product innovation and increased choice for brokers is something there is real appetite for in the market.

How important is it to maintain service levels, and how has the Coventry managed expectations?

Service has always played a critical role in our proposition to brokers. Whether that be our telephone

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“Our BDMs have remained open and available for case enquiries and are continuing to proactively support businesses via telephone and Zoom” or underwriting service. It’s important that the service a broker receives is consistent so they can manage their clients expectations.

That’s why we offer brokers our four intermediary pledges of 48 hours’ notice of product withdrawal, publishing our service standards on a daily basis, no dual pricing and while not service related, still very relevant in the broker space, no cross sell of insurance.

Any decisions we make are always viewed through the lens of maintaining those pledges to brokers, so at times to help us maintain the service we provide we have had to look at our pricing or product choice. All of this has been done to maintain that level of consistent service for both brokers and clients.

A good, transparent service offering can be a deciding factor for brokers and their clients, and we work hard to provide a best in class service Has the Coventry had to change its product availability and are there plans to make any in the future?

As other lenders have made changes to their offering this has created an excess demand, and in order to maintain service we have reacted accordingly.

We have maintained a presence throughout and have been a consistent player at 85% loan-to-value (LTV). We have also entered the 90% LTV market on two separate occasions, which was very well received by brokers. www.mortgageintroducer.com

SPOTLIGHT

COVENTRY BUILDING SOCIETY

n uncertain times However, as well as using product availability to manage excess demand and service levels, we have also re-entered the interest-only market in September, which broadens our strong offset offering.

As of 6 October, we relaunched a number of products across multiple LTV brackets, again up to 85%, which include Flexx fixed, 10-year with 5-year, and a number of 2 and 5-year products.

What more can lenders do to support the intermediary market?

One of the things that has worked for us is openness and transparency. Letting brokers know where you are in the market with service, rates, criteria and product withdrawals. This allows brokers to be open and transparent with their clients, and effectively use their skills. It’s also about making sure the conversation with brokers is two-way. Lenders need to listen to what brokers need and act upon it. We have done exactly this and it can be seen in the introduction of CFI chat, interest-only and the reintroduction of Flexx fixed.

What has the Coventry got planned for the rest of 2020 to support recovery?

We will continue to offer a wide range of products at various LTVs to support brokers and their clients, giving them the tools they need to do their job. We’ll maintain an open and efficient contact centre and strive to maintain quick turnarounds on underwriting.

Our BDMs will also be on the front foot, delivering informative and educational sessions on things like case packaging as well.

What trends do you predict for the market in the next 12 months?

Jonathan Stinton

www.mortgageintroducer.com

The stamp duty holiday comes to an end in Q1, and that will likely mean we see a massive push for purchasers to complete within that timeframe. After the deadline that may create a slowdown of purchases, but further government intervention here should not be ruled out. However, there is also a large product transfer opportunity next year, so brokers should make sure that they are staying close to their clients to capitalise on this. With the remortgage market also looking positive, all in all there should be good opportunities for brokers to give valuable advice to clients. M I

OCTOBER 2020 MORTGAGE INTRODUCER

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SPOTLIGHT

SHAWBROOK

Making digital a Mortgage Introducer catches up with Claire Rankin, director of strategy & digital transformation - property finance at Shawbrook Bank to reflect on the COVID crisis and the role of technology in the new mortgage market What has been the biggest impact of COVID-19 on your business?

The immediacy of the mass transition from the office environment to the remote environment was probably the most impactful challenge. Not least because of the sudden load on our technological infrastructure, but also because of the initial loss of connectivity between our people.

Fortunately, the systems we put in place held firm and our teams adapted incredibly quickly, which was hugely positive.

We’ve been working in this way for some time now and I’m incredibly proud of how we’ve performed as a business, how we have refocused our resources to ensure our brokers and customers are not disadvantaged by this fairly radical change, and how positive we are about what the future holds.

Technology will play an increasingly large part in how we interact with our brokers, and this has been brought sharply into focus, to the extent that we have some significant developments in flight designed to support our distribution and make us even easier to do business with.

Has the pandemic highlighted the importance of technology in the mortgage market?

In a world where face-to-face interaction is likely to

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Claire Rankin www.mortgageintroducer.com

SPOTLIGHT

SHAWBROOK

l advances be on hold for a while longer, technology will have a more important role to play in terms of how efficiently businesses are able to transact and communicate with their customers, not to mention internally.

That being said, our view is very much that technology serves to take the heavy lifting out of the transaction process, and that in the specialist market there will always a requirement for expert people.

The key is to get the right balance of innovative tech and talented people, both of which we are fully committed to investing in over the coming 12 months, whatever the pandemic throws at us.

COVID-19 appears to have increased the speed of technological change in the mortgage industry.

How important is technology to a strong mortgage proposition?

The pandemic has certainly brought the value of technology into even sharper focus, but I think this was always a direction of travel for the industry.

Certainly at Shawbrook we have been looking to build upon an already exciting digital infrastructure for some time.

It is a journey that requires constant time and investment in order to ensure a good experience for our brokers, and in a way that maximises our potential to help customers within our chosen markets.

How has the market adapted to COVID-19 and how has technology helped solve issues between borrower, broker and lender?

Broadly we seem to be experiencing some stability, and in some pockets a spike in property transactions, but in any market, growth should be viewed against the larger picture.

The property market entered 2020 with more momentum than at any point in the last five years, thanks to clarity on Brexit and the majority government.

Whilst the stamp duty holiday has undoubtedly stoked that momentum, it’s not the whole story.

There are fundamentals such as demand for housing outstripping supply, which it is likely to continue to do as our population grows.

Getting a mortgage isn’t any easier, so the rental market will persist, and this will create opportunities for investors, brokers, and the specialist lenders savvy

enough to invest resource where it is needed the most. For some this will be technology, for others it will be people, and for many I suspect that it will be a combination of the two.

We see technological development and the broad digitalisation of elements of our offering as key enablers to growth, facilitating not just transactional ease between customer, broker, and lender, but ease of communication as well.

What changes have you made as a lender?

We have some significant developments set to be launched over the next few months, more on that in due course.

Throughout the crisis we made sure that we used technology in the most practical way possible to support our brokers.

What is the main thing you’ve learnt since the lockdown period was implemented?

I think that a key lesson has been that we are all perhaps more adaptable than we might have thought.

It was a huge swing from the traditional working environment to the unconventional, but we all got to grips with Teams, Facetime and Zoom to find a way through.

It is undoubtedly more challenging to be quite as collaborative and creative in the remote environment, but we’ve all still managed to achieve great things in an extremely tough and uncertain environment, and we should feel very proud of that.

There has been a great deal of adaptation over the past few months. How can the industry take these changes, both tech-driven and otherwise, forward from its response to COVID-19?

As I’ve mentioned, achieving a good balance is important, and while we need to take advantage of all the fantastic opportunity that technology presents, we need to make sure we are looking after our people and listening to our brokers.

This feedback forms the basis for all our systems and process improvement, and is the most effective way of ensuring that we are focusing our resource in the right areas. M I OCTOBER 2020 MORTGAGE INTRODUCER

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THE OUTLAW

THE MONTH THAT WAS

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

THE THE

AND THE

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ell readers, it’s a departure from the norm this month.

As some of you know from having contributed yourself, the nature of The Outlaw’s monthly rants is such that my mailbag can be, shall we say, interesting…very interesting (a la Barry Davies’ immortal commentary of Francis Lee’s 1974 cracker versus Man City).

This month the mailbag took a distinguished turn, as I opened an email written jointly by five of the industry’s leading intermediaries.

All of them hold senior positions in their businesses; indeed two of them are owner-operators.

In return for guaranteeing them complete anonymity, I agreed to publish their letter in full.

Now, to begin with I don’t see eye-to-eye with a few of these industry patriarchs on certain trade matters. I don’t even like two of them very much (and they won’t know which two!).

But that won’t blind me from supporting their cause here. Because the trend towards lenders adopting Churchill’ s famous words and “not wasting a good crisis” in fact started several months ago.

It’s been a steady drip of margin-rabbing by stealth.

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Lenders profiteering?

Interesting, very Interesting

I’ll ask the question again then: just why are so many lenders’ staffers still not even going into their offices on a part-time, rationed basis?

Brokers at least have one ally here in One Savings Bank’s gutsy chief executive Andy Golding. He valiantly wrote in The Times last month that he wanted 100% of his staff back in the office 50% of the time by the end of October. In a world where there is now ample personal protective equipment (PPE) and office floor space, the only exceptions to this should be those who are shielding or vulnerable.

Further, Golding suggested that those not obliging his request would be subject to a “supervisory conversation.” Bravo, One Savings Bank. You’ve stood up and said what we are all thinking.

For my own part, I know of countless middle and senior tier managers who have no desire to abandon their spacious home offices and suburban gardens just yet. Perhaps after up to two decades of commuting, they’ve just decided to milk this cow for all it’s worth?

What these laggards don’t realise is that they will ultimately be the losers in this saga. Here are some miscellaneous reasons why: 1) Their teams’ productivity will deteriorate without genuine human interaction, especially their trainees or apprentices who need the sparks that a collaborated combustion creates. →

www.mortgageintroducer.com

Dear Outlaw,

Whilst it can be said that not all of us agree with all of your usual content, we do feel that your column is the most appropriate forum for us to express our concerns over what is becoming a very disturbing trend.

Coming to the point: are some lenders now blatantly profiteering from the near unique opportunity which the COVID-19 pandemic has given them?

In recent weeks we have seen countless products withdrawn and replaced by successor versions priced upwards by between 25 and 40 basis points. When we‘ve assessed the cost of funds in these lenders’ various wholesale and retail markets, these increases bear no relation to the increased costs now being passed on to consumers, many of whom are already vulnerable or exposed.

We are told that these increases are necessary to “control and limit capacity” within lenders’ back-offices. That might be a justifiable approach, were it not for the fact that we have it on good record from many of our colleagues within the lender fraternity that their resources are actually far from being so universally stretched.

On closer reflection, we can see that this rampant profiteering is primarily the result of certain lenders having not called enough of their staff and underwriters back into the office.

Whilst brokers at large continue to visit clients (safely) in their homes, or to execute meetings at either the client’s workplace or their own, we are hearing that the majority of lenders still have most of their staff sat at home.

Further, this doesn’t even date from the recent U-turn made by the government on its back to work instruction from the spring. For it appears that many lenders we’ve spoken to have no intention whatsoever of returning their staff to work this side of Christmas and in some cases not until next spring at the earliest.

Before we write to the Financial Conduct Authority (FCA) itself on this matter of clear consumer detriment and the near-exploitation of borrowers at a time when they need our help most, could we ask that you adopt this as a cause célèbre in your next piece?

It’s a story which requires not only the attention of the FCA and our trade body, but your readers at large.

Yours, Five disaffected heads of intermediary firms

OCTOBER 2020 MORTGAGE INTRODUCER

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THE OUTLAW

THE MONTH THAT WAS

2) Some of their talented staff will actually jump ship at some point to those businesses which are showing more resourcefulness and courage.

On this broader point, the Financial Times has reported that investment bankers were beginning to suffer from ‘FOMO’ – fear of missing out. With lockdowns being enforced unevenly and rivals getting the chance to see and meet with clients again, it soon won’t be so comfortable to stay at home and ask for yet another fatigued Zoom call. In our world, the parallel is the business development manager (BDM)...if they spent six months at home now, they might actually be pretty vulnerable come the time of the vaccine.

3) These middle managers and executives are probably rationalising (and monetising!) the roles and contributions made by those within middle and senior management roles. Being sat at home sharpens a bean-counter’s scalpel, as opposed to protecting an absentee from it.

Now I can imagine that any lenders reading this piece are considering me to be unfairly flippant or subjective in my support for a wider return to offices. So here are some nationwide statistics for the ensconced-at-home lenders to ruminate on; A) London’s offices in particular need repopulating.

The capital’s 100,000 highest earners mostly work in the square mile and they pay more than £20bn a year in income tax. London in fact generates as much tax as the next 37 largest cities combined.

Having myself maintained a twice-weekly commute to London this past six months I can tell you that it’s a spacious and safe environment right now, and there is no reason why large organisations shouldn’t be running rotas such that half of their staff can be at their desks, safely distanced and functioning more efficiently.

B) London’s not alone. Even before our incompetent Prime Minister’s U-turn on office-working, Cardiff only had a 15% occupancy, Manchester and Birmingham 14%, and Leeds 13%. Europe’s capital cities feature occupancy at twice those rates. Those are utterly shocking figures and they reveal just why Rishi Sunak

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OCTOBER 2020

Middle managers: Enough accountability at home?

is right to challenge the lazy and complacent lead taken by our callow Boris Johnson.

C) Reflect now on these office occupancy levels as we enter Q4 – when December’s product transfer cessations are scheduled to be a record £33bn. These will also occur at a time when the stampede for completions to occur before the stamp duty holiday ends is placing exceptional stress on the country’s conveyancers and valuers – who let’s face it, have also been dilatory in getting their staff back to an office environment wherein their huge workloads can be more efficiently shared and managed.

Are lenders resultingly telling us that up to £100bn of business can be completed in February and March 2021 whilst their staff are still sat at home?

There are, thankfully, some exceptions. Five lenders that have excelled throughout COVID include HSBC, Santander, Coventry, Accord and West Brom.

If they can deliver a good service, then why can’t others?

Let’s be clear.

Nobody is advocating for a reckless and OSB: Often Supporting Brokers universal return to work for all. The transport systems couldn’t absorb it, for one. But there is surely a hybrid answer amid the debate. And there needs to be.

Because right now, it is mortgage borrowers (many of whom ironically are actually back at work) who are having to carry the can for the fact that far too few lenders and conveyancers have shown the mettle to do the right thing by both the economy and the country as a whole.

Alas, lenders may still hide behind the behaviour of the regulator – an organisation which has an annual budget of over £600m (paid for by us!), but presently has its 4,000 staff sat at home watching Loose Women or The Chase in between their four Zoom calls a day... whilst all our Romes burn.

Drop me a line with your thoughts folks. M I

Winston: He wouldn’t be letting London burn

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TECHNOLOGY AND THE SPECIALIST MARKET Jake Carter covers the key points raised at Mortgage Introducer’s recent roundtable, which considered the fundamental role played by technology in the specialist market over the course of the year so far

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here is no doubt that the name of the game in 2020 has been for businesses to adapt and innovate in order to survive. At the very least, the move to remote working has forced huge logistical manoeuvres, and the removal of elements such as physical valuations has only led to further complications.

For an industry so reliant on face-to-face interactions and human underwriting, how smooth has this process of picking up new technologies been for the specialist lending market?

Specialist Finance Introducer’s Jessica Bird sat down with LendInvest, Wharf Financial, Blend Network, Brightstone Law, Kensington Mortgages, and Avamore Capital to find out.

then just plug it into our day-to-day systems. From that perspective, all specialist lenders are able to adapt and adopt technology, regardless of the pandemic.”

Jonathan Newman, senior partner at Brightstone Law, points to the already steady use of technology in the specialist market prior to the pandemic as a reason for this industry’s ability to continue operating successfully in the face of the challenges of the last six months.

He says: “Solicitors, valuers, lenders and stakeholders have all been on a journey to improve processes and speed, because that is what marks them out as being different to these monolithic institutional banks.”

Craig McKinlay, new business director at Kensington Mortgages, agrees that the purpose of a specialist →

READY TO ADAPT Andy Virgo, director of buy-to-let at LendInvest believes that even prior to the pandemic specialist lenders had the upper hand over the mainstream when it comes to being ready to adapt. He points to the use of preexisting template systems among institutional banks, compared to smaller specialist lenders offering solutions on a more agile, case-by-case basis.

Virgo says: “We as specialist lenders work on micro services, we build technology out of technology. So, we can be building something in the background and

“We can be building something in the background and then just plug it into our day-to-day systems. From that perspective, all specialist lenders are able to adapt and adopt technology” ANDY VIRGO

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“There is no replacement for old-fashioned face-to-face relationship building, where people can share ideas and exchange notes” ROXANA MOHAMMADIANMOLINA lender has always been to be smaller, more nimble and faster than the mainstream.

He says: “The high street lenders typically struggle with legacy systems and they are slower to make decisions, they have offshore processing centres which have been in lockdown.”

From the broker perspective, Marc Champ, managing director of Wharf Financial, says this agility had positive implications once the lockdown came into place.

He explains: “The speed at which processes changed was impressive – as a broker we were able to put deals in and we didn’t see much of a change. If you wanted to speak to an underwriter on the phone there was a slight delay, but fundamentally lenders were really geared up well to quickly switch over.”

However, while the specialist lending sector can feel secure in its ability to progress when it comes to improving funding methodologies, or streamlining customer service, there is still further to go says Philip Gould, head of underwriting at Avamore Capital.

He explains: “I don’t think that property has latched onto tech in the way other finance sectors have. Nothing has really been disruptive – no one has stepped into the market and provided a piece of tech which has fundamentally changed the way anyone actually works.

“We might do this in bits and bobs, but look at the way credit card [or] consumer lending is done, it has dramatically changed over the last five to 10 years, whereas property has still got its core tenets. I think there’s a long way to move.”

Gould adds that as an asset-backed market this kind of disruptive relationship with tech is harder to achieve; however, he sees it as something the industry can gradually move towards.

HUMAN TOUCH The broker-lender dynamic is built on relationships and networking, which – at least in the traditional face-toface sense – ground to a halt during peak lockdown, and is yet to show any semblance of a return to the old normal.

This has not stopped Wharf Financial, however, which in fact harnessed tech to boost its connectivity during this time, using a platform called Native to place deals and network with lenders by using a heat map, showing active lenders according to postcode.

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Champ says: “We’ve gone from networking events to being a bit proactive with technology, and finding customers in different ways.”

Nevertheless, despite there being an abundance of tech available to make up for the restrictions placed upon working life, Newman notes that “this does not mean that technology is the solution to everything.”

Roxana Mohammadian-Molina, chief strategy officer at Blend, concurs with Newman that “eyes tell you more than a balance sheet,” and that while technology can offer a lot in terms of speed and efficiency, it does not provide a full understanding of a customer. The human touch is still integral.

She says: “While investors are increasingly demanding 24/7 automation and digitisation, they also yearn to be able to speak to an underwriter on the other end of the line instead of sending a faceless application and facing the prospect of the computer saying no.

“That is why at we believe in blending the best of the old and the best of the new.”

REMOTE WORKING Remote working has caused significant upheaval, both in the traditional sense and in terms of shaking up the industry’s relationship with technology.

However, although few would understate the scale of the change, most panellists found that for their business, it was not an insurmountable challenge.

“Solicitors, valuers, lenders and stakeholders have all been on a journey to improve processes and speed, because that is what marks them out as being different to institutional banks” JONATHAN NEWMAN Gould notes that many people were able to adjust quickly to working from home, despite the increased complications, while Virgo agrees that for LendInvest the move was relatively swift and uncomplicated, due to the technology that the lender already had in place.

Virgo believes that, instead, it was the freeze on valuations that caused the greatest problem when lockdown was enforced. To this end, LendInvest launched a product focused on desktop valuations, in order to meet the demand while fitting with the government’s restrictions.

However, while advances in technology may have helped with the logistical challenges of moving online, there have been other challenges at play.

For example, Newman says: “The whole world is telling us how fantastic it is to work from home, even www.mortgageintroducer.com

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MARKET my own staff do; however, when I transitioned to come back into the office as I now have, my productivity increased significantly.”

Newman points to the instant collaboration with colleagues, as well as the tools and systems in place on site, as just some reasons not to forget about the value of the office just yet.

For many, whether due to childcare needs or space issues, home life is simply not conducive to productivity, with the challenges outweighing the benefits.

Mohammadian-Molina agrees that it is vital to get staff back into the office and back up to full productivity: “The collaboration with staff is so key to a business, what you learn and what you impart by communicating regularly furthers any company.”

PROCESS CHANGES Many lenders have had to alter the way they process cases due to the restrictions following COVID-19.

Some of these changes, made largely out of necessity, have in fact proven to have a positive impact in terms of streamlining daily processes. For example, LendInvest has seen its sales team move to conducting virtual visits with brokers, rather than relying on in-person relationship building.

Virgo says: “The bridging and buy-to-let side of the business has never been busier, [meaning] we need to keep up with demand, which in turn means altering pre-existing methods to fit with the ‘new normal’.”

He adds: “Virtual meet-ups is an area which did not exist before that now plays the largest positive role in our day-to-day working life, of all the new processes.”

McKinlay says that the restrictions have helped boost Kensington Mortgages in the direction it was already going when it comes to digital development.

He explains: “We have noticed more of an acceleration of changes as a result of the restrictions. We had APIs and robotics pre-coronavirus, and the pandemic has accelerated those areas, rather than [causing] the introduction of new processes altogether.”

Avamore Capital has also made some additions to its core processes, says Gould: “We are now outsourcing in order to complete our KYCs, and we are improving the connectivity in the chain between brokers and solicitors.”

Wharf Financial, meanwhile, has a different perspective. As a young company, Wharf’s processes were planned with much of this new tech in mind, and with the intention to be largely remote, all of which put it in a strong position when COVID-19 hit, as few adjustments needed to be made.

However, although the consensus is that the specialist market adapted quickly to the challenges brought about by COVID-19, Champ notes that there was an area in which processes became snarled: that of the government’s Coronavirus Business Interruption Loan Scheme (CBILS).

He explains: “The lenders that provided CBILS loans were distracted, didn’t have the staff in place to handle www.mortgageintroducer.com

the influx of new types of loans and processes, and I don’t think any amount of technology was available to be able to handle that. It was unexpected and difficult for people to adapt to that part quickly.”

THE RISE OF AVMS Automated valuation models (AVMs) and desktop valuations have been around for quite some time, but have not been regularly employed. However, the effects of lockdown on the ability to conduct physical valuations caused these models to come to the forefront of people’s minds.

“We had APIs and robotics pre-coronavirus, and the pandemic has accelerated those areas, rather than causing the introduction of new processes altogether” CRAIG McKINLAY As a result of coronavirus, lenders – including Kensington – have been utilising AVMs at an increasing rate. However, this is not a one-size-fits-all solution, and the specialist market is particularly likely to have a high number of cases where there is yet to be a tech alternative to in-person valuations.

McKinlay says: “While we will continue to use AVMs across our proposition in order to increase time efficiency, physical valuations still have their place in some areas of the market, such as [houses of multiple occupancy (HMOs)] and more complex property types.”

Gould agrees: “I believe AVMs will be used across the market more going forward; however, I do not believe they will take the place of physical valuations for the complex cases.”

He adds that many lenders are still holding off to see successful results, before adopting AVMs to any significant degree.

One positive element of relying on in-person valuations over automated models, notes Champ, is that any issues are easier to work through.

Champ said: “Wharf Financial has seen a lot of down valuations recently, which if they had been done through the use of an AVM, it would be easy to just blame the system – but where they have come from valuers, you are able have a conversation with this person in order to understand how they have come to their valuation.

“Therefore I think a heavy reliance on AVMs would be a negative, as the customer will not be able to understand how the valuation has been decided.”

For Newman, while AVMs might be touted as another way in which lenders can reduce the time taken to → OCTOBER 2020 MORTGAGE INTRODUCER

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I believe AVMs will be used across the market more going forward; however, I do not believe they will take the place of physical valuations for more complex cases” PHILIP GOULD progress cases and boost efficiency and service levels, it is important to focus on value.

He says: “What is key is the reliability of the AVM, not the speed, as it can cause a host of problems down the line if the valuation is proven incorrect.”

FIGHTING FRAUD With upheaval across the market, not only in terms of technology and lenders’ processes but also in consumers’ everyday lives, it is unsurprising that the subject of fraud has been high on many agendas.

The increased move towards digital processes – including such advancements as biometric ID checks, for example – can in many ways help in the fight against fraud. SmartSearch and the Financial Action Task Force (FATF) are among those calling for increased uptake of digital onboarding to help avoid scams, a move that will be made all the more palatable following the mass move towards digitalisation that has already occurred this year.

However, with many using systems they are unfamiliar with, as well as a decrease in the opportunities to tap into intuition that are often provided by face-toface communications, 2020 has given rise to greater potential exploitation by criminal parties.

As a result, businesses such as LendInvest and Avamore Capital have increased investment into their fraud protection systems, while others such as Blend Network have been glad to see their existing processes stand up to the test.

However, Newman warns that new technologies have yet to outweigh the value of human perception: “While it’s old school, one of the best ways to detect fraud is through sniff tests. Most of the fraudulent activity we intercept is through this method, rather than the use of online resources.”

THE FUTURE PICTURE For Mohammadian-Molina, although she believes that there is space for much more progress – such as into the application of AI and data mining within the industry – there are some elements of the market that would be best served by returning to the old normal.

She says: “I think that despite the time savings and efficiencies of working and communicating remotely, in my mind there is no replacement for old-fashioned

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face-to-face relationship building where people can share ideas and exchange notes. So, I would love to see in-person meetings and networking events return.”

Newman agrees: “While technology is important to the specialist market – and it aids in time efficiency – I believe physical interactions are more significant to the specialist marketplace, which I see as an area to come back into the forefront after coronavirus.”

However, there are certainly some lessons that can be taken away from how the market has dealt with the current crisis, and some advancements that should be here to stay.

AVM systems and speed efficiency technology will continue to be utilised by business including LendInvest, while open banking is another tool which will continue to be invested in post-coronavirus.

Virgo says: “I believe that as specialist lenders, due to the restrictions put in place due to coronavirus, we have realised that we are best served as light on our feet, easy and ready to adapt lenders, which high-street lenders cannot complete with us on.”

COLLABORATION AND RESILIENCE One of the legacies of technology during this period has been the proliferation of knowledge sharing that has been able to take place.

In addition, while the lack of in-person networking and relationship building is to be lamented, the other side of this coin is the increased ability to reach out and connect with industry players on a larger scale, and across greater distances.

As such, one of the counter-intuitive results of remote working and lockdown has been an increase in collaboration and, according to Virgo, it is key for this to continue moving forward.

He says: “Never has there been a more important time for mortgage brokers to play an essential role in everything we do within this industry, and never has it been more important that we as lenders ensure brokers are up to date with all of the changes that are happening.”

Virgo concludes: “Moving forward, there’s a huge opportunity [for specialist lenders] to use that light-on-their-feet ability, that non-monolithic set up to continue to grow and support their customers and brokers alike.” M I

“We’ve gone from networking events to being a bit proactive with technology, and finding customers in different ways” MARC CHAMP

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SPOTLIGHT

Crystal clear

Natalie Thomas catches up with Jason Berry, who has recently been appointed group sales and marketing director at Crystal Specialist Finance You have worked in the mortgage and insurance

markets for quite some time, how do you feel COVID-19 compares to other challenges these industries have faced?

Back in 2008 I had to lead a consultation process while at Platform Home Loans. Although horrible, it was also logical to undertake as liquidity had totally dried up. Reducing sales and marketing costs and mitigating credit risk were therefore obvious. Recovery was always going to be slow, but inevitable eventually. The previous market cycles told us so, and brokers are known for their resilience.

History now shows that recovery occurred, but it did take a while as we forecast. However, the economic issues that have come about due to COVID-19 are different.

Market liquidity is evident, yet it is almost impossible to plan and predict the future with any degree of certainty, there are simply too many ‘what ifs’.

Crystal focuses on specialist finance, are there any areas of this sector that have seen a significant uplift or decline in recent months?

Bridging finance is booming, and I expect this to continue. Currently we are refinancing developments where exit deadlines are being missed, we are helping mortgage chains continue by stepping in to offer short-term finance when buyers back out, and the recent Permitted Development rules – which see planning consents greatly relaxed – mean that there are both heavy and light refurbishment bridging requirements.

Conversely, the second charge market is slow. There are green shoots, but wider lender and product choice is needed and transaction levels are only around 10% of what they were in 2019.

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What do you feel are some of the challenges facing the specialist sector? And what are the positives?

In the coming months we are going to see a rising number of consumers become specialist in their profile. Thus, we will need lenders to adapt their propositions accordingly.

Life changing and often once in a lifetime events will undoubtedly affect employment and the overall financial circumstances of potential borrowers will worsen. However, many of these borrowers will still be highly credible, having just suffered an understandable blip, so we need product criteria and pricing which reflects fairness and flexibility.

The stamp duty holiday has been an excellent stimulus provided by government and, positively, demand will continue to drive increasing transaction trends through Q4 of 2020 and Q1 of 2021.

What is Crystal busy working on?

From a sales perspective 80% of our applications are bridging, commercial or complex buy-to-let cases, so these areas are very much our ‘sweet spot’.

Separately, we are investing in technology to improve both internal and external efficiencies. In a previous role, I was able to create an application process for insurance sales which meant zero additional questions were required from brokers. Basically, we integrated with broker customer relationship management (CRM) systems and third party ‘big data’ suppliers so vital client information was understood and quotes easily delivered from the information we scraped.

While the mortgage market has many moving parts, making it difficult to achieve a similar outcome, we can certainly improve processes so the amount of rekeying of the same information is hugely reduced. M I www.mortgageintroducer.com

Making it personal When you were young, what job did you aspire to as an adult?

A professional football player.

Is there something about yourself that people would be surprised to hear?

That I achieved the above – I played at York City FC from 1987 until 1990.

What is the best bit of advice you have ever been given?

Have no regrets.

What is your most prized possession (aside from family)?

My villa in Sotogrande, Southern Spain.

Jason Berry www.mortgageintroducer.com

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SECOND OPINION

Second chances: d Natalie Thomas asks whether our panel is considering diversification

T

he second charge mortgage market has not yet enjoyed the bounce back in business seen in the first charge market in recent months.

Unlike its first charge counterpart, the sector is not a direct beneficiary of the stamp duty holiday, which means lending volumes are taking longer than some would have anticipated to climb back up.

Year-on-year, volumes fell a colossal 80% in May, followed by 71% June and 64% in July, according to the Finance & Leasing Association (FLA).

Without a significant change in market conditions, the sector looks set to finish the year considerably down on 2019, meaning those who offer seconds as their core business are going to have to make up for lost revenue in some way.

So Loan Introducer asks: “Have you thought about diversifying while the second charge market recovers, and are you confident it will?”

Tim Wheeldon

a sizeable section of the population unable to borrow. I think we could see the supply side of the industry pick up again in the first half of next year.

The key thing the market needs right now is stability; we don’t need any more bumps.

Matthew Arena managing director, Brilliant Solutions We’re confident that the secured loan market is here to stay. We are still writing business and will continue to do so. We’ve felt no need to diversify at all – our business covers all forms of property-backed lending, so whilst markets such as secured loans and commercial mortgages are down, we are experiencing record levels of enquiries across our specialist mortgage business, both packaged and direct to lender. As our area of expertise is specialist lending, we see the current situation as one that has created more complexity, which heightens the demand for our services.

chief operating officer, Fluent Money We diversified years ago from purely second charges into first charge mortgages and equity release as well. Our group completes the same number of first charge and equity release combined as it does second charges.

In terms of a market recovery, I think firstly the issues some lenders are having around funding need to be resolved.

There is also the elephant in the room which is the end of the furlough scheme on 31 October.

There are potentially a lot of people who could end up unemployed, so we may see

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Steve Walker managing director, Promise Solutions We diversified into mortgages, commercial bridging and development finance a long time ago.

While purchase mortgages and product transfers are having a good time, second charges are starting to come back and the market will definitely recover – it already is.

It’s also worth remembering, particularly now, that from a cash flow point of view second charges will complete faster and

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brokers will get paid faster – normally the next day. If brokers are ignoring second charge opportunities at the moment they are throwing away income which is likely to hit their bank account far faster than most other income streams.

Paul Huxter head of sales, Enterprise Finance The second charge market will be more important to both brokers and consumers as we emerge from this pandemic.

The flexibility offered by the products give the client an option to borrow funds where the traditional high street will not assist or it would be detrimental to move the exiting mortgage. Issues such as debt consolidation will become more prevalent during recovery from this current situation, and the second charge market is set up to deal with this specific issue.

More clients are looking to improve rather than move, particularly with the changes to planning laws recently implemented, and again this is a facility that can be accessed through second charges.

Clients who have opted for longer term fixed products due to the historically low interest rates available will also benefit from a second charge when a further advance is not available and the client wants to avoid paying early redemption charges to remortgage.

All of these elements will mean that the second charge market will recover as more clients and brokers will need to use the products to access the funds they need.

We have not looked to diversify as we are confident that the market will be stronger than ever. www.mortgageintroducer.com

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SECOND OPINION

: diversification Paul McGerrigan chief executive officer, Loan.co.uk

We are already well diversified across mortgages, seconds, bridging, development and unsecured lending, and will continue to expand into new lending verticals as the opportunities present themselves, now we have the technology in place to scale.

I am very confident the second mortgage market will recover in time. The lenders in this market have experienced and capable individuals who will steer their businesses through this. After a recession, specialist lending plays a vital part in rebuilding the market. There will be increased demand and once supply returns fully, we will have a healthy functioning market again.

The longest lasting impact of COVID in the first and second mortgage market is the behaviour of the UK consumer. There has been a significant surge in internet usage.

During lockdown, the pace of online adoption quickened even more, as people had no choice (and more time) to embrace it. I hope this development urges lenders in both the first and second mortgage markets to push on with updating processes and adopting online solutions.

There are so many ways we can work together to make the client experience simple and straightforward.

mix is very different for us. Normally, our second charge business makes up around 50% of our business, whereas today it’s sitting at 8%, but stemming from a bigger overall pipeline.

While I am very optimistic about a recovery, I think it will be well into next year and beyond before it comes.

Jimmy Allen broker account manager, Norton Broker Services The Norton Group is already a diversified financial services company carrying out first and second charge lending, plus a range of broking services including secured and unsecured loans, mortgages, bridging and commercial mortgages.

Our secured loans department did feel the impact of the pandemic; however, we have already seen a steady increase in applications and conversions over the last couple of months, as lockdown measures have eased and customers have been unfurloughed.

We believe that the secured loans market will recover further, as consumers look to consolidate debt and reduce outgoings in these times of uncertainty, resulting in a healthy, growing second charge sector.

Michelle Westley Alistair Ewing owner, The Lending Channel Diversification has been key to our current and ongoing success – we learned this back in the Credit Crunch days.

Our pipeline caseload is now higher than this same period last year, but the product www.mortgageintroducer.com

head of marketing, Brightstar Financial We already offer the full spectrum of specialist finance across our teams. We are not concerned about the future for second charge lending.

In fact, we think that next year could be a really big year for the market, as it will continue to offer flexibility in capital raising,

where first charge options are perhaps being restricted and demand continues to grow for things like home improvements and debt consolidation.

Fiona Hoyle head of consumer and mortgage finance, FLA Before the COVID-19 crisis, the second charge sector reported growth of 11% and 13% in January and February of 2020 respectively, compared with the same months in the previous year.

Second charge remains a very popular product, and growth will return to this and other markets once the crisis recedes and customers have the confidence and certainty to plan projects like renovations.

Marie Grundy sales director, West One Loans We are seeing momentum building within our second charge business as we approach what is traditionally one of the busiest periods of the year.

There are some really positive signs that the second charge market will continue its pathway to recovery, with results expected to show a much stronger end to the year.

Many borrowers have opted to complete major home improvement projects since lockdown, whilst others have worked to shore up their finances, making sure they have robust arrangements in place in the face of greater economic uncertainty.

In addition to this we are seeing a more diverse range of loan purposes, including property investors releasing equity to take advantage of the current opportunities within the housing market. M I

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Supply or B

efore the pandemic hit, the second charge mortgage sector was making strong inroads into the first charge market.

Lending was climbing month-on-month, and many first charge brokers were finally seeing the advantages of using a second, but can the same be said in the current market?

While one of the main issues is a lack of supply from lenders, some second charge brokers are also reporting that enquiries from first charge brokers have dropped considerably.

So, is the continued fall in business in the seconds market a matter of supply or demand?

DIRECT VS BROKER It is no secret that some first charge mortgage brokers are struggling to keep up with the changing criteria and increased demand residential and buy-to-let (BTL) mortgages are seeing, but does this mean they are giving seconds the cold shoulder?

Michelle Westley, head of marketing at Brightstar Financial, believes there was already an issue before the problems associated with COVID-19 emerged.

“We recently carried out some research amongst more than 1,000 brokers and found that a significant number still don’t talk to their clients about second charge lending at any point during their relationship with them,” she says.

“We know that there is continued demand from customers, particularly in the current environment where second charge lending can provide the most suitable and flexible option for capital raising. So, it seems like lots of brokers who don’t specialise in second charge lending are missing the opportunity to create enquiries and work with a specialist partner in converting them.”

Westley says the most common reason given by brokers for not talking about second charge mortgages was not that they lacked the right knowledge, but that they did not have the time – or simply forgot.

“The answer then could be as simple as changing workflows and creating more prompts to remind brokers to have the conversation with their client,” she continues.

“Second charge lending is not right for everyone, but it can be the most appropriate way of capital

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Natalie Thomas considers what lay behind the continued fall in second charge business

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MARKET

r demand? raising for many customers, and when brokers don’t consider it, they are failing their clients.”

Those firms that operate in both the businessto-consumer (B2C) and business-to-business (B2B) space can also offer an insight into which channel their current demand is coming through.

“The B2B side of our business has been slightly restricted during COVID, compared to our other channels,” says Tim Wheeldon, chief operating officer of Fluent Money.

“While the B2B side is not the most significant part of what we do, it does represent a reasonable portion. We are fortunate in terms of the introducer relationships we have, and as a result, we have not seen a dip in enquiries on the scale that some other second charge brokers have reported.”

He explains: “First charge lenders are currently experiencing issues around capacity as a result of staff working from home. Their service levels are badly impacted, and many have become more riskaverse, which is resulting in more work and increased back-and-forth between brokers and their customers.

“Spotting the opportunity to refer a second charge case will consequently be fairly low down the broker’s priority list.”

Although Fluent Money does not operate a direct to consumer channel, its aggregators, such as Moneysupermarket, do.

“Volumes through these channels are relatively unaffected. Customers are still enquiring and shopping around on comparison sites, and the demand hasn’t gone away on that side,” says Wheeldon.

He adds; “The Finance & Leasing Association’s [FLA] figures have been sharply affected by the pandemic, which I think is not just about demand but also supply. We’ve had lenders pull back from the market altogether, others have wound in their underwriting and retreated to a safe place, with only a handful maintaining their lending volumes.”

CUTTING BACK The trend towards reduced B2B volumes does not seem clear cut throughout the sector, however.

“We have seen a contrast in enquiries-direct versus enquiries coming from our registered brokers; these have remained consistently high throughout the → www.mortgageintroducer.com

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MARKET pandemic. But we have seen a slight drop in enquiries direct from consumers,” reveals Jimmy Allen, broker account manager at Norton Broker Services.

“We believe that this is because we have some control over our direct enquiries – through how and when we advertise – but enquiries that come from brokers have almost no filter, and the demand for complex cases seems to have increased.”

For those second charge brokers who might currently be struggling with a lack of enquiries, Allen suggests advertising.

“In terms of boosting demand, we believe one of the best routes is to invest in advertising and marketing outlets,” he explains. “If customers and brokers can see you, you’re more likely to be considered over competitors. The problem with this is the cost and time – it can be a substantial amount for advertising, so if budgets are an issue, then this may not be the best solution. It can also take some time to see returns, but we do believe that this investment is worth it.”

The Lending Channel is another broker which has decided to rein in its direct channel in response to market conditions.

Managing director Alistair Ewing says: “We normally do about 20% of our second charges via B2C, but since the pandemic onset we have not restarted this channel. This is because we feel there are potentially too many clients out there with various challenges brought about by COVID-19 that would prevent them from being able to meet lending criteria.

“We are already stretched to capacity with our other products, and while we could scale our team up, I’m not sure the completion conversions would warrant this at the moment.

“Is there a solution for these clients now? I think probably not in the short-term, as the lenders are correct with their cautious stance. Until the full consequences of the whole furlough, potential job loss and payment holiday issues are resolved, this will remain the case.”

SO, WHAT ARE THE LENDERS SEEING? “We aren’t seeing significant changes in these different types of lead sources compared to a pre-COVID-19 environment, “ says Buster Tolfree, commercial director of mortgages at United Trust Bank (UTB).

“Because the second charge market has retracted as a whole since lockdown, we are still rising back up from a low base, so any split in lead source is open for variance given the statistical sample is not where it was prior to the pandemic.”

LACK OF SUPPLY Consumers’ appetite for borrowing money remains strong amidst the crisis and a lack of supply is becoming the bigger issue, believes Paul McGerrigan, chief executive officer of Loan.co.uk, which is seeing enquiries through both its B2B and B2C channels,

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“The demand for seconds is solid and should continue to be so as the market moves into next year” although the pick-up in the former type is a more recent occurrence.

McGerrigan says: “Introduced second mortgages were impacted significantly, as mortgage advisers focused on their core income streams – first mortgages and insurance. A further disruption came from the fact that many companies relied heavily on faceto-face interaction to service their clients. Many of their processes and systems were not established to work solely by phone or digitally. As businesses have adapted, enquires have started to increase again.”

McGerrigan believes lenders will not start to regain their appetite until the end of the year. He says: “Finding a product for the client has been the bigger challenge, as lenders wait to see what happens when the government removes the Job Retention Scheme.

“Only when this happens – and the inevitable increase in unemployment is fully known – can lenders assess where they stand fully and make decisions on their appetite to lend. The second charge mortgage market sits at about 35% of its peak, restricted only by lending.

“I would expect this to change in Q4 with the increasing appetite of a couple of the largest lenders.”

Marie Grundy, sales director, second charge mortgages at West One Loans, feels there is still caution among the lending community.

“Demand for second charges has remained relatively strong throughout,” she says. “The challenge has been balancing demand against product availability, which as we all aware is affecting borrowers across both the first and second charge mortgage markets.

“Gradual changes are being introduced by lenders within the second charge space to increase the scope for potential borrowers, with the biggest gaps still focused around higher [loan-to-value (LTV)] lending.

There is still understandable caution from the lending community around the reintroduction of higher LTVs until the full extent of the pandemic on the economic outlook becomes clearer, but in spite of this, lenders such as ourselves have been working hard to regularly review our product reach to provide innovative lending solutions to further support the market.”

So, demand through both B2C and B2B channels appears to be strong. While work still needs to be done in terms of awareness among first charge brokers, the fundamental demand for seconds is solid and should continue to be so as the market moves into next year.

A lack of supply is obviously a concern for the sector, but once confidence returns and the economy settles, this should hopefully push supply and appetite from lenders up once more. M I www.mortgageintroducer.com

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SECOND CHARGE

How can GI Joe help grow your business?

Michelle Westley head of marketing, Brightstar Financial

I

n recent research carried out by Brightstar among more than 1,000 brokers, we asked how many mentioned to their clients that they offered second charge mortgages while they were working on their purchase or remortgage, or indeed at any point during the term of their product.

The result was that 74% admitted they didn’t talk about second charge mortgages at any stage.

This is particularly startling given that it’s now more than four years since second charge mortgage lending came under Financial Conduct Authority (FCA) regulation alongside the first charge market, and since brokers have been required to consider second charges alongside other options for capital raising.

A second charge mortgage will not be the right option for everyone, but it will be right for some, and if it is not being discussed, there will be some clients who end up with a product that isn’t the most suitable solution for their needs.

Of course, brokers who don’t talk to their clients about second charges are also missing the opportunity to expand their repertoire and potentially grow their business.

So why are more brokers not making the most of this opportunity? In recent years, even before second charge lending came under the remit of the FCA, the trade press has been full of articles and comments on the subject of how it can provide a flexible – and sometimes more economical – method of capital raising.

However, with just a quarter of brokers talking to their clients about second charges, it’s clear that it has

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not yet made it onto the agenda for many intermediaries.

Maybe it’s time to think about things a little differently – and this is where GI Joe comes in.

OPTICAL ILLUSIONS

Professors at Yale University have come up with a theory they have called the GI Joe Fallacy, based on the 1980s American cartoon. At the end of each episode, there would be a public service announcement aimed at educating the children who were watching, with information about things like crossing the road safely. At the end of this section, the child in the cartoon would say “Thank you GI Joe. Now I know”, to which GI Joe would reply “Knowing is half the battle.”

According to the professors, this claim simply isn’t true. Merely knowing something is not enough to put into practice, and it’s not enough to actually change your behaviour.

One way of demonstrating this is by thinking about optical illusions that you have probably seen many times before.

The first is the Muller-Lyer illusion, which includes two lines of the same length, but where the top line looks longer. You know that the lines are the same length, but your brain will still tell

you that the top line is longer, and you can’t change the way you see it.

The Shephard’s Tables illusion, meanwhile, shows two very different looking tables that are, in reality, exactly the same size and shape.

In both of these examples, even if you know the answer, your immediate instinct is to see the images differently to how they are in reality.

So, the idea that knowing is half the battle is not true. Learning something does not necessarily make you do it and, in order to change behaviour, we have to change habits.

GROWING YOUR BUSINESS

By taking on board the idea behind the GI Joe Fallacy, it becomes clear that engaging in more conversations about second charge lending will take more than just education.

Simply reading articles in the trade press about the opportunities, or case studies on a website, will not change habits. You will tend to continue doing things the same way you always have.

Instead, think about taking steps to introduce new habits. Actively look for ways to update your advice process or look at introducing prominent prompts around the working space to remind you to have an alternative conversation with your clients.

The opportunity in second charge mortgages is huge. But knowing about this opportunity isn’t half the battle – you need to take action to change old habits and give yourself a better chance of growing your business. M I

Shephard’s Tables illusion

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SPECIALIST FINANCE INTRODUCER INTERVIEW

LENDERS

When all others are confused…

Brian Rubins executive chairman, Alternative Bridging

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he business community can be forgiven for being confused when simultaneously facing COVID-19 and Brexit. But as the saying goes: when the going gets tough, the tough get going. This is the time to introduce new ideas, improve systems, and widen your offering.

Bridging is such an opportunity.

No longer just a means of funding the purchase of a new home until the existing property is sold, bridging has widened its reach to include residential investments and commercial property

for both the property industry and business community.

Products now include residential development finance. More recently, residential development finance has extended to include owneroccupiers who wish to build their own dreamhome. Often the security is both a first mortgage on the house being built and a first or second charge on the one being sold. As both properties are owner-occupied, only lenders regulated by the Financial Conduct Authority (FCA) can offer these loans. This is only a small number of lenders, facing growing demand.

Although bridging brokers and lenders are infamous for offering flexibility, simplicity and fast completion, the truth is that bridging loans, particularly regulated ones, are

not flexible, the very reason being their rigid structure.

But flexibility can be offered with careful structuring. For example, Alternative Bridging is offering its form of overdraft, where a limit is agreed against suitable security and the borrower can drawdown, repay and drawdown again as often as necessary.

This provides flexibility and funds on tap, avoids repetitive setting up costs and interest is only paid on the balance being used.

Although the lender’s solicitor can issue a standard form of legal charge and loan agreement within hours, it usually takes more than a few days for the valuation to be carried out and for the borrower’s solicitor to complete the legal due diligence.

The pandemic – and Brexit before it – has caused many lenders to be less able to complete loans. Accordingly, be sure that the lender says what they can do and then does it. This is a great time for innovation, but spiced with reality and caution. As always, certainty of completion is paramount. M I

Affordability: A specialist approach Paul Adams sales director, Pepper Money

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he specialist mortgage market is built on the principle of lending to customers based on their future ability to repay, even if they have complexities with their finances or a record of missed payments.

This is one of the reasons why the market is going to play an important role for brokers as we emerge from the COVID-19 pandemic.

Specialist lenders take a hands-on approach to underwriting so that they can get an accurate picture of a client’s circumstances, enabling them to make an informed decision on affordability and progress the case. www.mortgageintroducer.com

This is why the specialist market is so much more than just adverse credit lending, and incorporates customer groups like the self-employed, contractors and people with multiple sources of income or complex income.

As we emerge from the pandemic, a significant proportion of customers’ incomes will have suddenly become more complex.

INCOME DIP

Nearly 10 million were furloughed as part of the Coronavirus Job Retention Scheme and most experienced a temporary drop in income. Even those not furloughed may have seen their income dip. Furlough hasn’t always meant a drop in income, though.

While the government subsidised up to 80% of people’s salaries, it also allowed them to take employment elsewhere and earn additional

money. Affordability isn’t just about income, of course, it’s also about outgoings; increased home working is reducing regular expenditure for many, who have been able to reduce their costs in terms of commuting and even childcare.

When it comes to assessing a mortgage application, a lender will need to understand what changes there have been as a result of COVID-19, whether temporary or permanent, and how they will impact affordability.

This is a challenge faced by all lenders, of course, but considering the full picture means taking a hands-on approach and understanding the story behind a change in circumstances.

This is the core expertise of lenders in the specialist market.

So, if COVID-19 has changed your client’s circumstances, take a look beyond the high street. M I OCTOBER 2020 MORTGAGE INTRODUCER

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SPECIALIST FINANCE INTRODUCER

DEVELOPMENT

Know your background with PDRs Kevin Thomson sales director, Connect for Intermediaries

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hilst the commercial mortgage market remains constrained by the cautiousness of commercial lenders, the appetite for development funding continues to grow. This has to some extent been fuelled by the “build, build, build” announcement by the government. It has also been added to by the revision of Permitted Development Rights (PDRs), done to enable the conversion of commercial premises to residential with less red tape regarding planning permissions.

PDRs have been used by developers in recent years, as it was deemed more profitable to convert an existing building than to embark on a groundup project. So whilst the schemes are not new, the amount of political noise has increased opportunities for developers. This noise has increased awareness around the removal of the normal planning process for conversion of redundant or vacant commercial premises into residential homes.

RED TAPE

As always, though, it is not as simple as the headlines might make it appear; whilst PDR does reduce the red tape, it does not mean that there is no process.

Local authorities do have to consider all the wider impacts of the development before giving permission.

These considerations also need to be taken into account before approaching lenders with a request for development funding for this type of conversion.

Most lenders will expect a thorough appraisal of the development before any application is submitted.

This appraisal needs to demonstrate a thorough understanding of what the end residential space would look like; for example, would it attract the buyers or renters expected? The lender will

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expect the borrower to have looked at this in order to weigh up whether the proposed exit from the development funding can be realistically achieved.

Another factor to be considered is ‘location, location, location’, to coin the name of a well-known TV programme. How desirable will living space be in an ex-commercial property? Many commercial premises may not be in an ideal place for residential development; for example, if the development will still be surrounded by other commercial units, or if it is out of town with no shops, schools or other amenities around.

Increasingly, the question is also being raised as to whether there is a need for city centre residential properties if ever more people are going to be working from home?

HOME WORKING

This already appears to be reducing the aspiration to live in a city centre in order to minimise commuting.

Therefore, one question from lenders may well be whether the conversion can accommodate a home working environment. Will this be built into the converted residential space to meet the needs of this new way of working?

There will, I am sure, be more and more commercial premises being converted to residential property using

PDR. Whilst this is an opportunity for the developer, it is also an opportunity for both the lenders providing development funding, and of course the brokers.

Brokers who are familiar with exactly what it is that lenders are asking for can play a highly valuable role, both in advising their clients and in helping to ensure that the application goes through successfully and the developer receives the funding that they need.

It is imperative that the full appraisal is obtained at the outset, not just the financials but including consideration of the wider aspects of the scheme. By having all the required information to hand before submitting an application, brokers will help the lender and the developer client save time, and will help to guarantee the loan is more likely to be granted.

If this is something that, as a broker, you’re not familiar with, make sure to work with a partner who can help you.

This may be a packaging arrangement where the packager can help you to find the right lender and advise you as to what your client needs to provide, or a referral where a company – such as Connect – will advise your client directly so they receive best advice, but you still receive a referral fee and can maintain the relationship with the client for future deals. M I

The political noise around PDRs has increased opportunities for developers

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SPECIALIST FINANCE INTRODUCER INTERVIEW

FIBA

FIBA Membership growth continues Adam Tyler executive chairman, FIBA

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s we enter the second wave of this pandemic, it is too easy to only see the obvious and distressing negativity caused

by COVID-19, so I am hoping that it will be cathartic to read about some good news for a change.

FIBA’s message to specialist finance brokers, and to every adviser with an interest in this dynamic sector, is definitely getting through, because I am delighted to report that since the lockdown, FIBA has increased its membership by 50%, which in itself is cause for a lift in our spirits.

In fact, we have increased our numbers every month since we opened for business in January 2018. There is no doubt in my mind that it is the proposition we are offering which is finding favour with so many advisers.

FIBA is an inclusive organisation that welcomes everyone with an interest in specialist property finance. We cater to the experienced practitioner of course, but FIBA is also there for those who are coming new to the commercial finance sector and need guidance and support.

The fully representative partner panel understands commercial property and offers a group structure that provides a focus of expertise for our members.

Naturally, we are an association which champions our sector and the aspirations and concerns of our members at all levels of government and with our regulators.

Everyone has been affected by this pandemic and FIBA represents a place not only where our industry can be represented, but which can also be a haven and a place where the best facilities are available for members to maintain and grow their businesses, as www.mortgageintroducer.com

to find if we all tried as separate businesses. This is the power of being part of a collective that is unique in the space it now occupies.

The stunning news about the increase in membership proves that our proposition is a strong one. However, it is important that we do not relax.

FIBA is certainly not going to stop there – we want to grow our membership. To to do so, we not only need to ensure that we maintain our lobbying efforts and market our services to a wider circle of potential members, but also continually seek to improve our proposition. I intimated that our plans for developing new services and other tangible member benefits are moving along, and I am confident that we will be sharing more good news with you about new initiatives very soon. M I

well as engaging professionally with their customers.

Last month, I highlighted the ways in which FIBA had delivered on its plans to develop a first class lender panel, a professional partners’ panel made up of experienced commercial conveyancing and surveying firms, a world class compliance facility and, of course, the FIBA professional indemnity (PI) block policy.

Having access to FIBA, these features gives all of us the political clout, access to lenders, and other services which we would struggle

Since the lockdown FIBA has increased its membership by 50%

New blood F

IBA sees itself as the natural home for specialist finance brokers, and the growing membership speaks for itself.

However, we want to broaden our appeal and look to attract every adviser firm, regardless of size.

Rather than just looking after advisers with plenty of experience, we feel that we have the resources now to offer help to every adviser who either wants to make specialist property finance a part of their business offering or simply wants to be able to place a case.

As you know, we have been asking some existing members to mentor newcomers who need help with cases. The preliminary results have been very encouraging.

There are several new initiatives in the pipeline to help your businesses. They are very easy to write about, but more difficult to implement.

However, our strategy is now coming to fruition and the launch of the first initiative went out on 5 October. So, as they say: watch this space.

Before we get too carried away with the future, let’s celebrate the present successes FIBA has achieved.

In some small way, I hope it will offset concerns stemming from a much wider, more difficult worldwide backdrop.

Here’s to our current 50% increase in membership and plans to further develop the FIBA proposition for everyone’s benefit.

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ADVERTISEMENT FEATURE

MTF

Bridging lending bounces back after lockdown

Bridging Trends is produced by MT Finance and groups together the figures from specialist finance brokers: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness, Finanta, Impact Specialist Finance, Sirius Group, and UK Property Finance. For more information, or to view previous versions of the infographic, visit bridgingtrends.com

Gareth Lewis commercial director, MT Finance

T

he latest data from Bridging Trends has revealed a 46% increase in bridging loan volume in the third quarter of the year, as activity recovers from the COVID-19 lockdown.

Contributor lending transactions totalled £115.52m in the third quarter of 2020 and although lending figures were 36% below the pre-COVID-19 levels of £180.94m, they had risen significantly (46%) from the £79.4mof bridging loans transacted in the previous quarter.

Regulated bridging lending continued to dominate the sector in Q3 at an average of 53% of all lending, compared to 47% of unregulated transactions.

The average weighted monthly interest rate in Q3 decreased to 0.78%, from 0.85% in Q2- falling back in line with bridging rates offered before the COVID-19 outbreak (0.75%).

Average LTV levels in the third quarter increased to 51.7%, from 48.8% in Q2. This is likely attributed to borrowers turning to bridging finance as mainstream lenders continue to tighten their maximum LTV restrictions.

Demand for second charge lending dropped significantly, accounting for an average of 17.7% of total market volume in Q3 - down from 26.1% in Q2.

First charge bridging loans accounted for 82.3% of total transactions. For the eighth consecutive quarter, the average term remained at 12 months.

The average completion time of a bridging loan increased in Q3, with average processing times increasing to 52 days, from 50 days in the previous quarter. This could be attributed to operational capacity issues affecting the sector. 

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ONLY FOR USE BY MORTGAGE INTERMEDIARIES

The transfer window deadline that gives you plenty of time to get the deal done When it comes to product transfers, you don’t need to be doing last minute deals on the stroke of midnight. That’s why we’ll give your customers a full 110 days notice when their NatWest mortgage deals are coming to an end.

We’ll write to your customers 110 days before their deal expires advising them to contact you to arrange a new deal No additional underwriting required No valuation required if your customers opt for a current House Price Index (HPI) or original valuation figure

Application to completion processing will be quicker than standard mortgages Additional borrowing can be applied for at the same time up to a maximum of 80% LTV. The additional amount will be subject to underwriting.

So, if you’d like all your deals done without any last-minute panics, use our product transfer process.

For more information go to or log on to LiveTALK

intermediary.natwest.com

NatWest Intermediary Solutions