Mortgage Introducer October 2021 by mortgageintroducer

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER

21207 MMB wrap pp1.qxp_v8 AA 06/10/2021 12:52 Page 1

www.mortgageintroducer.com

UTB mortgages for intermediaries A smarter place for your case

October 2021

£5

21207 MMB wrap pp2.qxp_v8 AA 06/10/2021 12:51 Page 1

UTB mortgages for intermediaries Competitive

Flexible

A smarter place for your case

Tech enabled REGISTER HERE

Broker-focused

Approachable

We’ve been shaking up the specialist mortgage sector since 2015, winning awards and fans left, right and centre. But although we’re not exactly the new kids on the block, we may not be the first name which springs to mind when you’re trying to place a complex mortgage case. Not yet anyway! Buster Tolfree Director of Mortgages

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

October 2021

SWITCHED ON Air Group give their take on what’s next for equity release

£5

Buy to let mortgages

Need a lender with a wide range of buy to let solutions? That’s us! C

Along with our ability to provide a decision in principle in minutes, our buy to let range can support a variety of needs with key criteria including:

CMY

5-year fixed assessed at pay rate

Top slicing available from 110% ICR across the range Refunded valuation (max £630) and £500 cashback available on selected products Options for personal ownership, HMO, limited company and portfolio landlords

Precise. Contact your local BDM precisemortgages.co.uk

FOR INTERMEDIARIES ONLY

Product and criteria information correct at time of print (04/10/2021)

021)

EDITORIAL

COMMENT

Ryan Fowler

Publishing Director Robyn Hall Robyn@mortgageintroducer.com

RyanFowlerMI

Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Associate Editor Jessica Bird Jessicab@sfintroducer.com 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 Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com CEDAC Media Ltd Signature Tower 42, 25 Old Broad Street London EC2N 1HN Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.

A sign of things to come?

here are a lot of things that you can’t be sure of at the moment. Can you fill your car with petrol or diesel? Will the item you want to buy be available in the shop? Will there be turkey at Christmas? Blame it on what you will. Maybe you blame Boris, maybe you blame Brexit or maybe you blame COVID. Point is that it’s happening and from what is coming out of central government it looks like we’ll have to deal with this uncertainty for a while longer at least. However, the one part of the UK that continues to flourish and thrive is the housing market. It remains a bright spot in an economy blighted by numerous challenges over the past 18 months or so. Indeed, there has probably never been a better time to be a broker. The latest Iress Mortgage Eﬃciency Survey found that a whopping 90% of mortgage applications are now coming through intermediary channels. The

opportunities for brokers are boundless. And the market looks in rude health. Mortgage Introducer recently attended the NACFB Expo and broker awards in Birmingham. It was arguably the first major trade show of since COVID set in and it was amazing to see the numerous brokers, lenders, service providers etc mix with many having not seen each other face-to-face for almost two years. More importantly confidence was high and people were excited about the coming months. The next event on the calender the Mortgage Business Expo - looks equally likely to packed and will provide further opportunities for the market to reunite. However, despite the optimism there remains the questions over the wider economy which this piece started with. Not having a turkey isn’t the end of the world. But are these one oﬀ events or are they symptoms of bigger issues that may impact the mortgage space? Time alone will tell. M I

Get a buy to let decision in principle in minutes

precisemortgages.co.uk FOR INTERMEDIARIES ONLY

www.mortgageintroducer.com

OCTOBER 2021

MORTGAGE INTRODUCER

F1565_NFI_Deposit Unlock_MI_225x300_AW_v2.indd 1

30/09/2021 16:56

1 16:56

MAGAZINE

WHAT’S INSIDE

Contents 7 9 13 14 15 16 17 18 19 20 23 26 34 38 43 46

AMI Review Market Review Education Review Networks Review London Review Housing Review Economy Review Recruitment Review Service Review Technology Review Self Build Review Buy-to-let Review Protection Review General Insurance Review Equity Release Review Conveyancing Review

RECRUITMENT

48 The Outlaw The latest from our resident outlaw 52 Cover: Making a move Jake Carter speaks to Stuart Wilson and Jon Tweed of Air Group on the move from equity release to the full later life market, the importance of tech, and the green movement

SELF BUILD

BUY-TO-LET

54 Loan Introducer The latest from the second charge market 59 Specialist Finance Introducer Development finance, bridging finance and more from the specialist market 59 The Last Word Nick Morrey talks about his next move

www.mortgageintroducer.com

INTERVIEW: OSB GROUP

OCTOBER 2021

MORTGAGE INTRODUCER

Property Finance

Introducing

Our new portal – MyShawbrook Buy-to-Let – uses innovative technology to revolutionise the Buy-to-Let mortgage application journey. Launched with an exclusive new Non-Portfolio product – 5 year fixed at 3.69%. Instant Indicative Mortgage Offers (IMO) Automatic Property Valuations (AVMs) available with IMO, where eligible Integration with third parties including Companies House & Hometrack More consistent and reliable credit decisions

Speed Efficiency Innovation

0330 123 4521

cm.broker@shawbrook.co.uk

THIS ADVERTISEMENT IS FOR PROFESSIONAL INTERMEDIARIES ONLY AND IS NOT INTENDED FOR PUBLIC OR CUSTOMER USE

REVIEW

AMI

Rumble, thud and drone Robert Sinclair chief executive oﬃcer, AMI

he dull rumble of consultation after consultation coming down the road from the FCA shows no sign of abating. The thud of concept after concept landing on a market that has low consumer inertia and is highly competitive appears distinctly at odds with the way we think the residential mortgage market operates. Despite the noise from the FCA that they are going to focus more on data and supervision, this continuous treadmill of ideas will force good firms to incur more cost and add bureaucracy to processes that are already complex. This is despite Rishi Sunak promising a bonfire of previous, but now unnecessary, EU regulation. We cannot wait!!!! Can they start with the ESIS, ridiculously incorrect APR definitions and a “cheapest rule” that adds grit to a process that should be simple. In the meantime, we have the on-going drone of changes required which are loosely connected to what mortgage advisers do in front of their customers. Vulnerability, diversity and inclusivity, fair value in general

insurance and protection, consumer duty and reviewing the role and structure of networks are all on the agenda. I remain convinced that the issues are predominantly in other markets, but that does not prevent us having to stop, consider and review on your behalf here at AMI, but also help you know what you have to do to keep safe. We know we have work to do on diversity and inclusivity, but it was not the FCA that has been driving the change on this issue.

“My thanks go out to all those who have pulled out all the stops as brokers, and our partners in lenders, conveyancers and surveying as well as the removal men as we have helped people to buy safely during this disruptive pandemic” The latest podcast from the FCA is a very new way of signalling change to the market. In it the FCA sets out their concerns over the investment advice market and what they think they may need to do. It certainly implies that they see smaller firms, flying under the radar as a big risk. The solution inferred is that firms will

need to hold more capital and that they will be monitored more stringently. New firms will find it tougher to get authorised. If firms cannot find that increased level of capital the only way for them to conduct business will be as an AR of a network. However, they have commenced a significant activity to ensure that all those have suﬃcient systems, reviews and controls. So, it will become more expensive to play. What happens in the world of investments will have to map straight across to mortgages and protection, unless the FCA fundamentally restructures its rule book. We will continue our dialogue with FCA and keep reminding them that without evidence of harm in the mortgage market and proper cost benefit analysis, then change is hard to justify. This is going to be visited on a market that has just delivered, at the end of September, another bumper set of completions on property sales to add to that at the end of June. My thanks go out to all those who have pulled out all the stops as brokers, and our partners in lenders, conveyancers and surveying as well as the removal men as we have helped people to buy safely during this disruptive pandemic. There is no doubt that the mortgage advice sector has played a crucial part with all our partners to help people buy houses to make new homes in. You should be rightly proud. M I

Back to work?

uring the pandemic many firms, large and small, canvassed their people to identify how much they preferred the “new ways of working” and how much they wanted to “go back to the oﬃce”. Many either deliberately or accidentally set an expectation that working from home might be an acceptable norm. In asking how many days a week people might want to attend the office, an expectation was created.

www.mortgageintroducer.com

Little thought appears to have been given to how an employer might provide a “proper working environment”, how they would adhere to local council tax issues, if domestic, public liability and professional indemnity insurers would be happy and how health and safety monitoring might operate. As inclusivity becomes a core regulatory requirement, how do firms avoid those at home feeling excluded? How do we avoid creating two speed career paths and how do we ensure that this does not create a gender

divide and make sure all voices are heard? For me, we work in a relationship led industry. Technical skills and quality processing are important, but we are a regulated sector with principles that require firms to have culture that works top down and bottom up. I struggle to see how this can be achieved by remote working unless there is serious investment in regular team and leadership meetings at a scale we have not seen routinely. I wait to be proved wrong.

OCTOBER 2021

MORTGAGE INTRODUCER

WHAT’S NEW AT KENSINGTON PEOPLE WANT THEIR OWN S P A C E

WE’RE NOT CLOSING OUR ON THE SELF EMPLOYED

SHARED OWNERSHIP

INCOME RECOVERY FOR THE SELF-EMPLOYED

RESI 6

With no product fees and rates starting from 4.14%, up to 95% of share.

For your clients who took a hit last year, we’ll take an average of their last 2 years accounts.

Products available for your clients with a small credit blip more than 6 months ago.

OUR CREDIT RECOVERY RANGE

With no upfront app fees, fast turnaround times, BDU webchat and our BDMs back out on the road, we’re ready for you to place your case.

DISCOVER MORE at www.kensingtonmortgages.co.uk/intermediaries or call us on 0800 111 020 THIS INFORMATION IS FOR INTERMEDIARIES ONLY Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited. Registered in England & Wales: Company No. 03049877. Registered address: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ. Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the FCA.

K M PA 0016

#KensingtonDifference

REVIEW

MARKET

Increased focus on remortgages Xxxxxxxxxx Craig Calder director of mortgages, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Barclays

s we move into Q4 2021, this provides yet another intriguing period for the housing and mortgage markets. In recent times, we’ve seen a glut of purchase activity, largely driven by the stamp duty holiday. Whilst the ending of this tax incentive does not exactly mean we are entering a new era, it remains vital for the government and lenders not to take their foot oﬀ the gas, and to continue supporting a variety of borrowers in meeting homeownership aspirations. Intermediaries also have a major role to play in this, especially when it comes to sourcing responsible solutions for first-time buyers (FTBs), and educating them on the availability of initiatives such as Shared Ownership, Help to Buy and the Mortgage Guarantee Scheme.

member branch stood at 23 in August, a drop from July’s figure of 28, which makes for an average of 19 buyers for every available property on the market. Heighted first-time buyer activity remains the bedrock of any healthy housing market, and the mortgage market continues to play its part, with

“Research from Paymentshield suggested that advisers could be losing around £16m in commission each year by failing to quote clients on remortgage or product transfers”

K M PA 0016

In the lead up to the closing of the stamp duty extension, it was evident that demand remained strong amongst FTBs. Data from the latest NAEA Propertymark Housing Report suggests that first-time buyers made up 28% of sales in August – up from 20% in July. This was suggested to be the highest sales figure for FTBs since June 2020, when it stood at 29%, and year-onyear this was the highest August figure since 2016, when it also reached a level of 28%. In August, 37% of properties sold for more than the original asking price, an increase from 31% in July, and of 185% from 13% in August 2020. This is also the highest figure on record for the month of August. The average number of sales agreed per estate agent branch fell slightly to nine in August, from July’s figure of 10. The number of properties available per www.mortgageintroducer.com

REMORTGAGE OPPORTUNITIES

competition across the industry heating up when it comes to pricing. This was outlined in analysis from Moneyfacts – released in midSeptember – which highlighted that the market experienced the largest monthon-month average rate reductions since May 2020. FALLING RATES

FTB DEMAND

The rate war also continued at the opposite end of the LTV spectrum, where the average 2 and 5-year fixed rates at 60% LTV fell by 0.04% and 0.08%, respectively, to 1.51% and 1.71%. Compared to the equivalent rates in September 2019, these are now 0.33% and 0.47% lower as providers work to attract borrowers.

For the third consecutive month, both the average overall 2-year and 5-year fixed rates fell. The average 2-year fixed rate dropped by 0.14% to 2.38%, while the 5-year equivalent reduced by 0.12% to 2.63%. Both currently sit at their lowest in 11 months, 2.38% and 2.62% respectively. For both, these are the largest monthon-month reductions seen since the onset of the pandemic, when, between April and May 2020, rates fell by 0.27% and 0.31% respectively. Not only are the number of deals available at 90% and 95% loan-tovalue (LTV) far above what was on oﬀer this time last year, but the largest rate falls this month were recorded in the 90% LTV tier. The average 2-year fixed rate fell by 0.23% to 2.85% – the lowest this has been since June 2020 – and the 5-year equivalent reduced by 0.18% to 3.23% – the lowest since July 2020.

It’s not only potential buyers who are benefiting for such rates. Existing homeowners who are in a position to lock into a new deal can also reap the rewards. Although, whilst many continue to benefit, it appears that some advisers may be missing out. Research from Paymentshield has suggested that advisers could be losing around £16m in commission each year by failing to quote clients on remortgage or product transfers. This showed that remortgage and product transfers account for approximately 20% of all mortgage transactions handled by intermediaries, which in turn creates an opportunity for approximately 208,600 approvals annually, and a potential overall commission of just under £17m. Yet, indicative market research suggests that the actual quote commission earned by advisers each year for remortgage business is around £937,500, resulting in an earning blackhole of £16m. This means that advisers are only quoting on 5% to 6% of the total remortgage opportunity. If this figure checks out, then it really does represent a significant opportunity for the intermediary market going forward, and especially in Q4, where a substantial number of mortgage terms are coming to an end across the residential and buy-to-let sectors. This means that a sustained remortgage focus over the next three months could help bolster business volumes to cover any purchase shortfalls, and help more homeowners to take advantage of such a competitive mortgage landscape. M I

OCTOBER 2021

MORTGAGE INTRODUCER

BELONGING

together

FEARLESS To make sure no one is left in the dark when it comes to general insurance, Paymentshield has conjured up an exciting new website filled with frighteningly good resources aimed at boosting advisers’ confidence. The GI Academy is the first time we’ve brought our learning resources together in one place and features learning modules, a test your knowledge area and a huge library of supportive content.

gi-academy.co.uk For intermediary use only. Paymentshield and the Shield logo are registered trademarks of Paymentshield Limited. Authorised and regulated by the Financial Conduct Authority. © Paymentshield Limited 10/21 02140

REVIEW

MARKET

Where are you on ancillary? Martin Reynolds CEO, SimplyBiz Mortgages

he life of a mortgage broker is never dull, and no doubt never will be. If we just look at the past 12 months you have had to help clients with support and advice around payment holidays, furlough, Bounce Back Loans, the stamp duty holiday, how to calculate self-employed income and thousands of criteria changes – positive and negative. So, after all that, am I wrong to challenge you and say are you ‘just’ a mortgage broker, or should that business introduction state you are a mortgage and insurance broker? Do you class protection and general insurance (GI) as ancillary sales, or a key function of your job? The simple answer is what permissions you hold, and whether you use all of them on a regular basis. Whilst this is always an important point, it is on the agenda of the Financial Conduct Authority (FCA) now, and so should be one on which you challenge yourself. But what is ancillary, and how much do you embrace it? We’ll take them one at a time, in the order of importance that we perceive them based on feedback from our members. Protection always follows the mortgage in importance. However, data shows that a good penetration rate in the market is still only 30% to 35%. Only a third of clients walk away being protected, and that may be even lower depending on how you calculate your policy count. Do you count multiple policies for one client as one or as the number of policies? We do have a duty of care to our clients to ensure that they fully understand the risks of not protecting themselves and the loans, ensuring that this is reviewed on a regular basis, and continual signposting is important.

www.mortgageintroducer.com

This duty of care has never been more evident than during the pandemic, which has put health – both mental and physical – wellbeing and safeguarding family at the forefront of everyone’s minds. The order in which we talk to clients about protection is also changing. We have just had an industry Income Protection (IP) Week, which has seen many debates, webinars and thoughtful presentations highlighting the importance of IP. There is a school of thought that this is maybe the most important protection policy, and so do we invert the protection triangle and talk about this first, then critical illness (CI) and finally life?

“The new policy changes from the FCA have banned price walking and I believe that we will be the first step in the levelling off of pricing” There is plenty of material, support and training courses in the market to ensure you have the right skills to help more clients. Next on the list it is protectionrelated, but we are seeing more of a demand for private medical insurance (PMI) after the pandemic. Are people feeling more vulnerable or anxious about the level of stress on the NHS? Many are now referring into specialist PMI brokers to help their clients. General insurance is normally next on the list. It is the one part of the mortgage process that brings with it a legal requirement, and that is for your client to have buildings insurance. What we do know from research is that potentially up to six million households have no insurances – either building or contents. Admittedly, not all of these will have a mortgage or even own their own home, but it is a worrying statistic. Feedback from providers is that, again, penetration rates are low on

average; around the 25% point within the intermediary space. Historically, we know that the price comparison sites have been a favourite for consumers, where they are looking at the cheapest price rather than the most appropriate policy. Times may be changing, though, and in your favour. New policy changes from the FCA have banned price walking, and I believe that we will be the first step in the levelling off of pricing – both across different distributions and between initial and renewal premiums. This will mean that the value of the policy cover should become more important, and you are in an excellent position to fill that need. Conveyancing has always been a marmite ancillary sale, but we are seeing more technology-based solutions. Add to this the fact that many lenders now offer free legals or a cashback for remortgages, and the time to put you and your clients in greater control of the transaction is surely here. The final two ancillary sale areas are private surveys and wills. Both do not tend to figure high on the adviser or client list of discussions, but both offer another form of protection and should be considered more. With more lenders offering free valuations on purchase products, fewer clients really understand the true condition of the property they are buying, and with the challenges consumers face in terms of depleted stock levels, there is the question of whether they are more likely to consider something that is not in perfect condition? The private survey again puts the client in control and provides them with greater transparency to make the right decision. The list looks like a thankless task to consider on all applications, but by embracing technology – where applicable – utilising the skill sets of all of the people in your business and creating the right processes, these sales stop being ancillary and just become part of your service. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

MARKET

Price of everything, value of nothing Tim Hague director, Sagis

ow do you stand out in a crowd where the cheapest rate still wins? This is a question all mortgage lenders ask themselves, probably daily. The answer will depend on your size, funding model, resources, IT systems, distribution relationships, marketing budget, the wider economy and a whole host of other factors.

“Broadly speaking, the market is divided into these two buckets – cheap vanilla or more expensive niche” Often lenders will major on one of these variables. Big retail banks with large deposits and access to capital markets usually err towards low margin, high volume plays, while those without the luxury of very cheap savings deposits to draw on typically look to specialise in one or another criteria characteristic. Broadly speaking, the market is divided into these two buckets – cheap vanilla or more expensive niche. While this ‘either or’ approach might have been a sufficient distinction in a prepandemic economy, it’s becoming more apparent with each day that it’s a model not fit for the future. More than ever before, environmental, health and safety, political, risk, legislative, demographic, social and economic pressures are changing both individuals’ personal finances and lenders’ risk appetites. There is so much change occurring that it’s hard to distill it down into a

precis that makes any sense, but here a just a few trends I believe will shape the mortgage market of the future – the tip of the iceberg, if you will. CLIMATE CHANGE

More houses at risk of flooding. More homes at risk of subsidence and other structural issues. More buildings in need of refurbishment to cut carbon output and meet net zero thresholds. More cost for homeowners and landlords. More valuation exposure for lenders. More legislated cooperation to ensure a generation of climate change mortgage prisoners doesn’t emerge. More flexibility needed on building methods and materials. CREDIT ASSESSMENT

More people with seriously wonky financial histories caused by the pandemic. Furlough fallout. Mortgage payment holidays and arrears on car finance, credit cards, utilities rising. Forbearance having a renaissance. How do you deal with a homeowner who, in today’s market, wouldn’t pass the test to be a homeowner? The rise of ‘buy now, pay later’ and demise of the credit card, and the withdrawal of support like Universal Credit. INFLATION

Interest rates so low there is nowhere to go on price differentiation. Fossil fuel prices rising, renewable energy supply still unreliable, and the disadvantaged poor being hit disproportionately hard as a result. Supply chain disruption, Brexit, customs duty uplifts, pressure on the labour market, a dangerous shortage of lower skilled workers, quantitative easing fallout. The squeeze on individuals’ incomes. AGEING POPULATION

State pension bill rising. Cost of care rising. The NHS budget rising. More personal tax rises under the guise of

MORTGAGE INTRODUCER OCTOBER 2021

the newly announced health and social care levy pinching people’s purses even further. Policy designed under political pressure to protect property wealth for those who have it, disadvantaging those who don’t even further and for more of their lives. SHRINKING VANILLA

You get the picture. The way mortgage lenders think, operate and design products will necessarily need to change if they are to keep lending. The pool of cheap vanilla borrowers is shrinking, while the more niche brigade are gathering ranks daily. What does this mean in practice? The big retail banks are going to have to start catering for those with more complex incomes, credit histories and whose homes are not conventional. It is going to take a massive amount of good will between competing lenders and considerable diplomacy on the part of UK Finance to ensure that consumers are not inadvertently left unable to buy or rent because of a cocktail of risk factors making them an unattractive lending prospect. More than this, it’s going to put incredible pressure on competition in the market. We now have approaching 150 mortgage lenders and thousands of products. We have lenders that specialise in large loans, high loan-tovalues (LTVs), poor credit histories, the self-employed, and older borrowers. When the value of straight vanilla lending starts to drop because of all of these, and more, changing macro and micro trends, cheaply funded money will start to consider ‘tutti frutti’ borrowers. In one sense this is positive for borrowers; in theory those being charged more for failing to fit in an easy box should see pricing come down. On the other hand, the issue of big cheap money muscling in on specialist niches is quite likely to trigger a new round of lender closures as a direct consequence of margin erosion forced by the biggest banks. Service and technology have always historically been the differentiators in a price war. Lenders resting on their niche laurels need to start thinking about the next steps before the market starts to move in earnest. M I www.mortgageintroducer.com

REVIEW

EDUCATION

Exciting times ahead for advisers Gordon Reid business development manager, learning and development, LIBF

as there ever been a better time to be an adviser? Over the past few months, I have often asked myself this. When I first came into the industry, over 35 years ago, being a mortgage adviser was seen by many as a job. A good job, admittedly, but a job rather than a long-term career. It was often perceived as a secondary role – a stepping stone to becoming a ‘fully fledged financial adviser’, where rewards were far greater. At that time, most mortgage advisers were employed by lenders – primarily building societies and a small number of banks. This meant that career progression was limited. INDUSTRY CHANGES

Now, however, the landscape is very different. Some of the differences have been created by changes in the long-term economic landscape, while many are due to changes within the industry itself. The market is no longer dominated by a relatively small number of lenders, and advice is available through many different types of intermediaries, as well as directly from some lenders. Financial advice firms and individuals have also realised the opportunities the mortgage market offers to both consumers and professionals. Instead of being viewed as secondary to financial advice, mortgage advice is now seen as a complementary specialist area. The structure of the mortgage industry is also very different to when I started out. At that time, almost all mortgages were arranged directly with lenders, primarily building societies. Over the past three decades, however, the way mortgages are distributed has changed in several www.mortgageintroducer.com

ways, including the introduction of lenders which rely entirely on intermediaries to ‘sell’ their loans. These changes were initially enabled when mortgages were deregulated. A voluntary code of conduct was followed by statutory regulation in 2004, and the Mortgage Market Review of 2014. This effectively removed ‘nonadvised’ sales and meant that all mortgage professionals have to be qualified to offer advice. Technological developments have enabled major changes in the way mortgages are distributed. Whereas in the 1980s and 1990s all mortgages would have been arranged face-to-face, now many are arranged over the phone or through the internet. Of course, as we have seen over the past 18 months, many face-to-face discussions are now conducted on video calls. The creation of mortgage networks has also been a massive contributor to enabling greater choice for the consumer, allowing smaller firms to gain central support in areas such as training and competence, compliance and administration. It remains the case that, for many people in the UK, their home is their biggest single asset. That being so, the importance of including it in any long-term financial planning cannot be understated. No fully competent financial adviser offers long financial planning without considering their customer’s assets and liabilities, including property and mortgages. This raises another question: how can a financial adviser do their job effectively without being qualified to offer mortgage advice, too? The answer to that lies in the quality of the relationship they have with mortgage advisers. Interestingly, I was reading a story earlier this week about a soldier who’d studied for his financial advice exams whilst on operations in Estonia. He decided to get his mortgage qualification, too, and talked about how they complement each other when he’s talking to clients.

ADVISER OPPORTUNITIES

So, what about the opportunities being a mortgage adviser now offers? Well, firstly, the changes to the way mortgages are distributed mean there are many more career pathways open to mortgage advisers. Nowadays there are far fewer opportunities within mainstream lenders, so many advisers start their career journey at brokers, either directly authorised by the Financial Conduct Authority (FCA) or as appointed representatives of mortgage networks. Once you’re competent and confident, there are opportunities to set up your own brokerage. This entails being an independent adviser, and also enables advisers to either diversify or specialise in the types of mortgage they advise on. ADAPTABLE SKILLSET

Of course, you will still always have the opportunity to train and qualify in financial advice. The skillset required to be successful in both roles is very similar, so many financial advisers are still recruited from a mortgage adviser background. In addition, there are very similar skills required in the world of unregulated lending, such as commercial lending, many buy-to-let mortgages and some bridging loans. Many advisers in these areas have taken this career path from the world of regulated mortgages. Perhaps the biggest opportunities for new or existing mortgage advisers is in later life mortgages. This specialist area has seen a significant increase in the number of providers, and an even greater increase in the number of products. Unsurprisingly, with an ageing population and an increase in the state pension age, the number of potential borrowers expressing an interest in these opportunities continues to rise. I think I’ve answered my own question. And I hope those of you currently in the profession are as excited about the future of the role as I am! M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

EXPOS

National expos: Are they still valuable? Shaun Almond managing director, HL Partnership

any of us have fond memories of when the industry would come together in London for a national expo, usually timed over two days to coincide with the beginning of the autumn business push. The traditional venue was Olympia, and then Earls Court. Of course, the Credit Crunch of 2008 ended its position as the one ‘big’ event of the year, but what was interesting in hindsight was that in 2008 there were estimated to be in excess of 30,000 advisers working in the intermediary mortgage market. Today that number is approximately 13,000. With a third of the number of advisers, the events which advisers can attend either virtually or face-to-face, regionally and nationally, probably number in the dozens every month. I remember one adviser telling me that if he took up all the invitations to seminars he received from lenders, product providers, networks, mortgage clubs and packagers or distributors, he could be out of the office at least one to two days per week, every week of the year. So, is the concept of an allencompassing national expo still important? With the target audience of advisers spoilt for choice, is a trip to London or any of the large conurbations to visit a show which – it could be argued – is just a seminar exhibition with a larger footprint, going to remain popular?

heralded a challenging time for the sector, but also ushered in a regulatory infrastructure which created a core of adviser firms that were better trained, better informed and infinitely more customer-focused. Communication – one of the byproducts of a more professional market has been the huge improvement in the dissemination of information from lenders and other service providers to the adviser community. Slicker marketing via email and the power of social media has given every adviser in the country full access to changes in criteria, product launches, marketing ideas and understanding of the latest advances in technology, governance and compliance. Time – in a market as busy as ours has been, particularly this year, time is at a premium. Despite the advances in technology, can advisers afford to take time away from their desks to travel to a national event? Local versus national – in the past, a national expo was a ‘must attend’ event because of its exclusivity. Now it has to compete with smaller more intimate events, which do not take so much time out of the working day. HYBRID SOLUTION

Taking all these factors into account, it would seem that national expos could

become extinct, because of the sheer volume of smaller alternatives and the need for advisers to concentrate on their businesses. Yet there is a counter argument which tells us that there is still life in the format. It seems that expos that concentrate in specific areas and serve a particular niche are actually improving footfall and adviser engagement every year. Without wishing to influence where advisers go, I would say that the National Association of Commercial Finance Brokers (NACFB) expo held near Birmingham is an example of an event with popularity based on its particular specialism. For many years, networking has been the main driver of attendance at expos. Having so much expertise in one place drives collaboration, and a better informed adviser delivers better customer outcomes. The hybrid solution over the past few years has been to recognise the importance of regionalising a nationally branded show. I think we will continue to see more regional scenarios, but one of the factors that has tended to be forgotten is that a show which wants to attract advisers from across the UK to one venue needs a ‘wow’ factor. One of the aspects of the original one venue national expos was their ability to attract the biggest names to exhibit. That is something which has been missing for some time. If a national show represents aspects from the whole lending industry, it also needs to attract the heavyweights regularly if it wants to pull in the adviser community from across the country. M I

FACTORS AT WORK

Sophistication – our market has learned a lot since 2008. The financial upheaval

MORTGAGE INTRODUCER

Local versus national: The changing face of the expo scene

OCTOBER 2021

www.mortgageintroducer.com

REVIEW

LONDON

All change good news for London Robin Johnson Xxxxxxxxxx managing director, Kinleigh, Folkard and Hayward xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Professional Services

hat a busy September it’s been. Forgive me, but this month I thought I’d deviate away from my usual approach to this column. There are just too many things to fit into one theme, and if anything, the sheer number of comment-worthy things going on at the moment illustrates why we all need to do some thinking. ALL CHANGE

First things first, let’s start with Westminster. Robert Jenrick is out and the new Housing Secretary is Michael Gove. This appointment is a bold statement from Boris Johnson’s government; Gove is a minister who gets things done. He’s also known for being unafraid of pretty radical change, and indeed, within days of the Cabinet reshuffle he notified Parliament that he was postponing planning reforms while he spoke to Tory rebels lobbying against the loosening off of regulation. There are several major challenges ahead for our new Housing Minister. Build more homes, tick. Sort out the ongoing cladding mess, big tick. Work out how on earth to cut the significant – in UK terms at least – carbon output of British homes, very big tick. Just the first of these has flummoxed one Housing Minister after another for decades. Relaxing planning rules and making it easier to convert commercial premises to residential stock was supposed to boost housing delivery – all eyes will be on how Gove opts to treat this legislation. Getting dangerous cladding off people’s homes, whatever the cost, must be top priority. It is scandalous that more than four years later people are still living in homes which, at worst, pose a risk to their lives and at best, have crippled them financially. www.mortgageintroducer.com

In London particularly, as well as in other major city centres with lots of high rise buildings, cladding is the most distorting factor on the housing market. If Gove could fix this one thing and no other, it would be a job well done. SO LONG STAMP DUTY HOLIDAY

It was nice while we could get it, but Rishi Sunak’s tax reprieve is as distant a memory as our summer holidays. Even before the market was fully weaned off this cash booster, the stats were showing the effect of its loss.

“The great escape to the country that typified the onset of the pandemic and rise of home working looks likely to slow down considerably. Demand for rental accommodation in central London and its commuter belt has ticked up noticeably over the summer” Office for National Statistics (ONS) figures show that in England, average house prices fell by 4.5% between June and July 2021, but an annual price rise of 7% took the average property value to £270,973. London saw the lowest annual price growth, with a rise of 2.2%, while the monthly change was down 2% – the steepest since 1992 and the second steepest since 1968. Far from signalling a price crash, however, this simply confirms what we all knew to be true – that sellers were factoring in the tax saving made by buyers on their purchases when they set asking prices. That added inflation will be dropping out of the overall average values index. INFLATION STARTS TO BITE

Inflation has been heralded as the elephant in the room. A recent Bank

of England survey discovered that an alarming number of consumers aren’t aware of the effect price inflation will have on their personal finances. The British economy is already starting to see what ‘unprecedented’ public spending and quantative easing does. Private equity has so much cash it can’t do merger and acquisition deals quickly enough, while IPOs are coming thick and fast. At the same time, energy prices are going through the roof for a host of geopolitical reasons, Brexit has piled the pressure on import and export costs, labour shortages in certain sectors are stymieing service delivery, massive pressure on supply chains globally is also driving up costs, and government has just confirmed it plans to tax individuals more to pay for a crippled healthcare system. All this ultimately means less spending money for all of us. September 30 also brought the end of the Universal Credit uplift and the furlough schemes, both of which will put pressure on some households’ finances. There will be implications for homeowners, renters and landlords. BACK TO WORK

Finally, the great escape to the country that typified the onset of the pandemic and rise of home working looks likely to slow down considerably. Demand for rental accommodation in Central London and its commuter belt has ticked up noticeably over the summer. Employers are acutely aware that hybrid working patterns, while needed in some cases, actually hit productivity very hard – much harder than having everyone working remotely. With record job advertisements open, new staff need hands-on training. Whether companies have taken a scythe to their workforce or been on a hiring spree, company culture cannot be cultivated with people who have never met one another. It’s back to work time, and that is good news for London property. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

HOUSING

The rise of the sandwich generation Graeme Aitken business development manager, Harpenden Building Society

odern life is full of emerging trends and circumstances, and none more so than in the way we live. One example is the increased interest from extended families and friendship groups wanting to live together, creating new opportunities for brokers. To overcome the complexities of mortgage applications in this space, specialist lenders like Harpenden are offering expert support so brokers can effectively build new business in this developing market. THE SITUATION

21st Century living is different from that experienced by past generations. One example is the increase in blended families and multi-generational living, emerging segments in today’s society that need effective mortgage solutions. The makeup of each household can be very different – from a group of financially independent individuals who can pool their resources, to the ‘sandwich generation’ – middle-aged adults who are financially responsible for running the household, but caring for both their ageing parents and their own, often adult children. In the UK, about 3% of the population is providing care for more than one generation, whether in the same home or across multiple homes, according to Athina Vlachantoni, a gerontologist at the University of Southampton. With the younger generation finding it harder to get onto the property ladder, and with the care home sector in crisis suffering from chronic staff shortages; middle aged parents or carers

are looking increasingly likely to look after generations either side of them. According to research from Aviva, a third of UK households are now multigenerational, which will include this so-called ‘sandwich’ demographic. LIVING WITH WIDER FAMILY

In the most straightforward situation, the middle-aged parents will be meeting the mortgage costs linked to the property their children, parents or wider family share together. What is apparent, however, as a lender in this space, is that families are increasingly pooling their resources to create the best living space possible and looking to secure a multi-generational mortgage which can facilitate this complex situation, with all three generations formally contributing to the mortgage payments. As you might imagine, the different permutations to this are numerous, so brokers and their customers need expert advice. ADVANTAGES OF USING A SPECIALIST LENDER

In this scenario, the property being purchased is likely to comprise either an annexe attached to the main house or an additional separate dwelling. Both spaces will appear on the same property title. In either instance, we are happy to consider these for mortgage security purposes. Specialist lenders like ourselves are more willing to accept this type of property, whereas other, more standard lenders often shy away from a property where more than one dwelling appears on the same legal title. As one might expect, a multigenerational mortgage application comes with complexities and a number of moving parts. It’s important to be able to partner with a lender that can more easily accommodate this complexity and be able to assess each named individual’s financial

MORTGAGE INTRODUCER OCTOBER 2021

circumstances in detail to create the best outcome. We find that our manual underwriting approach makes it easier to say ‘yes’ when an algorithm, used in the application process by many mainstream lenders, may say ‘no’. A CASE IN POINT

I was recently involved in facilitating a multi-generational mortgage application, working with a broker and his customers in Solihull. Their plan was to purchase a plot of land and obtain planning permission to build three dwellings on the same title. The properties were to be used primarily for the customers’ occupation, hence suitable for our self-build product, with mum and dad moving into one, the daughter and her partner moving into another, and the third being sold as part of the repayment strategy. The individual properties had their own title created once the house was ready for occupation or sale. While the build took place, they continued to live in their current homes. This was a slightly unusual proposal due to the number of houses being built, with the lending being secured against the site and in their four names, but we were able accommodate this bespoke request. The latter was changed once the properties were finished and the titles moved into by the respective named parties. It also satisfied their need to live closer together but still have their own home to occupy. This was one of the more complex mortgage applications I have dealt with in a multi-generational setting, but we’re experienced in dealing with multifaceted situations and bringing them to a positive conclusion. MULTI-GENERATIONAL CUSTOMERS

Whether it’s a standard residential mortgage that’s required in this multigenerational setting, or a later life or self-build mortgage option, our team of experts are available to steer you through the complexities and obtain the most appropriate solution for your customers’ needs. M I www.mortgageintroducer.com

REVIEW

ECONOMY

2022 will be very different Steve Goodall managing director, e.surv

s we emerge from the summer and look toward the last quarter of this year, our own experience of the Scottish housing market suggests that – notwithstanding the withdrawal of the stamp duty tax – there is a lot of activity left as we roll into Q4. This year then will have been very good for many reasons – many of which no one expected. The question preoccupying most minds will be: what is the likely shape of the mortgage market next year? Of course, there is an exhaustive list of dynamics, but surely the most significant is the impact of rising interest rates on the housing market. The Financial Times in September reported that economists are expecting rises in US interest rates to come more quickly than the Federal Reserve might otherwise believe, as it endeavours to wind down the stimulus resulting from the pandemic. According to their survey, just over 70% believe rates will rise in the US by 0.25% in 2022. It was Klemens von Metternich, the distinguished 19th Century diplomat, who famously said: “When America sneezes, the world catches a cold.” While the UK’s future is not entirely joined at the hip with that of the US, in a global economy there is little escaping many of the same dynamics at play – not to mention the impact of our cooling relations with Europe. More importantly, the recent flurry of job statistics, the reality that many furloughed workers are already working part-time and will not return to make up the job deficit, and the pressure on prices for everything from food to second-hand cars, means that there are many forces fanning the flames of inflation. www.mortgageintroducer.com

It’s a brave person who would bet against a rise at any time during next year. Price rises have seen the biggest jump since records began in 1997 as the economy continues to reopen. Official figures show that the increase in the cost of living, as measured by the Consumer Prices Index, hit 3.2% in the year to August. According to the Office of National Statistics (ONS), the unemployment rate now stands at 4.6%, in line with economists’ forecasts. The fall was powered by a record August for hiring, with well over 200,000 employees added to payrolls in the month. If labour shortages continue to persist, wage inflation – the like of which has been eye-watering in industries such as haulage already – will mean the Bank of England will be left with no choice but to pull the metaphorical trigger and raise rates. WHERE DOES ALL THIS LEAD?

One might be tempted to suggest that politicians do not need to put family finances under stress right now. You cannot inflate sovereign debt away with high interest rates either.

The interest rate outlook will affect the wider market

But the Bank of England’s own quarterly survey in August revealed a fall in the number of consumers who believe the bank was doing enough to keep a lid on inflation. Only a third believed the bank was doing a good enough job in keeping inflation under control – the lowest level since the survey started in 1999. The stage is set perhaps for things to change. If we too are to see a rise in interest rates, we should expect to see a few things fall into place. The first is that house prices, I suspect, will not be unduly affected. The supply remains chronically short and, if our experience of prices in Scotland is anything to go by, a lack of supply in key markets will not deter those keen to find a place in the right area with outside space. The second is that confidence and household finances may come under strain, but that will prompt a robust bout of remortgaging, and where that is not possible some product transfers. Fixed rates will become very popular once again. It will also mean that affordability will remain a real issue, and so this will force an extended bout of higher loanto-value (LTV) borrowing as buyers seek to get onto the property ladder, and those seeking to move endure more difficult stress tests. This prompts an interesting question for me as a surveyor and valuer: how will the robustness of property prices be further required to underwrite individuals who want to borrow, but whose circumstances are complex? Traditionally our confidence in house prices has meant very few are worried at lending sub-70%, but if maintaining market share becomes reliant upon higher LTV lending, the current and likely future value of the property may become more crucial to the process. With an ageing housing stock, and more complex borrowers needing larger LTV loans, understanding the value of the asset and the nuances may become more important than many in the industry might like to admit. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

RECRUITMENT

The right messaging Pete Gwilliam director, Virtus Search

ou can compare recruitment models to the differences offered by a whole of market mortgage broker to that of a tied mortgage adviser. An independent mortgage adviser will source from a wide range of lenders meeting the criteria and research those that are most suitable to the aims of the client, whereas a tied adviser will only concentrate on products the company they are tied to offer The virtues of intermediation in advice and product selection are extolled, but too often recruitment becomes all about cost per hire. Inevitably, this means a narrower selection of potential candidates are being explored and the benefit of consulting with the market is also significantly diminished. You can make adverts as inclusive as possible, but that doesn’t give any certainty that your opportunity has been properly considered by a wide range candidates, a focus that is likely to be at the heart of aims for ensuring diversity in a recruitment cycle. Advert response management means you are selecting from candidates who

are actively seeking change, and are inclined to apply at that time. Knowledge lead research is at the epicentre of what an executive search delivers and likewise independent mortgage advice. Through trusted networks a headhunter goes far beyond sifting through linked in profiles. The flaw in a recruitment focus predominately built on LinkedIn is the search algorithms used by LinkedIn mean searches present those with the best keyword matches to profiles that have been most actively posting content in the last three months. The imperfection of how you start your search ultimately reflects in the rigour that is applied further into the process, when selection focuses on the best of those who have responded to adverts or LinkedIn messages. Rather than a recipient of a well-researched, and structured headhunt call. The question for all firms in candidate short role types is how important is the hire? How confident are you that you can get the widest possible mix of candidate backgrounds? Of course, direct messaging can have some success, but after 23 years of headhunting I am still convinced that you don’t know whether a candidate is willing to consider their future career trajectory until you speak with them and ask some reflective and consultative questions.

Getting the message out: what is the best approach for recruiters?

MORTGAGE INTRODUCER OCTOBER 2021

The downside of direct messaging is that it’s easy for candidates to say no or just ignore you completely. You can’t overcome any misconceptions or objections and you certainly won’t attract passive candidates or indeed those who are not regularly active on the particular social media platform – a core reason internal and external recruiters are struggling to fill roles is due to a lack of response on social media platforms. Headhunters use a whole of market approach. Starting with a conversation to their network, learning and adjusting their research to proactively generate well researched targets. Another sentiment that resonates strongly is that candidates feel a bit more valued when a firm is using a headhunter. First impressions count a lot when it comes to approaching candidates, and the credibility of discussions about the prevailing market conditions can help realise this is a good time to discuss their career plan. Moreover, the fact that individuals who have been researched are much more likely to feel that they invest in a discussion about their career and this message carries far more weight to an external talent pool than any other I have ever come across. In the same way that independent brokers treat clients fairly and help realise the benefit of a market comparison, headhunters rationalise options individuals have for career pathways from a position of insight and knowledge, and in effect create a suitability report that shows how the needs and aims of the individual are matched to those of the firm. Believe it or not, as with brokers, this can involve explaining why this isn’t the right time to move. Sometimes, discussions have to signpost what more in terms of experience and profile is required before aspirations can be filled, in same way that a broker may tell a client how they might need to bolster their deposit or improve|their affordability. M I www.mortgageintroducer.com

REVIEW

SERVICE

You can be regional and national Stuart Miller chief customer officer, Newcastle Building Society

peculation that the Financial Conduct Authority will be granted the power to block bank branch closures is reaching a fever pitch, with the Financial Times reporting in August, customers’ access to cash is considered a priority by the Treasury. Thousands of bank branches have closed over the past decade, but for many people, young and old, when it comes to making those big financial decisions, face-to-face services and advice are worth their weight in gold. Brokers and branch staff know that having a person to talk to about big financial decisions can give customers the confidence they would otherwise lack to buy a home or invest money for a longer-term return. Mortgage advisers I speak to are all too aware of the value of face-to-face advice. Whilst it’s more costly to provide than a click on an app or a website, it offers more value to clients and customers, and builds long-term loyalty that digital channels often lack. At Newcastle Building Society, we know this regionally too, which is why we are investing more in our branch network with an imaginative approach to our branch presence and how we work with the communities we serve to enhance the services we offer to our customers. Earlier this year we announced a partnership with North Tyneside Council and plans for a new branch within a refurbished Tynemouth Library building, replicating the huge success of our Yarm Library branch and community partnership branches opened last year in Hawes in North Yorkshire and Wooler in Northumberland. The point of this approach is that, whether we are dealing with

www.mortgageintroducer.com

customers through Intermediaries or our branches, we aim to put people and purpose before profit, something building societies have long striven for, but which can be lost along the way when there are so many financial pressures to bear. I wrote last month about our commitment to purpose and there are so many examples of this at our Society. This year we’re donating £111,000 in community grants, with most of this focused on supporting employability skills, food poverty and debt management charities across our region, recognising that the pandemic has brought significant challenges for our communities. In August, we appointed one of the country’s youngest branch managers to our Barnard Castle branch at a time when employment opportunities for the younger generations are under severe strain. Our new Barnard Castle branch opened in September 2019 and was enthusiastically welcomed by locals. Balancing our commitment to our local communities and customers with our commitment to the invaluable service that mortgage brokers all over the country offer us is something we are very comfortable with. Our success on a national scale is simply

A clear purpose benefits a UK-wide outlook

not possible without the support we get from our intermediary partners. Brokers remain invaluable to our mission to put people and purpose first. It’s not just in our North East region that first-time buyers are struggling to secure high loan-to-value mortgages or just borrowers who live in our heartland who need the support of family members to get on the housing ladder. Indeed, the trends in our economy nationally affect every part of it. The growing army of self-employed borrowers and older borrowers with complex incomes are a national phenomenon. It’s these borrowers who you can find across the land from Durham to Dungeness who can really use our flexible, common-sense approach to approving high loan to value loans and those with complex sources of income. Customers looking to increase their borrowing capability with the Society’s Joint Mortgage Sole Proprietor mortgage, allowing the borrower to use the income of a family member to calculate affordability, are found everywhere – especially in areas where prices extend beyond what many young people can afford. We’re also the first lender to offer mortgages under the Deposit Unlock scheme, which is a new-build home purchase scheme supporting those with small deposits, created in collaboration with insurance broker, Gallagher Re, The Home Builders Federation and home builders: Barratt Homes, Bellway, Keepmoat, Vistry and Crest Nicholson. This scheme is now available in England, Scotland and Wales with no postcode restrictions. Preserving communities’ access to face-to-face financial advice and services is fundamental to our Purpose, and for firms who consider social purpose as one of their core values. That means continuing to invest in our branches. But crucially, it also means recognising the importance of giving customers as many avenues to access our loans as possible, especially through intermediaries. M I OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

TECHNOLOGY

Confidence is rooted in achievement Steve Carruthers principal mortgage consultant, Iress

t the beginning of September, I was very pleased to again launch the IRESS Mortgage Efficiency Survey in a webinar with UK Finance. Attendance was high but the questions reflected the value of this benchmarking study. Many lenders from all sectors posed questions and wanted to know more. Of course, those that participate get the opportunity of their own individual review within their peer group – invaluable stuff so if you want to take part next year drop me a line! A year has passed since the last survey which we conducted just a few weeks into the first national lockdown. I suspect few of us would have imagined that the lending industry would go on to experience the record volumes of lending it did in the first quarter of this year. The stamp duty holiday, which is still in play until the end of September as I write, and the government’s 95% loan-to-value (LTV) guarantee scheme did much to restore borrowers’ and lenders’ confidence. The pandemic obviously brought much change and many new challenges for lenders but the need to process business efficiently has not gone away. Volatile business volumes, the evolving requirements of borrowers with more complex circumstances and the changing risk appetites of lenders have all affected volumes of business and how these volumes have had to be serviced. Our report shows how the mortgage industry’s thinking and approach has evolved over the past 12 months and explores the changing nature of efficiency and what matters

now. What defines efficiency has evolved – the number of days to offer has increased, but this is not in and of itself problematic if the transaction still takes place within the timescale of the borrower. The transaction’s drag has been in conveyancing and valuing (though less so as remote valuations have come to the fore). Efficiency has been as much about the successful transition of business processes built for another era to a new working from home environment. Many ‘givens’ in the way we all work have been changed forever.

“Our report shows how the mortgage industry’s thinking and approach has evolved over the past 12 months” A lot of the confidence we detected in lenders’ faith in their change management is now feeding its way into their thinking about undertaking new ways of doing things – including their investment in more technology for the future. Some things that might once have felt overwhelming or rested in the ‘too hard pile’ have now been firmly put on the table for change. Businesses have performed well over the past 18 months, and, we believe, this has fed into the way lenders see themselves, the market and the opportunities to do more better. In instances where little has changed, many lenders have been ‘pleasantly surprised’ at how well processes and systems have coped with the seismic shift to working from home and have scored processes slightly higher. If there was one area where there was a discernible change in attitudes across the board, it was in recognition of greener practices. The high profile and demand for greener investments is changing the thinking of many

MORTGAGE INTRODUCER OCTOBER 2021

wholesale funded lenders and retail funded lenders are grappling with Prudential Regulation Authority (PRA) demands for managing climate risk in operations and on back books. Regulatory compliance with many initiatives (for example, understanding the ramifications of negative interest rates) already consumes huge amounts of lender thinking and capacity. Ironic when you consider interest rate rises appear to be the only likely game in town in the coming 12 months. Still, the environmental scrutiny of regulators is being heeded even if some of the ramifications are not yet fully understood. Notwithstanding the many doubts surrounding them expressed by policy makers and others in the industry, many expect Energy Performance Certificates (EPCs) to be the starting point of the greener product journey though few expect them to be the final landing place. For those lenders dealing in buy-to-let, this is already well established in their thinking. For others, for example in the mutual sector, there is a real concern that creating a new generation of mortgage prisoners who cannot afford to upgrade their properties remains a genuine worry. Older properties that cannot be easily upgraded and require a physical inspection are likely in current thinking to be penalised. Lower emissions may well be a natural by-product of more remote or digital valuations, but smaller lenders are reluctant to forego prudent property risk management – particularly when so much of their unique selling point is exactly their ability to underwrite deals more automated processes would shun. There is much more to this year’s survey, but these two trends illustrate the point that while things change, they do not stand still. While all lenders faced the same issue, their responses and level of response varied tremendously according to their scale, funding models, and markets. What is encouraging is that this year everyone we spoke to expressed increased confidence in their future exactly because of their experience of achieving so much to achieve so much in this extraordinarily difficult period. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

Make yourself API Neal Jannels managing director, One Mortgage System (OMS)

ith a growing number of homeowners seeking to unlock equity from their property without disturbing their first charge mortgage arrangements, it’s little wonder that a huge amount of activity and interest is being generated across the second charge marketplace. This is a sector which has not always enjoyed the attention or levels of business that it has arguably deserved. Although it has come a long way in recent years, especially from a tech standpoint. API INTERGRATION

This is evident in the many conversations we are having with second charge specialists and lenders with a second charge arm. Past conversations have swiftly turned into positive actions and we recently completed full API integrations with secured finance lender Selina Finance. Such integrations are in place to help support and speed up the advice process, sourcing and delivery of the type of products which are in such demand. Demand which is expected to continue as many homeowners evaluate their options in terms of creating and utilising more space in their home. As highlighted in recent data from Evolution Money which suggested sustained growth in the volumes of second charge mortgage lending to prime borrowers. The research emphasised a trend whereby there is growing parity between the volume of second charge lending to prime borrowers, compared to that made to debt consolidation borrowers. The lender puts this down to a greater demand amongst existing homeowners to utilise a second charge www.mortgageintroducer.com

mortgage for non-debt consolidation purposes, a trend which only seems likely to continue. Over the last three months, the most common uses of a debt consolidation second charge mortgage remained consistent. Over half were used to pay back a loan provider, followed by paying a bank, repaying retail credit, followed by car finance. Borrowers also used their second charge mortgage to pay debt collectors, first-charge mortgages and utility providers. As outlined in this research, the speed of turnaround and the ability to access funds far quicker than with a remortgage or product transfer remains a key asset for this sector and is one of the main reasons why technology is playing an increasingly important role for forward-thinking lenders. Taking a step back for a moment, whilst the importance of technology is repeatedly referenced across all areas of the mortgage market, it’s often talked about in very general terms. So let’s be a little more specific and outline what an API actually is and what does such an integration really mean? Firstly, an API is an application program interface. From a technical perspective an API is a set of routines,

APIs: Collaborative tech trends speed up processes

protocols, and tools for building software applications. Basically, an API specifies how software components should interact. Additionally, APIs are used when programming graphical user interface components. A good API makes it easier to develop a program by providing all the building blocks. A programmer then puts the blocks together. In short, it supports the processing of requests and creates seamless communication between other systems which is a must in the modern mortgage market. COLLABORATIVE TECH

API’s support a host of applications which intermediaries can integrate into their daily working lives to streamline processes and lessen administrative burdens. Customer relationship management (CRM) systems help manage customer data, support sales management, deliver actionable insights, integrate with social media and facilitate team communication. Cloud-based CRM systems offer complete mobility and access to an ecosystem of bespoke apps. An API integration with a lender means that advisers can essentially tap into their full product range, in this case via the OMS platform, to carry out a full decision in principle, without the need to rekey any data. By that I mean users will already have full clients details stored within their CRM system, so when looking to source a product with a lender who has an API link in place then this can now be a seamless journey. Collaborative tech trends such as these are helping to change the way businesses operate by simplifying and speeding up processes. Inevitably, some lenders will be more switched onto the opportunities this creates, some will lag behind and some still have system legacy issues to overcome which makes this a tougher and longer-term ask. The appetite from lenders is there and thankfully we are heading in the right direction, but this does remain work in progress. M I OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

SECOND CHARGE

Seconds could finally go mainstream Tony Marshall managing director, Equifinance

t is encouraging to see that not only has the second charge market recovered post COVID but according to reports has now averaged over £100m every month for the past three months. This is an encouraging sign and one which helps to demonstrate that the use of second charge loans is beginning to cut through to become a more mainstream choice among intermediaries. We had argued for some time that second charge was still being ignored by many brokers. However, to see the increasing volumes coming into the sector now suggests that perhaps, at last, we are seeing a sea change in attitudes towards capital raising and that remortgage or further advance are no longer the only options being put forward by advisers. In a few years, when better historians than me look back at this period, it is likely that they might very well draw the conclusion that one of the side effects of the pandemic was to start a reappraisal of the role that second charge mortgages can play in a post COVID market. If we look at mortgage activity, particularly during 2021, and the post lockdown buying frenzy, it was clear that, leaving aside second home acquisition, there was a general feeling that people were reassessing their needs in terms of family space and the novel issue of prolonged home working. Add in the realisation that urban living during a lockdown when access to outdoor space was limited and it is not surprising that so many were looking again what they wanted from

their homes and explored the option to move. However, house prices never need too much of an excuse to move upwards and the cascade effect of supply and demand saw prices escalate alarmingly. Those lucky enough to have their offers accepted found that acquiring and completing a mortgage before losing the valuable stamp duty holiday concession was a real trial. Equally, there were many whose incomes were unable to match the ever escalating asking prices for the properties they wanted. If we add those whose new house ambitions had been thwarted to those who pulled out when they knew they would not qualify for the SDLT holiday, a significant number started to look at how they could upgrade their existing property by way of an extension, loft conversion or adding a conservatory. This is where it gets interesting. Anecdotal evidence suggests that for the first time, we are seeing a significant uptick in adviser interest in second charge solutions. First charge affordability criteria and increasing down valuations apart, advisers are having to think outside the usual box which is labelled ‘remortgage’ and re-evaluate

alternatives. The attraction of second charge mortgages has been evident for some time. For those who have already embraced the opportunity to provide a second charge solution for certain capital raising circumstances, none of this will come as a surprise. They have already worked out when the second charge scalpel is superior to the remortgage sledgehammer. However, it has taken a significant shift away from moving home because for many a new purchase is no longer considered viable as property prices have expanded beyond affordability for many along with the reimposition of the full SDLT. It is, therefore, not surprising there is a growing demand to capital raise for refurbishment or extension of existing properties. Would the regulator be comfortable if remortgages remain the dominant means of capital raising in the majority of these cases? I would suggest that brokers are coming to their own conclusions and looking beyond a remortgage solution. Whatever their past misgivings about the role of second charge mortgages, but with the growing compliance concerns of committing some customers to unnecessary costs in the shape of ERCs on their existing mortgages and set up charges for remortgaging, we could, at last, be witnessing a growing recognition by the intermediary community that second charge loans not only have a viable role to play but also they can now be considered as part of the mainstream. M I

We are seeing a significant uptick in adviser interest in second charge solutions

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

REVIEW

SELF-BUILD

Self-build momentum is growing Sue Pedley business development manager, Hanley Economic Building Society

he past 12 months or so have seen record levels of business across the purchase market for all property types. As these numbers slowly reset back to some kind of ‘normality’, it will be interesting to chart how the pandemic has impacted the choices people are making when it comes to their homes going forward. For many people, this tough period has challenged priorities and aspirations when it comes to lifestyle choices. And it’s little wonder as any period of sustained restriction is likely to entice more people to chase their dreams - especially ones which are property-related in the wake of such a robust housing market and highly competitive lending conditions. Self-build has always been an

Specialist kniowledge is valuable in self-build cases

www.mortgageintroducer.com

intriguing prospect for many people and, speaking anecdotally, it appears that the pandemic has served to prise many of those off the fence who were not quite ready, willing or able to take that final leap. Thankfully, there is now a clearer route to self-build finance and a range of creative solutions are emerging to encourage more self-builders to incorporate environmentally friendly concepts or unique construction types in the build. Awareness that is also generating momentum on a wider scale. An independent review of the custom and self-build sector has recently recommended a major scalingup of self-built homes to bolster overall housing supply. The report calls for Homes England to take a greater role with the creation of a Custom and Self Build Housing Delivery Unit to establish serviced plots on housebuilding sites and support delivery at scale. It highlights the importance of raising awareness of self-builds and providing inspiration to aspiring homeowners through a show

park. The report urges the government to provide funding to communities to create more opportunities to build and argues for greater use of modern methods of construction (MMC) to create greener homes and help the government reach its net zero housing target. The mortgage market is also doing its bit as a growing number of lenders are demonstrating an increased appetite for this type of business. Building societies, including Hanley Economic, are now lending on a wider range of construction methods and it’s encouraging to see increased demand and competition emerging across this sector. This demand was highlighted in the recent Twenty7Tec monthly mortgage market data which showed that the number of searches for self-build mortgages rose by 11.5% between July and August. Education continues to play a major role within this process and, as within any specialist area of the mortgage market, criteria and product ranges will differ from lender to lender – as will attitudes to certain methods of construction and building types. However, there are many building societies, specialist lenders and expert finance providers who are on hand to support advisers and their clients every step of the way. For those advisers who may need more information about the self-build process, we have a guide which has become a bit of a bible for both direct customers and brokers alike and we will continue to keep it up-todate with new criteria and tips to help a variety of people through what can be an intimidating process Self-build will always be something of a niche product type. However, as momentum continues to gather, this is an area where specialist knowledge and understanding of acceptable – and unacceptable – self-build property types/criteria can go a long way to delivering the types of solutions which can meet a range of ever-changing client aspirations. M I

OCTOBER 2021 MORTGAGE INTRODUCER

INTERVIEW

OSB

Getting the right outcome Mortgage Introducer caught up with Colin Barrett, group mortgage proposition director at OSB Group, to find out more about product development at the lender Having joined Natwest straight from school,

Colin Barrett, group mortgage proposition director at OneSavings Bank Group (OSB), started working in the branches before moving into products and proposition, where he found himself much more at home. Barrett has worked in this sector for over 20 years, with various lenders, such as BM Solutions, where he worked on creating the one-minute mortgage. He has worked with some well-known personalities, learning the trade and benefitting from their mentorship. Ultimately, though, Barrett most enjoys mortgage product and proposition, which provides both variety and the chance to get involved in everything from tracking customer outcomes to marketing messages. Mortgage Introducer caught up with Barrett to find out more about his role and the product development process at OSB Group. How is your team structured? I work alongside 20 talented individuals who are split into five teams across the UK and India – I’m incredibly grateful for their support and hard work. We are a modest team in terms of size, but we have a lot of talented people and the challenge – and reward

MORTGAGE INTRODUCER OCTOBER 2021

Colin Barrett

– is to ensure that the individual personalities and skills work together to create amazing outcomes. The five teams are:  Customer insights – looking after customer and broker feedback and market research, as well as customer lifecycles for good outcomes, and monitoring whether we are doing a good job.  Mortgage product – dealing with all the pricing and new products across the three lending brands. They have a combined experience of 30 years across three people.  Mortgage proposition – always looking for new ideas, market changes, forward planning, and business planning. For example, fintech and green mortgages are some of the areas we’re considering.  Business intelligence – data really is king. The more we know, the more we can develop and deliver the right products for brokers and their customers. www.mortgageintroducer.com

INTERVIEW

OSB  Operational team – their job is turn it all into reality, liaising with product and marketing to ensure it all gets to market successfully. Can you tell us something we might not know about you? I once managed to shut down a branch of Natwest for half a day. I was doing the security checks before opening in the morning, and released the lock on the security doors. Unfortunately, I set it so that it could only be opened from the inside – the trouble is we were all on the outside! They had to get the facilities team out to come and rescue us. It certainly wasn’t the proudest moment of my career! It’s getting on for two years since the Charter Court/ OSB merger. Has it been a smooth transition? It’s been pleasantly surprising how smooth the transition has been, and it’s testament to both companies and their respective cultures. Both parties came into it as equals, and the coming together of such talented teams has enabled us to form an even stronger group. From a product angle, working with colleagues remotely across different sites, both in the UK and India, has been both challenging and rewarding. The strong DNA of each of the three lending brands meant we had to be careful not to compete against ourselves, and instead build the brands to cover a broad spectrum of the market. The most exciting part of the merger has been how distinct each brand has been, and whilst some people may think they’re very similar, they each play a very individual role within the market, which is something we’ve built on. Each brand has its own strengths, and this has been the biggest challenge to balance. How did your area in particular adapt to working in the pandemic? As strange as it might sound, I believe working from home has made us work together better. Our sites in the UK are a four hour car journey apart, or a 10 hour flight for India! Embracing video calls has helped us gel together our separate teams, and we now have teams where people are agnostic as to their location. We have people reporting into each other regardless of location, and the pandemic really accelerated a change to working practices. It’s important to remember that everyone’s home circumstances are different, though, and not everyone welcomed having to work from home, so we had to try and achieve some positive outcomes to the pandemic. Encouraging colleagues to be on camera as if they were meeting each other in the office was something we implemented right from the start. Video conferencing without video means you’re unable to get a real sense www.mortgageintroducer.com

of a person if you can’t pick up on visual cues as well. Like anything, you get used to it very quickly and it’s soon become part of a routine; it’s certainly made a real difference. Being on camera every morning at 9am meant everyone has got to know each other pretty quickly, so location became a non-issue. How do you go about creating mortgage products? Our priority is to look for good customer outcomes and to ask ourselves if there a demand for the product. We look at society changes, new opportunities, market predictions, longevity and, alongside all of this, we have to consider what we’re going to deliver – is it aligned to our target audience and will it deliver a good outcome? You might think value is the right outcome, but this is an offshoot of getting everything else in the process right. How does feedback from your intermediary partners play a part in product development? It plays a really important role, and ‘partnership’ is the key word here. For a product to be appropriate, we have to consider how our intermediary partners would sell it and their feedback is vital to this thought process. By listening carefully to what they’re telling us, it helps us to design the right products for the right customers, with the right outcomes. What future trends do you see in the product space? Speed will be the key. In the days where Amazon can offer same-day delivery, it’s vital that the mortgage market is able to offer a quick but still efficient service. When you look at the industry as a whole, it’s as if we’re still stuck at the ‘please allow 28 days for delivery’ phase, like when you used to send off for something in the past. Whilst I’m not suggesting that a same-day turnaround would be appropriate, due to the necessary checks and balances we have to consider, we do need to challenge ourselves and look at areas where we can make a real difference. I think there is a lot of change to come. Ultimately, we lend money to buy houses, so it’s the process rather than the product where we will see the biggest changes. What future trends do you see in the product space? To borrow a phrase from the great Sir Arthur Conan Doyle: I could tell you, but then I’d have to kill you! All I can say is, watch this space. We’ve got lots of interesting things in the pipeline. As a group, we’re growing and actively recruiting, so if you are interested in joining us, please visit www.osbg.co.uk. M I OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Don’t believe everything you read Bob Young chief executive oﬃcer, Fleet Mortgages

“P

icture yourself in a boat on a river, with tangerine trees and marmalade skies...” Of course, the lyrics to Lucy in the Sky with Diamonds might not seem the obvious choice to open an article about the private rental sector with, but to my mind this dreamy type of landscape fits in with a lot of media commentary about the UK housing market over the last 12 or so months. If you’ve read one article about the ‘race for space’ then you’ve read a hundred. We have apparently become a nation of countryside dwellers, or at least we want to be. The city no longer holds any allure and those who once found themselves within London, Birmingham, Leeds, Manchester, Cardiﬀ, and every other major conurbation in the UK, have either moved to their ‘place in the country’ or are in the process of doing so. And this is not just an owneroccupier trend but also one for private tenants as well – everyone wants away from the city. Now, I’m clearly exaggerating here and I fully accept that some people have moved out of their former city homes and have found new places to live further afield because they, for example, no longer have to do the daily commute into the oﬃce and their working life has become much more flexible in order to allow them to do this. However, I simply don’t buy the suggestion that everyone is now seeking ‘The Good Life’ and that we have become a nation of Tom and Barbara’s, who I should point out actually moved to the suburbs anyway and were not living out in the country. Anyway, as mentioned, there may be some of your landlord clients who

MORTGAGE INTRODUCER

have been looking at the growing amount of commentary around this and wondering/worrying whether their portfolio income/value is going to be maximised if they continue to hold, for example one- or two-bedroom flats and houses in and around the major cities/ towns. The clear answer I can give to that, is there is no need to worry at all. In fact, as we move further and further away from the worst parts of ‘pandemic life’ I become more certain that pre-COVID landlord strategies will be just as successful as any perception of what is required in the new environment. Yes, there are certain people who (literally) buy into the idyllic country property ideal, but for landlords who might think this has to be the next purchase into their portfolio, when you add up the numbers they often don’t make sense. For instance, those types of properties can only really be let out to families, for whom renting isn’t always the first choice when moving to such areas. They tend to be four/ five-bedroom properties and again the yield isn’t necessarily great here. You certainly can’t convert these properties into HMOs or shared accommodation to maximise the yield, and therefore this type of investment quickly starts to lose its allure. So, what are landlords doing, and increasingly likely to do? Well, they tend to follow the places where the jobs are. Again, there has been a theme emerging that every employee is now able to work from home, or via Zoom, and therefore they won’t need to live

Ignore the dreamy commentary

OCTOBER 2021

close to their places of work, or the City, or business parks, etc. Again, that’s simply not the case. If you’re a bar person, you can’t work via Zoom. Similarly for lorry drivers or retail employees or hospital workers, or…I could go on. These people will always need to live within a reasonable distance of their places of work Landlords get this, which is why they tend to have properties in those areas, or they opt for University cities/towns which have a strong tenant demand. In other words, what types of properties work (or are available) in those areas? Well, it tends to be one/ two-bed flats and houses, or it tends to be HMO/shared accommodation properties. There is some requirement for three-bed houses within that, but at four-bed level that does tend to tail oﬀ, as again you’re looking at families, which might not deliver the yield you want/need. Overall, therefore, we should not be blinded by media commentary that suggests we are going to see fundamental shifts in working arrangements that require landlords to add more country properties to their portfolio. This will only be relevant for a very small number of people, and therefore landlords know only too well that this is highly unlikely to be a core part of their portfolio, and perhaps not relevant at all. Since the end of the first lockdown we’ve seen landlords increasingly active in the purchase space – undoubtedly encouraged by the stamp duty holiday but not beholden to it. They continue to purchase those ‘fundamental’ properties in those high areas of unemployment, or close to them, or within University areas, where tenant demand remains very strong and so do yields. No-one is reinventing the wheel here but that’s because there’s no need to. In that sense, the outlook looks very strong for the PRS, buy-to-let and those advisers active in this space. Don’t believe everything you read in those lifestyle pages. M I www.mortgageintroducer.com

FOR INTERMEDIARIES ONLY

BTL covered from A to Zephyr Single properties & large portfolios Individuals and Limited Companies (SPVs) No upfront application fees* and product fee options from zero to 2% Standard & Specialist properties, including HMOs, MUFBs, FACs & New Builds 2 & 5 year fixed rates up to 80% LTV and max loans to £2m

Talk to our experts today… Call: 0370 707 1894 Email: enquiries@zephyrhomeloans.co.uk Visit: zephyrhomeloans.co.uk *Other fees and costs apply. This information is correct as at 29th September 2021. We reserve the right to withdraw and amend our products at any time without notice. All applications are subject to our full Underwriting Criteria, details of which can be found on our website. Zephyr Homeloans is a trading name of Topaz Finance Limited. Registered in England & Wales. Company No 05946900. Registered address The Pavilions, Bridgwater Road, Bristol BS13 8AE. Topaz Finance Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No 461671). Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.

REVIEW

BUY-TO-LET

Buy-to-let has proved its credit performance Richard Rowntree managing director of mortgages, Paragon

feature of buy-to-let (BTL) that is often overlooked is the credit performance of the product. Since its inception 25 years ago, buy-to-let has outperformed the owner-occupied market in terms of arrears, aside from a very short period during the Global Financial Crisis. As buy-to-let marks its quarter century, comparing the two market segments over the past 20 years shows that the proportion of BTL mortgages more than three months in arrears is consistently approximately half of those recorded in the owner-occupier space. There are a number of reasons for this. Landlords have enjoyed strong levels of demand for their product. Rental income underpins the mortgage, and consistently robust tenant demand has also meant that void periods – the time a property is empty between lettings – are typically short. Additionally, landlords will usually either have a primary source of income that their buy-to-let property supplements, or will operate a portfolio of properties that are able to easily absorb any losses from a single property during a void period. Plus, of course, lenders also have the receiver of rent option, where they can step in and take over the management of a poorly performing portfolio. But more fundamentally, lending practices in the industry have improved, both through choice and through regulatory requirements. Lenders learnt a harsh lesson from the Global Financial Crisis, which exposed the lack of prudency that some in the sector had adopted.

It was a wake-up call for the whole industry. It had become too easy to obtain a mortgage – both in the BTL and owner-occupied space – whilst some buy-to-let lenders failed to heed the warning signs around market saturation in particular sectors. Paragon, however, stopped lending on city centre flats in certain markets two years ahead of the crash. We also didn’t have any association with property investment clubs or similar schemes that encouraged people into investing with promises of yields that were unattainable, and involved borrowing on an unsustainable basis. One infamous company even encouraged people to raise deposits by borrowing on a credit card. Paragon was criticised in some quarters for not growing as quickly as other lenders, but when the crash ultimately came, the quality of our book stood firm. Of course, we

experienced some pain, but not to the same degree as others. The global financial crisis was a sharp lesson for us all, and standards of lending have improved significantly since then across the industry. That is reflected in the majority of business today written at below 75% loan-tovalue (LTV), or below. GOLDEN RULES

New rules introduced by the Prudential Regulatory Authority (PRA) in 2017 gold-plated the improved lending practices already implemented by lenders. These rules distinguished between landlords with one to three and fourplus properties in their portfolio, and applied tighter lending criteria to those with larger portfolios. Lenders have to consider the performance of the portfolio in the round, rather than just underwrite the specific property, and that’s sensible. As we mark 25 years, landlords are in a strong position. The majority have weathered two major economic shocks, whilst reducing the gearing of their portfolios. They have the financial strength to grow and also to withstand economic downturns. M I

Landlords have consistently weathered the storm

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Specialist solutions can make a difference George Gee commercial director, Foundation Home Loans

ver the past year or so, there has been a huge amount of discussion around the potential, actual and future influencing factors on people’s financial situations and the impact on their borrowing needs. Thankfully, we appear to be coming to an end of a period which has affected millions of people’s financial resilience, although it’s evident that changes to incomes and reliance on government support over this time will influence a variety of borrowing scenarios going forward. Despite these challenges, activity across the housing market has been relentless, even over the historically quieter Summer months. This was highlighted in recent data from HMRC which showed that residential property transactions totalled 98,300 in August, 20.8% higher than August 2020 and 32.0% higher than July. On a non-seasonally adjusted basis, there were reported to be 106,150 transactions, 24.8% higher than August 2020 and 28.0% higher than July. With the stamp duty holiday ending, inflation rising and the withdrawal of the furlough scheme, it’s little wonder that a slight lull in the Q4 housing market is anticipated. However, demand is expected to stay strong and the ongoing housing supply gap is likely to mean that prices will remain relatively stable. On the back of such an uncertain period for many people, it’s vital for lenders to establish a real understanding of how people view their homes (whether rented or owned), how/why

www.mortgageintroducer.com

any views may have shifted and how people have adapted. Not to mention, future property objectives and their perceptions of the current mortgage market. These questions – and many more – formed the basis of an exclusive Foundation Home Loans Housing Aspirations Report which was recently produced in conjunction with BVA BDRC. And I’d like to share some of the findings to try shed a little light on the sentiments of employed and self-employed people in regard to these aspirations, attitudes and potential barriers.

“A large proportion of the self-employed are not fully aware of the options available to them” When surveying tenants on their future outlook, almost two in five renters (38%) definitely want to own property with a mortgage at some point in the future, with the most commonly anticipated timeframe being three to four years. Interestingly, 20% responded that they would like to own a property but outlined that their financial situation was preventing this, a figure which rose to 28% for self-employed respondents. 15% said they preferred to stay renting. Staying with finances being the main barrier to owning a property, 31% cited a low/unstable income or salary as being the primary reason, an equal number said lack of deposit/still saving, with 10% suggesting that their credit score or debt history was the main barrier. In addition, two-thirds of people (66%) felt that now represents a good time to be a property owner but many were less optimistic about looking for a mortgage and being a first-time buyer. When it came to

looking for a mortgage, employees were generally more bullish compared to self-employed respondents. Only 39% of self-employed people thought it’s a good time to be a homeowner compared to 47% of employed people. Almost two-thirds (62%) considered it to be significantly more difficult to secure a mortgage as a self-employed person, with a similar proportion (60%) believing that some lenders don’t want to deal with self-employed applicants. Other results in this section showed that 59% felt it takes longer to apply for and secure a mortgage as a selfemployed person, 51% suggested that there’s a restricted choice of lenders available to self-employed applicants and 40% thought that mortgages for the self-employed are more expensive. This data offers some great insight into the perceptions of the selfemployed population in terms of their ability, or lack of, to secure a mortgage. Of course, this doesn’t take into account individual scenarios, how much research they have done or if they have already spoke to a mortgage intermediary. Although, another highly significant statistic did emerge in that only 44% of self-employed reported utilising the services of a broker for their current mortgage arrangement. Here at Foundation Home Loans, we have been working hard to develop and implement a significant number of product and criteria-related enhancements to service the ongoing requirements of the self-employed community and enable borrowers with complex incomes to fit underwriting boundaries. However, a large proportion of the self-employed community are not confident in their ability to secure a mortgage or are not fully aware of the options available to them, which poses a significant opportunity for mortgage brokers. As a lender, we need to utilise important research such as this and work even closer with our intermediary partners to raise awareness that a range of self-employed options are out there and that the specialist mortgage market can provide the kind of solutions which can make a real difference. M I

OCTOBER 2021 MORTGAGE INTRODUCER

TIME TO RETHINK PROTECTION? Over 50%* of all UK adults don’t have protection in place. That’s why we’ve made our Personal and Business protection more inclusive, simpler to explain to your clients and easier to access. We’ve reduced our number of critical illness conditions whilst widening the scope to offer comprehensive cover for your clients. Helping you provide cover to as many people as possible, including cover for 95%† of customers who disclosed a mental health condition. Together we can help deliver great outcomes for your business, and more of your clients.

adviser.scottishwidows.co.uk/rethink-protection

Ta k i n g o n t h e f u t u r e toget h er Sources: *FCA, Financial Lives Survey, 2020, †Scottish Widows, 2020 For UK Financial Adviser use only. Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. 35797 09/21

SW-6115-Q4 Campaign – Press Ad Mortgage Introducer 270mm x 410mm.indd 1

29/09/2021 13:09

REVIEW

BUY-TO-LET

Lingering questions remain Cat Armstrong mortgage club director, Dynamo for Intermediaries

s we head into Q4 2021, where has this year gone? The whirlwind of activity across the residential and buy-to-let (BTL) markets has resulted in the past nine months flashing by, as we’ve barely had a chance to catch our breath. The onset of Q4 also signals the end of a stamp duty holiday which has, in the large part, been successfully navigated by intermediaries, surveyors, conveyancers and lenders. The pressure placed on all links in the housing and mortgage chain were particularly extreme in the early part of the year, and whilst this pressure has eased, it’s still testament to the professionalism shown across the industry that so many property transactions have completed within the specified timelines amidst the most trying of conditions. As activity levels continue to slow down a little, there is an opportunity to reflect on the past 12 to 18 months and identify changes in tenant demand and landlord behaviour, in order to build a better picture of the BTL sector moving forward. With this in mind, some enlightening research emerged from Goodlord and Vouch to reveal which pandemic-induced shifts have proved short-term, and what market movements look set to reshape the industry permanently. The report, which also includes insights from some key industry figures, cited sustained optimism throughout the industry, with growing levels of positive sentiment being demonstrated amongst letting agents and landlords, although challenges were still evident. Lack of stock was named as a top concern by agents, with 32% raising this as their primary concern. In addition, 83% of respondents reported

seeing landlords leave the sector in the past year, and 64% believe that the coming year will bring more attrition. Almost half of the agents said that more than 5% of their landlords had left the sector in the past year, 28% said between 5% and 9%, and 14% said between 10% and 19%. The combination of the stamp duty holiday and mounting regulation has seen a greater proportion of landlords cash in their portfolios; 43% of agents surveyed said they believed legislation was the prevailing factor in landlords exiting the sector. TENANT DEMAND

In more positive news, tenant demand remains high. Most tenants predicted that they would remain in the rental sector for many years to come. More than half (54%) said they would not expect or weren’t sure if they would

“We are certainly seeing a rising number of enquires from landlords regarding short-term and holiday lets, but if and when more international destinations become readily accessible, will we see this trend continue?” own a property in the next five years. Less than half (46%) said they did expect to own a property within the same timeframe. Tenants also reported a decrease in their desire to move or relocate. Only 16% said they had moved or considered moving as a result of COVID-19 in the past 12 months – a decrease of 11% on the previous year. Of those who did move to a different area in the past year COVID-19, 80% did not intend to move again. The shifting demand of tenants continues to create a number of trends landlords need to pay close attention to.

MORTGAGE INTRODUCER OCTOBER 2021

Whilst it was inevitable that some landlords would leave the market in those uncertain times, the pandemic has also created a number of additional opportunities and many landlords have diversified their portfolios accordingly. STAYCATION BOOM

This was evident in analysis of more than 400,000 rental listings by Rightmove, which outlined that seaside towns and other holiday resorts have seen the biggest decline in available properties to rent when compared with the summer of 2019. The Isle of Wight topped the list with a fall of 82% in available rental stock. The shortages have led to a surge in competition among tenants looking for a long-term place to rent, with an average uplift of 317% in demand for each property across the 10 areas that have seen the biggest declines. The change in tenant competition is measured by the number of tenants enquiring in an area on Rightmove, compared to the number of available rental properties in that area. Competition was suggested to be more than six times higher in Blackpool (+517%) and had more than quadrupled in the Isle of Wight (+376%) and Cornwall (+345%). As we head into the winter months, it will be worth noting how landlords react to such properties away from the traditional holiday season. Will longer-term lets make more of a comeback to satisfy this tenant demand? Or will people who are looking to rent be forced to move further inland, while the ‘staycation’ boom extends into the non-traditional holiday period? We are certainly seeing a rising number of enquires from landlords regarding short-term and holiday lets, but if and when more international destinations become readily accessible, will we see this trend continue? At the moment, there still appears to be more questions than answers, as lingering COVID-related uncertainty remains for landlords and tenants alike. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Complex buy-to-let and specialists Xxxxxxxxxx Jane Simpson managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx TBMC

iven the increase in demand for complex buyto-let (BTL) mortgages, TBMC is receiving higher levels of enquiries about houses in multiple occupation (HMOs), limited companies, multi-unit blocks (MUBs), semi-commercial properties and large portfolios. These types of cases are, more often than not, placed with specialist BTL lenders. For intermediaries working in the buy-to-let sector, staying on top of all of the latest product updates and criteria changes is an ongoing challenge. This is especially true for complex buy-to-let, where the variation from lender to lender differs widely. For these types of cases, brokers may benefit from the help of a specialist buy-to-let broker such as TBMC. SEMI-COMMERCIAL

Professional landlords looking for higher rental yields or to diversify their portfolios have often found success with semi-commercial properties. These usually comprise a commercial unit with residential units above, and are exempt from the 3% stamp duty surcharge for second homes. However, to place these cases successfully there are some key pieces of lending criteria that brokers should be aware of:  Does the residential component make up over 50% of the building? Some lenders require this.  Does the property have independent access to the flats from outside of the commercial unit?  Does the square footage of each individual flat meet the minimum size requirement?  Shops and offices are normally acceptable by lenders. Pubs, takeaways and launderettes are examples www.mortgageintroducer.com

Complex cases are, more often than not, placed with specialist buy-to-let lenders

of properties that will be referred to the lender on a case-by-case basis. MUBS

Finance for multi-unit blocks is becoming more readily available, with a wide choice of lenders and products in the marketplace. It can be more time consuming to place complex buy-to-let cases, such as MUBs, and the lending criteria may be quite specific. For example:  Most lenders will require each unit to be individually saleable.  Each unit must have separate utilities – its own gas, electric and water supply.  Each unit must have its own secure and separate entrance, be that inside or outside.  Each unit might be required to have its own separate living space, kitchen and bathroom.  Check the individual units’ square footage – lenders will have a minimum each unit needs to meet. Exceptions for smaller units can be made where the majority of units meet the criteria. TBMC has placed an MUB with one unit at 19 square metres before.

 Your client will normally need letting experience when purchasing their first multi-unit block. The typical minimum criteria is two years of landlord experience. CLIENT REFERRAL SERVICE

The increasing complexity of the buy-to-let mortgage market means that cases can often take longer for intermediaries. For some it has become too timeconsuming to seem worthwhile in comparison with other financial products that they arrange for clients. For this reason, TBMC now offers a new client referral service for directly authorised and non-regulated brokers who receive buy-to-let enquiries, but who – for a variety of reasons – would prefer not to be involved in placing the business. Instead, they can refer the case to TBMC, which will deal directly with the client and process the application from start to finish. This means the broker can still offer a service to landlords, and will receive a share of the procuration fee on completion for referring the case. M I OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

PROTECTION

A guide to protection underwriting Kevin Carr chief executive, Protection Review; MD, Carr Consulting & Communications; co-chair, Income Protection Task Force

nyone new to advising on protection might be forgiven for thinking that underwriting is complicated. To put it simply, it’s about understanding what insurers need to know in order to make – and guarantee – their promise to pay out when the claim comes. The most important thing an adviser can do is help clients feel comfortable so they can be open and honest. How much involvement an adviser has is up to that adviser. Some advisers like to be involved personally all the way through, some will hand over the underwriting to a colleague or the insurer, and others may partner with a protection specialist and split the commission or fees. Honesty at the application stage is key to a successful claim in future years. A failure to reveal an important piece of information about health, occupation, family or lifestyle represents the main reason for declined claims. That said, 98% of all UK protection claims are paid, so the risk is low – but we don’t want our clients to be one of the 2%. Stubbing your toe on the stairs doesn’t matter – it’s the important stuff they need to know about. Just like saying your house is built on a flood plain or that you drive a sports car, the answers you give to the questions might impact the price. Advisers should be open and honest, too. Saying the process only takes a few inutes’ is untrue, for most people. Clients should expect it to take up to half an hour and be advised to set time aside so they can think about the answers, rather than rushing it.

Advisers will probably already know about their occupation, so ask a few general medical questions up front, such as whether there are any health issues the insurer might want to know about. Ask if they ride a motorbike or do any hazardous sports – flying planes, potholing etcetera. Ask briefly about family history, too. That should cover most bases in a few minutes to set the scene, and there are a range of solutions in the protection industry that can provide indicative underwriting and pricing decisions before the application is submitted – from insurer presales helplines and online tools to independent portals. Using these can help save the adviser and the insurers a lot of time, and can save the phonecalls for the more complicated cases. Try to become familiar with the most common issues – diabetes, blood pressure, height and weight, etcetera. However, be careful not to invent your own questions. The wording on protection application forms these days is very specific and has evolved over the decades to be as fair and accurate as possible. PROTECTION PARTNERS

Depending on the circumstances, insurers can and do vary. Sometimes the friendly societies might be different, sometimes newer insurers might be different, and sometimes

NEWS IN BRIEF The Chartered Insurance Institute (CII) has released a guide on income protection for advisers and insurance professionals. AIG Life has increased the maximum age and cover amounts for its Instant Life proposition. Aviva has announced changes to its underwriting questions on COVID-19 and mental health for individual protection applications. L&G has introduced a new Key Person Income Protection plan. Zurich paid out £222m across life insurance, critical illness and income protection during the first half of the year.

an insurer which seems expensive at first might actually have the best price once underwriting has taken place. Partnering with a protection specialist can speed up this understanding. Speaking to advisers, there is little doubt that underwriting rules tightened due to the pandemic. Delays obtaining medical records also increased, which to an extent is to be expected. Positioning this with the client is also advisable, so that any delays do not come as a shock. For new mortgages or product switches, this could mean starting the protection process earlier than usual. Finally remember, if you don’t want to talk to your customers about their health and hobbies, but do want to make sure they have protection in place, partner with a protection specialist adviser firm. M I

Underwriting rules tightened due to the pandemic

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

REVIEW

PROTECTION

Could we fuel a protection boom? Emma Thomson head of protection and GI propositions, Sesame Bankhall Group

eeing the lengthy queues of vehicles waiting ages to buy fuel – and creating unnecessary shortages – demonstrates what can happen when a combination of inflammatory media stories and the ‘fear of missing out’ takes hold over the Great British public. We saw it with the panic over toilet rolls last year, too. What if we could flip this from a negative to a positive? Wouldn’t it be good if that happened with protection – consumers desperate to buy cover,

Keeping the protection fire burning

www.mortgageintroducer.com

because everyone else is and they don’t want to miss out? Maybe that’s where we are going wrong – our statistics often unfortunately highlight how many people don’t have cover, rather than how many do, whereas human beings typically like being part of the norm. The problem is, we can’t tempt consumers by showing they are in the minority, because the sad reality is that most people have either minimal or no cover at all. We are facing statistics such as 87% of mortgage holders not having any income protection (IP), as reported in the Financial Conduct Authority’s (FCA) 2020 Financial Lives Survey. This is a worrying figure for us as professionals, but one that should be

even more concerning for the millions of people whose homes will be at risk should they become ill or injured and therefore unable to keep up their mortgage repayments. What can we do instead? We can make our clients aware of the risks of getting ill or dying before retirement, which can be done in seconds using valuable tools such as LV=’s Risk Reality Calculator. Then we can share the many positive stories about paid claims – people who have been supported financially whilst off work through illness, or children who have been able to stay in their homes after a parent died. Stories are a key part of our armoury in the battle against apathy. I’m an IP, critical illness and private mortgage insurance (PMI) claimant myself, having been diagnosed with breast cancer two years ago. I share my story as I want people to benefit from having a financial safety net like I was able to. Will Shackleton from 1st Mortgage Services and Kate Stratton from Home Mortgage Solutions recently talked about their experiences during Income Protection Awareness Week. Both explained that it’s best to discuss protection at the start of the mortgage process, so that it forms part of the overall advice on how a client can afford the property. The current low mortgage rates mean most customers can reduce their mortgage payments by rate switching, and that extra £50 to £100 saved per month could well be spent on protection cover. So, whether it’s a new mortgage or a remortgage, making protection a priority as an adviser means it’s more likely to be seen as a priority by clients. Sadly, getting hordes of people queuing to buy protection insurance is unlikely to happen. Nevertheless, we can still improve demand, and most importantly the financial resilience of our clients, by having more conversations about how valuable protection can be. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

PROTECTION

If you come at the king, don’t miss Ben Burgess senior adviser, LifeSearch

n 2017 when I started advising, critical illness (CI) was the big boss in the hearts and minds of clients. It was clear to me that people with limited sick pay and savings should be getting behind income protection (IP), but when discussing its merits with clients I would feel like a pilgrim in strange land. Boy, has that changed in this postCOVID landscape. Once looked down upon as CI’s underling, IP has waltzed into the stash house. IP numbers are spiking, so let’s take full advantage. The ease of being able to successfully make a claim, the high amount of conditions you can claim for, multiple claims being no problem, and the many added-value benefits to utilise without even needing to make a claim, all make IP very compelling. Despite all these overwhelming positives, in the past, asking a client to even consider IP was like pulling teeth! Now suddenly, since the pandemic began, I’ve got people routinely ringing up and asking me for a quote. But how did this IP coup d’état occur?

come as part and parcel of an IP policy. Insurers have therefore streamlined the process of paying claims, and more importantly, helped people get well enough to go back to work. In the past, these extras felt like fluff or a means of upselling a client; now they’re essential. A TIMELY PRODUCT

Our Superhero complexes have taken

a massive jolt over the past 18 months. The pandemic swept the rug out from under us in more ways than one and exposed how fragile our bodies and bank accounts are. CI policies undoubtedly have a lot to offer, and for certain clients, these do still fit the bill. However, in the eternal words of The Wire’s Omar Little, played by the late Michael K Williams: “Money ain’t got no owners, only spenders.” IP gives clients the highest chance of putting money back in their pockets. Insurers have made it simple for advisers to sell and clients to claim. The product is selling itself, so start riding the wave, because there’s a new sheriff in town. M I

COST-EFFECTIVE OPTIONS

The implementation of 1, 2 and 5-year claim caps and age costed premiums has made the product dramatically more affordable. Most providers now have their own niche, meaning advisers can find most clients a policy that meets their needs and stays in budget. ADDED VALUE SERVICES

Getting a GP appointment was always a chore, but now it’s like finding a Golden Ticket. Virtual GP services, counselling, and physiotherapy usually

IP gives clients the highest chance of putting money back in their pockets

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

REVIEW

PROTECTION

Opportunities continue to knock Xxxxxxxxxx Mike Allison xxxxxxxxxxxxxxxx, head of protection, xxxxxxxxxxxxxxxx Paradigm Mortgage Services

e all are acutely aware of the trials and tribulations of the past 18 months, but I won’t be the first commentator, or the last, to say that as an industry we haven’t come out of this in too bad a way. I have had the opportunity recently to speak with more Paradigm mortgage and protection firms about the recent past, and it has been quite heartening. Most appear to have been extremely busy, and despite some frustrations with lenders and insurers, they have done a great job for their clients. Helping them move home and ensuring that they are adequately covered for whatever life may throw at them is kind of therapeutic in itself for customers, and hopefully for advisers too, having completed a job well done. However, being involved in a busy and stressful environment, especially if this has been continuous, can make it difficult to get off the treadmill and have a look at what is going on around in the general economy, which drives a huge amount of the activity in our own space. I thought it would be useful to look at the current position on a number of high-level areas, to help identify protection sales opportunities, and where better to start than with what is going on in the mortgage space. The much-publicised stamp duty holiday clearly delivered an injection of pace into our market some time ago, but there are plenty indicators to show that the pace is not slowing down. Market forecasts for 2021 still sit around £275bn, and with the intermediary space buoyant, that bodes www.mortgageintroducer.com

well for everyone. Some lenders are predicting that figure could be above £300bn in 2022, the greatest barrier being stock, not demand. People still want to move or improve their homes, and for those in employment, lenders are keen to lend to them. A recent statistic I picked up confirmed that in September there will have been some £80bn of product transfers (PTs) alone washing through the market, with a further £40bn to come early next year as customers’ fixed terms come to an end for specific tranches from five or two years ago. TRANSFER FRENZY

In some instances, the rates being offered in that transfer frenzy are better than new business rates, which will keep customers, in reality, tied to that bank or lender for a further period. History shows that once a client transfers, they are highly likely to transfer again. From a protection perspective, it will be a rarity if nothing has changed in that household over a five-year stint, and even unlikely in two, so a discussion around that would be warranted. If they have increased the size of their house, for example, or added outbuildings, a general insurance (GI) review would be at least sensible. We know that regular communication and engagement with clients is likely to bring about positive activity when it comes to repeat purchases, and the opposite occurs when communication is lacking. We should not forget, too, that under new price equalisation rules, in the GI market especially, aggregators will no longer be able to tempt clients in using a lower price and relying on future price hikes to drive profitability – this is a great opportunity for brokers, as pricing in the intermediary channel will more closely match that of the aggregators and direct sellers.

Many, including myself, have referred to the furlough scheme as the largest income protection (IP) scheme ever underwritten in the UK. I make no apologies for re-iterating the point. More than 11 million people were paid income at a time when they were unable to work through no fault of their own. Whether you have or have not had clients that have benefitted, everybody will at least be aware of it and the purpose it served. So, the message would be to use this principally in communications or discussions to help people understand the benefit of IP. Continuing the ‘macro’ theme, the perfect storm of Brexit, along with other issues of course, has brought about a situation where employers are finding it increasingly difficult to recruit across a wide range of industries, not just specialist ones. We have seen market forces put wages up considerably in some industries, but it still hasn’t solved the problem. Employers therefore must work extra hard to recruit and retain staff, which is where employee benefits come to the fore. In the protection space, one of these benefits comes from the provision of life, IP or critical illness (CI) through an employee group life arrangement. These are generally inexpensive and tax-efficient for employers, they can make a huge difference in how they are viewed by employees, and the process of implementing them is simple when getting the right support. Paradigm Protect has seen a huge rise in broker activity in this area, with many Paradigm firms writing cases for the first time and many new to market cases. Of course, we have also seen the benefits of the ‘added value’ services associated with these schemes, too, which can support employers in their duty of care as staff return to the office. Overall, there are any number of protection-related opportunities for advisers to explore, and these can provide income generation which should hold for many years as the foundation of your business. Don’t miss the chance to explore and engage with what can be achieved. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

GENERAL INSURANCE

Pricing practices: Pain points and end game Rob Evans CEO, Paymentshield

t the end of May 2021, the Financial Conduct Authority (FCA) published its policy statement and finalised rules from the General Insurance Pricing Practices consultation paper. This new set of rules is aimed at providing better outcomes to customers, and is aimed at businesses such as insurers and distributors who set prices – but Paymentshield has been asked a lot of questions by advisers about how it affects them, too. Our full response can be found on our website, but I thought it appropriate to share a summary here. In October 2019, the FCA declared that the home and motor insurance markets were “not working as intended for customers.” To address this, the consultation paper proposes a number

GI: better outcomes to customers

of changes to ensure these markets work more fairly. Even before the final rules were published in the May 2021 policy statement, Paymentshield was already preparing to meet the expected requirements following the study. Certainly, there will continue to be tough changes we will all have to make in the near future. The ultimate outcome, however, will be a mutual good for insurer, adviser and customer alike, with a renewed focus on proper advice, appropriate products and better protection for the customer. The areas where advisers are likely to see obvious changes when quoting and applying for insurance products from January 2022 are pricing and auto-renewal. Advisers are also likely to see some changes in response to new guidance around what is considered ‘fair value’. PRICE WALKING

The main change will see the industry coming together to tackle the widespread practice of price walking, where products are discounted in the first year, with increases at renewal and in subsequent years. This has now become commonplace, leading to a greater focus on price rather than value, which has ultimately created a race to the bottom. This issue can only be resolved through collective action by the whole insurance community. With advisers operating in a market overrun with aggregators offering heavy discounting, there is a huge amount of pressure on companies such as Paymentshield to ensure the viability of our new business pricing and to give advisers the best possible chance to compete. This is why we welcome this change to a focus on value. Advisers can expect to see new business prices across the wider market

MORTGAGE INTRODUCER OCTOBER 2021

increase, while renewal prices will go down. This means a clearer and fairer proposition to the customer, with Paymentshield’s customers also benefiting from a panel of leading insurers, which helps to keep our pricing competitive. AUTO-RENEWALS

The FCA stopped short of banning auto-renewals outright, which is good news for policyholders, as it reduces the risk of an unwanted insurance lapse that could otherwise lead to disastrous financial consequences – especially for our most vulnerable customers. The removal of switching barriers ahead of renewal will also make it easier for advisers to attract remortgage and product transfer customers with an incumbent insurer. Across the distribution channels in the industry, businesses are going to have to take a hard look at the value of the commission they pay and receive. For example, we have already started to see some big-name providers making major changes, such as dropping trail commission on closed-book portfolios. Distributors such as Paymentshield will be expected to contribute to, understand and respond to the fair value assessment, including annually reviewing products to make sure they are working as expected, and reviewing and amending distribution arrangements. Thankfully, we’re already used to being guided by our own fair value principles, which we’ll continue to evolve to meet the latest FCA guidance, and we welcome the fact that more companies will now need to embrace this way of thinking. We expect that the new rules will really play into the hands of the adviser community. There is no better time to promote a value-led pricing model and harness all of our experience and customer relationships to demonstrate the importance of products that truly meet consumers’ needs. The FCA wants the industry to use the technology, data, analytics and human expertise at our fingertips to continuously improve the customer experience. This is where aggregators cannot compete. M I www.mortgageintroducer.com

REVIEW

GENERAL INSURANCE

Are you asking the right questions? Geoff Hall chairman, Berkeley Alexander

ustomer expectations are at an all-time high. So, when it comes to purchasing general insurance (GI), your clients – whether consumer or commercial – are expecting a fast, personalised, and seamless experience. As an adviser, your first responsibility is always ensuring your clients get the right policy at the right price, and technology alone cannot help you to

step up your due diligence work at a time when knowing your customer is more important than ever. The hard insurance market has tightened insurers’ criteria and risk appetites. In addition, a new industrywide initiative means that for nonresidential buy-to-let (BTL) policies, property owners’ insurers now want more information on the potential risks – particularly relating to cladding and fire risk. From 3 October this year, to obtain a new business or renewal quotation for any property owners’ policies, insurers will be asking us to gather more detailed information on construction, flat roofs, insulation, premises uses, and

Tackling the rising tide of building costs

t will come as no surprise to you, as mortgage experts, that inflation in the cost of building supplies and labour means that building costs – and therefore rebuild sums insured – are on the up, by as much as 14.7% according to the Office for National Statistics (ONS). So too, of course, are insurance premiums. Why? Because they track the Household Rebuilding Cost Index. Rebuild costs fluctuate all the time, of course, but too many policyholders are not aware of changes to the rebuild cost of their property, and are therefore woefully underinsured. I’ll admit I was certainly surprised when I read an estimate recently that suggested that the typical cost to rebuild a three-bed, two-storey, semi-detached home in the UK is now around £243,000, up a whopping 17% from £208,000 in 2020. For homeowners, many are now on ‘notional sum insured’ style policies that give up to between £500,000 to £1m of cover, but of course those www.mortgageintroducer.com

policies still have a rebuild calculation behind them. The premium will be higher for a three-bedroom house than a two-bed on the same street, simply because the cost to rebuild would be higher on the three-bed. Those clients don’t need to worry about the rebuild sum insured, but are likely to see increasing premiums. It is, however, those clients who have a specified sum insured that need to be more aware. This would include your commercial clients, as well as those who hold investment properties that are likely to be on a specified sum insured basis. I would advise that it is best practice for those customers to instigate a professional reassessment every three to five years, and to actively review the retail price-led indexation uplifts applied by insurers in between years. There is a cost for a professional survey or valuation, but the cost would be insignificant against a claim, should it transpire the client is under-insured to the tune of thousands of pounds. M I

other non-standard aspects, particularly when covering commercial or multiproperty portfolios. This means asking more questions – not something you’d expect at a time when we are being encouraged to automate and cut question sets in order to streamline the customer experience. However, with all my years of insurance behind me, I know how vital it has always been to ask the right questions, and automation and reduced question sets don’t change that. If you’re going to secure the right policy at the right price, and protect your clients in the event of a claim, asking the right questions at the outset is vital. M I

Insurance brokers are diversifying

ccording to Aviva, they might just be set to strike. With lucrative hard market conditions expected to be with us for many months, and perhaps years, to come, it is no surprise that insurance brokers who know how profitable this market is are looking to diversify. According to Aviva research, 88% of insurance brokers claim to be seeking alternative sectors and customer groups, with the key focus of their attention being financial services and real estate. Likewise, GlobalData has stated following its 2021 UK Commercial Brokers survey that 74.4% of brokers plan to utilise growth strategies such as upselling, cross-selling, and customer acquisition. As a mortgage broker, you are first to the table, so don’t let the opportunity to head off the competition slip you by. For those who don’t feel that GI sales are part of the proposition you want to offer clients, I urge you to think again. GI is a valuable and renewable source of income. Speak to a GI provider about how we can help ensure you are able to cater for your customers in such turbulent and unpredictable times, and protect and grow your business at the same time.

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

GENERAL INSURANCE

Insurance helps to keep clients loyal James O’Hara commercial director, Ceta Insurance

eptember is usually the month where summer starts to taper into Autumn. For the last month the news has been gloomy, whether its fuel queues, driver shortages or a wobbly economy. Yet, for the non-standard home insurance market, the sun has continued to shine.

In September our broker-led quote volumes are up 22% on the previous month and conversion rates are up 30%. We would have expected a fall at this time of year as the summer sales peak fades. The increase may have been sustained by the stamp duty taper and so the market continues to march onwards despite the Bank of England signalling that a rate rise is likely next year. The estate agent Hamptons have predicted that more homes will be sold in 2021 than in any year since 2007

Complex cases are, more often than not, placed with specialist buy-to-let lenders

MORTGAGE INTRODUCER OCTOBER 2021

and values will rise by up to 3.5% a year between 2022 and 2024. It’s true to say that home and building insurance follows where the housing market leads and policy sales follow on the back of new purchases. However, it’s worthwhile mortgage advisers bearing in mind that there are also areas where the general insurance market can lead mortgage broker business. There are two particular advantages for a mortgage broker to embrace home insurance, aside from its own merits of making sure the client is insured. Firstly arranging a policy for your mortgage client helps you keep in touch and retain them. There is a need to speak to the client every year on renewal rather than at the end of their current mortgage deal. If you’re waiting up to five years to speak to them because your only point of contact is the mortgage, the client’s circumstances may have changed, or they may have been approached by a competitor and rebroked, meaning you may have already lost them. Home insurance gives you a valuable regular contact point. Secondly, it is an important source of reoccurring income that is relatively simple to arrange even if it is nonstandard. That is because non-standard is quick and easy to quote and convert these days. There are no fax machines and four day waits for a quote, it can take a matter of minutes. In our experience it’s possible for brokers to find quotes 95% of the time. According to recent data from the Office for National Statistics, the average UK annual house price growth was still running at 8% in July. While this will fall back to a lower level in the coming months, the housing market continues to see healthy demand. Whether you think this will continue for years to come or whether you see major problems round the corner, one of the best ways to future proof yourself against a drop in either clients or income is by offering home insurance. As the old saying goes, it’s better to mend your roof when the sun is shining, or at least have the number of a good builder! M I www.mortgageintroducer.com

REVIEW

GENERAL INSURANCE

Insurance: From security to scary Lee Denton associate sales director, Source Insurance

or homeowners, home insurance is a safety net, oﬀering peace of mind that their property and belongings are covered, should the worst happen. However, a small accident can quickly become a horror story if your client doesn’t have the right cover.

their insurers of any changes to their property during the policy term, such as:  Renovations which could impact the structure or value of the property  Changes to periods of unoccupancy  Changes to the number of people normally residing at the property If your client needed to claim but hadn’t notified their insurer of any variations to the information provided at the policy inception, the impact could be grim! UNDERINSURANCE

NIGHTMARE SCENARIOS YOU CAN HELP YOUR CLIENTS AVOID

If Stephen King was to write a horror story about insurance, it’d start with “sorry, that’s not covered by your policy.” Those few simple words will send a chill through the bones of anyone when calling their insurer. There are myriad reasons why a claim will be rejected, and some of the most common are: MISSED INFORMATION DURING THE APPLICATION

During the application process, it’s important that your clients provide 100% accurate information, and disclose anything that could alter what the insurer will cover. If important information is omitted, this could lead to the provider not paying a claim due to non-disclosure. In some instances, it could void the insurance policy altogether – frightening! Research by Lexis Nexis showed that 70% of people believed it was acceptable to manipulate their insurance application to find a better deal. It’s unnerving to think that many people believe it’s OK to falsify information for a cheaper quote! NOT INFORMING THE INSURER OF CHANGES

It’s not enough to just provide accurate information at the point of sale. It’s also vital for your clients to inform www.mortgageintroducer.com

Underinsurance has the potential to be more of a nightmare than Elm Street, leaving your client out of pocket. Contents can easily be underinsured, as there is often a minimum cover value for contents insurance, which policyholders may automatically assume is enough. However, they mustn’t underinsure their possessions, and in particular, they’ll need to declare any high risk and high value items. If your client undervalues their contents and needs to claim, the insurer will likely only pay out a percentage of the total value. The rebuild value is also often incorrectly stated, so it’s important that you and your client consider this carefully and use the tools available, to ensure an accurate figure. HOW CAN YOU AVOID UNDERINSURANCE?

By providing your clients with clear guidance, you can help ensure they have adequate coverage. There are also tools and methods that you can use to help determine accurate cover levels, such as: BUILDINGS

Use the BICS rebuild calculator, which is fully integrated into the Source quotation platform, to help determine the true rebuild cost. Look for insurers which use a bedroom-based building sum insured,

as this will have been carefully calculated based on their years of experience. And it doesn’t matter whether they sleep in a bed or a coﬃn! CONTENTS

Go through each room of the client’s home and estimate the value of all of their belongings. In particular, make sure to highlight any high-value items, which will need to be disclosed. However, it’s important not to over-insure, as they’ll be overpaying for insurance and will never recover those overpayments. TREAT YOUR CUSTOMERS

When customers are unsure of the process, they will value expert support and advice in order to help them feel that they’ve chosen the right policy for their needs. To some, insurance can be a minefield. Policies tend to contain a lot of terms – often deemed ‘jargon’ – that can easily confuse people and are designed to trick them. However, with your guidance, you can help them see that insurance can be a treat. Take them through the quote – guide your client through each stage and help them understand the importance of accurate information. Reassure them of their coverage – once you’ve completed their quotation, go back through the levels of cover they’ve chosen. Enable them to select their policy – help your client to assemble their product, but with you as their guide throughout. Answer their questions – your client is bound to have uncertainty around the process, so use your experience to give them confidence. Talk to your client – your role doesn’t end when the policy goes live. Be sure to diarise your client’s renewal date and reach out to review their coverage every year. M I

OCTOBER 2021

MORTGAGE INTRODUCER

Introducing Pure’s new Emerald range

with high LTVs across our product range • High LTVs up to 57.5% available • ERC free repayments up to 12% • 4% cashback available

Emerald Range Discover Emerald at www.pureretirement.co.uk/professionals/product-emerald/ Company registered in England and Wales No. 7240896. Pure Retirement Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 582621.

REVIEW

EQUITY RELEASE

If in doubt, get an expert Stuart Wilson CEO, Air Group

he debate around the funding of social care in the UK feels like it has been ongoing since Noah was a boy. Numerous governments of numerous hues over numerous decades have effectively punted this one into the long grass, wary of the complexity and the potential to lose political capital if they ended up choosing a deeply unpopular solution. This has been exacerbated by the fact there is no perfect solution that suits everybody. Essentially the status quo has persisted because no-one quite had the political will, or gumption, to tackle these difficult problems, put off no doubt by the pushback that has been exhibited in the past whenever a potential solution was discussed. And perhaps no wonder given the enormity of the problem. How can the State sustainably continue to fund adult social care in a country where the need is ever greater and the number of people with that need continues to grow? Whatever solution was chosen, it was going to be met with some disapproval but this government, by basing its recently-announced measures on the recommendations of the independent Dilnot Commission – of 2011 I might add – has effectively chosen to put its faith in their expertise and who would blame them for that. The fact it has taken 10 years to get from Dilnot to here will not go unnoticed but this Government deserves plenty of praise for making a decision when so many administrations chose not to. Of course, there are no easy solutions here, and the criticism has already come thick and fast in terms of who actually ends up funding these measures, and whether younger, www.mortgageintroducer.com

working-aged people should be doing most of the heavy lifting, and whether the wealthier in our society are getting more out of this than those further down the income chain. Again, I make no judgement here except to say that, in my view, the whole issue of care and care funding is incredibly complicated and, this is particularly pertinent for later life advisers. If you are working with clients around their care funding then you certainly need to be ultra-careful, and you undoubtedly need to be using the services of a specialist in this area. We have long had a very strong relationship with My Care Consultant who are without doubt experts. They who work with people to guide them through the care system and to ensure they are getting the right outcomes

“There are some serious considerations here for every single client who might be looking at a later life solution to help with those care funding requirements” in a part of the market which has the potential to throw up plenty of obstacles to overcome in so many areas. In the equity release market, we talk a lot about what equity release might be utilised for, and one of the ‘problems’ we believe can be solved is in terms of long-term/social care funding. However, wanting to raise money to go into a care home or to receive domiciliary care at home is just the start of the conversation and this is a potential minefield for all advisers who are not specialists. The new measures, when they are introduced in October 2023, might well provide more ‘financial’ simplicity in terms of the £86k cap being introduced on the amount anyone in England will need to spend on their personal care through their lifetime. However, the

jury remains out on whether it is a true cap and it will not necessarily make the route through to that care any less tricky, and of course, it’s not going to apply to anyone currently in care or those who need it between now and that date. There are some serious considerations here for every single client who might be looking at a later life solution to help with those care funding requirements, not least the situation when it comes to State benefits, but also in terms of access to Local Authority care, eligibility, etc. The last thing a later life adviser wants to be doing is straying into such territory, recommending a product and inadvertently making the client worse off. Again, it’s important to stress the need for specialist support in this area because, with all due respect, the chances of you being both a later life funding expert and one on care are pretty close to zero. In a way, regardless of the route the Government has chosen – and I suspect there were few other credible options to available to them – the recent media headlines and the commentary generated by the decision, have effectively put this very important issue back on the agenda. Hopefully, it has encouraged many more people to think about how they are going to fund their care in the future and has set in train a move towards individuals accessing the professional advice they need in order to get the right outcomes for them and what they might need to do financially to meet them. Again, for advisers the important point is not to try and fudge this, or to make it up as you go along. If you are not an expert, then forward the client onto those that are so they can be assessed and then when you have that assessment you can begin to look at what might need to be put in place financially. By working as specialists together you have a much better chance of getting a very difficult process right first time. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

EQUITY RELEASE

Solving the care conundrum Alice Watson Xxxxxxxxxx head of marketing and communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx

ith the retirement phase now lasting longer, the majority of us will have to pay for care, whether for ourselves or for loved ones, but twofifths of over-60s haven’t planned how they will pay for care. With increased life expectancy already stretching the sector, the pandemic has put added pressure on the social care system, prompting over-60s to rethink their long-term plans. Our own research found that 1.5 million who were previously open to care homes for themselves or family

members now wouldn’t consider it. Instead, 22% are looking to pay for care at home. With the average cost of a care home estimated at between £600 and £800 per week, funding will be a challenge for the majority. As such, the government is overhauling the way people pay for later life care. From October 2023, there will be a lifetime cap of £86,000, after which people will not have to fund their own care. However, this amount doesn’t include all daily living costs, and it’s likely that many will still need to contribute. Ros Altmann recently told The Observer that by the time people reached the cap, some would probably have spent £150,000 or more. Later life lending has become increasingly popular as a method to pay for care, thanks to the flexibility and

certainty it provides, allowing people to access the wealth stored in their homes. Equity release enables those aged 65 and over to age in place, while accessing the cash they need to fund care. Similarly, it allows them to fund any home improvements or adaptations to suit their evolving needs in later life. We need to get people thinking about their wants and needs in the different phases of retirement, and have these conversations early on. We must highlight how property wealth can meet the needs of an ageing population. The market continues to evolve, and there is a growing number of flexible solutions available to help customers looking to unlock the equity stored in their homes. Ultimately, as the shape of retirement continues to change, financial advisers have an important role to play. M I

MORTGAGE INTRODUCER

OCTOBER 2021

www.mortgageintroducer.com

REVIEW

EQUITY RELEASE

Easing the cost of social care Claire Barker managing director, Equilaw

ith the impact of the pandemic continuing to place unprecedented pressure on the provision of health and social care services in the UK, the government has announced proposals designed to modernise existing structures and shake up funding, with overall costs to be met by a 1.25% increase in National Insurance contributions and dividend tax. The levy is expected to raise up to £36bn over the next three years, with £5.4bn earmarked for social care reform. While some aspects of the scheme have yet to be finalised, many campaigners and commentators believe that the changes will allow retirees to manage their assets and retirement costs more effectively, encouraging people to plan for the future without fear of incurring unknown care fees at a later date. The proposals will also offer a number of potential positives for the equity release sector, with the cap on costs allowing borrowers to use their property wealth to fund retirements rather than to pay for care charges. In order to understand why these reforms are so vital, we will need to begin – as Dylan Thomas would have it – at the beginning. Under current rules, people with assets or savings worth more than £23,250 are obliged to shoulder the full weight of care charges, with those requiring long-term assistance – such as people suffering from dementia or chronic heart conditions – often compelled to sell their homes in order to cover the high fees associated with residential accommodation. Indeed, LaingBuisson recently estimated that the average cost of care homes in the UK currently stands at £672 per week, or £34,944 a year, while fees for nursing homes – which

www.mortgageintroducer.com

offer round the clock care – are £940 per week or £48,724 per year, an incredible figure. The research has also found that self-funders, or those with assets that exceed the £23,250 threshold, are typically charged over 30% more in fees than those paid by local authorities, despite receiving identical services, while regional differences can also impact spectacularly on costs. Average fees in Scotland are over £300 higher per week than those in Northern Ireland – £858 versus £551 – while fees in London or the South East are almost £300 higher than in the North West – £840 versus £562 – reducing this to a postcode lottery that can differ radically from one county or local authority to another. SPIRALLING COSTS

With this in mind, it should come as little surprise to learn that the government has estimated that as many as one in seven people aged 65 or over will spend over £100,000 on care during their lifetime under current rules, with spiralling costs having already pushed that figure from one in 10 in 2011 – a truly depressing statistic. This goes some way towards explaining why the new reforms have been greeted so warmly. Indeed, under the proposals, social care costs will be capped at £86,000 from October 2023 onwards, meaning that any amount that exceeds this limit will be paid for by the government. The policy will also raise the asset threshold to a total of £100,000, thereby pushing the limit at which people are expected to self-finance by a substantial £76,750. This means that those with assets of £20,000 or less will pay nothing towards social care – barring contributions from any income or the need to move into a care home – while those with assets of between £20,000 and £100,000 will be offered some means tested support. Crucially, the government will also introduce legislation to prevent care providers from charging higher fees

for self-funders, effectively reducing the cost of services in many cases – a crucial piece of the puzzle. Nevertheless, while there is much to admire in the proposals, there are also some caveats to be considered, with the exclusion of daily living costs – such as food and accommodation – drawing much in the way of criticism. For example, board and lodging charges can account for up to a third of residential care home fees at the present time, or almost £12,000 per year for a person paying average fees of £35,000. So, this is not an inconsiderable sum, and could leave many people facing sizeable hidden fees – although it remains to be seen if the government will make any provision for these charges in the future. However, while some doubts remain as to the ultimate shape of these proposals, they also raise a number of possible scenarios in which equity release could be used to mitigate or to pre-empt potential areas of concern. For example, some experts have suggested that equity release could be used to cover the fees that are excluded from the cap, possibly alongside state pensions or other welfare benefits. Others, such as Jim Boyd, chief executive of the Equity Release Council (ERC), have pointed to the use of equity release in modifying existing homes, and through this method allaying the need for residential care in the first place. Indeed, research by the ERC has found that 67% of people aged 50 and above are determined to receive care at home in the future. There is little doubt that equity release can be instrumental in facilitating these preferences. Furthermore, the report also revealed that almost 50% of those surveyed believe that everyone should have access to state funded care, with the option to top this up from their own funds. If attitudes like this continue to grow, then the equity release sector could have a very big role to play in easing the cost of social care over the coming decades. M I

OCTOBER 2021 MORTGAGE INTRODUCER

REVIEW

CONVEYANCING

Government needs to incentivise buying Xxxxxxxxxx Mark Snape managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Broker Conveyancing

s I write, we are currently seeing something of an ‘Indian summer’ in terms of unseasonably good weather, although by the time you read this Autumn will be in full effect, and we could be back to normality. That phrase has been bandied about a lot lately, not least because – from a mortgage and housing market point of view – October has seen England go back to the future with a return to preJuly 2020 levels of stamp duty. Of course, in other parts of the country the land tax rates have been back to normal for some months, but England’s bigger market was given a period to allow those transactions not completed before the end of June to work their way through the system. So, what are we to make of the last 15 months, and can the holiday be judged a rip-roaring success? Well, there’s no doubt that it acted as a significant catalyst for activity, even on top of the demand that was already unleashed following the first lockdown. According to recent figures from Knight Frank, in Q2 this year – which coincided with the end of the full stamp duty holiday in June – the government received £2.06bn of taxation from residential stamp duty, with £485m of that coming from the purchase of additional properties; for example, landlord and second home purchases made up almost a quarter. A PERMANENT INCENTIVE?

The overall figures for last three quarters make particularly interesting reading, not least within the context of calls for this holiday to be permanent.

Now, you might think, there are always calls for stamp duty holidays to be extended or for the tax to be consigned to history once and for all. The assumption is that this would give a full-time boost to activity levels, and that the overall economy would benefit considerably for a longer time. However, I’m sure politicians and HM Treasury will be looking at the recent figures and wondering if that would really be the outcome.

“With one purchase you are talking about income being generated for any number of professional services, such as agents, advisers, lenders, conveyancers, removals” For example, in 2019 – the last full year pre-pandemic – when there was no stamp duty holiday, we see the stamp duty take being higher than that of the corresponding quarter through 2020 and 2021, except Q1 2020, which had a slightly better take than Q1 2019. From this, you might actually argue that the government has got it right in terms of stamp duty levels, because in a ‘normal’ environment, it is maximising the tax it receives. I’m not so sure, however, because what the stamp duty statistics are not showing is the increase in transaction numbers and activity since the announcement of the incentive. STIMULATING THE MARKET

As we know, UK plc relies on the housing market a lot. This goes beyond just stamp duty – which even with the holiday has clearly held up very well – and includes all manner of other activity generated by the market.

MORTGAGE INTRODUCER OCTOBER 2021

With one purchase, income is being generated for any number of professional services, such as estate agents, advisers, lenders, conveyancers, removals, etcetera. With every house purchase also comes a degree of retail spend that you would otherwise not get – with buyers kitting out new properties – plus work for plumbers, decorators, electricians and any other trades reliant on the housing market. It is impossible to over-estimate just how important a completed housing sale is within our economy, and therefore if you focus on improving the number of transactions every year, you’ll get this economic benefit as well as a growing tax take. This past 15 months should give the government plenty of data to work with on what might be possible with stamp duty. It’s highly unlikely that it will banish it to taxation heaven completely, but there might well be a sweet spot that gets the State the tax it requires and helps push transactions ever higher. This year, the number of transactions is likely to break the 1.5 million barrier, perhaps even by some margin. While this might be due to unique circumstances – and a lot of activity is going to depend on more supply coming to market – there is the potential to make such numbers a more regular occurrence. More transactions are undoubtedly going to support the work of advisers – the mortgage market is ever more complicated, and advice is needed now more than ever before. With that business comes ancillary opportunities such as in conveyancing, protection and the like, so it makes good business sense for many within the intermediary community to be seeking out an environment that allows more people to transact. In the case of stamp duty, going back to normality may give us all a little respite after what has been a very busy period, but a longer-term decision – which helps incentivise people to purchase permanently – is likely to work in all our favours for a long time to come. It is a measure the government should explore before the next Budget. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

Brokers and borrowers benefit Xxxxxxxxxx Karen Rodrigues sales director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx eConveyancer

here is a real price war going on within the remortgage market at the moment. Every week we see announcements from lenders, large and small, of price cuts or criteria tweaks to their remortgage range, aimed at making their products even more appealing. Nevertheless, for all of the talk of 2021 purchase activity levels setting new records off the back of the stamp duty holiday, in reality it’s in the remortgage market where case numbers are truly noteworthy. The months ahead are due to see incredible numbers of mortgage cases reaching maturity, making those borrowers ripe for discussing a remortgage. The exact size of this tranche of cases varies depending on who you speak to, from £29bn to £40bn, but even at the lower end that’s an enormous number of potential clients who would benefit from shifting away from their existing deal once they move onto the standard variable rate (SVR). A SLICE OF THE PIE

That’s precisely why lenders are adopting quite such a competitive attitude at the moment. They realise that there is a large chunk of potential business on the horizon, and they want to help themselves to a sizeable portion. Little wonder, then, that we have seen a succession of product launches featuring interest rates at – or close to – record lows, the cutting of product fees, and adaptations to lending criteria to attempt to make their products stand out from the crowd. This is excellent news for proactive brokers and their clients. We know that the best brokers like to contact their clients months before the maturity date, to open that refinancing www.mortgageintroducer.com

conversation in good time. Their clients will rarely have had such a wide range of attractive deals to choose from. Of course, when a client is nearing the end of their initial deal, then a remortgage isn’t the only option – they might also want to consider a product transfer. There are some obvious benefits to product transfers, not least the fact that – as the client is remaining with the same lender – there is no need to go through the full underwriting process again. This is always going to be a selling point for clients whose finances have taken a hit over the past year. This can also mean the process is a more rapid one than a remortgage, which helps if the client is up against a tight deadline. PRODUCT TRANSFERS AREN’T ALWAYS THE ANSWER

Product transfers, however, are not always as good as they look. In terms of speed, by working with the right conveyancers, there’s no reason why a remortgage deal cannot compete with product transfers. We have shown this with our Rapid Remortgage service, which has seen some cases turn around in as little as four days. Brokers will know only too well that the way lenders approach pricing their product transfers can be incredibly varied, too. While some will offer rates that are comparable to their best remortgage deals, in other cases a product transfer is far from the best rate around. This difference is only being exacerbated by the ongoing remortgage price war; it’s not unusual for there to be a substantial difference in cost now for some clients, between going for a cheap remortgage deal or taking the product transfer route. As a result, it’s vital for brokers to think carefully about the businesses they partner with. It’s one thing to find a decent remortgage product for your client, but completing the deal swiftly – in a timescale comparable with a product

Competition is no bad thing

transfer – is not possible with everyone. Working with the right legal partners can ensure that the case is concluded swiftly, ensuring your client benefits from their competitive new rate as quickly as possible. BENEFITING FROM THE PRICE WAR

Competition is no bad thing, and the fact that lenders are battling for a share of the significant number of remortgage deals approaching maturity is excellent news for borrowers whose products are nearing expiry. Brokers have a vital role to play in highlighting the competitive nature of the market to those clients, so that they understand why it’s important to get ready to refinance in a timely fashion ahead of that maturity date. What’s more, brokers who continue to highlight the perks offered by a remortgage, even if the client has a small deadline to beat before moving onto the SVR, can ensure that their clients benefit from this price war and secure the best deal around, and not simply the quickest. M I

OCTOBER 2021 MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS HGV Drivers: Like brokers they need new blood

L THE

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

THE THE

AND THE

MORTGAGE INTRODUCER OCTOBER 2021

his monthly diatribe of mine normally nails over a dozen judiciously chosen miscreants and marvels. But this month I only have a handful as the FCA are once again confounding me

in depth. Most mortgage brokers amongst readers will either know a local IFA or better still, might already be co-authorised as one. Over the years there has almost been an umbilical cord linking the two, even if my own view is that many IFAs look down their fauxintellectual noses at mortgage brokers! For they can occasionally patronise them as being the www.mortgageintroducer.com

sector’s great unwashed (despite the fact that their own sector’s negligences have seen their own brethren’s FSCS liabilities far out-deluge those of mortgage brokers!). And let’s be perfectly frank... for all their posturing and “playing” at being fund managers by proxy, many IFA’s own stock selections couldn’t outperform that famous monkey in Sweden who threw darts at an investment board and beat the so-called experts. Anyway, I digress. And they are obviously all not of this ilk. My point is that the FCA’s various “signposting” on it’s future strategic planning and enforcement behaviours in our world is often preceded by diktats issued in the parallel universe of IFAs. The potential read across last week from the FCA’s director of consumer investments, Debbie Gupta, was therefore utterly alarming. I’ll spare you the full sermon. But essentially the FCA is suggesting that the smaller (IFA) DA firms carry a greater solvency and advice risk to consumers than their larger network based counterparts. Unbelievable, isn’t it? Here we are, barely a decade on from the collapse of charlatan business models such as Network Data, Honister, and Mortgage Times (to name but three!) and Groundhog Day is here again. To which end I have asked one of the industry’s leading practitioners and independent thinkers to write you folks a piece on this gross misconception. Watch out for it coming shortly to this publication. There’s still space left here for what Match of the Day adroitly labels as being “2 Good/2 Bad”. Bad. The government’s appalling handling of the fuel crisis (a classic piece of Bo Jo complacency after his over-triumphalist Cabinet re-shuffle). I‘ll come to the “Blame Brexit” losers in a second. For whilst it’s now apparent that the hysteria which largely gripped swathes of the South East (where let’s face it, the majority of this country’s selfish and rude go-getters live and drive!) was sourced from a malcontented civil servant leaking what was then a minor concern to the press, the government took too long to get off its overweight ass. Also, ass-parked on the naughty step in September was Facebook and its truculent Mark Zuckerberg. Still no acknowledgement that the gross excesses of social media can be harmful for our youth, all whilst his and the

→

Bonuses: Follow the money

other FANG titans pay a modicum of tax. Thankfully the month also had two causes for optimism. Not only will October be a £40bn month for refinances, but January 2022 will exceed even this figure. Seemingly, 60% of deals initially done by a broker are then poached by the lender. Brokers who allow that to happen deserve what they get and in the immortal words of two famous Catherine Tate characters are just “lazy b*stards”!! The month also finally saw the World’s greatest ever footballer announce his arrival at the petro-dollar vulgarity that is PSG. His employer’s warts aside, his finish in the petrodollar derby with Oilchester Citey was sublime and a reminder to that narcissist Ronaldo at Old Trafford that he isn’t fit to lace Messi’s boots. And in completely separate news, the light aircraft flying over Manchester supporting → OCTOBER 2021 MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS

IFAs: So called experts

the rightly topical cause of abused women appeared to have taken a break. Next month we will see if the bed- wetting Remoaners of 2016 are blaming their early season flu, leaves on the track, their teenagers’ lousy exam results, and any inclement weather on Brexit! (As they do the fuel crisis, perhaps oblivious to the fact that petrol stations ran

far dryer in 2000 when you guessed it, there were problems with HGV drivers and the haulage community). In case readers forgot, the year 2000 was the UK’s 28th year as part of the EU’s fake little club which ultimately saw UK taxpayers pay over half a TRILLION pounds to be told what laws they could pass. Memo to the increasingly Trotskyite Daily Mirror whilst we are at it… These present food chain challenges are GLOBAL, and not the work of fascist and privately educated Tories; Each of China, Germany and Taiwan have admitted such in the last seven days! As for the HGV driver community, the parallel with our industry is ironic… There is quite simply too few new entrants replacing the thousands who are retiring Next month we’ll assess see how lenders are behaving in the wake of furlough finishing, and as ever the pricing on their product ranges will reflect precisely what their risk appetite is for next year. Right now, these omens are propitious not least because once a right group of bankers gets used to earning a bonus of X in one year, they don’t often want to see that regress to Y in the succeeding year. For as Deep Throat once said to Bob Redford in All The President’s Men, “follow the money!” M I

Poached business: Lazy b**tards

MORTGAGE INTRODUCER

OCTOBER 2021

www.mortgageintroducer.com

INTERVIEW

AIR GROUP

Making a move Jake Carter speaks to Stuart Wilson and Jon Tweed of Air Group on the move from equity release to the full later life market, the importance of tech, and the green movement

ir Group is a later life services platform and includes a number of propositions for advisers active in the later life market, including Air Mortgage Club, Air Sourcing and the Air Later Life Academy. The group provides training for advisers’ later life business development, as well as access to the entire range of later life product options via Air Sourcing. The Later Life Academy offers structured CPD and accredited training around a variety of core topics, ensuring a solid foundation of knowledge with which to advise clients. Air Mortgage Club pays out over £1.5m in additional commission to it members each year, and has partnered with providers in the later life market to offer products, market news and training. Having originally joined as a consultant in 2020, in February 2021 Jon Tweed was appointed group distribution director at Air Group. He explains that he has worked with Stuart Wilson, chief executive of Air Group, for close to 15 years. He says: “Stuart’s and Air Group’s mantra has always been about working together. And this is something important to me and the way I like to work.” Tweed adds that his and Wilson’s approach is to push the market forward through innovation, which plays into his recent change of position. He adds: “Our work is all about sustainability and making the market sustainable overall, and Stuart and I are completely on the same page with this.” LISTEN AND LEARN Looking to the expanded proposition Air Group offers, and its overall plans for the future, Wilson says: “We are innovators, we have created and built things that were the first to the market. “The market is growing up, we left infancy a few years ago, and for the last couple we have been in the awkward teenage years – now we are pushing on into adulthood. “So now there is more of a focus on standards and customer service, as well as technology and the environment.”

MORTGAGE INTRODUCER OCTOBER 2021

Stuart Wilson

Jon Tweed

Wilson goes onto express the importance of the Academy in improving customer outcomes, through instilling the knowledge in the next generation. Tweed says that the Club – and the market as a whole – has been on a journey over the past few years, and that it is now beginning to fulfil its potential. He adds: “We are now in the position to be able to help our members through training and providing information, which then has a knock-on effect by upping the quality of the market and improving customer outcomes.” Listening to what Air Group’s membership is saying is an essential part of improving standards. Tweed says: “This is something Stuart and I are in sync with, and is fundamental to improving and expanding our proposition.” Wilson adds: “God gave us two ears and one mouth and we try to use them in that order with the proposition, so we listen twice as much as we speak.” EXPANDING PROPOSITION Air Group has switched from focusing solely on equity release to branching out into the full later life lending market. Wilson says: “It is a direction of travel which is right for consumers. You don’t go to a doctor and say, ‘I have a bad knee, I’m in a lot of pain’, and the www.mortgageintroducer.com

INTERVIEW

AIR GROUP doctor replies, ‘Sorry I only deal with elbows’. Yet, as advisers this is what we have historically done.” The consumer’s perspective is that they want to raise money; how they do this is down to the adviser to piece together, rather than steering them down one particular route, explains Wilson. “If you as an adviser are handing out cards to customers that say, ‘equity release specialist’, you are prejudging the needs that they will have,” he says. Wilson believes that in being pigeonholed within equity release, advisers narrow down their offering. He believes advisers within this space should instead call themselves ‘later life specialists’. He adds: “There is no need to shorten your audience, the consumers’ needs are the same, it is just about what option suits them best.” In order to avoid a ‘computer says no’ mentality, Wilson believes that advisers must offer plenty of options to consumers to help them with their individual needs. The overall perspective an adviser takes must be based on all the possible solutions, rather than trying to fit customers into boxes, agrees Tweed. “This is a massive part of what we do at Air Group, and something that we intend to expand on and improve,” says Tweed. “There are a lot of customers looking at their potential options in this current market, with the intention to help their children onto the property ladder, and they want a variety of solutions available.” TECHNOLOGICAL PROCESSES Wilson stresses the importance of technology, and its increased use and implementation by the business, in particular since the initial onset of the pandemic. However, this is not a recent step for Air Group, but rather a continuation. He says: “When I first set up Air Group in 2007 we were able to do end-to-end processing and applications online. Here we are in 2021, and we are yet to see a single lifetime lender offer end-to-end processing.” Wilson explains that the process is actually simpler in this area of the market, as the client is being underwritten on the property rather than their income and various other factors. Without the technology in place, he says that the process can be “clunky, manual and inefficient.” He adds: “Efficiency always ends up with the customer paying less cost; if as a sector we are inefficient, then it means the customer is paying more than they would otherwise. Spin that round the other way, if we could change the efficiency of the process, then advisers can deliver better value to their customers.” As the later life market continues to expand, Wilson believes the investment in technology will grow, but overall more needs to be done in order to push this market forward. As there are various new sourcing systems coming onto the market, technology has become cheaper, because there are existing models www.mortgageintroducer.com

to work from, whereas building them in the first place is costly. Air Group has taken the position of leading from the front in this regard. “We have over 30% market share and growing, and as a result it is easier for competitors to see what we are doing in this space and build their own systems based on ours,” says Wilson. “It is always very costly to be the first, it is far cheaper to be the second and third, but if you are first, you have the momentum to keep yourself in that position.” As part of this ongoing approach to improving its processes, Wilson explains that Air Group undertook 156 updates to its systems last year – this is particularly impressive when considering that tech giants such as Apple will likely only undertake a handful a year. GREEN FUTURES Just as the onward march of technology is an integral part of the future of many markets, so is the question of climate change and green finance. Combining the two issues, Air Group is cutting down on the amount of paper it uses. Wilson says: “As part of the improvements to and furthering of technology, this largely removes paper from the process.” The Air Group team is also being incentivised to use more environmentally-friendly transport, and the business is installing charge points at its offices in order to encourage the use of electric cars. Although the business has not forgotten the importance of face-to-face meetings and retaining personal interactions, Tweed explains that these are not always necessary. He says: “Where possible, in order to reduce carbon emissions, we are happy to conduct meetings and have interactions over Zoom, as this is still an efficient tool to use.” Tweed explains that advisers have welcomed the switch to Zoom meetings since March 2020, and as a result, have proven that this method can still be highly effective. Looking to the future, Wilson explains this is an ongoing process, with more developments on the horizon for Air Group. He adds: “We also have our rewards programme, which we are in the process of reviewing. “We will be announcing a series of environmentally friendly incentives designed to reduce the carbon footprint soon. “Another example of our environmentally friendly push is that we are using recyclable items at the events and expos that we are attending, rather than adding to the mass amount of non-recyclable plastics that we see everywhere.” Overall, Air Group’s core goals when looking ahead are to further its technological processes, which in turn will benefit its push to improve the environment and, finally, benefit the customer experience. M I OCTOBER 2021 MORTGAGE INTRODUCER

LOAN INTRODUCER

SPOTLIGHT

It’s time to talk about f Loan Introducer chats to Paul McGerrigan, CEO at Loan.co.uk, about his campaign to help second charge clients, who he believes are paying £30m more in fees a year than they should You recently started a campaign about fees in the second charge market, what’s it about? Simply put, fees are too high. The second charge market and products have moved on massively in the past 10 years, but many brokers are still operating with an outdated mindset. As an industry, we should look at the fees being charged and be embarrassed. We’re responsible for making sure our clients get the best advice, coupled with a high value service, but that’s in danger of not happening while we avoid talking about the fees, and that needs to change. Will firms willingly lower their fees? Not to any meaningful level, without being forced. There are fantastic people and organisations across the mortgage and second charge industries – lenders and brokers – which have been around for a long time, but so has this issue and no one has addressed it. Our collective responsibility is to provide thorough and comprehensive financial advice, which represents value for money to our clients – fees of 10%-plus don’t meet this definition. Lower fees will happen three ways: 1) The Financial Conduct Authority (FCA) will enforce it – possibly with redress to consumers. 2) Lenders will get together and cap the fees being charged. I have spoken to several lenders, which all want to address excessive fees, but no one wants to make the first move and potentially have a drop in volume. 3) The companies introducing business to the high fee charging brokers will start to put their clients first, rather than their pockets. Can a second charge firm be profitable without high fees? Yes, and if they can’t then they probably shouldn’t be in business. I am not saying fees can be as low as the

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

SECOND OPINION

t fees first charge mortgage industry – they can’t currently, as there are more costs involved in the process, and brokers must pick up all the costs from applications that don’t proceed. That said, technology currently makes it possible for you to be far more productive than you were 10 years ago. I believe fees could – and should – be less than 5%, which would be under half of what they currently are within most of the market. Brokers should win business on their efficiencies, their level of service and advice, not the fact they can buy business in and cover over cracks by charging clients excessive fees. Is this an area the Financial Conduct Authority will crack down on? The FCA is already looking at this area, but I think it also expects firms – including lenders – to take the responsibility and work on areas such as fees. Introducers and companies which refer their clients to the high fee chargers have a choice, and they need to exercise caution in whom they partner with and how they treat their clients. We are a service industry giving financial advice. Introducers, mortgage brokers, networks, lenders and comparison websites cannot hide behind the fact that they are not directly charging the excessive fees themselves, when they are facilitating it as part of the consumer journey. Eventually, the FCA will impose caps on fee charging if the industry doesn’t take responsibility itself. This will be a missed opportunity to show the regulator – and the market – that this could be a mainstream product. What will happen if firms do not reduce fees? The sector won’t thrive, as many mortgage advisers and independent financial advisers will continue to ignore second charges as a viable option in their advice portfolio for their clients. Ultimately, clients will continue to pay, and many who get a second charge mortgage will pay too much for it through high charging brokers. Those who need it but don’t get offered it will miss out, with a less suitable product or no product at all. M I www.mortgageintroducer.com

Norton Home Loans helps Right-to-Buy customers with real life backgrounds. 100% of discount price plus fees available RTB with historic adverse credit Any construction type Flats considered Simon Mules

director, Applicants not oncommercial Section Optimum Credit 125 can be added

Tired of tick boxes? Come work with us. 01709 441926 Marie Grundy

sales director, www.nortonhomeloans.co.uk West One Loans

THIS INFORMATION IS FOR INTERMEDIARIES ONLY AND SHOULD NOT BE DISTRIBUTED TO POTENTIAL BORROWERS.

OCTOBER 2021 MORTGAGE INTRODUCER

LOAN INTRODUCER

SECOND CHARGE

Knowing the options Steve Brilus chief executive officer,, Evolution Money

ith the stamp duty holiday period now fully over in England, there may be some within (and outside) the mortgage market who believe ‘the race is run’ in terms of purchase activity. Part of the reason why the Government introduced its partial holiday for three months was to try to mitigate against that cliff-edge drop in transaction numbers and the early signs appear positive in that activity appears to be holding up. STRONG DEMAND

Of course, there was a drop off in July compared to June – there was always going to be – but August’s figures were strong, and we anticipate September will be stronger and the demand appears to still be there. The big question is whether supply can hold up sufficiently to allow that demand to be processed and it is the supply-side issues of the UK market which will fundamentally impact on the activity levels we all see. Supply, or rather under-supply, has shaped our market for decades and that will not change anytime soon. Those anticipating a drop in house prices for example might want to assess whether that will truly be the case when demand continues to outweigh supply. Constraints on supply however will play a role in all sectors, not least that for the second-charge market. Those who might wish to move home in the months ahead are likely to find a market where supply is short and demand for those available properties is high. What if, as a potential purchaser, you conduct your Rightmove or Zoopla search and it brings up just a handful of potential options within your price www.mortgageintroducer.com

range and your requirements? What if, due to the increase in house prices over the last year, you simply can’t get the increased space for your money that you anticipated? You might be willing to look further afield now – especially if you are not constrained by a regular commute, for example – but for the vast majority of people, that’s not going to be an option.

“Just as the first-charge market is ultra-competitive for those that qualify, the second-charge sector also has good product options and keen pricing” Most will be either looking in the same locale and recognising that, just because their home has gone up in value, it doesn’t mean it pushes them into a price zone where they can afford that extra bedroom/bigger garden/ office area that they’d hoped to secure. So, what are the options? Well, if you’re local area is anything like mine, the solutions to that problem are evident everywhere. When the ‘race for space’ can’t even get started, you might need to open up that space within your own home, and therefore we are seeing a raft of home renovations and upgrades being completed to properties in order to get them just right for that new work/life balance. EXCELLENT OPTION

The big question then becomes how you fund these home improvements and this is where a second-charge can be an excellent option for many borrowers. Let’s not misunderstand the situation, first-charge mortgage finance is readily available. Lenders want to lend, they have the funds to do this, and the competition is fierce, but a first-charge remortgage or further advance simply isn’t an option

for every borrower, and the need for funding doesn’t go away just because they can’t access a traditional bank or building society loan. What if the borrower has only recently remortgaged and they don’t want to pay an ERC to do so again for more money? What if their affordability assessment doesn’t match up to what lenders want? What if their credit situation has changed over the pandemic? What if they are not a ‘prime borrower’ that the mainstream first-charge mortgage lenders appear to be looking at exclusively? What if they need their money within a much quicker timescale or indeed they want to pay off some debts along with carrying out the work to the house? THE RIGHT PRODUCTS

All these, and many more situations, are relevant for an increasing number of borrowers, and when you add in the fact they may be on a higher LTV, or they might have had a change of job recently, or they might be selfemployed or a contractor or freelance, you can begin to understand why there are so many more potential secondcharge clients who need advice and the right products. The good news of course is that options beyond the first-charge are readily available. We are not in an environment where you get one shot with your existing lender and that’s it. Just as the first-charge market is ultra-competitive for those that qualify, the second-charge sector also has good product options and keen pricing, and therefore advisers who fully understand the market, or indeed those who partner up with specialists like ourselves, can get excellent products for those clients who want to make a difference to their lives but aren’t necessarily in a position to move. The first step for advisers is understanding the options that exist, but when you do, you’ll be adding a hugely important set of products to your proposition that has the potential to help many, many clients. M I OCTOBER 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

FIBA

The real use of tech in specialist finance Adam Tyler executive chairman, FIBA

n recent months we have looked at technology and its use in specialist finance. It is now time to reveal some of that in more detail, as FIBA rolls out its member benefit programme and embraces its use amongst the specialist finance broker community. It is now impossible to ignore the way in which technology is looking to revolutionise the commercial finance lending sector, and how this tech revolution will help brokers in their businesses. For many years I have reviewed and considered different platforms for commercial finance. DATA AND INTELLIGENCE

Our first technology partner, Native Finance, provides data capture of the highest order for the bridging, development and term commercial property finance industry, on lenders’ current and past loans, using a geographical search facility. It provides a unique insight into what is being lent, but also a fantastic sourcing opportunity for or market. It is the first of its kind in Europe – helping brokers to also source the right lenders for their clients, track market activity and effectively manage deals from start to finish. The customers and brokers who have already adopted the market-leading solution receive the following benefits: access to more than 480 lenders, including institutional and overseas; increased deal completions and less time spent on deal management; and market intelligence on more than 1.5 million loans across the entire market. Prasanna Kannan, co-founder at Native Finance, commented: www.mortgageintroducer.com

“We’re delighted to be in a position to introduce brokers to our unique platform. Our goal is to reduce the time and resources that brokers spend sourcing lenders and managing deals. We look forward to working with commercial finance specialists to create a more efficient lending process which prioritises data transparency.” SOURCING LENDERS

Alternative Business Funding (ABF) has partnered with FIBA to offer a solution to its intermediary members in sourcing lenders for all types of commercial finance which would otherwise fall outside of their usual requests, for bridging, development and term commercial property finance for both purchase and refinance. There has been a longstanding opportunity for the financial intermediary and finance platforms to be able to work together to help all small business customers. This is a particularly long-awaited launch for brokers, as it now allows them to find a funder for all types of specialist finance enquiries that they may receive. Importantly, this is also another way that small to medium enterprise (SME) owners can find the funding they need for their business. Adam Tavener, chairman of ABF and Funder Finder, said: “We are delighted to be partnering with the wider intermediary and broker market. Their adoption of the Funder Finder tool is a major vote of confidence in this technology, whose mission is to provide fast, fair and transparent access to finance to all businesses, no matter how large or small. “Businesses that are properly tech-enabled will continue to enjoy significant benefits that flow from an enhanced customer experience, and thus loyalty. “The direction of travel is unmistakeable and progress around

these kinds of automated customer journeys will continue to accelerate. “Far-sighted businesses already know this and make sure that they stay ahead, as is the case here with the Funder Finder tool providing a whole new type of technology to members and customers of FIBA.” LEGAL PARTNERS

Ensuring that the customer’s solicitor in a commercial property transaction has the knowledge and ability to understand the speed and the process required is important to all of us. Both lenders and brokers are looking for a solution to put the right legal adviser in place at the outset, and the Movin Legal platform, in conjunction with FIBA, will ensure there are more chances of successful completions across our sector. The partnership, using technology once again to find a solution, will help FIBA members and intermediaries find the right legal deal to suit their clients’ needs and timescales in specialist markets. This will allow them to place the client with the right solicitor for the right circumstances, rather than relying on a one-click approach, which can sometimes lead to misleading and time delaying conclusions. John Ahmed, chief executive of Movin Legal, said: “COVID-19 and the resulting pandemic over the last 18 months has shown how useful and essential good technology is for our industry. It has also highlighted how important it is to ensure positive communication between all parties on the more complex finance and legal deals. Not every transaction is clear cut and this requires people to speak to each other to delve into the potential complexities of the case and what legal timeframe people are expecting.” All of these partnerships will help FIBA members find the right funder for business finance to suit their clients’ needs, aid them in their sourcing of commercial property finance, and also boost their completion success. In conclusion, through these partners members are not only providing additional services for their customers, but adding to their own proposition as a financial intermediary. M I

OCTOBER 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

DEVELOPMENT

Get Britain moving, get lending Roxana MohammadianMolina chief strategy officer, Blend Network

“L

et’s get Britain moving again” has been Prime Minister Boris Johnson’s pledge ever since the end of the first lockdown back in June 2020. The only way that lenders can support property developers to ‘get Britain moving’ is by ‘getting lending going’. At the height of the pandemic last year, development finance debt seemed to have suddenly dried up. By March, we noted a marked reduction in appetite for lending within our market, but assumed that this would be relaxed over time. Borrowers who wanted to proceed with their schemes had to pay higher interest rates, and seemed willing to do so. In many respects, it felt like a déjà vu, because this was a trend we had seen in the aftermath of the Global Financial Crisis (GFC), where pricing of debt seemed a lesser issue compared to its availability.

offset the reduction in debt provided by banks and traditional lenders, which has ensured that finance has remained at a new lower norm. According to CBRE, the pandemic may not only crystalise this new lower level, but could also see it reduce further, at least in the shorter-term. Yet I strongly believe that now, more than ever before, it is high time to go back to pre-COVID levels of lending and gearing, so that together we can get Britain moving again. NIMBLE AND AGILE

Specialist lenders, nimbler and more agile compared to larger traditional lenders and banks, can and must play a key role in deploying more funding into the housing market. These specialist non-bank lenders which – despite being regulated – are bound by less strict credit criteria and parameters than banks, have a key role to play in allowing small to medium property developers and construction companies to unlock the funding they need to build the homes the UK needs. At Blend Network, this is the direction we have decided to go in to

ensure we are able to support a growing number of property developers looking to fund their projects. For example, at Blend Network we recently announced the launch of a new high-gearing product that offers experienced property developers pre-COVID levels of gearing, with up to 75% loan-to-gross-developmentvalue (LTGDV) and up to 90% loanto-cost (LTC). With this new product, we are effectively sending a strong signal to the market, saying that we are open and ready to back experienced property developers. In summary, I strongly believe that as part of the real estate development finance market moving further towards specialisation and professionalism, we will see a growing decoupling between traditional banking lenders and specialist non-bank lenders. The latter are able to better recognise customer needs and offer higher gearing, as well as more tailored lending solutions. Let’s get Britain moving, let’s get lending going, and let’s build back better together. M I

A CAUTIOUS APPROACH

But fast-forward 18 months, and liquidity has not returned to the development finance market to the extent that we had expected it to. By now – with life returning to some kind of normality – we would have expected lenders to begin to adopt a less cautious approach, but that doesn’t seem to be the case, and indeed, there are some signs of a further tightening up on the way. This change in lenders’ attitudes is not surprising within the context of longer-term trends witnessed in development finance, and how the market has evolved in recent years. According to the 2019 Cass Real Estate Lending report, debt funds and other new lending entrants have provided significant capital over the past decade, though not enough to

Deploying more funding into the UK housing market is essential for recovery

MORTGAGE INTRODUCER OCTOBER 2021

www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

DEVELOPMENT

PDR: Unlocking developer potential Ian Humphreys co-founder and head of lending, Brickflow

hanges to permitted development rights (PDRs), enabling developers to convert commercial, business and service properties to residential premises, will – commentators suggest – undermine the high street. Others counter that they address the housing shortage and will inject new life into neglected areas. So, where are we now with PDRs and what’s the approval process, pitfalls and funding requirements? CHANGES RECAP

PDRs allow changes to be made to buildings without having to apply for planning permission. In 2013, the government granted a temporary PDR allowing a change of use from office to residential accommodation and three years later, this became permanent. In August 2020, a PDR allowing upwards extensions of one/two storeys to commercial and residential properties was approved and in September 2020, the conversion of a wider range of commercial/retail premises (Class E) to mixed-use was permitted. In August 2021, a new PDR, for conversion between Class E and Class 3 (residential) use was introduced (known as the Class MA right). THE APPROVAL PROCESS

Although PDRs do not require formal planning permission, developers must obtain ‘prior approval’ for specific aspects of their projects from Local Planning Authorities (LPAs). And once work commences, they must adhere to building control regulations. www.mortgageintroducer.com

Planning permission and building regulations approval are separate legislation - one does not grant consent for the other - and developers may need both, one or none. Planning permission assesses whether a development follows local/national policies and its community impact, for example on neighbourhood amenities. Building regulations cover the structural and construction process. Providing a proposed development falls within the scope of its particular class, developers can automatically proceed if LPAs fail to advise if prior approval is needed (and if it is, their decision), within 56 days. PDR PITFALLS

Residential PDRs have blurred the lines between permitted development and the full planning process and pitfalls include:  Not all vacant buildings will be granted PDRs to convert into residential accommodation; an application for prior approval is required.  A condition of PDR for office to residential conversion is keeping the building’s appearance. Any window changes etc, require a planning application (once the conversion’s started, it’s unusual for requests for changes to be rejected, although not guaranteed).  If adding extra floors, structural engineers’ reports are required prior to the full planning application. And if the existing building is 18m+ high, chartered engineers or other competent professionals’ reports, confirming the external walls’ construction complies with building regulations, are required.  Most UK lenders will not provide mortgages on flats with a minimum net internal floor area of 30m2.  Consider location – there may not be demand for flats in a converted office or on an industrial estate? And

can the building incorporate a lift?  The property may have cladding that needs to be removed.  Some UK lenders won’t provide mortgages on non-standard materials such as concrete (also consider insulation and asbestos removal). Others won’t support applications in high-rise blocks. FUNDING PERMITTED DEVELOPMENT PROJECTS

Converting an existing building is seen as a quicker process and classed by many lenders as a refurbishment loan. As it’s perceived to be less risky, less development experience is needed. However, if you have no prior experience at all, lenders will expect to see an over-qualified contractor or project manager in the team, and preferably on some kind of profit share or performance incentive. Like all development loans, lenders offer varying amounts based upon criteria including: end value, total project cost, equity input, geography, loan size, construction complexity and team experience. Where PDR conversion and new-build projects differ is the weighting between build and land costs. Most new-build projects are roughly equally weighted between the two or build costs are higher (land costs are rarely more). With PDR, it’s the reverse; land costs are generally greater. Most lenders have a day one land cap, so whilst their LTGDV and LTC metrics might allow them to lend more, the cap restricts the total loan available. This leads to a larger deposit being required. Furthermore, unless prior approval has already been granted by the council, the lender’s valuer will normally value on a vacant possession basis - which will almost certainly be lower - leading to the borrower needing a much larger deposit. On a positive note, there are more lending options, as most bridging lenders are happy to support conversions PDRs do unlock huge potential for developers, but there are pitfalls along the way. M I

OCTOBER 2021 MORTGAGE INTRODUCER

21207

THE LAST WORD

NICK MORREY

On the move Mortgage Introducer catches up with Nick Morrey ahead of his upcoming move to Coreco Where did you see yourself when you were younger by this point in your career?

Nick Morrey

Like many in our industry I kind of fell into it in that I graduated from Imperial College in 1993 with grandiose ideas of management consultancy but an economic climate that didn’t offer many opportunities. Being self-employed as what was effectively an insurance sales person whilst doing bar work was the best short-term option. The more successful sales people at General Portfolio also arranged mortgages and so I learned the ‘dark arts’ of broking from them. At the time I thought I would be an adviser for life, but as many readers will know such long-term plans often change and change again. What will be your new responsibilities at Coreco? From November, when I am due to start at Coreco, I will be looking to work closely with lenders to help them hone their propositions servicing both brokers and consumers as well as working with the board to develop and grow the brand in all sectors. I shall also support their brokers with the more complex situations they are encountering and looking to grow their business across the markets so they can be as successful as they want to be. What are Coreco’s ambitions for the future? Coreco are building on their existing, excellent brand and looking to expand both their network and their Southend office allowing more brokers to flourish in a positive, forward thinking environment, providing their already high level of service to even more borrowers in all areas of lending. What challenges have you faced over COVID? History is full of change with things like the industrial revolution and flight as well as computer connectivity. It is that which has enabled millions of people around the world to weather the pandemic far better than they could in decades, or centuries gone by. That said, few historical changes have been so condensed and the changes we faced came upon us very quickly indeed. Not everybody reacts to change in the same way and many had a lot of changes to work through. Everybody’s mental health was affected to a greater or lesser degree

MORTGAGE INTRODUCER

OCTOBER 2021

with some suffering significantly worse than others. On the whole, as an industry and nation, we dealt with it better than might we have in the past thanks to a general feeling of togetherness and improved communication facilities. The hardest part for many was just feeling comfortable enough admit they were finding it hard in the first place. What are you most excited by within the industry at the moment? The industry is forever in a period of change facing challenges both internal and external. Constant talk of technology becoming increasingly important has spawned a variety of systems and companies looking to fill hitherto unknown gaps. Seeing what these offerings can do is exciting but do they add real value? Will they aid productivity? Sifting the rhetoric from fact, seeing the path that is actually unfolding and planning to embrace the future is a challenge and an exciting one at that. Trying to shape some of these for the betterment of the industry and consumers is very exciting and as an industry we should do everything we can to make things better at every opportunity if we can. M I www.mortgageintroducer.com

21207 MMB wrap pp3.qxp_v8 AA 06/10/2021 12:50 Page 1

UTB mortgages for intermediaries We’re competitive

We’re flexible

• Up to £750k / 85% LTV for purchase and remortgages with max 4.5 LTI over £500k • Up to £750k / 75% LTV for interest only • No minimum credit score required • 2, 3 and 5 year fixed rates from 3.8% • No ERC options

• • • •

We’re Tech enabled

We’re committed to our broker partners

• 24/7 Online DIP with Auto-Underwrite • Facial Recognition ID Verification • AVM’s and Integrated Credit Searches • Portal and SmartApp-based Document upload

Self-employed Non-standard property type Adverse credit Complex income

• Friendly and experienced specialists to guide you through applications • BDM coverage across the UK • Direct access to BDMs and underwriters

We’re able to consider adverse applicants

We’re able to consider a wide range of property types

• • • •

Married sole apps accepted Lend for most legal purposes No minimum credit score Unusual properties accepted

Ex-council/local authority Flats above commercial No floor limit Flying freehold

It was our flexible criteria and common-sense approach to underwriting that first got us noticed. But it’s our investment in the latest technology and high calibre people which has kept us at the top of the pile for mortgage intermediaries looking for a quick, easy and dependable experience for themselves and their customers. Mike Walters Sales Director - Property Intermediaries

Find your BDM here

21207 MMB wrap pp4.qxp_v4 AA 06/10/2021 12:49 Page 1

UTB mortgages for intermediaries A smarter place for your case

• 24/7 Online DIP with Auto-Underwrite • Facial Recognition ID Verification • AVM’s and Integrated Credit Searches • Portal and SmartApp-based Document upload

UTB mortgages for intermediaries combine a premiership team with the best in mortgage tech and a first class range of products to enable our broker partners to do more! Purchase | Remortgage | Unencumbered | Interest Only

T: 020 7031 1551 E: mortgages.enquiries@utbank.co.uk This information is strictly for the use of professional intermediaries only.

we understand specialised mortgages