The Intermediary - November 2023 by theintermediary

TECHNOLOGY SPECIAL ISSUE

INTERVIEWS OMS, Contact State, ClientTree and Property Circle talk tech

OPINION The latest from CoreLogic, Phoebus, Paragon, Coventry and more

Intermediary. The

www.theintermediary.co.uk | Issue 10 | November 2023 | £6

Moving with the times in the mortgage industry

From the editor...

sat down to write this comment with a clear message in mind and – in a turn of events that is becoming all too commonplace these days – all hell broke loose and I was entirely sidelined by happenings within the Government. I have already spent too many column inches in previous issues on the exasperating revolving door of Housing Ministers, and the fatal flaw our Government has of endlessly treating this important sector as a short-term policy area, and a stepping stone for ministers on their way elsewhere. Punchdrunk, all we can do for now is sigh our goodbyes to Rachael MacLean and begrudgingly wave in Lee Rowley, the 16th candidate to come in the door since 2010. I wouldn’t get out the biscuits, chances are he’s not staying for long. Speaking of short shri , the Government also seemingly tried to pull a fast one recently when it introduced no fewer than 111 pages of amendments to the Renters (Reform) Bill overnight, with the Commi ee stage already in full swing, and some experts due to give evidence within 24 hours of the amendments being made. While this has elicited ire from the Renters’ Reform Coalition as an “outrageous way to legislate,” I see it less as a deliberate a empt to be underhanded and slip changes by, and instead proof that the Conservatives, with all the hectic lack of grace we have come to expect, are desperately trying to figure out what it is that will get future voters back on side before the impending General Election.

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The Team

It’s hard to imagine either landlords or tenants, in theory diametrically opposed on the issues at hand, being taken in much by this haphazard, grasping approach. While the Government makes it clear time and again that stable and sustainable strategies are not on the priority list for a market which is, a er all, only a key lynchpin for the entire UK economy, experts turn their – likely rolling – eyes to how this market can weather the winter. If it is to be consistently let down by policymakers, then at least solace can be found among the key players that consistently show they are are willing to grow, adapt and evolve to fill in the gaps and help borrowers of all types through what continues to be a difficult period. One of the foundations of this evolution is, of course, the topic of this month’s special focus: technology. From brokers to lenders, conveyancers to platform providers, we have sought to help our readers keep up to date and understand tech advancements, with a view to making the most of the digital enhancements already available, as well as those on the horizon. Keep an eye out, not only in our expanded tech section, but throughout the pages of this issue for high-level insights and practical tips from across the market. If you take away one thing, though, the message to me is clear: from AI to CRMs, it is all about enhancing the human. ●

Jessica Bird @jess_jbird

@IntermediaryUK

www.facebook.com/IntermediaryUK

Contributors

Jessica Bird ................................ Managing Editor Jessica O’Connor ...................................... Reporter editorial@theintermediary.co.uk

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Ryan Fowler ............................................... Publisher Felix Blakeston ................... Associate Publisher Maggie Green ............................................. Accounts finance@theintermediary.co.uk

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TECHNOLOGY SPECIAL ISSUE

INTERVIEWS OMS, Contact State, ClientTree and Property Circle talk tech

OPINION The latest from CoreLogic, Phoebus, Paragon, Coventry and more

Intermediary. The

www.theintermediary.co.uk | Issue 10 | November 2023 | £6

Moving with the times in the mortgage industry

Cartoons by Giles Pilbrow

Printed by Pensord Press

CBP006075

November 2023 | The Intermediary

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Contents TECHNOLOGY SPECIAL FOCUS

Feature 6

Natalie Thomas asks what technology can do to solve the housing crisis

INTERVIEWS & PROFILES

The Interview 28 OMS

Neal Jannels, Dale Jannels and Melanie Spencer discuss the need for digital evolution

Opinion 14

Insights into tech and digitalisation across residential, conveyancing, later life and more

REGULARS

Broker business 68

A look at the practical realities of being a broker, from marketing tips to the monthly case clinic

Local focus 86

This month The Intermediary takes a look at the housing market in Carlisle

On the Move 90

An eye on the revolving doors of the mortgage market: the latest industry job moves

SECTORS AT-A-GLANCE

Residential 32 Buy-to-let 50 Specialist Finance 58 Later Life 76 Protection 80 Second Charge 84

Local Focus 86

Q&A 20 C O N TAC T S TAT E

Lindsey McLoughlin looks at lead generation and the customer journey

Q&A 70 CLIENTREE

Lilla Dilliway talks streamlined tech and enhancing the human touch

In Profile 48 P RO P E R T Y C I RC L E

Marc Randall discusses how to reinvigorate data for meaningful conversations

Meet the BDM 34 BUCKINGHAMSHIRE BUILDING SOCIETY

Matt McDougall on the challenges and opportunities facing business development managers

The Intermediary | February 2023

T E C H NO L O GY Special Focus

BUILDING BETTER CAN TECH SOLVE THE HOUSING CRISIS? Natalie Thomas for The Intermediary

From modular housing being used to boost supply, to artificial intelligence (AI) tools for mortgage brokers and lenders, technology has the potential to do much more than merely speed up the home buying experience. While it might seem at times that the housing and mortgage markets are well on their way when it comes to utilising technology, in many ways this industry has only scratched the surface in terms of what is available, and what is possible.

The homes of tomorrow The UK faces many challenges when it comes to housebuilding, from sourcing potential land, to obtaining planning permissions, securing funding, and addressing a skills and labour shortage. Chris Hall, technical innovation manager at the National House Building Council (NHBC), says: “Technology can help us build more homes in the UK in a number of ways. Unlocking land is a key driver of increased development, so better use of AI and geospatial technology to improve searches for land that meets certain criteria such as brownfield and flood zoning would be a strong starter.”

The Intermediary | November 2023

Geospatial technology is an emerging field of study comprising: geographic information systems (GIS), which store, analyse, and visualise geographic data; remote sensing (RS), which is the process of detecting and monitoring the characteristics of an area via its reflected and emitted radiation, typically via satellite or aircraft; and global positioning systems (GPS), which use satellites to map locations on the earth. These resources can help identify suitable locations for new housing developments by analysing factors like land availability, infrastructure, environmental impact and proximity to amenities. This ensures that new housing projects are strategically placed to meet the needs of communities. Geospatial tools can also be used to identify areas with a high demand for affordable housing, as well as pointing towards underutilised or brownfield sites. When it comes to actually developing on the land, Hall says greater adoption of construction methods such as novel foundation systems could release more brownfield sites for development, by minimising the disruption, cost and

T E C H NO L O GY Special Focus

embodied carbon involved in remediating those contaminated sites. The recent white paper ‘Solving the UK’s Housing Shortage’, from digital marketplace Brickflow, found that drones are also increasingly being used in housebuilding, helping with surveying site suitability and pre-construction mapping, as well as accessing hard-to-reach or elevated areas and monitoring building progress. Machine learning, the report found, can also help with mechanical, electrical and plumbing system design. “It's not all about new construction, however,” says Hall. “Increasing the use of building information modelling [BIM] and laser scanning to survey, adapt and deep retrofit homes to bring the UK’s historical building stock up to modern performance standards should also be considered.” He adds: “We also need to promote more self-build homes and support small and medium sized enterprise [SME] builders by assisting them in working with preapproved architectural designs and platforms. “Furthermore, we should encourage the adoption of smart building systems that can adapt to environmental limitations.” While there is evidently a lot of potential, Hall says developers face a number of stumbling blocks in adopting new technologies for housebuilding. “The most obvious is awareness or understanding of the role technology can play in the industry – the scope and potential can be underestimated or misunderstood, especially by traditional house builders,” he explains. “The cost can seem prohibitive, too – the initial outlay for certain technologies can be high, as well as further money having to be spent training workers to use them.

Unlocking land is a key driver of increased development, so better use of AI and geospatial technology to improve searches for land that meets certain criteria such as brownfield and flood zoning would be a strong starter”

What are modern methods of construction?

odern methods of construction (MMC) represent a departure from traditional construction methods, aiming to improve efficiency, sustainability, and costeffectiveness. Built offsite, MMC includes various methods and technologies, including:

Modular housing and prefabrication Offsite construction is one of the most prominent forms of MMC. It involves manufacturing building components, or even entire structures, offsite in factories. These components – such as walls, floors, and roofs – are built offsite and then transported to the construction site and assembled like building blocks. Offsite construction offers several advantages, including reduced construction time, the potential for improved quality control, and a lower environmental impact due to minimised waste generation. Modular homes developer TopHat is currently building Europe’s largest modular homes facility in Corby. Capable of delivering one house every hour, the state-of-the-art facility will use precision engineering techniques to create around 4,000 homes per year.

3D printing 3D printing is a cutting-edge MMC technique that involves the layer-by-layer additive manufacturing of building components. While still in its infancy in the UK construction industry, 3D printing holds great promise for creating complex and custom architectural elements. It has the potential to reduce construction waste and offer design flexibility. In November 2022, not-for-profit housing provider Building for Humanity announced the launch of a £6m project to construct the UK's first 3D-printed housing estate in Accrington, Lancashire. Comprising 46 eco-homes, the properties will provide housing for homeless veterans and low-income families.

Smart building technologies Modern construction methods increasingly incorporate smart building technologies. These include the integration of sensors, automation, and building management systems to enhance energy efficiency, safety, and user comfort. Smart buildings are paving the way for a more sustainable and interconnected future. In its report, ‘Futurology: The New Home in 2050,’ the NHBC provides a vision of future homes using smart building systems. The report foresees traditional letterboxes being replaced by smart delivery boxes capable of securely receiving registered deliveries and safeguarding valuable parcels. It also envisions future homes equipped with responsive cooling and heating systems. These 'smart homes' could also monitor health and activity, including executing tasks like medication reminders and warnings about potential safety hazards, such as scalding water or overflowing baths.

T E C H NO L O GY Special Focus

“A lack of confidence in terms of long-term performance can also hinder the adoption of new technologies.”

Building offsite It is not only in locating and in finding homes where technology can play a role. Modern methods of construction (MMCs) have the potential to revolutionise housebuilding. MMC includes modular housing and advanced 3D printing, which involves the manufacturing of building components in a factory, their transportation to the site, and their subsequent on-site assembly. In many European countries, MMC is an integral part of the house building industry. However, the UK has yet to see its widespread use. This is despite the Government launching a taskforce in 2021 to accelerate delivery.

According to Make UK Modular, modular homes are built 50% faster from start to finish than those constructed via traditional methods. Building with modular methods can also cut emissions by half during construction, reducing the amount of CO2 produced by up to 83%. Earlier this year, the modular housing sector suffered a setback when Legal & General closed its loss-making factory due to prolonged planning delays and Covid-19, making it unable to secure the pipeline. Nevertheless, there is some effort by the Government to implement MMCs, with the Affordable Homes Programme 2021-2026 encouraging their use. Ian Humphreys, chief executive and founder of Brickflow, outlines some of the setbacks in using MMC in the firm’s recent whitepaper, saying: “Supply chain issues, including a lack of

"I've changed my name to AI in the hope people will feel they have to adopt me!"

om o ms

ONE MORTGAGE SYSTEM

Lender | Broker | Network

Integration for every step in the customer journey to provide the most seamless mortgage application possible.

02/11/2023 14:04

T E C H NO L O GY Special Focus

AI ReVoLution: TransforminG customer outcomes With neW technoLoGies Andrei Lebed is chief executive officer and co-founder of Koodoo

t Koodoo, we believe that artificial intelligence (AI) will be pivotal in improving customer outcomes during the mortgage process. Not only will AI streamline mortgage approvals and processing times, but it will also ensure that customers benefit from the best possible advice, engagement and support throughout their journey, tailored to each unique situation. At the heart of our AI-driven mission is our Koodoo Large Language Model (LLM). This LLM recently achieved an industry-first by passing the Certificate in Mortgage Advice Practice (CeMAP) exam, showcasing that it has the credentials required to co-pilot human mortgage advisers and compliance teams. Built on the foundations of the KoodooLLM, our technology can help mortgage brokerage firms monitor the quality of customer calls and provide suggestions for human agents or advisers to improve the support offered to the customer, while the customer is on the phone. Crucially, this allows the customer’s situation to be

remedied in real-time, reducing the amount of time taken between a mistake being made on a call and it being rectified. This technology also enables a firm’s compliance team to have 100% of all calls checked by AI first, such that calls with a higher risk of procedural mistakes can be triaged for human review and remediation if required. Many first-time buyers lack the confidence required to approach a mortgage lender or broker and have limited awareness of their own financial situation and likelihood of being approved for a mortgage. Koodoo is developing tools which could help these customers to better understand their credit situation, and coach them on how to improve their mortgage eligibility to the point of applying. We believe AI will also be a critical tool in broker and lenders’ toolkits in adhering to Consumer Duty rules, particularly in helping them to ensure that customers fully understand the products being recommended to them. Using natural language, customers could query product documentation to ensure they

volumetric suppliers, hampers developers taking this route, and they may be bound by frameworks with preferred contractors, which stops them working with MMC suppliers.” In reference to MMC, he adds: “There are also issues around funding; mainstream mortgage lenders doubt the level of demand and ultimately their lifespan. If end users cannot mortgage these properties, lenders will not fund the development phase, compromising the ability of the developer to repay the loan through sales.” Unlike in a traditional build, a huge percentage of the overall cost to deliver the scheme is needed to manufacture units, months before delivery to site, Humphreys says. This could theoretically see lenders in a position where they have funded 50% or more of the construction budget, but their security is still a bare field worth less than their loan. Humphreys goes on to say: “Without

The Intermediary | November 2023

fully understand the terms of the product they are applying for. Again, AI doesn’t replace the function of the lender here, rather it ensures the customer has constant, personalised support throughout the mortgage process. We believe that AI is set to be a game-changer, but not a replacement for humans. AI will act as a superpower for brokers and lenders, supplementing their capabilities and ultimately enhancing the overall mortgage experience for customers. The emphasis on personal relationships and the expertise demonstrated by human brokers remains paramount, and Koodoo envisions a future where AI acts as a trusted partner, not a substitute, making the mortgage application journey faster, more precise, and customer-centric. The adoption of AI could lead to a new era in the mortgage industry, where technology harmonises with human expertise to deliver an enhanced customer experience. This promises a brighter future for customers seeking to navigate the complexities of mortgage applications.

supporting data, it will be difficult to get the mortgage market on board, which is key to MMC homes having any impact on the housing crisis. Currently, the most likely inroad for MMC would be council houses and housing associations, where a mortgage isn’t necessary.”

The use of Open Banking One area in which the mortgage market is feeling increasingly comfortable with its uptake of technology and its march into modernity is through the use of Open Banking and AI. Stelios Constantinidis, director of AI and AI products at MPowered Mortgages, says: “Predictive AI can analyse transaction data and identify income or spending patterns that slip through the cracks, like inconsistent gig economy income. This can complement traditional affordability methods like credit scores, and makes for more flexible underwriting.

T E C H NO L O GY Special Focus

“My Baby Boomer clients prefer old school communication methods” “The application of tech and AI in underwriting relies on bringing together many data sources to build a more holistic and comprehensive financial profile of their customers. “Ultimately, this lets lenders lend to applicants that would have been overlooked by traditional methods, like over-relying on credit scores. With technologies like Open Banking becoming more widespread, this trend of using AI in underwriting is expected to continue.” The market is indeed seeing an increasing number of lenders looking at new ways to assess borrowers’ broader financial information, and

assess their viability. Earlier this year, Leeds Building Society announced that it would now take into account borrowers’ regular payments to subscription services such as Netflix and Spotify when assessing their creditworthiness. To do this, it used Experian Boost – a form of Open Banking run by credit reference agency Experian. An Experian spokesperson says: “It means the last 12 months of regular debit payments, Council Tax and subscriptions to digital entertainment services can now contribute to a potential homeowner’s credit scores and be considered in mortgage applications.

November The Intermediary 2023 | The | November Intermediary 2023

T E C H NO L O GY Special Focus

The service uses Open Banking to link the borrower’s current account payments to their credit score, which is then integrated into the society's lending systems.” During testing, it says 7.5% of society applicants would have seen an improvement in their credit score by using this service, and no credit scores were reduced as a result. The hope is that the growing use of technology in the mortgage market will lead to more of a ‘computer says yes’ mentality. John Tilzey, sales director at Finova, says: “Lenders can leverage AI in credit scoring models, using Open Banking application programming interfaces [APIs] to monitor more relevant metrics, such as current income level and realtime earning potential. This stands in contrast to relying solely on historical credit reports, which can often be outdated.” Just last year, in its report into credit reference agencies, the Financial Conduct Authority (FCA) found that some borrowers’ credit files contained inaccurate information, which risked incorrect lending decisions. With an increasing number of borrowers facing credit issues on their records due to the cost-of-living crisis, any potential avenue for helping such borrowers is undoubtedly a positive development.

costs for a lender, while simultaneously providing lower pricing and increasing margins, benefiting both lenders and borrowers. “The increasing use of AI may lead mainstream lenders, who typically have access to lower-cost capital, to extend their products into more niche market segments, offering competitive rates to previously underserved areas in the market,” Tilzey predicts.

Product development

Tapping into tech potential

Tilzey believes there is also scope for some exciting innovations in the world of products and pricing. “Technology can empower lenders to refine their product pricing by gaining a deeper understanding of risk factors associated with individual borrowers,” he says. “The integration of AI enhances the analysis of diverse data sources, providing lenders with a comprehensive view of borrower profiles and risk assessment. This not only bolsters their risk management capabilities, but also promotes financial inclusivity by ensuring fair and tailored pricing for borrowers. “Going beyond this, evolving technology could result in the emergence of more granular and personalised pricing in the future. “Tech can help drive pricing directly linked to specific factors, such as loan-to-value [LTV], instead of using a tiered approach. “As an example, a borrower with a £500,000 loan at 85% LTV may pay £2,000 more annually compared to someone at 84.99% LTV, based on current market rates from a well-known high street lender.” This personalised pricing approach, Tilzey believes, has the potential to reduce lending

The integration of technology in the mortgage market seems to be progressing, and is better poised for easy implementation, compared with advancements in housebuilding. In the latter, in addition to the multitude of challenges already facing the sector, there is the added layer of complexity when it comes to mortgaging the properties, which currently appears to be the biggest barrier to the increased use of more modern construction methods. This will require something of a cultural shift in attitudes. This shift, however, is incredibly important, as no amount of advancement within the methods of creating and lending mortgage products, or supporting borrowers, will be effective while the UK is still faced with a severe and abiding shortage of housing. Nevertheless, the increased use of technology in the mortgage market does offer exciting prospects for assisting borrowers who currently find some lenders’ rigid affordability models disadvantageous. While technology alone may not resolve the housing crisis as it stands, or solve the problems of those unable to get on the housing ladder, it certainly has the potential to broaden market access for numerous new and existing borrowers. ●

Evolving technology could result in the emergence of more granular and personalised pricing in the future. Tech can help drive pricing directly linked to specific factors, such as loanto-value, instead of using a tiered approach”

The Intermediary | November 2023

inter

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T E C H NO L O GY Special Focus

Data and tech are key to delivering better lending

t such a difficult time for the mortgage industry, I’m conscious that futuregazing may appear a li le out-of-step. People o en say that in a crisis, the only thing that ma ers is the next five minutes. If only it were that simple. Understanding how technology and data will help us through today’s – and tomorrow’s – market means we can face the future with confidence rather than trepidation. Technology, and the data that it processes, is key to delivering sustainable operational models that allow for the lending that brokers and their clients demand, but crucially also meet the requirements of regulators and policymakers. From net zero initiatives to the implementation of Consumer Duty or the impending arrival of Basel III, the ra of regulatory requirements continues to increase scrutiny of an organisation’s decision-making and raise the expectations of its behaviour. As policymakers shape what lenders can and cannot do – as well as the priority of those deliverables – data and technology are increasingly how the industry chooses to deliver its expanding brief. Tech will continue to add efficiency, but also provide the means of evidence gathering, proving that the right thing is being done for the right reasons at the right time. The right data are key, and understanding what and how we use them is fundamental to long-term successful investment, funding and lending planning.

While the deadlines move, tackling the resilience of our housing stock must remain a priority for today. The momentum will grow as lenders reap the capital savings that result from a be er understanding of their exposures on back books and originations. Flood risk, soil shrinkage, extreme heat – these environmental factors all take a toll on British homes – and not all in the same way. Investors and lenders are acutely aware of the financial implications for asset security and capital value as a result. Political will and economic necessity will drive a granular understanding of property, supported by interoperable data sources and systems.

An environmental imperative

Transparency and governance

The goal of achieving net zero remains real, even if there has been a temporary hiatus in political will.

Understanding the asset brings me to the arrival in the summer of 2025 of Basel III, which heralds more

The Intermediary | November 2023

Delivering the duty Recording proof that every precaution has been taken to guarantee the greatest possible outcome for a customer is more than just a duty of care. Lenders will need to be able to prove that they can genuinely flex, and are willing to do so. In other words, the need for adaptability, agility, and the capacity to expand a process or system will probably be just as pressing when it comes to the operational management of borrowers as it is when the loan is originated. The technological applications and data sources that make this possible are expanding. A er the transaction is over, knowing your customer and their asset will remain important in fulfilling Consumer Duty, and data will be crucial.

MARK BLACKWELL is chief operating officer at CoreLogic

scrutiny and change for lenders. The proposals for lenders are around capital governance, and suggest that properties be revalued whenever a borrower has to switch products. This has clear repercussions for product transfers, as well as remortgages. How this is achieved is at present unclear, but timely, accurate data will play a huge part in the process. Whether current methodologies and triage systems – which comprise a combination of desktop evaluations, automated valuation models (AVMs), and physical inspections – continue, remains to be seen. Data will play a central role in supporting quick accurate broader assessments of property risk. The pandemic demonstrated that cloud-based, interoperable solutions were readily available and could also be quickly put into practice. It means not only developing technology and data strategies, but also addressing weak spots in the technology supporting operational delivery. Legacy systems are under pressure from data movement. Bandwidth – the amount of a pipe needed to transfer data across the several participants in the value chain – represents a real block. However, there is now more need than ever to access, evaluate, and analyse data. These are just three examples of how technology, data and people will come together over the coming months and years. Having a clear data and technology strategy around how this is achieved will be fundamental if the lending industry is to thrive. ●

T E C H NO L O GY Special Focus

Our technology evolution journey

HELEN LEWIS is national intermediary manager at Principality

ver the past five years, Principality has made a significant investment in its online savings and mortgage application platforms for both retail and intermediaries. With over 160 years’ experience as a mutual society, we have more layers of historical tech than the average building society; however, the momentum for improvements has continued to increase.

Customer service core Key to introducing new tech has been maintaining a high level of customer service. As the sixth largest building society in the UK, Principality has a strong reputation. This year, the society won the What Mortgage Award for Best Building Society for Customer Service for the sixth consecutive year. This commitment is reflected in the broker world. Principality has taken an incremental approach to introducing new products to its online mortgage sales originations (MSO) platform, not only to make sure that everything works as it should for registered brokers, but also so that new tech releases can work with their legacy solutions. Feedback from a recent consultation with more than 400 brokers indicates that the approach is working. Speed of service, customer service and support, and flexibility and tailored solutions were identified as Principality’s main selling points. This is reflected in the feedback following interactions with Principality’s intermediary team. So far in 2023, the Net Promoter Score (NPS) is over 80. Principality continues to be careful when releasing new features. However, as the MSO platform is further integrated into our day-to-day business with intermediaries, there has been an increase in momentum.

The building blocks for customer success

In 2023, we introduced online product transfers and online porting. A er mortgage criteria information and new mortgage ranges, product transfers are the most popular webpages, so it’s important that Principality evolves its service. The new services mean that brokers can complete the mortgage transfer more easily, with less paperwork and no wet signatures. It’s also faster, which means clients can confirm their next mortgage plans quicker. Online porting also means that brokers can now submit porting applications without having to refer their clients to Principality. More tech releases are in the pipeline for 2024, with more online solutions for different products.

Website reboot In parallel with improvements to our online platforms, there have been changes to the website. Feedback from brokers indicated that the clarity of the mortgage lending criteria and relevance of information on the website needed to improve. An online mortgage lending criteria search has replaced the previous cumbersome PDF. Following intermediary feedback, criteria changes and information updates can also be made more quickly.

The homepage has also had a design refresh, signposting more clearly the information brokers were using most. So far, feedback on these changes has been positive from both the Principality intermediaries team and intermediaries themselves. Brokers also identified a clear contact point as being key to their engagement with providers. As a result, the contact page is also having a reboot. Regional business development managers (BDMs) will be easy to find with a quick postcode search. The changes will be a test bed for the new website being launched in Summer 2024. It is being designed to respond to the current user data and feedback on challenges for brokers when using the current website, and will focus on things that ma er most to brokers.

Events refocus Principality’s BDMs a end more than 80 events a year in England and Wales, from exhibitions to round-table events. As an important part of how they engage with registered and new brokers, we’ve reviewed our approach. As well as a stand design refresh, we are launching an interactive game to boost broker knowledge on their key selling points, and enable Principality to follow up with brokers more easily post event. We have also reduced – and even removed – the use of merchandise on stand, to align with environmental, social and corporate governance (ESG) principles. The team intends to continue to evolve its event presence over the coming months, including improved signposting through its new website and social media channels. ● November 2023 | The Intermediary

T E C H NO L O GY Special Focus

A future vision of tech-enabled conveyancing

ll around us, industries are throwing themselves into technology for the benefit of consumers and partners alike. It’s happening in banking, publishing, travel and food. Take the online food ordering and delivery platforms industry. Groceries, meals, fruit and veg boxes, recipe boxes – even a cup of hot chocolate. From a huge selection of vendors, we can order consumables to collect, or have them delivered directly to our door in minutes. An app allows us to communicate with the provider and the delivery person, who we can also track. We can view all our orders from multiple vendors, and their statuses all in one place. If we’re not happy, we take a picture and get a refund. Occasionally, sure, things will go wrong. But fixes should be quick. Technology has enabled this truly extraordinary level of communication, transparency and accountability. In 2022, the online food ordering and delivery platforms industry was worth £3.2bn. They’re doing something right. Conveyancing needs to catch up, and we need to do it together. We need our industry peers, partners and all our brilliant people to adopt an ‘explorer mindset’ to really shake up the home moving experience for everyone involved. This includes movers, mortgage brokers, lenders, panel managers and conveyancers. We do need to be careful, though. We need to think human. Ordering your weekly shopping isn’t quite the

The Intermediary | November 2023

same as the financial and emotional investment you make when buying or selling your home. Yes, technology will make transactions more efficient, dealing with many of the required interactions that many moons ago would’ve been done face-to-face, then later on over the telephone. But the experience of moving house can be highly emotional and potentially complex. Having a trusted adviser on hand to steer you through the process can never be undervalued. Technology should only ever be there to actually help people. We expect technology in our lives. It is transforming businesses at every point, and people are increasingly embracing digital experiences and artificial intelligence (AI) tools, for example. Conveyancing must pick up the pace and start innovating across all fronts. How can we do this? With innovative technology that puts people first. Let’s explore.

Consistency, efficiency and accuracy A successful technology strategy to improve interactions with lenders, brokers and panel managers will focus on data flow. Specifically, technology needs to ensure the correct flow and accuracy of data when bringing instruction data into the organisation, ensuring correct personal information and supporting documentation. Then, as transactions progress, systems and so ware must enable transparency for all parties to have an accurate view of the transaction status.

Technology roadmaps must be aligned across all touch points, so that together we build and continually update integrations and application programming interfaces (APIs) that enable the accuracy and efficiency of data and information flow. Only then will it be really useful for people. We’re seeing advancements in the introducer experience, through technologies that help conveyancing companies like us to progress a technology roadmap that is aligned and consistent across the home moving sector. For example, there are AI solutions that help assess remortgage cases, informing the conveyancer of the case complexity and the areas to focus on for legal review. There are also, for example, products that improve the connectivity between stakeholders across a transaction, speeding up access to key documents, and the buyer and seller enquiry process. Using technology to guide the conveyancing effort helps efficiency and removes time-consuming, manual tasks from people’s daily lives, meaning they have more time for real human thought and interaction, which should benefit the overall conveyancing ecosystem.

Case management, automation and AI Technology goes a long way to help the legal process and the work delivered by conveyancers. From the very basics of a workflow case management platform that supports the overall process, to technology specifically designed for legal checking,

T E C H NO L O GY Special Focus

automation technologies provide significant help and time-saving by removing administrative processes. AI can now assist the review of legal documents, mortgage offers and title deed checks. As these technologies continue to evolve, they will support and guide legal professionals by extracting the key data and flagging areas to focus on. The good news here is that as legal processes become more efficient, legal professionals can spend more time building relationships with people, communicating with clients, and making sure they are providing the right level of guidance and support for the home moving experience.

We’re seeing advancements in the introducer experience through technologies that help conveyancing companies like us progress a technology roadmap that is aligned and consistent across the home moving sector”

Training tech It doesn’t stop there. Technology has a powerful role to play in education. Our brilliant legal professionals should be at the top of the game. Learning management platforms can help them continue their professional development through online or even contextual learning, where educational content is available at the appropriate time of them completing a transaction. Clever stuff. Technology can also help people identify further opportunities to improve. Using the latest collaboration and communication technologies, people can work closer together, coaching and mentoring.

Digital-first Clients want digital solutions to be part of their everyday experiences. Why would that stop when it comes to moving house? They should be able to make payments through Apple or

WASEEM HAQ is chief digital officer at Movera

Android Pay, submit documents through an image upload, complete a digital ID check or fill in online forms to submit required information. These experiences are commonplace across most brands and sectors, and we in the conveyancing world all need to make sure we’re supporting the transaction with digital solutions that align to client expectations. We need to provide digital-first experiences, but make sure that the client is never too far away from a human connection when they require it. Future successful conveyancing businesses will be the ones who understand the requirements of these three groups of introducers, conveyancers and home movers. They’ll only really understand them if they have strong relationships with the right partners, and directly with clients. Next, they’ll need the right level of technology capability. Teams must understand the opportunities of a case management system, of automation, of AI, of client apps and portals. Only then can they continually enhance the experience for introducers, feeearners and clients, by delivering the right blend of digital and human interactions. ● November 2023 | The Intermediary

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Fortifying your defenses with tech-enabled KYC

onducting ‘know your customer’ (KYC) or ‘know your business’ (KYB) procedures is a vital step for financial services firms and regulated entities when onboarding new customers to meet anti-money laundering (AML) law and protect against fraud. KYC is not just done at onboarding – it is an ongoing effort involving continuous review and maintenance, crucial for detecting suspicious activities or behavioural changes. Routine checks are essential in the face of evolving regulations and increasingly sophisticated financial crimes techniques, upholding trust and compliance within the industry. For most customers, KYC presents friction. Balancing the level of KYC due diligence is a significant challenge. Technology offers opportunities to enhance the speed and efficiency of evidence gathering. However, legacy systems, like the post, are still commonly used by firms in communicating with customers and conducting KYC refresh processes. These are inconvenient, inefficient, and insecure, leading to unnecessary delays and introducing security risks. There’s a notable risk of documents being lost, while posting documents is time-consuming and inconvenient, and error rates are higher. Calls are o en unanswered or inconvenient, while authentication procedures during calls can be weak. While digital channels like email offer some advantages, they come with security risks and a lack of structure.

Staff-intensive refresh Traditional channels in labourintensive KYC processes lead to extra expenses and inefficiencies related

The Intermediary | November 2023

to human resources, including varying skill levels, recruitment and training costs, and manual data entry. Addressing these issues requires enhanced communication methods among all stakeholders in a case. Verified identity messaging (VIM) modernises regulated industries, providing a seamless communication channel for collecting, processing and approving data, and robust financial crime and compliance controls. VIM leverages popular instant messaging apps like SMS, WhatsApp, Facebook Messenger, and Telegram, offering speed, ease, and convenience.

Enhance the experience VIM streamlines the entire customer journey through one channel, with a shared task list, eliminating the need for convoluted email chains and traditional channels. This simplification leads to a smoother and faster process, reducing the journey from weeks to minutes. It also results in a more satisfied customer base and improvements in Net Promoter Score (NPS). This is something one financial services firm experienced when its NPS increased from -43 to +72 once it had implemented VIM. By introducing the technology, the firm was able to reduce part of its process from 10 days to just 23 minutes, resulting in significant time and cost savings.

Gain efficiency VIM eliminates the frustrations and inefficiencies associated with legacy channels, allowing employees to manage KYC cases more effectively. It consolidates siloed channels into one streamlined application, enabling firms to verify ID, gather documents,

MICHAEL COMMON is CEO and co-founder at Nivo

get signatures, and perform other tasks efficiently. KYC refresh projects are costly and demand substantial time, resources, and workforce allocation. VIM significantly reduces processing times, delivering improved efficiencies across all KYC steps. Staff recruitment and retention stands out as an area in which VIM can yield substantial cost savings by streamlining the process. A prime example is that of a leading financial institution that realised over £10m in savings over a twoyear period. These savings were generated from reduced staff overtime, staff backfilling and consultancy costs. Nivo offers VIM to streamline communication between financial service providers and customers. With bank-standard security, biometric identity verification and integrated messaging, this can simplify KYC projects, resulting in increased productivity, reduced costs, and heightened customer satisfaction. The technology is designed with strong security, control, and audit threads at its core, providing a secure and efficient alternative to legacy channels. In conclusion, KYC compliance is more crucial than ever in safeguarding financial institutions against the rising tide of financial crimes. VIM emerges as a transformative solution, enhancing the customer experience, removing legacy channels, and significantly reducing the cost of the KYC refresh processes. By adopting VIM, financial institutions can navigate the evolving regulatory landscape with greater efficiency, speed, and control, ultimately fortifying their defenses against financial crimes. ●

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Elevating support for the principles of Consumer Duty

hecking a client’s affordability against multiple mortgages can be a complicated and time-consuming ordeal. If you want to find the best options possible for your client, you will probably end up rekeying information again and again. All the while, you may be be going back and forth to your client. Two words: laborious and painful. Then, how do you present all the options coherently, so clients can make sense of it all, and ultimately make an informed and confident decision? Clients can end up confused and bewildered, particularly if they are more vulnerable. The Financial Conduct Authority (FCA) has made it clear that borrowers aren’t always being given the most appropriate advice, while Consumer Duty regulations present expectations of good outcomes. Technology can be a key aid in helping mortgage brokers give be er advice, particularly when it comes to later life lending, which can be a challenge for many brokers, who aren’t always confident in placing later life cases. The recent expansion of products on the market for borrowers over50 has le an education gap. Today, many homeowners aged 50 to 90-plus have individual circumstances which mean that the traditional channel of equity release is not suitable, and options such as a capital and interest mortgage, a term interest-only mortgage, or a retirement interestonly (RIO) mortgage could deliver the best customer outcome. Working out affordability and si ing through potential product options for your clients can be a challenge, especially when it comes to compliance with Consumer Duty.

One of the core principles of Consumer Duty is that we in the financial sector give consumers a be er understanding of products, services and processes through effective communication. Technology, when used properly, can really help assist intermediaries in providing clients with the information they need – quickly, clearly, and in a way that’s easy to understand. Consumer Duty regulations also ask advisers to evidence consumer support, addressing both accountability and transparency. The duty is focused on good outcomes, and because outcomes only emerge with hindsight, it is important to document the steps you took to achieve the best results. Automated tools can help advisers store and track this information, while making it easily accessible for intermediary and client alike. It helps speed up the process, allowing the intermediary to spend more time focusing on their client. A key focus of Consumer Duty is vulnerable customers, who can o en be the recipient of poor advice. Technology can help them communicate be er with their broker, and even get a single view of their mortgage product options.

Counter-offer feature Lenders have the opportunity to build on the functionality of their mortgage origination platforms. Key features will help improve the experience for brokers, while at the same time helping brokers provide a be er, faster service – and evidencing best practice to achieve good outcomes. Features could include, for example, a counter-offer capability. So, if a client doesn’t meet the affordability criteria for one particular mortgage,

LEON DIAMOND is CEO at LiveMore

the so ware could automatically suggest potential alternatives. We’ve just launched this capability to our later life platform, and we’re finding that two times out of five it actually returns a be er product option based on their requirements – from capital and repayment to interest-only through to equity release. We believe that this feature helps in checking that customers get an improved outcome. Consumer Duty emphasises how important it is to provide accuracy, which can be achieved by providing customers with information on how much they can borrow via a range of different products. A counter-offer capability does this in real-time. Another useful feature to maximise brokers’ time is that both our simple affordability calculator –open to all –and a more detailed mortgage origination platform on the broker portal, share information so that the broker need only key in client information once. Our tech retains the information so brokers can take alternative options back to the borrower without the need to restart the application. This simplifies life for brokers and borrowers alike, allowing them to see exactly what products are available and suggesting alternatives all in one go – a big step in providing good outcomes. It helps support the vulnerable, improves communications, accountability and transparency, and provides evidence that the goal is to achieve be er. ● November 2023 | The Intermediary

Q&A

Contact State

The Intermediary sits down with with Lindsey McLoughlin, head of client strategy at Contact State, to discuss the changing world of lead generation and the customer journey First, can you give our readers a bit of background? My experience across the past 20 years has largely been on the digital, performance and client management side. I’ve specialised in affiliate marketing and partnerships, since a time when affiliate was quite a new marketing channel. It was quite unknown, but it went from strength to strength over the years that I was working in it across multiple industries. Affiliate marketing is an amazing channel to drive growth. That opened up the path of innovating and offering customers the most amazing experience and helping their journeys, making it easy for consumers to buy products. With my career came a lot of clever work with customer audiences, discovering how to target audiences. There were a lot of instances where – rather than having to be innovative on the technical side – it was more about tailoring our campaigns and targeting the right audiences, while working with tech firms that were able to help us be in the right place at the right time. There were also times of change, like bringing a business’ entire catalogue system online and convincing customers to work with a digital platforms, or working for JD Sports during Covid-19 when we had to shift to digital marketing to be able to hit revenue targets. When I joined Contact State, it was at a moment of growth. The business had been working really hard over three or four years to develop a platform that was going to create transparency, particularly in the face of regulation changes that were coming. It was so important to make sure that there were tools to help businesses, and to look at risk factors and certify the customer journey. It was the bread and butter of the business. My role was to come in and look at how we could support clients further, to help them with performance and elevate their customer experiences. This includes using meaningful data and insights to help them make sure that their budgets are more effective, or that they 20

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understand the customer journey, embedding tactics to make sure that that customer experience is enriched. To introduce Contact State, it’s a technology platform that supports helps financial services clients acquire prospective customers quickly, safely and profitably. We offer various levels of insight and oversight of the customer journey. Our clients who partner with lead generators can track that journey, as well as cataloguing it and embedding a level of consent, which is very important considering the Consumer Duty regulations. We can also validate those leads which are coming through before they hit the customer relationship management tool (CRM), to ensure they are as good quality as possible.

How has lead generation changed in recent years? It’s changed a lot over the past five to 10 years. We are able to offer oversight to businesses in the financial sector – where it’s heavily regulated, and regulation has brought with it big changes for businesses – and help them to navigate that. It’s tough for businesses – big and small – to acquire customers now that it’s so regulated. Previously, you could create a website and start generating leads with no questions asked, and pass those leads onto clients – but was it the best experience for the end customer? Did the customer fully understand the products? It must come back to the experience of that person, and over recent times it has become more about quality than quantity. Rather than driving thousands of leads, it’s about driving really good quality leads where the customer has had a great experience and feels understood. They know what’s happening next. They are expecting that call. They fully understand the product they’re investing the time to fill out a form for. Businesses can trust that the customer has gone through the steps, and they are saying yes. They’re saying, ‘I’ve had a great experience and I’m fully on board to hear what you have to say about your

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product’. That’s the biggest change. Contact State is pioneering that and supporting businesses with that change, that enrichment of the customer journey. It’s not just about getting the customer from A to B with our current tools – like certification and the visibility of the journey – but thinking about what else we can do. We’re currently rolling out appointment booking solutions, for example.

We ourselves have a mix of technology and a human-centred approach. Tech enables lots of great ways of working and enhances a business’ ability to be able to navigate change.

What does the future of tech in this industry look like?

Artificial intelligence (AI) is obviously a hot topic. It’s already very much part of You’ve been with the firm for our lives, but we will have to wait and LINDSEY MCLOUGHLIN see what AI brings to the table in the six months, what have been future. For now, like any piece of tech, it’s your major achievements? supportive of certain elements of people’s needs and decision-making. I have been working with such an amazing team, In the future, it’s about looking at the customer’s with an ambition and desire to make a difference. full journey. So, we’re very much looking at the As for achievements, we’re a young business multi-channel experience and how we can enrich and we are growing exponentially year-on-year, that journey and make it more effective. That’s our and within that we are seeing customers have focus. If AI plays a part in that, then we’re open to a fantastic experience, and we are adding value that, but now we’re more focused on looking at almost immediately as soon as we’re live. how we can get that customer to feel comfortable We’re always thinking about the ways that we and happy that they have the right information can solve problems. We listen and have made and that they get the best service. some operational changes that enable us to be more effective, working with our clients and How has 2023 been for making sure that they feel heard and understood. the business? Contact State has the agility to get new products out and meet a challenge, which has We celebrate our growth on a regular basis, and been incredible, and means we are changing and 2023 has been a huge success for us in many ways, adapting constantly. not just in terms of client wins, but in terms of learning and developing. Are people in this market set in We’ve developed as a team and have found a their ways, or ready to adopt tech? way of working where we’re all on the same page, working to our goal. We’ve set ourselves some We haven’t found much reluctance from potential important objectives to make sure that we can customers in this market. They are excited about give the best that we can possibly give to each the prospect of Contact State helping them make other and to our clients, as well as customers, better decisions or improving the effectiveness of while facing everything that happens within the their strategies, and they completely embrace our financial sector. ways of working. We’re looking at how people are using our We are not heavy integration-based technology services, and one of our strengths is our ability to – we’re very light touch. We’ve purposely made it continually talk about what we’re doing and how very easy for businesses to connect with us. We we can navigate anything that needs to be done, don’t want anyone to be in a tech support queue to either elevate what we currently do or find for ages and end up missing out on opportunities. something new that we can bring to the market. It’s about finding balance, with a human-centred We are an open book, and that’s a hugely approach and technology. There’s 100% a place for successful method for us in terms of having agility both, and technology provides the tools to enable – it’s the heart of what everything we do, to make decisions, but those decisions must be agreed sure that where there’s a problem, we immediately upon by a person. think about how we can solve it. ● November 2023 | The Intermediary

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Talking tech in 2024

t’s been a very challenging year for brokers and advisers, with interest rates going up and the cost-of-living having a major impact on potential borrowers. What is good to see, though, is that advisers are really starting to think quite carefully about the data they’ve got, and how they can use it to their advantage in these types of slumps. They are looking at their data within 360 Dotnet, asking for bespoke reports to enable them to spot opportunities. For example, they might highlight which clients took out a mortgage, but not protection, and use that data to their advantage to bolster their firm through what is quite a rough patch at the moment. This change has been furthered by the start of Consumer Duty – we had to be on the front foot in terms of the tweaks and changes that we made to our system to help and support those clients and spot those opportunities as well.

Challenges on the horizon Looking ahead to next year, I don’t think we’re going to have an instant recovery – it’s going to take a li le bit longer, perhaps until 2025 now, before we start seeing rates normalise. A big challenge for advisers in 2024 will therefore be client affordability. There is going to be more than one million people coming off their fixed rates, and if rates are still high, that’s going to be a huge challenge for them personally, but also a significant challenge for advisers. This is where exhaustive data analysis comes in. Firms should be analysing their data now, understanding their risks as a business going into 2024, as well as how many clients they’ve got coming off their fixed rates, and what that’s going to mean for them. Recovery itself is out of the industry’s hands, and what we all

The Intermediary | November 2023

learned in the pandemic is that it’s impossible to truly predict how things are going to look in a year’s time. It’s more about being well-equipped to handle change. If you can go into 2024, as an adviser, knowing the risks associated with your client bank, and having a back-up plan that uses data, that will mean – if rates still aren’t looking great – that at least you’ve got other business avenues to explore. The only way to do that is by being thorough with data analysis, which we facilitate, taking the guesswork out of things like selling protection. I was an adviser in 2007-8, during the market crash, when protection went through the roof. When you have a downturn in the economy, people tend to look a er the number one asset – themselves – making sure that should the worst happen they’ve still got income coming in. It’s clear that protection will be a big focus for the next year, and brokers will be looking to find those gaps where clients might be amenable to those conversations. The other big trend that we’re focusing on quite heavily at the moment is pre-qualification of new and existing clients. My view is that, as and when we start to see rates drop a li le bit, that’s going to cause a huge influx of enquiries to advisers and brokers. It’s going to be important to be able to pre-qualify those clients quickly and easily. That’s why we are working on ways to help advisers with this, looking at clients’ requirements and – most importantly – whether they picked up any adverse credit, which itself is going to be the biggest challenge without a shadow of a doubt moving forward.

Quick on the uptake This is a market that has been slow to take up new tech in the past. PreCovid, there was even an element

STEPHEN COWDELL is head of intermediary sales at 360 Dotnet

of fear around new developments, with brokers just not wanting to learn a new technology. However, lockdown showed us that the public is more tech-savvy than the industry had previously anticipated. Most clients will want to use features like a client portal. We have certainly seen a bigger uptake in the usage of our own portal at 360 Dotnet, and we know that 24% of clients will repeat transact with you if you use one. There are demands from consumers to be able to engage at a time that’s convenient for them, and advisers who don’t want to be working at all hours have to offer that facility. This doesn’t mean giving up on the human touch. Indeed, 98% of mortgages sold last year were via an intermediary – there’s absolute quality in the advice that’s being given, and that will remain moving forward. There’s an element of trust that consumers have with their advisers and brokers, and that will be a continuing trend, which will only be li ed by good data and automation. There are some brokers that – when it comes to client engagement – might be having ‘one night stands’, where they sell the mortgage for a 2-year or 5-year fix, and then don’t speak with the borrower until the end of that term. However, we’ve been inundated with broker customers over the past year looking for different ways to keep regular contact with their clients. Aggregators are potentially encroaching on brokers’ business, but tech can create that regular contact and personal communication touch, while alleviating what is already a he y workload. ●

T E C H NO L O GY Special Focus

Enhance employee expertise, don’t replace it

echnology is deeply rooted in almost every aspect of our lives, and its influence is only going to grow as our skills, knowledge and the tools available to us broaden. I recently a ended the National Residential Landlords Association’s (NRLA) Landlord Conference. It explored a wide range of topics, but an interesting theme was how we engage with technology. Our expectations of technology and digital experience grow daily. How we interact, shop, exercise, get around and entertain ourselves has been turned upside down by advancements in the past decade, and our expectations have increased as a result. Once we had to walk to the video shop to watch a film; today, we can simply ask our TV for it. Unless businesses evolve, they will wither, and the mortgage industry will be no different. If we look at our own segment of the market, younger landlords and intermediaries entering the buy-to-let (BTL) market have only ever known a digitally enhanced experience. As part of our strategy for future growth, we commenced a digital transformation programme two years ago that will improve the way our brokers and landlord customers interact with us, as well as how we operate internally. It will deliver benefits across almost all aspects of the way we work. It will not only improve the experience of engaging with Paragon, but also make us more efficient and data-driven. From an application perspective, for example, this will mean reduced touchpoints in the process and a shorter time to offer. Landlords will be able to know more quickly whether

it’s a case we can or cannot support, helping their business. A key element of the programme is the development of a digital platform that will help us deliver marketleading service. A er extensive scoping out of the solutions already on offer, we took the decision to build the platform in-house, because this approach would provide a completely bespoke solution, developed to meet the needs of our stakeholders. We established a cross-functional team, including IT, change and transformation, with resources also pulled in from other areas, such as insight and marketing. Working in an agile and ‘featuredriven’ way has helped us to incrementally work on small elements of the larger, more complex system that we’re delivering, some of which intermediaries may already recognise, such as our relaunched broker portal. A key aspect of this traditional method of system development is continuous experimentation and feedback loops to help us learn and improve throughout the project. This saw user stories fed into the development teams for shorter development ‘sprints’, lasting two weeks to reach an agreed objective. This was made possible by doubling our original investment to expand our user experience team, whose role in optimising the design and building prototypes for customer and colleague feedback was vital. An online research community made up of more than 200 mortgage intermediaries and 600 landlords was also developed. This provided a tool for two-way engagement, so brokers and landlords were able to inform our initial plans and then provide feedback to help refine the platform

JONATHAN WORKMAN is transformation director at Paragon Bank

at various key points throughout its development. At the heart of the project is the idea of using technology to equip our people to do their jobs more effectively and efficiently. Our people use their expertise to assess each case individually, enabling us to find solutions to some of the most complex cases. In an increasingly specialist market, this is something we are enhancing instead of moving away from, but we are doing so by addressing many of the pain points that brokers have helped us to identify. Application programming interfaces (APIs) mean we can access trusted data quickly, minimising the documentation requirements for brokers and landlords and, where appropriate, automation and artificial intelligence (AI) will reduce labourintensive tasks, while reducing the potential for inpu ing errors. This will be complemented with workflow routing, to mean that applications are managed by the most appropriate member of our team, who will have a clear view of each case to help them quickly direct their a ention where it is required. These are just some of a host of features that will transform the experience of those who work with and for Paragon. While our close collaboration with the industry throughout the project means we’re pre y confident that our efforts will be well received, we’re not going to spend too long pa ing ourselves on the back, and have plans for the next phases of our digital transformation. ● November 2023 | The Intermediary

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Paving the way in

he role of technology in financial services has evolved significantly in recent years, transforming the way financial institutions operate, and how consumers access and use products and services. The equity release sector has been somewhat behind in comparison with other financial industries, but more products and online platforms are coming to market and now exist to enable consumers to source, research and discover their own personal financial options. In general, the integration of technology in financial services has led to increased efficiency, enhanced security, improved customer experiences, and the development of innovative products and services that cater for the evolving needs of modern consumers and businesses. This really has pushed the industry to adhere to the new demands of consumers today. As a business we have spent the past three years working on the implementation of new technology and digital transformation within the equity release sector to achieve just this. We started by focusing on five key pillars, which would lead us to the delivery of revolutionary tech in the sector: Digital transformation: Implementing technology to enable the digital transformation of equity release, to improve convenience and accessibility for consumers. Automation and efficiency: Automation of various processes, leading to increased efficiency, reduced operational costs, and faster processing times. Data analysis and personalisation: Leveraging the technology to analyse vast amounts of data, gaining insights into customer behaviour and preferences, which allows for facilitation of personalised products and services, tailored to the specific needs of individual customers.

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equity release Enhanced security and regulatory compliance: Technology leading to the development of advanced security measures and the prevention of fraudulent activities. Improved customer experience: Implementing technology to enhance the overall customer experience by providing seamless and user-friendly interfaces, customer support, and personalised recommendations based on individual financial needs and goals. We have subsequently launched an eco-system adhering to these key pillars.

Digital transformation Over the years, we’ve seen the importance of online search excel at a compelling rate. Given that consumers want the power and control to conduct their own research whether that’s for retail shopping, holidays, financial products, or equipment – this shows trust, reliance, and demand for fast, real-time data.

Automation and efficiency Historically, however, the equity release market has been quite closed off to product research. Unlike the residential mortgage market, no advisory firm enabled customers to do this. So, we developed smartER™ – a ‘whole of market’ research tool for consumers.

Data analysis and personalisation smartER™ gives consumers live, real-time rates and features, and is presented in a way that they can understand, which is particularly important due to the Financial Conduct Authority’s (FCA) Consumer Duty principles se ing out higher and clearer standards of consumer protection across financial services, and requiring firms to put their customers’ needs first. This ensures customers can compare products accurately in their own time with their family,

and without pressure from outside sources, giving them comfort and more control. Since the platform went live, its usage has more than doubled. Providing real-time, accurate data has been critical and will continue to help the wider industry through the provision of smartER™ technology.

Enhanced security and regulatory compliance We have also launched a new factfind and product confirmation le er (PCL), a departure from the outdated paper-based system of gathering client information and delivering extensive suitability reports. This shi was prompted by the FCA’s ‘Dear CEO’ le er in 2020. Our innovative approach challenges advisers to thoroughly explore all opportunities for their customers. Most importantly, it captures customers’ responses in a personalised financial questionnaire, reflecting their unique voice. This questionnaire is securely stored in their personal portal, accessible 24/7 and throughout the recommended product’s term. From a functionality and compliance perspective, this provides auto-intelligence to save advisers time and make the process far more transparent, plus tooltips to help advisers explain key information to clients as well as provide adviser guidance, and a 100% completion requirement to ensure no client facts are missed.

Improved customer experience All this is supported via our live product database, forming the central part of our ecosystem, connecting all our consumer-facing tools, including live calculators, comparison tables, smartER, and now our digital fact-find and product confirmation le er. This enables advisers and clients to continually receive live and accurate product information – an industry first.

MARK GREGORY is CEO and founder of Equity Release Supermarket

Continuing to push the boundaries We have built Equity Release Group, which now services the entire equity release eco-system. The group structure consists of: Equity Release Supermarket – the smartER equity release comparison site; Equitec – pioneering the future of equity release technology; and Equity Release Partners – the smartER equity release referral service. We can also offer our advanced digital capabilities to the wider market, and share our technology with other brokers across the mortgage industry. Selected specialists can utilise these platforms via Equitec – the technology behind our online tools – helping to support and propel other brokers. The new model encapsulates broad digital capabilities which support the client and adviser journey, helping to ensure a more robust advice arm. This year, we will be bringing to market this group structure, which will help to encapsulate and be er communicate our ecosystem and value to the audience. Technology is critical in today’s market. Embracing technological advancements and staying updated with the latest trends is essential for success and sustainability in today’s dynamic market. ● November 2023 | The Intermediary

T E C H NO L O GY Special Focus

The latest trends in digital banking

ast month, I a ended the 6th World Global Digital Banking Summit in Berlin, which was very insightful and illustrated how much the modern approach to technology is changing. Speakers included Lloyds Banking Group, Starling Bank, Monzo, N26, ABN AMRO, Swedbank, Deutsche Bank and the National Bank of Georgia, among others. Topics were varied, which made the summit very interesting for someone who has worked in IT for a long time. However, my personal takeaways were three critical areas where some banks are leading the way for the rest of us.

Organisational structures Banks typically have a hierarchy, with reporting lines from juniors through to middle managers up to the C-suite and board of directors. This is ge ing to be a bit old hat, judging by some of the new kids on the block. Organisational structures and reporting lines are being replaced, pu ing an emphasis on trust in teams to do the right thing and drive solutions forwards. Among the presentations, there were comments that certain ‘neo’ banks are run by so ware engineers as opposed to the finance department. One person commented, “we have zero people managers,” while another said, “we have removed reporting lines.” It was noticeable that certain product owners introduced themselves as ‘working in’ an area, rather than being ‘responsible for’ an area, which we may have been used to previously. From an observer’s perspective, it was also clear that banks are trusting very youthful folks to innovate their products and move quickly. They are not tied to any previous custom and practice, which perhaps the more established banks are. Accountability sits within teams that consist of different disciplines –

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IT, compliance, product development, finance, etcetera. Problems are worked on by the team, which solves them however it sees fit, with outcomes and the team’s goals being key. The team just needs to ensure that those outcomes link to larger bank and organisational goals.

Process and speed of change The norm in the banking sector now is to update solutions frequently. An example was given of 25 deployments to production per day, and hundreds of deployments to production each week. Automation and cloud computing – clearly the new normal – were distinctly communicated as enablers for this, as well as regular, blameless post-mortems, feedback loops, discussion and learning from success and failure. Reliability is a fundamental solution feature, which requires communication, cooperation and coordination – so again, an emphasis on teamwork.

APIs and data-first Open Banking ecosystems and application programming interface (API) enablement are expanding outside of banks. Many banks are working with nonbank fintechs, partnering up to follow API-centric approaches to enhance their ecosystems. New Financial Data Access (FIDA) regulation being put forward by the European Commission will drive this further. This aims to improve payments and sharing of customer data in a secure way so they can access a wider range of financial products and services. Open Banking is available for mortgage applications, but is still not widely used. However, if there was greater uptake by lenders and brokers it would automate and speed up the application process.

NEIL DYKE is chief technology officer at Phoebus

Organisational structures are being replaced, putting an emphasis on trust” On a more general basis, there has been greater input from traditional banks, which are now seeing the value of data they have access to across all their subsidiaries. ‘Value’ is seen as the ability to drive additional sales, incremental customer value and ‘stickiness’ of a product or service. This not only drives immediate financial gains but also cements the long-term relationship with customers. In order to achieve a ‘data first’ approach – making strategic decisions based on data analysis and interpretation – there was much discussion at the summit on data cleansing, data-centric approaches and data monetisation. The conclusion was that good artificial intelligence (AI) requires good data, and that “data issues are the number one reason for AI failure.” This could be data that is inaccurate, incomplete or biased, but ultimately, the quality of the AI output relies on the input data. However, the biggest challenge to a data-first strategy is the ability to overcome traditional data silos. These are pockets of information stored in different systems that don’t connect with each another. The summit illustrated just how fast the fintech world is changing, with intelligent, creative and forward looking people at the heart of it. ●

T E C H NO L O GY Special Focus

Balancing human expertise with the development of AI

rtificial intelligence (AI) has made massive strides over the past 12 months. In particular, ChatGPT, the innovative chatbot technology, has not only illustrated the power and potential of generative AI, but popularised it with the public and businesses alike. Technology has already proved its worth to many sectors by speeding up administrative tasks, and this is especially true in the mortgage industry. Together with its close relation machine learning, AI is a new step that has huge potential to boost efficiency, improve performance, and enhance the customer experience. However, such transformative potential for how the mortgage business is conducted also raises questions among our brokers about what the future holds, and how their human expertise can intersect with increasingly advanced AI.

Wide-ranging applications The list of applications for generative and traditional AI continues to grow. For brokers, the biggest difference it may make could be to the quality of their service. Large language models that give creative responses to prompts will be more geared towards handling customer enquiries, while ‘traditional’ AI is being used to swi ly process and verify documents, reduce manual data entry, and streamline operations. The mortgage industry has experimented with the tech to automate the application and post-application process, reducing broker workloads and the burden on applicants. It could also accelerate and improve fraud detection through data analysis to detect anomalies,

personalise communications and customer experiences, enable more consistent and efficient underwriting, and even assist with lead generation. That is, assuming that AI and mortgage brokers are able to peacefully coexist!

Too much or too little The recent AI Safety Summit of world leaders at Britain’s Bletchley Park confirmed that the benefits of AI mean it’s unlikely to be abandoned. However, concerns have reached a fever pitch, and while the Prime Minister stressed that it was important not to be alarmist, he was very clear, warning: “[T]here is a case to believe that it may pose a risk on a scale like pandemics and nuclear war.” For mortgage brokers, the risks are less apocalyptic, but more immediate. On one hand, there is the potential for harmful unintended consequences. Evidence of AI and machine learning models introducing discriminatory bias has already been observed. We have seen Amazon’s AI-assisted recruitment process discriminating against women, and even bots in US healthcare neglecting the needs of black patients. There is also a risk of businesses being le behind if they fail to adopt AI at the pace of competitors. A recent survey by the CFA Institute found that 56% of members were routinely using AI and big data solutions in data analysis. Will those who continue to work without it lose out? Finally, there is the fear that the industry could go the other way, that AI will completely drive out people from the mortgage process, diminishing the importance of brokers and removing the human touch. We are confident that this fear is misplaced.

JONATHAN STINTON is head of intermediary relationships at Coventry for intermediaries

The power of people Time and again, the public makes known that, while they welcome the convenience and speed technology may bring, the human touch is still crucial. Providing clarity, certainty and confidence is at the forefront of brokers’ thinking. There is li le point in improving your lead generation only to alienate those leads by withholding the human voice. Customers’ preference for this is well-founded. Human expertise, insights, and above all, the relationships that enable professionals to explore customers’ needs, cannot be programmed. Equally, brokers must be able to discuss and make judgements about complex cases with lenders, or examine unique criteria in person to offer tailored guidance. As the market becomes more complex, and as lenders continue to innovate when it comes to building new products, the trusted human guide will only grow in importance. But this, of course, is also why AI can be so powerful. Used well, AI can automate time-consuming tasks, accelerate fact-finding and identify customer insights that the broker can then pursue further. At Coventry for intermediaries, our focus is on using tech to speed up the mortgage journey and help advisers to deliver the best possible service to their clients. We believe AI should empower rather than replace people, allowing brokers and customers to spend more time building out their client relationships and focusing on the tasks that boost their offerings. ● November 2023 | The Intermediary

The Interview. One Mortgage System

The Intermediary caught up with Neal, Dale and Melanie to reflect on the business’ success, the nature of tech in this industry, and what might be coming over the horizon next.

A gap in the market

Jessica Bird speaks with Neal Jannels, Dale Jannels and Melanie Spencer at One Mortgage System (OMS), about the future of seamless technology, data sharing, and the need to keep evolving

or Neal and Dale Jannels, managing director and CEO of OMS respectively, mortgages have always been a family business. The firm was launched in 2017-18 as a specialist customer relationship management system (CRM), and it is also now a full lender origination platform, along with 12,500 registered broker CRM users, and 2,000 broker licences. In that time, OMS has grown exponentially, enabling the system to service – in addition to its core broker market – eight out of the top 10 packagers, six or seven large networks, and three or four lenders so far, with more due to launch. As a result, the system is processing about £1bn in lending, and approximately 4,500 to 5,000 cases, per month. As part of this growth trajectory, in September 2023 OMS welcomed Melanie Spencer to the role of business partnership and growth director, bringing her 22 years of experience in the mortgages and protection market – and its various tech journeys – to bear.

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The launch of OMS came partly from necessity, a gap that needed to be filled, and partly as a result of extensive practical experience across various aspects of the market. Neal says: “I’m fully CeMap certified, so I do understand the broker side of things, as well as being in tech. I’ve been brought up in the mortgage industry.” Dale adds: “I came to this with a good understanding of the wider mortgage market, as well as being a broker and a packager, dealing with lenders, networks, and so on.” At the time, Neal explains, there was not a fit for purpose system that did everything needed for the mortgage journey, and the process could, as a result, take days. Anyone with an eye on the market for the past year alone can attest that this is not a sector that can afford to be bogged down in slow processes any more. The gap was in such need of being filled when the product originally launched, that Dale remembers competitors clamouring to be able to use it, too. He says: “The system was really good at simple things like automating pipelines to lenders, giving them updates on enquiries, [decisions in principle (DIPs)], applications, and so on, so that they can manage their tranche of funds on exclusive product ranges. “When lenders started asking our packager competitors if they could automate things similarly, the simple answer was that they couldn’t, so they started knocking on our door, and the rest is history.” The reason for the platform’s success over the years, Dale continues, is that it helps people across the market negate – via automation – the need for perhaps 13 hours’ worth of the workload of a normal mortgage. Neal says: “OMS was built to speed up that process and integrate with other companies and third-parties, to speed up the whole journey. For example, the client can do the fact-find themselves, on the portal at home in the evening, and by the time it hits the broker

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it’s got ID verification, open banking, it’s credit searched, and it’s done an AVM [automated valuation model]. “Then, instead of there being data entry into another system, it’s in one place and it integrates with others. “That’s what we looked at doing for ourselves, and then we realised we could go whole of market, because no one else at that time was doing it.” In the time since that initial launch, the platform has changed and evolved. This, Neal explains, has been supported and spurred on by listening to what clients and brokers want from the systems they use day in, day out. “We have the ability to listen, because we don’t outsource development,” he adds. “We can quickly change the system and build out new integrations or new systems to keep up to speed with the mortgage industry. However that’s adapting, we can adapt the system to it.” This ability to take and act quickly on feedback fits with the firm’s ethos, namely that it is built by brokers, for brokers and lenders. “We are not just a tech company that has come in and said, ‘this is how you should do a mortgage’,” Neal says. “We actually know the process, have that experience and knowledge, and we convert that into the tech world to help brokers.” “That ability to act quickly on client feedback is absolutely key in the current market,” adds Dale. “The other side of it is, while we are listening to clients, we are also listening to the market, which is moving so quickly – we need to be on top of everything that’s happening.”

Facing reluctance

It is widely accepted that the mortgage market has, certainly in the past, struggled to adopt new systems and technologies with any urgency. Indeed, many brokers still rely on Excel, at a time when all other areas of life are moving on at pace. From the firm’s start, bringing a new, muchneeded piece of tech to the market, to its current journey of growth and expansion, OMS sets itself up as a source of innovation. Dale says: “We’re disruptors in this marketplace, which has been pretty stagnant for a while. We are making changes happen, rather than just talking about it.” There are some valid reasons for this reluctance, of course, as brokers and lenders alike handle sensitive data and help borrowers through likely the biggest and most lifechanging purchase they will ever make. It might, then, seem sensible to hold back from adopting

OMS was built to speed up that process and to integrate with other companies and third-parties to speed up the whole journey. For example, the client can do the fact-find themselves, on the portal at home in the evening, and by the time it hits the broker it’s got ID verification, open banking, it’s credit searched, and it has done an AVM” flashy new systems without taking the time to fully consider. This is where having a tried and tested platform, built by people who understand the need for security as well as ease, comes into play. Dale notes that it is particularly important for OMS to work with lenders to bring them into the 21st Century – one of the reasons Melanie was brought on board. It is important to remember, also, that this market is not a monolith, and that there is no one-size-fits-all solution. Neal says: “Although the processes and what they’re doing is the same, everybody works differently. OMS has bespoke workflows, customised fact-finds, and is white-labelled and can be changed to how the broker wants to work, which is key. “They don’t want to be told how to process an application; they want to be able to do it themselves. We’ve adapted OMS to be able to facilitate that, and those changes can be made live, rather than waiting for a development team to do it.”

Changing times

Across all markets – and the world – perspectives towards tech and automation have undoubtedly shifted over the past few years. The onset of Covid-19 brought many reluctant people into the fold when it came to remote work, using text, emails and WhatsApp, as well as the need to digitise, automate and connect. Since then, although much of the inperson side of this job has returned, progress has continued at pace for various other → November 2023 | The Intermediary

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reasons. The introduction of the Financial Conduct Authority’s (FCA) Consumer Duty this year brought with it a need for increased documentation, while the ever-changing rate environment has helped many market players understand the need for speed and automation. In addition, client demand is pushing things forward, Dale explains: “People now expect you to be dealing with a mobile-friendly system. Otherwise, they’ll just go straight to the bank or building society directly, because their technology will take over the broker’s.” This environment is part of what has led to a substantial increase in new customers for OMS this year, as people embrace change at an increasing pace. In addition, the firm has moved into the lender origination space. Melanie says: “The broker journey is there – it’s now about moving into the lender journey, so they can deal with brokers and customers directly, and transact in a simple way, transforming their businesses as well.” Bringing lenders into the process, she adds, will also mean that OMS handles transactions end-to-end, giving it the ability to report on and analyse deep wells of data. “Lenders need to be able to access data, transact quicker, and give the customers more certainty,” Melanie continues. “Also, customers are likely going to become more vulnerable. So, when the type of mortgage they need in the future could change quite drastically, there’s got to be a choice for customers that the lender can offer. The lender needs to have the right systems in place to be able to transact with that customer. “Some lenders don’t have the ability to go into different lending areas because of their tech, but being able to retain those customers – as well as attract new ones – is key.” Melanie adds: “Customers are changing the way they interact. “You really need the right tech, with various funnels – websites, phones, Zoom and Teams calls – so that there’s lots of different ways to get that customer journey started.” When it comes to support for the Consumer Duty requirements, once again, the firm started the process by speaking with its clients. “Every compliance team has slightly different views,” Neal says. “So, what we built into OMS was a completely free area where brokers can put in their own understanding of vulnerability, their own questions – nothing is set in stone. “We’re already seeing people change things they implemented on the 31st of July – tweaking questions, for example – that’s the 30

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OMS offers a massive opportunity for brokers that may not be in the specialist area, or equity release, or second charges – we have links in with all of those, we have all the sourcing systems. Brokers need to have those tools in their armoury” beauty of OMS, they can do that themselves. There’s no delay.” This flexibility is of added importance when considering the fact that even the FCA’s guidance is likely to change and evolve, or at the very least, its expectations become clearer as time goes on under the new system. OMS is ready to adapt with these developments in real-time, and in the meantime, everything is audit-trailed, including products that the client did not take up. To this end, OMS links with firms like iPipeline and Uinsure in order to provide the opportunity to easily cross-sell.

Facilitating lending

The purpose of automation, digitalisation and integration in this market is often, at its core, a matter of freeing up time for brokers. “By the broker having the right tools in place, they can spend more time with the customer,” Melanie says. She notes that lenders also need to understand the value of automation and speed, particularly when they find themselves forced to pull and change rates on short notice. At the very least, lenders must be equipped with the right agile technology to be able to make those changes smoothly. This can also be the difference between keeping up with competitors – and entering into new markets – and being left behind, at a time when many are seeing new customer numbers take a dip. “Change happens so quickly, and lenders need to be at the forefront of that, rather than behind,” Melanie adds. Nevertheless, and particularly when it comes to things like spotting vulnerability, OMS does not suggest that automation and tech

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should be implemented to the detriment of the personal touch. Dale says: “We’re still catering for both opportunities, the tech side or a more manual process – our brokers and lenders can deal with both.” Neal adds that tech enablement simply aims to speed the process up, rather than negate the real conversations brokers are having with their clients. By removing much of the administrative burden, there are in fact more opportunities to forge real connections with borrowers. For example, while the conversation about artificial intelligence (AI) rages on, with some suggesting it might take over the advice process, Neal is clear that while there is a use for it, this will be in sourcing and analysing products, rather than replacing conversations between a broker and their client.

Diversifying for the future

With approximately 1.3 million people due to revert onto their lender’s standard variable rate (SVR) next year, brokers will have their work cut out for them providing assistance, particularly considering that rates – and borrower circumstances – may well look very different from when they first took out the loan. Using technology and automation to relieve the burden and allow brokers to focus on their personal relationships is going to increase in importance, as it will free the broker up to provide whole of market advice, and even diversify into new product areas. “Brokers using our platform deal with everything from mortgages to equity release, bridging loans and second charges,” Dale says. “We want to hold their hands next year in terms of areas of the market they may not currently be in. “OMS offers a massive opportunity for brokers that may not be in the specialist area, or equity release, or second charges – we have links in with all of those, we have all the sourcing systems. Brokers need to have those tools in their armoury.” This is particularly true in the face of increased competition. Dale adds: “There will be three or four people chasing every one of those 1.3 million people. “Technology can help the broker do the majority of the groundwork and speed up the process from start to finish.” One way in which OMS is looking towards improving the mortgage journey in the future is in its involvement with the Open Property Data Association (OPDA), the body which spearheads data collaboration in the industry.

“OPDA is looking at open data transferring schemas, making sure that this journey in the mortgage market is as quick and seamless as possible,” Dale explains. “2024 is going to be huge for data sharing and a trusted data framework.” This data can help lenders discover which areas of the market are showing gaps and which are in need of product innovation, ultimately helping the broker and the end borrower by shaping a market that is increasingly fit for purpose. However, with innovation and expansion from lenders comes an even further reinforced need for the tools to help brokers keep track and stay on top of their workloads. “There might be specialists in certain areas,” Melanie adds. “But brokers are going to have to start thinking outside the box, and they need to have support in helping them do that, whether it’s going into different lending types, or other areas of financial services such as protection. “We can support them to make that transition easier and ensure that the customer is not impacted.” OMS plans to make some game-changing developments in 2024, but the most important thing, according to Neal, is getting lenders on board which are ready to make the leap and lead by example. “The problems won’t be the CRM systems, it will be whether we can get lenders to use and collaborate with them,” he explains. “Take ID verification. You can do it through multiple systems – a broker will do it, but a lender won’t accept that and wants to press the button themselves. “We need to get lenders to jump a little, to come to where we can share data – that will speed up the market and make it easier for brokers.” While 2023 has been a difficult year for many, Neal believes that this will be the trigger needed to adapt, and that large lenders will hopefully take the lead, encouraging the rest of the market to keep up. Melanie says this should also build confidence in the security of CRMs, allowing people to embrace data sharing and work towards a more integrated market. As a message to the market, Dale concludes: “Don’t be scared of technology. Whether a lender or a broker, you need to move forward toward a process that is seamless and simple and meets client demand. Brokers and lenders will need to embrace technology to get their piece of the pie in 2024.” ● November 2023 | The Intermediary

RESIDENTIAL Opinion

Little details make up big pictures KATHY BOWES is intermediary manager at The Cambridge Building Society

Individual underwriting remains key to ensuring a case can be considered as a whole proposition

hat the UK property market is struggling is not news. But that the constituent parts are not all suffering equally, is significant. The UK is the sum of many micromarkets. We need only look at the plethora of monthly house price data to see that the market may be the sum of its parts, but they are not equal in either size or performance. Nationwide’s last house price index identified the South West as the weakest performing region, experiencing a year-on-year price decline of 6.3%, whereas Northern Ireland maintained its position as the top-performing region with a modest 1.8% fall. Meanwhile, e.surv’s house price index showed only two areas saw prices rise last month, Yorkshire and the Humber, rising 0.6% to an average house price of £244,300, and the North East, li ing 0.2% to £195,092. Average house prices in Greater London were flat in September, at £704,351. Of course, there are many more, and while they may broadly agree in their general direction of travel, there are important details in the narratives. According to The Money Charity, the average total debt per household – including mortgages – was £65,510. It is against that backdrop that deposits at the four biggest banks have fallen

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by close to £80bn over the past year, as retail and corporate customers look for be er interest rates, households grapple with higher costs, and mortgage holders pay off loans early. Arrears are growing, but employment is largely holding fast. This means that across the country, we are determined to remain pragmatic and commi ed to the market.

Human at the core Flexibility and pragmatic underwriting are key to ge ing any loan across the line at the moment, and will be for the foreseeable future. Individual underwriting remains key to ensuring a case can be considered as a whole proposition, and isn’t just based on a credit score together with a set of rigid computer-based rules. Now more than ever, a human-based underwriting approach is needed. It is a fundamental part of our purpose as a building society that we are there to assist people and make a real difference. Our unique Rent to Home initiative helps first-time buyers who can afford to rent, but are unable to save a deposit, to purchase a home. Successful applicants rent from us, and if they’re ready to purchase their own home within the following three years, 70% of the rent they’ve paid will be returned to help towards the deposit.

We have aspirations to grow this scheme. By thinking differently to help those who can’t afford to buy, and by working differently with community partners to improve access to shelter and housing, we’re able to provide the opportunity, via a substantial deposit, to those who wouldn’t otherwise be able to consider homeownership. This is one example of the effort we make to understand the challenges first-time buyers and current homeowners have. By frequently reviewing and revising propositions and initiatives, we want to ensure that we are in the best possible position to support intergenerational housing aspirations. We want to offer solutions to first-time buyers who cannot rely on the ‘Bank of Mum and Dad’ by supporting programs like Shared Ownership, and relaunching our 95% loan-to-value (LTV) mortgage line. Flexibility and pragmatism are key across any lender’s portfolio. When you look past the national picture, it’s easy to see the UK as a collection of micro-markets, each with its own distinct characteristics. This is one reason we haven’t adopted the one-size-fits-all Mortgage Charter. The time and willingness to respect these dynamics and the individual circumstances of borrowers – whether starting out on their homeownership journey or established and facing an uncertain future – are a prerequisite of lending, especially when it comes to those who don’t fit the statistical definition of ‘average’. For the millions of mortgage applicants who don’t fit the mould, having the underwriting resource to evaluate each case on its merits is essential. ●

RESIDENTIAL Opinion

Flexibility is crucial to support self-employed

he UK has a significant number of people who work for themselves. Levels of self-employment have dropped a li le in recent years, off the back of the challenges of the pandemic and the cost-of-living crisis, but despite this, millions remain their own boss. Indeed, according to Government data, between May and July this year around 4.24 million people were classed as self-employed. This might mean running their own businesses, such as opening up a café, florist or interior design firm. However, the definition of self-employment can also span contractors who have set up a limited company and work for a number of different clients. There are plenty of benefits to this method of working. You could enjoy greater flexibility over your working hours, for example, ensuring you enjoy an improved work-life balance. There is also the potential to enjoy a larger income or have more say over the actual work you take on when you are self-employed. Such workers have the same dreams of homeownership, and moving up the property ladder, as those in regular employment. Unfortunately, the variance in their employment status means that actually doing so can be rather more complicated.

Jumping through hoops We know from our conversations with brokers just how frustrating it can be to help self-employed clients access the funding they need. All too o en, lenders enforce very strict criteria, demanding years of accounts before they will even consider a case.

That’s all well and good if the business has been up and running for a lengthy period, but completely excludes those who have only recently branched out on their own. The fact that the business is young should not mean that finding funding for a purchase is all but impossible.

Doing things differently We take a very different approach here at StrideUp, embracing a more personalised way of assessing cases. Because each application is manually assessed, it means our underwriters are in a more informed position around what’s truly important in a case. As such, we are in a position to support more buyers than lenders that rely on automated decisioning. This is particularly important for self-employed clients, who really do benefit from the personal touch. It means that we can work with self-employed borrowers with just one year’s trading history if they earn more than £50,000 in total, or two years where the income is below this level. In either case, we’re able to assess affordability based just on the latest year’s income – this is particularly helpful for young businesses that are still growing. There is similar flexibility for contractors, too, who can be accepted with at least three months remaining on their contract, providing at least 12 months of history in the same industry, with affordability calculated on their day rate multiplied by 48 weeks. Ultimately, it all comes down to taking the time to get to know the client and their situation, finding ways to support them rather than reasons to say no.

SAKEEB ZAMAN is CEO and co-founder at StrideUp

Flexibility difference A client’s employment position is just one example of where flexibility and an understanding approach can make a difference to their homeownership dreams, but it’s certainly not the only one. There are many areas where mortgage lenders can be quite closeminded, to the point that it dents the ownership prospects of perfectly good applicants. Take deposits: as property prices have grown and household budgets have had to deal with rising bills, this has le li le room for some potential buyers to get a suitable deposit in place alone. This has meant they are turning to loved ones for gi ed deposits, yet some lenders are particularly strict over who they will accept such gi s from, enforcing their own definition of ‘close relatives’. The ability to offer enhanced affordability, by considering a wider range of income sources, means that StrideUp can offer up to six-times income, too. It’s flexibility in action, meaning clients can purchase a larger property, or one in a be er location, or simply access a larger refinance amount.

Offering more options This just emphasises the importance for brokers of looking beyond the conventional lender approach, as partnering with other home finance providers can expand the range of options open to their clients. Together, we can support greater numbers into homeownership, irrespective of their employment or any other perceived complications which may cause conventional lenders to think twice. ● November 2023 | The Intermediary

Meet The BDM Buckinghamshire Building Society

The Intermediary speaks with Matt McDougall, key account manager (East and South) at Buckinghamshire Building Society How and why did you become a business development manager (BDM)? Put simply, it appeared the be the next logical move in my career. I started out on the counters at Halifax, through Banking Consultant, which was the opening of current accounts, loans, savings, and credit cards, and then over to mortgage admin at a brokerage firm, before training to become a broker. After working as a broker for around five years, I learned a lot about how I like to work and what’s 34

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the best fit for me personality-wise. I felt BDM would be a great fit, and an area where I could start to make a bit of a difference.

What brought you to Buckinghamshire Building Society? Some say fate, some say luck. I say it was a recruitment agency. I’ll be honest, I didn’t single out Bucks as the one place I wanted to work; however, I knew that Bucks was of a size and structure that suited me. I feel with the smaller mutual lenders you can really get to know your brokers, and also, feedback

is welcomed up the chain so you can make a real difference to the society’s offering based on market needs from service to products. After having worked here for over a year now, I realise I struck gold.

What makes Bucks stand out from the crowd? Product innovation here is constant. Where we might not release a new niche or product every week, I can assure you we are always working on something. Take our joint borrower sole proprietor (JBSP) product, for example – with a plausible exit plan for the parent, we can base the term

MEET THE BDM

on the younger person’s age. Our Family Assist product allows a firsttime buyer to purchase at 100% loanto-value (LTV), as long as we can take a collateral charge of 20% on the parent or grandparent’s property. We don’t take payment towards that charge; it just sits there until the buyer reaches 80% LTV or under and it is then removed. It’s products like these that we didn’t need 10 years ago, but which will be the types of things that get the market moving again. Also, on the service side, brokers have access to not only the key account team, but they can also speak to the decision in principle (DIP) team and the underwriters, so they are getting first-hand information when they need it. Not every lender can offer that.

What are the challenges facing BDMs right now? I can only really speak from my own perspective here, but we need to be out and about or on virtual meetings to spread the word about what we do, as well as to really get to know our customers. Brokers are so busy with a million and one things, so I fully understand when someone can’t spare the time to come to an event or attend a meeting; however, that 15 to 30 minutes could make all the difference to customers who don’t fit the high street or need a bit of lateral thinking.

What are the opportunities for BDMs? Opportunity is out there. Now is the time for BDMs to be creative. Consider what makes you stand out, what will help the market recover, and what brokers really need from us. There was a great advert from Google once that was encouraging the asking of questions. It said to add a question mark to the end of statement and see where it leads

you. For example, the statement “Our service level agreement (SLA) is three working days.” Add a question mark to that and suddenly you are reviewing processes and seeing what can be done to improve. Think to yourself, if Stacey Soloman had a TV programme called ‘Sort Your Society Out’ what would she do? The possibilities are endless with a warehouse and a label maker.

How do you work with brokers to ensure the best outcomes for borrowers? Education and communication are key here. Every lender works slightly differently, they all have criteria quirks. Brokers do an amazing job of retaining this information to know where to look before even logging into a sourcing system. In terms of what I do, it sounds cliché, but I talk to people. Whether it is at an event, online on a virtual meeting, or in an office. How often is it that you are researching something online but keep hitting the same dead end? If only you could speak to someone who, even if they can’t help, could steer you in the right direction. Also, let’s not deny that there are cases that go wrong or are declined. Being open and honest and having that conversation may make all the difference to the outcome, or in the rare case we genuinely can’t help at all, that chat may help when the broker replaces the case if that is an option. You always have to remember that even though we are speaking to a broker, there is a customer at the end of the line that might be buying their first property or remortgaging following a bout of adverse credit, and this could save them thousands of pounds. Having been a broker before really helps me here, as I know exactly the conversations that will be happening and the amount of trust that a customer puts in you as their broker. Once you realise that, doing the right thing will follow.

Every lender works slightly differently, they all have criteria quirks. Brokers do an amazing job of retaining this information” What advice would you give potential borrowers in the current climate? My best advice would be: if you can afford it, don’t let the market or the media put you off. At the same time, just because an affordability calculator says you can borrow X amount, doesn’t mean you need to borrow all of that, borrow what you feel comfortable with. Take time, listen to your broker, consider all the information you have, and if you feel you can afford to buy and you want to, do it. For most people, mortgages are going to be 25-years plus, there are always going to be highs and lows during that time. ●

The Bucks

Established 1907 Products ◆ Standard residential ◆ Non-standard and impaired ◆ JBSP ◆ Family assist ◆ Later life lending ◆ BTL ◆ Holiday let ◆ ExPat BTL and holiday let ◆ Self-build Contact mattmcdougall@bucksbs.co.uk 01494 321883

November 2023 | The Intermediary

RESIDENTIAL Opinion

Adviser innovation key to first-time buyer success

he constraints for firsttime buyers ge ing onto the property ladder have been well documented in both mainstream and trade press. Last year, we collaborated with the Industry Panel for Financial Advice (IPFA) on a white paper on this very topic, and unfortunately, many of the challenges highlighted have only exacerbated in the current economic landscape. At the time of writing, we are awaiting the Autumn Statement, where it is rumoured the current Mortgage Guarantee Scheme will be continued. Outside of this, though, the recent Conservative and Labour Party conferences gave us li le hope. Aside from new-build home pledges, there isn’t much on the agenda to solve the many issues facing firsttime buyers. Help to Buy was a huge success, and supported approximately 330,000 people to buy their first home. The pros and cons of this scheme have been widely discussed, but the key area for me is consumer awareness. Every new-build site was decked with Help to Buy promotional signage, the scheme was in essence easy to understand, and most first-time buyers were aware that this potential solution was available to them. Can we say the same about the other options that are still available today?

Research from Rightmove shows that there are now 25 enquiries from prospective tenants for every available rental home, increasing from eight in 2019. Average rents have increased by 10% from this time last year, reaching a new record of £1,278 per calendar month. In London, it’s increased by 12%. Rising rents impact not only tenants right now, but also their future plans, by further constraining day-to-day affordability and the ability to save for a deposit. We have seen lender innovation, such as Skipton’s Track Record product. This is designed to support first-time buyers stuck in the rental cycle, where they can demonstrate a track record of making rental payments but may have minimal or no deposit. This is a fantastic new concept, but regulatory requirements mean this will not be a wide-scale offering or a product concept all lenders will adopt. Other potential solutions – from joint borrower sole proprietor (JBSP) and First Homes, to ‘Bank of Mum and Dad’, guarantor mortgages and Shared Ownership – provide a plethora of options, but are first-time buyers aware? Have they become disenfranchised with the possibility of homeownership? Cross-industry collaboration is needed to stop this becoming a reality, alongside promoting the importance of professional advice.

Stuck in the cycle

New normal

The rental market faces the same supply and demand dynamic operating in the purchase market. Of the 8.5 million households that rent, 4.6 million are rented privately – the remainder via social, local authorities or housing association, according to Government data.

Over the past 14 months, mortgage rates have become mainstream news, with higher interest rates becoming the ‘new normal’ for current homeowners. For first-time buyers, this will be their only normal, with no previous low rate environment to compare against.

The Intermediary | November 2023

STEPHANIE CHARMAN is strategic relationships director at Sesame Bankhall Group

Help to Buy was a huge success, and supported approximately 330,000 people to buy their first home” My conversations with advisers suggest that first-time buyers are stuck in a ‘go/no-go’ decision cycle. Mortgage rates appear to be on a downward trajectory, but Nationwide’s recent house price index data shows a circa 6% year-on-year fall in house prices. The dilemma for buyers is whether to buy or wait and see if their dream home becomes more affordable. However, market conditions may change, and rates may increase. This is where the guidance from an adviser is crucial to helping people make informed decisions. For me, the answer is to introduce a new affordable housing scheme, possibly similar to Help to Buy but in a very different guise, taking on board everything we’ve learned from the past. A scheme that supports first-time buyers buying their starter home in both the new-build and second-hand market. Key to success, however, is ge ing the right people around the table to devise the scheme, including the Government, lenders, developers and advisers. I believe the invaluable consumer insight our advice community can offer is essential to the development and success of any new scheme that is brought to market. We need to ensure advisers have both a seat at the table and a voice that is heard. ●

RESIDENTIAL Opinion

London is well placed to weather the latest fluctuations

hen Charles Dickens wrote ‘A Tale of Two Cities’ he was talking about the great social divide that existed in 1859 London. It still exists today – the corollary relationship between socio-economic demographics and the salubrity of areas in London is self-evident. As a concept, it can be applied to the capital’s numerous boroughs – a tale of London’s many villages. Location has a material impact on property values, and on how hard they are hit in a downturn. Forget the broader national trend of so ening house prices for a moment – estate agents, mortgage brokers and valuers all know that the price of a home has everything to do with, to quote Phil and Kirsty, location, location, location. From Dulwich Village to Hampstead Heath, Greenwich Village to Primrose Hill, Chiswick to Dalston, Forest Hill out to Ruislip, in London, location is very finely tuned. Areas with a high density of social housing sit side by side with streets of terraced houses where well-off families have their homes. Catford is a stone’s throw from Blackheath. There are corners in trendy Shoreditch and Hoxton where the old East End is still in evidence, while next door are multi-million pound penthouses, vast apartments in converted industrial factories and storage warehouses once home to some of the poorest in London. The effect of location is powerful in London, perhaps more so because of the volume of people who want to live and work there. It’s no surprise that London’s micromarkets are responding differently

ROBIN JOHNSON is MD of KFH professional services

to the current pressures on the wider economy.

Buyer profiles It’s worth considering the types of buyer that dominate in certain areas. Homes in Kensington and Chelsea, Mayfair and Knightsbridge are far less likely to be bought with mortgages, particularly when rates are over 5%. Though August’s Rightmove index showed asking prices fell by an average 0.5% in Kensington and Chelsea, that reduction is tiny compared with other boroughs. A fall in this area more likely reflects stronger buyer negotiating power than a fall in demand. Compare asking prices in Merton in Surrey; according to Rightmove, the borough has seen a significant drop of 6.7% over the year to August. As a predominantly leafy, residential suburb, it’s likely the fall correlates to buyers in the area. Reasonably well-off families are typical – precisely those who are really suffering at the hands of inflation and higher mortgage rates. The average house price here is £690,286 – no small sum. Many of these family homes will have been purchased in the pandemic rush out of Central London, when mortgage rates were at their lowest ever level. Monthly repayments on a typical £500,000 mortgage at 1% would have been £1,884. At 6%, a mortgage that was perfectly affordable five years ago now requires monthly payment of £3,333 – a significant proportion of most households’ income. In many cases, it will exceed it. Coupled with higher food costs, energy bills and increasingly expensive children to pay for, it’s unsurprising that prices in areas like Merton have been disproportionately affected.

Rightmove’s data shows there is still a shortage of stock on the market, with the number of available properties down by 7% on 2019. The number of sales being agreed in August across all property types drops to 18% versus August 2019. The first-time buyer sector is once again the best performing, with sales agreed down by 13% versus 2019. This is also a relevant factor when assessing values in the different areas of London. First-time buyer homes may be prolific in one borough and almost non-existent in another. Average household incomes vary by location, too. The average asking price in Barking and Dagenham is £369,213 – a steal compared with Bromley, where it’s £625,756. While the la er has seen prices come down 1.6% over the past year, likely for similar reasons to Merton, Barking and Dagenham, where prices are down 2%. Affordability is almost certainly to blame in both suburbs, though purchasing power is relative. It’s worth noting that this data, Rightmove’s most recent, reflects summer prices – a time when demand always falls as people head abroad on holiday. We may yet see demand pick up going into winter – particularly as average mortgage rates have come down quite considerably since the start of the summer. Rightmove reported that the number of new properties coming to market was up 12% in the first week of September compared with the ‘unusually low’ August weekly average. As ever, the housing market is no stranger to fluctuations. London is well placed to weather this latest one. ● November 2023 | The Intermediary

RESIDENTIAL Opinion

Is it time to stop lending on holiday lets?

year ago, I wrote in The Intermediary about improving routes to homeownership through Shared Ownership. In January, I wrote about be er utilising our existing housing stock. Both articles spoke to the need for immediate solutions to address the root cause of the UK housing crisis: a lack of homes to meet demand. Centre for Cities estimates that 4.3 million homes are missing from the UK’s housing supply. Today, I’d like to tell you about the research we published in September, which revealed that 426,000 lost first-time buyers will be priced out of the housing market over the next five years. That’s 233 people per day. We’ve been helping people save and get on the housing ladder since 1875. But in all those years, homeownership was never as unaffordable, inaccessible, and unavailable as it is now. First-time buyers today face challenges that are incomparable to previous generations – a triple combination of historically high house prices, high deposit values, and high mortgage repayments. The largest influences on affordability for first-time buyers are rising deposit requirements and the interest rate increases over the past 18 months. Average deposit values stood at 115% of average first-time buyer earnings in 2022 (£68,700). This increased further to £73,100 in March 2023, or 26% of total purchase price. In 2022, it took up to 12 years for an average private renter to save their deposit; the time required to save for a deposit while living rent-free stood at four years. Those able to buy a first home will need higher incomes than ever

The Intermediary | November 2023

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

Further supporting first-time buyers by ending new lending for holiday lets, where there is local support for this action, is the next option that we are pursuing. Our question is this: can we be a valuable partner to local authorities seeking greater control against the growth of holiday lets?

Careful balance

We risk a lost generation of first-time buyers

before, with mortgage repayments amounting to 29% of their take-home earnings, compared with 22% in 2022, even though those who can afford to become first-time buyers in 2023 are earning more than their equivalents in any previous period. It’s no surprise that homeownership has fallen by a third among young people.

Addressing the cause To find answers and solutions, we must look at the root cause of our housing crisis. The growing political consensus on the need to build new homes is encouraging. However, we risk a lost generation of first-time buyers if we don’t also take steps to improve supply immediately. That’s why last year Leeds Building Society became the first national mortgage lender to stop providing mortgages for residential second homes. We did so to be part of the solution to the housing crisis, by prioritising helping people to buy their first home.

There is a balancing act between the significant role holiday lets can play in local economies, and the detrimental impact they can have on housing for residents. We believe the choice is best placed with communities. Earlier this year, we began discussions with local authorities to restrict new mortgage lending on holiday lets in areas where they feel those negatives outweigh the positives. Our proposals would only apply to new mortgage lending – existing customers would remain unaffected – in specific locations as agreed with local authority partners. A 12-month pilot scheme will allow time to assess the impact before seeking to extend to other areas. To those who ask why we are doing this, my reply is simple: every generation deserves a place to call home. We need real change in the housing market; we need homes to become more affordable, accessible, and available. It’s time to take action to tackle the causes, and not the symptoms, of our homeownership crisis. Solutions lie in building more homes of all types, increasing affordable routes to homeownership, and be er supporting people to save for their deposit. ●

RESIDENTIAL Opinion

Vulnerability challenges

isk comes in many shapes and guises. It evolves as we move through the credit cycle, and while – understandably – much of the focus for lenders has been at the sharp end of arrears, we need to acknowledge that, as an industry, we have not had to manage significant arrears since 2007. A succession of managers within lenders will not have had to experience a downturn of any sort in their careers where the state has not provided significant support in the form of furlough, deferred payment schemes, etcetera. Arrears have not been forgo en, but they have most certainly not represented a significant issue for lenders for some time. Nevertheless, what is expected of lenders has changed significantly. A Financial Conduct Authority (FCA) thematic review set the tone as far back as 2014, when, despite improvements from previous reviews, the regulator stated: “Mortgage lenders and administrators need to place greater emphasis on delivering consistently fair outcomes for customers based on their individual circumstances. We want firms to take steps to identify risks to borrowers posed by changes in the macroeconomic environment and take proactive steps to reduce the impact on the most vulnerable.” In 2018, this was followed by the ‘Management of the long-term mortgage arrears and forbearance review’, where the regulator noted: “Some firms in our sample had introduced specific call handlers or designated sub-teams which provide the customer with a consistent point of contact and improved the overall customer experience.” Roll into 2023, and we have an increasingly challenging landscape. According to Bank of England statistics, the amount of mortgage

balances in arrears increased by 13% in the second quarter of the year, to reach the highest level since 2016. In recent months, rising interest rates and unemployment have reduced household disposable income, prompting some households to reduce or stop making monthly mortgage payments. In areas of the country where tenants are experiencing the cost-of-living issue, pressure has also been placed on buy-to-let (BTL) mortgage holders. The overall amount of mortgage balances with some arrears increased to £16.9bn, up 29% from the prior year and the largest amount since the third quarter of 2016. While this is not the worst arrears performance some veterans might remember, the manner in which – and expectations around – how we manage arrears will make even these numbers more challenging.

Sensitive handling Growing arrears is only part of the issue facing lenders, which – a er some 15 years of record low interest rates – are in many cases bere of the large-scale experience and expertise that may be required to manage the growing arrears problem successfully and sensitively. The Consumer Duty legislation is making the identification and management of vulnerability a far higher issue for lenders. According to data released by consultancy Newton Europe in May, almost half of UK consumers who are classed as vulnerable and used online financial services did not receive the outcome they needed. What’s more, the Mortgage Charter has changed borrower expectations of who actually diagnoses the problem, and how readily and easily lenders must address their plight. This poses another risk. It is not just about what this may mean for lender balance sheets, but about the people

TONY WARD is non-executive chairman at Fortrum

who are working day in and day out to help struggling borrowers. How well prepared are they, and do they have the skills, expertise and experience to identify and manage vulnerability? The first study of its kind on the experiences, procedures, and difficulties encountered by employees of debt collection agencies while dealing with debtors who have mental health issues was carried out in 2010. The project established a crucial partnership between the creditor, money advice, and research sectors. It was inspired at the time by a commitment within the industry to investigate how these consumers could be serviced most effectively. There was a follow-up study in 2017, which found that while frontline and specialist staff are not doctors, counsellors, or an NHS helpline, they need to know what questions to ask and how to respond to the plethora of drivers that can create a vulnerable customer. They must not compound the problem, so knowing what to ask and how to use the information gleaned is essential. A vital piece of information can mean successfully mitigating, identifying, anticipating and managing challenges, and escalating appropriately any customers with complex needs to a colleague with specialist expertise, or to seek support from external agencies. The element of operational delivery represents a real area of risks for lenders – increasingly so over the coming year – and having access to the right corporate support will be increasingly important as lenders rush to upskill and reallocate current resources to address these issues. ● November 2023 | The Intermediary

RESIDENTIAL Opinion

New mortgage propositions to fix age-old problems

elp to Buy and the Mortgage Guarantee Scheme boosted first-time buyers’ purchasing power and gave lenders, ji ery a er the Global Financial Crisis, the capital reassurance they needed to boost high loan-tovalue (LTV) lending. The Mortgage Guarantee Scheme closed in 2022, while the equity loan scheme ceased new applications in March this year – excepting first-time buyers in Wales. There are other Government-backed schemes still running. The relatively new First Homes scheme allows firsttime buyers in England to buy a home for 30% to 50% less than its market value. Shared Ownership schemes operate slightly differently depending on jurisdiction. However, broadly this allows all types of residential buyers to purchase a share between 10% and 75% of the home’s full value and pay rent to the landlord for the share they own, along with monthly ground rent and service charges. Mortgages designed to rely on joint borrower, sole proprietor (JBSP) terms are also increasingly common – particularly in the mutual sector. Various designs on the 100% mortgage concept, either using a charge over the family home to guarantee the higher LTV risk, or holding equity in a separate cash savings account with the same lender, continue to knock around the market. Skipton Building Society recently introduced a Track Record 100% mortgage allowing reliable rent payments to function as a track record on affordability. Several developers have teamed up with Newcastle Building Society, Nationwide and Accord to support the privately put together Deposit Unlock scheme.

The Intermediary | November 2023

Another option for first-time buyers is a Save to Buy scheme, on offer from property developer Fairview, which sees them move into a new home and save into a pot held by the builder, rather than pay rent. When a sufficient savings amount is reached, it can be used as a deposit.

Unchanged market Each of these schemes has been innovative in its own way, supporting hundreds of thousands of people out of the rented sector and into homeownership. Yet the market remains largely unchanged. 10 years ago, the challenge facing borrowers was the ability to save a large enough deposit. LTV represented the larger credit risk for lenders. Today, the challenge for borrowers is affordability, which in turn presents lender challenges which, if they relax rules, will necessitate a review both in the context of credit risk – will the borrower still be able to meet their payments? – and conduct risk – could the lender’s relaxed affordability rules be causing foreseeable harm? Lenders’ biggest issues are profitability when facing the headwinds of an ever-increasing cost of funds, and greater competition for reduced lending as they ba le for customer retention and to keep rates low for affordability reasons. While the cost of living, high energy bills and rising supermarket grocery bills have all ripped into household budgets, those with money to save can now earn a healthy return. Savings accounts can pay up to 9% in some very limited cases – suddenly building up enough cash for those who can afford to save li le and o en is much, much more doable. What’s now a problem is loan-to-income (LTI) ratios.

TIM HAGUE is managing director at Sagis

This is quite a different challenge to overcome, and the innovation born out of the last economic crisis does not meet it. Lenders must look to develop solutions that address affordability. The Financial Conduct Authority (FCA) has been unequivocal that lenders must exercise forbearance. Arrears are rising already, and there are many millions of borrowers still to come off very low fixed rates. There is a limit to how far lenders can take borrowers who can simply no longer afford their mortgage. Keeping them in their homes must be balanced with trapping them in negative equity – under the Consumer Duty, that course of action is not going to wash. The market needs to do more if it is to protect people from interest rate shock. How we think of innovation must change. There is a place for much longer-term fixed rate mortgage products. However, administering those while meeting Consumer Duty standards, and protecting borrower access to advice, is going to be the next ba leground. The insurance market has mastered the balance between long-term protection and lower churn rates, with the critical role that advisers play. This debate is already underway; the Mortgage Charter rules mean a huge increase in borrowers remortgaging with their existing lender. Though many will pay brokers a product transfer proc fee, the income that generates can be less than half that of a full remortgage. With longterm fixed rates, more frequent or ongoing commissions may begin to feature. It’s a conversation we need to have now. ●

RESIDENTIAL Opinion

Borrower preferences are evolving

t’s unbelievable to think that, until the middle of last year, at least 3.8 million borrowers in this country had never experienced an environment where interest rates were above 1%. For nearly 12 years, we became used to the notion of rock-bo om interest rates and the ultra-low monthly repayments that came with them. While most borrowers during that period would have expected rates to rise eventually, the pace at which they have done over the past 22 months will have come as a major shock. In fact, the last time interest rates rose this quickly, Margaret Thatcher was Prime Minister, the Berlin Wall was still standing, and ‘Look Who’s Talking’ was showing in cinemas. That was 34 years ago, so the number of borrowers from that period who remember what it was like and are still repaying their mortgages will be relatively small. The past two years have been completely unchartered for millions of borrowers, and a highly confusing and worrying time to boot. It’s interesting, then, to observe how borrowers’ preferences have evolved and changed, first when rates were soaring, and now that the current rate hiking cycle looks to be coming to an end.

Locking in low In the six years to 2022, the 5-year fixed rate overtook the 2-year fixed rate as the most popular mortgage product. There are two very good reasons for this. First, this was a time when mortgage rates hit one record low a er another. As a result, it made sense for most borrowers to lock into an ultralow longer-term fixed rate, rather than going through the hassle of

refinancing every two years. However, regulation also played a part. In 2014, the Bank of England introduced new affordability rules, forcing lenders to check borrowers could still afford their loans if rates rose by three percentage points. Crucially, though, the rules only applied to borrowers fixing for up to five years. Effectively, that made it easier to get a mortgage if you fixed for five years or more, so it’s unsurprising then that they became a more popular option for borrowers. However, it must be noted that some lenders decided to stress 5-year loans even though the rules didn’t require them to. While the Bank of England scrapped that stress test in August last year, 5-year fixed rates became even more popular, peaking in December 2022, when they accounted for more than 67% of new mortgages. That’s understandable. At that time, interest rates had risen to 3.5% in just 12 months, and they were predicted to surge much higher. Borrowers were merely trying to protect themselves from further rate increases. However, things have now changed. The Monetary Policy Commi ee (MPC) voted to hold rates at its past two meetings, albeit by a small margin.

Taking to trackers Talk of this being the end of the current rate rise cycle is becoming louder and more widespread, with some economists predicting that the Bank of England will even begin to cut rates next year. Borrowers are cognisant of this, and are starting to act accordingly. Bank of England data shows that it is actually the 2-year fixed rate which is now once again the most popular mortgage

LUCY WATERS is managing director at Aria Finance

Borrowers sense the end is in sight for the current rate hiking cycle” product, despite being pricier on average than 5-year fixed rates. At the end of June, they accounted for nearly one in two transactions. There has also been a noticeable uptick in the number of borrowers opting for tracker mortgages. The same data shows that ‘floating rates’, as the Bank of England calls them, accounted for more than 15% of new mortgages in June, up from 4% a year earlier. That tells me that borrowers sense the end is in sight for the current rate hiking cycle, and are looking to profit from potentially cheaper mortgages sometime in the future.

Valuing advice As us professionals know, we cannot take it for granted that rates will fall from here. If inflation proves sticky, or even rises, the Bank of England won’t hesitate in increasing rates once more. Some market observers, such as JP Morgan, believe we may even see interest rates reach as high as 7%. However, even if rates do fall in the next year or two, as some expect, I believe borrowers will need good, independent advice as much as they did when rates were rising. If the trend is towards shorter-term fixed rates and trackers, it will provide a much-needed boost in activity for what was promising to be a tough market next year and the year a er. ● November 2023 | The Intermediary

RESIDENTIAL Opinion

Reform: The only way to build a more sustainable market

ow the theatrics of the Party Conferences have concluded, it feels like we’ve engaged gears and are picking up serious political momentum towards the next General Election. While we can guarantee that tax, education and environmental policies will feature heavily in manifestos, there’s another altogether ho er topic that will likely dominate hustings. It is one that not only needs to be a manifesto pledge, but a focal policy point: housing. Specifically, a commitment to reengineering mortgage lending to prevent the destructive perpetuation of the situation we find ourselves in now. The past five years have seen the industry wax and wane in equal measure; it’s become abundantly clear that there is no long-term strategy for one of the most critical sectors propping up the economy. As such, there has never been a be er time for politicians to fully acknowledge, understand, and frankly discuss the changes required to make the sector significantly more resilient. Over the past five years, we have witnessed events which we would have considered unimaginable the last time we took to the polls. The housing industry did, too. The pandemic delivered initial shell-shock and a plunge in sales, driven by lockdowns and social distancing, alongside the wider financial shock of Covid-19. However, a er three months of pain, the market picked up again, supported by the Stamp Duty holiday, which helped bring about a boom in the market, with prices up 10.2% from March 2020 to March 2021. A er that, we saw prices continue to rise, driven by a build-up of wealth during lockdowns, inflation

The Intermediary | November 2023

and pent-up demand. In short, the market over-heated. It has taken eyewateringly high interest rates to start it cooling down. Except a cool, stagnant or depressed housing market is not good. In fact, it’s going to hurt the economy more than it will help. It’s also exposing flaws in the system which, until now, were not evident. So, what needs addressing?

Keep forbearance for emergencies A byproduct of a hot market is buyers taking on more debt. This is manageable on lower interest rates, but as we’ve seen with rising rates, repayments can quickly escalate and leave people in serious financial hardship. The market doesn’t have an adequate response – with forbearance currently being used to help manage the situation. This is not a viable, longterm solution, it’s actually making things worse. Without intervention or insight from the powers that be, the industry is doing what it can to support borrowers. A policy be er than forbearance needs implementing – whether this is taxing other industries prone to stoking inflation to subsidise the poorest hit by rate rises, or creating mortgage-specific benefits policies to cover the gaps. Either way, making sure the market can adequately respond to issues and not permanently damage homeowners’ credit scores should be high on the list.

Fix the ownership gap Homeownership has slipped to 65% – levels not seen since the 1980s. However, according to Schroders, 40% of homes are owned outright in the UK, showing a distinct skew in terms of where wealth is situated.

KATIE PENDER is MD at Target Group

While controversial, Help to Buy at least offered a stepping stone for borrowers to get onto the housing ladder. It was not perfect, but with no alternative offered, younger people in particular look priced out of the market. Driving homeownership upwards will ease pressure on the rental market, in theory helping to stabilise prices due to less competition. This, in turn, may help renters save more, and give them the chance to get onto the ladder sooner.

Change how ownership is taxed Prioritising long-term outcomes over short-term gain would see the overall costs of moving reduced. For example, scrapping Stamp Duty unless it’s for a second home would save movers thousands, and importantly, encourage older homeowners to downsize, instead of worrying about punitive tax charges. This would help ensure more fluid stock levels. Of course, the Treasury would need to replace this annual income, but double taxing savings seems counterintuitive. Guaranteeing the enduring health of the UK housing market should be a priority for any Government. However, based on what homeowners are currently facing, I can’t help but think now is the time that manifestos should be have this front and centre. Owning a house is an aspiration for many, and should remain so, but with house prices and affordability out of reach for many, we need to fix what’s starting to creak. A new Government brings fresh hope. Who knows, we may even maybe see fresh hope for the housing market, too. It is long overdue. ●

RESIDENTIAL Opinion

Impaired credit and missed payments

he mortgage market has undergone a whirlwind of change in recent years, shaped by various economic factors, including an ongoing cost-of-living crisis and relentless inflationary pressures. These factors have played a pivotal role in shaping the lending landscape. Buyers are not only grappling with property prices that have soared over the past decade, but also the added burden of increasing living costs, which further strain their financial resources. It’s an environment that has produced numerous issues for potential buyers, leading to an increasingly common scenario where at least one party on a mortgage application has missed payments or credit blips, creating significant challenges for intermediaries looking to place these types of cases.

Mortgage applicants with impaired credit can be subject to even stricter evaluations, including more detailed assessments of their financial stability” The cost-of-living crisis is driven by various factors, including rising energy prices and increased housing and grocery costs. As the prices of essential goods and services surge, household budgets are stretched to their limits. Even for those without existing credit card debt or loans, these cost increases can be challenging to navigate, but for individuals with outstanding finance and additional credit commitments, the situation becomes more precarious.

Inflationary pressures are another significant issue impacting buyers. Inflation erodes the purchasing power of consumers, leading to decreased disposable income in real terms. While the Bank of England aims to maintain inflation around a 2% target, recent years have seen levels exceeding this threshold. This eats into the already limited resources of those struggling to repay existing debt, making it increasingly difficult to avoid missed payments and balance their monthly budgets. Applicants with impaired credit, typically with a history of missed payments, defaults, or other credit issues, face a steeper uphill ba le in the mortgage market, given the current economic climate. Lenders are naturally more cautious when considering such applicants, as they can pose a higher risk.

Borrower roadblocks As a result, these individuals o en encounter a series of issues and roadblocks, such as: Limited lender options: Applicants with impaired credit may find themselves restricted to a smaller pool of lenders willing to work with them. This limitation can make it challenging to find competitive mortgage rates and terms. Moreover, fewer options means applicants have less room to find a lender that suits their needs. Limited product options: In a similar way to limited lender options, a limited pool of products – particularly with constraining criteria – can also be problematic when it comes to the fulfilling the specific needs of your clients, making it difficult to find a suitable solution. Stricter affordability criteria: In response to the challenging economic environment, some lenders have tightened their affordability criteria. Mortgage applicants with impaired credit can be subject to even stricter

CLAIRE ASKHAM is head of mortgage sales at Buckinghamshire Building Society

evaluations, including more detailed assessments of their financial stability. Meeting these criteria can be a formidable task, especially when simultaneously juggling increased living costs and inflation. Nevertheless, despite these daunting challenges, there are still solutions available for applicants with impaired credit looking to purchase or remortgage a property. Here at Buckinghamshire Building Society, we have a range of products specifically designed to cater for those applicants with a less than perfect credit history. Whether it’s a minor credit blip, a County Court Judgement (CCJ) or even an active Debt Management Plan, it’s always worth talking to one of our key account managers to see how we can help. With this type of applicant profile likely to become even more common over the next couple of years, and lenders continually altering their products and criteria to meet these changing needs, there’s an opportunity for intermediaries to firmly cement their places as the goto experts when it comes to helping secure lending for this growing group. Mortgage brokers have never been be er placed or more valuable than they are right now, not only for advising clients with credit issues, but for advising clients with all kinds of complex needs. As the industry starts to slow down towards the end of the year, it’s a great opportunity for brokers to use this time to build on their knowledge by speaking to a variety of lenders. Our team are always happy to spend half an hour talking through our criteria and products, either online or face to face – so take advantage, and get a jump-start on 2024! ● November 2023 | The Intermediary

RESIDENTIAL Opinion

The interest-only comeback – value in the right moment

here was a time, in the run-up to the financial crisis, when interest-only loans were very popular indeed. Borrowers were a racted by the fact they could significantly reduce their mortgage repayments compared with a capital repayment loan, and these loans were readily available to a very broad range of borrowers. At their peak in 2007, full or part interest-only loans accounted for nearly one in six new mortgages, with nearly 160,000 borrowers opting for one that year alone, according to Financial Conduct Authority (FCA) data. However, by 2015 the interest-only loan was on the verge of extinction, with lenders advancing fewer than 16,000 to borrowers. Interestingly, though, this oncepopular product is experiencing something of a renaissance. While interest-only loans are not being wri en in anything like the numbers they were pre-crisis, their numbers have been rising steadily over the past seven or eight years. According to FCA data, more than 61,000 new mortgages were wri en on a full or part interest-only basis last year – four-times the number wri en in 2015. Why are we seeing increased demand for interest-only mortgages? And what does this mean for the market?

The right circumstances I have always said that interest-only can be a suitable option for the right borrower. However, the truth is that in the run-up to the crisis there was much less emphasis on fully understanding the characteristics of interest-only mortgages, and which

The Intermediary | November 2023

MARIE GRUNDY is managing director of residential mortgages and second charge at West One Loans

via bonus payments; borrowers with substantial equity in their property with plans to downsize; older borrowers looking for alternative later life lending options; and business owners who plan to sell up one day and use the proceeds to clear their debts.

Low risk An interest-only mortgage can be a valuable option

type of borrowers and circumstances would be best suited to this type of repayment vehicle. It is completely understandable, then, that the regulator wanted to address this as part of the Mortgage Market Review (MMR), which was introduced in 2014. The MMR meant that, for the first time, borrowers had to convince their broker and lender that they had a legitimate and plausible repayment vehicle to clear their debts at the end of the term. This hadn’t been a requirement before, and so it’s no surprise that the number of interestonly loans plummeted under the new regime. A er a major new piece of regulation is introduced, lenders typically become more cautious as they find their feet in the new regime. Unfortunately, as lenders retreated from the interest-only market, it denied many borrowers for whom interest-only is a perfectly legitimate solution the opportunity to borrow on terms that best suited them. These included: higher earners with the ability to clear their debts

While interest-only loans were perhaps handed out a li le too freely in the run-up to the crisis, that’s no longer the case. In fact, interest-only loans today are relatively low risk. That is evident in the FCA’s data, which reveals that the current median loan-to-value (LTV) of interest-only loans wri en last year is currently 38.6%. That compares with nearly 50% for loans wri en in 2007. Product design is much more targeted at borrowers who could benefit from taking out an interestonly mortgage, which means that there are o en specific eligibility requirements a ached. There are o en restrictions around maximum LTV, minimum equity or minimum income, as well as much greater scrutiny around the plausibility of the exit strategy to ultimately repay the interestonly loan. It may have taken some time, but it feels as though the market has landed exactly where the MMR intended it to with regards to interest-only – and that’s a good thing, for both brokers and borrowers. Mass-market solutions they are not, but for the right borrower, an interestonly mortgage can be a valuable option in the right circumstances. ●

RESIDENTIAL Opinion

Why the holistic propostion?

o choose a holistic approach to mortgage and protection advice, or not, and take the transactional approach, that is the question. Mortgage and protection firms – whether directly authorised (DA) or appointed representatives (AR) – have been busy adapting to life under Consumer Duty. One of the key decisions has been to decide whether to offer advice to consumers on a transactional or holistic basis. For some, taking the la er approach has perhaps been a natural extension of their existing proposition, although many would recognise that they, and colleagues, had followed the former route previously. For many, excellent advice and great service have been drivers for developing our mortgage and protection businesses. The addition of Principle 12 now means that level of service and expertise results in consistently good outcomes. However, the past three years have provided our industry with some significant challenges as the impact of Consumer Duty has hit, including: Covid-19 and the subsequent lockdowns and damage to usual incomes; The invasion of Ukraine and subsequent political and economic disturbance and nervousness; The September 2022 mini-Budget; Interest rate rises and inevitable mortgage product price increases; So er levels of housing transactions. Despite it all, here at Try Mortgage Network, we decided unanimously that the holistic approach to customer service was the way forward. Nevertheless, it begets a change to conventional thinking. Offering a holistic service is not restricted to those that require mortgage advice. There is a huge

proportion of the population that do not – or may not – have any need for mortgage advice, but they should still benefit from the same level of advice by offering protection solutions, too. Customers who may be deemed vulnerable for whatever reason, especially those who are not financially aware, may well be stuck in the rental market, while customers with more complex income streams and clients with existing or previous health issues, for example, should all be welcomed.

Close contact More broadly, providing solutions for individual customers, couples, partnerships, and families, and ensuring that their needs, circumstances and objectives are met and protected, is at the very heart of a successful, professional mortgage and protection broker firm. Whether that is one person or a multiple adviser firm, the same principles apply. Having regular contact with our customers to keep close track of their circumstances, is at the core of the holistic proposition. That’s not confined to the point where the customer approaches the end of a fixed rate product. Keeping in touch regularly benefits all parties and minimises the potential for client harm. Planned contact by the advising firm, delivered consistently and well, can lead to: Reinforcing the loyalty and trust between both parties; More potential for repeat business and further opportunities to meet needs and deliver new solutions and advice; Greater probability of referrals and recommendations for both mortgage and protection solutions; Raising the profile of the advising firm and advisers; Overall making the advising business more successful.

IAN MERRIMAN is head of network recruitment at Try Mortgage Network

We acknowledge that with change comes the risk of resistance. From a network’s viewpoint, a successful holistic service provided by members to customers is evolutionary rather than revolutionary. Embedding change of this nature will require close support, training and a holding hand, allowing firms and advisers time to adjust to managing lifetime customer relationships and building more robust and successful business. For us, it remains critical that network members have access to high quality tech support, to manage the need for professional regular customer communication. This should include: Easy to use web-based customer relationship management (CRM) technology; Fully integrated mortgage and protection sourcing technology; Integrated communication functionality via email and SMS; Integrated regulatory documentation compiled, completed, and stored within the CRM as standard; The capability to offer easy-to-use task and diary management, to record key dates and information. Equally, to avoid the potential for future harm, advisers need access to a comprehensive range of lending and protection products – without the need for weighted premiums – and sourcing tools as a given. Through targeted support and development, sound sensible compliance, high levels of trust and ethics, networks can help deliver a rock solid, holistic mortgage and protection advisory business. Treating our members as individuals is key to embracing change and developing holistic advice-driven businesses. ● November 2023 | The Intermediary

RESIDENTIAL Opinion

Positivity in the

s the nights draw in, the clocks go back, and winter hovers into view, it’s hard not to look at how the rest of 2023 might pan out, and what is then in store for us in 2024. In a sense – and with some major announcements in the Autumn Statement not withstanding – it would be easy to consider the final two months of this year, and the whole of next year, as being somehow bound by the same ‘rules’; meaning what might happen over the rest of 2023 will be replicated in 2024, and with that being the case, the next 14 months might appear a little bleak. Given the year we have had, it might be easy to be pessimistic about what is to come; however, I tend not to feel that way. Now, this probably differs from a large number of views of what is likely to happen next. I would say there is more of a general view that we are likely to be in for more of the same, with high interest rates impacting affordability, purchase activity being subdued as a result, supply-side issues requiring a long-term solution that doesn’t seem imminent, and various economic factors – particularly stubborn inflation – requiring the

Monetary Policy Committee (MPC) to stay its current course. To my ears, this sounds like a somewhat maudlin assessment. I tend to believe there are a number of interesting factors at play that impact consumer confidence in particular, and which can move sentiment quickly. That’s certainly happened in a quite negative way over the past 12 months, and in that sense, I believe the opposite is just as possible.

Positive examples First, while rising interest rates have put up the cost of borrowing, the house price to inflation factor has already fallen by about 10% in the past year. That makes affordability more improved for certain buyers, especially those with better incomes who believe they can buy the right house at the right price. Given that mortgage rates have begun to fall in recent weeks, mostly due to increased competition, we have to ask to what extent that will drive consumer sentiment. Are more potential purchasers likely to be interested by such moves? I tend to think they will be. Second, we continue to have relatively low unemployment. When unemployment is high, the

I can envision us operating in an environment where rates are falling next year. That opens up avenues for individuals, specifically when it comes to meeting affordability”

BOB HUNT is chief executive at Paradigm Mortgage Services

RESIDENTIAL Opinion

year ahead mortgage and housing markets tend to suffer from the low consumer confidence that unemployment naturally engenders. However, we don’t have that, we actually have an incredible number of job vacancies, and therefore we are not likely to see confidence impacted any further by this. October’s inflation data saw a further fall. So, what might this do to consumer confidence in the idea that we are now over the worst? Might we continue to see mortgage pricing move southwards? I suspect so. In fact – and I’m trying not to look too far ahead here – I can certainly envision us operating in an environment where rates are falling next year. That opens up avenues for individuals, specifically when it comes to meeting affordability, that we have not seen throughout 2023.

Pent-up demand One also wonders just how many prospective purchasers have been sitting put throughout this current year. How many have been happy to hold their ground and ‘wait out’ the conditions we’ve had? There could, in my view, be a significant amount of pent-up demand within the housing market that is waiting to be unleashed, and all it

might take is rates continuing to move in the direction they’ve already been heading recently. Supply will of course play its part here – and as mentioned, this is still a conundrum that needs to be solved – but we should not discount demand improving, and again, that could be a shift that happens quite quickly. Overall, therefore, I’m certainly not downbeat about what 2024 will bring. As a starter for 10, I’m expecting the Autumn Statement to include a number of housing-focused measures and policies. Potentially a Stamp Duty cut, which, historically at least, has tended to give the market a leg-up. Ensuring you are front and centre for all those clients who might feel empowered to make their move in the purchase and sale market will be crucial. Remortgaging and product transfer business has been the backbone of our market for some time, but we clearly need a stronger number of purchase transactions, and advisers should ensure they market themselves accordingly in order to pick up this business.

Mortgage marketing In August, we held a specific ‘Marketing Month’ which built on last year’s ‘Summer School of Marketing’. I’ve learned over the years that

you can definitely teach an old dog new marketing tricks, particularly when there are now so many avenues to explore which can help with both existing clients and potential new additions. We have a number of blogs on our website under the ‘Marketing Month’ banner which focus on key areas, including generating content, SEO, choosing the right social media platform, making your marketing accessible, strategic thinking, artificial intelligence (AI), and much more. These will undoubtedly sow some seeds about what you could be doing, how you could be doing it, and where to target your resources. There is guidance and support available, in order to help you do this. Calls of a status quo marketplace in the next year or so may well be overblown and off the mark, but as always, setting yourself apart in this market, highlighting your offering and signposting all clients to you, is never going to go out of fashion or stop being the backbone to bringing in new business and growing your income. ●

In Profile. Property Circle

The Intermediary speaks with Marc Randall, founder and CEO of Property Circle, about how to reinvigorate data and use technology to have meaningful conversations

tarting as a broker in 1998, Marc Randall, founder and CEO of Property Circle, has far-reaching experience in mortgages and protection, even as an estate agent, property developer and landlord. However, it was only when a customer gave him an insight into the world of tech – and the success to be had therein – that Randall realised the ambition to bring this into the mortgage sector. As part of this month’s special focus on technology across the market, The Intermediary spoke with Randall about Property Circle’s proposition, and why good data can be the key to effective client relationships.

Space for change

Randall set up a business with fingers in various pies. He says: “Property Circle’s technology is extremely broad – it works across all sectors and sections of the mortgage market, with a specialism in buy-to-let [BTL].” The through-line is about making brokers’ lives easier, while continuing to reinforce customer outcomes. This is where tech comes in, taking processes that needed for the smooth running of a business, but which take up unnecessary amounts of time and effort. “If you can do something on a repetitive scale, you can teach a computer to do it,” he says. “All that heavily lifting can get done and [brokers] can get back to what’s really important, which is creating the relationship and making sure they have the best advice.” Randall points out that the mortgage sector still to this day has filing cabinets, and comparatively little uptake and availability of technology. Nevertheless, people are increasingly ready to make a change, sometimes out of necessity. Randall says: “If you don’t have the tech backup, you’re getting left behind. Brokers have the leads, but to actually do the same level of work as in previous years is a challenge, because there’s so much regulation and recording of information.” 48

The Intermediary | November 2023

In addition to streamlining the journey to purchase and mortgage, Property Circle looked to the sections of this market with gaps that could be sewn up. One of the most glaring of these, Randall says, was the bridge between completion and the next transaction. He explains: “There’s a lot of technology in the transactional space that will help with collecting documents, doing ID checks, getting credit reports, sourcing mortgage products, but where I saw an area that was important to address is the person who is either not ready to transact or has already transacted, and now they’ve got their mortgage, but nothing happens until they either need something or their mortgage comes to an end. The mortgage market is changing daily, so how does that person know that they have the best mortgage for that entire fixed rate period? “We worked out that it would take 42 days to review a bank of 500 customers, [but] products will have changed by then. It’s physically impossible without the help of tech, for a broker to constantly keep on top and engaged, and confirm that their client has the best mortgage throughout the life of that loan.” Property Circle aims to create more touchpoints to engage with the customer, to connect digitally, and to allow brokers to review their client book every week to take into account loan-to-value (LTV) and rate changes, without exponentially increasing their workload.

Dormant data

Using an app connected to a lead generation system, rather than another approach to the platform, was informed by the need to avoid having what Randall refers to as “dormant data.” He says: “Brokerages can be guilty of arranging a mortgage, filing it away, and all of that nice, rich mortgage data – which could create revenue for the brokerage – just sits there gathering dust until the mortgage comes up for renewal. “We want to make sure that within any environment – broker, estate agent, letting agent – all that rich customer data that’s otherwise sitting

I N P RO F I L E

there doing nothing, is constantly working for the benefit of the consumer.” At the moment, one of the most helpful ways in which Property Circle is able to deploy its dataled technology is in calculating the right time to change rates, taking into account the full nuance of the mortgage market – including factoring in end dates and early repayment charges (ERCs) – to ensure that the borrower gets the best, not just the cheapest, product.

Motivating conversations

Increased touchpoints and visible customer data create a more informed, engaged and motivated starting point for brokers’ conversations. Randall says: “If you catch a customer cold, they haven’t had time to digest. Whereas, because the app nudges them to understand that there’s something they have to do in the not-too-distant future, it starts that thought process.” Brokers can in theory use the system to come to clients armed with everything they need to have engaging and effective conversations. The system also helps a broker tell if there is a change in behaviour – such as the customer repeatedly visiting the affordability calculator – which might prompt them to call and check to see if their circumstances have changed.

Silent partner

Property Circle operates via a white labelled app, which Randall says was a pointed decision in order to allow for better access to information, as well as to put the broker front and centre. “The consumer has a branded app from their broker, which has the touchpoints during their journey,” he says. “Property Circle doesn’t exist for the consumer. We want this very much to be about the broker to their customer, without Property Circle in there as a distraction. We want the broker to be the hero, constantly being remembered by their customer, to create that lifetime value. “We can be quite a transactional industry, and brokers can be guilty of letting business walk out the backdoor as they focus on what’s coming in the front. We can stop that, and create lifetime value for the customer and broker, by keeping them engaged and on the journey together.” The app also connects to the firm’s lead generation system, allowing brokers to see the same things as the consumer, and use this to inform their conversations. The choice to have an app rather than a website or other system was driven by the push for better informed conversations, among other things. Randall explains: “You can also see a lot more in an app, whereas a website is a static journey. When they come off a site, how are you getting

back in contact with them? We receive so many emails, important information can often be lost.” He adds: “Everything that we do within Property Circle is broker-led, not technology-led. We make the technology work for us and what we want to do, not the other way around.”

Building BTL

Looking at the BTL market in particular, technology can help borrowers understand the holistic picture, beyond the bleak headlines, and stop them from making rash decisions. Often landlords – particularly those with large portfolios – are dealing with information that is out of date, and have little understanding of the workings of their own portfolio. This makes it increasingly difficult for a broker to give them truly the right advice. Randall says: “We transform that dusty old spreadsheet into an interactive portfolio, which is on your phone, and every property is analysed and pulled together as a portfolio analysis.” This provides the opportunity to review the portfolio on a weekly basis, and to better leverage equity as and when needed, either to handle the shocks and vagaries of the market, or indeed grow and expand the portfolio itself. This includes highlighting potential improvements, as well as opportunities to enhance yield, at a time when landlords are facing a squeeze. “If the broker is having a conversation with the landlords, they’re on the front foot knowing if there is an opportunity to release equity at an acceptable cost,” he says. This could be the difference in helping a landlord see the benefit of remaining in the market, and where they might be able to shore up their position, at a time when doomsaying headlines are full of an exodus out of this market.

Future developments

For Property Circle, key future milestones include the introduction of two-way conversations, as well as document storage and secure quotes. The firm is also considering expanding its relationships with lenders, particularly BTL specialists that want to better understand the market and use this information to develop products that will help landlords. Beyond this, Property Circle’s ethos moving into the next year to release tools that have been tested from broker to consumer. This might mean smoother lead generation, improving non-static data, doing away with rekeying, and giving agents a stronger platform, all to reduce pain and stress. Randall concludes: “Property Circle is about filling the gaps and allowing people to work in a completely new way.” ● November 2023 | The Intermediary

B U Y - TO - L E T Opinion

Buying and selling property and the influence of EPCs

e recently carried out some research among landlords which shows a mixed picture of their appetite for property. A third said they wanted to buy more property in the next 12 months to build up their portfolios, and two-thirds have no plans to sell any property. However, there is a bit of divide between the North, Midlands and South, with landlords in the Midlands and the East of England the keenest on buying more property (46%), followed by the North (39%), while London and the South trail (23%). If we look at selling intentions, the reverse happens, with half of landlords in London saying they want to sell some property. In the South, 29% intend to sell, in the North 25%, and in the Midlands 22%. So, the Midlands is where more buying and less selling is occurring. It’s interesting to note that most of the landlords we surveyed are looking to sell some of their property, not all of it, and there is quite a lot of portfolio restructuring going on. The majority hold their property in limited companies (85%), and 70% are portfolio landlords with four or more properties. For 37%, property investment is their full-time job. This is just to show that our survey base is the more professional end of the market, rather than accidental or so-called ‘dinner party landlords’.

Energy performance One of the big issues for landlords – and a reason why some of them are selling – has been somewhat watered down now. It concerns the Government’s previous proposal for

The Intermediary | November 2023

all rental properties to have an Energy Performance Certificate (EPC) rating of Band C or higher by 2028. Prime Minister Rishi Sunak has now scrapped that, along with some other net zero plans, like banning the sale of petrol and diesel cars from 2035. These were commendable aspirations to tackle climate change, but in reality, upgrading more than half of rental property in the next five years is unrealistic. Around 58% of property in the private rented sector is D-rated or lower, which reflects our survey, where 57% of respondents said they owned lower rated housing. We asked landlords if they were in favour of removing this minimum EPC requirement, and 74% said yes while 26% said no.

Changing sentiment For those landlords with properties rated EPC Band D or lower, we asked if they intended to make any changes to bring them up to at least a C rating. The sentiment this time, compared with our last survey in Q2 2023, was slightly different, and reflects the removal of the EPC Band C rate requirement. Fewer landlords now will upgrade their property (62%) compared with six months previously (73%) when the EPC deadline was still on the cards. This time, 42% said yes, they would make changes at some point in the future and 20% would upgrade as soon as possible. The previous survey found that 39% of landlords would upgrade but wait until nearer 2028, and 34% planned to do so sooner. Also in the latest survey, a quarter (25%) said they will only upgrade if the law changes and they have to, while 13% said they won’t make any changes.

ROB STANTON is business development director at Landbay

For and against upgrading The main reasons landlords are against having to upgrade centre around the difficulties and expense in retrofi ing energy improvements into older properties. For example, the Government wants people to install heat pumps in their homes, but these are expensive and impossible to fit in some properties, such as individual flats. However, there are other issues like outside cladding that landlords have no control over. The expense of the upgrades is also likely to be passed to the tenant in higher rent. Some landlords also felt that a be er energy efficiency rating system to EPCs should be put in place. Earlier this year, the Government published its ‘Mission Zero’ report, which suggested EPCs should be reformed and replaced with a Net Zero Performance Certificate (NZPC). Not much detail was provided, but 34% of landlords in our survey agreed that EPCs should be reformed, 19% said no and 47% weren’t sure and would like more information. The other point of view, supporting the upgrade of housing, was that we all have a social and environmental duty, so landlords – and homeowners – should be improving the ratings on their property. Some also felt that housing stock needs to be upgraded to increase energy efficiency for the wider good. Ultimately, tenants should be able to enjoy higher property standards, including well insulated and energy efficient homes. ●

B U Y - TO - L E T Opinion

A changing of the guard: Landlord 2.0

eople sometimes forget that, compared with the residential mortgage market, the buy-to-let (BTL) sector is still relatively young. The concept of taking out a mortgage to buy a property to then let out to tenants only emerged in the mid-1990s, and quickly became a very popular alternative asset class for the middle classes. Back then, your average landlord had a few properties that they were using to top up a pension, or were maybe a successful tradesperson seeking a high-yielding home for their spare cash. Given that many of these early adopters will have held onto their properties for at least 25 years now, it’s safe to assume that some of them are eyeing retirement. This notion is o en overlooked when you see reports of a mass exodus of landlords. The media and other observers are quick to blame the supposed failure of the buy-to-let business model in the face of higher interest rates and a more inhospitable tax environment. Few consider that landlords, too, might want to retire someday. Given the way house prices have soared over the past few decades, many of those buy-to-let early adopters will be si ing on enormous profits. Therefore, it makes sense that they would want to cash in as they hit their 60s and 70s, with many benefi ing from Capital Gains Tax (CGT) at a maximum of 28%.

Two-way street Another thing that irks me about the way the ‘landlord exodus’ debate is framed is that it is always assumed that the traffic is one way. The accepted wisdom is that disillusioned older landlords are piling out of the back door en masse and are not being replaced by new landlords

DAVID WHITTAKER is CEO of Keystone Property Finance

New landlords are more likely to use a company structure

coming in through the front. That’s simply not true. There is strong evidence that a new, younger and – dare I say it – more professional cohort of landlords is entering the sector, and they look very different from the one that came before them. According to UK Finance, the average age of BTL purchase borrowers in August was 43. That is nearly 3.75 years younger than at the start of 2014, when trade body first started collecting this data. There is also plenty of evidence to show that these younger landlords are increasingly looking to buy through a company structure in order to gain from the associated tax breaks. That suggests a level of professionalisation, but also savviness. Property investment firm GetGround recently revealed that almost 30% of the 2,800 buy-to-let companies it set up in the past 12 months had shareholders aged 35 or younger. That’s up from 23% the previous year. Earlier this month, Hamptons, the estate agents, revealed that, of the 37,624 landlords who bought through a limited company so far this year, 30% contained just a single property, up from 14% in 2019. These are more likely to be younger, first-time landlords, rather than older, more experienced buyers finding buy-to-let in later life.

Our own data also shows that younger landlords are making up a much higher proportion of our business than they used to, particularly within our limited company volumes. In 2022, just 8.2% of our borrowers were under 37, compared with 10.9% this year. That may not seem like such a large leap, but it’s revealing that under-37s currently make up nearly 30% of our limited company purchase volumes, up more than five percentage points in a year. That’s a staggeringly high proportion, and further proof that younger landlords, in general, see buy-to-let more as a hands-on business than an investment to be kept at arm’s length. This is backed up by recent research by LV=, the insurer, which found that younger landlords aged 18 to 34 were nearly three-times more likely to invest through a company structure than those over the age of 55. It’s easy to fall for the doomsday narrative and to convince oneself landlords are jumping ship because of less favourable market conditions. However, the evidence suggests that a new generation of landlords are entering buy-to-let and are taking a more business-minded approach to building their portfolios. If that implies a greater level of commitment to the sector, and in turn this raises standards, that can only be a good thing. Ladies and gentlemen, meet Landlord 2.0. You’re going to be seeing a lot more of them. ● November 2023 | The Intermediary

B U Y - TO - L E T Opinion

What should agents and landlords make of reform manoeuvrings?

n October, the Renters (Reform) Bill finally had its second reading in Parliament. A er quite literally years of speculation and delays, it seems that this seminal piece of legislation is finally on track to hit the statute books in the near future. However, this latest reading also came with a slew of last-minute changes and concessions from the Government, most critically around Section 21 – so-called ‘no fault evictions’. Many predict that the next phase of legislative scrutiny – the Commi ee stage – will also see significant changes made to the shape of the bill. Here are some key things to know about the latest changes.

Government delays scrapping of Section 21 One of the headline changes announced on the eve of the bill’s second reading was what appeared to be a U-turn. With strong opposition to the scrapping of Section 21, it seems Housing Secretary Michael Gove was seeking a way to quell a potential

The Intermediary | November 2023

rebellion from backbench MPs who are against the changes. The result? The Government stated that the courts process would need to make “sufficient progress” before Section 21 could be abolished. However, the details of what this means have not been substantiated. Some even speculate that it could mean no changes will be brought in until 100% of courts meet a certain minimum standard, such as hearing all claims within eight weeks. The decision to abolish Section 21 touched a strong nerve in a market already under pressure. It follows tax changes that disincentivised expansion for landlords, a failure of multiple Governments to build enough homes, interest rate increases, and a huge strain on the social housing sector. While still very unpopular, sentiments around the scrapping of Section 21 have been shi ing over the past two years. In 2022, 71% of landlords believed abolishing Section 21 would have a negative impact on the le ings industry, according to Goodlord and Vouch’s ‘State of

the Le ings Industry Report 2022’. However, in the 2023 edition of the report, this dropped to 62%. In contrast, in 2022, 27% of le ing agents believed the abolition of Section 21 would have a positive impact. In 2023, this number had dropped to just 11%. Given the vague nature of the Government’s announcement on the policy and the dire straits the courts currently find themselves in – prompting many to welcome this pause – it seems likely that Section 21 won’t be abolished any time soon. However, it’s unclear why the Government has failed to step in on the crisis facing the courts sooner.

Issues with the court process remain unsolved With the courts touted as the blocker to these reforms, what’s actually going on, and what’s the plan to address the issues? There has been a general feeling in the property sector and industry press that the courts are struggling, with reports that some landlords were at the end of their tether with court

B U Y - TO - L E T Opinion

OLI SHERLOCK is managing director of insurance at Goodlord

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delays caused by funding cuts and the a ermath of the pandemic. The Government acknowledged that the system needs to be as “smooth and efficient as possible” when disputes arise. To help make this possible, the Government has identified key areas that need to be addressed before Section 21 is abolished. These include: Digitising more of the court process to be simpler and easier for landlords to use. Exploring how the courts can prioritise cases that involve antisocial behaviour. This includes mandating that tenancy agreements should have clauses that antisocial behaviour can result in an eviction. Improving bailiff recruitment and retention – reducing admin to prioritise possession. Providing early legal advice and be er signposting to help tenants. However, we are yet to see the full detail on how these changes are likely to be delivered. What metrics, for example, will come into play when it comes to

improving recruitment or be er signposting? It remains an open question that the Government must quickly answer.

Scrapping periodic tenancies According to the initial scope of the Renters (Reform) Bill, most tenancies will shi to Assured Tenancies, or periodic, rolling contracts. Tenants would be able to give two months’ notice to move out, and landlords would need a specific reason to ask them to leave. The only exceptions to the tenancy reforms were slated as purpose-built student accommodation (PBSA), temporary accommodation, and supported housing. However, that means that privately rented student properties were still set to move onto the new periodic system of tenancies. This became a key cause of concern for those landlords keeping track of the bill, who were worried about how they would move students on at the end of each academic year, ready for a new cohort of tenants to move in.

The Government a empted to allay these fears during the second reading by promising to introduce a measure that would allow landlords renting to students the ability to take possession of their property at the end of the academic year. However, fixed term contracts still won’t be allowed, and students will be given the right to give two months’ notice at any point during their contract – prompting fears from some that landlords may increase rents on student lets to create an insurance ‘buffer’ against being le with a vacant property in the middle of the academic year. The full impact of these changes on the student lets market is likely only to be seen next summer and beyond, as a new cohort of students embark on fresh tenancies. With the Commi ee stage still to come, it’s a case of ‘watch this space’ for more information on the latest changes and concessions being made. Smart agents and landlords will need to stay on their toes and be prepared for all eventualities. ● November 2023 | The Intermediary

B U Y - TO - L E T Opinion

Time for landlords’ big break?

s we edge closer to pantomime season, we’re reflecting on how landlords have been portrayed as the villains of the housing market. Just like their onstage counterparts, things are never as straightforward as they might seem. Landlords provide a vital service, offering accommodation to people o en at a stage where they cannot afford to buy their own home.Yet, perhaps because of their undeservedly bad rep, landlords have come in for a particularly hard time recently. If action isn’t taken soon, there could be an exodus from, which would generate boos and hisses from everyone.

Home Truths Recent research commissioned by Yorkshire Building Society for our ‘Home Truths’ report shows that landlords are doing what they can and – for now at least – remain commi ed to providing muchneeded accommodation despite the challenges. However, that may not be the case for much longer if they aren’t given the support they need. In fact, almost three-fi hs (58%) feel pushed out of the rental sector, and 61% stated the sector is becoming less a ractive as an investment proposition. None of this is good news, given that the critically short supply of private rented housing could leave those needing help most stranded. At the same time, 61% of first-time buyers and 54% of remortgagers think the UK is in danger of becoming a nation of renters within five years, due to the affordability challenges, heightened by the cost-of-living crisis, historically high house prices and higher interest rates. It doesn’t take a great leap of imagination to realise this is an equation which just doesn’t add up.With buying a home increasingly difficult, who will ensure those would-

The Intermediary | November 2023

be borrowers have somewhere else to go if the current pressure on the rental sector is allowed to continue? Respondents still aspire to own their own homes, but neither renting nor borrowing is easy, with landlords having to pass on their increasing costs by raising rents and, in turn, making saving for a deposit even harder for their tenants. The good news is that the majority of private landlords remain commi ed to helping stem the housing shortfall at the moment, with 66% intending to stick around for at least five years. Almost two-fi hs (38%), though, say the Government needs to offer more support in light of changes to regulation and taxation which make it harder for them to operate profitably. Our report includes a series of recommendations for changes to ensure a healthy future mortgage and housing market, for everyone. These include pu ing landlords back on a level playing field with other types of small business, and enabling them to operate profitably to safeguard their contribution, altering the new taxation rules to allow them to offset costs including mortgage interest. While they might have been able to absorb the impact of recent changes while interest rates were unusually low, this isn’t sustainable now that they have returned to more typical levels – in many cases two or threetimes higher.

Major part to play What landlords bring to the market’s overall vitality shouldn’t be underestimated. Contrary to one popular myth that they swipe homes from first-time buyers, they o en invest in properties, and areas, buyers might not desire, fuelling regeneration and avoiding voids which drag the homebuying market down. They also give would-be buyers a credit footprint and payment track record, something lenders take seriously

JEREMY DUNCOMBE is director of mortgage distribution at Yorkshire Building Society and managing director at Accord Mortgages

Their reputation for profiteering isn’t really true, either. In fact, many are doing their best to avoid passing on more cost than necessary to tenants. For many, their properties are a longterm pension investment rather than a ‘get rich quick’ enterprise. Where they do operate commercially, we would argue landlords deserve the chance to make a viable income to maintain properties for those who need them. This right is taken for granted by every other kind of small business. We know that the social housing sector and corporates are unlikely to step up to meet the need for housing. There are signs of companies ge ing into the build-to-rent and commercial markets, just not quickly enough, or at sufficient scale. Innovative solutions are needed from lenders like us to help landlords meet affordability requirements against a higher interest rate backdrop. We’ve seen a significant shi , with more taking advantage of options like top-slicing, where we include earned income when calculating affordability. The geographical split of these cases is changing, too; we’re ge ing more applications from across the country, whereas they used to be more prevalent in London and the South East, given their higher property values. The industry’s trade associations are also calling for change. It’s now about policymakers stepping in and making necessary changes to give landlords a fair crack of the whip so they can play out their role as the potential heroes, not the baddies, in this particular drama. ●

B U Y - TO - L E T Opinion

A view from the top needs boots on the ground

ith Bank of England base rate up from 0.1% to 5.25% in less than two years, the dynamics of the housing market have changed considerably, prompting more speculation from commentators than usual. Every two months, we produce our Property Watch report – taking the temperature of the housing market from the perspective of our surveyors. Our September report suggests that many homeowners are pu ing second homes up for sale in order to extract equity to make remortgaging their primary residence more palatable. Demand from downsizers, meanwhile, has seen a bigger pick-up than any other buyer profile. Some 8.3% of our surveyors reported seeing a rise in those looking to size down their homes. That compares with just 0.6% of espondents reporting an uptick in buyer demand from homemovers, 1.4% from investors and 2.3% from first-time buyers. The pressure on existing landlords remains significant, as they face increasingly tight operating conditions. The supply-demand imbalance in the private rented sector (PRS) continues to push up rental values, with a huge 45% of London-based surveyors reporting an uptick in the number of homes let above the initial asking rent. Half of the surveyors we canvassed saw an increase in the number of privately rented homes entering the sales market, as pressure on landlords mounts. For those rented homes put up for sale, 90% of surveyors observed that they were typically being sold to buyers who intended to make the

properties their primary residence, reducing local rented supply further. There has been a fall in landlords participating in the sales market compared with other buyer groups. Some 79% of surveyors noted a decline in landlords planning to buy new investment properties, with the trend broadly the same across all regions. In addition, half saw a rise in landlords planning to rationalise their portfolio or exit entirely in the next 12 months. Extrapolated out, our findings show – fairly irrefutably – that things are only going to get tighter in the rental market. Worsening affordability among tenants is already leading to rent arrears. Coupled with much higher buy-to-let (BTL) remortgage costs, there are landlords who cannot make the financial case for continuing in the sector. UK Finance arrears and possessions data showed a 28% rise in arrears of 2.5% or more on BTL mortgages between Q1 and Q2. Lighter arrears are increasing at faster rate, rising 41% over the same period and accounting for over half of arrears in the sector. It should be noted that arrears and possessions remain at a very low base; just 440 BTL mortgaged properties were taken into possession in the second quarter of 2023, some 7% more than in the previous quarter.

Little reprieve Amid this sombre outlook for both renters and landlords, Prime Minister Rishi Sunak announced that his Government would axe the current 2028 deadline on upgrading privately rented homes to a minimum Energy Performance Certificate (EPC) Band C. The announcement, made during the Conservative Party’s conference speech this autumn, was billed as a reprieve for renters – based on the

STEVE GOODALL is managing director at e.surv

assumption that landlords would pass on refurbishment costs estimated to be up to £10,000 per property to tenants. In practice, ditching the policy is more likely to saddle renters with higher energy bills, while doing li le to curb rising rents. In any event, most landlords have already made or begun to make the required upgrades to insulation, triple-glazing and gas boiler alternatives. It is the cost of servicing mortgage payments that is pushing rents up at such a rate, forcing many to put properties up for sale. Our research indicates that the vast majority of those properties are not being recycled back into the private rented sector – so higher rents are even more likely. Dwindling supply is now the biggest issue in the rented sector – exacerbated by the imminent Renters (Reform) Bill which proposes to scrap Section 21 no fault evictions. In spite of widely reported opposition to parts of the bill within the Government’s own ranks, Sunak has commi ed to it. Though there will still be some agency for landlords seeking to give tenants notice under the proposals, there is also concerning evidence that the bill has triggered a wave of landlords selling up. According to Shelter, 540 tenants are issued with a Section 21 notice a day at the current count. The sector is already in a challenging position. The future currently looks as though those pressures will intensify. Our research will continue to elicit the ‘boots on the ground’ view of policy decisions and market nuances. ● November 2023 | The Intermediary

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Court reform needed for PRS success

ctober’s second reading of the Renters (Reform) Bill confirmed a pause to the abolition of Section 21 no-fault eviction notices, in a turn of events that will be viewed very differently by many landlords and tenants. However, the one thing that all will agree on is the need for greater clarity and stability for a sector which has been subjected to significant reform in recent years. Section 21 remains one of a number of issues which must be se led. But like most bones of contention, the conditions must be right before things can effectively change. While most landlords have largely weathered the impact of reform up until now, the cost-of-living crisis – combined with enhanced regulation and taxation – has led to a point of inflection, forcing many to either raise rents or sell up. This has resulted in greater pressure being placed on tenants, either through financial impact or lack of supply, and heightened risk of Section 21 evictions. The threat of no-fault evictions must be addressed in due course, or it risks further damaging the sector. But to ensure the success of the private rented sector, its abolition can only happen pending improvements to the courts. The current court system is slow, inefficient, and underfunded. The courts of tomorrow must operate as a reliable and trusted process for both landlords and tenants. Without the right reform, the situation for landlords and tenants could worsen, with the following consequences: Increased backlog of court cases: landlords with large portfolios could find themselves dealing with years-old cases, distracting from their primary responsibilities. Legal costs: Abolishment would cause high legal costs, meaning smaller landlords and individuals

The Intermediary | November 2023

could end up facing potentially ruinous additional bills. Delayed legal proceedings: Ministry of Justice statistics from earlier this year show the median time from claim to repossession is just over 22 weeks, significantly longer than pre-Covid and higher than legal guidelines, which stipulate no more than eight weeks between claim and repossession. Landlords already face delayed court proceedings, and the abolition of Section 21 could lead to unmanageable financial strain. Impact on tenants: Higher legal costs may disincentivise improvements to rental properties. A lack of court reform will drive good landlords out of the market and disincentivise potential good landlords from joining it. This drag on supply will drive rents further up. Looking more broadly at the issues facing the sector, it is clear we need it to succeed for both tenants and landlords, for the simple reason that both are essential to a healthy housing market. For that to happen, the market needs the right Government intervention so that reform supports a fair outcome for all. As the second largest provider of buy-to-let (BTL) mortgages, and the largest mutual in the market, we are dedicated to supporting landlords and raising awareness within Government of what they need. We work closely with Government and public bodies to make sure they hear landlords’ voices, and we believe it’s paramount that senior public figures address the following issues: Unfreeze the local housing allowance to account for rising rents. Give new legislation enough time to bed in. Landlords need time to make the right changes, so there should be a moratorium on all but

DAMIAN THOMPSON is director of landlord at The Mortgage Works

essential new PRS legislation for five years a er the bill becomes law. Provide certainty on future taxation and regulatory changes to ensure that the process of ‘greening’ our UK housing stock complements the development of the skills needed to support new homebuilding, and crucially, more social housebuilding. Landlords deserve a period of certainty in which to make the right decisions around taxation, policy, and trade skills. Aligned thinking across these key areas would ensure they have a sustained period to rebuild, following an era of political indecision which has disadvantaged them and ultimately impacted tenants. Private landlords are a diverse group with an important role in society and the wider economy. We strongly believe that if they are supported to work effectively, they’ll take into account the impact of the cost-ofliving crisis on their tenants, as well as their own finances. In today’s environment, where landlords are overwhelmed with regulation, it’s essential we all help them understand their role, which will encourage them to spend more time thinking about the wellbeing and needs of their tenants. We have always been in support of the Renters (Reform) Bill proposals, and will continue to support interventions in the market aimed at fostering a positive relationship between landlords and tenants – as we have done for a long time, and as we will continue to do long a er the Renters Reform Bill becomes law. ●

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S P E C I A L I S T F I NA NC E Opinion

Understanding gross development value calculations

n the property investment and development world, gross development value (GDV) is an important metric used to determine what a project may be worth on the open market once all of the planned works have been completed. GDV is a significant calculation, as it is the foundation on which all other aspects of a build are determined. This includes the cost of acquiring the development site, the cost of construction and other associated works, the profit margin of the developer or investor, and the likelihood of a successful and profitable financial outcome. The way in which GDV is calculated is extremely complex, and can prove to be a minefield for many brokers, particularly those unfamiliar with working in this area of the specialist lending market, says Stephen Henman, managing director at Method Valuation UK. “At Method, we see at close quarters the impact of the complex nature of GDV calculations. This can occasionally cause friction during the valuation process and is exacerbated by current market conditions,” he says. “It’s important that brokers and lenders are fully aware of the contributing factors to the GDV calculation, particularly the impact of the developer’s anticipated profit margin on the GDV.”

From one lender to another Understanding the way in which lenders calculate GDV is crucial to securing funding in any development finance project, because it can vary hugely between projects, and also

The Intermediary | November 2023

differs vastly from the standard loan-to-value (LTV) ratios used in residential mortgage loans. Different lenders also use different methods to determine affordability, with the most common being the GDV plus costs. This can typically be between 50% to 70% GDV, plus up to 100% of the construction and development costs, but will depend on the size of the deposit, the experience of the developer, the feasibility of the project, and the planned exit strategy. Each lender also has its own lending criteria as well as a minimum and maximum borrowing amounts, which can range between £50,000 and £50m. Proof of a solid exit strategy will also be critical, as your ability to sell or remortgage the development will also determine the GDV value. As a general rule, lenders like to see an expected 20% minimum profit built into any development plan, with the GDV calculation split into thirds across the purchase cost, the cost of works and projected profit. Examples of this can be seen in the graphic, with Example 1 showing the three splits and Example 2 showing a 20% profit.

GDV £500k

Example 1

Profit

Cost of purchase

Managing expectations Understanding this is crucial as it can sometimes be an issue on day one of lending, as clients may find the current value to be quite a bit lower than what they expected. This is an important factor to take into consideration, as it could impact the project and cause delays. Calculating GDV is an extremely complex process, so brokers unsure of how a case should progress should talk to a trusted development finance expert to help them through the process. This will not only help to alleviate the pressure of placing the business, but also ensure they provide their clients with an accurate GDV calculation on any planned development finance project. ●

GDV £500k

Example 2

£200k

Cost of works, legal & lender fees

£166k

Lenders also tend to work backwards from the GDV calculation to work out the current valuation for day one of the lend, and will deduct any expenses, development costs and contingency costs built into the calculations, which can result in a lower valuation than the client may expect.

£100k Profit

£168k £166k

MATTHEW DILKS is bridging and commercial specialist at Clever Lending

Cost of works, legal & lender fees

£200k

Cost of purchase

Gross Development Value

S P E C I A L I S T F I NA NC E Opinion

South East and East Anglia – vibrant and dynamic

he South East and East Anglia is a rather unique place in England, in that it consists of two sizeable areas, but is generally treated as one region for business development purposes. Being in such an economically vibrant and dynamic region, so close to the country’s capital, the bridging market is vigorous. Each day I see cases ranging across all manner of complexity and risk. It is hugely thrilling to be an active part of.

Where and why? Watching the news, it might be difficult to imagine there being anything other than the most static and risk-averse business environment throughout England. However, in our experience, the story on the ground couldn’t be more different – especially in the South East and East Anglia. A recent piece in The Telegraph highlighted how demand for rental properties in London is such that would-be renters outnumber available rooms by six to one. This certainly chimes with our own experience, as we see the effect of ever more people being pushed out of the capital and into its surrounding areas. For instance, we are seeing a growing number of clients looking for funds to help convert existing properties from standard rentals to houses in multiple occupation (HMOs) in order to meet this increased demand from tenants. This is alongside the many cases consisting of land with planning deals a ached that are currently crossing our desks at HTB, which are o en experienced developers wishing to extend or adapt existing planning for extra units, as well as purchasing land

with planning – again, to meet this increased demand. In recent months, we have seen a surge of development exit deals for properties to be sold within Stevenage, Canterbury, and Medway Kent especially – suggesting that developers believe the economics of renting in London will push even more city workers beyond the M25, and that businesses will also increasingly choose to locate along its boundaries. Aside from this, we have registered greater interest in small extension and light refurbishment projects in an effort to bring up property yields. Although this is a significantly smaller growth area, it has always been a consistent source of business.

South East features Having moved from covering the South West of England, there’s a major difference between opportunities and yields. Partly because of its large holiday let economy, the South West features generally higher yielding properties, with refurbishment work being extremely popular. In this part of the country, clients might be people with a handful of properties under their belt, who are happy to keep what they have and not massively expand their portfolios. In the South East, however, the clients I speak to o en already have significant investments in the region and a deep knowledge of the local market. Decisions are based on a strategic reading of the situation, and many of them are prepared to invest heavily in major refurbishment and conversion works. This means that the brokers who operate in this area are tremendously focused on fostering quality, longterm relationships with their clients. The most successful brokers here

MIA HOUSE is business development director for bridging at Hampshire Trust Bank

We are seeing a growing number of clients looking for funds to help convert existing properties from standard rentals to houses in multiple occupation (HMOs) in order to meet this increased demand from tenants” don’t concentrate only on the initial enquiry, but seek to understand the bigger picture of a project, too; for example, why a bridging loan is necessary, how it fits into their client’s vision, and what their exit plan is – both plan A and plan B.

The affordability crisis The past few years have hammered the point that the future really is impossible to predict. One thing does seem certain, however: a larger and larger cohort will struggle to find affordable housing in the South East of England. While I won’t pretend that I have the answers to this problem – does anybody? – from my position I do get to see how bridging helps the market adjust to this need. Whatever does happen in future, I am certain this sector of the property market will continue to perform a vital function. ● November 2023 | The Intermediary

S P E C I A L I S T F I NA NC E Opinion

Flexible lenders for healthcare business borrowers

inding a dentist is not easy at the moment. A study by the British Dental Association last year found that only 25% of practices have an open waiting list, while more than 1,000 practices have a waiting list of above a year. There is enormous demand for quality dental care, yet all too o en patients struggle to access that care from local dentists. Practitioners are already at capacity, meaning they are simply unable to take on more customers, leaving those prospective patients frustrated. It’s a troubling state of affairs, with a clear imbalance between the demand for dental services and the number of dental practices up and running. There is inevitably a big regional variance, too, with certain areas far more underserved than others. There is some encouragement, though, in the fact that there is demand from dentists for funding to set up their own practice, something we have seen first-hand at Atom bank. These dentists want to help meet that demand, but they can face significant burdens in doing so. All too o en, lenders in this market will insist on dentists having a certain level of experience before they will allow them to borrow the funds needed to go it alone. It doesn’t have to be like that, though. The key should be to ensure that the dentists know what they are doing and have the right qualifications, not that they have an arbitrary amount of experience. Dentists are far from the only healthcare businesses facing such funding issues. Care homes are another excellent example, with many would-be practitioners excluded from funding because of those very

The Intermediary | November 2023

Nine out of 10 dentists recommend business success

same experience requirements from lenders. The need for greater numbers of care homes is acute, given our ageing population and the rise in conditions like dementia amongst older people. However, while we know there are an awful lot of would-be borrowers who are keen to set up in this industry, they are prevented from doing so because lenders – which in many cases are unfamiliar and therefore overly cautious about the industry – will not even consider first-time operators.

Flexible lending Healthcare is an area of the market filled with potential for brokers. There will be clients coming forward, hoping to raise funds to set up their own care homes, dentists, pharmacies, and other healthcare provider businesses. They are well aware of the demand, of the keen interest in such services, and are ready to meet that demand. Yet those potential borrowers so o en are unable to secure the funding which would allow them to set up those businesses, to branch

TOM RENWICK is head of business banking at Atom Bank

out on their own and deliver for the customers crying out for their services. This isn’t a phenomenon unique to healthcare, either. There are all sorts of industries across the UK which are ripe for the entry of new businesses, but that won’t happen if brokers have to rely on traditional, o en more risk averse banks, to fill the void. There are alternative options, however. At Atom bank, for example, we are proud to take a more flexible, understanding approach to business lending. At its heart, that means taking the time to truly grasp what the client is looking to achieve, and what they can offer, but also delivering terms that can give the client the best chance of success. For example, we can lend against market value and at more generous loan-to-values (LTVs) – up to 95% depending on the sum looking to be raised by healthcare professionals. It also means an open-minded approach to lending against goodwill. At Atom, we can lend up to 100% against goodwill for dentists, or up to 85% for pharmacists.

Working together The demand for finance from healthcare businesses is only likely to grow in the years ahead. That makes it all the more important for brokers to pinpoint the lenders best placed to support their clients active in this arena, and other business areas which remain underserved by mainstream lenders. We both have a huge role to play, and working together means we can set these businesses up for success in the future. ●

S P E C I A L I S T F I NA NC E Opinion

The art of the complex

“I

f it were easy, everyone would be doing it, and you wouldn’t have an opportunity.” This quote is well known in its many variations, this one a ributed to Bob Parsons, entrepreneur and founder of web hosting firm GoDaddy. The truth of it can be seen all around us, from sport to business, and in the mortgage sector, which over the past four years has shi ed from being a benign conveyor belt, to being layered in complexity and challenge. The drivers behind this are complex, but can be largely a ributed to the post-Covid changes in society and the impact of inflation. The pandemic had a profound effect on the working lives of many of us. From becoming selfemployed, to zero hour and short-term contracts, to second jobs, reducing hours or working part-time. For some, a itudes towards work also shi ed, as time away provided an opportunity to reflect. Many of us learned new skills and found new confidence. In the home, we also had to fix things. So, adventurous homebuyers are now looking for doeruppers and non-standard property. More recently, the rapid rise in mortgage rates is catching homebuyers out, as affordability calculations no longer work. The impact of the cost-of-living crisis is biting hard. Consumer lending in July this year was just shy of £30bn. At the start of 2021 it was just under £18bn. Increasingly, borrowers are becoming ‘non-standard’. Recent research revealed that more 53% of people already fall into one or more specialist lending criteria, and one in four struggle to get a mortgage. Professional property investors are also becoming more creative. Top-slicing is useful to help manage interest coverage ratios (ICRs), and the conversion to semi-commercial spaces

JASON BERRY is group sales director at Crystal Specialist Finance

or to houses in multiple occupation (HMOs) is also on the rise. Last week at Crystal, 25% of our enquiries were for commercial borrowing. At the start of the year, this was 20%. Auction transactions are also back on the rise, up 11% year-on-year.

depending on the complexity and the broker’s confidence.

Changing times

A complex landscape

Borrowers’ financial situations, needs and wants have changed – but high street lenders haven’t. Yes, we’ve seen some headline-grabbing rates – with eye-watering product fees – or high loan-to-value (LTV) products – with limited supply – but lending criteria have remained broadly the same. These lenders don’t want to cater for the new breed of borrower – it is too risky. They don’t fit the mould, and the computer says no. Let’s use the art analogy. Your subject is the same, the result is the same, but the tools at your disposal are different. You now have to use different brushes, take a different approach, use a different style. Have you picked them up, embraced the challenge and adapted? Or have you stayed in your comfort zone and accepted the struggle? Increasingly, brokers are turning to master brokers and distributors like Crystal Specialist Finance to support their businesses. In our annual survey last year, brokers told us they were diversifying into new markets this year, with 37% moving into buy-tolet (BTL), 29% into bridging finance and 17% into commercial finance. 70% said they planned to continue to diversify, with 52% actively looking to work with a master broker. That has certainly proved to be the case, with our enquiries up 19% year to date. Distributors also offer brokers fair value and choice. Fair value because we work with a panel of more than 100 lenders, and choice because we offer either a packaged or referral service, allowing brokers to provide the advice, or pass the baton to us,

The change in lending landscape and the rise in the sophistication of borrowers’ needs is naturally driving the specialist market. Here’s just a couple of examples of recent Crystal cases that highlight the art of the creative approach: A semi-retired teacher had taken up a role advising young people, which he thoroughly enjoyed, to the point that he wanted to invest in the business and become a part-owner. He wanted to purchase 33%, but was unsure how. Affordability didn’t work for a conventional second charge – which his broker had tried – and a er discussion, Crystal established there was sufficient equity in his residential property to raise funds for a pure business purpose loan. A pharmacist was managing a successful chemist, where turnover had increased considerably. He was offered an opportunity to invest to become a shareholder, but he declined, feeling potential had been maximised. He had however identified an alternative chemist nearby, which he believed was underperforming. He required £200,000 to buy into it. His residential property was valued at £1m with a £375,000 outstanding mortgage. Again, the broker involved tried – and failed – to place a traditional second charge. Crystal easily placed and delivered funding within six weeks. The mortgage landscape has changed, and so have borrowers. Yet the need remains constant – to raise property finance. As an intermediary, your role is still to be ‘the dream catcher’ – to make funding a reality. ● November 2023 | The Intermediary

S P E C I A L I S T F I NA NC E Opinion

The importance of speed RANJIT NARWAL is head of origination at Kuflink

Money saved on the rate is wasted if the client misses the deal

f I had a pound for every time I asked a broker what they would like to see in short-term lending and they answered ‘speed’, I would be a rich man. It is perhaps the most talked about aspect of bridging finance. More than rate or any other feature of the service, speed is what most brokers would like to see. Of course, both rate and speed are equally important in a perfect world, but what we must remember is that this is short-term finance. The money ‘saved’ on the rate is wasted if the client misses the deal they were a er because the process took too long. Brokers will always need an ‘emergency’ service when the deal absolutely must be done, and it is time to become less fixated on the rate as the most important factor in deciding a recommendation to a client. It is, therefore, important that the choice of lender and the reasons for choosing a particular deal are noted and accepted by the customer. In these days of rate fixation, it is easy to forget to set down why the cheapest was not the chosen product. If we look at the bare bones, while rate is hugely important in long-

The Intermediary | November 2023

term lending, we are talking about bridging, where terms vary between six and 18 months on average. The difference between a cu ingedge rate for a bridge and a more conservative offering makes so much less of a difference than if the loan was over 25-years. Nevertheless, we are in danger of making the cheapest rate the most important consideration, when it is in many cases not the most relevant feature when clients need to complete very quickly. At Kuflink, we believe that while it is not impossible to find a combination of the best rate and speed, in the real world clients – both business and domestic – would prefer to have the certainty of knowing that when they apply, the outcome is going to happen in a timeframe that suits their circumstances, rather than having to make their deal fit around a lender, no ma er how competitive their rate.

Personal responsibility There can be no doubt now that regulation is an evolving entity. People who think that Consumer Duty will be the final part of a modern compliance framework are going to be

disappointed. We could just wait and see what happens, and like the ostrich with its head in the sand, hope that our sector will not come under any future spotlight. I am not saying that we can turn back the tide of formal compliance, but we can take individual responsibility for those parts of the business process in which we work and measure our performance, not just by the success of our sales or administration efforts, but also by the personal integrity we bring to the role. The concept of self-regulation might have been superseded by the formal variety, but holding ourselves to the highest standards of care for our customers should not just be a ‘right on’ affirmation of a company’s values that looks good on the marketing material, it must be a deliberate choice made by every individual, no ma er how big or small a cog in the wheel they happen to be. When the bridging sector was much younger, a empts were made to improve standards of care among lenders by signing up to a voluntary set of principles as a code of conduct. However, while it was a noble idea to a empt a version of self-regulation, it did not include intermediaries, and assumed that by ge ing lenders to sign up to a code of conduct, bad practice would also be reduced across the industry. We work in a regulated environment now, but it should not stop any of us working in this market – as a broker or a lender – from remembering that rather than regarding regulatory compliance as just another task to perform, we should take a li le more personal responsibility for the area we work in. ●

S P E C I A L I S T F I NA NC E Opinion

A specialist lending review

s we come towards the final few weeks of 2023, it’s been one of those years that seems to have flashed by in the blink of an eye, yet also one which – at times – has lasted an eternity. This thought came into my mind because only a few weeks ago we celebrated the first anniversary of our rebrand from First 4 Bridging, and maybe my previous observation was a hangover from the work which went into this. Thankfully, this has been a huge success – but it has not been without its challenges, as I’m sure many firms operating in the intermediary market can a est. The rebrand also delivered on our intention to reflect the growing level of enquiries involving complex residential transactions, buy-to-let (BTL), second charge, commercial term loans and development finance that we were experiencing, and how activity levels across the specialist market were changing. During the subsequent 12-month trading period, we have noted a 37% increase in specialist buy-to-let business, a 31% rise in commercial mortgages, and an 18% growth in secured loans. Focusing on the specialist buy-tolet upli , within this a high number of applications have emerged from first-time landlords and for houses in multiple occupation (HMOs). We have also remained active in the bridging and development finance sectors over this period, as well as more recently seeing an upli in our specialist residential business.

Specialist buy-to-let and commercial finance The relationship between specialist buy-to-let and commercial finance is becoming increasingly interlinked, and a rising number of landlords are recognising the potential on

offer from commercial and semicommercial properties as they look to adapt their strategies to futureproof their portfolios. This was evident in research from Shawbrook, which found that one in five landlords (19%) are considering moving into commercial property, with 37% of these respondents citing diversification as the key reason for doing so. Those who already own commercial properties are also planning to expand further, with 35% of landlords with commercial assets stating that they are looking to invest more. With a greater proportion of workers returning to the office, and a high street revolution suggested to be underway, more than a third of all landlords (36%) have noticed an increase in demand for commercial property and view it as a good investment opportunity. In addition, a quarter believe there is currently a lack of good quality properties for businesses, indicating a possible need for development or conversion work. With landlords seeing the opportunity to branch into commercial property as a chance to support their local community (29%), many plan to invest in small (33%) and large (30%) retail spaces. As highlighted in our findings, demand is on the up from a specialist buy-to-let business and commercial finance perspective, and it will be interesting to see where this momentum takes these sectors over the course of the next 12 months.

Auction finance Each quarter of online auction sales this year are reported to have outsold the last, and while winning new private treaty instructions remains a challenge, agents’ auction sales continue to grow at pace. Data from iamproperty’s Q3 Online Auction Index shows there were 2,530

DONNA WELLS is managing director at Envelop

As highlighted in our findings, demand is on the up from a specialist buy-to-let business and commercial finance perspective” properties sold online via the modern method of auction in Q3, an increase of 31% compared with Q3 2022, and up 7% on Q2 figures. Capital value raised also reached a record figure of over £431m in Q3, an increase of 5% on the previous quarter and of 27% compared with the same period last year. Sales in August alone topped £155m, which is the most capital value iamproperty has ever seen raised in a single month. These figures demonstrate the increasingly influential role being played by the auction process for both residential and investment purposes, and the rising reliance on the intermediary market to help facilitate these transactions. This is a trend we’ve experienced over the course of 2023, as meeting strict timelines and finding the most appropriate lending partner for quirky and sometimes unhabitable property types has proven a constant challenge for many intermediaries in such a turbulent and o en unpredictable lending arena. This is where a trusted specialist packaging partner will continue to add real value moving forward. ● November 2023 | The Intermediary

S P E C I A L I S T F I NA NC E Opinion

A housing crisis

he housebuilding sector contributes over £42bn to the economy and supports more than 770,000 jobs. Despite its size, the sector is in crisis, and the UK has an estimated deficit of 4.75 million homes. The Government believes providing more new homes will help to level up the country and reduce inequality; however, it has yet to find practical solutions to deliver these homes. Brickflow has analysed every element involved in the housebuilding process, including hundreds of pages of Government policy, and our whitepaper is the only report of its kind. With input from 12 influential industry leaders, including Knight Frank and PwC, it offers opinion from those at the coalface of the process, with actionable recommendations that cut through political rhetoric.

The key barriers Planning: Delays in the planning and development process have caused small to medium (SME) housebuilder numbers to drop by 80% since the early 90s. Indeed, 93% of SME developers say securing planning permission is a problem, while 76% believe local authority staffing shortages are the main cause of delays. Land supply: Over 90% of land in England is of non-developed use, yet just 0.2% is available for development. The current system fails to encourage development: Councils are o en under pressure to reject plans, and authorities have no immediate financial benefits. Supply chain: Ongoing shortages of raw materials and skilled workers have caused unprecedented high build costs, while 60% of the imported construction materials coming from the EU are now subject to Brexit complications. Environmental: The Future Homes Standard requires homes built from 2025 to produce 75% to 80% less carbon emissions. There have

The Intermediary | November 2023

IAN HUMPHREYS is CEO and founder at Brickflow

The main factor for finance being less readily available is the rising base rate. With every 1% increase, a developer needs £10,000 more in equity per £1m borrowed, meaning that based on the UK’s £8bn development finance market, £400m more is needed in equity”

been calls for no new homes to be connected to the gas grid from 2025, while nutrient neutrality guidelines affect more than two-thirds of SME developers and restrict development across 74 local authorities in England. Affordability: Inflation, increased mortgage costs and restricted availability, and inflated rent has created affordability issues and an equity gap for potential homeowners. Developers are therefore reluctant to build houses that may not sell.

Finding funding A er planning, the biggest challenge to developers is funding; 41% of SME housebuilders said sites they were interested in had stalled due to finance issues. Lenders have tightened their criteria since the 2008 crash, but the main factor for finance being less readily available is the rising base rate. With every 1% increase, a developer needs £10,000 more in equity per £1m borrowed, meaning that based on the UK’s £8bn development finance market, £400m more is needed in equity. With less equity available, the amount developers can borrow with the same amount of equity is now 25% lower than last year, creating a liquidity crunch. The Home Builders Federation (HBF) has advocated for the

S P E C I A L I S T F I NA NC E Opinion

framework Government to help bridge the gap between current lending terms. While Government-backed initiatives can help – for example, the Affordable Homes Programme and National Home Building Fund – industry leaders who commented on our white paper highlighted some shortcomings. Andrew Lazare at Mint Finance said: “Overall awareness of these schemes remains low, and they’re complex and difficult to navigate.” Martin Reynolds, chairman of the Financial Intermediary & Broker Association (FIBA), said: “Only a small percentage of those requiring funding can actually be helped for a variety of reasons.” Realistically, it’s the private sector, rather than Government, which can make a real difference. The problem is lack of access to the market due to an absence of technology. This industry has been one of the last to digitise, meaning brokers and intermediaries cannot easily compare finance options. Lenders, brokers and developers must adopt the technology already available to a ract more investment into digitisation.

Moving forward Through the recommendations in our ‘Solving the UK’s Housing Shortage’ white paper, we give politicians from all parties a comprehensive framework for addressing the housing crisis, which the Government itself has failed to produce. Increase planning department funding now: Allocate more funding to planning departments, rather than consulting on whether to increase planning application fees. It may cost developers more in the short-term, but they, and the whole economy, will benefit from a faster process long-term. Provide greater household projection clarity: Introduce a methodology that enables local authorities to identify requirements and adhere to new local timetables.

This industry has been one of the last to digitise, meaning brokers and intermediaries cannot easily compare finance options. Lenders, brokers and developers must adopt the technology already available to attract more investment into digitisation”

Introduce a database for all public sector land: This includes local authority and national Government-owned. Identify suitable brownfield sites and audit greenbelt land, reclassifying low-quality ‘grey belt’ areas. Focus use of the Infrastructure Levy on supporting local communities and infrastructure: Contributions must not be used to plug other authority financial gaps, but benefit the local communities where house building occurs. Improve Government and private sector funding for developers: Increase the longevity, scale and access to Government-backed schemes. Improve access to development finance from the private sector through investment in further digitisation. Implement a robust energy and water infrastructure strategy: Improve energy and water infrastructure, with more wind farms to reinforce the electricity grid. Address key contributors to nutrient-related river pollution, such as the agricultural industry and water companies, rather than developers – which contribute just 5%. Increase buyer affordability: This could be achieved by bringing back Help to Buy or a similar scheme. Build market confidence in Modern Methods of Construction (MMCs): Use MMCs to build council and housing association properties where a mortgage isn’t necessary, to prove its longevity and efficiency. Invest in technology to facilitate more building, buying and selling: In addition to digitising planning and land supply, digitise the buying and selling of homes to remove the archaic paper-based conveyancing process. Adopt a culture of collaboration and action: Cross-party Government ministers or representatives must meet with housing sector stakeholders to move forward with practical solutions. Also, end the revolving door of housing ministers. ● November 2023 | The Intermediary

S P E C I A L I S T F I NA NC E Opinion

When the only certainty is more uncertainty

s euphemisms go ‘rollercoaster ride’ doesn’t really begin to do justice to the unprecedented peaks and troughs experienced by the development finance sector over the past four years. From the deep lows of Covidinduced lockdowns, to the highs of booming building, infrastructure, and DIY projects by the middle of 2021. Now, a er a run of 14 successive interest rate rises that only came to a halt in September, the headwinds of house building are once again blowing strongly. While the commercial building sector seems to have stabilised, October saw house building decrease for the 11th successive month, due to a lack of demand and subsequent cutbacks to new projects. It’s not all bad news, of course. The sudden switch from easy money to a sharply tightened monetary policy is finally beginning to see inflationary pressures easing for the construction sector, and this – along with the normalisation of supply chains and the shortening of lead times – is undeniably good news. Indeed, October saw purchasing prices decreasing at their fastest rate in over 14 years as vendors passed on the lower costs of timber, steel, and transportation. However, it’s the trend of recent years that, just as green shoots start to appear, another disaster seems to befall us. The first global pandemic in 100 years, the invasion of Ukraine, and now the horrific conflict in the Middle East. If the la er escalates, it has the potential to disrupt the fragile recovery of the world economy, and in the UK, delay the point at which

The Intermediary | November 2023

interest rates start to drop – or even force the Bank of England to make further increases. This threat, coupled with the lack of any visible Government plan to address the steep downturn in housebuilding rates, does not bode well as we head into the difficult winter period.

Collaboration is key The net result of all the above uncertainty is that, now more than ever, it’s harder for developers to accurately schedule works and to project build costs and cashflow. Contingency funds have generally increased in size, o en to 10% or more of the total build costs, but uncertainty can still surround the budget and whether it’s sufficient to get a scheme completed. This is the point at which the best brokers and specialist development lenders come into their own. At Saxon Trust, our office-based team moves quickly and collaboratively to analyse the viability of every single development and development exit enquiry we receive, large or small. Within our ranks, we have individuals who have been successful developers, and this means we can offer unique and incisive market observations and solutions. Even when we decline an enquiry, we always do so in the most constructive fashion possible, providing real insight into the dynamics of the planned project – insight that can be of great value to both the broker and developer. We have all learned a great deal since the beginning of 2020, and at Saxon Trust, we pride ourselves on adding value, even on those deals that we choose not to progress. A specific area of concern in the current market is the number of

BRIAN WEST is head of sales and marketing at Saxon Trust

bridging lenders writing growing volumes of development exit loans. Ground-up development is massively more complex than straightforward bridging loans, and taking on board a part-built scheme can be inherently dangerous, even for highly experienced development underwriters. The temptation for bridge lenders – under threat of breaching their non-utilisation clauses – to write large development exit loans is obvious, but the stark reality is that we are now, sadly, seeing stalled schemes taken into possession by lenders which were never really qualified to write development exit deals in the first place. As a specialist development lender, we are known for our deep-rooted market knowledge, the strength of our analytical skills, for working with best-in-class professional partners and our use of market leading technology. It is this a ention to detail, combined with our understanding of planning legislation, varied geographical locations, and commercial into residential conversions, and crucially our hands-on experience of building many ground-up units ourselves, that allow us to write deals others will shy away from. The value of working with a lender that genuinely understands the development finance space should never be underestimated. Strong partnerships are o en forged in times of adversity, and by working with the right lending partners, both brokers and developers can look forward to a positive 2024-25, whatever unforeseen problems may be coming down the track. ●

S P E C I A L I S T F I NA NC E Opinion

Will 2024 be the year of bridging?

here’s li le doubt that 2023 has been a difficult year for the mortgage industry, with lower business volumes, multiple rate rises and product withdrawals, and product transfers increasingly eating into the potential remortgage market. The bridging sector, however, has bucked this trend. According to the latest figures, compiled by auditors from data provided by members of the Association of Short Term Lenders (ASTL), bridging loan books hit a new record high in Q3 2023, with applications and completions also showing strong growth during the period.

Upward trend The data shows that bridging loan books continued their upward trend, growing by 2.0% to reach a new high of £7.3bn. This could be nearly £9bn once we have gathered all ASTL members’ information. Applications rose to £9.7bn, an increase of 5.6% compared with the quarter ended June 2023, and completions were £1.4bn, which is an increase of 5.8% on the previous quarter. Compared with the same period last year, application volumes have risen by more than 8%, completions have grown by nearly 11%, and loan books have swelled by well over 18%. This means that, in Q3 2023, member loan books exceeded £7bn for second consecutive quarter, hi ing a new record. This growth can be a ributed to several factors. The versatility of bridging finance is being recognised by a growing number of customers and brokers, who are realising the vital role it has to play in financing a period of transition, particularly in an uncertain economic environment. Feedback from brokers is that they are seeing a larger than usual number of applicants who want to raise capital

to upgrade their property ahead of pu ing it on the market. This approach is particularly popular among the later life age group, where trading down is a good option to move to a smaller property while releasing equity from the current home. At the same time, regulated bridging continues to be a popular solution for chain-breaks, while also providing excellent options for investors who want to renovate, refurbish or convert property, release capital or buy at auction. Another reason for the ongoing growth of bridging is the increasing confidence in our sector, as levels of professionalism and customer focus continue to advance. We have, of course, recently launched the Certified Practitioner in Specialist Property Finance (CPSP) programme, as a joint initiative alongside the Financial Intermediary and Broker Association (FIBA) and The London Institute of Banking & Finance (LIBF), which has already seen almost 500 registrations, with more than 50 industry professionals having achieved the accreditation.

Sustainable growth However, even before CPSP, the industry has worked hard to continue to deliver on the speed and flexibility for which it has such a strong reputation, at the same time as supporting sustainable growth. Lenders have maintained a robust approach to underwriting and responsible lending, matching the demands of customers with their own commercial appetite, and being proactive and prudent when it comes to ensuring a demonstrable and sustainable exit route on all cases. This may prove frustrating for brokers on some occasions if they don’t achieve the outcome they would like on a case, but it does mitigate problems further down the line, and also helps to ensure the lender is in a

VIC JANNELS is CEO at the ASTL

stronger position to help more customers, with a healthy flow of liquidity. At the ASTL, we are playing our role in supporting the ongoing growth of bridging. All of our members have always commi ed to our membership rules and code of conduct, which provide confidence to customers that they will be treated with transparency and fairness – and our membership is growing in number. We continue to engage with the regulators and policymakers to ensure they understand and consider the implications of any future changes on short-term mortgage customers, and of course, we are supporting the ongoing growth of the CPSP.

Extended reach As we move into 2024, I have every confidence that bridging will only continue to become an even more crucial cog in the wider mortgage market. As we build our membership and more industry professionals take and pass the CPSP, the reach of bridging will extend within the broker sector. We have more ambitious plans also, to raise our profile and the reputation of our members within the consumer media, while continuing our respected events programme to deliver added value to our membership. In 2023, bridging finance has demonstrated its significant role in the mortgage market. In 2024, we can build on this together to make an even bigger impact. My message to brokers is this: if you don’t engage with the bridging market, or are not considering doing so, then you are missing out on the opportunity to help more clients to finance their objectives. ● November 2023 | The Intermediary

B RO K E R B U S I N E S S Opinion

Staying safe in the festive season: Have no regrets

t’s that time of year when we start to reflect on the ups and downs of the past 12 months and plan for what the new year will bring. This means our social calendars go into overdrive, o en being out late at night and even staying in hotels. It’s a merry time of year, as we get in the mood with questionable Christmas jumpers, too much tinsel and party poppers, while trying out new cocktails and singing ‘All I Want for Christmas’ be er than Mariah Carey herself. Joking aside, it can be easy to find ourselves in situations we hadn’t planned for, so it’s key to make sure you have everything covered to ensure you stay safe and have a wonderful time with no regrets. I write this article with my own experience in mind, and I’m sure I am not alone in finding myself in a tricky situation that led me to re-evaluate my approach to a night out, which is why it is worth talking about personal safety. According to the Ministry of Justice, there were an estimated 430,000 to 517,000 adult victims of sexual offences in the last year in England, with figures for the rest of the UK making this number even higher. However, only 15% of serious sexual offences and 21% of partner abuse incidents are reported to the police, says charity Rape Crisis. More worryingly, 20% of women and 4% of men have experienced some type of sexual assault since the age of 16.

Safety when out late at night It’s important to plan your evening and share with others. Whenever possible, travel with colleagues and friends or in groups. There’s safety in numbers, and potential a ackers are less likely to target a group.

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Stick to well-lit streets and populated areas. Avoid shortcuts through dark alleyways or parks. If you leave alone, let your group know and make sure you agree to let them know when you are home. Use a WhatsApp group and share your location. When using taxis, try to travel together, and check the taxi identification. If using Uber, confirm the driver’s identity and match the vehicle details provided in the app before ge ing in. Always ask the driver to wait until you have got inside your destination. There are other considerations on a night out. Drink spiking is on the rise, so always buy your own drinks and don’t leave them una ended. Avoid drinking too much alcohol, especially in unfamiliar situations – it could increase the likelihood of risk taking and make you less aware of danger. Don’t accept drinks from anyone you don’t know well. Accompany the person to the bar if you do wish to accept the offer of a drink, and take the drink from the bartender yourself.

Navigating Peer Pressure Ensuring personal safety involves not only being aware of physical threats, but also recognising and responding to social pressures. Equipping yourself with strategies to handle these situations can significantly enhance your safety and wellbeing. Set personal boundaries. Knowing your limits and being confident in your choices will help you resist peer pressure more effectively. Most people will respect your choices if you communicate them clearly. Our personal safety is nonnegotiable, and knowledge is a powerful tool in staying safe. By following these guidelines, we

TRACIE BURTON is senior corporate account manager at HSBC UK Intermediary Mortgages

can take proactive steps to protect ourselves in various situations. Everyone deserves to feel safe and enjoy their experiences to the fullest. Trust your instincts. If you find yourself in a situation that feels unsafe or uncomfortable, then leave. Your wellbeing is your top priority!

Know your safe spaces In my case, I was able to use a known hotel chain as a safe space, something many of us may not realise. Recently, I caught up with Paul O’Grady, assistant director of security at the Four Seasons Hotel in London. While hotels are a good stop-in when you need to call a cab, or step out of a dangerous situation, he also shared various tips on how to stay safe during your stay if you have booked a room: “Choose your hotel carefully with good reviews and security, preferably in metropolitan areas rather than ones on hidden away quiet roads. Request a room on higher floors, away from secluded areas like stairwells or service entrances. Try to avoid misplacing your room key by keeping it in a wallet, purse or bag when not using it, and be mindful about being overheard if sharing your room number while in a public place. “Don’t get into the same li with anyone you feel uncomfortable with. If you feel in danger with anyone that gets into the li with you or feel you are being followed, then don’t get out, go back down to the reception and report your concern. “Double-lock your door before you go to bed or for that added protection if you’re alone in the room. Ensure your room has a deadbolt lock and a peephole, and use them to verify the

B RO K E R B U S I N E S S Opinion

Safe resources Addressing violence against women and men is a critical concern, making our personal safety more of a priority than ever. Fortunately, there are numerous advances in technology and many charities seeking to support with personal safety:

Everyone deserves to feel safe and enjoy their experiences to the fullest. Trust your instincts. If you find yourself in a situation that feels unsafe or uncomfortable, then leave. Your wellbeing is your top priority!”

Life360 Advanced location sharing helps you make sure loved ones are where they need to be, safely and on time. WalkSafe Digital solutions that help make people feel safe and secure: police crime data, community-reported data and soon CCTV and ‘safe zone’ data, all plotted on maps with information icons, allowing the user to plan safer journeys, understand local crime hotspots, and help others make better safety decisions. It also has a human ‘satnav’ feature, which allows the user to plot their walks, avoiding trouble spots, and also invites their ‘circle of protectors’ to monitor them on their journey. Strut Safe An initiative to help anyone who feels unsafe when walking in public, with volunteers based across the UK ready to take calls and stay on the line with you until you get in the door.

identity of anyone knocking on your door before opening the door to any strangers. Staff will always announce themselves when knocking. If you aren’t expecting a visitor, do not open the door, and call reception [or] security. “Don’t leave luggage una ended. Hotel lobbies a ract thieves who have devised clever strategies to commit crimes. If possible, keep your luggage in front of you or in eyeshot and at arm’s [reach]. Most hotels will have a luggage store – use it. Hotel bars and restaurants will also have some form of bag and coat check, where your items will be stored away safely and recorded.” ●

Personal safety top tips Make sure your phone is fully charged. Have an emergency £20 in the secret compartment of your purse or wallet, or in the back of your phone case. Use ‘Find My’ on your phone and share with whoever you are out with. If you plan to wear heels, get a folding pair of flat shoes. Carry an alarm – one good option is the Ashley personal alarm. Download one of the safety apps, and if you do have to walk alone, use it. Save the Strut Safe number in your phone, or call someone you know and keep them talking as you walk. The Strut Safe number is 0333 335 0026 (Friday & Saturdays 19.00-0300; Sundays 1900-0100). If you’re worried in any way and you find yourself alone, pop into any hotel and explain your situation. They will assist you. In London, have a look at the Met Police scheme ‘Ask for Angela’, a safe word used in bars. The staff will help the person get home discreetly and safely by either escorting them to a different room, calling them a taxi and escorting them to it, or by asking the other party member to leave the establishment.

November October 2023 | The Intermediary

Q&A

ClientTree

The Intermediary speaks with Lilla Dilliway, director at ClientTree, about the importance of streamlined tech in enhancing the market’s human touch Can you introduce yourself and ClientTree for the readers? I’m originally Hungarian, and moved to the UK as part of an international company’s relocation back in 2005, before realising that wasn’t my life’s calling. After getting my Master’s in surveying and coming to understand more about the property market, I found myself in mortgages. Here, I can help people and make a difference. I did my CeMAP and started to work for Countrywide, which provided some much-needed training. I had to learn how to swim in deep water very quickly. After about two years, I went to a smaller broker firm which specialised in self-employed people and contractors, which was slightly different from the type of clients I had previously. I learned the ins and outs of being selfemployed. I also had my first experience of working from home, and how tech can work for you. This was important because, at the time, everything was very much paper-based. During this period, I also realised that I would like to try it on my own, so I became directly authorised (DA) and set up a broker fiirm. We struggled with the customer relationship management (CRM) side all the way through, so we tried different systems, and found that none of them worked in a way I would have liked. This is how we came to build and introduce the ClientTree mortgage CRM system. The other systems were handling mortgages as standalone projects, but really, they aren’t – a client may have multiple transactions at the same time, refer others, or come back to you later on. Our proposition is centred around the client, rather than around a particular project. It’s a new approach compared with what else is out there.

How have you approached this on a day-to-day basis? When you look at the interface, for each client, you can find the different sections detailing their 70

The Intermediary | November 2023

properties, their mortgages, and their insurances. You can go into each section and get more detail. At the same time, the system also allows you to search for just one specific property or one specific mortgage if you want to. So, it’s very flexible. There are things that we do slightly differently from other systems at ClientTree. For example, how we show income. If you think about employed income, some systems show your basic salary, and any additions and deductions. But really, it’s a bit more than that – there’s a deduction, but is it before or after tax? There’s additional income, but what kind? You might have more income sources than just one job. This is becoming more important because a lot more people have side-hustles, work more jobs, or have an additional online business, so there are different income types and it’s important that you capture them all. Some other systems – in my opinion – are not detailed enough, especially when researching a case for a self-employed person. Every lender is different in what information it wants and how it calculates affordability. Capturing those details is quite important, and we automate some of it. There are other things as well, like how you show adverse credit, or property and mortgage information. Capturing granular data is important, because if you don’t have it in your fact-find or in your system, you still need to have it somewhere. But then, you’re looking at information in different places, which is not helpful, so it’s about streamlining your processes.

What do brokers need to know about picking the right CRM? Ultimately, you have to think about how you work – what is a ‘must have’ and what would be a ‘nice to have’. We go through an introductory discussion to find out these things and see how the ClientTree system can cater for them. Every system is different. The perfect system is the Holy Grail – it’s like finding the perfect house. There’s always something that you could improve on, and things will also change over time.

Q&A

We rely a lot on those conversations with brokers and that feedback. This is a system developed by brokers for brokers. It’s based on broker feedback, right back to my own initial input.

Did you face any particular challenges developing the system? Not during the development phase, because we had a clear vision of what we wanted to achieve. Now that we are marketing it, we find that the biggest challenge is the effort that brokers have to put in when changing or introducing a new system. Work must be done to get people to embrace technology – a lot of brokers still use paper files and Excel sheets, and they say it’s working for them and there’s no need to change. However, the world is moving, and sooner or later they will start to be asked about this stuff by their clients. Do you have a portal? Do I have to fill out the fact find on a Word document? Can I do it on my mobile? Brokers will need integrated systems. Some people are just not at that stage yet, and others find it challenging to switch systems, because getting your data out of an existing system can be difficult. On one hand, you have a system that doesn’t really work for you. On the other, it is an effort to change it. Luckily, people can see the benefits and make the leap. People are thinking more about what is important to them. They know it will be better for them, in the long run, to have the right system.

Has take-up improved post-Covid? On one hand, definitely. More people are working from home and can’t just pass a paper file to an admin, they need to have things online, or at least in some electronic format to email over – but we are told time and time again that emails are not that secure. It’s pushing things more toward having a secure system that can handle the data and that makes sharing documents much easier. Tech enables you to share things, rather than just work in isolation. However, there’s a difference between being tech-enabled and giving ‘robo-advice’, because people still want the human touch. Artificial intelligence (AI) should be able to take over most of what the broker does in practice, but would we really want that as a client?

Some people might say yes, but many others would like to deal with a person. From a safety perspective, it’s also important because a client might ask something which they don’t realise is perhaps slightly borderline or dodgy. A broker can step in and make sure the client is advised properly, which an AI might not handle as well.

How can CRMs be used to enhance this human element? A CRM helps you collect and handle data more efficiently, so you have everything in front of you, and you don’t have to sort through paper files. It speeds up the administration side, so you have more time to spend with your clients. Integration also brings together all the different elements of the market, such as ID verification, solicitors, getting a quote and sourcing, and more. That then speeds things up as well, and enables things to be more streamlined. When you are a broker, you’re selling a product as much as you’re selling yourself. You have a relationship with the client built on trust, so a portal with secure info and document sharing is meant to underline that trust.

What are some of the business’ plans for the upcoming year? Currently, we have a fully functional CRM system and client portal, and have recently integrated with a mortgage sourcing provider. We also have lots of other integrations in the pipeline. Our big changes will be all these integrations, as well as looking at how we can make the system even better for our brokers. As a result of these integrations, it will be easy for brokers to do things end-toend, on top of the existing client-centric approach. The ClientTree system offers brokers an environment where they have all the information they need at their fingertips. That’s where the market is going, and it’s a work in progress for everyone. It is a complex market, but eventually, there will be a streamlined, joined-up experience where systems work together. ● LILLA DILLIWAY

B RO K E R B U S I N E S S Opinion

Internal comms: Vital to a good PR strategy

f you’ve ever looked through the earnings statement of a major listed company, it can sometimes feel like you’ve inadvertently signed up to a game of corporate bingo. The client is always ‘at the very heart’ of an organisation, strategies are always ‘customer-centric’, and good customer service is aways a ‘top priority’. I won’t focus on the fact that these are all incredibly dull clichés. Instead, I want to pose a question: is the customer really the most important person to your company? If you answered ‘yes’ to that, you’re not alone. Columbia Business School analysis of more than 31,000 S&P 500 investor calls between 2007 and 2019 revealed that executives talk about customers 10 times more than they do employees. I get it. Happy customers equal more revenue. That’s why companies spend so much time, money and effort on PR and marketing when they have a major announcement to make. However, much less time – if any – is dedicated to nailing the message to staff and other internal stakeholders. At best, it’s an a erthought. But it should be your starting point. A er all, your employees are – or at least should be – your biggest knowledge base, and hopefully, advocates. If they get what you’re doing and buy into it, your organisation will speak with a unified voice, the value of which cannot be overstated. If they are le unconvinced, fearful or – worse – confused by what you’re doing, your external PR efforts are doomed to failure. Consulting client-facing staff first on a major announcement will allow you to hone and stress-test your messaging before you decide to go public.

The Intermediary | November 2023

They have an encyclopaedic knowledge of pain points felt by clients, because they are the ones on the phone hearing about them from the horse’s mouth. They therefore have a much be er idea of how that new product launch, restructure or acquisition will go down with clients than the C-suite ever will, so use them. How, then, do you perfect your internal comms and get buy-in from your workforce?

Talk to your people The first thing you should do is establish a small feedback group with which you will test and hone your messaging. These employees should be trusted, honest and range in seniority. They should also not be afraid to deliver their honest opinions about what you’re planning to announce. The last thing you want from this group is for it to tell you what you want to hear. Equally, you need to make sure the known ‘squeaky wheels’ in the organsation don’t dominate these discussions. You should meet regularly with them to determine what reservations they may have about your planned announcement – assuming it’s not market sensitive, of course. It’s important in these meetings that staff understand that they can truly affect change, so you should take on feedback and adapt your messaging accordingly. Just as important is playing back why particular feedback wasn’t incorporated, so that trust is built up on both sides.

Stress-testing At the end of this process, the messaging will have been robustly stress-tested. Most people hate change and worry about it having a negative impact

PAUL THOMAS is head of news and content at MRM

on their day-to-day lives. So, when you do announce the changes to the wider internal audience, expect a curveball or two. However, you can prepare by looking beyond what it means for the business, in terms of growth, expanded footprint in a key market, etcetera. Focus on your people and how it will positively affect them, and positively affect your clients. Let’s take, for example, a mortgage advice firm that is moving into broader financial advice or wealth management. When conducting internal focus groups, several staff raised concerns about what this might mean for workloads. This, therefore, should form the basis of the internal comms. Perhaps you are planning on bringing in extra resources? Or maybe you will invest in new tech to boost productivity? Whatever you are doing, be open about it and invite a two-way dialogue. But also, don’t dwell on the negatives. Will this move result in be er or more development or promotion opportunities? If so, make this a central part of your message. The main aim here is to head off any concerns before they fester, and to stress the tangible, real positives. If your employees can see that this move could or will be good for them, you’re much more likely to get buy-in. The last thing you want is for staff to be le unconvinced and jaded, because this will feed through into their interactions with your clients. Get it right and you’ll have a whole army of advocates ready to spread the good word about the new development. ●

B RO K E R B U S I N E S S Opinion

It’s a family affair… for everyone

eople’s financial lives are more complicated than ever. As well as pu ing pressure on the everyday person, this also puts pressure on both mortgage and protection advisers and financial planners, who are expected to deliver a first-class service across a huge and growing number of financial sectors. One way of meeting this challenge is to join an adviser network, such as Rosemount Financial Solutions (IFA). While the majority of networks in this space provide the expected level of support, training, compliance services and access to a wider range of products and services as standard, we believe that we differ from our peers in several key areas, particularly in our values, which stem from a positive view of the advice sector.

Like family One value that we thread through every one of our actions is to treat people how they wish to be treated – and that goes for clients and advisers. We believe that building trust, mutual respect, and strong relationships with everybody we deal with not only ensures the best immediate results, but leads to long-term repeated business, too. This long-term thinking is vital in our industry. Every one of our clients will go through major life changes – good and bad – and we want our advisers to be there providing help at every step, from the purchase of a first house and the sometimes difficult protection conversation that follows, to se ing up a solid retirement plan. As part of this commitment to spreading long-term and family values, I make a point of inviting everybody in the business, along with their families, to summer barbecues at my house. I take a lot of pride in ge ing to know each of our staff members on a deeply personal level.

While many financial advisories might focus on just one type of product, such as mortgages, we make a point to approach financial planning in a truly holistic manner. This ties into our long-term approach mentioned above. We recognise that changing life circumstances demand different products, services and plans. That’s why our offering encompasses investments, retirement, estate planning, insurance, protection, and more.

We want our advisers to be there providing help at every step, from the purchase of a first house and the sometimes difficult protection conversation that follows, to setting up a solid retirement plan” This o en means mortgage brokers engaging with financial planners to ensure that all the needs of our clients are being served. Because we are completely independent, all of our advisers can offer truly unbiased advice and the best products from any bank and building society.

Facilitating growth Working with us means access to regular masterclass events on all aspects of running a business, mentors, and personalised guidance. Our advisers are split into regional peer groups for local support, and we offer marketing and website expertise. We understand and act on the fact that

AHMED BAWA is chief executive officer at Rosemount Financial Solutions (IFA) Ltd

as your business grows, so does your need for support. An example of how this plays out is the fact that it’s not unusual for us to partner with sole traders writing £25,000 to £30,000 a year, only to see them write £250,000 within the next three or four years. This focus on our advisers can be seen in the fact that, unlike some larger networks which might have one member of staff assigned to 80 advisers, we have one member of staff dedicated to four advisers. This ratio upholds the sense of community and trust that permeates throughout the business.

Acquisition and recruitment Acquisition and recruitment strategy is an additional key part of our business. As well as hiring advisers, we look to buy entire businesses, too – this allows us to bring experienced people who don’t wish to work as directly authorised (DA) brokers into the fold. This helps create a diverse team with a wide range of expertise to be er serve our clients, and which our entire business can draw from.

The next step for advisers For mortgage and protection advisers and IFAs who wish to take their cra to the next level – and do so knowing they have a proven support system backing them up the whole time – joining a network is an essential move. Our focus on personalised care and holistic financial planning, our commitment to ongoing development, and our deeply held values of treating everyone how they wish to be treated makes us the obvious first choice. ● November 2023 | The Intermediary

B RO K E R B U S I N E S S Case Clinic

Case Clinic Want to gain insight into one of your own cases in the next issue? Get in touch with details at editorial@theintermediary.co.uk

CASE ONE First-time buyers with non-UK passports

pair of first-time buyers are looking to purchase a residential property for themselves and their two young children. Having spoken to several mortgage brokers, they are under the impression that they can’t buy for the price they needed in their area. Their circumstances are not straightforward, as they are non-UK passport holders and in receipt of foreign income – specifically, a military pension one of the applicants received from Brazil that was awarded to their late father and paid to them.

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“The borrowers will stand a better chance if they have lived in the UK for at least three years and have an established credit history, alongside a track record of rental payments. Most lenders would also probably want to establish that they have indefinite rights to reside. If the borrowers have additional income payable in UK sterling which is enough to meet the required affordability assessment, this income source could be used instead of the pension paid in a foreign currency. They may also qualify for a foreign currency mortgage by working with a [specialist] broker.”

NEEDINGADVICE.CO.UK

“Whether or not we can help depends on a few factors; the type of Visa, how long is left, and how long they have lived in the UK. The leading factor 74

The Intermediary | November 2023

is how much deposit they have. Having a 25% deposit opens up the number of lenders that can accept foreign income. It can be possible with a deposit as small as 10%. They would require an address history of at least one year and at least two left on their visa. If they have both a two-year address history in the UK and a 10% deposit, this increases the chances of finding a lender that will accept the foreign income. “Lenders are more likely to lend when clients have pre-settled status. Care also needs to be taken to identify the source of the deposit. In all cases, the deposit must be inspected fully for clients that have a short address history and a sizeable deposit. Often, lenders will require these to be translated to English and the source of the funds may have to go back years. “It’s also likely that the lender will require payslips and income details from the clients’ old jobs, including from their previous countries, to ensure that it is feasible for them to have saved this amount. In cases where the deposit is gifted from abroad, this makes proving the income easier. It’s important to check that it’s not from a highrisk country.”

CASE TWO Applying using sick pay

client is looking to take out a residential mortgage, but is on sick pay at the time of application. Her employer gave her one

B RO K E R B U S I N E S S Case Clinic

year at full pay, and she would have returned to work in November. However, she is also pregnant and due to begin maternity leave just prior to ending her sick pay. She is the higher earner between her and her partner, earning about double.

CASE THREE Two flats on one freehold

BLUESTONE MORTGAGES

“We can’t always predict what’s around the corner, and life events such as this should not compromise someone’s ability to get on the property ladder and achieve their homeownership goals. “Bluestone would be able to consider this case on the basis of the following criteria. The first [is] an employment letter confirming when the applicant will be returning from maternity leave and what her returning salary will be. In addition to this, we’d require the applicant and her partner to have sufficient savings to cover shortfalls without the higher income stream. Along with the partner’s income, these savings would need to cover the basic expenditure, including proposed mortgage payments.”

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“This suggests this was a serious illness. It would be important to establish during the advice process the nature of the illness to understand if there are any long-term implications that may affect the borrower’s ability to meet their mortgage payments. This may also mean that this borrower could be identified as a vulnerable customer, and it is important that the borrowers’ explicit consent is obtained to store details of the illness in the customer’s file. “If the borrower is on maternity leave, then it is likely that she will need to have returned to work to obtain a mortgage, particularly as she is the higher income earner. It would be important to understand the nature of their childcare arrangements so this can be factored into the affordability assessment. “If the borrower has returned to work and is back in good health then they should have a good prospect of obtaining a mortgage.”

NEEDINGADVICE.CO.UK

“The key to this case is to obtain four months’ payslips from before maternity and four months’ latest payslips, too. We would discuss these with the lenders to ensure they are happy with the case, [as] the payslips without sick pay are quite old, and it would require a more flexible approach. Care should be taken to consider and include the new dependant and any childcare costs on the application. We would initially check maternity criteria using the useful Knowledge Bank system. We find this system useful as this as a guide and then double check this with lenders.”

wo applicants need to use their latest year of net profit and salary towards affordability, as opposed to the average of the past two years. There was a big jump in net profit from the previous year to the current year. The property they are purchasing is two flats on one freehold. It’s in central London, they are purchasing for just over £2.8m and looking for 75% loan-to-value (LTV). The property will remain as it is, with separate entrances and separate Council Tax. They will live in one flat, and parents will live in the other.

NEEDINGADVICE.CO.UK

“A number of lenders will consider using net profit and salary as an income stream for self-employed borrowers, but the challenge here is the big variance between the current and previous year. Providing an upfront plausible explanation for this increase – together with strong evidence that the uplift is sustainable – may help the underwriter. “Where there are significant variances in income it may be prudent to use a percentage of the uplift. Alternatively, if the previous year’s dip can be explained, providing a three or four-year track record would be a good way of evidencing that the latest year is more in line with the average. “It might be difficult to find a residential mortgage lender to lend on a multi-unit freehold flat. The purchaser might need to consider splitting the titles and refer this to a lender prepared to lend on the main residence as well as the selfcontained flat for their parents.”

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“We have done many similar cases. We can also help in situations where clients want to let out one of the annexes as a holiday let. The key issues with this case is that it is a combination of two flats and one freehold, and they are trying to use net profit and salary. This restricts the lenders available. “[One] option would be to get separate leases created for each flat. The clients could apply for a residential mortgage and either a dependant relative or regulated buy-to-let mortgage for their parents. This would only be a last resort. Hopefully they have separate utilities, or the work involved might be too extensive. [They should] speak to a legal expert, to see if this is a possibility.” ● November 2023 | The Intermediary

L AT E R L I F E L E N D I NG Opinion

How repayments can help manage borrowing

n today’s equity release market, the option for your clients to make ad hoc or regular repayments is one which may help them save thousands in equity over the lifetime of their borrowing. Many customers are, of course, looking to use equity release to help remove the burden of increasing monthly mortgage costs, or the repayments required on unsecured debt, such as credit cards. However, even repaying £100 a month towards a lifetime mortgage can go a long way to improving beneficiaries’ inheritance potential in the long-term, and a detailed discussion on the benefits of this approach with clients is essential.

Tax-free cash One of equity release’s unique selling points is the ability for your clients to release tax-free cash from their homes without having to make regular repayments. However, in today’s rate environment, it’s arguably more important than ever for clients to fully understand the impact compound interest will have on their agreement, and what options they have to help mitigate it. According to Key Group’s Market Monitor, the average equity release interest rate in Q2 2023 was 6.30%. That’s more than double what it was in Q2 2021. In financial terms for your clients, using the ‘rule of 72’, this rise in interest rates means it now takes a li le over 11 years for their equity release debt to double when they choose not to make repayments. So, while equity release can be a great way to significantly reduce monthly outgoings, in today’s market, it’s more important than ever to talk

The Intermediary | November 2023

to clients about the benefits of making repayments where they can, rather than allowing the compound interest to grow untouched.

Making monthly savings Take this case study as an example. Having recently retired, Mr and Mrs Wilkinson are looking for a way to help boost their finances. Due to recent price rises, they now find themselves cash poor but asset rich, and they wish to explore whether their property’s value could help them meet their retirement needs.

It’s arguably more important than ever for clients to fully understand the impact compound interest will have on their agreement” A er speaking with their equity release adviser, the Wilkinsons decide they want to help reduce their total cost of borrowing so they can still leave a sizeable inheritance for their children. The Wilkinsons wish to release £133,000 from their property. Their adviser uses Standard Life Home Finance’s Voluntary Repayment Calculator to find the best solution for their circumstances. They learn that, without making any repayments, their debt will increase to £346,904 a er 15 years; leaving just over £280,000, based on an annual HPI of 1%, to pass on as remaining equity when their lifetime mortgage is se led typically upon

KAY WESTGARTH is group manufacturing sales director at Standard Life Home Finance

death or entry into long-term care. However, by repaying £400 a month across the estimated 15-year term, they can give their finances a boost and still pass on more than £400,000 in property wealth when their plan ends. By making repayments, they can save over £52,600 in interest charges – a monthly saving of almost £300.

Smaller repayments By repaying £250 a month, the Wilkinsons can still make a net saving of almost £33,000 in interest compared with if they made no repayments whatsoever. This would also leave them with more than £357,000 of remaining equity to pass on. Even by repaying £100 a month, the retired couple can make a net saving of over £13,000, versus if they chose not to make repayments – leaving more than £311,000 to pass on as an inheritance a er 15 years. By using Standard Life Home Finance’s Voluntary Repayment Calculator, you can clearly show your clients the impact of making repayments, and how this can be a benefit in the long run. Within it, you also have the option to set specific, even multiple, repayment periods and repayment amounts – ensuring clients’ results are personalised to their circumstances – plus the ability to programme in future drawdowns to give a highly accurate picture of how they can help reduce their overall debt accrual over time. Ensure your clients are doing all they can to help themselves in today’s market. ●

L AT E R L I F E L E N D I NG Opinion

The mortgage market is not as it was

‘N

ostalgia ain’t what it used to be’ goes one saying, but the fact is that nothing is, so it’s far be er to focus on the here and now, and what is likely to happen in the future. I say this because it will be quite clear that the current mortgage market is also not what it was a few, or even a couple, of years back. That is certainly the situation in the later life lending space, where we can all accept that a difficult trading environment is with us, and has been for some time, certainly over the past 12 months. The big question, of course, is what to do about that? First up, it is important to recognise that the market of yesterday will not be the market of today, or indeed tomorrow. Once you recognise that truism, it takes you a long way to understanding that you can’t keep on waiting for the market to ‘turn’ and for it to suddenly transform into a more buoyant one. The shi towards a more upbeat market will be a much slower process, but it can certainly be boosted by the work that firms and their advisers do now, in order to mitigate the dampened environment and put in place a range of actions which improve that situation in both the short and medium-term. I said recently at one of our monthly ‘Breakfast with Stuart’ meetings, that if you hold your breath waiting for things to shi and turn in your favour then you are likely to suffocate, because what we have in front of us is going to literally be a very different market. Customer needs will be different. Products will be different. Lead generation will be different.

Everything is changing, and if you follow the words of Take That, that ‘everything changes but you’, then you’re only going to put yourself in a much more difficult position to get out of. Now, if this all sounds slightly dramatic, you might be right. But the idea here is to develop the understanding that what has happened has gone, and what is here – and what will come – is going to need a different level of engagement, and potentially a broadening of the services and products you offer. That should be fairly clear already.

More to offer There are those who think a future in which they are purely an equity release or lifetime mortgage specialist is still sustainable. It might still be, but my view is you can no longer sit in that one silo. You have to be able to offer much more to your clients, simply because there is so much more to be able to offer. The other point to make here about this shi , and the changes we’re all coming to terms with, is that it’s likely to be disconcerting for advisers, even more so if they feel there’s no support for them, and they view these changes as a cliff-edge over which they are likely to tumble. Our job at Air is to ensure this isn’t the case, and we can provide a wide range of support through resources, technology and tools, as we have on repayments and with our recentlylaunched Later Life Lending Navigator tool, which is focused on affordability. This is a real game-changer in tackling one of the biggest issues for advisers and their clients in this current – and future – marketplace. The other point that o en gets forgo en in all of this, is how valuable

STUART WILSON is chairman of Air Club

having someone to speak to is, especially when the situation looks a li le challenging. I’m not just talking about speaking to someone on a product or criteria helpdesk – which of course is valuable, especially when cases are far more complex than they used to be – but also in terms of having a sounding board. I’ve probably taken 20 to 25 phone calls over the past couple of weeks alone from advisers who not only wanted the tangible support we provide, but also just wanted to chat through what is happening. O en, it’s just to find out if they are an outlier in this market or if they are one of many – currently it’s the la er, and just knowing that can ease the stress and the burden. It’s also important for them to know there is support available, that they aren’t on their own, and what they might be seeking to do – stay in this market, increase income, get costs down, etcetera – is also on our minds and we are focused on helping them. This industry has always been very good at looking a er its own, particularly during tougher times. We o en talk about the resilience of the adviser community, but that resilience is multi-layered, and everyone can do with some help now and again to solidify that defence and help to get on the front foot to tackle those issues head on. We’re certainly here to do that in the later life space, and I would urge any adviser who is thinking about these same things to reach out and get the support and help that is available. ● November 2023 | The Intermediary

L AT E R L I F E L E N D I NG Opinion

Many approaching retirement without plans in place

he population has seen significant change over the past few decades, with lower birth rates, medical advancements resulting in an ageing population, and more people living longer and healthier lives than ever before. According to figures from the Office for National Statistics (ONS), the number of people aged over-65 in England and Wales rose 20% in the last decade, to reach 11.1 million in 2021, with nearly one in seven people expected to be over the age of 75 by 2040. This shi in demographics marks a significant turning point, with official Government census figures showing there are now more people aged 65 and over in England and Wales than children under the age of 15. For advisers working in the later life lending market, the ageing population presents a real opportunity to tap into a growing area of the mortgage market and address the financial needs of these customers. The past 12 months have proven challenging for many borrowers, with rising interest rates and higher inflation making mortgages more expensive and squeezing the disposable income of many households. In addition, the significant increase in house prices over the past three decades has resulted in higher loan values and longer mortgage terms for many borrowers, while the average age of first-time buyers has risen to 34-years-old.

Debt in retirement This maelstrom of events means that many people are now approaching retirement still holding significant

The Intermediary | November 2023

levels of mortgage debt. In fact, recent data from Equifax shows that 41% of homeowners are expected to still be paying off their mortgages in retirement, with more than a quarter of borrowers anticipated to be over the age of 70 at maturity. Many of these customers may find themselves approaching retirement financially unprepared in their later years, with a reduced income but continued mortgage commitments forcing them to seek alternative ways to finance their later years. Catering for the needs of these customers is essential, and it is here that later life lending could create opportunities for some older customers looking to capital raise by releasing equity in their home or taking out a new mortgage.

Capital raising opportunities Many people traditionally consider later life lending and equity release to be synonymous, but later life lenders also offer conventional retirement mortgages and retirement interestonly (RIO) mortgages, specifically aimed at the over-55s, as part of their later life lending solutions package. It is imperative for customers to know they could have various options and alternatives available, and speaking with a specialist is key. These can provide those in – or approaching – retirement with capital raising opportunities to help family members get onto the housing ladder, carry out essential home improvements, go on the holiday of a lifetime, or simply access a sum of money to help finance their retirement – especially in these uncertain times. Understanding the variety of products on offer is crucial.

VICTORIA CLARK is head of equity release at The Right Mortgage & Protection Network

Consumer Duty has highlighted the requirements even more, so that all advisers must ensure older borrowers get all the relevant and appropriate information they need to make an effective and informed decision about their borrowing requirements. Working in an equity release silo is no longer an option. Having access to a network that offers these products via a range of providers is important, as it can provide advisers with the peace of mind they are working in the best interests of the customer. The Right Mortgage & Protection Network & The Later Life Lending Network, for example, has a dedicated specialist lifetime mortgage arm consisting of more than 100 specialists, and provides access to the whole of the market, as well as exclusive products not available in the wider market. This means advisers can rest assured that they are fully addressing the later life lending needs of their customers. Being part of a wider network also means there are options in all areas to refer, depending on the needs of a customer. Ensuring customers’ full needs and demands are met, but still within the network, rather than being elsewhere and out of sight. With the population of the UK ge ing older and people living longer than ever before, demand for later life lending products is set to increase. Being part of a network can provide advisers with the support they need in this area of the market, and offer access to products addressing the retirement financing needs of their older customers. ●

BUY-TO-LET FINANCE SOLUTIONS FOR

PORTFOLIO GROWTH Supporting your client’s next investment No limit to the number of properties you can own

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Our experienced frontline team manually underwrite every deal, supporting your clients through the application process and beyond. You won’t find frustrating portals, complicated forms or jargon here. You will, however, find an expert team looking to help your clients grow their buy-to-let portfolio with confidence.

Let’s talk.

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P RO T E C T I O N Opinion

Five fundamentals of good GI practice today

n our recent Adviser Survey with more than 500 advisers, 45% said that general insurance (GI) has become a more important source of income in the past year. But knowing that it’s important and knowing how to have effective GI conversations aren’t the same thing. There’s a clear pa ern of behaviour among those advisers who have made a huge success from selling GI. Some advisers might also be new to this, with almost 90% seeing it as an important part of new Consumer Duty responsibilities. Against the backdrop of the rising cost of living, however, it isn’t always an easy sell – no ma er how important it is in generating good outcomes for the client. So, beyond the obvious point of just making sure you’re at least speaking to every client about their GI needs, what does good practice look like right now? Here are our top five tips:

Timing is everything, and it pays to be proactive

Speak to all your clients early about their GI needs, especially your remortgage customers – even if their renewal isn’t due for several months. Go through your GI book and look for all those within a six-month window to renewal, and offer to provide a quote. Our quotes are valid for six months, so you can lock in a quote now in advance of any potential rate increases in 2024, and your clients will thank you for helping to save them money. Also, with house sales predicted to stay low, advisers will be more reliant on the remortgage market. This is a great way to engage remortgage clients

The Intermediary | November 2023

EMMA GREEN is distribution director at Paymentshield

– something our Adviser Survey respondents have consistently told us they struggle with.

Utilise the tools available to you

The tools available might include Defaqto Compare, which provides like-for-like product comparisons and makes the process more transparent for customers, helping to build trust. Again, it’s a great tool to use with remortgage customers who might already have insurance, in order to see where their policy may be falling short in certain areas. We’ve recently improved the Defaqto Compare experience for our advisers, removing jargon that isn’t helpful for customers, making sure new key product features are listed – such as no cancellation fees – and reordering features to bring it more in line with customer priorities.

Be proactive with cancelled policies

In the current climate, it’s highly likely that policy cancellations are a cost-saving exercise, but clients might be purchasing a new policy that doesn’t fit their needs. Follow up with your client quickly and don’t be afraid to ask why they’re cancelling. Ask about what’s important to them, when was the last time they added up the value of their home contents, and whether they have any big-ticket items. It also helps to do some probing to introduce ‘so facts’: have they got a child going to university, for example? Did they know that family members in full-time education are covered, even if they’re living in a different

property? If price is a sticking point, think about what you can offer to temporarily alleviate that, and ask if they’ve considered things like payment break options.

Be willing to refer

Sometimes, good GI practice means referring your customers on. If you don’t have the time, expertise or appetite to discuss GI, refer them to experts who do – this will help to ensure your clients are still ge ing the best possible outcome, while still developing an income stream for yourself. We recently launched our referral option, which means advisers can refer customers to our in-house team of experts with a wealth of experience in advised sales, while still retaining full oversight of the sale. In a nutshell, good GI practice means selling it or referring it, but not ignoring it!

Bring real examples to life

Last but not least, if you are speaking to clients about GI, don’t forget optional extras. We know that the cost of living is causing some people to cut back on their protection, which can end up being a completely false economy where things like home emergency cover are concerned. Clients will appreciate guidance on where it’s sensible to make savings on financial products and where it isn’t, and advisers shouldn’t be afraid of talking about optional extras as part of that mix. ●

P RO T E C T I O N Opinion

Finding the right weapon in the war for talent

he ‘war for talent’ has become the phrase used to describe the competition between firms to acquire the finite amount of talent in the marketplace. While accountancy, consultancy, finance and law firms still find themselves significantly oversubscribed, why doesn’t insurance seem to have the same lure as other, perhaps more ‘sexy’ service-based businesses? While I haven’t been in the job market myself for over a decade, I have spent an equal amount of time trying to recruit young, enthusiastic, and passionate individuals into my business. Once upon a time, this wasn’t very difficult – with good development resources, good starting salaries, and low barriers to entry, we never struggled to a ract quality talent to apply – but that does seem to be ge ing more difficult. Recently, I was part of the New Generation Programme with the Chartered Insurance Institute (CII), and along with eight fellow colleagues in the Broking group, we set out to try and understand some of the above issues. It seems that, despite providing nearly all of what graduates and other job seekers look for in an industry, the desire to work in the insurance sector wasn’t just poor, but it had also go en worse. Why is it that business graduates up and down the country desire to work an 80-hour week, for mediocre pay at an inner-city location for one of the Big Four? Despite having some fairly clear thoughts in our minds, we set out to research the reasons behind some of the views above – and the results shocked us.

TOM MURRAY is a senior partner at NFU Mutual

Hard to shift fictions It seems that young people’s understanding of the industry is poor; inaccurate opinions and views are being formed very early, and those opinions are then very hard to shi . As ridiculous as it sounds, students’ views of industries are being formed from fictional media. Despite their fictionality and questionable ethics, TV programmes and films like ‘Suits’, ‘Wolf of Wall Street’, and ‘The Big Short’ have painted a picture of certain industries. While these industries’ realities are far from the fiction of their on-screen counterparts, it doesn’t ma er – a direction of travel has been set.

What is the answer for insurance? It’s not easy, but the answer certainly starts with a few basic points: Fish in the right pond: Adverts on job sites and glitzy graduate websites don’t ma er if your target audience spends all their time on social media. No ma er how good the ad, it won’t be seen by the right people if it’s not where they are! There is still an ignorance in this market around social media – some companies believe they are too ‘professional’ for socials. Unfortunately, these are also the same companies complaining about the lack of new talent coming through the doors. By the time they’re students, it’s too late: Just like the fictional TV shows, insurance must find a way of influencing younger students sooner, because by the time they are applying for roles, it’s too late, they’ve already told mum and dad they are going to be management consultants, accountants or lawyers.

The workplace desires of young people are changing fast: One large trend we saw in our research was that people were starting to pivot away from the city-slicker lifestyle in search of fulfilling industries that could provide a be er quality of life. Once upon a time, all young business graduates wanted was a sexy London-based job, and they were happy to work all hours for mediocre pay, just so at Christmas they could tell Auntie Doreen that they worked for a ‘top London law firm’. These views are waning, in favour of more regionalised industries that can still offer good pay, while being able to support flexible working, countryside living and bringing your dog to work. The great news about all of this is that insurance is fantastically placed to capitalise. It has the resources, size and scope, as well as a lot of the a ributes capable of fulfilling the desires of young people today. At the conclusion of our recent project, we set out to inspire the next generation of ‘Insurance Influencers’, those who will take the reins to inspire the next generation, while also influencing the world around them – a er all, insurance touches and supports just about everything we do. We created used video content to inspire and grab the a ention of our audience, as well as using mediums they resonated with – TikTok, Instagram and Facebook. It would seem that – despite the woe – insurance is well-placed, with a huge opportunity to accommodate and fulfil the desires of the next generation of young professionals. The real question is, are we prepared to seize it? ● November 2023 | The Intermediary

P RO T E C T I O N Opinion

Safety and security for the self-employed

here are many reasons why self-employed people need protection, arguably more than other groups: they don't have employee benefits and sick pay, and overall lack the security that is provided by an employer. Therefore, the need for selfprotection is generally a lot higher. In addition, self-employed people are their own business tools, so they need to keep themselves fit, healthy and working. It’s not just personal protection, it’s akin to business protection, too. Our products have been designed with self-employed people as a target market. We want to make it understandable, accessible and engaging for a customer group where there is both a need and a desire. In 2022, we paid more than 19,000 claims – our top occupations being people like builders and drivers, who tend to be self-employed. The need is there, so it’s about ensuring advisers are talking about the products and making it clear that these are the segments they were built for.

Challenges and blockages While the reasons for taking out protection are clear, there are still issues that cause self-employed clients to pause. Budget, for example, particularly during the cost-of-living crisis. According to our research, 96% of customers would consider cu ing back on protection to save money, which is a shame, and shows a lack of understanding the value. A relatively small insurance premium can save much larger costs in the future. What we need to do be er is get across the message as to why it’s important. When looking at products on Amazon, a retail consumer can see

The Intermediary | November 2023

at a glance if something is built for them. We can take a lesson from that in insurance. My hope is that Consumer Duty will be a catalyst. We’ve got to think about the products and services we offer, and consumer understanding. We have to have much clearer target segments, and rather than opting for a hierarchical method of selling protection – going through each product in turn – advisers should start with the customer and think about which products are right for them following fact-find conversations. When it comes to ge ing the message across, it’s all about telling the story. One of our most popular sales aids is a case study booklet, which illustrates the uses and benefits of certain products have had for other people just like the customer. There are misconceptions about the industry that we’ve been trying to combat for a long time, such as around what percentage of claims the insurance industry pays. This is going to be a long-term process, and clarity of communication is part of that.

The role of tech Technology will be a big help. One of the reasons there’s a protection gap is because there are not enough places you can go to find out about it. I’m a huge believer in traditional financial advice, and that intermediaries will always have a place in the market. But the fact is, customers will still get information online, so data and technology will allow us to get other routes to customers and give them the information, which will benefit advisers as well. The more people understand about the products available, and that the industry pays out a lot of claims and there is

RICH HORNER is head of individual protection at MetLife

a huge amount of value to be found, the more it will drive people with complex needs and questions into traditional advice. Technology should also help with ge ing positive messages out to deal with pervading market misconceptions, using clear, engaging communications. This, again, goes hand in hand with Consumer Duty, where the drive is to have clear terms and conditions, and brochures that can be easily understood by the average consumer. This might even mean using social media to engage with more people, and particularly the next generation. We recently brought out our innovative product Child Shield, and some of the people already most successful in ge ing it out to customers are using TikTok and other social media to drive traffic. Part of that is about having a product that is simple, easy to understand, and can be discussed in a quick video. If we can get people on the first step via this route, that opens the door to greater understanding as they interact more with advisers.

Fit for future purpose Product innovation is close to my heart, and core to what we do at MetLife. The protection gap is still dramatic, and there’s room for other insurers to do more on the side of product innovation. Our mission statement is ‘protection made simple’, so we build products that are easy to understand, accessible and affordable. Our advisers are then able to offer a greater range of protection to their customers. We are always going to innovate, and I hope the rest of the industry does the same. ●

P RO T E C T I O N Opinion

Let’s talk about protection

had the pleasure of facilitating a panel discussion at the recent London Mortgage Business Expo (MBE), with Dan Hobbs, MD at New Leaf Distribution, Stephanie Hydon, director at iPipeline, Amy Wilson, director, client distribution at The Right Mortgage and Protection Network, and Jeff Woods, head of intermediary development at L&G. It centred on the important subject of insurance, namely discussing why the conversation ma ers, and asking ‘are brokers having quality protection conversations?’ Sessions I a ended earlier in the day had bemoaned the difficulties for the economy, inflation, the cost of living and the worry around the increase in mortgage repayments, and how difficult it is now for consumers to pay for the basics. It therefore worried me that, with the additional cost of protection, advisers may not be having a comprehensive conversation with their customers on protection at all. We all know that buying a home is a significant milestone in anyone’s life, representing stability, security, and a sense of belonging. When taking on a mortgage, it is essential to protect your investment and ensure that unexpected events do not jeopardise your ability to meet the financial obligations. This is where the role of the adviser is so important in offering a range of solutions to provide homeowners with peace of mind to safeguard their most cherished asset and protect their family.

Mind the gap Mortgage advisers play a crucial role in guiding people through the complex process of purchasing a property, but I was worried that there may be some hesitance to broach the topic of protection during this time, when budgets are being stretched and the importance of addressing protection needs head-on may be missed.

I was pleased to hear from the panel that quality protection conversations are being had, and that Consumer Duty has helped focus the industry in ensuring that the best customer outcomes were being addressed. In the Association of Mortgage Intermediaries’ (AMI) 2022 Viewpoint report, titled ‘The Great protection Shi ’, it reported that 44% of advisers expected the Consumer Duty to increase the focus on protection, so it’s encouraging that the panel felt that this was the case. Even though studies show us that the gap in protection is still evident – Sco ish Widows finds only 50% of mortgage customers have life cover and only 25% critical illness – the panel felt that customers are still heeding the advice and looking to put the policies in place. Where they are not, it was highlighted that in some situations where the advice was not taken, the customer was asked to sign a waiver to say they understood the pitfalls.

Painting the picture This poses the question as to how advisers paint the picture of why protection is so important, and the risks of not addressing the situation. In my opinion, it’s difficult to bring to life by statistics and education alone. The ability to tell a story of what life may be like should the worst happen is a real skill, particularly doing this without it feeling like scaremongering. The panel was equally concerned, saying that advisers couldn’t even detail personal experiences as part of the advice process. In my view, surely this is the reason for consumers to seek professional advice to ensure they fully understand the situation – good and bad – when looking to buy their dream home, and to have the peace of mind they can stay in it. Advisers have the responsibility to protect the customer and their

DAVE ROGERS is an industry consultant

I was worried that there may be some hesitance to broach the topic of protection during this time, when budgets are being stretched and the importance of addressing protection needs head-on may be missed” family’s future, by advising them to take proactive steps to ensure their financial security, and to explain the potential hardships they may face in the event of losing a job, contracting a critical illness, or death. It is crucial that the conversation around protection carries the same weight as that around mortgages, as we need to remember: while we cannot control the future, we can take steps to safeguard our loved ones and provide them with a stable foundation, even if the unthinkable occurs. The panel, I am pleased to say, felt that these quality conversations are happening, and in the main are an integral part of the advice process. Maybe I’m a bit of a pessimist, but I still think we have some way to go to embed protection into the advice process for the majority. So, well done to MBE for arranging a panel on the subject, as well as to AMI for shining a torch on the subject, as it’s a welcome opportunity to have the conversation. ● November 2023 | The Intermediary

S E C O N D C H A RG E Opinion

Support struggling borrowers, secure clients for life

he changing mortgage market has made diversification vital for any broker looking to build a resilient, longterm business. In times gone by, some brokers would have been able to rely simply on aiding clients with their mortgage needs every couple of years in order to sustain their business. When 2-year fixed rates were the dominant product choice, advisers could be confident of a steady stream of clients coming through the door looking for help in selecting the right deal for their circumstances. Given the short length of time the product was fixed for, there was also a naturally higher chance of the client returning to the broker for their remortgage needs, since the memory of the high quality service they had received was still fresh. However, as the market has changed, brokers have had to adapt. With ever more borrowers opting for longer fixed rate terms – and the risk that memories fade around how well they were served by the broker – intermediaries need to broaden out their service beyond the traditional mortgage, taking a more comprehensive view when assessing what products may meet their requirements.

Time to restructure Many brokers will have heard from clients recently who are looking to raise extra funds. Where once this form of borrowing would have been largely aspirational – the desire to add an extension or convert a lo , for example – this is likely to now be more needs-based. These clients have taken on additional debt during the difficulties

The Intermediary | November 2023

of the past few years, in some cases simply to keep their heads above water. But even though the economy remains somewhat choppy, they are in a be er position today and want to cut the cost of those debts. That’s where raising funds comes in, since it offers them the opportunity to consolidate those various lines of credit into a single, cheaper loan, secured against their property. Should the client be nearing the end of their existing mortgage term, then a straightforward remortgage is the common strategy for raising those funds. However, if that’s not the case, then sacrificing their current mortgage rate for one which will no doubt be substantially higher is less appealing than ever. Throw in the exit fees that will inevitably be incurred, and the cost of opting for the remortgage route is seriously punishing. In contrast, a secured loan allows the client to raise the funds needed for the debt consolidation without touching the current mortgage, allowing them to make the most of that low rate for as long as possible. Presenting the cost savings afforded through the secured loan route, rather than remortgaging, will only highlight to the client the benefit of using a broker who can present all the various options open to them, rather than a single, more expensive solution.

Protecting loans This more comprehensive process opens up further selling opportunities to savvy brokers. Having some sort of protection in place is always an important consideration for any borrower, so that they can rely on having a safety net to fall back on should their circumstances change,

MAEVE WARD is director of commercial operations at Central Trust

leaving them unable to make their repayments. The uncertainties of recent years have only reinforced the need to have that back-up plan to fall back on, and increased borrowing through a secured loan on top of an existing mortgage offers the opportunity for brokers to review what protection the client has in place.

Building a futureproof business Securing a client’s business for life does not happen by accident; it’s the result of a lot of hard work on the part of the broker. While communication is obviously a fundamental aspect of building that sort of long-term relationship, so too is offering the widest possible range of solutions to clients, ensuring that no ma er what their needs, the broker is best placed to support them. That means highlighting how products outside of traditional mortgages can play an important role in pu ing the client on surer financial footing. Clients will remember the brokers who have provided vital help during tougher times, for example by assisting them in the financial restructuring that so many borrowers are losing sleep over currently. Delivering that support will make it all the more likely that those clients will return to the intermediary for all of their financial needs in the future, establishing them as a client for life. ●

S E C O N D C H A RG E Opinion

Could 2024 see a surge in second charge mortgages?

he Finance & Leasing Association (FLA) figures for second charge mortgage lending published in October were something of a mixed bag. While the headline was that volumes of new business agreements in August were 15% down on the same month in 2022, the number of new agreements wri en was still above the monthly average for the year. The past few years have shown the resilience of the second charge market, which has grown to around £1.5bn a year. However, while I believe there are many more brokers who are very comfortable considering seconds in the right circumstances, I don’t think that can be said for the whole broker community. That gives me confidence that 2024 is going to be a growth year for the industry – let me tell you why.

Keeping a good rate Homeowners who managed to get a low fixed rate first charge mortgage before the Bank of England started to ramp up the base rate will be wise to hang to it, but there are several factors which can drive homeowners to want to release equity from their properties. Around 12% of August’s second charge mortgage completions were to fund home improvements, while 59% were for debt consolidation. The remaining 24% were for a combination of the two. As the higher cost of living continues to bite, consolidating debt to reduce monthly outgoings could be the difference between homeowners being able to stay in their homes or having to sell up. Meanwhile, if their first charge is already on a good rate, remortgaging

to a higher rate may not be their best, or even a viable, option. Although second charge mortgage interest rates are typically higher than for a first charge, reflecting the higher risk, the blended cost of a customer keeping their main, lower rate mortgage and adding a higher rate second charge to release the equity they need may well result in a lower total monthly cost than can be achieved by remortgaging the whole lot on to current first charge interest rates. Customers may also decide to take their new second charge out for a longer term than remains on their first charge, to keep their monthly costs as low as possible. If the customer is releasing equity to consolidate debt and relieve the pressure of the rising cost of living, securing the lowest monthly repayment could be a real advantage. In addition, the speed at which a good second charge mortgage lender can agree, process, and then pay out is o en substantially quicker than the time taken to remortgage. Given that when a customer decides they really do need the money they’re going to want it as quickly as possible, a swi second charge may be music to their ears.

Shaking off perceptions Lenders need to keep educating brokers on the benefits of second charges. Many brokers are still a bit fearful of second charges, or feel that they are a product of last resort. Despite the Mortgage Credit Directive (MCD) coming into force in 2016, I think on many occasions brokers immediately recommend a remortgage without fully considering the benefits that a second charge loan might offer.

CAROLINE MIRAKIAN is sales and marketing director – mortgages at United Trust Bank

There may also be a feeling that, while consumers readily understand what a remortgage is, seconds take more explaining and possibly more reassurance that they’re not some dubious, expensive loan where lenders can increase interest rates whenever they feel like it. Those perceptions are a hangover from 20 years ago, when the industry was very different. There is a huge variety of useful information and educational material out there, with many lenders happy to provide training to help their broker partners grow their businesses. Of course, there are also the master brokers who are happy to a ain the referral and consider all options in helping the customer achieve a great outcome. Second charges are undoubtedly a useful addition to a broker’s financial solutions toolkit, and incorporating them fully into their range of services and expertise can not only help to diversify revenue streams, but help brokers demonstrate their ability to provide comprehensive financial solutions encompassing all available options. Just suggesting to a potential client that a second charge mortgage could be an alternative to a remortgage may be all it takes to elevate your service above that of many of your peers, cementing your position in the customer’s eyes as someone who really knows what they’re doing. Giving customers more than one possible solution can distinguish a great broker from their competitors and convert them into a trusted adviser who they will return to time and time again. ● November 2023 | The Intermediary

L O C A L FO C U S Carlisle

Each month, The Intermediary takes a close-up look at the housing market in a specific region and speaks to the experts supporting the area to find out what makes their territory unique

Focus on ...

JESSICA O’CONNOR is a reporter at The Intermediary

Carlisle

s a region that sits only a stone’s throw away from the Scottish border, Carlisle is uniquely placed. However, following many months of turmoil within the wider UK markets affecting all areas, can the same be said of its property sector? In a market which has seen rising interest rates and widespread affordability issues go hand-in-hand, it has been an extremely unpredictable year for local authorities, with one of the few constants being change. In light of this, The Intermediary sat down with local property professionals in Carlisle to uncover the current state of its mortgage market, and discover how it has fared in the face of a tumultuous 12 months.

Average house prices According to the latest data, the average sold price in the Carlisle postcode area is approximately £202,000, while the median price stands at around £160,000. This is in comparison with an average and media across England and Wales of £354,000 and £272,000. Prices in Carlisle show an average annual price increase of 3%, equating to around £5,700 – this is a relatively modest figure, which likely represents the continuous market volatility that has plagued the property sector over the past year.

The Intermediary | November 2023

The most affordable postcode area in which to purchase property in Carlisle was found to be ‘CA24 3’, which boasted an average price of £93,000. In comparison, the most expensive place to buy is currently in ‘CA12 5’, where properties command an average price of £508,000. The average detached property in the Carlisle area costs approximately £350,000, while semi-detached homes sell for £185,000. Meanwhile, terraced homes cost an average of £138,000, while a typical ﬂat in the area could set buyers back around £130,000.

Increased enquiry levels Last year, there were approximately 3,800 property sales in the region, marking a substantial annual drop of 33.3%, or 2,100 transactions – undoubtedly as a direct result of the Truss Government’s failed miniBudget, which sent shockwaves through the mortgage and property markets. However, despite what has been a somewhat subdued 12 months for the housing sector across the UK, local Carlisle brokers report that the region has been recovering nicely. Karen Latimer, mortgage and protection adviser at Dan Brown Mortgages, says that although the area has not been immune to the ongoing economic troubles, the Carlisle market still has plenty of opportunity. She observes that despite the inevitable slowdown, housing stock

in the region remains plentiful, and there are, in fact, a good number of new properties coming to market on a regular basis – and often selling quickly. Richard Jennings, founder and managing director of Richard Jennings Mortgage Services, corroborates this positive assessment, stating that, following the Bank of England’s decision to hold the base rate in September after 14 consecutive rises, he has seen a notable increase in enquires.

New developments Not only are there signs of green shoots emerging in the residential mortgage market, Carlisle is also

Active first-time buyer market KAREN LATIMER is mortgage and protection adviser at Dan Brown Mortgages

lthough the housing market has slowed down, there are still a good number of properties coming to the market, many of which are still selling quickly. There are several new-build developments, and a new Southern Link Road infrastructure being constructed, which will eventually deliver the St. Cuthberts Garden Village and 10,000 new homes over the next 30 years. All of this is a huge investment in the city and a positive outlook for the future housing market. My key demographic is first-time buyers, as well as home movers and buy-to-let investors. We’ve still seen a good level of enquiries from first-time buyers, as although interest rates are higher, they have never experienced anything else. So, if it is affordable for them and they’re comfortable with the monthly

home to a number of new housing and infrastructure developments that look likely to bolster the property market even further over the coming years. According to Jennings, the city continues to draw tourism and enterprise due to its proximity to the Lake District, as well as its “excellent links” to surrounding cities. In fact, the upcoming development of the Southern Link road has seen funding of over £225m and is pegged to lead to the construction of more than 10,000 new Carlisle homes, as well as providing greater connectivity across the area. James Vince, managing director at Castle View Finance, also points to the potential for new housing developments in the area, citing the new Cumbrian Garden Village, which will see the construction of thousands of new homes. →

payments, there’s no reason they shouldn’t be buying their first home. Homemover enquiries did slow during the peak of interest rate rises; however, these are also starting to pick back up. Where clients are opting for fixed rate mortgage deals, many of them are choosing to fix for 2-years or 3-years in the hope that interest rates may have reduced in this time. Although there is no guarantee rates will reduce, many people are choosing to opt for a shorter fixed rate, as they would rather take this gamble than be fixed on the current higher rates for five-plus years if rates do reduce over the next few years. In the past year, there has been a reduction in the number of people looking at new buy-to-let purchases, as the higher interest rates and lender stress tests have meant a reduced rental yield and reduced loan amount. In fact, I have portfolio landlords who are deciding to sell some of their properties, as they just don’t feel the return they’re getting is sufficient. →

PROPERTY SALES SHARE BY PRICE RANGE Price range

Carlisle

Market share

Sales volumes

● Under £50k

2.1%

● £50k-£100k

20.2%

760

● £100k-£150k

24.1%

905

● £150k-£200k

17.6%

662

● £200k-£250k

11.0%

414

● £250k-£300k

8.1%

306

● £300k-£400k

9.4%

354

● £400k-£500k

4.2%

157

● £500k-£750k

2.6%

www.plumplot.co.uk

● £750k-£1m

0.5%

Data source:

● Over £1m

0.3%

Residents

318k Average age

44.4

Residents per household

2.26

www.ons.gov

www.gov.uk/government/ statistical-data-sets/pricepaid-data-downloads

November 2023 | The Intermediary

L O C A L FO C U S Carlisle

COST COMPARISON OF HOUSES AND FLATS

 DETACHED

£350k

 SEMI-DETACHED

£185k

 TERRACED

£138k

 FLAT

£130k

Latimer agrees, further highlighting the Story Homes sites at Oakleigh Fields and St Andrews Gardens, The Gleeson Homes Moorside Place and Greymoor Meadows sites, and the upcoming Genesis Homes site, The Woodlands.

Client demographics With demand for both residential mortgages and new-build developments on the rise, brokers have also noted a shift in client demographics in the Carlisle area as of late.

COST OF NEW HOMES AND OLDER HOMES  A NEWLY BUILT PROPERTY

£270k

 AN ESTABLISHED PROPERTY

£201k

CARLISLE PROPERTY PRICES

Price

Carlisle

England & Wales

 AVERAGE

£202k

£354k

 MEDIAN

£160k

£272k

Jennings says that over the past 12 months, his core client base has seen undeniable change – with home movers and first-time buyers being replaced by an increase in remortgage clients. Nevertheless, Latimer says that, while there may indeed have been a notable reticence from home movers during the height of base rate rises, enquiries from those looking to move home in Carlisle have started to increase once more, suggesting a positive trend moving into the next year.

In addition, she cites firsttime buyers as one of her key demographics, with those looking to step onto the ladder braving high mortgage rates in order to secure their first home. Latimer explains: “Although interest rates are higher, they have never experienced anything else. “So, if it is affordable for them and they’re comfortable with the monthly payments, there’s no reason they shouldn’t be buying their first home.”

Later life demand Aside from first-time buyers and home movers, it seems that Carlisle is also home to a healthy demand for later life lending. With more than 318,000 residents and an average age of 44.4 years, Vince notes that interest-only residential products have become increasingly sought after. He adds that Castle View Finance has seen an increase in clients who may have “overlooked” their financial planning previously. Whether through products like retirement interest-only (RIO) or

Rising enquiry levels RICHARD JENNINGS is founder and managing director of Richard Jennings Mortgage Services

s we have seen across much of the UK, the market has slowed over the past 12 months. A mixture of the increased cost of living and continually rising interest rates has had an impact on new purchases and first-time buyers. There was a slowdown in purchase and mover applications as clients paused their plans to move while the economic outlook remained uncertain. House prices have, however, remained stable, and the heightened prices may have subsided as the market changes in favour of buyers, though that hasn’t yet had any bearing on property prices across the region. In the interim, buyers with mortgages in place, deposits lined up and who can afford mortgage payments are in an excellent position to buy at a stabilised price with reduced competition. Following the latest base rate decision, enquiry levels have begun to pick up, with many clients citing optimism that we are over the worst of things, and plans being put back into focus. Carlisle is a beautiful city, with excellent links to surrounding cities, and continues to draw tourism,

The Intermediary | November 2023

shoppers and nightlife visitors. As we see rates begin to stabilise, Carlisle is well-placed to see the housing market reach the peaks of the last couple of years. We have seen the Sands Centre relaunched following a £27m pound investment, we have a £225m Southern Link road planned over the next two years, and investment in the area continues, with the city centre undergoing planned regeneration. My client demographic has definitely shifted over the last year. Prior to the cost-of-living crisis, around 80% of my clients were first-time buyers and movers. This has dropped down to 40% with the business seeing much more enquiries from remortgage clients. There has also been a shift in mortgage terms, as client budgets remain broadly the same, but with mortgage repayments higher, a longer term is needed to accommodate those budgets. The buy-to-let market has slowed, with many smaller portfolio landlords looking to exit the market following regulatory changes, affordability model impacts, and increased rates eroding the profitability of their buy-to-let business. Where we have noticed a growth in enquiries and business levels, however, is from those landlords with medium to larger property portfolios, who are looking to change their business models to limited company structures.

L O C A L FO C U S Carlisle

Positive developments JAMES VINCE is managing director at Castle View Finance

arlisle’s housing market has been relatively stable for a long period, with compound growth since the 2007 housing crisis. Stock is currently heavy with traditional terrace houses around the main areas of Carlisle, but that changes to semi-detached and detached properties as you move away from the centre. We have seen an uptick of newer developments along with heavy commercial to residential smaller developments. The Cumbrian Garden Village is a major housing development across the south of Carlisle, with around 6,000 new-built homes. This – along with the longawaited Southern Link road – is a major investment and positive development. As we look after clients across the whole of the UK, we have two key areas. First, we specialise in first-time buyers in the residential space, those who need a bit more support and are keen to achieve the best product available for their circumstances. Second, we look after a range of portfolio building clients, who look at different investment strategies to equity release, he notes that there is an opportunity for brokers to help new clients wishing to bolster underperforming pensions or handle large outstanding mortgages.

Lender trends When it comes to lender trends in the area, brokers report a strong demand for the typical national names, such as Halifax, HSBC, NatWest and Nationwide. However, Latimer is also quick to highlight the popularity of more local options, such as The Cumberland Building Society. Vince also notes this strong borrower preference for local lenders, stating that Darlington Building Society and Penrith Building Society “have a handle on all lease, property and client types in the northern region.” However, Jennings notes a more specific trend that has been emerging over the past six months, citing a strong “gearing towards Accord Mortgages,” due to this particular lender’s offset mortgage rates, which many clients are currently looking

achieve key goals, such as retirement pots or cashflow to replace income. As keen investors ourselves, it makes sense that we keep up to date with investment trends and products available for our clients. Like the rest of the UK, we see urgent cases where buyers are keen to ‘lock in’, as the risk is too great for their client profile, as well as those who have been happy to wait and see what developments come. We have seen a rise in second charge lending to sort out unsecured debts and control current expenses. In addition, the popularity of product transfer ranges has increased due to lesser due diligence, which helps in the cost of living situation. Cumbria has seen an increase in buy-to-let due to the rise in base rents over the past five years, as well as reasonably priced homes. The employment in Cumbria is stable, which includes a range of job roles that supports both the lower and higher end of the rental market. Interest-only residential products are my main concern at the moment, as we have seen an increase in enquiries where new clients have almost ‘overlooked’ their financial planning. This is a key area that the older generation needs to pay attention to, especially if they have underperforming pensions to support them into retirement and large outstanding mortgages.

to take advantage of, particularly among the self-employed in higher tax brackets.

Rental sector With plenty of mortgage activity available in the area from a large range of lender options, Carlisle’s residential market certainly has potential. However, the same cannot be said when it comes to its buy-to-let (BTL) market, where brokers believe things are more of a mixed bag. The private rental sector (PRS) takes up just 13.6% of Carlisle’s housing stock, compared with a national average of 23.6%. In light of these somewhat subdued figures, Latimer says that she has seen a reduction in the number of new buyto-let purchases, due to higher interest rates and tighter lender stress-tests. Jennings also shares this view of a slowed buy-to-let sector. Nevertheless, he also says that he has noticed a growth in enquiries from landlords with medium to larger portfolios looking to transition into a limited company structure.

This sense of optimism – albeit somewhat subdued – for the rental sector is also shared by Vince, as he says potential landlords have been drawn to market by the abundance of reasonably priced properties. He also cities a stable employment market, which supports tenants in affording rental prices on both the lower and higher end of the market.

Busy months ahead It is clear that despite the challenges that have plagued the property market this year, brokers remain fairly optimistic when it comes the state of the market in Carlisle. With business levels on the rise, many new-build properties on the cards, and the opportunity for brokers to operate in all areas of the mortgage market, Carlisle cements itself as an area full of viable investment. From its range of local lender options – as well as a generally eager client base – it seems that the region has a busy few months ahead as it closes out the year and heads into 2024. ● November 2023 | The Intermediary

On the move...

ModaMortgages names head of mortgage sales and distribution

hetwood Financial has services in 1991, going on to hold made Darrell Walker head roles with Coventry Building Society, of mortgage sales and Barclays Bank, Bank of Ireland, distribution for its Lloyds Banking Group and new specialist buy-to-let Legal & General over the lender, ModaMortgages. next 22 years. Walker, who has From 2014 to 2020, been integral to Walker worked at ModaMortgages’ OneSavings Bank development over the past (OSB), building and year, brings over three developing the Prestige decades of experience in Finance and Interbay financial services to the Commercial sales and his new role. He began distribution propositions. DARRELL WALKER his career in financial Following this, he went

on to lead the group’s product and proposition function. Walker said: “Over the past year, we have been working tirelessly behind the scenes to develop a proposition that will really resonate with brokers and landlords, and I think we’ve done just that.” Andy Mielczarek, CEO of Chetwood, said: “Darrell understands the specialist lending market inside out, and has been instrumental in developing the ModaMortgages proposition. We are delighted to have him as part of the Chetwood team.” ●

Movera makes key leadership hires

overa, formerly ONP Group, has made two key hires to fuel its next phase of expansion: Lisa Daniels as head of marketing and communication, and Claire Smith as chief people officer, leading a newly formed people and culture team. Nick Hale, CEO of Movera, said: “Claire and Lisa will bring a wealth of experience to our culture and brand, as we steer the Movera platform towards its next period of growth. “With their expertise, and the brilliant people in our brands, we are on a mission fuelled by a promise to help our customers move with confidence.”

Daniels joined in September, having worked with BT, Sky, Ericsson, and Vodafone leading market strategies for new products and services. She said: "Movera is here to do things differently, shake up the industry, and innovate the house moving process. We want people to look back in years to come, and recognise that Movera brought together a platform that changed the dynamic of our industry." Smith started her career as a personal injury solicitor, later going into business development as a partner at Pannone LLP. Smith has held senior roles with

LISA DANIELS

CLAIRE SMITH

QualitySolicitors and Moneypenny. She said: "Having a celebrated company culture is key to attracting brilliant people, and brilliant people are the essence of the Movera brand. “The opportunity to return to the legal industry, to develop an employee value proposition for Movera is an amazing opportunity.” ●

ASK appoints Gila Cruise as chief financial officer

GILA CRUISE

The Intermediary | November 2023

eal estate funding specialist business ASK Partners has appointed Gila Cruise as chief financial officer. Cruise joined ASK from Investec Bank, where she held roles as CFO for the private bank, and most recently as head of finance for specialist bank lending. Cruise will work closely with ASK co-founder Doug King on the financial operations and strategy of the specialist real estate lending business, which has enabled over

£1.4bn of lending through its technology platform. King said: “We are delighted that Gila has joined the ASK team. “This role is crucial to us achieving the vision we have for ASK as a leading real estate lender and investment platform for private clients. “Gila’s experience of specialist lending will be invaluable in helping us streamline our processes and achieving our growth targets and we are looking forward to working together.” ●

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