The Intermediary – April 2024

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The specialist path to Net Zero

Intermediary. The | Issue 15 | April 2024 | £6 INTERVIEWS  In-depth conversations with Together, Foundation, MSP and Atom ROUND-TABLE All the key points from the recent development nance debate SPECIALIST FINANCE FOCUS ISSUE

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From the editor...

With International Women’s Day in the rear view, and several events focused on women in finance under my belt,

I’d like to discuss one of my biggest pet peeves when it comes to the language we use in business: the ‘so ’ and ‘hard’ skill. So-called hard skills refer to the technical – read ‘practical’ – skills seen as being at the core of your ability to do a job. So skills, meanwhile, are linked with emotion, empathy, and people skills. They also tend to be seen as, at best, ‘nice to haves’, and at worst, an outright hindrance to ge ing a job done well.

How on earth are you going to run a company at high profit and make tough decisions when you are plagued with ‘so feelings’ about how these movements affect your employees? How, indeed.

I hardly need to explain which of these skills is seen as traditionally masculine, and which feminine, and the exclusionary implications of this gender delineation.

Of course, those of us who have entered the 21st Century know that this is all hokum.

First, we know for a fact that thought and skill diversity is one of the things that allows businesses to function best, and to run properly, profits and all.

It should also go without saying that these ‘so ’ skills are integral to the smooth running of any business you wish not to resemble a Victorian workhouse. If low retention and poor

staff loyalty, lacklustre customer experience and myopic decision-making are all part of your core values, feel free to ignore me.

Second, we are moving away, at last, from the idea of gendered skillsets, and it cannot come soon enough. Roll on the days where we simply assume that men can be empathic and women can be technical-minded – and that both belong in the boardroom – without having to make a song and dance of the whole thing.

This discussion comes into play in our focus issue this month, which takes a close look at the state of play in the specialist market.

While we focus on everything from green finance to development, bridging to business cashflow, the through-line of it all is a market that is agile, adaptable, and ready to meet modern challenges.

That might mean being open to flexible ways of funding the fresh injection of housing stock so desperately needed, creating products for an increasingly complex cadre of borrowers, or simply being open to developing a market that fits with the modern world, women and all.

We have dedicated this issue to specialist finance, but never fear, you’ll find all your old favourites still between the pages, too.

But do take the time to check out our extensive exploration of a sector that is doing its bit to change the face of UK property. ●

Jessica Bird @jess_jbird @IntermediaryUK

The Team

Jessica Bird Managing Editor

Jessica O’Connor Reporter

Stephen Watson BDM

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Helen Thorne Accounts

Barbara Prada Designer

Bryan Hay Associate Editor Subscriptions


Adam Higgs | Ahmed Bawa | Alison Pallett

Alpa Bhakta | Arian Manouchehri

Averil Leimon | Bill Lumley | Brian West

Chris Storey | Christopher Tanner | Conor McDermott | David G Jones | David Lownds

Gabriella Macari | Gavin Braham | Grant Hendry

Guy Murray | Hugo Davies | James Gillam

Jason Berry | Jeremy Duncombe | Jerry Mulle

Jess Rushton | Kathy Bowes | Kelly Melville-Kelly

Laura omas | Les Pick | Lisa Martin

Marcus Robinson | Mark Blackwell | Mark Snape

Mat Rees | Matt Tucker | Matthew Cumber

Paresh Raja | Paul Auger | Rebecca Salt

Richard Rowntree | Robin Johnson | Ryan Davies

Ryan Etchells | Sam O’Neill | Samuel Gee

Steve Goodall | Tim Hague | Toby Fields

Toni Mawer | Vic Jannels | Victoria Je eries

Copyright © 2024 The Intermediary Cover illustration by Barbara Prada Round-table photography by Paul Clarke Printed by Pensord Press CBP006075 Intermediary. The
SPECIALIST FINANCE FOCUS ISSUE SUSTAINABLE FINANCE The specialist path to Net Zero April 2024 | The Intermediary 3
April 2024

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Feature 6

Sustainable Finance

Bill Lumley looks beyond the high street for the march to net zero

Opinion 16

Insights into the specialist nance market across bridging, development, complex buy-to-let, and more

Round-table 44

The key points from a development nance debate in association with Downing


Broker business 74

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

Local focus 97

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

On the Move 98

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


Specialist Finance  6

Residential  50

Local Focus 86



The Interview 36


Ryan Etchells looks back at 50 years of specialist nance

In Pro le 22


Arian Manouchehri discusses the power of relationships in a complex market

In Pro le 32


Grant Hendry maps out the direction of travel for specialist buy-to-let

Q&A 26


Chris Storey catches up on the journey so far after a decade in business

Q&A 58


Jeremy Duncombe unpacks a new product making waves in the market

Meet the BDM 62


Gavin Braham on the challenges and opportunities facing business development managers

Meet the Broker 76


Sam O’Neill on the broker’s role in a problem solving market

Buy-to-let  68
Later Life
Second Charge



Opportunities abound in the field of green finance, as the wider market gradually awakens to the need to comply with initiatives such as net zero, and developers come to terms with need to meet the RIBA Climate Challenge.

Under the latter initiative, new and retrofitted buildings should meet net zero whole life carbon by 2030. This alone presents major challenges for anyone working within the mortgage sector, and it is only one of the sources of green pressure closing in on UK housing.

The buildings sector represents 40% of Europe’s energy demand – 80% of it from fossil fuels. Greenhouse gas emission from building and construction exceeds 40% of the total generated worldwide.

The challenges of recent years have made it increasingly evident that there are some things that simply cannot be done by the high street alone. The march toward energy efficiency and a greener future is no exception, not least because development finance will play a considerable role. Indeed, it is arguably in the specialist market

where the innovation and agility to meet these challenges truly lies.

Leading the charge

Nic Gillanders, CEO at energy efficiency provider SCIS Group, believes specialist finance plays a crucial role in driving green initiatives forward. He advises brokers to be aware of tailored lending solutions that integrate financial return with sustainability return on investment (ROI), ensuring that clients can achieve both their financial goals and environmental aspirations.

Matt Tucker, director at Pluto Finance, goes further, explaining that the industry is in a position of influence when it comes to supporting borrowers in the shift to net zero.

“This primarily takes the form of commercial incentives for better performing assets from a carbon perspective, but also through knowledge sharing of best practice that we see across the portfolio,” he says. However, he warns of a growing need for asset owners to access shortterm finance to improve their stock.

In focus SPECIALIST FINANCE The Intermediary | April 2024 6

Louisa Sedgwick, commercial director at specialist lender Paragon Bank, which o ers preferential rates for buy-to-let (BTL) landlords purchasing or remortgaging properties with high energy e ciency ratings, says the area of shortterm lending is where specialist lenders will play their part as opposed to mainstream lenders.

“Mainstream lenders wouldn't typically lend on properties that are either not t for rental or not suitable for human habitation,” she says.

“The direction of travel we're taking is very much with a view to improve the sustainability of the properties. [Our] preferred route is that we get a really good quality property once any works have been undertaken, where a tenant can be comfortable in the knowledge that it is indeed sustainable.”

Sedgwick sees great opportunity for bridging lenders to support BTL customers in making properties more sustainable. Nevertheless, she says: “I think they may have less interest in the sustainability of the property as a result of not having a long-term interest in the property.”

Guarding against greenwashing

While the e ort to create innovative propositions is to be commended, a clear green taxonomy is necessary to help galvanise developers and cut down corporate and investor ‘greenwashing,’ warns Jose Hopkins, founder and CEO of environmental, social and governance (ESG) and sustainability specialist Simplify Climate.

He says this taxonomy is critical to allow nancing to ow adequately to green investment projects, and must include a de nition of what constitutes ‘sustainable’ nance.

“The UK economy needs the implementation of this taxonomy urgently to help the sector decarbonise,” he warns.

Everyone involved in the property market should work toward self-education on sustainability and ESG, which is critical in this landscape. For guidance and consistency, Hopkins points to the UK Green Building Council (UKGBC), a membership-led industry network that he says is “radically transforming the sustainability of the built environment.”

The Intermediary | July 2023 47 p
In focus SPECIALIST FINANCE 7 April 2024 | The Intermediary

This is not just about knowing the products and legislation in play, but being aware of the realities of the current climate.

Hopkins explains: “Extreme weather events are becoming more frequent and increasingly severe. March 2024 was the hottest on record.”

Complex properties

Part of the role for the specialist finance market is catering for complex properties, and there is considerable scope among these for green progress that goes beyond simply putting Energy Performance Certificate (EPC) expectations into lending criteria.

With commercial and mixed-use properties, for example, it is important to create an environment that not only incentivises investors, but also their tenants, to be more sustainable.

Understanding the various energy performance measures, such as providing a discount to the rate if they decide to install solar panels, can help improve the performance of the property.

Hopkins says: “If you perform a diagnostic assessment and identify those inefficiencies, it will help you get an improved rate [on] the mortgage. If you install efficient measures of lighting and also a renewable energy source, you can improve the performance of the property. Low energy lighting and heating can account [for] as much as 40% of energy costs in many properties, which is quite a significant amount.”

Meanwhile, with Europe’s oldest housing stock, the UK represents an energy efficiency

puzzle that cannot be solved with new-build developments alone. Much of the push to net zero will have to take place within homes that are older and less well-suited to the changes needed to reach an EPC Band A.

Michael Wynne, green developer and cofounder of Q New Homes, warns: “Retrospectively fitting existing homes, with the air leakage in old buildings, is not going to be as efficient compared to homes that are built to support these.”

This makes it a less desirable, higher risk lending option, but one that must be taken if progress is to be made. Where the algorithms used by the high street will make it harder to create financing options that suit these properties, the human underwriting prevalent the specialist finance market is more likely to provide solutions.

Nevertheless, this does not mean the role of tech is less prominent.

Gillanders asserts: “These insights can inform which tailored green financing route, such as


reducing my carbon footprint by retro tting insulation"
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Tdevelopment finance, bridging loans, auction finance or refurbishment loans, is most appropriate for sustainably focused projects. Accessing funding in various forms requires expertise, so it’s advisable to consult with specialists in the field early.”

Andrew Charnley is managing director at Assetz Capital

he UK specialist nance sector can play a key role in the shift towards net zero, as it is able to support speci c funding needs and innovative projects, which often go beyond the scope of traditional lending.

Specialist nance providers o er tailored nancing solutions that are speci cally designed to support the unique requirements of net zero projects, such as renewable energy installations, energy e ciency improvements, and green infrastructure projects.

These bespoke solutions can better match the nancial needs and risk pro les of such initiatives.

Specialist lenders often possess a deep understanding of the environmental and technical complexities associated with net zero projects. This expertise allows them to assess risks and opportunities more accurately, thereby facilitating investments in innovative and high-impact projects that may be deemed too risky or unconventional by mainstream or high street lenders.

Specialist nance can bridge the gap between the capital required for the transition to net zero and what traditional nancial markets can provide.

This is crucial for early-stage technologies and projects that are essential for decarbonisation, but lack the track record to secure conventional funding.

Higher risk appetite

Specialist lending institutions often have a higher risk appetite compared to traditional banks. This is instrumental in funding the new technologies and business models essential for the net zero transition, which might not have proven pro tability yet.

The exibility of specialist nance allows for innovative funding structures, such as green bonds or sustainabilitylinked loans, which can provide incentives for achieving speci c environmental milestones.

This innovation in nance matches the dynamic nature of net zero goals. Many net zero projects, particularly in renewable energy, require long-term investments to become viable. Specialist nanciers are more likely to o er longer investment horizons that align with the lifecycle and payo periods of these projects.

This all might sound painfully granular, calling for an approach that is too involved for most busy market players. This is where intelligent, data-driven solutions and insights can come in, allowing for informed, real-time decision-making without the need for a person to examine every potential site for a solar panel or low energy lightbulb.

Gillanders says: “Integrating these solutions and platforms into end-to-end processes spanning the work of brokers and lenders, assessors and installation experts, and running comprehensive assessments of energy ratings, carbon footprints and retrofitting or development costs for assets, is vital to align expected benefits over time.”

Green financing instruments

Andrew Charnley, managing director at Assetz Capital, says there is a growing selection of green financing instruments, such as green bonds, sustainability loans and green private equity. These are designed to fund projects that have a positive environmental impact, including those related to the net zero transition.

Specialist finance is increasingly involved in Public-Private Partnerships (PPPs) to leverage public funds with private investment for largescale infrastructure projects that are critical to achieving net zero targets.

“This collaborative approach can mitigate risk and increase the viability of projects,” Charnley says. “There is a noticeable innovation in funding models, such as blended finance, where public or philanthropic funds are used to de-risk investments, thereby attracting private capital to net zero initiatives.

"This model can significantly accelerate the deployment of sustainable technologies and infrastructure.”

The next phase that brokers and lenders need to be aware of is the work around retrofit, improving properties that are already in the market but making them more sustainable, according to Sedgwick.

However, she warns: “Until such time as we see that legislation from the Government, whomever that might be, we're not necessarily going to see an overwhelming demand for that type of product offering.”

Sedgwick adds: “Around 60% of all properties in the [private rented sector (PRS)] don't have a p

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Green nance initiatives are still in an evolutionary phase. Leading the way from a developer perspective, on the border of West Kent and East Sussex, Hartdene Barns is a collection of nine net zero carbon new homes designed to meet the RIBA Climate Challenge.

The project is nanced under a pilot scheme from lender Atelier. The 10-property eco-development is under creation by Q New Homes, which the rm says raises the bar for residential property developments, even going as far as to assert that these eco homes set new benchmarks that are 10 to 15 years ahead of the majority of newbuilds expected in the UK. The project has nance terms agreed with Atelier, under which, when it is complete, a rebate will be provide in

mortgage. So, there’s a massive opportunity for brokers who might well have customers on their books that are asset rich and cash poor, and could really benefit from education on improving their existing properties or adding to their portfolios through refinancing.

“This year in particular is going to be a big year for remortgages.”

Despite the back and forth on prospective EPC legislation for buy-to-let properties, Paul Braithwaite, commercial development lead at Leeds Building Society, says: “Lenders can’t shy away from the challenge of net zero.”

The scope of opportunities ahead for brokers in this sector is immense, according to Tucker.

“The UK Green Building Council has done a lot of great work on UK’s housing retrofit requirements,” he says.

“When you see that just under two-thirds of the nation’s homes rated an EPC rating D or below, and they expect 29 million homes will require retrofitting before 2050 – there is going to be huge demand in this sector.”

the form of a reduced package of between 1.5% and 2% in the cost of borrowing.

Co-founder of Q New Homes Damien Wynne says: “It has to be a gradual step. You can't suddenly expect everyone to be able to do what we're doing.” His brother, co-founder Michael Wynne, adds: “Atelier were testing a new green product. We have set out to be highly sustainable, super-energy e cient.”

Some 90% of developers only commit to building regulations they are required to meet. Incentives to go beyond these are likely to entice developers to go further down the Net Zero path.

However, Michael Wynne says: “We’re doing it anyway, because it is a passion of ours.”

Banks and lenders must therefore remain committed to their green finance goals, supporting the growth of this side of the market and collaborating across industries to ensure these financing routes are viable.

Nevertheless, engagement from this market is not enough.

Gillanders says: “It is important that the Government supports this market. Clear and consistent policy direction, with fewer U-turns, is necessary to provide stability and confidence for lenders, brokers, and developers.

“By aligning financial incentives with sustainability objectives and leveraging technology for informed decision-making, we can accelerate the transition to a greener housing market and create a more sustainable future.”

Modern Methods of Construction

Modern Methods of Construction (MMC) are widely seen as the direction of travel for most in the construction world, and Tucker agrees that this has a major part to play if the UK is realistic


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about achieving its target of building 300,000 homes a year with net zero at the forefront.

“The challenge is transferring a lot of the great work that has been done into a commercially viable industry,” he says.

“That is ultimately achieved through scale and a steady pipeline so that the industry can reap the benefits of the considerable investment that is required to form factories and transition from established construction delivery models.”

He acknowledges that funding MMC has long been a major hurdle owing to the complexities in funding works off-site, but says: “The specialist market has an opportunity to come up with creative solutions that can overcome the some of the barriers while maintaining the necessary security for the lender.

"This comes from human underwriters gaining an intrinsic understanding of these business models.”

Pluto, for example, offers a low carbon lending product, under which it facilitates substantial financing cost discounts to developers that are able to implement whole life carbon reduction strategies, beyond just those demanded in the current status-quo.

“The initiative offers reduced interest rates for projects delivering materially lower operating and embodied carbon footprint,” Tucker says.

Harnessing AI

The greatest area of innovation that needs to be stepped up and encouraged by the Government, and which brokers should be on the lookout for, is the use of artificial intelligence (AI), according to Hopkins.

He says: “In terms of Government innovation, what they need to do from a policy perspective is focus on AI, which includes the way in which AI can improve the decarbonisation journey of the sector from an efficiency perspective. This will help access more accurate information to allow for better decision-making.”

In spite of widely publicised initiatives, such as the Government’s target to reduce net energy consumption by 30% by 2030, the specialist finance sector has a challenge ahead.

Sedgwick says: “In light of some of the changes that the Government announced last year, I don't think it's a march to net zero. I think that it's a slow stroll.”

She concludes: “While a sizeable proportion of landlords are continuing to make their properties more energy efficient, something that benefits both themselves and their tenants, there will be some that are reluctant to undertake the works until there is legislation, with realistic deadlines, and clear guidance from Government.” ●


Predictions and HMRC’s other role

Having had two decisive by-elections in favour of Labour in February, pundits are already calling a nailed-on Labour victory when the General Election is held later this year. But can we expect any difference in the way that the new Government will handle the economy, or how it will deal with the issues surrounding housing that have yet to be resolved or become part of a cohesive, thought-out strategy?

Labour is trying hard to make itself electable, schmoozing the City in an a empt to convince it that it has developed a business and financefriendly agenda which can be trusted more than the current Government’s efforts. Whether it is able to affect the kind of change that manages to put property within the reach of the next generation and build enough new houses – while keeping a rein on inflation and interest rates – remains to be seen.

Back in today’s world, the more immediate question is whether, or when, the Bank of England will reduce rates. Then the question is, by how much?

What we do know is that – for all the experts with intellectual firepower being sought to give opinions – there is no real consensus of what will actually happen. All we can say is that lower interest rates would be very welcome – particularly if the lower rate can be sustained!

Not just a tax collector

How many brokers are aware that HMRC is much more than a tax collector? If you engage in financial services, the chances are that you already know about money laundering rules and are suitably covered. But if you are not a regulated broker registered with the Financial Conduct Authority (FCA), either directly authorised (DA) or an appointed representative (AR) via your network, or as a member of a recognised trade body, such as the National Association of Commercial Finance Brokers (NACFB), and you are engaged in arranging loans and mortgages, then you need to be registered with HMRC for anti-money laundering (AML) regulations.

As a non-regulated sole trader or company, HMRC needs to have you registered if you conduct loan

and mortgage business. It is not HMRC’s responsibility to chase firms to register, but it is empowered to issue fines to those it finds are noncompliant. Ignorance of the rules is not an acceptable excuse.

Regardless of what you might think about the likelihood of serious money laundering in a seeming backwater like ours, there is no opt-out –regardless of how much or how li le business you write.

Money laundering has been and is a serious crime, and figures from HMRC show that it issued £3.2m in money laundering penalties in 2022 against financial services firms.

At Kuflink, like many lenders in the bridging space, we only offer nonregulated short term loans.

While it is not our role to police brokers as to their regulatory status, the question of whether they are registered for money laundering is still important.

As a lender, we try to ensure that all of our introducers are registered accordingly.

Despite the fact that we operate in a non-regulated space, as a lender we still have a responsibility to ensure that outcomes for all borrowers are considered, and that the principles outlined under the Consumer Duty are embedded in our processes as well as the broker’s, to ensure the most suitable product is offered to the applicant.

The number of non-regulated brokers we find to be unaware that they need to be registered with HMRC is growing.

I would urge every broker to talk to their compliance support, or at the very least go to the website and check their status. ●

The Intermediary | April 2024 16
In focus
HMRC needs to have you registered if you conduct loan and mortgage business

Lenders must support landlord diversi cation

Diversification is a core aspect of any investment strategy. It’s as true of investors pu ing their money in stocks and shares as it is for those who prefer to back bricks and mortar. By diversifying across a range of different assets, the investor can spread the risk involved. As one asset struggles, others may outperform, meaning that the investor benefits from a more stable return over the longterm. This is core to building a solid investment foundation.

This diversification among property investors has taken on a host of different forms in recent years. Where once the focus may have been geographical, tapping into the unique selling points of the property market in specific regions, it is now increasingly resulting in landlords adding varied forms of property assets to their portfolios.

For example, significant numbers of professional landlords have added holiday lets to their portfolios over the past few years, off the back of the ‘staycation’ boom.

While the pandemic undoubtedly boosted demand for domestic holidays, this has not tailed off in the fashion that some naysayers suggested. Instead, many households are planning to have at least one holiday to a destination within the UK, potentially looking to stay within a rental property rather than in a hotel. As a result, this has opened the potential for landlords to enjoy greater rental incomes from properties situated within holiday hotspots.

Though certain regions have taken steps to limit the number of holiday lets available, there are still opportunities in all sorts of popular

destinations to purchase such properties, and a clear demand among investors to do so.

Similarly, we have seen a greater interest from landlords in adding semi-commercial and commercial properties to their existing investments. This is not simply down to the yields on offer, but the security as well.

By bringing on board a different type of property asset, investors boost their chances of riding out any issues which may arise with the residential market, since they will still enjoy a return from the commercial property elements of the asset.

With the property market on increasingly sure footing as buyers return to the market and interest rates stabilise, confidence is growing among investors around backing property in its various different forms. Given this, the trend of diversifying by investing in a range of property assets is likely to be here to stay.

Move to professionalism

We are seeing a ‘changing of the guard’ when it comes to property investment. The part-time landlords – those with only a property or two in their portfolio – are largely leaving the market as the sums simply do not add up for them any longer.

However, there remains a great appetite among the professional investors, who are increasingly stepping in and purchasing those quality rental properties being offloaded by the part-timers.

The reality of the property market in the UK is that there simply are not enough homes to meet demand from potential purchasers, and that imbalance is delivering long-term capital growth for investors across the country.

With diversification being such a fundamental element of property investment, and other forms of property delivering solid returns, we should expect to see greater numbers of investors adding the likes of semicommercial and holiday lets to their portfolios in the years ahead.

Understanding landlords

Recognising this trend is only the start; these landlords need to get the funding in place to support those moves to diversify their portfolio beyond regular residential properties.

This is not always as straightforward as they may expect. Brokers know only too well that while the regular buy-to-let (BTL) mortgage market enjoys healthy competition, the options become rather more limited once the needs of the client are more specialist.

That’s why it’s so important for brokers to work closely with lenders that understand the needs of property professionals and can put in place the sort of financial solutions that allow them to build their portfolio to meet their own ambitions.

It’s something that we have taken seriously at LHV Bank, adding expertise and knowledge to our buyto-let team to ensure that the products and processes we have in place are best designed to support such borrowers.

As the BTL market becomes more professional, landlords are only likely to continue to look to diversify into wider forms of property. The challenge is for lenders and brokers to work together to ensure they have access to the funds to make this possible in a cost-effective way. ●

April 2024 | The Intermediary 17 In focus SPECIALIST FINANCE
CONOR MCDERMOTT is director of SME Lending at LHV Bank

Tax for international buyers in the PCL market

The prime Central London (PCL) property market has long a racted the interest of international investors.

In fact, the proportion of PCL homes purchased by an international buyer increased from 39% in 2022 to 45% in 2023, according to Hamptons.

There are various factors that contribute to the global appeal of London’s residential properties. For one, there are the beautiful properties themselves – from Georgian and Victorian townhouses through to modern penthouse flats.

From an investment perspective, there is also the potential for both capital growth and rental income. Indeed, while PCL prices have deflated since 2014 as a result of tax reforms, Brexit, Covid-19 and rising interest rates, experts believe that there will be a return to growth in the years to come. Savills, for instance, predicts that PCL prices will grow by 19% by 2028, while Knight Frank puts the figure at 18%.

Not to be overlooked are the UK’s transparent legal and tax systems, offering peace of mind to investors looking to purchase a PCL property.

However, that does not mean they are immune from complexities for international buyers – especially when it comes to tax.

Supporting buyers

Then, there are all the qualities London has to offer. The capital boasts incredible restaurants, charming pubs, and world-renowned art galleries and museums; it has lovely green spaces, a melting pot of cultures, faiths and languages, is a global hub for commerce, and has exceptional universities and hospitals.

Many brokers operating in the PCL market will be well-versed in supporting overseas buyers, given that they account for almost half of purchases.

Crucial to the service brokers provide, aside from the primary goal of finding the right mortgage lender and products for international clients, is helping guide the buyer through the taxes relating to their purchase. A er all, this has to be factored into the financial equation, impacting as it does the amount they need or can afford to borrow.

2024 introducing changes to tax laws affecting non-domiciled residents. A non-dom is typically known as a person who lives in the UK but whose permanent home, for tax purposes, is registered outside the UK, allowing them to only pay tax on their earnings within the UK and not on the money they make elsewhere in the world.

From April 2025, the Government will abolish the current non-dom regime and replace this with a new residency-based regime.

People who move to the UK will not have to pay tax on money earned overseas during the first four years. Regardless of where an individual is domiciled, once an individual has been tax resident in the UK for more than four years, they will be liable for UK tax on any newly arising overseas income and gains.

To help shed some light on the issue, here is a guide to the main taxes that international investors buying PCL property must consider, starting with the newsworthy topic of ‘nondom’ status.

Non-dom status

Non-dom status has taken a prominent position in the news of late, with the Chancellor’s Spring Budget on 6th March

The Intermediary | April 2024 18 In focus SPECIALIST FINANCE

The Government is constantly assessing how it can reform di erent taxes to incentivise or disincentivise di erent types of property ownership”

Home to high-net-worth (HNW) individuals from around the world, the PCL market could be affected by the non-dom reforms.

International investors who may fit into the category should, therefore, keep abreast of the upcoming changes and seek independent legal advice where required.

Stamp Duty Land Tax

First introduced in 1694 as a form of taxation on a wide range of goods, Stamp Duty has evolved drastically over the past 300 years. Stamp Duty Land Tax (SDLT) – a tax on land transactions payable by the buyer –was introduced in 2003. But it has been reformed regularly over the intervening two decades, adding increased complexity for those buying PCL property. In the PCL market, with multi-million-pound property prices, SDLT costs will be significant. As an example, a non-UK resident buying a £2m additional property would face a stamp duty bill of £251,250.

given that it only applies to purchases under £625,000. Should that be the case, for non-UK residents, SDLT is charged at 2% on the first £425,000 of consideration and then at 5% on any remainder of consideration, as long as it doesn’t exceed £625,000.

Brokers must be aware that their clients have to pay their SDLT bill –officially called a ‘land transaction return’ – within 14 days of the completion date on their purchase.

Capital Gains Tax

Capital Gains Tax (CGT) is a tax on the profit – or gain – someone makes on an asset they own. As of April 2015, CGT has applied to non-UK residents selling properties in the UK, although this only applies to additional properties, not property that the owner has lived in as their main home since owning it.

For brokers, it can be worth flagging this to clients if they are selling one PCL investment property to purchase another, as there could be a CGT bill to pay on any profits made on the existing property. There are many variables that can make this particular tax complicated to navigate.

Income Tax

relevant expenses that can be offset.

Brokers working with international investors seeking a BTL property in the PCL market should flag the potential Income Tax liabilities.

Shifting tax landscape

Brokers will know as well as anyone that property-related taxes in the UK are rarely static. The Government is constantly assessing how it can reform different taxes to incentivise or disincentivise different types of property ownership, all while balancing this against the state’s tax receipts.

With a General Election on the horizon, the likelihood of new policies and further reforms increases notably.

The key, therefore, is for lenders and brokers to double down on the broader support we provide for property buyers, especially international buyers who may be less familiar with the numerous tax implications they face when buying and then owning PCL properties. ●

Importantly, first-time buyer relief is available to both UK and non-UK residents. However, this is not likely to be relevant in the PCL market,

International investors purchasing PCL property as a buy-to-let (BTL) asset will also need to consider the Income Tax implications.The NonResident Landlord Scheme (NRLS) was introduced in 1996 to ensure Income Tax is paid by people earning money from BTL property while living outside the UK for at least six months of the year.

The amount of tax that has to be paid is dictated by the income earned on the rental property, factoring in

April 2024 | The Intermediary 19
ALPA BHAKTA is CEO at Butter eld Mortgages

Time for all bridging lenders to step up

If you’ve paid any a ention to the trade press over recent months, you’ll know that the bridging market has continued to go from strength to strength, even while much of the property lending industry has stu ered.

According to our data, bridging loan books hit a new high of £7.6bn at the end of 2023, increasing by more than 16% on the previous year. The data certainly tells an impressive story, but we know that it’s not the full story.

The Association of Short Term Lenders (ASTL) data includes detailed information from those lenders that have chosen to sign up to membership of our association, and in doing so, agree to abide by our membership rules and Code of Conduct. Membership includes most of the instantly recognisable names and, at the last count, we have 44 lender members – with a few more in discussion.

The popular view is that there are probably up to 50 lenders that would be considered as the popular recognised brands. This means that, while most of the bridging lenders you might think of are already members of the ASTL, there remain some notable exceptions that would account for not insignificant levels of business.

Our message to those nonmember lenders is simple: as a trade association, our membership has helped us to advance the size and reputation of the bridging and development lending sectors. We have been instrumental in the introduction of the Certified Practitioner in Specialist Property Finance (CPSP), alongside the Financial Intermediary and Broker Assocation (FIBA) and the London Institute of Banking & Finance (LIBF), and we continue to promote the interests of the industry and our customers among policymakers, journalists, property investors and home movers.

The larger our membership, the stronger our voice and the more accurately we can report on the sector, which in itself delivers credibility, and with that, greater trust and positive engagement.

A larger membership would enable greater clout in our discussions with regulators and policymakers, which can only further the benefits for our customers, providing be er outcomes for those who engage with both the regulated and non-regulated sectors.

If you are a lender active in bridging and development lending, we ask you to consider how you can support our efforts to make our sector more recognised and recognisable to the end user.

Can you bring your expertise and contribute to our industry-wide efforts to raise standards, support be er outcomes for our customers and promote the continued growth of the market? And if not, dare I respectfully ask, why not?

Unknown quantity

The bridging and development market is much larger than the circa 50 recognised brands, of course. It is estimated that the total number of short-term lenders varies from 250 to 450 firms, with many small players operating, mostly in the nonregulated environment.

These small operations are o en individuals or families that have a large sum of money and choose to earn a return by deploying it in the form of bridging loans.

Many of these lenders will focus on a local area, maybe even working only with one or two customers and perhaps completing only one or two loans a year. But there are many of them – hundreds. As lenders operating on this scale tend to only be active in the unregulated market, we have no record of just how many there are, who they are and how much business they are collectively writing.

Our membership has helped us to advance the size and reputation of the bridging and development lending sectors”

It’s worth saying that I am supportive equally of small-scale bridging lending – size is not a crucial factor, nor a bad thing. The ability for smaller lenders to operate in our market is one of the driving forces behind the pace of change and innovation in bridging.

However, as we grow as a sector – engaging with more brokers and customers, we must also continue to mature and professionalise. Not least because, as the industry grows, it will a ract greater a ention from the regulator. As an industry we will be expected to, and must, be more transparent.

At the ASTL, we have set the tone for this transparency with or Member Rules and Code of Conduct, and our recent work on the CPSP accreditation, but if the industry’s trade association is unable to give a definitive size for the market, or even estimate how many lenders are operating within it, then we still have some way to go.

So, with the bridging and development market continuing to go from strength to strength, I believe that now is the time for all lenders active in our sector to stand up and be counted. Join us and support our efforts in the exciting, growing shortterm lending sector. ●

The Intermediary | April 2024 20
In focus

In Profile.

The Intermediary catches up with Arian Manouchehri, head of broker relations at MSP Capital, about the power of relationships in a complex market

When Arian Manouchehri first came across MSP Capital, while working in the second charge market for another lender, he says he was drawn to the firm by its “solution-focused mentality and approach towards lending,” which stood out from his experience with other firms.

Manouchehri joined the business in 2021, and since then has taken on the role of head of broker relations. The Intermediary sat down with him to discuss this solution-focused approach at a time when the specialist and development finance markets are facing more challenges than ever.

Getting the deal done

MSP Capital is, at its core, Manouchehri explains, “eager to get deals over the line,” which informs its agile approach and collaborative culture. This means keeping administrative requirements to the minimum and focusing on the “salient aspects of a deal, rather than box-ticking exercises.”

It helps that this is a relatively small lender in terms of headcount, with around 50 members of staff, which Manouchehri says adds to the feeling of a “family office,” even as it continues to grow.

He says: “Everyone is quite accessible, no one is too corporate. Everyone is focused on the job and approaches it with a sensible mindset.

“This is one of the differentiators for us within the market. We pretty much operate all from the same office, and anyone making a decision on underwriting a deal sits within the same room.

“We all know the policy inside and out. When we make assurances about deals we can do, we do it with a high level of conviction. If something feels like a grey area, our set-up lends itself to very quick decision-making, rather than needing to wait, say, for a weekly credit committee meeting. It’s real-time decision-making.”

In terms of what deals come across the table, Manouchehri says MSP Capital boasts a breadth of different client types, aiming to provide a “onestop shop for short-term lending.”

MSP Capital’s sweet spot is small to medium sized (SME) clients, those not catered for by the high street institutions.

This might be first-time developers or those who are more established regional players, and Manouchehri adds that the firm often works alongside the former as they progress along the journey to becoming the latter.

“Provided what they’re doing makes sense for their level of experience, we are happy to entertain and support that,” he adds.

Creativity through crisis

This support for SME developers, Manouchehri says, is key to fighting the ongoing housing shortage, and in turn, so are the specialist lenders that serve them.

“The SME developer market is now dominated by the specialist lender,” he explains.

“The UK housing crisis is being addressed not solely by large national housebuilders, but by SME entrepreneurs pursuing the infill sites that can create attractive housing, that might not necessarily appeal to the larger players.

“In aggregate, that comprises a large section of the homes built within the UK.”

Nevertheless, these lenders, like all others, have had to navigate a choppy market over the past few years, despite a relative boom period on the back of Covid-19, when people came to realise “the place to spend money was where they live, and that’s what they valued the most.”

This has been set against a back drop of build cost inflation, labour shortages and supply chain disruption. Manouchehri reports that these inflationary pressures are now easing, but that this is in part due to a decline in new schemes following interest rate rises – in a world in which housing delivery is not keeping up with demand, this is not a good sign.

“To compound matters, there has been uncertainty and a slight softening in terms of end values,” he continues. “That uncertainty fortunately has now been largely removed, and there has been a reasonable uptick this year, which I see as confidence returning to the market from a developer perspective.”

Developers can, within reason, rest assured that the UK will not see a crash in property values – that the “correction has largely now occurred”

The Intermediary | April 2024 22

– and are therefore back to acquiring sites and building properties.

This oscillating environment reinforces the importance of working with developers who understand the nuances of the market, while lenders should take opportunities to flag key risks and potential pitfalls during a loan’s journey.

“Informing people and being transparent is critical,” Manouchehri says.

“That comes from having a good relationship with the broker, as well.”

Looking back over the events of 2023, Manouchehri notes that where some areas of the market – such as buy-to-let (BTL) mortgages and residential sales – slowed, this created more opportunities for bridging, which tends to do well in times of volatility.

Change ahead

Turning to the road ahead, Manouchehri says there will likely be increased demand for development exits in 2024, as part of the ongoing backlash from the events of the past several years.

He explains: “For a lot of loans written within the past 18 months, the term was calculated based on market history, where properties were flying off the shelf as the industry tried to satisfy insatiable demand.

“That demand has stabilised, and a lot of lenders will have written aggressive terms, and developers now need more time to sell units.”

finding more opportunities for unnecessary input into the free market.

What Manouchehri does call for is increased awareness of “whether policy actually makes sense at a ground level.”

Regardless of Government intervention, this market will continue to evolve. This comes into play with environmental factors, as well, despite back and forth from policymakers. MSP Capital enacts minimum Energy Performance Certificate (EPC) levels on its deals, for example, and factors sustainability features into its underwriting, which can then have an impact on price. This, Manouchehri adds, is being driven by consumer behaviour more than legislation, in addition to simply being “the right thing to do.”

Progressing the business

All of these complexities add to the overall importance of having the right broker – one who is able to understand and navigate the nuances of this market. In its early stages, MSP Capital was focused on self-origination, but as it has grown – particularly over the past six years –it has embraced the importance of its broker relationships as a “powerful tool” in this market.

Now, the firm prides itself on providing a service to brokers that is “simple, to the point, and focuses on trying to get the deal done.”

In order to stimulate the supply of more housing schemes in the years ahead, and help developers get back to normal, Manouchehri says that lenders have perhaps reached the limit of their responsibilities. The biggest change that is needed now is planning reform.

“Planning issues have been a feature of this market for decades, and it’s one of the reasons for the inflation of UK housing prices,” he explains.

In a market which often – and understandably –focuses heavily on speed, Manouchehri says that, it is actually reliability that is most important. The role of the broker, he adds, is to help lenders ensure that certainty, and to help clients understand that a good deal is not just about rate and leverage, but also the way the lender works with the borrower.

Looking ahead, Manouchehri notes that – having been active for 42 years in total – this is not a firm that plans only for short-term goals. In order to grow sustainably, he explains that MSP Capital will continue to lend to “credible borrowers on sensible projects, with excellent service and efficiency – so, more of the same.” is unsure that much will be done to active for

Even with an election – and in theory a period of change – ahead, Manouchehri is unsure that much will be done to revolutionise the planning system, though he is hopeful that some reform may come. At the moment, developers facing basic admin struggles that delay project starts is an ongoing issue, particularly with finance costs remaining high.

However, when asked for his wishlist for potential Government support for this market, Manouchehri is clear that further intervention is not what is needed.

Instead, he suggests that the Government should focus on efficiency within those parts of the process where it must be involved, rather than



US in ation and the

The UK property market is intricately linked to the broader global economic environment, a dynamic relationship underscored by recent events in the US. As inflation figures in the US prompt aggressive market responses, repercussions are felt across the Atlantic, influencing the Bank of England's (BoE) monetary strategies and the overall landscape of our property sector.

The sharp increase in US inflation has led to higher bond yields, impacting the S&P 500 and erasing notable market gains. This market upheaval puts the BoE in a precarious position, faced with the challenge of adjusting interest rates amid global volatility. The potential for the BoE to refrain from cu ing rates – especially ahead of the Federal Reserve – poses a threat to affordability within the UK housing market.

From an economic standpoint, the reluctance to lower rates could see mortgage rates climbing, dampening demand for housing.

This would particularly affect first-time buyers, for whom high borrowing costs could push the dream of homeownership out of reach – once again, for some. Economists point out that while this may cool overheated segments of the market, it risks prolonging the affordability gap and slowing down the property market's momentum since the start of the year.

Simultaneously, the prospect of ‘higher for longer’ enhances the UK's relative value on the investment world stage. This could lead to increased capital inflows, which would be a tailwind for asset values, particularly in premium locations or for high value schemes. The ebbs and flows of the property market can be difficult to predict, and it underscores the importance of supply-demand relationships in determining capital allocation and liquidity in response to economic shi s.

energy and food bills, but there is also evidence to suggest that household budgets continue to be strained.

A relative lack of confidence, intertwined with the prospect of higher housing costs, will limit consumer spending, raising the odds of a ‘hard landing’ and possibly reviving the short-lived, albeit technical, recession we believe we may have just come out of.

The backdrop to these economic manoeuvres has been the UK's ongoing cost-of-living crisis.

Economic data will tell you that good progress has been with respect to both

The supply side of the mortgage market is complicated further by higher funding costs and mounting pressure to grow net interest margin.

The relationship between price, affordability and demand has never been so stark, not since the financial crisis. Such friction naturally leads to a slowing in the market; investors don’t believe they will get the right price, homeowner budgets are too stretched, and developers won’t get the best terms, leading to a 'wait and see' dynamic.

Despite these challenges, interest and mortgage rates will come down. It is important not to forget that, and that there is plenty to be optimistic

In focus SPECIALIST FINANCE The Intermediary | April 2024 24

UK property market

about. Inflation is trending in the right direction, and the more stubborn components appear to be sending reassuring signals.

It’s possible that we may need to wait a bit longer for that elusive first cut in the Base Rate, but it is coming. It is no longer a question of if, but of when.

We witnessed tremendous volumes go through the market in the first quarter of the year, spurred on by renewed confidence in the capital markets and lower swap rates. It suggests significant pent-up demand that will unlock itself when rates fall.

The UK property market is at a crossroads, facing both challenges and opportunities. The unfolding narrative will require market participants to be adaptable, strategic, and vigilant around both global and local economic indicators.

As the BoE weighs its next steps, the implications for the property sector are two-fold; on one hand a period of significant recovery could be ushered in, and on the other, an extended period of uncertainty.

The decisions of the BoE are therefore critical in this context. Historical precedents show the BoE occasionally leading rather than following the Fed in rate adjustments.

Nevertheless, the current economic equation, marked by the UK's relatively weak position, calls for a nuanced approach and potentially a divergence this side of summer; although, just when we need leadership from the Bank of England, the Bernanke review is published. Go figure!


As we navigate these challenging economic waters, it's important to recognise the resilience and adaptability of the UK property market.

Despite global economic uncertainties, this remains a robust and a ractive market for investment, characterised by its stable legal framework, credit performance and mature market dynamics.

For lenders, this environment presents unique opportunities to innovate and offer flexible lending solutions that meet the evolving needs of both homeowners and investors. ●

sharp increase in US in ation has led to higher bond yields, impacting the S&P 500 and erasing notable market gains. This market upheaval puts the BoE in a precarious position, faced with the challenge of adjusting interest rates amid global volatility”

HUGO DAVIES is chief capital o cer and interim CFO at LendInvest
In focus SPECIALIST FINANCE April 2024 | The Intermediary 25


Atom Bank

Following Atom bank’s 10th birthday, The Intermediary catches up with Chris Storey, chief commercial officer, to find out about the journey so far and plans for the future

What are the big lessons from the first 10 years?

It has emphasised the importance of being adaptable. There have been so many significant swings in the macro-economy due to forces like Covid-19, Ukraine and the disastrous mini-Budget. What’s clear is how crucial it is for lenders to be fleet of foot so that these events don’t have a significant impact on your business.

Being able to deliver simple, straightforward products that offer consistently good value for money has always been valued by brokers and customers, but it has become increasingly attractive over the past decade. More than ever before, people want a bank that’s easy to deal with, and provides fast answers and value for money. That has been a core aspect of how Atom bank has worked since launch.

In the more recent past, it’s also been clear how important it is to have banks that think and work in a different way from the big high street names. Look at how slow they have been to pass on rate rises to savers, for example; it demonstrates the need for nimble competitors who are consistent and can provide a real alternative.

Are business borrowers in a better position today than in 2014?

The level of choice has seen real improvement. Go back 10 years and the vast majority of lending in this space came from the big, Tier 1 banks. That has now flipped and there are a few great challengers like Atom bank making a difference.

The process itself is improving all the time, too. There is a more flexible approach to underwriting for specific cases, and technology is helping make that faster and easier. The market is no longer reliant on the business having an existing relationship with a Tier 1 bank in order to have a chance of securing funding.

The market has certainly been impacted by the difficulties of recent years – just look at how Covid-19 affected offices and retail. But even those sectors have now settled, and it feels like they have started to come out the other side.

There are opportunities to utilise technology to a greater degree in working with small to medium enterprises (SMEs). We have learned a lot from how we operate in the residential market, which can be brought across to deliver a better experience to commercial customers.

Looking at the market, if you go back slightly further to the Global Financial Crisis, it has changed immeasurably. The regulation that came in at the time – which many thought might be onerous – has actually been hugely positive. It has meant that all those market shocks we have faced in recent years have not had as dramatic an impact as they might have done previously.

There is a cost to pay for that regulation, of course, but if things are more stable then ultimately it means a better deal for the borrower. That relative stability is obviously welcome, given the challenges we have faced.

It’s also encouraging that, despite regulation, there is still an enormous level of choice for borrowers, which breeds competition and better outcomes.

This market is growing, and the incumbent banks will need to keep on their toes to match the sort of value for money and service levels we are looking to achieve by blending innovative technology with experts in the sector.

How have relationships with brokers changed?

We took the decision early on to be brokerfocused, to ensure customers get the best possible advice. Brokers have played an increasingly important role in the market, as independent advice is invaluable for borrowers of all kinds.

Over the years, we have built a really strong relationship; we like to talk to brokers regularly to

The Intermediary | April 2024 26

get a sense of where we are doing well and where we can improve. What always comes through is how much they appreciate the improvements in technology and speed that we provide. Brokers also really appreciate the fact that Atom bank is clear and transparent. They understand how we work, how we make our decisions, and the fact that those decisions are so consistent means that we are an easy lender to work with.

The fact that we provide access to underwriters has also been positive, as they can talk through complex cases – having a sensible conversation about how it could be reshaped or what information is needed to get to the next stage.

When the market is more volatile, as it has been in recent years, that speed and certainty only becomes more important. Brokers want their clients to have certainty, and to remove the anxiety that comes with waiting for a response. Even if it’s a no, they want to be told quickly so that they can formulate a new plan.

We’ve been able to offer a quarter of residential cases the same day, and a third by the next, which has removed much of the uncertainty for the customer. When you have a housing market where, in some areas, you can’t even get a viewing without having an agreement in principle (AIP) in place, being able to deliver that within a tiny timeframe is a really compelling proposition.

Which underserved markets have emerged during your first 10 years?

There is certainly more to do on delivering options for those looking to build a better credit position. Various challenges over the past few years have meant there are plenty of prospective borrowers who have had the odd wobble but remain a good option over the long term. These customers need more support from lenders than they are getting.

The non-prime market has changed, too –whereas a decade ago it centred around credit, today there’s a greater element of those with more complicated or unusual incomes.

First-time buyers also remain in a difficult spot, and we want to play our part. One particular challenge is around deposits. It typically takes them six to eight years to get a sufficient deposit in place, and around half of that tends to come from other sources. We accept gifted deposits from a wide range of sources, whereas some lenders are quite limited, which just serves to make things even tougher. They are the bedrock of the market; without them, you don’t have the next-time buyers or remortgagers of tomorrow.

How have views on tech changed?

Technology has been crucial, and is only going to become more important going forward. Because of changing demographics, customers are going to expect to see the same level of speed and automation from all lenders in the years to come.

Over time, tech can open up the opportunity to deliver more bespoke products and greater insight into when individual customers need particular additional products.

There are opportunities to do more with it, too; we’ve piloted the use of artificial intelligence (AI) and found significant benefits in covering some tasks underwriters would normally have to undertake, allowing them to get the data they need in a usable format, in a fraction of the usual time. This allows them to deliver value where it really matters, ensuring we get the best outcome for the customer at speed. It also cuts the cost of delivering those products to our customers and allows us to pass those savings on.

What are your ambitions for the next 10 years?

We want to grow and become a top 10 lender within the mortgage market. Our technology has helped lay the foundation for that, but we want to go further in delivering good value for money products to greater numbers of customers.

We also want to leave a legacy, contributing to the levelling up agenda and delivering jobs and opportunities to those in the North East. We have had the incredible opportunity to build a bank from scratch, but in doing so we want to deliver for our local communities as well as our customers.

It has been a tremendous first decade, but we are only just getting started. ●

April 2024 | The Intermediary 27
Double digits: Atom bank celebrates 10 years

Green shoots show in the development market

Anyone who has worked in property or development for a reasonable amount of time will know that the market goes in cycles. The ‘ebb and flow’ means that at any one time it is either experiencing crash, correction, recovery or something akin to a rally.

For the past 18 months it has felt as though we are living through a market correction, with higher interest rates sapping demand for newly built properties. At the same time, the biggest bout of inflation in four decades has led to a surge in the cost of both materials and labour, which has hit developers hard.

The combination of these factors has led to a significant slowdown in the purchase market, and unfortunately also to the demise of several developers and other related firms.

However, while the past year and a half has been difficult, it feels as though the green shoots of recovery are starting to emerge.

Why? First, it looks as though the Bank of England’s (BoE) tightening

cycle has come to an end – unless, of course, inflation starts to pick up aggressively again.

Most observers now predict that the BoE may even be forced to cut rates by as early as the summer in order to jumpstart the UK’s stagnant economy.

This won’t lead to the opening of the floodgates, but it will give a confidence boost to a market that was in dire need of it.

Barometer for optimism

In fact, if you look at the latest trading updates from the largest developers, there are signs activity is picking up even with the hint of future rate cuts. While most housebuilders are selling fewer homes than they were a year ago, Barra Developments, Persimmon and Bellway have reported an uptick in reservations in recent weeks.

Barra has seen its net private reservation rate per active outlet rise from 0.49 in January last year to 0.6 this January. Similarly, Persimmon, Bellway and Vistry Group reported a 9.3%, 15.4% and 18% upli , respectively, in their reservation rates.

Further, Berkeley Group recently revealed that “enquiry levels are good,” again as would-be buyers anticipate rate falls.

Of course, while these large housebuilders don’t account for the whole market, they offer a good barometer of conditions as they currently stand. It seems as though the data is pointing toward signs of recovery.

Anecdotally speaking, I have also noticed a palpable improvement in optimism levels in my conversations with developers so far this year. Most I speak to expect they will do at least as well as last year, and most likely be er.

That said, there is no denying that challenges remain and a full recovery is some way off yet. Interest rates remain high by recent historical standards, and even when they do fall, we won’t see a return to the ultra-low levels that we have become accustomed to. This means that developers and buyers alike may have to get used to a ‘new normal’ with rates in the 3% to 4% range.

They will, and in time we will see a complete recovery in purchase activity once the shock of rising interest rates has worn off.

That process has already started, and I’m pleased to say it feels as though there is light at the end of the tunnel for the first time in a while.

For that reason, I’m cautiously optimistic for the remainder of the year, and especially for H2, when we may see the first of those widely anticipated interest rate cuts starting to filter through. ●

The Intermediary | April 2024 28 In focus SPECIALIST FINANCE
GUY MURRAY is head of development nance at West One Loans e BoE may be forced to cut rates by as early as the summer

Bridging is changing for the better

The bridging finance landscape is currently evolving, both rapidly and decisively. To plan for the future successfully, it’s essential to have a comprehensive understanding of precisely what is now unravelling.

Evolving market dynamics, regulatory changes and other emerging trends have become key considerations – and the past few months have shone the clearest spotlight yet on their impact.

This period has seen a blend of challenges and opportunities, which are resolutely shaping the way borrowers, lenders and intermediaries approach short-term financing solutions. So, let’s appraise these key trends to assess their potential impact on the future of bridging finance in the UK.

Evolving market dynamics

Flexibility – in the truest sense of the word – now underpins the bridging finance market. Borrowers are increasingly seeking the most flexible financing options that cater for specific needs and circumstances as economic uncertainties and market volatilities endure.

Lenders have responded by offering loan terms which are truly customisable. These, in turn, are enabling borrowers to tailor repayment schedules, interest rates and loan structures to align with their short-term objectives.

Moreover, technology continues to drive innovation in the bridging finance sector. Digital platforms and innovations within fintech have streamlined the application and approval process, ensuring that borrowers now have even faster access to funds. This is something that they have rightly come to expect.

Separately, the importance placed on sustainability and environmental,

social and governance (ESG) considerations in bridging finance is constantly mounting.

As environmental awareness and social responsibility take centre stage, borrowers and lenders increasingly incorporate ESG criteria into their financing decisions. This trend will prevail for the near future.

Regulatory changes

Regulatory developments are also shaping the landscape of bridging finance in the UK.

Recent regulatory changes –including updates to lending criteria and risk assessment standards – have resolutely influenced the lending practices of bridging finance providers.

Lenders are now placing greater emphasis on responsible lending practices, conducting thorough due diligence and ensuring compliance with regulatory requirements to mitigate risks and protect the interests of borrowers.

In addition to regulatory compliance, risk management has emerged as a key focus area for both lenders and borrowers in the bridging finance market.

With heightened market volatility and economic uncertainty, lenders are adopting more conservative lending strategies and risk mitigation measures. From stress-testing loan portfolios to implementing robust credit assessment frameworks, lenders are now rightly taking proactive steps to safeguard against potential risks and uncertainties.

Borrower segmentation

Different types of borrowers –including property developers and investors as well as homeowners – all have distinct financing needs and risk profiles.

Market segmentation is becoming increasingly pronounced in the bridging finance sector.

Lenders are tailoring their products and services to cater for the individual requirements of these different borrowers by offering specialised bridging finance solutions tailored to meet specific market niches.

However, despite the challenges posed by economic uncertainties and regulatory changes, I believe the outlook for bridging finance in the UK remains positive.

Through innovation, flexibility and a real commitment to responsible lending practices, the market continues to evolve and adapt to these changing dynamics.

Communication is key

As borrowers, lenders and intermediaries navigate this evolving landscape, collaboration and communication will be key to unlocking the full potential of bridging finance as a vital component of the UK’s financial ecosystem.

The bridging finance market has witnessed these significant trends and developments most clearly since October 2023, which reflects the evolving needs and priorities of borrowers, lenders, and regulators.

From flexibility and innovation to sustainability and risk management, these trends are reshaping both perceptions of bridging finance and the way lenders operate.

As the market continues to evolve, we must all remain vigilant, adaptable, and forward-thinking to overcome the challenges while simultaneously seizing opportunities when they arise. ●

April 2024 | The Intermediary 29

On 12th February, the introduction of Biodiversity Net Gain (BNG) legislation marked the biggest shi in planning regulations in decades. It mandates that developers ensure a biodiversity net gain of 10% for each development project. In practice, this means that new developments must lead to a greater number of – or higher quality – natural environments.

which must be approved by local planning authorities before building work begins.

Are builders and developers ready?

Notwithstanding the good intentions of the scheme, as with so much in planning, the timing could have been be er. At a time when developers are –like many – facing challenges over the cost of build and buyer affordability, some developers understandably view them as another hurdle on the track of housing targets.

Many of our borrowers and their sales agents are advising that homebuyers are increasingly seeking more sustainable housing products, which means BNG may further enhance the premium that new homes command”

Since the national planning policy framework already required net gains for biodiversity, BNG is not entirely new, but the conditions were previously patchy. BNG legislation aims to streamline and improve existing policies.

The introduction of this policy has been hailed by the Government as an ambitious strategy to make sure that habitat for wildlife is in a be er state than it was before development.

The rules are designed to protect England's natural environment. Understandably, though, developers have voiced concerns that BNG is yet another requirement in already lengthy planning application processes that o en appears to thwart the residential building we so desperately need.

BNG is a method of creating and improving natural habitats by ensuring that any development has a measurable positive impact – net gain – on the environment. Biodiversity is measured in ‘units’ using the statutory biodiversity metric, which considers the type, condition and size of a habitat to calculate its biodiversity value.

Developers must determine how many units existed pre-development, how many were lost during construction, and how many are needed to achieve a net gain.

Developers will need to create a biodiversity gain plan outlining how they will achieve a BNG,

Others argue that leaving a site in be er condition post-development may not always be feasible or commercially viable. All of this needs to be considered in the light of a drastic under-supply of new homes too.

There are three ways to achieve the Biodiversity Net Gain to facilitate action more quickly:

On-site: Improve biodiversity on the development site, such as by installing birdboxes, preserving mature trees or le ing areas grow wild.

Off-site: Create biodiversity on land you own elsewhere. Alternately, buy biodiversity units from another landowner.

Statutory biodiversity credits: Purchase statutory biodiversity credits from the Government to fund habitat-creation in England.

These steps must be followed in order, with the last resort being purchasing credits from the Government. Importantly, habitat improvements must be maintained by the landowner for 30 years, representing an ongoing responsibility.

While this may increase project costs, if approached in a positive way there will be opportunities to enhance the end product and potentially increase the values. The cost to developers will vary depending on the

In focus SPECIALIST FINANCE The Intermediary | April 2024 30

characteristics of their development and whether biodiversity activities are being undertaken on or off-site.

For on-site biodiversity, developers will need to allocate land for habitat enhancement, potentially reducing the available space for housing and impacting the profitability of the site.

Additionally, any habitat created will need to be maintained by the landowner for 30 years, meaning an increase in operational costs.

Other costs to consider include staff training to ensure compliance, and the alteration of work schedules to build around optimum timings for habitat creation.

Seeking sustainability

While these challenges, at face value, appear to hamper new-build efforts; the fact is that they are now law, and we believe some of these costs may be recouped in increased prices.

Anecdotally, many of our borrowers and their sales agents are advising that homebuyers are increasingly seeking more sustainable housing products, which means BNG may further enhance the premium that new homes command.

enhance the natural environment in coming years.

For now, however, BNG is about making a positive contribution toward sustainable development.

While market rebalancing takes time, these legislative changes may prove to be an opportunity.

Developers and their brokers should know that financing these projects is still entirely possible, and that there are opportunities to secure be er terms with the right lenders.

At Pluto Finance, we incorporate environmental, social and corporate governance (ESG) factors into our investment analysis and decisionmaking processes, and we make a point of supporting developers with a focus on sustainable development.

This is demonstrated by our low carbon lending product, with which we fund developers and offer financing cost discounts to those who can implement whole life carbon reduction strategies to deliver housing beyond the current status quo.

Finally, developers that join the BNG market as sellers of off-site units may be able to generate a new revenue stream while helping to preserve the natural environment.

For developers, a couple of things are clear. First, before development can commence, they will be required to obtain the LPA's approval of a biodiversity gain plan, demonstrating how the development will deliver a BNG of 10% and ensure this is maintained for a minimum of 30 years.

The future of residential development planning needs innovative strategies from lenders like ourselves in order to ensure the future of legislation changes like this can be sustained in the future.

We like to think we are leading the charge. ●

Second, it is unlikely that this is the end of these kinds of requirements. BNG is one part of a growing movement to increase the emphasis placed on the natural environment. There will undoubtedly be further regulations seeking to protect and

April 2024 | The Intermediary In focus SPECIALIST FINANCE
MATT TUCKER is director, construction and ESG at Pluto Finance

In Pro le.

The Intermediary speaks with Grant Hendry, director of sales at Foundation Home Loans, about the direction of travel for specialist buy-to-let

Foundation Home Loans launched its specialist buy-to-let (BTL) brand ‘Solutions by Foundation’ in January 2024. With landlords under increasing pressure and business models becoming more complex, e Intermediary sat down with Grant Hendry, director of sales, to discuss the role of specialist lenders in this market.

Building BTL

Hendry started out as a telephone business development manager (BDM) more than 20 years ago. In the years since, a large part of his role has been working with intermediaries to make deals work. Nowhere is this more important than in the increasingly complex BTL market.

In 2015, then Chancellor George Osborne is credited with having “created the specialist buyto-let market” through changes to Stamp Duty tax relief. “All of a sudden this market appeared, more toward the specialist side,” Hendry says. “It’s about manual underwriting, looking at complexities and asking how we can make a deal work.”

This ethos has kept the specialist BTL market moving over the years, underpinned by the drive to evolve alongside landlord propositions. Looking ahead, Hendry expects the landscape to continue becoming more complex. For example, mixed use residential and BTL properties are on the rise.

customers that don’t have a lot of opportunity in the UK. We have carved out a niche and understand that under-served market.”

As of March 2024, Foundation Home Loans also launched its ‘multi-properties on one title’ (MPOT) proposition. This might cater, for example, to a deal involving four holiday cottages on one title.

Hendry explains: “It’s an evolution of what we’re doing already, where we’ve seen that there’s a market that we can further support.”

Hendry’s message for the market is this: even if a proposition is working, do not underestimate that change might make it lag behind.

“Don’t rest on your laurels thinking ‘we’ve got the perfect solution’,” he says. “We always have to aspire for more and listen to our intermediaries and landlords to understand their needs.”

Indeed, Hendry puts the challenge out for more innovation and competition in the BTL space. However, this does not mean competition for its own sake, he says: “What lenders need to do is to have something they believe in, an area that they want to support. If you are good at something, how do you evolve that?”

This is also about looking internally, he adds: “Part of our success comes off the people in the business. You can write the criteria, but what if you haven’t got the expertise?

With this pace of change, Hendry predicts “more speed and more technology coming in,” but with the caveat that it be deployed to “remove pain points within an application that don’t need a human, allowing underwriters to really specialise in the areas that do.”

really specialise in the areas that do.”

Start from solutions

The launch of Solutions by Foundation was in part, Hendry explains, a reaction to the increasingly crowded BTL market. The proposition looks at properties that are “not the norm” –extra-large houses in multiple occupation (HMOs) and multi-unit blocks (MUBs), mixed-use semi-commercial properties, and more, but he adds: “It’s also for those

“Expertise is what helps us carve out the something

the expertise within the business, and that informs

“Expertise is what helps us carve out the specialist solutions side. We’re not just doing something for the sake of it, we have the expertise within the business, and that informs the direction that we go.”

Landlord trends

By catering for complex properties and nonvanilla borrowers, Foundation is keeping up with a growing trend – namely, the ongoing search for higher yields in a more restrictive environment.

Landlords, Hendry explains, have been “doing their research” when it comes to understanding what property types are needed, in what locations, and how best to optimise their portfolios.

The Intermediary | April 2024 32

This is positive news, beset as this market is with news of landlords exiting in the face of tightening taxation and regulation. Instead, while some with smaller portfolios are perhaps leaving the market, where landlords are selling properties – among Foundation’s clients at least – it is largely to rebalance, shore up, or expand their portfolios.

“Yes, some landlords are potentially reducing some of their stock,” Hendry says. “But for professional landlords, this is what they do day in, day out. They’re geared to it.”

Those with a long-term view, he adds, might have been gradually increasing rent over the years, serving to insulate them – and their tenants – from the recent interest rate shocks to a certain extent. This speaks to the fact that landlords are used to constantly being buffeted, whether by economic headwinds or Government and regulatory changes. If nothing else, this has created resilience.

Hendry points to the Renters (Reform) Bill and the removal of Section 21, as well as the nowpaused changes to Energy Performance Certificate (EPC) requirements. In the midst of all of this, all landlords want is certainty.

“Landlords are business people, yes, but they are also providing a service and filling a hole in the market where there is demand and need,” Hendry says. “I feel massively for landlords who are building a business but the goalposts keep moving and the direction isn’t clear and transparent.”

With a General Election on the horizon, this is an issue regardless of party politics. This, Hendry adds, is where mortgage advisers have had to step in, taking on the burden of interpreting the Government’s “cryptic clues.”

Budget and Government

The Spring Budget did not do much to clarify the trajectory of this market or drive the change needed to support either landlords, tenants, or prospective buyers. Some measures, such as those around ‘non-dom’ status, will have minimal impact on the market, while others – namely the change to holiday let taxation – might take a toll. Nevertheless, Hendry says those who take holiday let BTL seriously as a business are unlikely to be overly shaken, with the measures more likely to affect those buying a second home. A good thing, too, as holiday lets have a role to play in stimulating the economy in many areas. Simply disincentivising this side of the market would be too blunt an instrument for a nuanced area.

Overall, while it is perhaps refreshing for the BTL market to be largely left alone, Hendry says there was not enough to stimulate either the residential or rental markets. For example, he calls for change around Stamp Duty. As part of the wider approach to tackling the housing issue

Hendry also says there needs to be less of a focus on tinkering with the finance of these markets, and Government must instead address the elephant in the room: building more houses or repurposing existing vacant buildings.

Issues around supply are well documented, but Hendry goes deeper, suggesting there must be a shift toward supplying starter homes, not just building the biggest property possible.

Another factor that could be addressed is EPCs. Hendry suggests that every new property should be expected to fit Band A, taking undue pressure off landlords to be the driving force behind greening the UK’s housing stock.

“Why are they not fitting every new property with an air source heater, or solar panels?” Hendry asks. “Why are they only aspiring for Band C? Why is it always aimed at landlords with Victorian properties when there’s a great opportunity at the point of building? It’s not just for lenders to be encouraging the customers to do these things, either. We are there to support them.”

Turbulent times

Hendry takes pride in the fact that Foundation Home Loans, in the upheaval that followed the Truss-Kwarteng mini-Budget, was one of the “last lenders to crack” and pull products. However, while this was “the right thing to do,” he adds that there is a balance that must be struck when it comes to protecting the business.

At that time, lenders had to quickly pivot. They started reviewing different funding options, and some were able to slow down originations as an intentional method of keeping their books strong.

Hendry says: “We’ve always been cautious, and that’s why we focus on having the expertise within the business, to make sure we’re doing the right thing at the right time.” Whatever measures the firm takes, the important thing is to communicate these externally “clearly and honestly.”

For the business, the future means continuing to evolve its propositions and broker interaction model, and working with intermediaries to find out what gaps need to be filled to support landlords.

Hendry says that 2024 is already showing green shoots. The recession has been shallow, unemployment has not increased, while house prices have not dropped to the levels expected, and the base rate may come down sooner rather than later. Rents have gone up, but rent arrears have not. He adds: “Properties are holding stable, and if anything, prices may start to increase further, which gives investors greater confidence.”

Hendry concludes: “If you go back to the Global Financial Crisis, with unemployment and house prices, it was a perfect storm. This time is different. Now, it’s about how quickly we recover.” ●

April 2024 | The Intermediary

Demand for specialist nance to grow in 2024

Around 1.5 million borrowers will see their fixed rate mortgage come to an end in 2024, and some may find their situation has substantially changed, calling for a more specialist approach.

While mortgage rates are coming down, defaults, on the other hand, are rising. The latest Bank of England (BoE) Credit Conditions survey showed an increase in missed payments in both secured and unsecured lending.

During the final quarter of 2023, a net balance of 23.6% of lenders saw an increase in secured lending defaults, which includes mortgages. Looking ahead into the next quarter, 39.7% expected defaults to rise again.

During the same period, lenders also reported an acceleration in the pace of unsecured defaults. A net balance of 25.7% of lenders reported rising default rates on credit cards, compared with -7.6% in the previous quarter. Furthermore, 33.7% expected defaults to rise further during the first three months of 2024.

Those borrowers who may have missed even just one repayment

may find that their options are more restricted with a high street lender, whereas a specialist lender, which doesn’t base its lending decisions solely on a credit score, may be able to help.

Likewise, it might be that their employment status has changed or they find themselves with mounting debt since they last remortgaged.

The more flexible approach that the specialist market can offer is o en what sets it apart from the mainstream market.

As we see demand grow, having the right valuation partner can help facilitate a more efficient process for everyone in the chain.

Outsourcing the valuation can result in a speedier process for lenders, brokers, and their clients, not only aiding client retention, but also freeing up internal resources and staff time.

Dealing with debt

The speed of funds can be of particular importance to debt consolidation clients, another area expected to see growth this year as borrowers potentially become more indebted.

Debt consolidation loans currently account for 58% of all secured loans

according to the Finance & Leasing Association (FLA).

We just have to look at the recent Money and Credit Report from the BoE to see the huge reliance on credit. Credit card borrowing increased to £0.9bn, with net consumer credit borrowing on the whole rising to £1.9bn in January.

Meanwhile, the annual growth rate for all consumer credit stood at 8.9% in January, the highest since September 2018.

Reaching new heights

As the year unfolds, we should also see demand for specialist finance remain high in the buy-to-let (BTL) and bridging sectors, whether from those looking to buy at auction or from investors seeking to increase returns through refurbishing a property.

During 2023, we saw investors increasingly look for new ways to diversify their portfolio to try and boost returns in the face of increasing BTL rates.

The bridging market, in particular, experienced an uptick towards the end of 2023, with the bridging loan books of the Association of Short Term Lenders’ members growing by 4.2% to reach a new high of £7.6bn, which represents an increase of more than 16% on the same period the previous year.

We expect this trend to continue into 2024 as investors offset some of the higher mortgage rates with more inventive approaches to their investments.

An accurate, swi , and professional valuation from a surveyor familiar with the specialist market will be crucial as we see the need for specialist finance take further hold in 2024. ●

The Intermediary | April 2024 34
JAMES GILLAM is managing director of Pure Panel Management
Demand for specialist nance should remain high in the buy-to-let and bridging sectors

Expertise: whenever (and wherever) you need it

Live updates on every application, direct access to underwriters and live chat facilities with our experts; we’re here to make every mortgage simple, whatever your customer needs.

For intermediaries only
LendInvest Mortgages Unregulated lending is provided by LendInvest BTL Limited (Company No. 10845703) and LendInvest Bridge Limited (Company No. 11651573), which are wholly owned subsidiaries of LendInvest plc. LendInvest plc is a limited company registered in England No. 08146929. Registered office at: 8 Mortimer Street, London, W1T 3JJ. Borrowing through LendInvest and its affiliates involves entering into a mortgage contract secured against property. Your property may be repossessed if you do not repay your mortgage in full.

The Inter view.


Jessica Bird sits down with Ryan Etchells, chief commercial o cer at Together, to take a long-term look at 50 years of specialist nance

When Ryan Etchells joined Together directly out of university in 2007, little did he know the rollercoaster ride this market would face in the years since, from the Global Financial Crisis just around the corner, to an as-yet unfathomable Covid-19 pandemic, and beyond.

Now chief commercial officer, Etchells spent his early career learning the ropes of Together’s lending journey, from underwriting to sales, before leaving to do the same in the broader banking world, returning to the business in April 2021.

When Etchells originally joined, Together had a loan book of around £500m and a staff of 200. Now, it boasts a £7bn loan book, and Etchells says: “There’s only one way to refer to Together now: a financial services institution. We’re

the biggest non-bank lender in the market by some stretch, and part of the heritage of UK financial services.”

While Etchells’ history with the firm may be long, allowing him to “see the business in every form,” it is still a drop in the ocean considering that this year marks Together’s 50th anniversary. e Intermediary sat down with Etchells in order to understand how the specialist market has evolved in that time, and what the next 50 years might have in store.

Together through troubled times

Starting just before the Global Financial Crisis, Etchells says that while this was a difficult time, what it gave people was “a grounding in how to do things right.”

He adds: “I learned a lot as a young person cutting his teeth in financial services in that period. Looking back, it gave people a strong foundation in the basics of lending and how you make sure you get it right, how you treat your customers right, especially when they’ve gone through challenging economic environments.”

These challenging times did not work out so positively for many of the firms that were Together’s competitors at the time that Etchells joined, of course. Now, he says, the lender’s competitors might have 10 or 15 years of history as a business.

“That 50 years is something we’re really proud of,” Etchells explains.

“It demonstrates our heritage, especially when you consider that every single one of those 50 years has been profit-making.”

This does not, he notes, mean that Together has not faced its share of “ups and downs.”

“We’ve had probably four or five economic cycles, including the one that we’re in now,” Etchells explains.

“Our heritage means that brokers can have confidence that we’re here to stay.”

Core appeal

This longevity forms part of what Etchells sees as the core of Together’s appeal. Having a proven history means that brokers can easily understand what to expect and be reassured that the lender will not suddenly change its stance or back out of a deal.

The Intermediary | April 2024 36

“When we say ‘yes’, we’re not going to run out of funds tomorrow,” says Etchells. “We’re here, we have the trust and respect, and that’s one of our [unique selling points (USPs)].”

Other key selling points include a broad product set that has been built up over time, fuelled by what Etchells sees as the firm’s “entrepreneurial spirit” and willingness to “believe in market niches as they’ve developed.” This means Together can provide brokers with a “one-stop shop” and multiple solutions for complex cases, while access to the distribution and underwriting teams provides a resource that can help intermediaries best use that range and flexibility.

“We will always look to offer brokers solutions,” Etchells explains. “Because we have tools in our toolbox that other lenders haven’t. Another lender might have a more attractive BTL range, but can’t do commercial term, for example.”

Furthermore, he says: “Our ownership structure – and the fact that we aren’t a bank – gives us an advantage. Decision-making can happen really quickly, and we’ve got our own capital structure we can allocate as we see fit. We can take steps that some of the bigger institutions can’t.”

Building up and out

One of the core markets that has developed over the years – both for Together and the

broader industry – is bridging. Together now handles around £125m in bridging per month, the vast majority through brokers. This is a market that barely existed when the business was first formed five decades ago, coming into being during Together’s own infancy.

Etchells says: “Being such an entrepreneurial business, we pretty much invented bridging during the late ‘70s and early ‘80s, recognising that there was a need for people to act quickly and take advantage of opportunities. It was a small market then, and although we struggle to get a true sense of the market size now, it’s definitely north of £10bn a year.”

This spirit of expansion has continued, with Etchells citing houses in multiple occupation (HMOs) coming into their own in the 1990s and on, as well as multi-unit blocks (MUBs), Shared Ownership and holiday lets, to name a few.

“When the banks were struggling with figuring out [how to handle holiday lets], we took the time to underwrite that properly and explore that market niche,” he explains.

“Because of how we’re built, our structure and long-term market view, we can build business cases for products and markets where you might not make money for the first three to five years, but which then turn in your favour.”

This differs from firms that are private equity backed, he adds, which must present an immediate business case with a planning horizon of two to three years. →

April 2024 | The Intermediary 37 Stronger together: From niche lender to financial institution

We are 50 years into a 100-year plan, halfway towards the goals laid out by our founder all that time ago. The fundamentals are that property will always be a good investment. We see that appetite continuing to improve, perhaps with a continued trend for longerterm mortgages”

Etchells continues: “Our planning horizon is different, so we will commit resources, cost, expenditure, to believe in markets that are small and then watch them as they grow.”

This development of the firm, he adds, is only possible with the support of strong relationships with brokers, who can help it identify the “next big niche.”

Onward movement has not slowed, with Together launching a regulated bridge second charge product in 2023, for example.

Etchells says: “There wasn’t a market there, but we launched a product and we’re now doing about 50 deals a month on it. It’s the same picture with fixed rate bridging.

“The philosophy we’ve always had is that if you see a market niche and think there’s growth in there, trust that, invest in it, and look beyond three to five years and ahead to the potential in 10 to 20 years. That’s what makes us different.”

Etchells adds that the market is always in need of vanguard firms willing to “take that initial step” into new sectors – with all the uncertainty and risk they pose, and the delay before they might be profitable – so that others can follow and keep it moving and adapting.

Risk and funding

Another benefit to breadth, and one which has shown its value over various economic cycles in the past 50 years, is the ability to turn dials to manage risk and funding.

“Our range means that as markets ebb and flow we can pick up and drop off certain markets if they cool down,” Etchells explains.

“For example, everyone is aware that buyto-let [BTL] has been a bit cooler over the past two years. Every lender will be somewhere between 10% and 20% down on BTL volumes because the demand isn’t there from landlords. As that cools, we look at other product ranges which can pick up. That has helped us manage through these challenging economic markets.”

Together is not the only business that can benefit from this breadth. Etchells points out that recent macro-economic events and pressures have seen brokers increasingly realise the value of diversifying to shore up their own profitability, for which he says Together’s broad range is ideal.

In order to find a balance between innovation and careful risk management, Together relies heavily on the relationship between its distribution team and its broker partners, which feeds into product design, backed up by market and customer research.

Etchell says: “We trust that our distribution teams are working with our broker partners, and that the broker has a lot more experience in terms of helping their customers that can help us.”

The way that this shows up in terms of product design, he adds, is that rather than being led by the money, the treasury team starts with what products the firm believes will work best, and finds the funding, rather than vice versa.

It is not always plain sailing, of course. Innovation sometimes means getting it wrong, but Etchells reaffirms that this is not a reason to be deterred from new products or niche markets. It is all about taking a long-term view.

“There are lots of examples I can list of small areas that have become massive, where we’re proud of being among the first,” Etchells says.

“There are also examples in our history where we’ve got stuff wrong, even when we’ve done our research and thought we were doing something right. You’ve got to be prepared to admit where you’ve got something wrong, and to act quickly, even if it means ending up back where you started.”

Looking ahead

While much of the past few years has been about leveraging Together’s longstanding experience to handle fresh challenges, Etchells is positive that 2024 has seen the market turn a corner.

“Our pipeline is probably the biggest it’s ever been,” he explains. “We feel like we’re heading into a very good summer. There’s an election on the horizon which will give us a bit of a boost, and there’s more confidence coming back into the market now that rates have stabilised.”

For the business itself, he cites a “massive appetite to grow” and continue its positive trajectory. This means continuing to engage with brokers as the “lifeblood of the business,” and of the market, which Etchells says has only become clearer in the 10 years since the

The Intermediary | April 2024 38 INTERVIEW

Mortgage Market Review. On both the broker and lender side, he adds, it is important to have new faces and competitors, which can keep stimulating an active market. However, this must be married with respect for those who have seen the history of this field and how to navigate its ups and downs.

Sustainability specialists

Although confidence and stability may be emerging more in 2024, the fact remains that there are longer-term concerns that need attention, and in which the specialist market has a key role to play.

For example, Together has worked over the past year on how to launch a green product, and what part it wants to take in addressing the ongoing climate change issue.

“At the moment, the high street and bigger banks will reward customers that have got greener properties,” Etchells explains.

“They reward customers that have already achieved, whereas the specialist market is there to support them getting there in the first place. Together’s focus has been on launching a proposition that helps customers develop or improve their properties, to one day take part in those high street products.

“That’s what the specialist market is for – to support customers that are underserved by large segments of the lending environment. That’s our purpose for existence.”

Another important issue – and one inherently tied in with the climate crisis – is the matter of housing supply.

While Etchells warns that the specialist market “can’t answer the housing crisis alone,” it does have an important role to play in boosting housing provision moving forward.

Together, for example, has funded 7,000 new-build properties through its development finance product over the past five years. It also has a new product which, Etchells adds, should enable the firm to inject even more funding into this area, particularly for residential housebuilding.

“We do contribute, and we are looking to expand that contribution,” he says. “However, despite the Government’s targets for the past 10 years being 300,000 new homes a year, the most it has ever built is about 170,000 a year. There’s a fundamental lack of policy delivery.”

Etchells notes that many of the issues around delivery stem from challenges posed by the planning system, and then the barriers to access around finance.

Specialist lenders can help break down some of these barriers, supporting small to medium

(SME) builders and thereby fuelling the development of much-needed property types that large national name builders have little appetite for, or even simply cannot do.

“This is still one of the fundamental questions of our market,” Etchells says.

“I hope it’s a key battleground for the upcoming election – the housing crisis has to be front and centre.”

However, he warns that where Boris Johnson and Jeremy Corbyn presented voters with a stark choice, Kier Starmer and Rishi Sunak are increasingly alike, posing the risk of a great amount of debate with very little new being said. This does not bode well for the type of creativity, innovation and change the housing market so acutely needs.

Century in the sights

If the past few years have taught the market anything, it is the difficulty of predicting what turbulence might be waiting around the next corner. Nevertheless, while Etchells agrees that the future is uncertain, he says Together’s longterm approach will see it through whatever challenges might come.

“We are 50 years into a 100-year plan, halfway towards the goals laid out by our founder all that time ago,” Etchells says.

“The fundamentals are that property will always be a good investment. We see that appetite continuing to improve, perhaps with a continued trend for longer-term mortgages.”

Even when looking so far into the future, he is clear that science fiction will remain just that. Digitalisation and streamlining via artificial intelligence (AI) are important trends, but Etchells feels that this will not fully take over, and indeed will likely “reverse a bit” in reaction to changing customer needs.

“The need for lenders that invest time into their relationships with brokers and customers will come back into fashion,” he says.

“We’ve been bucking the trend a bit over the past few years, being willing to invest in people and resources that engage with the market, unlike the big banks, where digital has been the priority.”

Overall, while there will likely be more challenges on the horizon, Etchells concludes: “We expect the next 50 years to look similar. There will be periods of recession, of market challenges, but broadly the property market will show the same growth.

“Meanwhile, brokers will make sure we keep on our game, keep identifying customers’ needs and market niches, and provide great service to the end customer.” ●

April 2024 | The Intermediary 39

Women in Finance

Key takeaways from Together’s ‘Opening Doors to Women in Finance’ event

A word from the host:

We all know that there is a gender pay gap, and that it’s not actually getting better. Covid-19 put us back a couple of years. One of the first things I did when I took over my department was look at everybody’s salaries with the lens of tackling the gender pay gap.

In my younger days, I didn’t necessarily have a mentor. I did have inspirational role models, but I can’t speak highly enough of finding yourself a mentor that can give you advice, give you guidance, and perhaps even open doors for your career.


Rosalia Lazzara, CEO, Manuka Media

Iwant to shine a light on something that we all experience from time to time: ‘imposter syndrome’. When I came into the UK in Year 3, and English was my second language, I was sat next to the smartest person in the room at school and told to copy everything. I was held back for so long, because I was put next to someone who knew what they were doing and I was just copying them, not realising that I could bring something to the table.

So, are you hiding in someone else’s shadow?

Are you letting someone else take the first step, stand up first, speak first, because you’re afraid that your answer might be below 10?

That’s how it shows up for women in finance: we might speak last, or speak second.

At Together we share the belief that women are a powerful force with strong commercial ideas that should be listened to. By taking the time to treat all of our customers as individuals and fully understand business plans, Together provides access to finance allowing equal and fair participation. In any business there are barriers to overcome, and adding any gender bias into this, even if unconscious, can drain both confidence and ambition.

We know that there is no gap in talent, capability or ambition between men and women, yet the gender split of SME leadership clearly suggests that women face more disadvantages in terms of opportunity and accessing finance. By recognising and addressing these challenges, female entrepreneurs will find a powerful base of allies for networking, support and financial advice.

This is a call to action. I’ve been known as a troublemaker in my time, and I’m ready to make a bit more trouble here.

The second lesson takes place when the Nativity play came round. I put myself forward bravely for Mary, and I got a sheep – but I said “you watch, I’m going to be the best sheep.”

How you do anything is how you do everything.

You already have a ‘personal brand’, whether you want one or not. This might be what you represent, how you’re perceived, your connections, or perhaps your flaws. How many of us hide our supposed weaknesses because of embarrassment or lack of confidence?

But this might be your next milliondollar business idea, if you take control of the negatives.

As women, that’s what we have to do. Use the things others would see as weaknesses to our advantage. Personal brand is something that, if you don’t use it, you are not helping yourself, you’re holding yourself back.

The Intermediary | April 2024 40 EVENT


Roxanne Goodman, founder, Female Founder Finance

Currently, 18% of all trading businesses in the UK belong to women, and 20% of incorporations last year were female-founded. Meanwhile, only 11% of CCJs are for female-founded companies, and 2.9% of administrations in the last 12 months. We are safer to lend to.

Only one in 20 construction businesses are run by women, but ironically, in construction, female-led businesses are the most successful. Only 9% of financial services firms are female-founded.

The British Business Bank recently released data that found male-led businesses on average received £507,000 for every loan application, whereas women only received £174,000. Only 2% of venture capital funds go to women.

Most of you will have heard that figure before, because it hasn’t changed in 10 years.

So, what are we doing? We are connecting female business owners with female commercial finance providers to turn the dial.

I was honoured enough to be invited to Business Connect with the Prime Minister recently, and he announced a £250m fund to be made available for female founders. I put this to him: that’s brilliant, but where is this £250m going to come from?

We keep being told that there’s not enough money to go into the NHS, to go into schools, and I think this fund is missing the point: commercial funders have money to lend.

I want to drive change in the industry and put the issues that female founders are dealing with across to Westminster.


Sarah Furness, ex-RAF pilot and founder, Well Be It

Sometimes, life doesn’t go the way we want it to. Mindfulness has helped me navigate difficult periods, and it’s something that everybody should know about, so that they can perform at their best, even when under the most pressure.

Our attention can only be in one place at a time. How often is your attention in multiple places? How often do you think you need to be able to multi-task in order to get more done? It’s a lie.

In fact, I might even say it’s a lie the boys made up to stop us from out-performing them.

Multi-tasking drains cognitive capacity, and our performance standard goes down by up to 40%. To put it another way, our errors go up by 40%. Task switching also takes time, which adds up throughout the day.

Switching from one thing to another also triggers our stress response, and that interferes with our ability to regulate our emotions, to access long-term memory, and to problem solve. That’s why we often can’t see solutions that are right in front of us in the heat of the moment.

You may have preconceptions about what mindfulness is, but it’s not about hearing your mind or sitting in a trance for hours. It’s about noticing where your attention has gone and focusing on where you want it to be. That’s it in a nutshell. We are going to be distracted, that is a fact, but we don’t have to stay distracted. And when we focus our attention back to where it needs to be, that’s when we do our best work.

April 2024 | The Intermediary 41

Education is a two-way street

As we gear up for a General Election, it seems hard to believe that it’s over 25 years since a new political rallying cry was enthusiastically adopted by New Labour. Of course, this famous slogan was “Education, Education, Education,” and by the late 1990s it was being repeated ad-nauseum. In truth, the first Blair Government was less radical in education than other areas, but politicians rarely let the truth get in the way of a good slogan, and this short phrase a ained almost trademark status.

Today, education seems to have slipped down the political pecking order at a national level, with issues such as the cost-of-living crisis gaining far more a ention. In contrast, in the specialist lending sector it’s hard to recall a time when there was a stronger focus on this vital area. Last year saw the long-awaited launch of a tailored qualification for the sector, the Certified Practitioner in Specialist Property Finance (CPSP), which focuses predominantly on bridging, development finance and buy-to-let (BTL).

Driven by the Financial Intermediary & Broker Association (FIBA) and the Association of Short Term Lenders (ASTL) and backed by the London Institute of Banking & Finance (LIBF), this qualification will hopefully improve standards, increase professionalism, and enhance the reputation of the industry.

Crucially, official regulators will always prefer to work with those sectors and trade bodies that proactively seek to improve their own standards and self-regulate.

Alongside this formal manifestation of the specialist finance industry’s desire to improve sits a plethora of initiatives by individual lenders, packagers, and brokers, with a huge range of people working incredibly

hard to raise standards. In doing so, they have made the sector accessible to literally tens of thousands of new customers. However, it is fair to say that not everybody gets it right.

Good educational marketing can position a brand as an industry authority, build trust with potential customers, and over time lead to stronger relationships and increased loyalty. By offering educational content that addresses the needs and interests of potential clients, the quality of leads should improve, and good content will of course have a longer shelf-life than adverts and other forms of marketing.

Interactive learning

The flipside is that there is a growing number of organisations and teams that have become so focused on the ideal of education that they lose sight of what actually works. They devote huge amounts of time and effort into researching, writing, editing, and filming content – which sadly misses the point. To be truly engaging, education must be a two-way street rather than a lecture. It needs to be an interactive learning process, where both the teacher and the pupil become smarter thanks to mutual exploration and exchange.

In a world driven by multiple channels and interfaces, there has been a proliferation of content online, but it’s important to avoid ge ing caught up in the race to deliver content for the sake of delivering content. The danger in doing so is that it becomes prescriptive, unhelpful, and worst of all, disengaging.

Ensuring that content remains interesting to the reader, listener or viewer can be a huge challenge, given that social media algorithms encourage such frequent and regular posts. Quantity o en triumphs over quality, with the authors remaining blissfully ignorant that their content is poor thanks to a ra of ‘likes’ from

The key to delivering good educational marketing still boils down to one fundamental skill ... the ability to listen as well speak articulately”

people who sometimes haven’t even viewed or read the material posted! The pace of technological change in recent years has been staggering, but the key to delivering good educational marketing still boils down to one fundamental skill that all good business development managers (BDMs), brokers, and lenders have always possessed: the ability to listen as well speak articulately. If you preach to potential clients, you won’t win them; if you preach to existing clients, you will lose them. But if you engage in conversation, listen, learn, and work together you will build lasting and successful relationships.

In his book, ‘The Cycle of Leadership’, Noel Tichy wrote: “The company that fields the be er team with the smarter people and has them working most o en on the things that create the most value will win out over its competitors.”

What a great quote to keep close to hand if you are actively engaged in producing educational marketing material. Done well, educational content can be a powerful tool for driving engagement. But ultimately, to drive sales and revenue, it’s just one element of a multi-layered strategy that delivers results for the most successful sales teams. ●

The Intermediary | April 2024 42
BRIAN WEST is head of sales and marketing at Saxon Trust
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Steering through

Jessica O’Connor details the debate from the recent development finance round-table hosted by The Intermediary and Downing

Against a backdrop of economic fluctuations, geopolitical tensions, and domestic policy shifts, the development finance market stands at a critical juncture. Faced with challenges brought about by the pandemic, as well as skyrocketing interest rates and material costs following the ill-fated Truss mini-Budget, conditions have been onerous for developers. However, 2024 ushered in renewed hope for the mortgage market, with commentators predicting Bank of England base rate cuts and investors returning to market with a sense of confidence.

The Intermediary partnered with Downing to host a explorative round-table of industry stalwarts, sharing insights into the sector’s current state, and shedding light on the challenges and opportunities shaping its trajectory.

Challenging markets

The UK property development finance landscape has always been intrinsically linked with broader economic factors.

According to Sat Bhandal, corporate sales director at Crystal Specialist Finance, last year proved particularly challenging.

He says: “Last year was a bit of a damp squib, especially across development. We found everything stayed pretty static.”

Despite the Bank of England’s continued efforts to stabilise inflation through 14 consecutive base rate rises, lingering concerns around this and supply chain disruptions have cast shadows over investment strategies. These concerns, according to Keith Park, founder and director at Funding Track, resulted in a widespread reticence from developers to take risks on new projects.

He says: “Last year, you might have an initial meeting with a developer in which you agree the way forward, but then you wouldn’t hear from them for two months. Talking to other brokers and lenders, they were all saying very similar things.”

Phil Mabb, property finance broker at bridgedevelopment, agrees with this somewhat subdued assessment, stating that many in his client bank found themselves walking away from deals, even ones with decent profit margins.

He says: “It was a lose-lose situation last year, but it’s only a case of time, because you can’t sit on your hands forever, and you’ve got to find the right deals. The biggest issues are with those who bought a couple of years ago and are coming out of their schemes now – they’ve had to deal with


harsh headwinds

Covid-19 and the delays, and now those schemes might be at 85% loan to gross development value [LTGDV]. They need to have a good relationship with their lender or else they are going to walk away with a big nosebleed.”

g eopoliti C al faC tors

With inflation still heavily affected by international conflicts, the issue of rising material and labour costs has been a major challenge.

Both investor and market sentiments have been greatly influenced by these factors; Chris Salter, investment director at Downing, was quick to highlight the environment of unpredictability.

These factors remain entirely out of the control of developers and lenders alike, so Salter urges those looking to enter the market to focus on the things that remain within their remit.

He says: “If you’re good at what you do, you buy your land at the right price, get the correct planning for the right site, and build out a product that you can sell to your target audience, that’s all you can really do.

“Everything else is just what is around you. There’s a lot of headwinds out there, but we see the good developers come back to us doing what they’ve always done.”

A recent rise in the availability of labour is a positive, although Salter notes it is one of the “the fastest growing parts of developers’ rising costs.”

According to Richard Lamb, investment director at Downing, material costs have softened over the past few months, following skyrocketing prices on the back of Liz Truss’ mini-Budget.

“Back in the Truss days everything was going crazy, with material costs going through the roof along with everything else,” he notes. “Now that seems to have levelled out, certainly with inflation coming down.”

Martyn Pollock, co-founder at Hallcroft Finance, notes that not only has the macro picture been affecting the material costs of building a home, but its effect on the mortgage market has also altered the types of houses being developed and sold. With mortgage costs at their highest point in nearly two decades, certain challenger banks are showing a preference for prime developments rather than average-priced homes. Pollock says firms are targeting high net worth (HNW) individuals in the market for prime property, rather than the average homebuyer, whose financial state is more vulnerable to market fluctuations.

He says: “From a risk profile, if you have a development with five high-end houses, the buyers for those houses are going to be cash

April 2024 | The Intermediary → IN ASSOCIATION WITH


Phil Mabb bridgedevelopment

Chris Salter Downing

Satwant Bhandal Crystal Specialist Finance

Parik Chandra Downing

Keith Forster PF&D

John Crabtree Direct2Lender

Richard Lamb Downing

Martyn Pollock Hallcroft Finance

Keith Park Funding Track Round-table.

buyers or those with the ability to get a mortgage. Whereas if you have a collection of 20 houses that are mid-market stock and completely exposed to the mortgage market, you may not be able to sell them as people can’t get mortgages on them – which is as a result of Gaza and Israel and also Ukraine to an extent.

“It is interesting that some lenders like prime or super-prime, because even though it is a high risk asset, they feel that there will always be a buyer who can finance it.”

e le C toral influen C e

The upcoming General Election will also no doubt prove extremely influential. Despite the results being all but a foregone conclusion, a party’s proposed housing agenda, regardless of political leaning, could still prove persuasive at the polls, shaping development projects and financing structures for years.

However, according to Parik Chandra, partner and head of specialist lending at Downing, the outcome may not prove as influential as one may initially believe.

He says: “For the past six or seven years we’ve had one problem after another with Brexit, Covid-19 and everything else. If we look at the data that we see at Downing, UK investment

inflows are increasing now and should continue to increase. Whatever happens at the next election, whether it’s Rishi or Keir, it’s either centre right or centre left.

“Globally, no one is really that bothered about it, and it won’t make a massive difference.”

Despite both candidates being centrist, the housing sector is still crying out for reform, with major issues with affordability, housing stock and planning plaguing the sector.

Politicians will be acutely aware of this. However, even if both Labour and Conservative election campaigns prove fruitful with promises for the housing sector, whether any of these actually come to fruition remains to be seen.

Salter highlighted Starmer’s promise to build “over 300,000 houses a year” should Labour come into power, which would undoubtedly prove to be a huge boost to the development sector. However, he remained doubtful as to whether this could be achieved, adding: “They haven’t said how they are going to do that – there’s no detail on it, but to do that will probably take over 10 years.”

For Pollock, the election is not so much about promises to revamp the housing sector, but about what it could do for the economy as a whole. He says: “For me, when we are talking to developers and clients at the moment, it’s about thinking about the key factors that will help drive demand.

“That’s going to have to be growth in the economy, and throughout the election cycle we are hopefully going to see Keir Starmer come in and talk about growing this economy to give people the confidence to go and buy houses.”

According to Parker, change is most certainly needed, particularly after the recent Spring Budget proving to be something of a disappointment. Going forward, he says that reform to the planning system is high on the wishlist: “Clearly, the whole planning permission system needs to be overhauled. The difficulty was, if Jeremy Hunt tried to kick that off in the Spring Budget, it’s a long-term play – something that would take years rather than months – so Jeremy was never going to see the benefits.

“It all depends on what happens come the next Government. I begin to feel sorry for [some clients] after a while, because they are mired in planning.”

p lanning overhaul

Planning has time and again proven to be the proverbial thorn in the side of the development finance market.

The number of permissions granted reached an all-time low in Q2 of 2023, with the House Builders Federation recording a meagre 2,456 starts, and the barriers to building have never been higher.

Keith Forster, director at PF&D, says that project delays are getting worse, with some taking 12

The Intermediary | April 2024 46

months to get planning “if they’re lucky.” In his view, the developers that have proven successful of late are those able to move forward with the right priced land and work on the planning.

Chandra also notes this increased delay, highlighting a situation in which one of Downing’s clients put in planning for four houses and was not allocated a planner for over six months.

John Crabtree, director at Direct 2 Lender Private Finance, agrees that increased planning regulation is ultimately at fault for such delays, with everything now taking “five times longer and five times the cost.”

He adds: “The thing is, the people who are sitting in the planning office are not paid a bonus if they do something quickly. If they do something or nothing, they get paid the same.

“I can’t help but think these planning objections or concerns are nothing new. There must be a certain number of issues that come up time and again, and there must be a way to standardise them so that the process becomes quicker.”

With delays more prevalent and wait times on the rise, Lamb attributes this trend to not only delays on behalf of the planning office, but also the rise of ‘Nimbyism’ among local councils.

He says: “You’ve got this system where you’ve got a planning officer recommending a project, but the local council are turning it down. This is due to all the Nimbyism going on.”

i n C reasing regulation

Another pressing issue facing developers is the increasingly stringent regulations being placed upon the mortgage market. While some developers have been able to push through economic headwinds and the pernickety planning system to make more houses available, actually selling them is another issue altogether.

Bhandal has observed developers struggling to get rid of some units, stating: “While the end game is obviously to sell, there just isn’t a demand.”

He notes that many developers have built with first-time buyers in mind, but often fall short of filling these homes, as first-time buyers do not have the deposit, and are unable to secure a mortgage due to increasing affordability constraints. These, according to Forster, are in part due to the Financial Conduct Authority (FCA) placing further restrictions on brokers and buyers.

He says: “You could see the writing on the wall years ago. The problem is that we keep getting more and more regulation.”

Crabtree agrees, urging the financial watchdog to make things easier for brokers, thus streamlining buyers’ ability to secure a mortgage.

He adds: “I thank God that I don’t do regulated mortgages, but I watch the guys that do them, and even if your parents give you money, the hoops you have to jump through to prove that it came from them make it so complicated now. Everybody is worried about proving this and proving that, that people are just getting deal fatigue.”

Crabtree adds: “Even if you certify a document, you go to one bank and they say you have to word it like this, and then another bank will say it’s not the wording they want.

“Surely there must be some uniformity there to make things easier for everyone.”

s ustainability targets

Boasting the oldest – and least carbon neutral housing stock – in Europe, the Government has increasingly imposed environmental, social, and governance (ESG) regulation upon new-builds. However, while contributing towards the UK’s net zero target by 2050 may be the right thing to →


do for developers from an ethical standpoint, it is costly and time consuming. According to Mabb, the cost of complying to ESG recommendations often outweighs the end benefit for developers.

He says: “You can either do it for posterity, to do the right thing, or you can look at those lenders who offer a 1% or 2% discount if you have your Energy Performance Certificates (EPCs) at the right level.”

He argues that, due to the costly nature of features such as solar panels and ground source heat pumps, these features must first become more prevalent before the price can drop.

He adds: “We need to see bigger housebuilders doing it, because like everything else, the more people do it, the more the costs come down and the ‘S’ in [small to medium enterprise (SME)] can actually afford to do it. A lot of clients think that it’s too much trouble, and it’s about how we can break that mould.

“The state are trying to subsidise it by incentivising lenders who will incentivise people, but I don’t think the incentive is big enough yet.”

Pollock agrees with this, stating that he has seen a lot of smaller developers push the envelope on sustainability innovations just to keep up with big housebuilders, such as Redrow or Barratt. However, for him, the larger issue facing developers in terms of ESG lies within the field of biodiversity restrictions.

Citing biodiversity targets as “the next thing that is going to hit us like a train,” he says that the unrealistic expectations placed upon developers by the Government will soon become an overwhelming problem.

He explained: “If you’re taking three trees away from a site, that means that you’re then going to have to plant nine trees. Trees are expensive to buy, not to mention the land to plant them on.

“You’ve got water neutrality, you’ve got biodiversity, you’ve got great crested newts. It’s all just another tax on these development projects.”

He also highlighted the effect that such targets will have on the price of land, as demand for unused land has begun to increase, with developers looking for available space to plant trees in order to offset their biodiversity issues on existing schemes.

“Buying that land to reach biodiversity targets and plant trees is just unachievable, because it is too expensive,” he says.

Bhandal agrees, stating that he has seen prices of available land rise in the shadow of existing schemes. He says: “We’ll find people putting these developments in place and will be looking at any open land to try and offset, which is then raising the price of all nearby land. These pieces of land may be worthless, but now because these people want to buy, the price has gone up.”

From a lender’s perspective, Lamb says that some are now recognising the burden that such issues are placing on developers, and thus offering discounts to help offset additional costs.

“It has become a bit of a tax, and they are putting more and more into the planning conditions,” he says. “That’s why a lot of lenders like us are doing ESG discounts and rebates. A lot of the stuff that will generate those rebates is being built into the planning, but until it comes to a point where, in the developer’s eyes, the end value is going to reflect

The Intermediary | April 2024 48 Round-table.

the extra that they are putting into it, I don’t think there is actually a lot of motivation for the developers to actually embrace it.”

f unding styles

Funding styles and cost of capital has become a widely discussed topic in the development finance market. In light of the abundance of headwinds currently facing developers, clients have become increasingly reliant on lenders’ ability to be flexible in a somewhat unorthodox market.

According to Bhandal, finding lenders that are willing to be flexible with capital has been key for brokers in the past few months.

He says: “It’s about lender who doesn’t just work off the textbook and will actually say ‘we will bend to this’ and work with the developer.

“Late last year we found that there were less and less lenders willing to be flexible, we would probably find only one or two each case. Availability is creeping up, but we are still finding it difficult to find flexibility – which often leads us to the same one or two lenders each time, which can be frustrating from a broker’s perspective.”

This reliance on lender flexibility has also been key for Forster, who notes the increasing trend of brokers looking to find lenders with the client’s best interest in mind, rather than just seeking those with the lowest rates.

“Now we’re in a situation, one that we should always be in to a certain extent, where it is about which lender is the best to look after that client, not about chasing rates,” he says.

“In terms of availability of capital, I think a lot of interest rates are pretty much the same. If you take 10 lenders and look at the same loan-to-value [LTV], a lot of rates will all be within one or two percentage points.

“There’s been a benefit of the interest rates levelling out, because that then forces the market to look at who is the best lender for a client.”

Crabtree finds identifying the source of the lender’s capital to be vital when choosing to do business: “When a new lender comes out, and there are plenty of them popping up, I do try and find out how they get their money. A family office will have a selection of people who are investing, and some will want their money back in a few months, but some two, three or five years.

“Some of these entities can get quite aggressive if you are overrunning, and they are just dipping into development because it’s something to do for them. It’s about finding out where they get their money from.”

Chandra agrees that some lenders do see lending in this sector as a trade, and urged that borrowers focus on lenders which understand the nuances of property finance, adding: “Over

the past 10 to 15 years the development finance market has almost been commoditised in the same way bridging and buy-to-let have, which is why a lot of people are just focused on rates.

“A one or two percentage point differential on a development finance deal which is spanning over 12 or 18 months shouldn’t make or break a deal – it is really about relationship lending.”

He continues: “The way lenders are funded is actually not talked about enough in my view. I can understand that a lot of borrowers just want the money, but there is a massive difference between high street, challenger banks, fund managers, peer-to-peer, and people who are funded by debt and equity strips. It is all very different.”

g reen shoots

Following numerous reflections on both challenges and opportunities, it is clear that – despite the complexities –development finance is on the rise. Although not without its issues, such as ongoing geopolitical tensions inflating costs, a planning system fraught with problems, and restrictive regulation, the market has successfully navigated through a labyrinth of challenges.

According to Chandra, the prevailing view of the next few months should be optimistic, with Downing reporting a 50% rise in enquires since late last year, as well as a greater availability of labour across the board, with overall construction costs generally levelling out.

With new investors turning to the market and inflation looking tentatively likely to near the Bank of England’s target of 2%, 2024 is shaping up to be a refreshing break from the tumult that has plagued the market for the past several years.

Indeed, according to Mabb, with such green shoots on the horizon, one thing remains certain: “People still need to buy and people still need to sell […] there are deals to be done.” ●


Can you predict

Interest rates play a vital role in the economy; they influence the rate of borrowing, saving, investment and spending. Understanding their movements is a valuable tool, but can anybody predict interest rates accurately?

The se ing of interest rates and control of the money supply both fall under ‘monetary policy’. Monetary policy is generally set and managed by central banks around the world; the Federal Reserve (Fed) in the US and the Bank of England (BoE) in the UK.

Central banks set the short-term interest rate, or base rate, for their domestic economy as a tool to manage inflation to a long-term target – 2% here in the UK – and stimulate economic growth.

The BoE reviews and votes on rates eight times a year.

These short-term base rates influence the rates offered by banks, affecting the longer-term cost of money, such as mortgage and deposit rates.

Central banks and interest rates

Various factors will influence a decision, which can make predicting what might come next challenging. The BoE will look at economic indicators such as GDP growth, unemployment rates, inflation and sentiment surveys.

If the economy is in danger of ‘overheating’ – think high inflation rates, very low unemployment rates, and a sharp uptick in economic activity – the BoE may look to ’tighten’ monetary policy by raising rates.

The yield curve can provide you with information about likely changes to mortgage and interest rates at banks in the short-term. For example, if you wanted to understand the likely changes to 5-year mortgage or deposit rates, you could look at changes to the 5-year gilt yield"

This has the effect of increasing the cost of money in the economy, and is likely to reduce borrowing and spending.

Conversely, if the economy is in danger of stagnating, the BoE may look to give it a boost by loosening monetary policy and cu ing rates. This should stimulate borrowing, investment, and expenditure.

The yield curve

Many investors look to the yield curve to assess the outlook for interest rates. But what is it? The yield curve is a graphical representation of bond yields for each different maturity date at a given moment in time. Bond yields themselves are a derivative of the price of a bond, and so are driven by demand and supply. The yield curve is an illustration of market sentiment; it is not a forecast, or a guarantee, and it changes continuously. Generally, the yield curve of Government securities is closely monitored.

The chart opposite is a snapshot of the UK gilt yield curve taken in early March 2024, compared with the same chart from one year prior. It shows gilts with maturities from six months to 50 years. By comparing the two curves side by side, you can see how yield and rate expectations are different from the previous year.

The curve can move quickly if there are significant changes in the market environment or economic data. In any event, the yield curve is not a guarantee for future policy decisions from the central banks.

The yield curve can provide you with information about likely changes to mortgage and interest rates at banks in the short-term. For example, if you wanted to understand the likely changes to 5-year mortgage or deposit rates, you could look at changes to the 5-year gilt yield.

Bank rates – on both lending and deposits – generally follow the same path with a short lag.

In a ‘normal’ environment, the yield curve slopes upwards – this characterises a positive outlook for the future economy – reflecting the expectation of investors to receive a higher compensation for the increased risk associated with holding bonds for longer periods.

Changes to the yield curve can be used as an indicator of a change in market sentiment for the future on interest rates, as well as on the


interest rates?

outlook for an economy in general. If the yield curve inverts, this can be an indicator of an impending economic deceleration, broadly speaking, as investors race to ‘lock in’ capital in longer-term bonds for security, expecting markets and rates to fall in the shorter-term.

At Arbuthnot Latham, our investment commi ee looks at the same metrics that the central banks consider as a way of estimating the directional forces that would influence both short and long-term rates, to inform our portfolio positioning.

This is challenging, but we have successfully managed our portfolio’s sensitivity and exposure to interest rates over the past five years, taking advantage of how rates have moved.

A diversi ed approach

While the yield curve, alongside market data and central bank guidance, can be helpful for

understanding interest rate expectations, the challenge is that the landscape is ever-changing. For example, towards the end of 2023, with inflation rates falling in the US, UK and Europe, expectations were that we might see rate cuts as early as the first half of 2024.

However, in early 2024 we saw some surprising inflation readings, and the expectations for rate rises have now been pushed back.

This is why having a diversified approach to portfolio management is key. At Arbuthnot Latham, we adjusted our portfolios at the start of 2024 to reflect the opportunities that we see in the fixed income market with the prospect of rates falling this year. But, importantly, we have not pivoted entire portfolios on this thesis. We have some positions that would fare well if rates do fall, but we have other assets that will fare be er if this does not happen. ●

The Intermediary
51 Opinion RESIDENTIAL 50Y 3.6 3.8 4.0 4.2 4.4 4.6 40Y 30Y 20Y 15Y 10Y 5Y 3Y 1Y2Y Yield (%) Yield Curve (United Kingdom) Now One year ago
senior investment manager at Arbuthnot
Source: Tullet Prebon Information, SWX Swiss Exchange

Stop start economic environment means advice is essential

In March, PRIMIS held its annual broker conference at Wembley. The event was brilliantly a ended, with a mood of optimism and the future of broking firmly in our sights. While everyone was relieved at the buoyancy of activity in January and February, some spoke of a so ening in March. The economic environment remains a concern for borrowers, brokers and lenders alike, and with li le help forthcoming from the Chancellor’s Budget, the market will once again have to fend for itself.

Advice has never been more important and yet more difficult to give. It’s not that the technical nature of lending has changed, but more that the context in which advisers perform is so volatile. Moreover, our work has never received as much scrutiny as it does today.

Good outcomes

Homeowners on a fixed rate deal that is coming to an end soon, or on a standard variable rate (SVR) or tracker mortgage, will be avidly watching where rates head next and when. Good outcomes are always advisers’ goal – delivering these in this volatile environment is hard.

The outlook for inflation is still uncertain, with the Bank of England forecasting a temporary dip from its current rate of 4% down to around 2% in the next couple of months before rising slightly again. This relatively benign forecast depends on reasonably stable international geopolitics, and that is less certain.

Stock markets are at record highs, with valuations looking on the expensive side. That makes them more vulnerable to geopolitical shocks. Commodity prices are exposed, as are international trading routes.

This year also brings with it a General Election in the UK and another in the US. Wholesale political change is a real possibility in both countries. These factors just scratch the surface when it comes to UK inflation prospects, but they illustrate how easily the global economy could stumble.

Markets are currently still pricing in a cut to the base rate in July, with further cuts over the subsequent 18 months bringing the rate down to around 3.75% by the end of 2025.

Mortgage rates rose slightly in March, with HSBC, Santander, NatWest and Nationwide all announcing increases.

What does this mean for advisers?

The potential for lower mortgage rates later in the year presents borrowers coming to the end of their fixed rate deals with a choice – wait on the SVR and refinance when rates come down, or fix again now.

It was noteworthy that at its meeting on 1st February, there was a three-way split on the Monetary Policy Commi ee (MPC): six voted to hold the base rate at 5.25%, two for a rise and one for a cut.

This is the third time in a row that there was a split vote – and it indicates that rates may not fall any time soon without the stimulus of an economic shock.

Many commentators are of the view that the decline in overall fourth quarter GDP, which marked the second consecutive quarter of negative growth and therefore a technical recession, is unlikely to be repeated in the first quarter of 2024, which will again deter an early rate cut from the central bank. Nevertheless, many see it as likely that the start of rate

cuts will be in the second half of the year. Goldman Sachs said it expected the first rate cut to be made in June, though it had previously said this would take place in May.

Good outcomes

It’s not a straightforward stick or twist, particularly in light of the Financial Conduct Authority’s (FCA) Consumer Duty rules.

The maths ma ers. Product fees have risen across the market and are now around £1,141, according to Moneyfacts. The number of deals offering free or refunded valuation fees has dropped year-on-year, so too for free legals and cashback offers.

Rates have been more volatile, creating a false sense of urgency when it comes to securing the cheapest one. Advisers need to be mindful that clients can be led by market noise, and should be reminded that the lowest rate ma ers less than the overall cost of borrowing.

Ultimately, the best approach will depend on how much clients are borrowing, at what loan-to-value (LTV) and for how long. Moneyfacts puts the average SVR at 8.19% at the start of Q4 last year. Now the average 2-year fix at 75% LTV is 4.99% and on 5-year fixes the average stands at 4.63%, according to Uswitch.

We will see over the spring period how the market is really faring. House moving may still be driven by necessity rather than discretion, but refinancing will figure high on many borrowers’ agenda. The calls we make must really make the difference. ●

Opinion RESIDENTIAL The Intermediary | April 2024 52
VICTORIA JEFFERIES is proposition director at PRIMIS Mortgage Network
New Build
Jonathan Evans – National Accounts & New Build Lead “New Builds demand quick decisions and flexibility.” Skipton Intermediaries is a part of Skipton Building Society. Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under registration number 153706, for accepting deposits, advising on and arranging mortgages and providing Restricted financial advice. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN. Ref: 323749_25/03/2024 Talk to our specialists today 0345 601 6683 9+3 month offers 48hr underwrite queue Enhanced approach to incentives Up to 95% LTV on New Build houses and flats For Intermediary Use Only
buyers? We’ve got the keys! We’re all about helping you boss your New Build business and unlock the doors to the homes your clients are set on.

Providing certainty in an uncertain world

Aer more than two years of careful planning and preparation, April Mortgages is now live and borrowers can enjoy the peace of mind that can only come with a product that enables them to fix their mortgage from 5 to 15-years without fear of early repayment charges (ERCs) if they move or pay down their loan. We’ll also lower the rate as the loan is paid down.

April is a lender with pedigree, as a subsidiary of Dutch asset manager DMFCO, which has wri en nearly £30bn in residential mortgages over the past 10 years through its Dutch lender, Munt. If the experience of the past two weeks is anything to go by, the arrival of longer-term fixed rates with added flexibility in the UK market has garnered a huge amount of media interest.

Cultural shift

You can see why. The fairness that these mortgages can offer has long been a ractive to policymakers. In January, ahead of travelling to the World Economic Forum in Davos, Rachel Reeves told The Times she had commissioned a review of financial services. The review, to be carried out by independent senior bankers and other experts in the City, aims to work with lenders to facilitate a “broader cultural shi ” in the mortgage market. Conservative Secretary of State for Housing Michael Gove has also suggested that lenders put more effort into offering long-term fixed rate mortgages. In June last year he told The Daily Telegraph: “One of the things that is right for levelling up over all is making sure we can develop the types of products that are elsewhere in the world.”

For those who have, like me, had the privilege of being part of the UK mortgage industry for some time, statements such as these have sounded sensible in theory, but remained impracticable because of the way our lending market is funded.

Where money raised to underwrite mortgages is predicated on money market swap rates or shorter-term retail deposits, the ability for a lender to price in a sufficient risk margin to fix for 15 years makes the product commercially unviable. It has been the single biggest barrier to longterm fixed rate mortgages in the UK. April has cracked that nut by securing funding from pension and life insurance funds seeking long-term income-bearing assets.

Intermediaries may be thinking: how does that length of deal work for me and my business model? It’s a fair question. Based on the same principle that we want to offer borrowers simple mortgages, with fair and transparent fees and rates, we also want to offer that to brokers.

Intermediaries referring clients to April will receive an initial very competitive proc fee, and then they will receive further fees to reflect their ongoing client support and advice during the product term.

We don’t just pay a procuration fee for arranging the mortgage at the outset; our remuneration is designed to reward intermediaries for the consistent value they offer clients every day.

What we are trying to do is offer something to complement the current market, to give additional choice and, for those who need it, peace of mind either as a borrower or as a broker who can deal with us and know we are embedding real value in the business. ●

Intermediaries may be thinking – how does that length of deal work for me and my business model? It’s a fair question”

What is April o ering?

◆ Borrowers will be able to choose from rates xed over 5, 7, 10, 12 and 15 years.

◆ Rates start from 4.99%.

◆ ere are no early repayment charges when borrowers move home or repay part or all of their mortgage before the end of the xed term using their own funds.

◆ Loan-to-values (LTVs) up to 85% are available for remortgages only at launch, but April plans to bring a 95% LTV product to market later this year to support rst-time buyer access to homeownership.

◆ April will automatically reduce the rate as the LTV passes into a lower band.

◆ Borrowers can request a new valuation if they believe the LTV will reduce faster.

◆ Initially April Mortgages can be accessed through the Stonebridge and HL Partnership networks.

Opinion RESIDENTIAL The Intermediary | April 2024 54
TIM HAGUE is commercial director at April Mortgages

How the mortgage market is failing newcomers

As a mutual, we are proud of our 175-year history of helping people realise their homeownership dreams. However, as the needs of society evolve, so too must lenders. Our founding purpose was to address the need for accessible mortgages, but in today's world, we must reassess how we can best serve borrowers' changing needs.

Most modern residential borrowers now have a range of options provided by both high street banks and more specialist lenders. This would suggest that the role of the modern mutual should be to move away from mainstream lending, and instead identify groups struggling to access a mortgage – and find solutions to allow responsible lending to them. Essentially, we need to continue to meet a societal need by serving those currently underserved.

One area where we have seen a growing need is among foreign nationals. Statistics show that there is an increasing number of skilled workers coming to the UK to fill acute labour shortages, but many face barriers to integration, not least in being able to buy a home.

In 2022, the Government granted more than 220,000 worker visas, almost double the 114,000 granted in the last full year before the pandemic, with the majority of those being in the healthcare (38%) and IT (17%) sectors. While these are temporary visas, usually for four or five years, it’s important to note that extensions and indefinite right to remain requests are granted in 98% and 99% of cases, respectively.

Growing demand

So, clearly there is a growing workforce of skilled workers from abroad. But does that translate to a growing demand for mortgages? Criteria searches on key platforms would suggest a resounding yes. Indeed, residency-related broker search terms exceeded a quarter of all criteria searches for the first time in Q4 of 2023 – that figure was just one in six two years ago.

As well as showing a growing demand for mortgages from this group of borrowers, the figures are a strong indication of unmet demand, as brokers tend to use these tools for tricky cases that they struggle to place.

That paints a very clear picture of a large group of skilled workers

who are coming to the UK, not just to work but to se le, put down roots and make this their home. For many, though, securing a mortgage is just not an option, because lenders currently find it difficult to assess their creditworthiness.

What we currently see in the market is restrictive criteria, designed to protect lenders, which has created a large underserved segment of potential borrowers.

Some of the challenges for borrowers include needing a minimum UK residency of one or two years, minimum remaining time of one or two years, and a £50,000 minimum income.

These requirements, alongside the fact that loan-to-value (LTV) rates are o en capped at 75%, show that many new arrivals to the country would find it hard to meet demands.

What’s harder to understand, however, is how they are relevant to the individuals behind the mortgage applications. Surely, the test for lenders should simply be: can this individual afford to buy this property?

In reality, of course, it’s not quite that simple, but what does seem clear is that the industry as a whole tends to follow the restrictive criteria in place rather than seeking innovative solutions to challenges. In many cases, that is at the detriment of borrowers.

We advocate against such barriers and want to dismantle them to ensure that a greater number of borrowers can pursue their dreams of homeownership. We believe that this is the responsibility of a contemporary mutual, and it is how we plan to contribute to the expansion of homeownership and provide ongoing support to borrowers in the months and years to come. ●

Opinion RESIDENTIAL April 2024 | The Intermediary 55
A large group of skilled workers are coming to the UK, not just to work but to settle

Navigating the path to homeownership

The homeownership dream has long been part of British identity.

However, since the end of the Help to Buy (HTB) scheme in March 2023, this dream seems further out of reach for many first-time buyers (FTBs). Since then, the gruelling combination of high interest rates, inflation and rising house prices have been having an impact on affordability.

As a result, it’s no surprise that a third (34%) of potential FTBs are worrying about saving for a deposit, according to our own research.

With an HTB hole remaining and no clear long-term solution from the Government, there has been increasing pressure to develop new and innovative approaches, such as Deposit Unlock. This scheme offers a 95% loan to value (LTV) deposits for new-build properties.

However, as an industry, we must ask ourselves: will the Deposit Unlock scheme alone adequately support the first-time buyers cohort? And how can the industry support customers beyond just achieving a deposit?

The state of a ordability

In the past two years, mortgage holders’ affordability has been hit from pillar to post. Interest rates saw 14 consecutive hikes from historic lows of 0.15% in December 2021 to highs of 5.25% in September 2023, and will remain this way for at least another month.

Some of our latest research found that interest rates and the cost-ofliving crisis led to nearly half (47%) of UK mortgage holders seeing an increase in their mortgage payments by an average of £234 per month, or £2,808 over the year.

Coupled with consumers also finding themselves £215 worse off a month – or £2,580 a year – compared with 2022, the financial landscape has

not been favourable for prospective homeowners of late.

What is Deposit Unlock?

Following the fall of HTB, the rise of Deposit Unlock has been a positive scheme introduced to the market to help prospective FTBs feel more empowered to achieve their homeownership dreams.

Deposit Unlock is an innovative mortgage guarantee scheme created to help borrowers secure a new-build home with only a 5% deposit, and in January, Bluestone Mortgages officially expanded its lending through Deposit Unlock.

Since launch, we’ve seen a similar demographic of applicants from those who applied to the Help to Buy scheme. Both initiatives a ract customers with an average age of 33 to 34, looking for a loan between £250,000 to £270,000 and a property value of £270,000 to £280,000.

What this tells us is that this band of consumers are hungry to find solutions to give them a leg up onto the housing ladder. At a time when there is a lack of long-term solutions from the Government to address the housing crisis, this is an example of how lenders are looking to find new and innovative situations to support people onto the property ladder.

However, once on the ladder, how can homeowners be supported on the next stage of their mortgage journey?

Going beyond deposit support

With the cost-of-living crisis continuing to hit consumers’ wallets, our latest research suggests that one in five (18%) UK adults – equivalent to 9.7 million – have missed a payment in the past 12 months. Among those, 7% had missed a mortgage payment.

This highlights a need for support for homeowners at the next stage in their mortgage journey – beyond just the deposit.

Offering robust support for customers facing affordability hurdles would not only aid with initial deposits, but also provide ongoing support to ensure that mortgage payments remain affordable in the long term. For example, flexible mortgage terms tailored to individual financial circumstances, or longer-term fixed rate mortgages to provide payment security for firsttime buyers.

By shi ing the focus toward affordability support, we can bridge the gap between deposit assistance and sustainably affordable homeownership. It's important the industry prioritises initiatives that empower individuals to not only purchase homes but also maintain financial stability throughout their homeownership journey.

A look ahead

The landscape of homeownership in Britain has undergone significant shi s. While initiatives like Deposit Unlock offer hope for first-time buyers, the question remains whether such schemes alone can address the affordability gap. The industry must recognise the broader challenges faced by prospective homeowners, including high interest rates, inflation, and the cost-of-living crisis.

It's important that we as an industry extend support beyond deposit assistance, focusing on sustainable affordability measures that ensure individuals can not only purchase homes but also maintain financial stability in the long term.

By prioritising initiatives that address affordability holistically, we can work toward making the dream of homeownership a reality for more people in Britain. ●

Opinion RESIDENTIAL The Intermediary | April 2024 56
RYAN DAVIES is strategy director at Bluestone Mortgages

Consumer Duty will go beyond the transaction

While many will view the Consumer Duty rules through the lens of mortgage product provision, there is a strong case for arguing that the goal of ‘be er outcomes’ is more expansive. Of course there is some catching up to do, and current practices have to be revisited, audited and reshaped to ensure they are fit for purpose.

The Financial Conduct Authority (FCA) has made it clear that firms need to be revisiting their implementation plans and asking themselves whether the changes they set out to make go far enough to deliver the outcomes they are set to achieve for consumers in their target market.

But looking forward, the FCA has said that the Consumer Duty and transition to a focus on good consumer outcomes is a process, not a destination. It will evolve, and that means that brokers must be equipped to evolve, too. In recent feedback on 20th February, the FCA highlighted good practice, but also areas where it believes firms are already failing consumers.

Enhancing the experience

While the temptation will be to think all is well enough in mortgage broking, the FCA states that it expects issues to be addressed before it spots them and takes action. The areas for improvement are considerable.

It’s with this last point in mind that I think there is an opportunity for brokers to really enhance the homebuying experience for clients and ensure the risk of borrower detriment is reduced. Property is unique as a purchase, there is no buyer’s remorse and no cooling off period as you

might expect with other products. Indeed the phrase ‘caveat emptor’ is still used in connection with property transactions. The point is that you cannot simply hand the keys back if it turns out it is faulty.

Today, however, lenders rely on automated valuation models (AVMs) for a huge proportion of their lending, which means that very o en no one has seen the property being purchased except for the buyer. The result is that the client, o en under the erroneous impression that a lender valuation is being done on their behalf, knows very li le about any potential faults or problems with the property.

Economic asymmetry

‘So what?’ some would say. Homebuying is a decision you live with, and live in. It is always with you and is the largest transaction most people ever undertake. They do not do it regularly, so everything feels alien. The opportunity to make mistakes is significant. The lack of supply of housing stock also means that, at a time when emotions are o en running high, few buyers want to find problems with their ideal home purchase. In some ways you could argue this is the very definition of ‘vulnerability’ – if not, it is certainly economic asymmetry.

The answer, I think, lies in the private survey. Once, a private survey would have been considered by many brokers as an opportunity to kill a purchase, but if it means a consumer knows what they are buying and is ge ing fair value it may now be the very protection everyone needs under the new rules.

As a result, the broker cannot be accused of selling an inappropriate loan size, and the consumer can purchase at a price that reflects the

real value as it stands in full sight of any defects or issues.

Consumer Duty, when we distil it, simply means be er customer relationships resulting from clearer information and communication.

The broker is in the key place to act as their guardian throughout the life of the loan, making sure they get the right loans for the right reasons, and that will mean extending the services they offer.

Expected outcomes

Advisers will be expected to carry out annual reviews of their customers to ensure that customers are supported in achieving their expected outcome. This means that providing a facility for something like a private survey to allay fears and validate the loan applied for is the right one, and navigating any problems in advance of exchange, should be a key part of that additional service.

For our own part, we provide networks, clubs and directly authorised brokers with that very service, and it comes with a ‘never knowingly undersold’ guarantee so brokers can be sure they are not causing foreseeable harm for clients with additional and avoidable cost.

Our mission is to make homemoving a be er experience for everyone. Protecting your customer from detriment means understanding your role across that entire process, seeing how you can be er manage it, and being able to evidence you have done this. ●

Opinion RESIDENTIAL April 2024 | The Intermediary 57
MARK SNAPE is managing director at GOTO Group


Jessica Bird and Jeremy Duncombe discuss Accord’s newest product, which is making waves in the mortgage industry

What was the thinking behind the £5,000 deposit product?

We did some research last year, and one of the striking findings was that a large number of respondents felt homeownership was becoming an elite privilege. People still wanted to buy homes, though. This comes with two main challenges: affordability and saving a deposit.

In certain parts of the country it can take up to seven years to save a deposit. The average size of a mortgage for FTBs is £200,000, and £5,000 was a figure that customers said would take them up to two years to save, as opposed to seven.

This product is for people who’ve got a good credit score and could qualify for a mortgage, but just don’t have that deposit, or are having to put off lifestyle decisions like getting married to find it.

The figure is significant in two ways. First, it is still a meaningful amount to save up, putting a commitment into a property. Second, it was a realistic figure across the country, even for people paying a lot of their income in rent every month.

It’s about proving willingness and ability, while also making that period of saving much shorter.

Is this just a 99% mortgage?

The 99% mortgage didn’t come into fruition as a Government-led product, so we were pleased that we had something ready to go when that wasn’t launched. However, this is a different product. We’re creating a level playing field for borrowers wherever they are, unlike a 1% deposit mortgage, which would be a vastly different sum for someone, say, in London. We go up to £500,000, which would be a 1% deposit, but we also go from £100,000 at the other end. We expect it to represent a 97% or 98% mortgage on average.

They have to pass stringent credit checks, and affordability has to be there, in the same way as any product. You can’t control the uncontrollable, but what you can do is put mitigants in place to understand the risks that you’re taking on with any mortgage, particularly where it’s a higher loan-tovalue (LTV) than normal.

We look at income, expenditure, and affordability. We also face into the mitigants for negative equity, and there’s a couple of very specific things we’ve done to make sure that we’re mitigating that as much as we possibly can. First, this is available only on a 5-year fixed rate. Second, these are all repayment mortgages. We’ve done a lot of modelling on the risk elements, and we have a five-year horizon and reducing debt.

We also factor in the potential for house price movement. We model lots of different scenarios, from price reductions to flat markets. In these forecasts, customers should not be in negative equity at the end of five years. There are things that are out completely outside of everybody’s control, like a housing crash, but we’re comfortable that the mitigants are in place as much as possible.

If the worst happens, we would always support customers, whatever their scenario. We have teams of people who look after borrowers in difficulty. We also make sure that customers have product transfers that they can move onto.

How has the market reacted?

There have been questions around the risk position, and for customers and brokers to really understand what our thought process is –these are all really sensible and understandable questions. Hopefully, we’ve been able to answer them, and once those are taken into account, the response has been phenomenal; it’s exceeded our expectations in terms of interest.

The profile of the product has landed really well in the market, and more importantly, among the customers who can benefit from it. We’ve invested a lot of money in this product, and the bottom line success of it will be how many customers we can help. We’ve already got some great examples of customers who’ve been accepted, and these are typically people who you’d want to help – key workers who’ve been renting for a long time, for example. These are genuine, real people who need help to get into a home.

The more people that know about it, the more will reach out to brokers. That’s why we made it such a simple concept. Brokers’ phones have been ringing with potential new customers.

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It’s also busting the myth that young firsttime buyers have got money that they’re just wasting on other things – coffee and avocados. The reality is, people are desperately trying to save up in a very difficult environment and it’s hard work.

What other support do fi rst-time buyers need?

We lost Help to Buy at the worst possible time, when rates were increasing, affordability becoming even more of a challenge. More homes being built is the ultimate way that the market will help itself, but we also need a version of Help to Buy which doesn’t just concentrate on new-build. This has to be done in a way that’s balanced, so perhaps more properties, but limited to particular customers.

How can brokers understand the current direction of the market?

We’ve seen massive changes from the very stable market we had for over 10 years. There is inevitably a correction that needs to happen.

There’s also been a lot of Government intervention. Lenders have been given funding to keep the market going, driving low costs of fixed rate pricing for customers. That Government money needs to be paid back, and there is a deadline looming in 2025. All lenders will be working through the best way to pay that back, and what effect that will have on them.

Another factor is increases to the base rate following the mini-Budget. There was a steep rise in mortgage rates, and then a gradual reduction to where we are today. There are also external pressures around conflict, fuel and supply chains, much of which are out our control.

We are seeing inflation come down, and the theory is that the base rate should come down as long as inflation gets under control. The question is how quickly and by how much. These questions are very difficult to answer, and it certainly won’t be in a straight line.

To understand that more: swap rates are based on where the base rate is likely to go over the next two or five years. That’s why there’s often quite a disconnect between the base rates and fixed rate pricing. As rates were going up last year, the base rate was heading towards 6%, but fixed rates were still at 3% and 4%. This year, fixed rate pricing is much lower than the base rate, rather than the

other way round as you might expect. Brokers need to be aware of that disconnect. There’s a lot to understand, but it does show that we shouldn’t assume fixed rate pricing will continue to drop.

On top of these fundamentals, lenders have to overlay more strategic or tactical decisions. What’s their lending appetite? How much capital and liquidity do they have? Can they deploy their capital better in a certain part of the market? Do they have to write a certain amount of business?

Do we need more transparency on rate decisions?

I’ll always be as honest as I can as to what we’re trying to do, how things work, and what the market is telling us. Obviously, though, there’s commercially sensitive and information. It’s for every lender to decide where that line is. But we can do more in terms of general education.

I appreciate just how much extra work there is for a broker when things are pulled at short notice or if there’s a significant change in the price. What we’ve seen recently are extremes, which create a lot more panic and pressure. We always try and give 24 hours notice, but there will be very extreme circumstances, like after the mini-Budget, where that’s just not possible, because you’re going to lose money on your mortgages.

What are the 2024 trends?

The market was much lower last year. Things look to be picking up slightly, but certainly not to any extent near where the year before. It’s about settling into a smaller market. That means competition is going to continue to be strong. Lenders are looking for opportunity and innovation, as their margins are reducing.

There is also some opportunity in the buyto-let (BTL) market – that has rebounded a bit, particularly with rates reducing and affordability or rental calculations working more.

For us, this year is about making sure our proposition stands out from our competitors’. That’s not just about price, it’s about propositions, service, and flexibility.

The positive for brokers is there has never been a more beneficial time for advice. There is a lot out there for customers to get their heads around, and the majority won’t have seen a market like this before. Customers need to hear from you more than ever before. ●

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First-time buyers must have our support

The job of any building society is at its core a simple one. We are here to help people own their homes.

But it is a task that is more easily said than done within the conventional product mix. Affordability remains a key issue, along with the eternal issue of supply. The Budget provided li le respite.

It was arguably a missed opportunity in an election year to take substantive action to support the availability and affordability of new homes. The Chancellor, keen not to stoke a market that is clearly recovering if not marching at full strength, chose to rein in the ideas that had circulated before the event about 99% loan-to-value (LTV) mortgages and Stamp Duty cuts. Instead, hopeful buyers got a slew of tactical changes that did li le to address their problems. Jeremy Hunt scrapped tax reliefs on landlords renting properties on a short-term basis, and the Stamp Duty relief for those purchasing multiple residential properties.

Given the data now emerging with regard to house prices, not adding fuel to a fire that is already kindling was not an altogether bad move.

Tactical shots in the arm are not order of the day, but while politicians sharpen their pens and manifestos undoubtedly promise great things for a future Government to deliver in housing, first-time buyers must continue to rely on current market and monetary support.

On the up

The housing market is improving for now. Moneyfacts found there were 5,899 fixed and variable rate mortgage products at the start of the year – up from 5,694 products at the end of 2023, and so housing was deemed to not need a further short-term boost. Longer-term systemic issues remain which we will hopefully see addressed post the coming election.

There was in the Budget a modicum of levelling up support and the promise of more houses in some very specific areas, but nothing to move the dial. Likewise, the abolition to tax law regarding multiple purchases.

If we put aside the issues around supply which have plagued our housing market for as long as anyone can remember, we must look at affordability.

Achieving the requisite deposits and being able to demonstrate affordability

while incorporating a lender’s stress test remains a challenge, especially in the more expensive parts of the country.

The mutual movement has made huge inroads into filling the void for first-time buyers.

Deposit Unlock, First Homes, higher LTV lending, and gi ed deposits all figure in the plethora of options, along with one more: joint mortgage sole proprietor (JMSP).

At its heart, the JMSP product is all about garnering family support to make the purchase of a home possible.

Our joint borrower sole proprietor (JBSP) mortgages allow up to two occupiers to apply and live in the property together – so not really ‘sole’ in this context – and use the incomes of up to two close family members –non-occupying borrowers – to help support the application.

With the income of up to four people allowable, first-time buyers can now borrow more, and while all those will underwrite the loan, only the occupiers will be named as legal owners.

With a maximum LTV of 95%, and availability across the standard product range, it’s another option in the broker’s toolbox to support first-time buyers, many of whom are still desperate to move in the face of rocketing rents.

If the Budget made one thing clear it is that, while Government has the power to change markets for be er and worse, it can also decide to do nothing, at which point the role of providers like ourselves becomes even more important in enabling people to fulfil their dreams of owning a home. ●

Opinion RESIDENTIAL The Intermediary | April 2024 60
KATHY BOWES is intermediary manager at e Cambridge Building Society Achieving the requisite deposits and being able to demonstrate a ordability remains a challenge

Super-prime is the epicentre of London’s market

The Budget rather indirectly reflected the fact that London is an island when it comes to residential property. The capital o en gets lumped in with the South East when it comes to the housing market. It’s true that the capital and its environs have the country’s highest house prices, but it’s worth remembering that the London market is a very different beast. There are markets within the geographic market of London.

London rebound

Rightmove in March put the average asking price in the South East at £478,936, while in London it was £686,844 – over £200,000 more. Buyers in the capital must shell out almost quadruple the amount of those buying in North East, where the average asking price is £187,592.

While more headroom on mortgage affordability in the North has pushed price inflation up more than the rest of the country, London’s house prices are rebounding faster than the wider Southern regions. Price growth in the South West was -0.3% in March. In the South East prices were down 0.6%, while in London they were up 0.9%. The city is also leading the charge when it comes to buyer demand, both overall and for top-of-the-ladder properties, compared with last year.

Workers are back in the office, while generous wage rises and the surety that house prices are unlikely to fall significantly short-term and most likely rise in the long-term is also supporting demand. While strong sales in the North are largely supported by mortgaged buyers, in London the market is being driven by higher priced properties, the buyers of which are less sensitive to

mortgage affordability constraints. Rightmove recorded a massive 18% rise in high value sales agreed over the past 12 months, with buyer demand for top-of-the-ladder properties 12% higher than the same period last year compared with 8% higher overall for all property types. The density of those properties is greatest in London, where cash rich buyers are more common.

The highest annual price growth across all of the city’s boroughs was seen in Richmond, Hammersmith and Fulham – two of the four highest value markets in London, where average prices are £949,555 and £1,010,417, respectively. February figures from LonRes show the very top end of the market is still the best performing sales sector, with £5m-plus activity well above long-term trend levels. Sales in February were 4.2% higher than a year earlier and 25% ahead of the pre-pandemic average. New instructions in this market rose by 8.4% annually, with 26% more £5m-plus properties for sale at the end of February than a year ago.

We should not forget that what happens to the top end of the market inevitably washes through to the rest, and while at first glance the Budget provided some change for super-prime owners, it is not expected to halt the current bounce.

The Spring Budget may have been bere of stimulus for the wider housing market, but its proposed changes for typically high net worth (HNW) individuals domiciled in the UK has relevance for the super-prime property market in London. Nevertheless, we are not anticipating a significant effect on the London market a er the Chancellor confirmed that non-dom tax status will be abolished from April next year.

Medium-term boost

A range of different tax treatments will begin to apply from April 2025 depending on an individual’s residence status. Looking at the detail of the changes, some elements may well boost the UK economy and London’s housing market in the medium term.

Guidance issued by the Law Society a er the Budget states new arrivals to the UK, or those returning a er at least 10 years, can elect not to be taxed on their foreign income or gains during the first four years of UK tax residence. Rather than encouraging HNW individuals to keep their international income outside of the UK economy, this is likely to boost cash investment in London’s prime market over the next four years. Different rules will apply to nondoms who have been resident for four tax years or longer, with their global incomes taxable from 6th April 2025.

A proposal to bring worldwide wealth into the UK Inheritance Tax regime is also due for consultation. This would apply to both an individual’s assets and to property bought in trust by a qualifying resident a er 5th April 2025, closing the existing loophole. The rules won’t apply for trust property se led before then – meaning current non-doms won’t be incentivised to sell existing property, much of which is situated in prime Central London.

While the status of non-dom might have bi en the dust, there is plenty of room to accommodate those wishing to move here. Like a stone thrown into a pool of water, the activity at the top of the market o en ripples out into the markets below and we expect this to continue to be the case. ●

Opinion RESIDENTIAL April 2024 | The Intermediary 61

Meet The BDM

Kensington Mortgages

The Intermediary speaks with Gavin Braham, business development manager (BDM), London Central Region, at Kensington Mortgages

How and why did you become a BDM?

A er spending several years working in retail, I came to realise that this career path would not allow me to reach my full potential. I decided that I wanted to work in a profession that would o er a greater challenge, and began working as a telephone BDM for Bank of Ireland.

ree years later, I found myself still feeling as though I could be accomplishing and learning more. A er working closely with one of the

eld BDMs, I understood that this was where I wanted to be, face-toface with the intermediaries that I had been supporting.

is led me to move to Kensington Mortgages, where I spent three years as a telephone BDM, before being given the opportunity to work as a eld-based BDM. e rest, as they say, is history!

What brought you to Kensington?

I was drawn to Kensington in part by the leading position that the

company occupies within the market and the truly fantastic people that it brings together.

Since joining, I have had some invaluable opportunities to work with exceptionally interesting and intelligent people who have strengthened my understanding of our industry and helped me to become more e ective at what I do.

I was also attracted by the continuous opportunities that Kensington o ers to develop my skillset and the e ort that the company dedicates to helping sta to achieve their full potential. Most recently, I’ve been o ered the

The Intermediary | April 2024 62
When working with brokers, I use direct informative questioning skills to try to build a mental picture of how the case will look in front of an underwriter. I ensure that I make myself available, taking the time to answer or return calls”

responsibility to work as the sales team’s New Build Champion with the view of performing a key role in Kensington’s future developments in this area.

What makes Kensington stand out?

One of the key qualities that distinguishes Kensington is the mutual respect that everyone on the team has for one another, and the lack of any big egos. We also work hard to embody and deliver on our company values, for example in driving positive customer outcomes, keeping these at the forefront of our thinking in everything that we do.

What are the challenges facing BDMs right now?

One of the most signi cant challenges facing BDMs currently is the constantly changing market environment. Following the pandemic, more advisers have been choosing to work from home, meaning that BDMs have had to adapt the service they o er to re ect a more hybrid approach.

We have also had to work hard to manage the frustration created by the current market as conditions

become more challenging. In addition, many brokers are currently dealing with increasing complexity in the nancial situations of their clients. As a specialist lender BDM, this requires more personalised support to help identify the right solution for their speci c circumstances.

What are the opportunities?

As technology continues to play an increasingly important role in the industry, BDMs who develop relevant capabilities and knowledge will place themselves at signi cant advantage. Digital tools, customer relationship management systems, and social media platforms are only some of the new areas in which BDMs have an opportunity to expand their skillset and ultimately provide greater value.

With the market environment remaining uncertain, BDMs should also ensure that they o er highly responsive support for brokers, ensuring that they make themselves available to provide insights into the characteristics of di erent products and processes.

In addition, as the regulatory environment becomes increasingly complex, most notably with the introduction of Consumer Duty last year, BDMs have the chance to o er more support to brokers as they navigate evolving requirements.

How do you work with brokers to ensure the best outcomes for borrowers?

As a BDM, the broker is my direct customer, meaning that I consider their needs from the same perspective from which they view their own clients. When working with brokers, I use direct informative questioning skills to try to build a mental picture of how the case will look in front of an underwriter. I ensure that I make myself available,

taking the time to answer or return calls within a set timeframe –generally before the end of the day –and aiming to acknowledge all emails as soon as they arrive in my inbox.

I also work to place myself in the shoes of the broker and frequently remind myself of the end client and their aspirations of owning a home.

Finally, when helpful, I make sure to share the knowledge that I’ve built of the specialist market, o ering insights into its behind-the-scenes complexities.

What advice would you give potential borrowers in the current climate?

It is very important that borrowers nd a great mortgage adviser. Borrowers should ensure that they do their research, using platforms like LinkedIn and Trustpilot, and may also nd speaking with friends and family about their experiences helpful. e service o ered by advisers can be invaluable when borrowers are open about their nancial situation past and present.

When provided with the information that they need, advisers will do their very best to nd the right lender for each borrower’s individual circumstances. ● Kensington

April 2024 | The Intermediary 63 MEET THE BDM
Mortgages Established in 1995 Key Products Self-employed, contract workers, multiple-income applicants and those who have a small blip on their credit le. No credit scoring, no upfront fees and a choice of incentives. Contact 07891 501 543

blend of tools will deliver improved customer outcomes

As one of the leading suppliers of residential valuations and surveys in the UK, working with the majority of the big banks and building societies, we see a tremendous volume of instructions on a daily basis. However, it is vital we never forget that individual customers are integral to each instruction. This not only forms the foundation of ongoing training for our team, but is fundamental to us as a business.

In turn, our lender clients rely on us to provide insight and knowledge to help them manage their exposure to property risk, both on a holistic level and with every valuation we conduct on their behalf.

Lenders also have a wider duty to ensure customers are treated fairly and that good customer outcomes are achieved. This is why in recent months I have talked regularly in the trade press about why it’s vital that we ensure our customers understand the difference between a valuation and a survey. I believe that we, as lenders, mortgage brokers and surveyors, all have a duty to ensure that customers are as well informed about the property they are purchasing as they can be.

Chimney sweep

One recent incident which particularly sticks in my mind is where we spo ed unsupported chimney brickwork in the lo of a property – the first-floor fireplace and chimney breast had been removed by a previous owner – that could have crashed into the bedroom below, and which would not have been discovered without a physical inspection.

As mentioned earlier, we see thousands of properties a week, and

with many no issues are found, but it is by no means an irregular occurrence that serious faults are discovered.

Machine limitations

Before Countrywide, I spent much of my career working for the biggest lender in the UK, so I understand the challenges around offering service level agreements (SLAs) and the need to factor in risk ceilings.

Undoubtedly, the development of automated valuation models (AVMs) and data-driven tools have enabled those risk ceilings to be increased with the aim of improving the overall customer experience.

We are also potentially entering another transformational change period with the development of machine learning models that will inevitably help to extend the capability of technology beyond the –arguably dated – regression modelling approach that is currently employed in many AVM models.

We must, however, ensure that the drive for speed and cost savings delivered by non-physical valuations does not put our end customers at undue risk, financially or otherwise, when they move into their new homes.

Looking at these challenges facing the industry, I’d like to reference a recent series of articles by Charlie Jackson FRICS from the Royal Institution of Chartered Surveyors (RICS), who looked at non-physical valuations and addressed topics such as ‘Why professional judgment ma ers in valuations’, ‘Due diligence urged to underpin reliable valuation’, ‘Exercising professional judgment in valuation practice’ and ‘How does RICS regulate and support valuer judgement?’ In my opinion, Jackson breaks down the issues succinctly

I make no apologies for reiterating the need for greater education of consumers on the value of obtaining professional survey advice”

and highlights key ma ers that we continue to discuss – both as a business and with our lender clients.

Technology will inevitably continue to transform how we as surveyors and valuers work, but in my view it will never replace human intervention for certain types of properties, scenarios and levels of property risk. Our work with lender partners continues to help them manage their a itude to risk, considering the pros and cons of both non-physical and physical valuations while also applying and monitoring thresholds accordingly.

Nonetheless, at the end of all this and as I mentioned earlier, there is always a customer, so I make no apologies for reiterating the need for greater education of consumers on the value of obtaining professional survey advice.

Regardless of the lender’s decision to instruct a non-physical valuation or a physical one, it should always be remembered that neither are for the customer’s benefit. Whether a lender, a mortgage broker or a surveyor, we must all remain sharply focused on providing good customer outcomes, and the role played by professional survey advice. ●

Opinion RESIDENTIAL The Intermediary | April 2024 64

Vulnerability should get our attention

While the Budget stole the headlines in March, the Financial Conduct Authority (FCA) announced plans to conduct a review into how firms are “acting to understand and respond to the needs of customers in vulnerable circumstances.”

It’s interesting timing. While January and February were busy months, affordability as an issue has not evaporated. The Budget did nothing to help. For all the noise about tax cuts, welcome as they may be, many millions of actual and wouldbe homeowners will find themselves slipping into higher tax rates over the coming months. No one expects the stress levels of those seeking to refinance or move home to reduce significantly.

In that context, the findings – which will be published by the end of 2024 – will be interesting reading. All regulated firms must be up to speed with their compliance processes now, with systems in place to document how vulnerable customers are dealt with. The review will look at firms’ understanding of consumer needs, the skills and capability of staff, product and service design, communications and customer service, and whether these support the fair treatment of customers in vulnerable circumstances.

Outcome equity

Importantly, the FCA will carry out research with consumers directly, as well as with firms and organisations such as Citizens Advice, in order to assess whether outcomes for consumers in vulnerable circumstances are as good as the outcomes of other consumers.

This focus on vulnerability will challenge many in the industry, not least because its definition is evolving.

It is almost nine months since the Consumer Duty came into force for open products and services on 31st July 2023. Yet the FCA has been crystal clear that, while some firms have made improvements to ensure all customers receive advice and products that result in good outcomes, there are still those that are “lagging behind.”

Specialised outlook

In February, the regulator laid out examples of good practice it has seen from some companies across the various aspects of Consumer Duty, including culture, governance, the treatment of vulnerable customers, and products and services.

Some regulated firms have centralised their systems to analyse vulnerability and ensure they have specialised and trained individuals to handle these consumers. Within the mortgage market, the FCA highlighted one mortgage firm, which now allows brokers to pass on details about customers who may need help managing their home loans.

The regulator also outlined where it wants to see firms improve. It found gaps in data collection and a lack of ability to track the outcomes experienced by customers a er the point of sale.

Nuance in understanding vulnerability types was lacking, as was the consideration that 50% of people will become vulnerable at some point in their lives, making ongoing assessment crucial. Asking consumers to repeatedly disclose their additional needs or personal circumstances when passed between teams was singled out as having the potential to cause foreseeable harm to a consumer’s mental wellbeing and ability to engage with their provider.

The FCA has made it very clear that the Consumer Duty isn’t a ‘one and done’ process – and demonstration of ongoing tweaking is expected. This is a key point in the context of a volatile

50% of people will become vulnerable at some point in their lives”

economy. Not only is the financial environment continually changing, whether in terms of fiscal policy or monetary policy, but as people we are not static either.

People have vulnerable times, and this is particularly relevant when dealing in ma ers that rely on advice. Financial services offers plenty of opportunities for feeling overwhelmed, and those with the understanding have to ensure what they say is fully understood, especially when the issue at hand concerns your home. The very expertise brokers offer is – in the wrong hands – an opportunity to mislead. The very real challenge here is how you take account of all this when providing great advice, and ensure that you continue to do so over any given period.

For directly authorised (DA) mortgage advisers, the work involved in meeting such a diverse range of compliance demands can be overwhelming, especially given the commercial need to write business day-to-day. That’s where the tools and the benefits of a mortgage club can really help.

At TMA, we have the technology, expertise, knowledge and training to bring consistent processes and compliance to the DA space – and we take the time to build bespoke packages for each firm we work with. Increasingly, ge ing that spot on is make or break for businesses. ●

Opinion RESIDENTIAL The Intermediary | April 2024 66
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Do rent controls have a negative impact?

Scotland’s runaway rental inflation offers policymakers across the rest of the UK a clue as to the effectiveness of rent controls in delivering a private rented sector (PRS) that is fair and affordable for tenants, and a ractive for landlords.

Just before the Easter bank holiday, Patrick Harvie, Sco ish Greens coleader and Tenants’ Rights Minister, introduced the Housing Bill to the Sco ish Parliament. Commenting on X, Harvie said the new Housing Bill delivers significant parts of the Sco ish Government’s New Deal for Tenants, which will “protect tenants against unfair evictions, enhance tenants' rights to allow them to redecorate and keep pets as well as introduce a system of rent controls.”

While few will be against measures to create a fairer PRS, critics have cautioned against the rent controls, arguing that they result in higher rents. This seems paradoxical, but the impact of the cap introduced by the Sco ish Government in 2022, which ended on Easter Sunday, would suggest the warning is not without basis.

Failed experiment

Scotland now grapples with the highest rental inflation in the UK, exceeding 11% nationally and reaching even higher peaks in popular cities like Glasgow and Edinburgh. Contrast this with London, where Zoopla shows rental growth sits below the national average at 6.4%. Notably, this figure marks a significant decline from the highs of 16.1%, seen this time last year.

Despite Scotland's ill-fated experiment, London Mayor Sadiq Kahn has consistently advocated rent controls over the past year. While I completely sympathise with tenants

who have faced rising rents and understand that policymakers feel it’s their duty to intervene, it is actually London that serves as a testament to the market's ability to self-regulate. Demand surged post-pandemic, driving up rents as tenants competed for a constrained supply. However, as tenants adapted – choosing to share with friends or moving to cheaper areas on the fringes of London, for example – and supply improved, rental inflation has moderated.

Scotland, on the other hand, illustrates the challenges of introducing dysfunction into a free market. Rent caps exacerbated an existing supply-demand imbalance, with tenants staying put, stifling the turnover of properties and pushing rents for available homes even higher. The media painted a grim picture of limited rental options and intense competition.

Furthermore, rent controls destabilised the business environment for landlords, many of whom are small and medium enterprises (SMEs). Uncertainty fuelled by the legislation dissuaded investment, as evidenced by a doubling of Sco ish investors purchasing properties outside Scotland.

Rent controls, o en touted as a quick fix, rarely produce the desired results long-term. They are flawed tools o en wielded for political expediency rather than true tenant benefit. In the a empt to address rising rents, they inadvertently inflict damage on the very market they aim to protect.

Us v them

The narrative surrounding rent control is o en simplistic, painting landlords as villains and tenants as victims. Reality shows a more

nuanced picture. Landlords, too, face inflationary pressures.

Instead of addressing the underlying issues – insufficient supply, for instance – the discourse devolves into an ‘us versus them’ mentality.

The London Mayor overlooks the city's specific issues that have contributed to a challenging rental market in the capital. The 2016 introduction of the 3% Stamp Duty surcharge significantly slowed new stock entering the market – there were more new mortgaged rental homes added in the North West than Greater London last year – while London has the highest proportion of property for sale that was once tenanted.

Coupled with the growing shortterm let market, London's issue is demonstrably a supply-demand imbalance, not landlord exploitation. We need to move beyond simplistic solutions and delve deeper into the complexities of the housing market. This is something that we’re taking an active role in, and I’m encouraged by policymakers in Wales engaging with stakeholders representing a range of views on the issue.

Last month, I spoke at the Welsh Senedd Local Government and Housing Commi ee, alongside representatives from organisations such as Crisis, Shelter, Generation Rent, the National Residential Landlords Association (NRLA), Propertymark and RSPCA. It is through balanced debate, supported by evidence, that we can cra policies that truly benefit both tenants and landlords, ensuring a sustainable and equitable landscape for all. ●

Opinion BUY-TO-LET The Intermediary | April 2024 68

Why investors are looking closely at the Midlands

The Midlands has become an increasingly a ractive prospect for investors in recent years, and that a raction shows no signs of slowing.

When it comes to rent, the Midlands remains one of the more affordable regions of the UK. Recent analysis by Zoopla, for example, found that the average rent in the West Midlands stands at £905, while the East Midlands has an average monthly rent of £860, far lower than the £1,000-plus rental payments which have become commonplace in so many other parts of the country.

Despite this being the case, the Midlands regions have still been the beneficiaries of some substantial rent increases of late, which will clearly be noted by landlords and developers firmly ensconced in the region already – or looking at the opportunities within it. That same Zoopla study, for example, found that West Midlands rents have grown by 8.6% on average, and 8.7% in the East Midlands.

As a result, the Midlands area has a somewhat unique appeal to both

tenants and developers or landlords alike, given that it is more forgiving on budgets for renters, but offers the potential to deliver some substantial returns over the long-term when compared with pricier areas.

The HS2 e ect

The development of HS2 has undoubtedly had an impact on the housing situation in the region. While the project itself has been scaled back in ambition, the fact that it will continue to provide faster access to the South from the West Midlands has been a boon for the area. We are just scratching the surface of what that could mean in the years ahead.

This is certainly true around the site of the Curson Street station, where the substantial Smithfield Development is planned, a project which could see investment of around £1.9bn into housing, leisure and cultural spaces. It is likely that, as we get closer to the launch of HS2 itself, further projects will also be announced in a bid to tap into these much-improved transport links.

There has inevitably been substantial disruption courtesy of


is regional sales director for the Midlands at Tuscan Capital

those works, but equally this has seen the development of improved infrastructure, such as new road systems. This, in turn, is helping to spur on new-build developments, designed to appeal to those working within the region itself, but also those commuting into London or elsewhere in the South.

A time of development

At Tuscan, this has meant we are already seeing greater numbers of developers looking to add residential spaces to the towns around the outskirts of Birmingham, particularly those with good links to the metro system. Indeed, many of these towns are undergoing exciting changes of their own – West Bromwich, Lichfield City and Tamworth have all put forward redevelopment plans for their town centres which could see much improved provision of public parks, hospitality and hotels, further boosting the appeal of the region.

These trends are only likely to continue, opening the door for greater numbers of brokers to support such developers and landlords in accessing the funds they need for their ambitious projects, or indeed to focus on their existing portfolios.

This means working with lenders that boast detailed local knowledge, truly understand the region, and are best placed to understand the needs of investors and developers who wish to purchase in the Midlands.

Such expertise can make a significant difference when it comes to ge ing a case over the line, and ensuring the client is able to maximise their returns from any transaction. ●

Opinion BUY-TO-LET April 2024 | The Intermediary 69
Local expertise can make a signi cant di erence when it comes to getting a case over the line

Challenges and opportunities in UK holiday let

Advancements in le ing platform technology, a surge in domestic tourism as a result of the pandemic and cost-of-living crisis, the prospect of higher yields, a favourable tax regime – in combination, these factors have boosted popularity for holiday lets among property investors in recent years. In fact, between 2018 and 2021, it is estimated that the number of holiday lets in England grew by 40%, according to council figures analysed by the BBC.

However, the proliferation of holiday lets has triggered a backlash. As more properties have been bought by investors, residents in tourist hotspots across the UK have complained that these places become ‘ghost towns’ outside of peak holiday periods.

Meanwhile, in many popular holiday destinations, local homebuyers and renters have faced

a diminishing supply of properties, leaving them priced out of the market.

In the popular seaside town of Salcombe, for example, data shows that average house prices reached £1.2m last year, around four-times the national average (£344,185).

With one in 12 properties in Salcombe’s district council being second homes, it is understandable that campaigners have called for the Government to intervene in the growth of the holiday let market. The Government’s response

Rightly, the Government has tried to take a balanced approach to the situation thus far. A er all, holiday lets are important constituents of the UK property market and tourism sector, so clamping down on them too hard risks destabilising what is a booming industry.

But a situation where local people are being priced out of their areas is not sustainable, and several

regulations have been brought in to limit the number of properties being used as second homes and holiday lets in tourist hotspots.

While they will only apply to new holiday lets and those renting out their homes for more than 90 nights a year, they do represent a significant shi for holiday let investors.

So, what are the key policies that have been announced?

1 Additional council tax

First, in May 2022 the Government announced its intention to double the amount of additional council tax that local authorities can impose on holiday lets.

2 Planning permission

In addition, investors will now need to acquire planning permission if they wish to bring a new short-term let property to market – pre-existing holiday lets will be automatically listed. According to the Government’s consultation, this will give local


councils more power to control the number of homes being used as holiday lets in their communities. As part of this proposal, a new use class would be created in the planning system for short-term lets that investors do not use as a home themselves.

3 National register

Elsewhere, plans have been announced to set up a mandatory national register which councils can then use to acquire information about the holiday lets in their areas.

In doing so, they will then be a stronger position to monitor their use, measure the impact that they are having on local communities and ensure they are meeting health and safety regulations.

4 Changes to holiday let taxation

More recently, we have seen a change to the way holiday lets are taxed. As announced by Jeremy Hunt in the recent Spring Budget, from April 2025 investors will no longer have tax allowances for their mortgage repayments or spending on things like furniture and appliances.

The policy is set to affect 127,000 holiday rental businesses and investors, but aims to close the loophole that has caused many investors to turn their long-term residential lets into holiday homes to benefit from the favourable tax regime. Furthermore, investors

looking to buy multiple homes at once will no longer be able to claim relief from Stamp Duty. For holiday let investors looking to shi their assets into a company, this is a particularly important change that could make it a more expensive process.

Balancing regulations with opportunities

Landlords and property investors can be forgiven for feeling as if the Government is once again choosing to penalise them for their investments, when they continue to overlook the central issue that underpins the holiday let debate: the chronic undersupply of homes across the UK.

Countless Governments have failed to maintain their electoral commitments to building new homes and, following the current Government’s decision to scrap its ‘mandatory’ housebuilding targets last year, the clampdown on holiday lets does appear to be another distraction from its failure to deliver on its promise to boost supply.

However, an inequitable property market is simply unsustainable, so these regulations need not cause excessive worry among landlords – particularly those who have preexisting holiday lets – if they do indeed help to create a fairer market.

Of course, there will be additional paperwork to complete and regulatory obstacles to overcome, but the future continues to look bright for the holiday let sector.

For example, recent research by Statista shows that people are taking more holidays per year on average (2.3) than at any time since 2011, and more holidaymakers are opting to stay in the UK. According to the same data, more than £165bn was spent on domestic trips in 2022 alone, so the appetite for holiday homes is clearly there.

As a result, the holiday let market’s size is estimated to have grown by 38% since 2013, according to data from Stripe Property Group, and looks set to continue to grow in the coming years.

Coupled with the fact that shortterm lets can generate up to 30% more yield than a residential property, investor appetite for this asset type is likely to remain healthy – even if there is more red tape to navigate. ●

PARESH RAJA is CEO at Market Financial Solutions

Helping expats gain, maintain or extend their foothold

The buy-to-let (BTL) lending landscape remains challenging for sections of the landlord community, but it’s also one which will provide pockets of opportunity along the way for landlords, investors and developers who continue to demonstrate entrepreneurial spirit.

This was highlighted in the latest Lendlord UK Landlord Survey, which showed that 38% of landlords are looking to expand their property portfolio over the course of the next 12 months.

As to how investors plan to fund these endeavours, 40% intend to leverage existing equity in their portfolio, while 35% would consider taking out a new mortgage or loan. Meanwhile, 25% of investors were open to partnering with others to achieve their property ambitions.

Beyond our borders

While those active landlords are likely to be heavily ingrained with the UK BTL landscape, there are more existing and potential landlords operating from beyond the UK border who are also keenly eyeing this

market in 2024. This comes on the back of a relatively positive end to 2023 from both a market and economic perspective. Indeed, late November saw Offshoreonline, an online mortgage adviser for expats, note a significant upswing in expat mortgage enquiries, a ributing this to the Bank of England’s decision to hold the UK Base Rate steady in November.

At the same time, a straw poll of estate agents revealed a steep rise in enquiries during the second week of November, indicating a growing interest in the UK expat buy-to-let market and house buying in general.

The expat market is an interesting one. In 2022, 90,000 British citizens were reported to have moved abroad to work, and around 560,000 people le the UK to live abroad long-term. This helps demonstrate the vast number of people who are working and living overseas for varying timeframes, many of which are existing UK homeowners. For those that aren’t, a good proportion may be looking at their native market with a view to moving back in the not too distant future, housing their children through higher education or supporting them in their early

working years, planning to pass down property in the future or as a part of a retirement or investment plan.

Whatever the reason, they are reliant on the UK lending community to provide access to a range of options which can help meet their everchanging needs.

We first introduced our BTL expat offering back in 2020 following substantial due diligence and extensive intermediary feedback. Four years on, this remains a somewhat underserved area of the BTL market, largely due to the fact that it requires a specialist approach from lenders which tend not to rely solely on an automated decision-making processes, with manual underwriting key to ensuring that all risk and compliance boxes are ticked.

Inevitably, eligibility criteria will vary from lender to lender. Having said that, as a more general rule of thumb, borrowers in this domain will usually require a UK bank account or credit history, and lenders will give consideration depending largely on which country the borrower currently resides and how the property will be managed.

It’s been a clear positive to see more expat BTL products and propositions emerge in the early weeks of 2024, and with the advice process proving so crucial in such a complex product area, it’s clear that building stronger links and connections with lenders that are specialists in this niche area of the BTL market will help open more doors for expats to gain, maintain or extend their foothold in the UK property market. ●

Opinion BUY-TO-LET The Intermediary | April 2024 72
A good proportion of expats may be looking at their native market with a view to moving back

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Why you need psychology in life

What’s psychology got to do with finance, business, life? Let me ask you a few questions: What’s your background? What subjects did you study? How much time do you spend dealing with people? How well were you trained for that?

If up to 80% of your time is spent handling people – something you may have no real grounding in – this is not only a potential source of stress for all, but a waste of precious human resources if poorly handled.

In my work in executive coaching, I am always looking at how to enhance leadership skills, get the best out of people, create the best working environments for both results and everyone’s wellbeing.

My degrees made me a clinical psychologist. The reason I later moved into business was a naive belief that all the stress I was witnessing in my clinics could be alleviated with good leadership and a successful working life.

Work – you know, that place you go where everyone looks pleased to see you. They know your strengths. They respect your opinion. They work together with you to achieve the best outcomes, led by someone with drive and emotional literacy. Where you get loads of feedback about how well you are doing, which makes you thrive and strive even more. Sound familiar? No?

I still believe in that concept of good leadership as an antidote to stress and a path to good mental health and business success. Sometimes, though, it feels like I’m trying to practise the dark arts.

The senior people I coach got where they are by sheer hard work, drive and technical skill. Then, magically, they were promoted into leadership positions. It’s a bit like saying: ‘you’ve been a passenger on a plane many

times. Have a go. Fly it yourself.’

Consequently, many leaders feel like amateurs when dealing with the complexity that people inevitably bring. So, they do it badly or they delegate, preferably to a woman because they are assumed to know about this ‘so stuff,’ which they themselves find very hard to do.

Scienti c methods

There’s more science to handling the human condition than there is to many of the technical decisions that make up every day in business. It is just very hard to do if you have no real insight.

So, think of my articles as a crash course in the practical psychology that will prove effective in ge ing the best out of yourself and those around you, and according to many clients, improving the bo om line while blowing your competition out of the water. One banking client reported their return on investment (ROI) of coaching as 6:1.

All development starts from the inside out. When working with our clients, we always start by establishing their strengths, which is o en not what they expect. People are always tremendously aware of their weaknesses, having had them pointed out throughout their career, o en to no avail. Why is this? Many of us are uncomfortable with positive feedback, due perhaps to a lack of practice. People rarely ask for feedback for hearing the worst about themselves.

The reality is that, in the past, that is just the way it was rather than the way it should be. It may be partly a gender thing. Men were encouraged to be big and brave and just get on with it. Women and younger generations tend to seek feedback to develop, but have o en been told they shouldn’t need it once they become more senior.

There’s a belief that you ought to be able to tell for yourself that you are doing a good job, and that it is weak to

Think for an instant.

What was the last praise you received from anyone?

When did someone point out your very special strengths?”

seek feedback. In fact, I’ve had clients who resigned because their boss cancelled their appraisal three times in a row. It gave the impression that they weren’t valued, when in fact the boss had failed to recognise the importance of what they privately considered a bit of box-ticking admin.

Think for an instant. What was the last praise you received from anyone? When did someone point out your very special strengths? How far back do you have to go? Do you recall what they said? How did you feel at the time?

Research tells us that, to maintain good behaviour, the ratio of positive to negative feedback should be 3:1. If we want to improve behaviour that ration changes to 5:1. That will seem like a bridge too far for many!

Your challenge for this month

Start to tell people around you about their strengths. Saying ‘thank you’ or ‘well done’ is the bare minimum. Tell them what strengths of theirs contributed to their success

Don’t go overboard right away. Build up your new positivity slowly or it will scare your colleagues! And watch this space for more pearls of practical psychological wisdom. ●

The Intermediary | April 2024 74 Opinion BROKER BUSINESS

Networks must go further with their support

The mortgage market is an exciting one when it’s in positive health, but recent years have demonstrated how quickly things can turn. As rates have risen and the general economy has entered more uncertain times, it’s unsurprising that many potential homebuyers have put those plans on hold, leading to a substantial drop in purchase activity. February, for example, saw the lowest number of residential transactions in a decade, according to HMRC figures.

This can make a tangible dent on the revenue levels of brokers if they are particularly reliant on purchase activities for their income. While a greater focus on remortgages can prove fruitful, it may only go so far.

As a result, diversifying beyond mortgage advice into wider areas has rarely been more a ractive, or more necessary, for brokers to consider.

Helping hand or going it alone

Once you have determined that you want to offer a wider service to clients, the big question is how to go about doing so. Moving into pensions or wealth management, for example, is not an overnight process – you need to ensure that your skills and knowledge in these areas are up to scratch and can rival the depth of expertise you can deliver on mortgages.

This is extremely difficult to do if you are going it alone, but even if you do have the relative security of a network there’s no guarantee that such expansion will be simple. A er all, the level of support around diversification can vary drastically between different networks.

It’s something that we’ve thought long and hard about at Rosemount FS,

Brokers who serve a wider range of needs for their clients are more likely to see those clients return”

recognising that networks have a huge role to play in providing the training and support needed if advisers want to spread their wings and add to their proposition.

To ensure advisers have the right foundation in new areas of their business, we run bespoke training, tailored to their specific needs.

We also hold regular surgeries across a range of different subjects, allowing advisers to pick the brains of more experienced peers, and get their guidance on complicated cases.

The reality is that each advice business is different, so taking a ‘onesize-fits-all’ approach risks leaving some without the training they really need.

Delivering long-term value

It’s vital to recognise that there are important long-term benefits to moving into a wider range of advice services for individual businesses.

There will come a point when those advisers want to leave the market, to sell their business and retire, or even move into something completely different. That is reliant on their business having some embedded value, something longer-lasting beyond the more transactional relationship that may result from being strictly mortgage-focused.

A er all, brokers who serve a wider range of needs for their clients

are more likely to see those clients return year a er year, with each interaction offering the opportunity to highlight other ways in which the advice business can help them. For example, when the time comes to remortgage, the broker can also open discussions around their investment plans, pension provisions, and the like. It doesn’t have to be limited solely to mortgages and protection.

We have a business strategy manager on the team who can help guide advisers on building that value, based on his own experience se ing up a mortgage advice business which went from a standing start to bringing in £250,000-plus a year. The fact that he has lived it adds greater weight to his suggestions, helping our appointed representatives (ARs) build value in their business which will deliver longterm benefits.

Finding the right network

Networks have an enormous role to play in helping AR businesses to achieve their potential.

All too o en we hear of networks pu ing in the hard yards to woo an adviser into signing up, only for that adviser to then feel like li le more than a number once they are part of the network. But it’s at this point that the network can truly deliver value to the AR in helping them build a stronger, more efficient business for the years ahead.

If that means diversifying and offering advice across a broader range of financial products and services, then it’s crucial that a network has the right systems and support in place to ensure the advice business can do so to the best of their abilities. ●

April 2024 | The Intermediary 75 Opinion BROKER BUSINESS

Meet The Broker

Clifton Private Finance

The Intermediary sits down with Sam O’Neill, head of bridging at Clifton Private Finance, to talk about the broker’s role in a problem solving market

First, can you introduce yourself for the readers?

I head up the bridging team at Clifton Private Finance. Before I joined, Clifton was predominantly brokering traditional residential and buy-tolet (BTL) mortgages. When clients needed bridging, they’d refer them to me. But with clear demand from Clifton’s clientele, they eventually brought me on board internally to build a dedicated bridging team.

That’s a reflection of the wider market at the time – bridging has become harder to ignore as time has progressed, and it brings with it the benefits of doing something a little more specialist.

Our core service is regulated residential – chain-breaks, downsizing, upsizing, buy before you sell – but we do a little bit of

everything. Again, I think that’s a reflection of the wider market.

Not every bridging broker is regulated, so it’s certainly a selling point. Some brokers just focus on commercial development conversions, for example, but may not advise on a residential bridge because they’re typically smaller deals. However, that client might speak to their brother-in-law who is a serial property developer and needs a significant development exit deal. We’ll win that because we’ve done the residential advice well.

Residential bridging is our backbone, while the more specialist development cases can be where the proc fees are more attractive. I might help an elderly client downsize for retirement today, but then work on a £2m development exit case for an experienced developer tomorrow. That’s what makes it interesting.

How do you approach working with clients?

Everyone experiences the same process with us, whether it’s a multi-million-pound deal or a smaller deal. We’ve invested heavily into our front-end infrastructure and technology to make the journey as easy and transparent as possible.

We were previously using a system that we had to shape, whereas our new system is specifically built for what we’re doing. There’s a lot of automation in terms of prompting brokers and clients to make sure that there are no stalemates where they’re waiting for documentation, for example.

We’ve also created internal calculators which essentially replicate what lenders are quoting, so I keep my finger on the pulse

The Intermediary | April 2024 76

and make sure that’s all working correctly. That way, we don’t have to go to the lender every time we want a set of terms. Even that process is going to be more automated now with the new system we’ve built.

Can you tell us about the firm’s graduate scheme?

We decided to invest in the graduate route, hiring ambitious individuals off the back of strong university results, and teaching them what we do. We invest in their development and progression. We’ve taken on nine trainee advisers since 2019, and they’re all still with us today.

In terms of the client journey, all of our advisers have been taught the same high standards of work, following the same training process. If a client calls, whether a serial developer or residential, they’re going to get the same service no matter who they speak to.

There’s a common challenge for new talent entering the finance industry – securing your first role without any industry-specific experience to your name. Our scheme certainly opens that door to those who are serious about a career in property finance.

But we’re not in the habit of bringing people in and expecting them to just learn on the job. We’re a regulated firm in a very regulated industry, and we take training and development seriously.

It’s also worth noting that some of the clients in this industry – perhaps those buying a property and turning it into a house in multiple occupation (HMO), or doing it up and flipping it – might be in their 20s, and find it refreshing to speak to someone of the same age. While there’s no substitute to hands-on experience, you don’t have to have 30 years of experience to be a good adviser.

From a business perspective, there isn’t a huge pool of brokers with 30 years of experience looking for new opportunities. But you can invest in people and start developing that experience in a nurturing

environment – even if they might not be ‘income-generating’ immediately.

While many companies run graduate schemes when times are good, we’re proud to say that we kept with it even when times were tough during Covid-19, as well.

What are the big trends so far in 2024?

We’ve seen a big uptick in development exits over the past few months. As a country, we’ve been trying to build more homes for years, but that’s not a two-minute job, so obviously the domino effects from market events aren’t immediately visible. Clients building homes need finance to pay off the developments until they sell, or perhaps they’ve seen another opportunity and they need some cash out.

Generally these are higher value deals and good repeat clients, as opposed to transactional. This is a type of client that, again, is getting more difficult to ignore, and brokers who don’t do development exits should consider referring them to someone like us.

As for other market trends, transactions across the board are good. We were busy towards the end of last year and still at the start of this year. Bridging in particular is growing and expanding as a market in general.

What role does the specialist market have in meeting the challenges of the post-Covid years?

Bridging was thrust into the limelight with the Stamp Duty Holiday in 2020-21, as residential buyers wanted to move fast to get transactions over the line.

Lenders could have seen this as a chance to bump rates and make hay while the sun shines, but instead the market thought ‘how do we pull our socks up and give these clients a good service?’

As time goes on, more people hear about bridging and know of it as a useful tool, with good products. People may be nervous about the potential costs, but today the best bridge on the market is within about 0.5% from standard mortgage rates.

It’s becoming a more important tool for addressing any and all property financing problems, be that short-term cashflow, needing to be a cash buyer, or giving your existing property enough time on the market to sell. It’s a product made for problem solving. Nobody wakes up in the morning wanting to take a bridging or development exit loan. Every deal we do is problem solving in some shape or form.

How do you help clients deal with difficulties in the development market?

It’s really about having an honest and frank assessment up front. It’s also about finding a balance between getting them the best price possible, and getting them the best package. Is a lender going to sting you if you go overtime with horrible fees, or are they going to work with you? Are you trying to take short cuts with your contingency plans, only to risk getting stuck?

The broker’s job is to look beyond just the black and white numbers. Is this person a first-time developer? Do they want to be dealing with a big machine of a company, or making relationships with a lender they can use time and again?

You get what you pay for. It might be a bit more expensive to use a more boutique lender but they’re going to come and visit the site, look you in the eyes. Then they’ll work with you if things are difficult.

The other end of the spectrum is that there are lenders that are very quick, but fairly expensive. It’s lazy for a broker to fire all their cases to them without figuring out what the client’s drivers really are.

It’s all about getting to know the client and their motivations. ●

April 2024 | The Intermediary 77 MEET THE BROKER

Case Clinic

Want to gain insight into one of your own cases in the next issue?

Get in touch with details at


Client with three sets of arrears

A customer is looking to purchase their first home but has arrears on three financial commitments. After viewing their credit report, they also discovered that one had reached default status. After contacting a number of lenders, even those that would normally lend on adverse credit were not happy with the recent nature of the adverse credit. To combat this, the debt has now been cleared by the customer’s parents. However, the customer is still finding it difficult to place their case.


“We could potentially consider this case, but it would largely hinge on the nature of the commitment that fell into arrears. If it’s unsecured, it aligns with our criteria, and we’d therefore be able to move forward with the candidate’s application. However, for secured debts we would need further details as missing payments on secured debts would hinder our ability to proceed. If repayments were simply late, there’s a possibility we could move forward.”


“This could be considered providing there is no more than one missed payment within the past 12 months and the other two arrears are more than 12 months old. Alternatively, if all three are older than 12 months, then this could be considered for below 80% loan-to-value (LTV).

“Again, to fit within policy of up to 80% LTV the default must not total above £1,000 registered in

the last three years, or over £500 in threeplus years.”


“Flexibility is at the core of our approach, especially when dealing with unique cases such as this one. The client, despite facing challenges with arrears on three financial commitments, including one reaching default status, can find assurance in our commitment to exploring viable solutions.

“We have a specialised credit repair range tailored to address such scenarios. Upon initial review, it’s crucial to delve deeper into the specifics of the missed payments and defaults.

“Understanding whether these commitments are secured or non-secured plays a significant role in shaping our decision-making process. Additionally, certain types of arrears, such as utility bills, may be treated differently, potentially offering further leniency. In this case, the positive aspect of the debt being cleared by the customer’s parents signals a proactive approach to resolving financial obligations.

“It’s worth noting that all defaults must be satisfied to meet policy requirements prior to or at the time of application, a requirement that the client has already met, further strengthening the case for consideration.

“Our willingness to accommodate would allow us to consider up to 70%.”


“We can consider cases where applicants have had a life event or issues with management of existing debts. The society does not base its lending decision on the credit score, it looks at the credit search. With our manual approach to lending this helps us consider each case on an individual basis.

“The society would need to understand what happened to cause the applicant to miss payments, how much they were for, and whether they are now back up to date. Any defaults or CCJs that are outstanding would need to be

The Intermediary | April 2024 78

cleared on completion, but the society would do this on behalf of the applicant. The society has a number of options to help applicants who have experienced difficulty with our non-standard credit and impaired credit product options.”


“Mansfield Building Society has a range of products to accommodate clients who have had credit blips – whether it’s historic adverse, which we can consider on our prime range, or more recent defaults, which we can look at on our credit repair proposition.”


63-year-old renter looking to purchase

A63-year-old, semi-retired client, with a large pension pot exceeding £2m, is renting his home and looking to buy. The client wants to own a new home to enjoy his retirement years, without depleting his pension savings. But he also doesn’t want to pay an high amount per month for his mortgage. The client is determined to leave as much of his pension untouched to avoid the hefty 40% tax hit.


“The society does have products to help support older applicants, and can take pension income to support affordability, as with no max age, we can help support longer terms to help. The applicant would need to have some deposit to support the lending. We would require more information to look at how we could support.”


“We understand the importance of flexibility. With a substantial pension pot exceeding £2m and a desire to purchase a home without significantly impacting retirement savings, we’re committed to exploring viable options depending on the nature of the client’s earned income – especially applicable for non-manual workers, where we can consider this income up to the age of 75. Additionally, we can explore the possibility of monetising the pension to bolster financial stability if required.

“In terms of mortgage structures, we’re open to considering full interest-only options, provided the applicant holds a minimum of £150,000 in equity within the security property. It’s important to note that the LTV ratio remains conservative, typically not exceeding 75%.”


“The standard we would be able to consider on interest-only would be up to 75% LTV; however, as the applicant is semi-retired this would cap the LTV to 70%. Assuming the payment vehicle plan was downsizing, the society would be willing to go up to the age of 80. The only requirement is that there must be a property within a three-mile radius that the applicant could downsize to with the equity remain in the property. In order to consider the pension income, the applicant must be making monthly drawdowns in order to be used for affordability.”


“Mansfield is able to consider applications from clients and take the mortgage up to age 85 on interest-only or on a repayment basis. Scenarios like this are bread and butter for a lender like us.

“We would be happy to use a percentage of the applicant’s pension pot without making him start to draw the income. We are interested in what they could draw as opposed to what they have.”


Dream home with cladding issues

AA couple is looking to sell their existing property and purchase a new dream home. They initially opted to approach their bank directly, believing it would be a straightforward process. However, they found themselves in a complex situation due to issues related to the new property’s cladding and the absence of a valid External Wall System (EWS1) form. The application, submitted directly to their bank, faced a prolonged two and a half months of processing before being outright rejected. The rejection was attributed to the cladding on the new property and the absence of a valid EWS1 form. This not only put a halt to the sale of their current property, but has also jeopardised the purchase of their new home.

April 2024 | The Intermediary 79


“Unfortunately, we would not be able to assist with the purchase of the new property. The society requires an EWS1 to be in place before we consider lending against the property. However, if they chose to remain in their property and extend or refurbish it, we have a self-build product that would be suitable for these purposes. They could work with an architect to create their dream home, which would hopefully be suitable for their changing needs. We release the monies in tranches, and the clients only pay interest on the monies drawn down. The initial mortgage is placed on an interest-only basis during the process of the build and can remain so, or the clients can opt for a full repayment or part and part.”


“Unfortunately, this would not be one which we consider as we would require an EWS1 form to be in place.”


“The society would be unable to support in the absence of an EWS1. We follow the guidance of surveyors, and this is still a requirement.”


“This is not a scenario we can consider due to the property type. Without a valid EWS1 form we are unable to lend.”


Buying a current rental home

Aclient has the option of buying their current rental home from the landlord who is looking to sell. The landlord has provided a £10,000 gifted deposit, and the tenants have a family gifted deposit of £20,000. The overall property price is £300,000. One of the clients has recently repaid a Debt Management Plan (DMP), as of January 2024. They have a joint income of £53,000 salary plus £12,000 bonus and overtime income – so overall income is around £70,000, with no significant outgoings. The biggest issue for lenders seems to be the acceptance of the landlord’s gifted deposit, alongside the credit impairment from the repayment of recent DMP.


“This is something which we would have been able to consider as the society has no issues with gifted deposits from the seller or family members. We can also consider 100% of bonus and overtime income providing we can see 12 months evidence. The issue we have is the client recently being on a DMP. Our policy states that the clients cannot be subject to a DMP within the last three years.”


“We accept gifted deposits from family, but we wouldn’t accept a gifted deposit from a landlord. Unless this is in the form of gifted equity by way of a discounted purchase price. Unfortunately, we would not be able to assist.

“Our maximum LTV is 80% on a full repayment basis and the clients require 90%. With regard to the DMP it would need to have been repaid for at least 12 months before we could consider.”


“The society can consider a landlord gifted deposit up to 10% as long as the applicant has been renting the property for 12 months as a minimum, the property would need to be sold at full market value, but landlord can provide a gift.

“As the DMP has only just been paid off it would fit on the impaired product up to 70% LTV.

“The applicants would need to provide an explanation as to the life event that occurred for the DMP to have been in place, and confirmation would need to be provided by the DMP provider to confirm that all payments have been made.

“Affordability would need to be checked first on the society’s affordability calculator.

“As the society does not base any lending decisions on credit score, the case would not fail due to maybe having a low credit score due to the impact of the DMP.”


“At Mansfield we take a holistic approach to lending. We take the time to understand each case and also the scenario, therefore combinations of criteria such as this are things we can accommodate. We can accommodate a recently repaid DMP up to 85% LTV on our Versatility range. We can also accept the gifted deposit from a family member, but would not accept the deposit from the landlord. If the landlord can exchange the goodwill from a gifted deposit to a discounted purchase price for the property, we could accommodate up to 95% of the discounted purchase price (max 85% LTV because of the background DMP).” ●

The Intermediary | April 2024 80

Timing can be everything when switching W

hen a broker decides to switch networks, usually that is it – once the decision has been made, there is no going back. Yet when you make the move could make all the difference.

Last year was particularly busy in terms of appointed representatives (ARs) switching networks, and I suspect timing played a part in many brokers’ decisions.

During 2023, the mortgage market experienced several quiet periods. Gross mortgage lending fell to £226bn according to UK Finance figures –down 28% compared to 2022.

Naturally, when the market is busy, brokers may not have the capacity or time to consider moving networks, or they may lack the resources to implement any plan of action. In contrast, quieter times not only offer a period of reflection, but perhaps more importantly, a time when brokers’ outstanding commission payments are relatively low.

It used to be that the market saw a lot of network movement around December and January, as these months were traditionally the quieter

periods. Last year, however, was the exception, with January in particular being very busy and the market seeing a record number of sellers put their property up for sale.

It may be that those brokers who considered leaving their network put their plans on hold, but will revisit them during a quieter period in the market this year. Of course, when this may be is becoming increasingly hard to predict.

Being ready to act

If we look to 2024, the latest predictions from UK Finance show that gross lending is expected to fall by a further 5% to £215bn before the market is expected to rebound in 2025, which potentially means there should be an opening for brokers thinking about leaving their network to do so.

If you have decided to make the move, it can be worth pu ing the wheels in motion so that you are ready to act when the opportunity arises and outstanding commission payments are not at their peak.

While any outstanding payments and commissions should be paid upon leaving a network, the process can be messy and there is always a risk that some networks might unfairly

withhold owed commissions, at least for a period of time while paperwork with the new network is finalised.

There are lots of different ways a network operates. At Beneficial, for example, our members pay a flat fee, so brokers keep 100% of their commissions. However, this isn’t the case with all networks, and one of the biggest worries for brokers leaving a network is the fear of not being paid what is owed, so it’s perhaps wise to plan for the worst-case scenario.

We know from our own experience when ARs migrate over to us that they have thought long and hard about the move. ARs can move for lots of reasons, but one frustration we o en hear is incompatibility with a network’s technology, whether this sourcing systems or customer relationship management (CRM).

While technology should make brokers’ lives easier, it can also make it harder. We know from our own day-to-day use of technology, whether it's our mobile phones or laptops, that if it's not the right fit, tasks can take longer.

Another reason we o en hear from brokers coming to us from larger networks is that they felt like they were just a ‘cog in the machine.’

Unfortunately, this sentiment is not uncommon, and sometimes a broker can be so dissatisfied with their network that they may feel it’s a bit like ripping off a plaster – they just want it over with quickly.

Yet, there can also be some benefit to not acting on impulses and instead planning and choosing the right time to leave – this could make all the difference financially. ●

April 2024 | The Intermediary 81 Opinion BROKER BUSINESS
MAT REES is chief executive o cer at Bene cial Network Planning the right time to switch networks could be bene cial to brokers considering moving

A closed book on closed products

While the vast majority of financial services organisations naturally look to provide good customer outcomes, the introduction of Consumer Duty took significant time and effort to deliver. We have not ticked the final box as yet, even as we face the final ‘closed products and services’ deadline of 31st July 2024.

Given the focus of the changes, there is li le doubt that it will be the providers and funders that are most impacted. However, as it also covers services, advice firms need to fully understand the legislation and make the necessary adjustments. To support provider, funder and adviser members, the Equity Release Council (ERC) recently published a practical guide which considers what needs to be achieved by this date.

To start, it pays to understand what is considered a ‘closed product or service’ and what is not – especially if you are providing long-term advice such as that seen in the later life lending market. A product or service is considered closed if – in the case

of equity release, for example – no new customers can take the plan out. Further agreed borrowing in the form of drawdown can still be taken when the product is closed if the provider allows it, but this is not necessarily guaranteed.

While the product may be closed, the distributor – in this case the adviser – has an obligation to continue to support customers who have previously utilised its services.

To achieve this, advisers should consider the Consumer Principle and cross-cu ing rules as clearly outlined on the Financial Conduct Authority (FCA) website.

There are four key areas in which advisers are ideally placed to support ‘closed book’ customers.

1 Existing customers should be supported when their circumstances change, and the suitability of the product needs to be assessed. In the equity release space, this might mean contacting a client whose early redemption charge period has come to an end to ensure they are still ge ing the best value.

2 Where the adviser has an ongoing relationship with the customer, they may want to consider if the

features and benefits are being used and offer value. You can only take out equity release with the support of an adviser, so while the provider has a relationship with the customer, they remain a client of the advice firm and any agreed regular reviews need to take place and be clearly documented.

3 Distributors should consider the information needs of existing customers and how information is shared, which is clear, fair and not misleading. If it becomes apparent post-completion that the customer is not clear on the product details, it is vitally important to take the time to meet them and provide clear wri en communication to aid understanding.

4 Finally, the spotlight falls on customer support. A er the age of 55, there are likely to be material changes to an individual’s health, finances and needs. Advisers need to consider how they best support each customer with a tailored and appropriate approach.

Given that there is only a ma er of months to go until we reach the final Consumer Duty deadline, I anticipate that most firms will be well on their way to achieving what is necessary to support their closed book customers. This is good news for the industry, but we do need to avoid complacency and remember that Consumer Duty has never been about a point in time. It was designed to be a cultural change for the entire financial services industry, and will challenge firms to learn, adapt and grow long a er 31st July 2024. ●

Opinion LATER LIFE LENDING The Intermediary | April 2024 82
KELLY MELVILLE-KELLY from the Equity Release Council It is just a few months until the nal Consumer Duty deadline

LTMs have potential as advisers look to holistic solutions

The later life lending industry has seen challenges over the past year; however, 2024 is expected to see renewed interest and modest growth in the sector as customers reconsider making the most of their property wealth and look into options such as lifetime mortgages to support financial needs.

In the UK, over-55s hold more than £3.5tn in housing wealth, according to the Office for National Statistics (ONS), driven by years of house price growth. Despite some uncertainty, the market continues to be in their favour, as house prices remain significantly higher than pre-pandemic levels, having risen for a fi h consecutive month in February, according to Halifax. For those above 55, property wealth remains one of their most valuable assets, with the potential to make a significant difference to their financial capability into retirement.

The past few years have seen enormous challenges to household costs, from the impact of the pandemic to the current recession. This, along with longer-term social changes, such as longer retirements and increased reliance on older family members to provide financial support, has seen the needs of customers change over time. To meet these increasingly diverse needs, advisers are frequently called on to provide a greater range of options.

In response, the later life lending sector has continued to evolve and innovate, anticipating that accessing property wealth will become an increasingly mainstream option for financial planning. We also know that homeowner a itudes are changing, and the number of homeowners open to using equity release is

expected to rise as a itudes among consumers shi .

At Legal & General Home Finance, our figures already show that a quarter (25%) of new customers are taking up lifetime mortgages (LTMs) to repay their mortgage. This trend has the potential to grow, and is in addition to a broad range of potential uses of equity release, from home improvements to the provision of financial gi s for loved ones.

Diverse challenges

The infrastructure that sits around later life lending has allowed it to evolve in such a way that it can meet a range of diverse challenges and become a more trusted, mainstream option.

Industry trade bodies have shown support towards the development of new products, and ensure standards are high. Recently, the Equity Release Council (ERC) updated its standards on mandatory payment term lifetime mortgages (PTLM), which brought an extra layer of reassurance to customers who are looking for improved borrowing options.

Legal & General Home Finance also recently introduced the PTLM, a first-of-its-kind product for over50s, designed to offer more choice for homeowners who are si ing on equity in their homes, but can’t access it because of their age and borrowing needs.

In addition, broader changes such as the introduction of the Consumer Duty regulations will support the move towards more integrated financial advice. The changes not only target the simplification of products, but also offer the opportunity for people to access more holistic mortgage and financial advice, without having to pay additional fees.

As we progress further as an industry, this will become more the norm, and customers will expect to interact with advisers who can offer them a range of options to suit their individual needs, further pushing later life lending into the mainstream.

As this change occurs, lenders must continue to work closely with advisers and listen to their feedback, to help provide the best customer outcomes.

We’ve transformed the lifetime mortgage market since our entry in 2015, and we continue to innovate by exploring customers’ evolving demands, identifying customers’ appetites, and being on the side of advisers by trying to offer a seamless process on the Legal & General Adviser portal. Legal & General Home Finance was one of the first providers to offer drawdown, so customers only borrow what they need when they need it, to suit their circumstances at the time.

We were also one of the first to introduce an optional payment lifetime mortgage, encouraging customers to pay the interest on their loans through a regular monthly direct debit, which provides them with the flexibility to manage their interest across the life of their loan.

The lifetime mortgage industry has evolved significantly over the years, offering more solutions for changing customer needs, and accessing property wealth is becoming an increasingly important option to support people’s later life financial planning.

While lifetime mortgages aren’t for everyone, the products have the potential to be an essential consideration as advisers look to provide holistic solutions in client conversations. ●

Opinion LATER LIFE LENDING April 2024 | The Intermediary 83

What to ask clients for a successful later life mortgage

Lending to older borrowers is increasing in response to the rapidly aging UK population. For example, by 2066, UK residents aged 65 years and over will total 20.4 million, according to the Office for National Statistics (ONS).

An essential part of meeting this demand is to support their mortgage application process. But older people o en have unusual or complex finances, which means that brokers can easily overlook vital information that would help evidence their affordability.

To get a successful case through, brokers need to supply lenders with relevant information, such as the client’s retirement income through their pensions, employment, investments or other assets. Business development managers (BDMs) can then work with underwriters to find a solution.

However, if the broker hasn’t asked the right questions, even an affluent older client with several income streams can be rejected.

So, which questions should you ask to help clients sail through their mortgage application?

Understanding their needs

First, it’s important to understand why older people might apply for a mortgage. Sometimes, they want to help their children or grandchildren get on the property ladder, so they free up cash that is currently tied up in their home, and use it towards a deposit. In 2023, parental help was estimated to contribute to 47% of home purchases, according to Legal & General.

Other older homeowners might want to remortgage their property to

help with Inheritance Tax planning, or release equity to access muchneeded retirement income.

What to ask

Affordability for older borrowers is not always clear cut, so the client may need your support in understanding their own situation. They may have different income streams but not always know what their exact income is.

Do they know where they can get impartial pension advice or guidance? Do they have a financial adviser or a wealth manager? Do they know what to do if their spouse passes away before them?

Working with the client, you’ll need to patiently unearth the facts.

1 Pensions

It’s essential to provide the lender with details of the client’s pension or pensions, including the value and any relevant details around drawdown rules.

You’ll also need to ask the client how much their state pension is worth and when it’s due to start paying out.

Then find out if they have a private pension. If they do, you should ask:

◆ when they can claim and begin drawing down;

◆ whether they have any defined benefits;

◆ if they have a self-invested personal pension (SIPP);

◆ if they have a small, selfadministered scheme (SASS) pension.

2 Investments

You’ll need to ask whether the client has any investments. If so, you’ll need to understand the nature of how they can be used and if they have any maturity date.

While investments can help with affordability, some clients will be unaware of how they can make the most of them. For example, you can ask if they can sell company stocks, investment funds, bonds or ISAs.

Not every lender will accept every form of income, but there is a lot of flexibility with some mortgage lenders, particularly those that are later life specialists.

Technology helps

A client-focused matching engine will steer you through all these questions and more, making sure you’ve covered off all the potential income sources that may improve the outcome of your client’s affordability check.

An even be er matching engine will also – based on your client’s data – suggest a list of products suitable for their specific requirements.

Whether 50 to 90-plus years old, retired or working, they could still be considered for our retirement interestonly (RIO) or a lifetime – equity release – mortgage, neither of which have an upper age limit. Our oldest borrower was 92 years old when she came to us.

Ageism is over the hill

Despite the growing number of older people, many high street lenders still take a conservative approach to mature borrowers.

Yet later life lending is a growing market full of short and long-term opportunities for intermediaries. Consumer Duty notwithstanding, with the right questions and guidance, brokers and lenders can help older clients achieve their life goals. ●

Opinion LATER LIFE LENDING The Intermediary | April 2024 84
LES PICK is head of intermediary sales at LiveMore

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Five tips for stronger GI conversion

Many industry commentators expect the housing market to recover across 2024, but with house prices still rising, advisers may continue to experience muted borrowing activity.

While advisers are no doubt being kept busy contending with changing mortgage rates, many are seeing a smaller pool of clients.

Homeowners need insurance, so diversifying to add general insurance (GI) to your portfolio adds value for clients, and in turn helps advisers build a more resilient business.

There are several ways mortgage businesses can go about offering GI to their clients, whether it’s the adviser offering advice themselves, employing an in-house GI specialist, using a telephone referral service, or providing clients with a digital journey where they can buy quality insurance in their own time.

Paymentshield’s telephone referral option is backed by a team of insurance experts trained to offer advice. So far this year, our telephone referral team has delivered a quote-tosale conversion rate of 63%.

So, if you’re wanting to improve your own GI conversion, or would like to know more about the conversations we have with the clients referred to us, here are the secrets to our success.

1 Ask probing questions

Fact-finding is critical, but this must go beyond the obvious questions about the property itself. We ask questions that help to establish what the client really values: What’s important to you about your insurance? What do you expect this to do for you? Are there any

specific items you want to make sure are covered?

We want the client to feel we’ve put in the effort to really understand them, rather than immediately offering them a standard product.

Establishing these things upfront is important to support the rest of the conversation, allowing us to link back to why a particular option will meet their needs.

2 Tailor the conversation

Anything picked up during the conversation can be used to help shape it and show we’re actively listening. For example, if the client mentions a dog or cat, it could be an opportunity to talk about product exclusions such as pet damage, and introduce optional extras into the conversation.

Likewise, if they mention that their child is going to university, we might reference specific product features that may benefit them, such as that up to £10,000 of contents cover is included for household members who move out.

The key thing is to be flexible and adaptable, and to be led by what the client tells us.

3 Assess eligibility early on

We sometimes get cases referred to us where a customer isn’t actually eligible for our standard home insurance. This might be because they have a bespoke type of property, it might have subsidence, or it might be used for business purposes.

We establish upfront whether we can help, and we don’t waste their time if we can’t. You don’t want to go through the process, get to the property detail stage, and then realise what you’ve discussed so far is no longer applicable.

4 Demonstrate how the product performs

Everyone is price conscious in today’s market, and it’s important to be prepared to address that. Reinforcing the benefits and demonstrating how the product performs if something were to happen is really important. It can also be a good opportunity to link back to what’s valuable to them. For example, an optional extra might ensure a ring they mentioned earlier is covered both in the home and away.

We also make sure that if they ever do need to make a claim, they are confident that they can afford the excess. We’ll talk them through the different excess options, as well as what they might pay with or without optional extras.

5 Respect the decisionmaking process

If the client needs more time to consider, we’ll diarise a convenient time to get back in touch. Clients might need to go away and check the value of an item. Some people are just naturally more reflective. There’s no rush to make the sale today!

Agreeing a time to call back means that you’re not going to catch the client at a bad time, and they’re willing and prepared to carry on the conversation. Using these tips will stand advisers in good stead where they are having the GI conversation themselves. But even if they do want to refer, it’s still a good idea to pose some of these questions to the client beforehand. In doing so, they’re effectively warming the client up so they know what to expect. Our data tells us that where advisers do this, it leads to a more effective referral and stronger conversion. ●

Opinion PROTECTION The Intermediary | April 2024 86
TONI MAWER is outbound customer operations manager at Paymentshield

A polite suggestion around protection

How much time do you spend talking about protection with clients for whom you are arranging a mortgage?A er completing a mortgage, how important is it to your business that you can boast that the protection needs of your clients have been fully discussed and actioned?

Hopefully, you set up regular reviews to keep track of all of your clients, especially those who turned down your protection suggestions at the time of mortgage completion. If you don’t, then you are missing out, not only on a repeating income source, but also the satisfaction of knowing that you are fulfilling your obligation to offer clients a truly full service – not just the mortgage part.

Some argue that the financial reward for advising and arranging protection is not matched by the work required to offer such a service. That sounds like a pre y mercenary position to take, bearing in mind that – as the regulator has increasingly pointed out – it is a fundamental part of every adviser’s work to point out where there are weaknesses in a client’s financial planning and offer solutions accordingly.

Mortgage brokers might think that they can afford to ignore client protection needs, as they describe themselves as offering a mortgage

service only, but with li le extra effort, they can ensure that – at the very least – clients are made aware of the dangers of not having adequate buildings and contents cover.

It might not be as lucrative as arranging a mortgage, with its procuration fee and perhaps a broker fee, but many advisers only tend to look at the first year’s commission, and forget that the average lifetime of a contents policy is at least five years, along with the renewal commission that goes with it.

The Financial Conduct Authority (FCA) has had to spell out under the new Consumer Duty regime that it expects all advisers to demonstrate a tangible duty of care to all customers. This not only includes the protection conversation but also a wri en account of the recommendation.

Compliance to the new rules has to be backed up by demonstrable evidence, not only at point of sale but also showing that existing clients are looked a er on a regular basis to ensure an ongoing duty of care.

At HL Partnership (HLP), we help our members to see how important protection is in a number of ways.

First, education. We provide voluntary workshops and facilities so that appointed representative (AR) principals and their teams can be made fully aware not only of the nuts and bolts of the products, but also how the protection conversation can be

made in a way that is easy for clients to digest, for the greatest chance of a recommendation being accepted.

We have also set up a specialist unit within HLP, the role of which is to deal with client referrals from members for protection advice.

This unit provides an important resource for member firms to utilise, and ensures that all clients are in contact with a protection expert should the member make a referral with the client’s permission.

Commission earned is shared between the unit and the member firm, so for no cost, members are able to fulfil their obligation to their clients and stay compliant under Consumer Duty rules.

Most importantly, customer needs are properly explored, and recommendations made.

In an era where clients can go online and find the ‘cheapest’ protection quote for themselves, in case a er case customers have been disappointed to find that their quick and easy online home and contents policies did not provide the cover they thought.

Mortgage brokers are in the best position to make sure that customers’ circumstances and needs are synchronised so that a recommendation is based on real life.

It might not be the cheapest deal at the outset, but it can be the cheapest solution for the individual’s particular requirements.

I strongly urge all brokers to give priority to ensuring that every client is provided with protection advice.

In the event that it is not taken at outset, I suggest that the protection conversation is constantly returned to in regular annual or semi-annual client reviews. ●

Opinion PROTECTION April 2024 | The Intermediary 87
CHRISTOPHER TANNER is CEO at HLPartnership Mortgage brokers are in the best position to make real-life recommendations

What is value in protection? 31

– this is the number of times the Final Non-Handbook Guidance on the Consumer Duty references “price and value.” Shorten this search to just “value” and you will find the word is referenced 211 times. Indeed, the entirety of Chapter 7 is dedicated to “the price and value outcome,” in which the regulator sets out its expectations.

But what is “value” when it comes to protection, and how does this change for different clients?

The term can have different meanings depending on how it is used, but the considerations will always be cost and what the customer is ge ing for that amount. Theoretically, things that cost more should provide more.

From a protection point of view, life cover is the generally the cheapest type, with income protection o en the most expensive. This is because a person is more likely to require time off work due to ill health than they are to die. Is protecting income, maintaining their ability to pay their monthly bills and keeping a roof over their head more valuable for most clients?

If we look at product selection, does the cheapest product always represent the best value? Guardian’s Life Protection plan is slightly more expensive than many life policies, however its terminal illness definition is far broader, meaning it is more likely to pay out than other policies.

The value conversation

When considering income protection, the cheapest policies will only pay for one year at a time. Full-term plans are more expensive, but the average length of a claim is o en reported at five to six years. Imagine having to tell your client that, because they saved a few pounds a month, their claim is going to stop even though they are

still off work.The stability of a client’s income is another key consideration for advisers. Self-employed and contract workers may have earnings that fluctuate month-on-month or year-on-year. This opens up risk to both under- and over-insurance.

Fortunately, modern plans provide features to protect against these risks. The ability to financially underwrite income at outset – and as such guarantee the amount paid at point of claim regardless of how much they earn – is particularly useful for such clients.

Critical illness presents a host of value conversations. Is the client willing to pay for more comprehensive cover? Do they have children? Are they planning to have children?

These are all important questions that will have an impact on the type and structure of plan that may provide most value to them.

If a client doesn’t have children or their children are grown up, they cannot claim on children’s cover. Children’s cover would therefore offer no value to them.

Pay more, get more

These are all factors that we enable users of ProtectionGuruPro to assess when analysing protection plans. Combining information about the client and their particular scenario with both a quality assessment and the price enables advisers to have that value conversation.

Of course, you will not have the luxury of taking this approach for every client, and in some circumstances cost will be the biggest factor in determining value.

Likewise, there may be pre-existing medical conditions that mean underwriting decisions dictate which policy offers best value.

Where there are not influencing factors, it must make sense to buy a more comprehensive plan when protecting loved ones.

ADAM HIGGS is head of research at the Financial Technology Research Centre
The Consumer Duty clearly states that ‘fair value is about more than just price’”

Indeed, research conducted with ProtectionGuruPro users shows that, when given the choice between the cheapest product or a be er one, 85% of consumers are happy to pay a li le bit more to get be er cover.

Most clients will opt for a be er plan when shown a value-based assessment of why premiums are higher. Our experience is that the average client is willing to pay £6 per month more for a be er plan.

Consumer Duty is very much here to stay, and the focus on avoiding foreseeable harm means that a protection conversation is vital.

Few realise this, but the origins of the Consumer Duty were very much driven by the need to address the protection gap, as it is the Financial Conduct Authority’s (FCA) response to Lord Sharkey’s proposal to introduce a direct right of action against anyone who sold a mortgage without protection.

Consumer Duty clearly states that “fair value is about more than just price.” While for some clients the cheapest product may represent fair value, our research suggests that most clients will select be er cover over the cheapest in most cases.

As such, just selecting the cheapest products without justification as to why this represents fair value is not good enough. ●

Opinion PROTECTION The Intermediary | April 2024 88

Why e-signatures are important

In any discussion about the merits of technology when it comes to the mortgage process, it is easy to underestimate how the smallest innovation can help to move the needle of progress on.

E-signatures have been around for many years, but their adoption by businesses up to this point has been inconsistent. Questions have been asked – and continue to be asked –about the validity and legal status of e-signatures, which has hampered their widespread adoption.

Although the Government accepted the conclusions drawn in the Law Commission’s Law Com 386 headed ‘Electronic execution of documents’ as far back as 2019, which validated the use of e-signatures, it has taken five years for the majority of lenders to even research the advantages of using them, let alone actively integrate them into their processes.

One of the drags on overall acceptance has been the feeling among clients it was not secure, even though the Land Registry had agreed to accept them in July 2020. The other one was for lenders to overcome the challenges of engineering e-signature technology into their processes and make sure it met security parameters and Land Registry protocols.

Many of the pros are self-evident. First, accessibility. Signees can use e-signatures anywhere they have access to the internet, so they no longer have to be in a particular place

to wet sign a document. Second, security. E-signatures are very secure when using specialist cloud-based services that adopt state of the art security protocols.

Enabling process automation

Lenders, like Equifinance, recognise that streamlining the mortgage process is an ongoing task, and e-signatures are now an integral part of cu ing out increasingly unnecessary tasks such as wet signing.

They also provide improved records management. Once signed, parties can save document copies locally in their own records. No one has to make copies or email finalised documents, so parties can readily reference and use them.

In the interests of fairness, it would be wrong not to include opposing arguments. Security varies depending on vendor. Not all electronic signature vendors offer enough security for business transactions. The most basic type of electronic signature offers no security against tampering, while others offer some basic tamper protection. Only one signature technology offers the highest level of security – a specialised type of electronic signature called a digital signature. At Equifinance, we use only the most secure process for e-signatures and follow the requirements of the Land Registry for the transfer of e-signed deeds and supporting documentation.

Overall, we are already seeing a marked difference in timescales and increasingly positive feedback in relation to the obvious convenience of e-signatures since we adopted them. I am sure that many more lenders in our sector will adopt the mechanism in the coming months. ●

Second charge statistics

I, for one, am not interested in lending statistics about the second charge market, which might seem odd for someone who is fully immersed in the sector and has been for over 20 years. While I am sure that the gures supplied by various bodies are accurate, there seem to be too many times when di erent sources can give con icting results.

I did see a report recently from a ‘respected’ source claiming that 2023 had seen a considerable increase in business volumes, while another source claimed that volumes were down 10% over 2022. Who to believe?

Naturally, the providers are getting brand awareness for publishing their ndings, but until such time that there is just one body into which data can be fed from every lender, it is just not possible to trust the accuracy of any gures, except as a very rough guide.

e main issue is that there is no set metric which includes every lender’s gures, and unfortunately until there is, there is no way that we can have a totally true and accurate analysis of the sector’s progress.

e-signatures are now an integral part of cutting out increasingly unnecessary tasks
LAURA THOMAS is regional sales manager at Equi nance
April 2024 | The Intermediary 89

Solutions for smarter data use

For years, businesses have known the value of data, but they have o en struggled to understand and use it efficiently. Some sectors have been much quicker than others – retailers were early adopters and have sophisticated sales and marketing strategies in place to provide customers with what they want, need and are likely to be tempted by.

In financial services, there are areas where businesses have been more successful, and others where they have found it harder to collect good data and harness it to improve their efficiency and profitability. Tracking consumer spending habits is relatively simple when compared to tracking the condition of a building over time or flagging properties where value is dramatically changed by regulatory, environmental or locational factors.

Yet the housing industry is ge ing be er at smart data use. Data and digital innovation are changing the way we design, build, sell and fund property. From Building Information Modelling in housing design to Modern Methods of Construction and ultimately valuation and survey reporting, data increasingly underpins the assessment of a property’s value.

It has taken longer to build accurate databases in the housing market – transactions take months not minutes. The average homeowner moves anywhere from once in 10 years to once in 20. Energy Performance Certificates (EPCs) are valid for 10 years, making some data collection a slow process. However, a wide range of alternative data sources are already available and used to inform valuation decisions. This includes subsidence, proximity to large scale infrastructure projects, historical land use, flood risk and geological properties.

Many of these data sources are constantly updated as new information comes to light, and if

used appropriately, support delivery of accurate valuations.

We are developing our own unique – in size and quality – residential property datasets and constantly reviewing timeliness, completeness and accuracy across the bank of information we use to assess value.

With the right expertise, it can be used to drive be er risk management, more efficient processes and deliver on environmental, social and governance (ESG) requirements.

Data driven triage

Our recently launched fully automated new-build remote valuation service uses data-driven triage to identify sites appropriate for speedier non-physical valuations, saving days on service compared to a physical valuation.

Using it, we can monitor numbers of instructions within developments to assist in managing lenders’ exposure risk, allowing for accurate and realtime updating of lending appetite.

It costs less, saves time and produces fewer carbon emissions by reducing the number of site visits required.

It’s the rationale and methodology upon which we built our cladding database. This is the UK’s most comprehensive and quality assured dataset of this type of property, and has revolutionised how lenders –through real-time assessment – are able to make more upfront lending decisions and control valuation risk, based on a constantly updating environment and regulatory landscape. Similarly, our ‘nontraditional construction’ database contains around 750,000 properties.

What these solutions do is address a very real problem that needs a solution. We know they work, because our customers are buying them.

Using Energy Saving Trust data and energy expertise we launched our HomePlus Digital Home Survey in early 2022. Along with improving

buyers’ understanding of the property they’re purchasing, we can provide guidance on how to reduce its carbon emissions and energy costs.

How we use data is continuously evolving, and there is considerable space to keep improving business performance and efficiency.

As part of the Government’s National Data Strategy, the Department for Digital, Culture, Media and Sport (DCMS) commissioned the UK Business Data Survey to help the department understand the significance of data to industry, what it is used for and how it drives the economy.

Its second iteration, updated in December 2023, found that among businesses that handled digitised data other than employee data in 2022, some 17% reported sharing data outside of their organisation.

Around a third of businesses acquired or collected data from other businesses or organisations, and 66% of those that share data, said they share data with other businesses.

While data sharing is more useful to some types of companies and industries than others, these figures nevertheless illustrate how big an opportunity to develop how we use it to improve business practices and customer service and experience.

Ge ing the right data is part of the job, and applying it to precise lender challenges is what we are investing in.

We know there are challenges. Timeliness, completeness and accuracy of data are all vital to deliver be er decisions.

However, by focusing on the issues that need a solution, and with the right sources and expert insight, data products are impacting every element of what we do. ●

Opinion TECHNOLOGY The Intermediary | April 2024 90

Better use of data will increase margins this year

Housing is always a key election ba leground, and it looks set to be again when Britain finally heads to the polls some time before January 2025.

All the parties will espouse more ambitions for the sector. The Conservative Party says it aims to build 300,000 homes a year. Labour says it will build 1.5 million affordable first homes over five years and reform Stamp Duty. The Liberal Democrats want to build 150,000 social and council homes a year. All sensible aims, and yet delivering on these promises is a different story.

The Spring Budget should have been an opportunity for the Government to outline much more detailed plans to support the housing market, but it was conspicuously absent from Chancellor Jeremy Hunt’s speech.

Deepening crisis

The uncomfortable truth is that the country’s housing crisis is deepening, and even if Government could push developers to up the number of new home starts, it has missed its opportunity to do so. To increase the supply of new homes, which are desperately needed, there must be a commercial incentive for developers.

In terms of supporting buyers, lenders must fill the gap. That means understanding all the nuances of what is a very complex market when you consider the niches and margin decisions lenders must make. What you know and can demonstrate affects your capital position as well as any decision to be in a particular market.

Lenders must be willing to lend to support purchasers, because whichever party wins the next election, even if it does commit

to meaningful policies that will encourage developers to deliver at sufficient scale, it will take years to add to housing supply.

That leaves the housing industry to cope with the status quo today, and there are several challenges facing lenders in the current market.

Savills is forecasting a 3% fall in house prices over this year, before recovering and rising 3.5% next year. They see housing transactions at just over one million this year, rising slowly over the next five years. Rents will rise by an eye-watering 18.1% by 2028.

These numbers, although estimates, reflect the financial situation faced by households across the UK. Homeowners are squeezed, with budgets having to cover much higher remortgage costs. Inflation over the past two years has pushed up fuel bills, the cost of the weekly food shop, broadband, home insurance, car insurance, mobile bills – all have risen considerably.

Rent rises are perhaps the biggest dampener on residential transactions. Higher mortgage costs for private landlords are eating into a renter’s ability to save for a deposit. The supply of rented homes is shrinking, pu ing more upward pressure on rents.

With such a significant squeeze on homeowner and first-time buyer affordability over the past two and a half years, developers are cautious. Real estate specialist JLL forecasts 150,000 construction starts in 2024, the same number of as there were in 2023.

Mortgage lending forecasts are also modest. UK Finance expects gross lending to fall 5% over the coming year to £215bn, and lending for house purchase to fall 8% to £120bn. Arrears are expected to rise to 128,800 cases

by the end of the year, meaning banks and building societies will have to set more aside to cover rising default costs.

Back on track

The good news is that the affordability shock is set to peak this year. Inflation is expected to fall back to target, and the Bank of England has dropped its outlook from the possibility of further monetary tightening to sticking to the current position. January and February trading this year has been buoyant. Spring trading data will be crucial.

With the picture as it is, lenders are faced with the reality that protecting their own balance sheets and profitability is down to them and them alone. A smaller pool of borrowers means competition is rife, allowing li le leeway to raise mortgage rates.

Maintaining sufficient margins therefore comes down to operational efficiencies, and the pressure is on to achieve those quickly.

Gaining efficiencies and a competitive headstart by investing in the right data services can help to speed up the correct assessment of risk, mitigating balance sheet exposure to falling property values, rising loan-to-values and affordability pressure. Streamlining workflow processes using be er technology saves time and resources.

With be er data, lenders can make be er decisions that protect margins in what is set to be a challenging market for some time yet. ●

Opinion TECHNOLOGY April 2024 | The Intermediary 91

Operational models for lenders more important than ever

The housing market was on tenterhooks in early March ahead of Chancellor Jeremy Hunt’s final Spring Budget before the country goes to the polls. There were rumours of Stamp Duty reform, help for first-time buyers, 99% loan-tovalue (LTV) mortgages – none of which materialised.

The measures affecting the housing market did include: scrapping the current Multiple Dwellings Relief (MDR) from June 2024 for those buying more than one house in a single transaction; scrapping the Furnished Holiday Le ings tax regime in April 2025; cu ing the higher rate of Capital Gains Tax from 28% to 24% from 6th April 2024

The industry was disappointed, facing the same challenges now as before. Lending profitably in niches that ma er remains a commercial imperative. Higher interest rates continue to have a dampening effect on consumer spending power. Fiscal policy claiming to cut taxes was met with a response from the Office of Budget Responsibility (OBR) that the tax burden on UK residents was set to rise to the highest level ever recorded.

Whatever your political leanings, the direction of travel for the housing market looks set to rely on forces underpinned by buyer and seller sentiment for the foreseeable future. Lenders now face the practical reality, and their ability to move quickly will be essential to win ground. It’s also vital to protect existing borrowers at the mercy of market sentiment, possible redundancy and pressure on household finances due to rampant inflation over the past two years.

Of course, lenders compete while also trying to ensure the current

operational models address the latest concerns of regulators and policymakers, and yet can adapt swi ly to enter more margin friendly niche markets.

Vulnerable customers

The Financial Conduct Authority (FCA) has announced its intention to review how firms are implementing standards to ensure that vulnerable customers are being treated with due care over the coming months. How firms assess who is potentially vulnerable is under scrutiny, as is how processes are adapted to accommodate that vulnerability. Given the current economic circumstances, the parameters around what ‘vulnerable’ means are not fixed.

Understanding when a customer transitions from not vulnerable to vulnerable is also key when it comes to evidencing due compliance. This regulation is new, it is very much more expansive than what preceded it, and all lenders, brokers and other regulated firms are still learning how to understand and apply it.

The fluidity of interpretation and application is what firms need to focus on: the FCA has been clear that the Consumer Duty and transition to a focus on good consumer outcomes is a process, not a destination. It will evolve, and that means lenders must be equipped to evolve too. That takes flexible technology platforms, which can support process changes quickly, consistently and efficiently.

Foreseeable outcomes

UK Finance figures show the volume of internal product transfers rose 11% in 2023 – suggesting borrowers facing refinance were financially under pressure and unwilling to undergo affordability checks if possible.

There is also lender risk appetite to consider. The cost of underwriting a new customer, re-evaluating their affordability and property value and balancing that against existing customer retention without those checks must be factored into pricing.

Commercially, lenders are walking a tightrope. Balancing existing book exposure with the need to maintain margin is not easy – it requires vigilance and the ability to react quickly and prove that the right things were done for the borrower.

Delivering new

Amid such fast-paced change, cu ing edge technology is the only way lenders can remain in control of their competitive position. But it needs to be affordable and secure, and in truth, no legacy platforms achieve this. Lenders need to innovate.

Recently Ohpen partnered with April Mortgages to deliver its broker portal, origination, servicing and credit management. True innovation requires systems that can adapt and evolve to meet customer and business needs.

Delivering new propositions, that are market ready and fit for purpose is key if lenders are to grow sustainable business models.

The cost of doing business from a regulatory point of view alone has seen margins erode and this will continue. Capital adequacy requirements have reduced lenders’ room for risk taking, and more competition means adapting at pace is an operational necessity. Not all of this is bad, but achieving change at pace, securely and affordably requires a partner that really can deliver. ●

Opinion TECHNOLOGY The Intermediary | April 2024 92
UK managing director at Ohpen

Sharing customer feedback with senior managers

The latest adverts by Nationwide Building Society offer an extreme view of a bank’s senior manager dismissing the notion of providing customers with what they actually want, including providing a great experience. There’s obviously an exaggeration in Dominic West’s portrayal, but o en it’s true that the complaint in many companies is that the higher up the hierarchy you go, the less real idea senior managers have of the actual customer experience.

Therefore, it’s critical that the people at the top get a clear and accurate picture of what customers think of the services that they’re receiving. Sourcing the information is relatively easy, either through postsales questionnaires or via comments le on review sites like Smart Money People. Trawling social media can also deliver some genuine insights.

The real question is how to deliver this information to the people in power in a way that they’ll take notice.

Hopefully, this will also lead to actual changes as a result of the feedback.

Smart Money People has developed a five-step plan to creating a report that should be effective to share customer feedback with senior managers.

1 Collate and organise the data

The first step is to gather all the feedback that you have and organise it into topic areas or themes. Unless you do this as a first step, you won’t be able to create a coherent report at the end of it. The more precisely that you can create the categories, the be er.

2 Structure the report

Senior managers and board members are busy people, with many different demands being placed on them, so they need information to be clear, focused and concise. To achieve this, any report is going to need to be wellstructured with a logical progression running through it leading to a definite conclusion.

3 Be brief but use professional language

When addressing senior personnel, people sometimes fall into the trap of using the sort of management speak they believe they’ll respond to best. This can be a mistake, as it o en equates to waffle that fails to make its point, so choose your words carefully, but keep them relatively formal.

4Add visuals and other contextual information

Whether you’re presenting in-person or as a document, use charts, graphs and diagrams that help to make sense of the information being presented. These add context and can lead to a deeper understanding of the insights that you’ve been gaining from customers. They also make it much easier for anyone speed-reading the report to extract some of its key points.

5 Review and edit before presentation

Review, review and review again, first to spot any typos or other literal mistakes that might have crept in. Then, see if you can make the report even more concise without losing any of the content. We also suggest that providing such a report no more than quarterly is ideal. This will allow time for changes driven by customer feedback to be made – which should always be one of the main objectives of the report in the first place.

In our experience, if you work through these five steps, you’ll end up with a well-structured report that should meet your needs.

However, good luck if your boss is Dominic West – maybe deliver the report with a smoothie. ●

Opinion TECHNOLOGY April 2024 | The Intermediary 93
JESS RUSHTON is head of business development at Smart Money People Deliver a clear picture about what customers think of the services they’re receiving  Photo: Nationwide

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

Focus on... Bristol

Bristol’s mortgage market has bucked several national trends of the past few years, maintaining a relatively healthy level of demand.

As the nation continues to grapple with broader economic uncertainties, including ongoing inflationary pressures due to wider geopolitical concerns and fluctuating interest rates, demand for property has been cooling. However, boasting some of the most popular areas to buy in the country, Bristol has withstood recent economic headwinds.

The Intermediary sat down with local mortgage professionals in order to ascertain what is driving growth within this corner of the market.

Current values

The average property price in the Bristol postcode area is £375,000, and the median is £332,000. This is compared with an average of £351,000 and £270,000 respectively across England and Wales.

The average price in the area has declined by £5,900 (2%) over the past 12 months.

The most affordable place to buy within the postcode is in the ‘BS23 1’ area, with the average price coming in at around £209,000. Conversely, the most expensive place to purchase

a home in the area was ‘BS32 4’, where homes could set buyers back over £736,000.

The average detached property currently costs approximately £586,000, while semi-detached homes sell for £414,000. A typical terraced house sells for an average of £386,000 and a flat in the area costs around £276,000.

Competitive residential market

The latest data reveals that there were more than 5,200 property sales in the Bristol postcode last year, marking an annual drop of 35.7%, or 3,100 transactions.

While this subdued figure might suggest a cooling market, it has not dampened the optimism among those in the know. According to Toby Fields, director at Langley House Mortgages, Bristol’s property has been historically home to its “own microclimate compared to the rest of the country.”

He notes increasing property prices in the past few months due to a recent surge in demand, which he has said has led to a very “competitive” market.

Marcus Robinson, managing director at Mortgage Style, corroborates this, noting that there has been a rise in the number of properties put on the market in the area. This, he believes, is due

to increased market confidence in the first half of 2024, which has seen many commentators predict upcoming base rate decreases by the Bank of England.

This optimism, Robinson says, “should encourage more people to purchase or move house.”

Among the areas exhibiting highest demand, Samuel Gee, director at Manning Gee Investments, has seen particular interest in St George, Bishopston, and Bedminster, noting that Bristol “continues to exhibit strong property hotspots.”

These areas have consistently ranked among the UK’s top destinations for homebuyers over the past few years.

Bristol The Intermediary | April 2024 94 LOCAL FOCUS

A fast-paced microclimate

he housing market in Bristol is fast paced and seems to be in its own microclimate compared to the rest of the country, based on the increasing property prices, leading to a very competitive market.The city offers a variety of property types and neighbourhoods, catering to different demographics. Rental demand is also high, particularly from students due to the two universities, and young professionals.

We deal mainly in sectors such as new-build, adverse credit or self-employed. The majority of our clients do qualify for the most competitive rates on the market. Therefore, we have found that we are recommending the lenders who are pricing well which is not specific to Bristol specifically.

Our main demographic are first-time buyers and home movers. The main make-up of this tends to be young professionals. The main change that we have seen is a lot of these professionals are moving from London.

The reasons are due to remote working becoming more common, greater availability of garden space, and that housing and living is generally more affordable here than in the capital city.

Bristol is experiencing a huge amount of development across different areas of the city, aiming to address housing demand.

Examples include the Brabazon development in Filton, where the plans are to create multiple schools, healthcare facilities, office and retail spaces, wildlife habitats and parks.

There are multiple developments on the outskirts of Bristol planning to offer a mix of residential, commercial, and community spaces.

Despite the challenging market of rising interest rates, we have still seen the appetite for residential mortgages at high levels.

We have seen a huge shift to the focus being around the monthly payments they can afford, rather than what they can borrow. Buyers know their monthly budget and do not want to exceed this despite having the capacity to borrow much more.

We have found the buy-to-let market to be very stagnant for new purchases, most landlords that we deal with are reluctantly renewing their product despite payments rocketing up.

A lot of landlords in the Bristol area can see the long-term capital appreciation, whereas in other areas if the property is not increasing in value as much, it seems they are looking to sell as their new monthly payments are exceeding the rental income.

The average detached property in the area currently costs approximately £586,000, while semi-detached homes sell for £414,000.

A typical terraced house sells for an average of £386,000 and a flat in the area costs around £276,000”

Popular demographics

First-time buyers seem to be particularly drawn to the Bristol area. According to Gee, while his client pool comprises a diverse mix of individuals, including young professionals, families, and investors, he has seen a rise in first-time buyers of late, who have been less affected by the rise in interest rates due to their existing rental payments which were already high.

This skew towards younger buyers has been suggested in recent

95 April 2024 | The Intermediary

Returning to confidence

here has been a gradual return in confidence generally over the last 12 months; however, interest rates are still a lot higher than they were a couple of years ago, despite lenders reducing their rates over the last six months.

We are seeing more properties being marketed now and the general consensus is that the Bank of England will reduce the base rate in the summer which should encourage more people to purchase or move.

We tend to see more clients these days looking to take advantage of opportunities that might not have been appealing in the past. That could be buying properties in poor condition to renovate, purchasing land with or without planning permission for future development, or picking up auction purchases and needing to complete under time pressure.

Following the effects of Covid-19, we also still see a strong demand for properties with an outside space.

Bristol is always evolving. It’s culturally diverse and has a strong engineering heritage, which means property solutions are often innovative and creative.

There is a huge project underway in the heart of the city to regenerate 130 hectares of brownfield site to deliver sustainable new homes, jobs and infrastructure based around the main railway station, Temple Meads. In addition, South Gloucestershire Council agreed another large development of up to 6,500 new homes in Filton which lies to the north of Bristol.

We deal with all the typical, well-known high street mortgage lenders, but also explore smaller building societies and private banks. When researching deals for our development clients we work with a lot of specialist lenders like Roma Finance, Redwood Bank and Shawbrook Bank.

As a vibrant university city with many young professionals, Bristol is the ideal place for landlords to invest in rental property. Investors are seeing a healthy return from buy-to-let properties, and we work with a number of clients who have found success investing in HMOs over the past few years.

Higher interest rates have made things more difficult in terms of returns and making the numbers work on the lenders rental stress tests, but we can usually get around this by considering various strategies.

With a new student campus being developed by Temple Meads, the demand for student accommodation is only going to increase over the next few years. We are already seeing landlords taking advantage of this, as well as looking at new potential areas to invest in.

population polling. In 2020, there were approximately one million residents living in the Bristol postcode area, with the average age coming in at 39.3 years.

Fields also notes this trend, as his main customer base continues to be first-time buyers and young professionals.

With the rise of working from home, he reports that many young people have moved away from more

central business hubs such as London in search of larger properties and better value.

Lender trends

Unsurprisingly, the ‘big six’ lenders tend to be dominant. Gee notes that while these well-established lenders –like Halifax, NatWest and Nationwide – feature prominently, other large building societies like Leeds and Coventry are also popular among

clients. In addition, he notes that some smaller building societies such as Leek Building Society have been particularly helpful over the past few months, as they offer products that help people with more challenging requirements and provide muchneeded flexibility in a troublesome market. When it comes to more specialist clients, Robinson says that lenders like Roma Finance, Redwood Bank and Shawbrook Bank have proven popular.

New developments

The Bristol region is popular with housebuilders, with a number of new developments popping up around the postcode. Fields says this has come about as a direct result of growing demand, as developers aim to keep up with the number of prospective buyers interested in purchasing in the area.

He adds that projects such the Brabazon development in Filton, which will create multiple schools, healthcare facilities, retail spaces, wildlife habitats and parks, is indicative of the growing investment in Bristol’s housing market.

Robinson has also seen new initiatives in the area over the past few months, citing a huge project underway in the heart of the city to regenerate 130 hectares of brownfield site to deliver sustainable new homes, near the main railway station of Temple Meads.

Not only has the area benefited from a number of new residential developments, Bristol is also seeing an injection of new infrastructure projects to support its rising population. Plans for improved transportation networks, such as the MetroBus expansion and rail enhancements, all promise greater transport links for the city and beyond.

Rental opportunity

With private rental stock taking up over 25% of overall housing, compared to a national average across England and Wales of 23.6%, Bristol is well positioned to cater for prospective tenants and buy-to-let (BTL) investors.

Demonstrating this trend, Field says that he has seen a steep rise in rental demand in recent times, particularly from students, due to the city’s two universities, and its numerous office spaces which offer employment

The Intermediary | April 2024 96 Bristol LOCAL FOCUS

Continued local appeal

The Bristol housing market remains dynamic and resilient, reflecting the city’s appeal as a place to live and invest.

Despite fluctuations in demand and pricing, Bristol continues to exhibit strong property hotspots, with areas such as St George, Bishopston, and Bedminster consistently ranking among the UK’s top destinations for homebuyers. Notably, the average property price in St George surpasses £323,000, indicating sustained demand, albeit with affordability challenges for first-time buyers.

Gentrification trends persist, underscored by rising property values in key neighbourhoods, signalling ongoing transformation and investment within the city. Bristol was named best city for property investment 2024 by Aldermore for the second time in three years, ahead of Manchester, Coventry, Brighton and London.

Our clients comprise a diverse mix of individuals, including young professionals, families, and seasoned investors. Over the past year, we’ve seen more first-time buyers who have been less directly affected by interest rate rises, where very high rents are often in excess of the payment of a typical first-time buyer mortgage in Bristol. We do find, though, that salaries of first-time buyers have to be strong to obtain the lending needed locally.

Bristol continues to witness exciting developments and infrastructure projects that enhance its appeal as a vibrant place to live. Notable initiatives include the Temple Quarter Enterprise Campus, a hub for innovation and technology, and the ongoing regeneration of Bristol’s waterfront, attracting both residential and commercial investment. Moreover, plans for improved transportation networks, such as the MetroBus expansion and rail enhancements, promise greater connectivity and accessibility across the city and beyond.

In recent months, the appetite for residential mortgages in Bristol has cooled, and houses are typically taking significantly longer to sell than in the height of the market in 2021-22.

Homebuyers continue to seize opportunities amid favourable market conditions, albeit with heightened diligence regarding affordability and long-term financial sustainability. There is a good amount of stock available, a reasonably buoyant mortgage market despite significantly higher interest rates, although the rush to purchase and the ability to offer over the asking price, as was typical at the height of low interest rates, has calmed down very significantly.

Conversely, the buy-to-let market has experienced more difficulties, influenced by regulatory changes and evolving investor sentiment. Stress tests and reduced valuations have put some landlords into tricky situations, but generally in Bristol the rental yield still justifies the level of mortgage payment, with long-term average yields at 4.4%. Bristol is not, however, the location for the investor looking to make a quick return.

For investors who are struggling, there are some mortgage deals available to assist with cashflow, although some leveraged investors are already in for a tough ride, and there’s no sign that will change in the shorter-term.

There will be some continued market fluctuation, and valuers are being cautious, but locally in Bristol we are seeing values generally hold up due to the significant demand from the both the normal housing sector and the vast student property market, which continues to grow significantly year-on-year.



1 million Average age


Residents per household


opportunities to many young professionals. According to Robinson, Bristol is an ideal place for landlords to invest in rental property, and he notes that Aldermore bank recently named the city as a top BTL hotspot for investors.

He adds that investor clients have been seeing a healthy return from buy-to-let properties, most of which have found success investing in houses in multiple occupation (HMOs).

While Robinson admits that higher interest rates have made things more difficult in terms, he remains confident that the demand for student accommodation is only going to increase over the next few years, and notes that he has already seen landlords take advantage of these favourable conditions.

An evolving market

The mortgage and property market in Bristol is ever-evolving. With healthy levels of demand from first-time buyers, a rise in developments and optimism from its BTL investors, the market in the area seems less affected by broader economic challenges than other areas of the UK.

2024 brings about a lot of new infrastructure, and many returning homebuyers to the market. As stated by Fields, the housing sector in Bristol most certainly “fast paced,” thus “leading to a very competitive market.” ●

97 April 2024 | The Intermediary Bristol LOCAL FOCUS
SAMUEL GEE Bristol postcode area. Source:

On the move...

Maeve Ward joins Together as intermediary project manager

Maeve Ward has joined specialist lender Together as intermediary project manager. Ward will provide strategic support as the lender continues to grow across

colleagues, providing group training presentations, lender days, and where appropriate, media and events in the region.

365 nance appoints new CEO as

it targets further growth

the UK.

She said: “I’ve known Together for a long, long time and our paths have crossed many times while I’ve worked for competitors.

3She will primarily be Together’s representative in Wales and will review strategic growth plans with directors.

“There was a part of me that hoped I would end up working here, it was just a case of when was the right time.

65 finance has appointed Warren Abbey as CEO in a bid to drive further growth. Abbey joined 365 finance in 2023 as chief commercial officer, achieving a 42% year-onyear increase in business.

strategic growth plans directors.

Ward will also support brokers and

Hinckley & Rugby appoints

Danny Cranie as chief customer o cer

Hinckley & Rugby Building Society has appointed Danny Cranie as chief customer officer, a role created to enhance the focus on customer engagement and digital innovation. Cranie will strengthen the society’s service capabilities across existing channels and develop a new digital offering. He has 34 years of experience in the banking and building society sectors, including leadership positions at Lloyds Banking Group and Virgin Money.

Cranie said: “It’s an exciting time to join as we get set to launch our digital proposition, which will widen our reach to a ract new members to the society. I’m looking forward to using my business transformation experience to help us achieve further operational efficiencies and deliver outstanding customer experiences.”

Barry Carter, CEO of Hinckley & Rugby, said: “His experience, knowledge and passion for providing outstanding member service are second to none. As part of my executive team, he will be a key person to help drive our member-centric growth agenda. He joins us at an exciting moment in our history for both members and colleagues.”

“I’ve been impressed with all aspects of Together; the heritage, the product suite, and the huge potential and desire for further growth with its intermediary partners.”

L&C Mortgages appoints Mark Harrington as CEO

L&C Mortgages has appointed Mark Harrington as chief executive officer. He joined the company in 2003 and has held a number of different roles, from adviser through to CEO.

Harrington said: “The business is already a powerhouse in the UK broking market and I look forward to leading the team here to greater growth and success in the future."

Current CEO and founder Andrew Raphaely will transition to the role of executive vice chairman. Raphaely said:“We’re delighted Warren is stepping up to this role, following a very competitive appointment process.

“He has an enormous amount of experience in leading businesses with a commercial focus and I look forward to working closely with him to supercharge our growth.”

Abbey added: “365 finance is an incredible business with a terrific team in place.

team in place.

“The business has grown to become a leader in revenuebased lending and embedded finance, and our growth trajectory is very exciting.”

Hampshire Trust Bank (HTB) has made two senior appointments in its property finance divisions. Alex Upton, previously head of the development finance division, is managing director of specialist mortgages. Neil Leitch, formerly commercial director of the same division, is managing director of development finance.

person to help drive our agenda. He joins us at an and colleagues.”

Upton said: “I’m thrilled to be swapping my comfy steel toecaps for my blister inducing heels as I return to my roots in specialist mortgages to take HTB’s biggest business to the next level.

Leitch said: “I’m really looking forward to taking the helm in development finance as we

grown to become a revenue-

HTB enhances property nance leadership team

continue to support a broad range of developers to build more much needed homes across England [and] Wales

Charles McDowell, chief commercial officer, added: “Alex and Neil’s commitment to the bank has been fundamental to our rapid growth and their continued close collaboration will underpin HTB’s formula for success.”


Don’t let your development lender frustrate your client’s project

At Magnet Capital we are a genuine solutions provider and experts in development finance.

Why choose Magnet Capital?

• No hidden costs. We are completely transparent about our pricing.

• Quick, decisive approach. No ‘double underwriting’ or slow credit committee process. Brokers and clients have direct access to genuine decision makers.

• Flexible funding. Our funds are provided by our equity partner in the business and therefore we aren’t limited by numerous investors or have the risk of funding lines being pulled.

• Lower fees. All our fees are based on net loan amounts and not gross.

• Better products. We don’t offer retained interest so the client doesn’t pay interest on a large interest slice from day one. Interest is rolled up or serviced if the client prefers.

• Loans from £200k to £2m.

• Low surveying fees - no QS monitoring for loans with build costs below £500k.

• ‘Commended’ Best Service from a Development Finance Provider 2022 at Business Moneyfacts Awards.

• Additional introducer fee can be added to the loan.

 020 8075 3255   The development finance experts

See how VAS can add value to your valuations. Call our team on 01642 262217 or email

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