The Intermediary - August 2023

Page 1

CASE CLINIC  ⬛ Experts provide their tips for dealing with readers’ trickiest cases OPINION ⬛ MRM, KFS and ClientTree provide insight on the trends affecting brokers
problem solving for surreal times
BROKER BUSINESS SPECIAL ISSUE Intermediary. | Issue 7 | August 2023 | £6 DIGITAL EDITION
Technology that lives and breathes your success
The platform for later life lending professionals

Stay ahead of the later life lending market with Air

In a rapidly changing later life lending market, standing still is not an option. That’s why Air moves your business forward with best-in-class real-time digital sourcing tools, personal development services, incentives and reward programmes. As the number one platform for later life lending professionals Air has all you need to connect, promote, learn, monitor and manage your activities.

And because that cutting edge technology is supported by expert, peer-led support and advice, you’ll have a far more rewarding later life experience with Air.

Plus, more API integration than any other sourcing platform

Air Sourcing has integrations with some of the biggest lenders in the market enabling a more efficient sourcing for our Air Club members.

API integrations with...

The club is free to join, and this advanced technology allows members to source the most relevant and up-to-date products for clients and provide rates in real-time.

A more empowering way to better business Visit: Call: 0800 294 5097 today


Feature 6

Natalie Thomas looks at the realities of being a broker in the modern age

Opinion 14

Insights into the marketing, recruitment and tech trends for brokers

Q&A, Oportfolio 18

Oliver Ward explains the challenges and opportunities running a brokerage

Case Clinic 20

The experts weigh in to help resolve readers’ tricky cases

In Pro le, Crystal 24

Jason Berry talks broker mental health and wellbeing


Local Focus 88

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

On the move 98

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


The Interview 40


Jonathan Stinton on keeping up a human touch in an ever-evolving market


Meet the BDMs 54, 60


Jonathan Braddick and Samantha Brain tell us about the challenges and opportunities they face as business development managers

Q&A 72


James Gillam and Helen Scorer on the role of valuations in keeping the market steady

In Pro le 86


Martin Wilson discusses why trust and longevity are primary concerns

In Pro le 94


Claire Hird explains how customer service is evolving


Meet the BDM

AT-A-GLANCE Residential  26 Buy-to-let  44 Specialist Finance  56 Technology  74
Charge  78 Later Life  82 Protection 92

From the editor...

othing will make you proud to be British more than the run up to the rousing democratic masterclass that is a UK General Election. I can already hear chuckling from all but the most credulous corners.

Prime Minister Rishi Sunak is eyeing November 2024 as the proverbial ba leground, and the country is gearing up for the next round of electioneering, as if there wasn’t already quite enough going on to keep our eyes rolling and our magazine pages full.

Those of us harbouring a glimmer of optimism might hope for healthy debate, a well-informed and motivated voting public, and manifestos founded on the good of the people, rather than the chance to grab headlines. Really, we are just likely to find out who eats pasties wrong and slip back into another four years of sad hibernation.

Just what exasperating form will this next bout of political absurdity take? Well, the housing market is in the crosshairs. The issue is top of mind for the British public, which has the politicians slavering over new slogans, no doubt.

You don’t have to have a crystal ball, or a long memory, to understand that this spells likely disaster. With 15 Housing Ministers testing out the revolving doors since 2010 alone, this market needs more than party politics, false promises, and headline-grabbing.

Maybe added a ention will give a muchneeded platform to informed voices from within the residential and rented sectors to enact real

The Team

Jessica Bird Managing Editor

Jessica O’ Connor Reporter

Claudio Pisciotta BDM

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Maggie Green Accounts

Barbara Prada Designer

Bryan Hay Associate Editor Subscriptions

change. It might, if this wasn’t clearly an episode of ‘The Thick Of It’.

Instead of coherent, progressive strategy, for example, we have Sunak reportedly gearing up a bizarre ‘anti-green’ agenda, at the same time as landlords are told – albeit with next to no clarity – to upgrade their properties for net zero targets. That’s just from the past week – I won’t delve into the Government’s long-running efforts to prop up demand while actively engaging in anti-development rhetoric, leaving many in this market nonplussed.

Until the ma er of housing is removed from party politics, we will get plenty of headlines, but no peace. Something so integral to the UK’s economy – already careening toward recession –cannot continue to be used as a punching bag.

No one feels those hits more than brokers, particularly in their capacity as the link between the market and its increasingly beleaguered customer base.

To that end, this issue sees the muchawaited launch of our Broker Business section, which looks at the very real challenges and opportunities open to intermediaries.

No empty sloganeering here, from our Case Clinic to conversations around mental health and marketing, we want to use our pages to help those looking to improve this market, even if the politicians can’t get their acts together. ●

Jessica Bird



Ali Habib-Ur | Alison Pallett | Alpa Bhakta

Amadeus Wilson | Austyn Johnson | Carl Parker

Carly Nutkins | Chris Pearson | David Whittaker

Emma Green | Gareth Lewis | Gemma Cu

Grant Hendry | Ian Humphreys | Jeremy Duncombe

Jerry Mulle | Joshua Baker | John Carter

Kerry Stephens | Leon Diamond | Lilla Dilliway

Lorenzo Satchell | Louisa Sedgwick | Lucy Waters

Maeve Ward | Marie Grundy | Mark Blackwell

Mark Harris | Martese Carton | Matt Aston

Matthew Dilks | Michael Conville | Michelle Walsh

Natalie omas | Nick Lovell | Paul Brett

Paul Glynn | Paul omas | Rachael Welsh

Ranjit Narwal | Richard Sharp | Robin Johnson

Shaun Almond | Sophie Mitchell-Charman

Stephen Palfreeman | Stephanie Charman

Steve Carruthers | Steve Cox | Steve Goodall

Steven Oladipo | Susan Baldwin | Tim Hague

Tom Denman-Molloy | Tony Marshall | Tony Ward

Vic Jannels | Victoria Clark | Will Hale

 @IntermediaryUK
Copyright © 2023 The Intermediary Feature cartoons by Giles Pilbrow Printed by Pensord Press CBP006075 Creative problem solving for surreal times THE ART OF THE BROKER BROKER BUSINESS SPECIAL ISSUE Intermediary. The August 2023 | The Intermediary 5

Formed under pressure


Each day brings its own set of unique challenges for mortgage brokers. While advisers are no strangers to a fluctuating market, the current abrupt product withdrawals, escalating interest rates and the advent of Consumer Duty are impacting professional and personal lives across the sector.

All corners of the intermediary market, from residential to specialist, are feeling the strain. As the new era of higher interest rates takes root, brokers are seeing a need to become more creative and, in some instances, step beyond the traditional role of the mortgage broker.

While some of the recent market shifts will be temporary, others have the potential to reshape the market in the long-term.

So, how can brokers prepare for the future and grow their business in the current climate?

Products: Going, Going, Gone

The thorny issue of product withdrawals shows no signs of abating, causing grief for brokers in all sectors.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), says: “Late notice withdrawals are the biggest single issue facing the broker market at the moment, causing genuine stress and fatigue every time a lender gives short notice.

“Our partners we know in those lenders understand the issues. However, there are a number of key decision-makers who have no understanding of what they do to customers and brokers when they make the decision to withdraw a product.

“I’ve heard stories of people not turning up to coach their kids’ cricket practice on a Friday night, people missing swimming galas and endof-year performances, because they have to get that deal across the line for the customer.”

Certain lenders’ technology is also adding to the stress, according to Heather Greatorex, sales team leader at LDN Finance.

“Some lender systems are unable to handle the sudden influx of traffic,” she explains. “This creates delays and queues to access systems,

Natalie Thomas for The Intermediary
Special Focus BROKER BUSINESS The Intermediary | August 2023 6

sometimes resulting in system failures. Similarly, we are seeing a delay to lenders’ service level agreements [SLAs], where they are double or even triple the time that was required previously.

“This is causing significant setbacks to the progression of applications.”

Sinclair questions what has happened to call handling targets: “Before Covid-19, lenders all had to answer a call within five minutes; it can now be one hour.

“If a broker has a question, it takes far too long to get an answer. Lenders have just let that slip and become a shoddy standard. If Coventry – a big lender – can answer routinely in five minutes, why can’t everybody else? It makes you question if some lenders genuinely care at all.”

Specialists: Under Pressure

Often, when one market segment encounters struggles, others prosper; unfortunately, however,

many of the current issues affecting the market are universal. The challenges in the wider mortgage market are also affecting bridging borrowers’ affordability and exit strategies, says Gareth Lewis, managing director of MT Finance.

“This is having a big impact on value, as property prices stall and potentially fall,” he says.

“We are paying particular attention to this as well as from a credit and risk perspective.”

Matthew Dilks, bridging and commercial specialist at Clever Lending, says constantly changing lender criteria can result in clients pulling out of deals, either because they cannot secure the loan size they need, or because they are not prepared to pay the increased rates and lender arrangement fees.

“Lenders are also reducing the period they are prepared to commit to a fixed rate that was offered initially. Some clients have decided to sit on the side-lines and wait to see if property

The Intermediary | July 2023 47
"Are you any good at multi-tasking?"

prices start to fall, as well as waiting for rates to stabilise.”

While lenders have garnered little sympathy from some brokers, the current market turmoil is also negatively impacting them.

Colin Sanders, chief executive o cer at Tuscan Capital, says: “As a short-term property nance provider, our biggest challenge is making sure we have access to liquidity so that we can always meet demand and that this is correctly priced.

“When it comes to borrowing costs, this can be extremely tricky in such a volatile market. Most short-term lenders in the bridging space cannot hedge their funding or buy swaps as the costs or scale of the transaction is prohibitive.

“This can leave them exposed when their lending is xed but their borrowing costs are not. This can be very painful and costly, with many short-term providers –including Tuscan – enduring an expensive period during sharp rate increases of 2022.”

Sanders says the introduction of new variable bridging products and more sophisticated xed pricing modelling has helped.

The buy-to-let (BTL) market is arguably the sector that has seen the most rapid decline in a ordability and brokers’ ability to place deals.

Stephen Perkins, managing director at Yellow Brick Mortgages, says: “The BTL market is broken, with the high rents required to meet the increased stresstest rates, new purchases need larger deposits and remortgages are not viable for most, leaving only the product transfer option.”

Rob Stanton, business development director at Landbay, says that while the higher mortgage rates are a challenge, there are solutions.

“The way to secure a lower rate is through a variable fee structure, so although fees may be higher, more money can be borrowed,” he suggests.

Consumer Duty: Are We Ready?

While higher mortgage rates may be denting borrower con dence, one by-product of the recent market uncertainty has been, in some instances, a deeper broker-client bond. Darryl Dho er, mortgage expert at The Mortgage Expert,

says: “In the past 12 months, my split is now a ratio of 40% advice and 60% life counselling.

“I have always been passionate about helping and showing empathy to all clients, so no change there, which no arti cial intelligence [AI] system could ever replicate.

“As brokers, we always o er real-time, genuine, focused mortgage advice, which has been obtained from real-life experiences and compassion – not just uploaded, nonexperienced data.”

Consumer Duty, alongside current market conditions, will see a greater emphasis on this all-important broker-client relationship. Sinclair says small rms, in particular, need to think about why clients fall out of the advice process.

“If you have a big gap between those you fact- nd and those you o er to, why is that, and what is happening to that customer?” he asks.

“How are you changing your business model to help more people and not putting people in a position of frustration because you can't help. The rules say if another type of product might be suitable, you should refer them to someone else.”

He does, however, o er some reassurance, adding: “Broadly speaking, the mortgage sector was already in a good place going into Consumer Duty. The challenge is being able to evidence things. It’s not something we’ve been great at – thinking about what the advice process is, going through and reviewing and documenting it.

“Nobody runs a perfect business. Do rms have a vulnerability policy? Have they got a fee-charging policy? Have they done a proper assessment of the value of those fees and documented that?

“We are in a good place in terms of the delivery perspective – do I think we’ve got the bureaucracy that sits behind to underpin that? In larger rms I'm pretty con dent, but across the whole mortgage broker population, I think we are going to struggle.”

While, overall, Sinclair is not worried about the residential market, he adds: “Do I think if rms get a supervisor turning up on their


The Intermediary | August 2023 8
Broadly speaking, the mortgage sector was already in a good place going into Consumer Duty. The challenge is being able to evidence things. It’s not something we’ve been great at –thinking about what the advice process is, going through and reviewing and documenting it”
Robert Sinclair
WE HELP YOUR CLIENTS TO SPREAD THEIR WINGS Let’s talk. 0344 225 3939 For intermediary use only. Cambridge & Counties Bank Limited. Registered office: Charnwood Court, 5B New Walk, Leicester LE1 6TE United Kingdom. Registered number 07972522. Registered in England and Wales. We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register No: 579415 Whether it’s commercial investment or owner occupier, our knowledgeable relationship managers are here to help your clients continue building a portfolio through straightforward and simple solutions. We’re always here for you. Our flexible finance solutions are perfect for property professionals looking to expand their portfolio


Ask any broker and they will tell you that these are challenging times on an unprecedented scale. ere are considerable issues to contend with on a macro and micro level, both internal and external.

Brokers must factor in a broad range of considerations, including how the wider economy is performing, what consumer con dence is like, how the housing market is doing, what lenders and insurers are up to, whether there are any changes in risk or appetite a ecting the markets they operate in, as well as political and regulatory facts, such as Consumer Duty.

en there is the broker’s business itself. How is that operating, what are the challenges, opportunities and risks, are the advisers and support sta operating at a consistently high level? Is the quality that the business was originally built on still there? In a constantly changing, dynamic and competitive environment, are clients being looked a er? Are they able to deal with you in the way they want, and are you doing enough to attract new business? To further complicate matters, the landscape has changed post-pandemic, along with the broker’s role. Certain groups have been heavily impacted by the cost-of-living crisis, while there are others who, while noticing the increase in their outgoings, have the nancial capacity to absorb or partially o set these higher costs.

SPF works with many high-net-worth (HNW) clients who are fortunate to fall into the latter category, but also with those who think they can’t be catered for to nd the most suitable outcome for their requirements.

As well as looking outwards at what we o er, it is essential that we look inwards. e wellbeing of our sta , from the most senior to the most junior, is paramount. We o er them support, whether that is physical, mental or nancial, as and when needed.

Advisers are nding technology invaluable, enabling them to market themselves to potential clients, monitor their journey through the mortgage, general insurance or protection process, and maintain a relationship post-completion. Time and duplication can be reduced, whether that’s via fact- nds, E-ID or research and submission. Technology also allows data to be accessed 24/7 from anywhere, enabling sta to function e ectively wherever they may choose to work.

One thing that recent challenges have illustrated is that diversi cation is extremely helpful. While we are perhaps best known for being a residential mortgage broker, we cover a wide and diverse range of debt specialisms, as well as having a signi cant general insurance division, wealth management and protection teams. ese enable the business to dovetail and function e ciently, e ectively and pro tably should one part not perform as well as previously. However, even a diverse business can’t rest on its laurels, and should continue to explore other aspects that it may not currently service, which could potentially enhance the customer proposition and revenue streams.

doorstep, they will all have the documentation that might satisfy that supervisor? I’m a bit more worried about that.”

Diversifying: Keeping the door open

So, what can brokers do to make sure they are meeting the needs of their clients? A cooling mortgage market has historically brought about diversification. Current market conditions are likely to do the same.

Against a backdrop of Consumer Duty, firms will need to encompass a broader range of products to ensure they provide the best outcomes for clients, rather than focusing on one area for growth.

“With transaction volumes down, brokers are having to think outside the box,” says Lewis.

“Brokers also need to be looking at how to best equip themselves so they can better understand this very changeable environment and find alternative funding solutions.”

Leon Diamond, chief executive officer and founder at LiveMore, highlights the UK’s growing and ageing population, which increasingly needs access to home finance. He advises brokers to consider broadening their knowledge to include the later life sector.

“You don’t have to be a qualified equity release adviser, as there are many mortgage options available,” he explains.

“But a surprising number of brokers are unaware or don’t want to deal with later life lending, so they either send the client away or refer them to an equity release broker.”

In the context of Consumer Duty, Diamond says: “For those brokers who advise on later life lending, often the first – and sometimes only –product they consider is equity release.

“This needs to change, because although equity release may be the best option for some, there are mortgage alternatives that could be better, especially for those at the younger end of the 55plus age scale.”

Looking ahead, there are a number of potential opportunities for the intermediary market – such as the upcoming energy efficiency remit.

“There is scope in bridging development finance,” says Sinclair.

“We have a retrofit agenda coming, and we need to think about how we finance that. We are going to see what people think of the private rented sector [PRS] as a means of upgrading the housing stock – we can't keep killing it.

“Landlords coming in, buying a dilapidated property, and making it good – that's really important for a country that has a lot of uninhabitable housing.”


Technology: The rise of AI

Despite Dhoffer’s important point about the human element of broking, technology does have the potential to play a big part in helping brokers offer a better range of products and identify what might be best suited to clients.

Maeve Ward, director of commercial operations at Central Trust and Mercantile Trust, says: “The market is evolving in a way that is driving greater numbers of brokers to look beyond their core business.

"Technology has been a strong enabler of this, with a variety of platforms, systems and solutions opening the door for different types of business, either direct to the lender or through a specialist broker panel.

“There will be a wider array of opportunities out there for brokers who work with solution-led lenders, as opposed to being too focused on a specific product.

“For example, provided enough information has been gathered in the fact-find, capital raising could be sourced through a number of solutions depending on the customers’ circumstances, such as an unsecured loan, remortgage, second charge mortgage, second charge BTL, second charge bridge, BTL mortgage, or homeowner business loan.”

Ward adds: “When faced with new challenges and market turmoil, it’s vital that brokers expand their knowledge and forge new lending relationships. It’s the only way to help protect their client banks.”

In light of Consumer Duty, Sinclair encourages brokers to check that the technology they are using is helping them produce the best outcomes for clients. However, he recognises that the array of choice can make it difficult.

“The biggest question I get when I'm out on the road meeting firms – brokers and lenders – is ‘what technology should I be using?’

" is isn't the face-to-face meet with my mortgage broker I was expecting!"


One of the biggest challenges for brokers is educating clients about the market in which we now nd ourselves. e miniBudget last year marked the end of cheap money, and many borrowers are still coming to terms with that. So, while some are still waiting for rates to go back to normal, brokers are having to educate clients on the new normal and what it all means for their individual circumstances.

But rst, there’s the lack of consumer con dence for brokers to overcome. is hasn’t been helped by lenders withdrawing rates with little notice, which in turns puts additional pressure on broker workloads.

Rather than a constant stream of business like we’ve seen in recent years, brokers are having to work much harder and be more proactive to get in front of borrowers. When they do, higher mortgage rates and living costs can mean greater a ordability pressures.

Brokers are having to use all the tools at their disposal to make the numbers work, whether it’s restructuring the mortgage, extending terms or exploring niche lenders.

It’s these skills and access to the whole of market that makes advice from a broker invaluable in the current climate. ere are opportunities still out there for clients, and some good news with recent rate reductions. It’s now up to brokers to get out there and share it.

In the current climate, there’s no question that brokers must be alive to opportunities beyond mortgages and protection. Utilising tools such as the fact- nd is critical in identifying greater needs, such as referring a client for a pension review or wider nancial advice. Not only are brokers then part of that revenue share, they increase their value to the client.

Expanding licence options may not have been a priority in recent years, but it should certainly be a key consideration now, as brokers look to win more business and maximise their earning potential. Across our nationwide network, we’ve seen strong uptake for our licence training courses – especially in business protection, which is an underserved area of the market. In addition, there are commercial mortgages and later life lending, such as equity release.

e job has certainly gotten harder in the past 12 months. Yet demand for academy places remains high, as does interest in joining our selfemployed division. A er appointing 48 new self-employed brokers in Q1, we received 52 applications in Q2.

While some may argue it’s not as attractive, there’s no question there’s still opportunity available for ambitious brokers. Rather than focusing solely on the market, it’s also about making sure employers remain attractive too, o ering the right support package to help brokers grow and succeed in challenging times.

“There are lots of people out there promising lots of things,” he says.

Remote working during Covid-19 brought to light the benefits of technology, with most brokers now embracing a more digitalised approach. The next big thing is slated to be AI.

Adam Oldfield, chief revenue officer at Phoebus, says: “Engagement with the end customer is undergoing a transformative shift, and AI is poised to play a central role in this evolution.

“With advancements in AI and natural language processing, businesses are increasingly turning to AI-driven solutions to connect with their customers effectively.

“Whether it’s through screen presentations, interactive chatbots, or any other channel preferred by the customers, AI is revolutionising the way brands interact with their audience.”

It is still early, but the market is already seeing brokers use AI for admin, with an expectation that we will start to see it make further inroads.

Neal Jannels, managing director of One Mortgage System (OMS), says: “I feel a bit like a broken record, but I will continue to bang the drum for the intermediary market that data is king.

“AI will be a key driving force, with its continued rise in prominence, as it has the ability to assess and analyse vast amounts of data and identify potential risks.

“For lenders, this will provide the opportunity to deliver instant approvals to not only streamline the time taken within the underwriting process, but also help speed up the overall application to completion journey.”

The shifting market

Freeing up time and using technology to outsource some of the more mundane tasks filling up the day will be increasingly important for brokers moving forward, allowing them to focus on advising and retaining clients. Quieter times can also represent an opportunity for expansion, with new blood vital to foster a growing intermediary sector.

“I see evidence of larger firms and intermediaries now building their own recruitment processes and academies, casting their nets in a much wider pond,” says Sinclair. “We have businesses that are nurturing their own talent far more than we had 20 years ago, when we relied on banks to train people and we would take their best individuals.”

Fortunately, the mortgage sector has many strengths, and now more than ever, it is time for brokers to utilise all the tools at their disposal. Including, in some instances, stepping outside of their comfort zone.  ●


Buy-to-Let and Bridging Loans from Lendco

Buy-to-Let Bridging

a market that increasingly makes no sense, let us show you something different. Speak to us about why we “can do”, where others can’t. 0333 414 1495 Speak with our sales team today Register with us to increase your clients’ leverage, allowing them to borrow more 5 year fixed rates with tiered fees BTL Bridging Bridge Exits Sensibly priced Bridge Exits allowing borrowers to exit to a term product which we underwrite simultaneously Fast, flexible short term finance giving your clients the opportunity to acquire, refurb and sell or retain assets Lendco Limited is a company registered in England & Wales with company registration number 11177105. HMOs up to 8 bedrooms No upper limit on units in a MUFB £3m maximum loan per asset £10m aggregate borrowing
Ltd Co / SPV / Trusts
/ Ex-Pats / Foreign Nationals
to £2.5m @ 75% LTV
and Semi-Commercial Individuals / Ltd Co / SPV / Trusts
with planning to 55% LTV No country or currency restrictions for Ex-PatsLight and heavy refurbishment loans Graham Palmer 07541 689262 James Phillips 07519 328425 Ben Pike 07519 328426
Individuals /

Standing out

Despite the growing popularity of many social media sites, when it comes to business-led communications, LinkedIn remains the best way to engage with a professional audience.

It can be a wonderful tool for lead generation, building brand recognition, a racting new talent, or making important business connections. With this in mind, how can mortgage advisers ensure they

are making the most out of their LinkedIn profiles?

In this article, we will explore a few things we have learned along the way at MRM, which will help you build a profile that benefits your business, without monopolising all your time.

The ve Ws

The first, and most important, step is to ask yourself about the ‘five Ws’: Who am I trying to reach? Why do

they need to hear from me? What do they need to hear from me? When do they need to hear it? How do they need to hear it?

OK, I cheated a li le with the last one. But regardless, these questions will help you to develop clarity on why you are using LinkedIn, and what you want to get out of it.

Maybe you want to boost your brand awareness? A ract outside investment? Or perhaps you want to make new professional connections with independent financial advisers

Special Focus BROKER BUSINESS The Intermediary | August 2023 14

on LinkedIn

(IFAs) or accountants to grow your referral network?

Answering those questions will help you decide what content you share, what tone you use, and generally how you interact with those in your target audience.

Back to basics

A er you’ve worked out your five Ws, it’s time to ensure you’ve got the basics right.

It’s amazing how many company LinkedIn profiles are lacking straightforward information, such as the office address or other contact information, or even a professional photo and company logo.

Make sure you also write a clear, thought-out summary of the services you provide, your mission and motivations. Keep this simple and don’t leave people guessing.

This section should also include any relevant skills or qualifications you or your firm have.

It’s an opportunity to showcase your abilities and help your target audience understand your strengths.

Don’t ‘post then ghost’

If you’re new to LinkedIn, or you’ve perhaps neglected your profile, the next step is to build and maintain your network.

Despite what many believe, social media – and particularly LinkedIn – is not necessarily a numbers game.

Having lots of contacts can be useful, but it’s far be er to have 50 strong, strategically selected connections than 1,000 who are irrelevant or who you never interact with. Make a list of the type of people you want to be talking to and what

types of things you believe they would like to hear about.

A lot of people on LinkedIn are picky about who they connect with, keeping their circles small and relevant. However, they may be willing to follow your posts without formally connecting with you. Ensure you change your se ings to allow followers as well as connections.

Once you’ve built your network, you need to take the time to nurture and maintain those connections. This requires ongoing commitment. You can’t just ‘post then ghost’ if you want this to work.

Content is key

Develop a content strategy. This is essentially a set of guidelines se ing out your goals, what type of content you will post, and who is responsible – and ultimately accountable – for seeing it through.

It can help to research your audience – what types of content will your clients and contacts want to see?

What questions are those audiences asking when they need a broker, and how can you anticipate and pre-empt those internal conversations with what you post?

If you’re unsure, it can help to analyse your competitors or firms that offer similar services to you to see what types of content people engage well with.

It’s also important to remember that LinkedIn favours ‘native’ content created via its own tools. So, if you make videos, blogs, posts or pictures, try to use LinkedIn’s tools as you will get greater visibility.

Calendar hooks

Next, build a content calendar. This is essentially a schedule of what you are going to publish and when, and it will help you stay organised and maintain consistency.

A good content calendar should include any upcoming corporate announcements you may want to shout about, but also relevant news hooks you can piggyback on.

For example, if your aim is to win new clients, you might create a post explaining what the latest Bank of England rate rise means for borrowers and how you can help.

From quality to quantity

That said, don’t post for the sake of it. When you go to post, ask yourself: will this help me achieve my aims? If the answer is no, then don’t post.

And remember, social media is an art as well as a science, so if something doesn’t work, don’t worry. Try something new.

Test and learn and you will find a formula that works for you. ●

Special Focus BROKER BUSINESS August 2023 | The Intermediary 15
PAUL THOMAS is head of news and content at MRM

Are you an early adopter or a laggard?

Iknow that today’s buzzword is artificial intelligence (AI), but considering that most mortgage brokers are middleaged or older, sometimes it’s interesting to stop for a second and consider how we got here.

A few days ago, my husband and I mused over old typewriter features. Do you remember the carbon copy sheets, the correction fluid, and the occasional jamming of typebars?

The world of computing adopted some words and phrases from this age. For example, ‘cut-paste’, which was originally quite literal.

The conversation moved on to old computer types, the dial-up internet sound, and floppy discs. In those days of the early 2000s, mobile phones were already widely used, but most still had a landline, and offices worked with faxes. Even as recently as 10 years ago, lenders asked that brokers physically stamped, signed, and faxed all pages of all documents in support of a mortgage application. The resulting paper files took up lots of cupboard space.

The crucial role of tech for brokers was always twofold: having up-to-date information about the deals available that day, and keeping track of clients and applications. The former is largely covered by a few big players, while the la er is still up for debate.

Excel sheets or a CRM?

The technology adaption lifecycle has the following categories:

2.5% innovators – those coming up with new ideas.

13.5% early adopters – people who are happy to try new things before they become mainstream.

34% early majority – more conservative, but still open to new ideas and making things mainstream.

34% late majority – those starting to use things a er they had been thoroughly tried and tested.

16% laggards –those who only adopt new technology when there is no other choice le .

As a recent entrant to the customer relationship management (CRM) market, we come across all types of people when presenting our system.

Some are open to a new approach, as old systems did not quite work for them, while others were more risk averse and would rather wait and see.

Of course, we also hear that Excel sheets work just fine, and some completely close the door on the possibility of eliminating their manual paperwork and reducing hours – or even days – of work compiling Financial Conduct Authority (FCA) report data.

The next big thing

Let’s face it, the past 10 years have brought a lot of change into the brokering tech world. Not only did we bid farewell to the fax, but we are now integrating various systems to make mortgage advising more digital.

A few years ago, the term ‘roboadvice’ was everywhere. Broker firms popped up claiming to use the latest-greatest technology to search the market and find the best deal. In reality, though, human intervention was never far.

Mortgages are not black and white, nor are client circumstances nor lending criteria straightforward. Things are o en subject to the valuer’s or underwriter’s discretion, and roboadvice simply could not capture this.

Instead, new features were introduced by lenders and thirdparty providers: automated valuation models (AVMs), digital signatures and ID verification, income and

expenditure checks via Open Banking, etcetera. The other day, a broker said it took a lender a mere three minutes a er submi ing a purchase application to get the offer. All the information and documents were checked, searches done, and the offer document generated in this time.

Although it may take a li le while –if it ever happens – before all cases can be approved in minutes, technology helps. Integration helps.

How does AI t into this?

There are various definitions for AI, such as from IBM, that it “leverages computers and machines to mimic the problem-solving and decision-making capabilities of the human mind.”

An MIT article further clarifies: “Machine learning is a subfield of artificial intelligence, which is broadly defined as the capability of a machine to imitate intelligent human [behaviour]. Artificial intelligence systems are used to perform complex tasks in a way that is similar to how humans solve problems.”

But how does it work? A computer is given a set of data to train on – the bigger the data set, the be er. Can this work for mortgages? Or could it start as a filter to decide if the case is vanilla, and prompt a human to take it further if not?

We also have to ask, would clients really like dealing with robots? As a former broker, it’s hard to imagine. Then again, we are glued to our mobile screens, virtual reality and alter-egos are coming, so only time will tell.

In the meantime, at ClientTree we continue working on our piece of tech to give an ever-improving experience to our broker clients. ●

BROKER BUSINESS The Intermediary | August 2023 16
LILLA DILLIWAY is managing director at ClientTree Group
Special Focus

Riding the recruitment rollercoaster 2

023 has been a very interesting year in the recruitment sector – a tale of companies’ bravery and quick responses to changes in rates. It has also seen some rash decisions and serious cost-cu ing exercises. Some of the more ambitious firms spent money opportunistically on staff they cannot quite afford yet, but it’s always good to hire the best candidates when they are available, so that by the time the waves calm, the right team is on hand.

Recruitment trends

Recruitment agencies are at the mercy of the same barriers as brokers and lenders. We aren’t seeing the panic of 2006-08, and thankfully every month we are placing permanent candidates from entry to board level. However, those who experienced the ‘bi er years’ will be using their hindsight to look at the profit margins in order to find scale-backs.

It is one of our responsibilities at KFS to read the market so that we can prepare our database appropriately. Recruitment agencies come into their own in a difficult market, as our clients simply do not possess the time it takes to openly advertise a vacancy and filter all applicants.

The consensus is that the more applicants in the market, the easier it will be to find the right hire. This isn’t true. In fact, a greater number of applications increases the time taken in filtering candidates, and as clients have to be extremely choosey with each appointment, this can be very time consuming. Agencies earn their fee by saving a huge amount of time during the recruitment process, enabling the company to focus on the deals coming in.

Deadheading and diversi cation

Due to restrictions on lending criteria across the market, brokers are finding it difficult to get deals over the line. Funding lines for many specialist lenders have added new restrictions, and this is having a negative impact on the profitability of broker firms.

The slowdown has prevented firms hiring rapidly, with some deciding to have a temporary recruitment freeze. A lot of successful businesses are reevaluating their headcount to make sure that employees are still hungry.

We are seeing an increase in demand for brokers who can diversify, with experience of multiple products – not just residential, but buy-to-let (BTL), bridging, commercial and development finance.

The slowdown has also resulted in a greater number of brokers feeling frustrated in their current roles, as their earnings may have decreased.

A vast amount of our broker recruitment since Covid-19 has been for firms that have adopted a more varied offering. A good portion of our recruitment has also been sourcing the ‘perfect individuals’ to replace employees who have not been hi ing targets.

Now is a great time for businesses to bolster their sales force, ensuring that teams are multi-skilled, so that they have more of the market to go a er.

Valuing sta

As important as cost saving is, it is also imperative that our clients understand the value of their employees. We are seeing more brokers opt for an employed package, plus commission, over a commission-only package.

Businesses are notably increasing their requests for self-employed

brokers, but this is highly unrealistic and results in a quick staff turnaround, which ultimately costs more time, effort and stress.

Since Covid-19, we are also seeing a steep rise in benefit expectations. Clients who offer flexi-time, hybrid working, critical illness and gym membership discounts have a higher ratio of candidates accepting vacancies.

The world has become much more aware of mental health and the need for work-life balance.

Generally, broker firms tend to offer fewer benefits, fuelling an increase in brokers applying for BDM vacancies. This has always been a hard leap, but with lenders looking to save on payroll costs, we are seeing more brokers enter the market as junior BDMs.

Shifting focus

Within lending organisations, when the appetite to lend decreases it directly affects recruitment.

As completed cases decrease, servicing departments increase, as the game-plan turns to accruing monies owed.

We have certainly seen an increase in servicing, collection and litigation roles this year, and some of those vacancies have been taken by former sales staff and ex-brokers, who have honed their relationship management skills and possess similar skill-sets.

As we navigate tumultuous times, we know for certain that people still need houses, businesses still need dependable and driven staff, and agencies are still be the best way to destress the recruitment process.

It’s a busy time, and many of us, while keeping grace up above, are paddling like crazy under the surface. Recruiters, brokers and lenders alike. ●

Special Focus BROKER BUSINESS August 2023 | The Intermediary 17


The Intermediary speaks with Oliver Whitehead, managing director at Oportfolio, about the challenges and opportunities running a brokerage in the current market

Can you give us an outline of the business?

I set up Oportfolio in 2009, a brokerage predominantly based in Parsons Green and Putney. I was previously director of another firm and decided to go out on my own. It was right at the end of the financial crisis, where you really had to look after clients properly and make sure you were providing a high level of service. At bigger firms, that wasn’t really the case.

The goal was to provide a high level of customer service, so that clients were supported. The concept was just about providing sensible advice from a professional who knows what they’re talking about, and who will then do what they say, follow up and prioritise – that has always been the bedrock of good client service. Recommendations have always flowed from that.

What are the big market trends?

The main difference these days is that now everything is on Zoom or digital as opposed to face-to-face, so the essence of broker relationships is changing. We’re becoming more of a service.

That’s the challenge, because to properly advise someone, you need to understand their situation. For example, you have to properly protect them. Basically, it’s not just the mortgage, and it needs more of a holistic relationship, and that can be a bit harder to do in the current climate.

When it comes to maintaining those relationships, you can always do it, it’s just through a different medium. In fact, there are advantages – for example, you can see more people, and they can be from anywhere in the country. It’s harder to build a relationship when it’s on a screen. It’s about finding out a bit more, making a bit more time, and asking relevant, pertinent questions and being clear that you’re there to support them.

Other than that, currently the majority of transactions are product transfers and some

remortgages, and the buy-to-let (BTL) market has shrunk. So, it’s about working with your existing clients, because there are fewer transactions.

There’s never been a better time to get advice, though, because in the past 12 to 18 months it’s been turmoil, so clients need bespoke advice based on their situation.

There hasn’t been a steady period in mortgages for a long time. We had a recession, and then we were just coming out of it when we had the Brexit vote, and since then everything has been pretty tumultuous in different ways. More recently, the mini-Budget put the fear of God in the market, and rates suddenly jumped up.

The main scenario is that the cost of funds has changed – it was virtually negligible for a time, and we had 15 years of low rates, which became the new normal. With inflation and the cost-of-living crisis, as well as fuel and other issues, the Bank of England’s only seeming way to combat that is to raise interest rates. The result is some people will just not be able to pay their bills.

Buyers don’t know whether the prices are going to stay or drop, so there will probably be up to a 12-month period where there’s less activity, which would mean house prices drop. However, the raw interest in owning your own property still exists, even if the Government has failed on its property building targets, and stock remains a key issue.

What are some of the hurdles to overcome in running a brokerage?

The most important thing is having people that can learn and do things differently. Getting the right people into the right roles is the hardest thing of all, but what we’ve always managed to do well is provide a culture where people are appreciated, remunerated well, and rewarded if we succeed.

I’ve not expanded the team as much as I might have, because of the volatility of the market. That’s good and bad – having more brokers is better because when there’s more activity, but there’s

OPORTFOLIO The Intermediary | August 2023 18

also more exposure in the event of a potential slowdown of the market.

If you’ve become a mortgage broker in the past few years, you will really struggle, because you won’t have an existing client base. Also, most brokers don’t have diversity to their practices –they can do a mortgage, but then they don’t crosssell and do the related protection advice.

There will be lots of people potentially going out of business during this period, depending on how long the difficulties last. Regardless, it’s a good market to be a part of, you just have to be clever and find ways to do business, where previously it might have just landed in your lap.

What are some of the benefits of working within a business?

When you’re joining a business, it will work with your strengths. For example, if you’re a broker, you’re probably good on the telephone, good at building client relationships, and good at reaching your personal goals by speaking to lots of people.

What you may not be as good at is admin, such as chasing clients for bank statements and the other things involved with following the case through from start to finish. When I started Oportfolio, I was doing the majority on my own. You can only do a certain level of business without there being a standard drop, or a compliance drop.

It makes a lot of sense to join a team, especially one that has a really good compliance department. We don’t have clients ringing us up asking what’s happening to their mortgage. We also work with a network, which provides compliance, information on Consumer Duty, and general Continued Professional Development (CPD).

If the Financial Conduct Authority (FCA) has an issue, it will go through the network and everything is covered. If you’re directly authorised (DA), there is inevitably more of a risk.

What do you look for in a broker?

What we like to do is to bring people through our process. They often start in the admin team to really understand the nuts and bolts. Then, it’s about speaking to people and communicating, as well as personal drive. You have to do everything correctly in terms of compliance, of course, but it’s primarily about your own motivation. Individually, they should be personable, trustworthy, and have good values – meaning they are

motivated to help both the client and the company get a good outcome, and they get something out of looking after people.

What are your favourite achievements?

Being the top overall adviser in the Primis Network was a big achievement. But on a dayto-day level what I’ve also managed to do is to properly protect the clients. If you’re getting into mortgage debt, you should have some life cover, critical illness and income protection. I do both sides of it, all while we’re consistently writing a high level of business.

Building client relationships is ultimately the success of any business – you can look at all our Google reviews and see that people really feel looked after, during what can be a stressful time.

What is on the cards for the coming year or so?

We’re in the process of expanding our admin department, and taking on another mortgage adviser. We also want to create more digital leads. We’re working quite a lot on referrals and recommendations, reaching out to estate agents and other parties to recommend their clients to us. Otherwise, we will just be weathering the next 12 months like everyone else, because it will be more difficult. Nevertheless, after these next couple of base rate rises there is every chance that things will stabilise. On that basis, the market will be more competitive. People still want to buy properties, and the rental market is getting harder, which is pushing people to buy.

In the meantime, we’re in for a quieter time. As a business, it’s just important to adjust and adapt, and support the people that you work with.

Brokers continue to be very important. For example, people are scared to tell their banks if their situation has changed, and they don’t understand that if they’re on a variable rate, they’re automatically allowed to get another rate.

It’s not just about making the banks richer. Intermediaries keep banks accountable by finding the best deal in the market. Yes it’s about making money, but actually it’s about giving the right advice. People make our business, and what we do particularly well is value that, and care about those we help. ●

Special Focus BROKER BUSINESS OLIVER WHITEHEAD August 2023 | The Intermediary 19

Case Clinic


From owner-occupied to rental property

Aclient wants to rent out a property he currently lives in and move in with his partner in her property, which she also owns. His current mortgage lender will not allow him to switch to a buy-to-let (BTL) mortgage from a residential one.

Once he moves out of his property and into his partner’s, he will no longer be a homeowner or owner-occupier, as he would not technically own his own residential property anymore.

A lot of the lenders have issues with the scenario, because he does not currently rent the property out. He therefore does not have any proof of rental income, either received or potentially received.

BTL lenders will base the amount of mortgage they are willing to lend on the rental income received, which he does not have, without having ever rented out the property and having only used it for residential purposes.


“While our normal BTL criteria requires the applicant to be an owner-occupier, we can consider scenarios where the applicant will be residing with a partner who is already an owneroccupier. Our valuers will assess the property and provide us with their estimate of the monthly rental potential, and we can use this figure to determine the amount we are prepared to lend.”


“We had a similar enquiry the other day and spoke with Together, as they would accept this as a Consumer BTL and stress test using 90% of the income if the property is not currently being

rented out. A lot of lenders will require an onward purchase or for the property to have been rented out for the past six months before considering, so options would be limited.”


“In this case, the client would need to request from his current lender a consent-to-let which would allow him to rent the property out because his personal circumstances are changing and he is moving in with his partner. Consent-to-lets typically last for three to six months, however some lenders will grant this until the end of the current product period.

“He will also need to change his building insurance, as his residential building and contents insurance policy will no longer be valid, as he needs to be covered for his new circumstances and associated liabilities as a landlord.

“Once he has these in place, he will be able to let the property out. His current residential mortgage will remain in place until the end of the term, at which point he will have proof of rental income allowing him to remortgage and switch to BTL.”


Declined checks without visible adverse credit

Aclient’s residential mortgages and several BTL fixed rate mortgages are coming to the end of their period and are due to fall back onto the standard variable rate (SVR).

The client gave the go-ahead to run a credit check, but this came back as a decline with no reason given. The mortgage lender advised that the client should check her credit file, which she did.

The client’s credit score has dropped very low with no visible reason. She has not missed any

The Intermediary | August 2023 20

payments, defaulted on any credit, and had no County Court Judgments (CCJs) or bankruptcies.


“There could be several factors which have resulted in the applicant’s low credit score. We would suggest the applicant contacts the credit reference agencies to obtain her credit file – this can be obtained for free – and checks for any errors or incorrect information, which if updated could help with a future mortgage application.”


“Lenders’ credit scoring will take a number of factors into consideration. Note that the applicant has several BTL properties – we would need to check to make sure that all linked or associated addresses, including the BTLs, are keyed in the personal details section of any personal credit file. A lender’s credit search will pick up credit information at any addresses the applicant may be connected with, whereas a personal search will normally only search the address keyed in.

“We have had instances like this in the past where a utility bill relating to a BTL property has not been paid due to the applicant not being made aware of this, as the correspondence may not have been sent to them at their home address.

“Other factors would include looking at the credit limits on any active commitments and the current balances. Are the balances being paid down, or just the minimum payment each month, for example.”


“It is extremely important that the client downloads their credit report so they can understand why they have been declined. The credit report will provide a detailed account of the client’s credit history and will allow them to see the reason behind the failed credit check. This could be something as simple as a missed payment or something more serious such

as identity theft. Once the reason is identified, the client will have a better understanding why they have been declined and if they have seen anything untoward in the report, they would need to contact the supplier to get a notice of correction.

“This can take weeks or months and can sometimes go to court, depending on the scale of the issue, in which case, the priority is to avoid moving onto their current lender’s SVR.

“To prevent this from happening, it will be prudent for the client to opt for a product transfer and secure themselves onto a more favorable rate than the SVR and provide temporary respite by keeping the mortgage repayments affordable while they resolve the credit profile issue.

“Once the credit profile issues have been rectified and the client has improved their credit profile, they can then refinance onto a better deal.”


Three people, a low deposit and a change of job

This three-person mortgage application is comprised of two sisters and one husband, who want to buy a residential property together to live in. All three applicants need to be on the mortgage and deeds, as all of them are contributing to the deposit. All three incomes need to be considered towards affordability to make the property price they want achievable.

The applicants only have a 10% deposit between them, where most lenders will want a 15% deposit or more.

Most lenders also tend to cap applications at two people – some will do three or four applicants, but only take two incomes into account for affordability. One of the applicants also moved job part way through the application.


“Single and joint mortgage applicants are welcomed by the society. Additional applicants –up to a combined total of four individuals – will be considered where the additional parties are close family members.

“All incomes can be used to support affordability up to 95% loan-to-value (LTV). As one of the applicants has recently changed jobs, this can still be considered, providing there has been at least six months continuous employment and no more than a four-week job gap between employers.

August 2023 | The Intermediary 21
The Intermediary gives its broker readers the opportunity to ask for responses, tips and comments regarding their trickiest cases

“We will require the applicant’s first full month’s payslip to be able to assess this income.”


“At 90% LTV the options are limited. Kent Reliance will allow income from a maximum of four applicants up to 90% LTV, and we can consider one month’s payslip in the new role if it is in the same type of job and industry as the previous job.

“We would also need to see 12 months’ employment history. If they are in a probationary period, we would require a copy of the contract and an employer’s reference.

“If it’s a completely different role and industry, we would need six months’ service in the new job and probation to be passed, as well as 12 months’ employment history.”


Short lease and a lodger

The client wants to purchase a £650,000 London two-bed flat in a Victorian house.  The deposit is £310,000, £110,000 from the applicant and the remainder from their parents.

The loan requires £340,000, and the term is 21 years or to a maximum age of 85 years. Both parents are now approximately 63 years old.

The lease is currently at 84 years and 5 months, which the applicant is seeking to extend himself if necessary, or to get the current owner to start the process and then assign it over.

The applicant also wants to have a lodger when he moves in, if possible, but is not asking to use the income from the lodger for affordability purposes.

He would also like to use his mother’s pension pot (£1.25m) and his salary (£36,984 per annum) for income. Both parents are also entitled to full state pension in due course.

The client has a fixed term contract that ends in August 2023, but is set to go permanent soon, and can get employer references if required.


“We require leasehold properties to have a minimum unexpired term of 85 years, therefore the current lease would need to be extended, prior to or at completion.

“As this will be a single application in the son’s name, we would not be able to consider any of the

parents’ income, as they will not be party to the mortgage. A full affordability assessment will be required to determine the maximum loan available based on the applicant’s income.

“As part of the deposit is being paid by the applicant’s parents, this would need to be a nonrepayable gift, as opposed to a loan. Completion of our gifted deposit declaration would be required as part of the application submission process.

“As the son is moving from a fixed term contract to a permanent position, we can consider this, providing any gaps between these roles are less than four weeks. We would also require the first full month’s payslip to verify the applicant’s income from the permanent role.

“An additional occupier can be considered. We would require this to be declared at application with an additional occupier declaration. If this was to happen post completion, then the customer should contact us directly in the first instance.”


“Although the length of the lease is generally not a problem for most lenders, unless it falls below 70 years at the time of application, the best advice for the client is to agree with the seller to assign the benefit of the extension to them.

“If this doesn’t happen, then the buyer would have to wait two years to have owned the property before they can approach the freeholder to ask for a lease extension, which could result in a higher figure being commanded by the freeholder.

“By doing this, the buyer can start negotiating with the freeholder to extend the lease and have it signed over as soon as he purchases the property.

“The age of his parents and the pension pot are not relevant in this situation, and most lenders will allow a lodger with consent.

“Future employment contracts can also be easily taken into consideration once a letter of offer from the employer has been secured.”

Want to get insight into one of your own cases in the next issue?


The Intermediary | August 2023 22
in touch with
details at
Introducing our two-year fixed rate and tracker products featuring a reduced stress test and flexible fee structure for clients looking to remortgage with no capital raise. Buy-to-let. Better. Call 020 7096 2700 or visit Maximise affordability with our like-for-like remortgages

In Profile.



Jessica Bird catches up with Jason Berry to discuss the importance of looking after brokers’ mental health and wellbeing in a volatile market

In October 2021, Crystal Specialist Finance was among the founding signatories of the Mortgage Industry Mental Health Charter (MIMHC), a not-for-profit collaboration which aims to bring conversations about mental health to the foreground in this sector. Signatories – which range from small brokerages to building societies, banks and mortgage clubs –pledge to have a clear mental health focus, and to signpost employees to relevant supports.

Focusing on the business of being a broker in all its forms, The Intermediary caught up with Jason Berry, group sales director at Crystal Specialist Finance, to discuss the work to normalise conversations about mental health in an industry that is still, in some ways, behind the times.

The right moment

In 2021, Crystal Specialist Finance conducted research which found that 73% of respondents in this market said their business did not participate in any mental health or wellbeing initiatives. It also found that 10% of all sick days taken direct result of poor mental health – this number is likely even higher when taking into account the still pervasive stigma around disclosing mental health issues as a reason for absence.

In 2023, PwC and The Times Health Commission found that two-fifths of employers across all sectors had seen an increase in employees taking long-term sick leave due to mental health concerns. Mental health support was the most indemand employee benefit, with 64% of employers seeing an increase in staff asking for counselling, compared with a 19% increase in demand for gym memberships, and a 21% increase in demand for private medical insurance (PMI).

In 2023, MIMHC found that 42% of businesses operating in this sector had no mental health strategy, or at least none that was visible to employees, while 54% did not think that their workplace mental health provision had improved. While this is something of an improvement on the data from 2021, it is clear that there is much work to be done in this sector.

Berry says: “Our sector has overlooked the importance of mental health for too long. I personally found, during Covid-19 in 2020, that there was an immediate need to support our own

Crystal staff. It felt natural to expand this support and share best practices with our wider marketplace as we moved into 2022-23.

“I knew support was needed from like-minded individuals operating in our sector, and thankfully some brilliant people stepped forward to help.

“I will be forever grateful to the co-founders, Nicola Firth of Knowledge Bank, Rob Jupp of Brightstar, Andrew Montlake of Coreco, Paul Brett of Landbay, Scott Howitt of Chartwell Mortgage Services, and Martin Reynolds of Simplybiz.”

Brokers under pressure

Crystal’s 2023 report found that nearly a quarter (23%) of individuals in the mortgage industry regarded their own mental health as either ‘poor’ or ‘of concern’, while 58% admitted to working beyond the recommended weekly guidance of 45 hours. Additionally, a quarter confirmed that they never get the recommended seven hours of sleep in any given week.

There are some universal challenges facing people across all sectors and walks of life. If anything, the pandemic further cemented the shared experience, and brought the mental health conversation further to the fore. There are, however, some pressures that are particularly acute among mortgage brokers, which make this charter an important step forward.

Berry explains: “Dealing with clients’ dreams of homeownership carries huge pressures. Mostly, a broker’s role is incredibly rewarding, but the unprecedented challenges we’ve faced in recent years, overlayed with the current cost-of-living issues and interest rate rises, means many brokers find themselves working relentless hours, never getting enough sleep, and not exercising enough.


While the pressures that mounted during Covid-19 and the resulting lockdowns might have shifted, the market has remained volatile. Berry also explains that tech advances, while providing incredible opportunities, mean that it is easy to overwork and hard to switch off.

An environment of rapid rate withdrawals has forced many brokers into increasingly unhealthy working patterns, high stress, and burnout. More positively, however, this has led to greater awareness, and even a rise in signatories.

stress, anxiety and depression can be both short and long-term results of this.”
The Intermediary | August 2023 24

“What we’ve seen over the past three to four weeks is an increasing number of signatories who have actually cited the current market conditions,” says Berry. “The stresses of product withdrawal, often with minimal notice, have been specifically cited as a reason to sign up to our charter, as undoubtedly these actions have contributed to worsening mental health for brokers.”

Making a start

In such difficult times, looking after your own wellbeing might be as simple as setting aside some sacrosanct ‘switch off’ time.

Berry says: “I recently held a webinar with Clarke Carlisle, an ex-Premiership footballer and one of the best-known mental health campaigners here in the UK. Clarke talks passionately about the importance of ‘me’ time.”

This might sound easier said than done in a market that demands long hours, but could simply be a matter of placing personal time on the same pedestal as work, rather than on the back burner.

“Brokers should consider scheduling tasks or activities which they most enjoy using the same emphasis they would apply when scheduling work commitments,” Berry explains.

“Clarke also highlighted the crucial value of physical exercise, consistency of sleep patterns and ongoing open discussion or therapy.”

Berry points out that Crystal’s own approach hinges crucially on constantly encouraging feedback and opinion from staff, in order to stay abreast of their needs, saying: “Receiving staff feedback comes with responsibility to shape change, so we listen and take action, meaning people feel engaged and valued.”

For those outside the traditional employment structure, the challenge can be harder. It is therefore important to know where to access resources and support such as those provided by MIMHC, as well as bodies like Mind, Mental Health UK, and the Mental Health Foundation.

Berry says: “From day one, we wanted to gain an increasing number of signatories who represented companies of all shapes and sizes. Additionally, we wanted to provide free resource material, so companies could easily lift and drop a health and wellbeing framework into their company.

“I am delighted that our MIMHC website now provides many useful assets for business owners to consider, and am extremely proud to see such a diverse cross-

section of signatories – everything from oneperson brokerage firms to larger national firms and mainstream lenders.”

The mental health conversation has been growing over the years across all sectors. For Berry, it is just as important to engage with broader, non-industry specific initiatives as it is to focus specifically on the challenges being faced within the mortgage sector.

He explains: “Neither myself or any of the cofounders profess to be mental health experts, but through our life experiences we all recognise the crucial value of conversation. Any industry or nonindustry initiative which encourages discussion without stigmas has to be applauded.”

One such initiative which MIMHC has urged the industry to engage with is Time to Talk Day, run by Mind and Rethink Mental Illness each February. This campaign encourages families, communities and workplaces to openly discuss mental health, and provides downloadable resources to help start the conversation.

Moving forward

The first step for industry players looking to engage in the conversation, Berry says, is to join the MIMHC and start collaborating on creating a better environment in the future. Even if the current turbulence of the market settles, this will not resolve the stressors affecting brokers, many of which are baked into the market’s processes.

“Over the next few years, I see lots of opportunities,” Berry explains. “Although this is great news, unfortunately the stresses and strains will continue unless behaviours are modified.

“Separately, communication between all parties involved in the mortgage process has to improve. Brokers are affected by unexpected deadlines or a lack of information, which does not equip all parties to manage expectations.”

For MIMHC, looking ahead means continuing the work to provide helpful resources, as well as encouraging conversation. Berry says: “We want to continue evolving best practices.

“Most importantly, we want our website to be recognised as the ‘go-to’ platform for any individuals seeking expert help.”

Finally, he adds: “We are about to create our first steering group committee composed solely of signatories. This will see ideas and actions created and delivered by a diverse range of supporters who are extremely passionate. Rest assured we are just getting started and have so much to achieve.”

● August 2023 | The Intermediary 25 Special Focus BROKER BUSINESS

New-builds have a key role to play W

hen evaluating current market conditions, it’s impossible to look beyond the impact of rising interest and mortgage rates, which continue to restrict the borrowing ability and appetite of some potential buyers.

As outlined in the Royal Institution of Chartered Surveyors (RICS) residential survey for June, the housing market is seeing a “renewed deterioration in sales activity” due to a sustained upli in the cost of borrowing.

The survey outlined that new buyer enquiries slipped to a net balance of -45%, down from -20% in May, the lowest reading recorded since October 2022 (-51%). Respondents across all parts of the UK reported a firmly negative trend in buyer enquiries compared with May.

From an affordable housing perspective, it’s encouraging to see some more positive news emerge. According to data from Homes England, the Government’s Shared Ownership and Affordable Homes Programme is on course to exceed its objective of delivering 130,000 new affordable homes, with 126,800 starts by the end of March 2023, and a further 5,000 remaining starts to deliver in 2023-24.

From 1st April 2022 to 31st March 2023, more than three-quarters of starts (28,457) were for affordable homes – an increase of 3% on the previous year.

Due to the impact on the affordable housing sector caused by the Covid-19 pandemic, the Government agreed an extension to the 201621 programme until March 2023, giving the sector funding stability and ensuring affordable housing providers could continue to build their pipeline and deliver through the current programme.

This figure of 130,000 new affordable homes represents a good foundation for the new-build sector, although it still falls well short of the numbers required to bridge a significant supply gap.

Economic pressure has inevitably placed an even greater burden on housebuilders over the course of 2023, but a er a period of growing concern around elevated levels of inflation, the latest Office for National Statistics (ONS) data has brought some good, and slightly unexpected, news, with annual consumer price index (CPI) inflation falling from 8.7% in April and May to 7.9% in June.

In addition, the core rate of inflation – which strips out volatile food and energy prices – was predicted to remain at May’s elevated level of 7.1%, but in fact fell to 6.9%. CPIH inflation – which includes owner-occupiers’ housing costs – also dropped to 7.3% in the 12 months to June 2023, down from 7.9% in May.

This set of reassuring data is a welcome shot in the arm for the housing and mortgage markets, and will provide a degree of additional confidence for borrowers. The news also caused housebuilder shares to rise sharply.

While the falling CPI may have boosted housebuilder shares in the short-term, companies operating in this sector still face their fair share of obstacles through a number of factors, including build cost inflation, rising labour costs, material availability and building remediation issues.

Cautious optimism

When looking at the bigger picture, it’s prudent to keep in mind that house prices have only fallen relatively modestly when compared with recent highs. Property purchases, including many new-builds, are still being completed across the UK, and there is an even greater emphasis on the advice process to help a range of potential

buyers and existing homeowners to navigate this transition into a higher interest rate environment in the newbuild sector and beyond.

Lenders are also doing their best to step up and deliver products and service standards which meet a variety of borrower and intermediary partner demands.

In terms of our proposition, we’ve recently revamped our new-build offering to include a dedicated pre- and post-submission application support team, as well as the instruction of day one valuations, and six-month offer extensions.

It’s been a turbulent period for the housing and mortgage markets, but lenders, housebuilders and the intermediary community are constantly seeking innovative ways to be er support their customer base and provide solutions to keep the wheels of these markets turning.

New-builds will play a key role within this evolution, and with a growing number of homeowners, landlords and tenants increasingly aware of the layers of value a ached to greater energy efficiency within the home, this is an area which the intermediary market must keep a close eye on in H2 2023 and beyond. ●

Opinion RESIDENTIAL The Intermediary | August 2023 26
MATT ASTON is head of lending development at Barclays
While falling CPI may have boosted housebuilder shares in the short-term, companies operating in this sector still face their fair share of obstacles”

Lenders must do more for the newbuild market

Property hasn’t always been seen as front-page news, but housebuilding is likely to become an increasingly hot topic in the months ahead. We have an election on the horizon, with all the main parties already making noises about measures that might be included in their manifestos.

A er all, housing measures have long been recognised as not just an emotive subject, but potentially a votewinning one, too.

Supporting developers

Whatever the main parties promise in their manifestos, the proof will ultimately lie in the pudding when it comes to housebuilding. And the proof, at the moment, is that there is plenty of room for improvement.

While there is a consensus that we don’t have enough homes to meet demand – and that this imbalance has led to the incredible rates of house price growth seen in recent years – the reality is that relatively li le progress has been made on addressing that shortage.

Take the most recent data on housebuilding from the Office for National Statistics (ONS). In 2022, there were 178,110 starts of new-build dwellings, while 177,810 new-builds were completed. Given the talk in recent years from the authorities about building 250,000, or even 300,000 new homes a year, current production levels are some way off.

At Mansfield Building Society, we’ve long advocated a fresh approach when it comes to the building of homes. If we want greater numbers of properties to be built, then greater support needs to be offered to those looking to build them.

Because of this desire to improve the lot of developers, we partnered with NEXA Finance back in 2021. NEXA works to bring together developers and funders across the East Midlands, ensuring that builders can secure the financing they need in order to deliver greater levels of housing.

We know that many developers find it difficult to get deals in place where the sums make sense, particularly given the complicated commercial models that are so o en insisted upon by traditional banks.

The partnership has already led to a host of exciting developments in the region, and clearly demonstrates how embracing a different way of working can mean that higher levels of housing are delivered to the communities that so badly need them.

Going the extra mile

However, the health of the new-build market is down to more than just greater levels of help for those building the properties – the industry needs to do more to support those hoping to purchase a new-build home.

Would-be buyers have been dealt a new challenge this year, with the conclusion of the Help to Buy scheme. While the scheme has come in for some criticism – with opponents arguing it pushed up prices of newbuild properties rather than making them more affordable – the facts speak for themselves. Up to the end of December 2022, around 384,000 properties were bought using the scheme, utilising £24.4bn in equity loans.

Despite speculation about the scheme being revamped and relaunched, there is no sign of this happening, though it’s worth highlighting the other support measures for potential buyers.

Mansfield, for example, was one of the first lenders to sign up for the First Homes Scheme, an initiative which offers eligible buyers discounts of between 35% and 50% off the market value of the property. While it is still early days, we have already seen some promising cases which highlight the scheme’s potential to assist greater numbers of would-be buyers of new-builds.

Beyond these central support schemes, there is more that lenders can do if they are serious about this area of the housing market.

Actions speak louder than words here; we know that a big source of frustration for brokers is the inflexible way that some lenders handle such cases, and the way that they assess the borrowers involved.

In contrast, lenders like Mansfield Building Society that employ a manual, more details-based approach, are be er able to paint an accurate picture of the individual case, and therefore be er able to be flexible where necessary to ensure the buyer is able to get their deal over the line.

New-build market matters

The new-build market plays an incredibly important role across the economy as a whole, and not just the property market. It’s a big contributor to our national economy and a vital source of jobs, which is why it’s likely to come under greater focus as the next election draws closer.

However, there is more to the healthy operation of the new-build market than the interventions of the Government. If we want to see this sector thrive, lenders must do more to support both the building and buying of these homes. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 27
DENMAN-MOLLOY is intermediary sales manager at Mans eld Building Society

Help is at hand for A

s the rising cost of living continues to impact us all, there’s help at hand for customers who wish to ease some of the pressure of their increasing mortgage repayments.

As I write, lenders representing around 90% of the mortgage market are signed up to the Government’s Mortgage Charter. This allows customers who are up to date with their payments to move to interestonly for six months or extend their mortgage term, with the option to revert to the original term within six months. In both cases, the intention is to reduce the monthly mortgage repayment for that six-month period and therefore ease the pressure on overall household budgeting for a while.

Participating lenders are also committed to providing up to a

six-month window for customers to secure a product transfer deal, requesting a better like-for-like deal with their lender right up until the new term starts.

They have also committed to ensuring that a borrower will not be forced to leave their home without their consent – unless in exceptional circumstances – within a year from their first missed payment.

There’s a very practical guide on the Government website which provides an overview of the scheme and the participating lenders. My intention here isn’t to go over the details of the scheme, but it’s worth highlighting the role of the broker and the lender in all of this.

Phased introduction

As inflation continues to be higher than the Bank of England’s target, we’re likely to be in the current interest rate environment for some time to come, and therefore the Mortgage Charter is likely to be with us for the foreseeable future also.

The lenders which have signed up to the charter have acted quickly to ensure systems and policies are in place to enable customers to benefit from the scheme without delay. This means that there will inevitably be a ‘phase one’ implementation of the Mortgage Charter, with some manual processes and details still to be ironed out, with hopefully some fast follower ‘phase two’ and ‘phase three’ finessing

to address any process or technical challenges not there at initial launch. What this means for brokers is that there will be slightly different approaches taken by the different lenders depending upon the agility of their systems. Nothing new there, then.

However, brokers should look out for a relatively fast-paced evolution when it comes to how lenders approach the charter as they learn what works and what processes and technology can be improved to avoid any cottage industries taking hold. The slicker the process, the better it is for customers and lenders.

The value of advice

The key message, therefore, is to have a good understanding of the approaches being taken by the different lenders, maybe just by starting with the ones you use most frequently. Check out the lender’s website, as it’s highly likely there will be a page dedicated to its Mortgage Charter commitment, and have a chat with the business development manager (BDM) or use phone and live chat facilities if you are in any doubt. The temporary change itself takes place at the request of the customer and is a direct process with the lender.

CHRIS PEARSON is head of intermediary mortgages at HSBC UK

those who need it

It is not an advised process, but there is no intention that a brokerintroduced customer will become a direct customer after making an amendment under the charter.

It is highly likely that your customer will come to their trusted broker to talk about their options and ask for your opinion on what route to take, which includes the temporary savings as well as the impact to the overall terms of the mortgage, and primarily what the longer-term costs might be.

Calculators are available to provide a good indication of what happens to repayments and overall costs once a change is implemented, so it’s worth knowing where they are on a lender’s system to enable you to point the customer towards it.

The general intent is that, if you can afford your contractual repayment when you move to a higher interest rate, then it’s better to try and run with that if at all possible.

Clearly there is not enough space here to dive into what’s the best advice for a customer, but I’m sure that will be covered off in plenty of detail in future articles.

As a broker, the likelihood is that you’ll at least be asked the ‘what

would you do if you were me?’ type questions, so you have to be alive to the sort of guidance you’d give and where to find those answers.

There will be unique customer situations that arise as the Mortgage Charter embeds over the coming weeks and months. For example, what happens if a customer has already booked a product transfer deal a couple of months ago, and is just waiting for the early repayment charge (ERC) period to end, and now wants to take a Mortgage Charter interest-only deal? How does all that work in practice?

Here, I’d refer to my earlier guidance to ensure you’re on top of the processes that each lender is taking, mindful that the rapid deployment of the Mortgage Charter will mean some manual processes evolve and get slicker over time, so it is important to keep up to speed.

Finally, it’s really important to differentiate those customers who are in genuine financial difficulty and require a more bespoke approach from their lender through a range of forbearance measures.

These are not Mortgage Charter customers, and they should speak to their lender without delay, to talk through an individual plan, specific to their circumstances and perhaps eliminating a few sleepless nights at the same time.

The Mortgage Charter will be a feature of our market for the next 12 months and perhaps beyond. Customers will look to trusted brokers to provide some level of guidance throughout that time, and therefore keeping close to the approach lenders are taking, both now and over the next few months, will be a good investment of time and will further underline the depth of your client relationships. ●


The right tools for the job

Irather think it may be time to reassess whether our economy’s tools to fix itself are fit for purpose. In the years that followed the global financial crash, keeping inflation at 2% a year got, frankly, just too easy. Rather than using monetary policy as a tool to direct economic growth, curb consumer demand for debt and incentivise savings to then be reinvested by holding banks, the Bank of England opted to hide behind monetary policy.

The bank sliced the base rate from 5.75% in summer 2007 –when honestly, no one felt that was particularly high – down to 0.5% by March 2009. Then, it set about slamming the money printers into maximum output mode.

On the one hand, pumping hundreds of billions of pounds into the economy when the pandemic hit was the right thing to do. On the other, central bankers should have known and flagged that a massive injection of funds into any market would send spending, and therefore inflation, into a very dangerous spiral.

Even if we had known Russia would invade Ukraine and that supply chain disruption would be so severe, economic turmoil was more than enough of an explanation for central bankers, the markets and consumers alike to keep the Bank of England base rate at record lows for more than a decade. Meanwhile, soaring house prices, sent rocketing by the Help to Buy scheme, rock bo om mortgage finance costs and then the Stamp Duty holiday, have coagulated into more economic stress.

Headlines like to scream either ‘boom’ or ‘bust’ when it comes to the housing market. The truth is, neither can ever really be described as accurate when it comes to house prices. The number of homes is too few and the number of families too high to damage Britain’s housing market irretrievably.

And this does not even account for the wild variances across the nation.

Property, price and placement are all far too nebulous to be accurately representative of the wider market. This said, the latest Rightmove index reveals the increasing affordability challenges for homebuyers, that mean some new sellers have adjusted their asking price expectations.

The average asking price of a home in Britain dropped this month by £905 to £371,907. In London, the fall is more profound – largely as house prices are that much higher.

Meanwhile, the results of the June 2023 Royal Institution of Chartered Surveyors’ (RICS) UK Residential Survey point to a renewed deterioration in sales market activity on the back of the recent escalation in interest rate expectations.

Traditional rules

What does this tell us? The traditional rules of supply, demand and price are no longer sufficient to describe what is happening in the UK housing market. It sounds upside down to a traditionalist economist, who would tell you that tighter affordability means dampening demand. Would-be first-time buyers give up because they cannot get a big enough mortgage to buy. That reduces buyer supply and forces sellers to drop asking prices to secure the sale. Except, that’s not actually what happens.

We saw it in the a ermath of 2008’s financial crash.

The property market responded to the economic turmoil – far more widereaching than it is today, it’s worth saying – by digging in and refusing to sell at a ‘paper loss’. Transactions dried up. House prices didn’t fall much in areas where the supply of homes matched the supply of jobs.

The areas that did see prices plummet were city centre purposebuilt skyscrapers, bought in cash by overseas investors promised guaranteed regulated returns without the due diligence of ensuring steady tenant demand. Those armchair investors bailed, because no one wanted or could have afforded to live there. That dynamic does not apply in London, particularly in central and prime semi-central zones, which continue to behave in a fashion that has much more in common with other global cities.

Higher interest rates are not dampening demand in the capital, and yet the very crude tool of interest rates is being used to try and club inflation to death.

I have long said that London belongs on the international continent which is more about wealth than geography. Ineffectual monetary policy is evidence to that effect. It has always been of limited use to base economic policy on the general – it satisfies no one, because it caters to a meaningless mean average.

The time has come for us to admit that the monetary tools deployed more than 200 years ago may no longer be fit for purpose. The world has moved, and anyone who wants to survive must move on alongside it. ●

Opinion RESIDENTIAL The Intermediary | August 2023 30
Monetary policy must evolve with the times

Bringing borrowers along on the net zero journey

This summer, the world has seen the ho est weather recorded, as climate change and shi ing weather pa erns pose risks to our way of life and livelihoods. Climate change is the defining issue of our generation, yet as the shi towards a low carbon world gathers pace, key questions remain. Many homeowners know there’s a need for change but are unsure how to get there, while others may not realise the role they play, or the options out there.

Six months ago, an independent review of the country’s net zero ambitions was published. It looked at how the UK might deliver its own targets in a manner that is affordable, efficient and pro-business.

We all need to work together –lenders and Government, lenders and consumers, brokers and lenders –maintaining a flexible outlook to keep adapting, learning and searching out the latest advice and solutions.

Rewarding our customers

The UK not only has the oldest housing stock in Europe, with one in five homes failing to meet the Government’s definition of a ‘decent home’, but also among the least energy efficient. Our homes lose heat up to three times faster than in Germany, and housing stock contributes around 16% of all carbon emissions.

The Government has proposed key deadlines, initially for landlords but eventually all homeowners, to bring properties up to minimum standards. The proposed changes to buy-to-let (BTL) Energy Performance Certificate (EPC) legislation is intended to kickstart the retrofit.

Consumers are becoming increasingly aware of the need to

decarbonise their homes, constantly looking for products that support this approach. There’s real scope for lenders to widen the choices available. As lenders, we need to bring consumers with us on a net zero journey.

The way the industry currently measures the energy efficiency of a property is through an EPC – first introduced in 2007. Every home listed for rent or for sale needs a certificate, which is valid for 10 years.

EPCs allow consumers and other stakeholders in the industry – such as lenders looking to benchmark their mortgage portfolio, or the Government as it looks to set minimum efficiency requirements –to compare properties. EPCs estimate a property’s likely fuel cost, energy use and carbon dioxide emissions.

Here at Leeds Building Society, being able to demonstrate our principles by making a direct link between products and actions is very important. We were the first UK lender to offer a carbon neutral mortgage, which offset the forecast environmental impact of each home during the initial fixed term. In 2021, we introduced preferential rates and cashback deals for the most energyefficient homes. Last year, we offered enhanced affordability on the most energy-efficient new homes. We can use more detailed data about projected fuel bill savings for new-build homes with an A or B EPC rating, enabling customers to borrow more.

As well as being the right thing to do for the planet, ensuring homes are as energy efficient as possible also makes financial sense for homeowners.

It’s important that employers also take responsibility for their own carbon footprint, including their property portfolio. When we moved

to our new head office in 2020, we upgraded its EPC rating from D to A. We’re constantly assessing our own impact and making good progress against challenging targets to reduce our own carbon footprint. We aim to reach net zero operations by 2030.

Retro tting housing stock

The Government wants homes in England and Wales to reach a minimum EPC of Band C. Despite some suggested deadlines, no legislation has been forthcoming. At present in England, 40% of assessed homes currently reach a C or above.

It’s no surprise, then, that against a backdrop of political uncertainty, rising energy prices and soaring interest rates, there has been li le incentive for landlords to start the retrofit revolution. While around 85% of the public believe that climate change is an important issue, only 35% have adopted, or are planning to adopt, energy efficiency measures anytime soon.

Climate change solutions will keep evolving, and a ‘big ticket change’ like investing in a heat pump might not be the best option for everyone. For some, cheaper actions like changing everyday habits or switching to a green energy supplier could make a more tangible difference.

There is no doubt that the costs are enormous. According to the ‘Net Zero Homes Report’, published last year by UK Finance, it could cost UK homes approaching £300bn to reach the required EPC ratings.

What is certain, however, is that this is an issue that demands all our focus. Working together is the best route to achieving lasting and meaningful change. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 31
MARTESE CARTON is director of mortgage distribution at Leeds Building Society

Boardroom to borrowers, everyone is vulnerable

The decision of some lenders to embrace the Mortgage Charter is interesting. Let’s be honest, some are of a size and import in the market that means – for the sake of making a Government idea look charitable – they had to agree. Even from a reputational point of view, it is not helpful to be a household name that shuns such an apparent act of policy chivalry.

But for others, I’m not so sure. The Mortgage Charter is unquestionably a force for good for borrowers, but if you are si ing in the boardroom of a smaller lender, having the decisions on how to deal with distressed borrowers effectively removed from your gi may be a li le worrying.

To recap, the signatories have agreed that any borrower worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file.

Lenders can suspend affordability checks for product transfers, and if necessary extend mortgage terms to reduce payments, switch to interestonly payments, or take one of many other options, like a temporary payment deferral or part interest, part repayment.

One-size- ts-all

All lenders share similar issues, but few have much in common when it comes to how they respond. Balance sheets, funding lines, operational target models, and distribution strategies all differ, and they all ma er.

The Mortgage Charter is a one-sizefits-all approach that squarely focuses upon borrower issues. Now, I am not about to ask everyone to cry into

their beer over lenders’ issues – unlike the Intermediary Mortgage Lenders Association (IMLA) funding booklet for brokers, which was about as tone deaf if well-meaning a piece as I have seen in recent times.

Di cult calls

From a risk perspective, however, I can see that for smaller lenders there are real problems being stored up here. Self-diagnosis by borrowers is one issue. Does a borrower really need that help? Is there something else that might be done that they simply do not want to do? Are they gaming the opportunity for help? This la er issue was not uncommon during the pandemic.

Already, we know that the definition and regulatory expectations around vulnerability have made for difficult calls for young staff in call centres up and down the land.

The requirements and reporting of capital positions as borrowers race for interest-only loans, how securitised borrowers will be managed…the list of questions goes on.

All of these risks will need to be managed against the ongoing improvements in practice being driven and implemented by the Consumer Duty rules. These are by no means undemanding. The level of understanding of what constitutes vulnerability, where hand-off points are in the current value chain, where these will likely evolve, and how we get through the current challenges of oncoming arrears and forbearance, will be acute.

Robust audit is critical

At present, a lot of work has been done on identifying what needs to be done, and improving some basic practices, but my suspicion is that the regulatory risks – and for that, read litigation risk – around conduct are growing. This ma ers, because funders and investors too will be becoming more aware of the threat to returns.

Good robust thinking and audit will be critical. Not just of what you do today, but how this will likely have to evolve for tomorrow.

In the end, the outcome of this Mortgage Charter should largely be good for those it is trying to help. Where it isn’t, they will be able to point at bad advice and a worse outcome as a form of defence.

The impact of some of these measures on some lenders will be sizeable. Boardrooms need to understand and deal with this. ●

Opinion RESIDENTIAL The Intermediary | August 2023 32
TONY WARD is non-executive chairman at Fortrum Funders will be all too aware of the growing threat

Housing: Beyond party politics

Food and shelter are among the most basic of human needs. Right now, both face crisis-level challenges. Figures from the Office of National Statistics (ONS) show that food and non-alcoholic beverage prices rose by 18.4% between May 2022 and May this year. The annual inflation rates for this category in March and April were the highest seen in over 45 years, with the ONS estimating that food inflation reached 21.9% in August 1977.

According to the ONS’ latest Opinion and Lifestyle Survey, based on data collected between 28th June and 9th July 2023, close to half (48%) of adults in Great Britain said they were buying less food when shopping over the past two weeks.

The rising cost of food was the most commonly reported reason among the 60% of adults who said their cost of living had risen in the previous month. Among those respondents, 96% said the rise in the price of food shopping was a reason why their cost of living had gone up.

Rent and mortgage payments

Equally arresting is that the same survey found that 46% of people living in Britain reported difficulty affording their rent or mortgage payments.

More detailed analysis from the survey covering the period 8th February to 1st May 2023 showed that renters across Britain are around five-times as likely to be financially vulnerable as those who own their home outright. Those with mortgages were twice as likely to be financially vulnerable as people who own their homes outright.

The Bank of England’s half-yearly Financial Stability Report, published in July, detailed that a million households will see their mortgage repayments rise by more than £500 a month by the end of 2026.

Millions more will see monthly repayments rise by over £200 a month when they come to remortgage.

The situation for renters is arguably worse. Joint research by homelessness charity Crisis and property listing site Zoopla showed that average monthly rental prices have increased by 11% across the UK in the past year.

Ma Downie, chief executive of Crisis, warned that as mortgage rates continue to go up the country faces “a very real catastrophe as many landlords will be forced to pass these increased costs down to tenants who are already struggling to make ends meet.”

Richard Donnell, executive director at Zoopla and a long-time very wellrespected commentator on the UK’s housing market, points to years of low investment in new rental supply.

Commenting on the joint research, his central message was that it’s essential we focus on policies to boost investment in rental supply across all tenures.

A matter of policy

The next General Election must be called before January 2025, a mere 18 months away, and already housing is the policy area that seems to be garnering the most weight.

In May, opposition leader Sir Kier Starmer told the British Chambers of Commerce that house prices had to come down relative to incomes, an aim he said should be met with the building of more homes.

He was reported as saying: “The building of houses is likely to drop down to the lowest level since the second world war.

“I’d say the dream, the aspiration of owning your own home is going to be killed, and we need to do something about that.”

Labour, he said, would be “the builders, not the blockers,” making sure permission to build on green belt land was easier to obtain.

Already housing

Prime Minister Rishi Sunak has also pledged to support voters’ homeownership aspirations.

However, we are in a difficult position: interest rates are already pu ing considerable pressure on affordability, inflation more so.

The Government’s recent push for lenders to sign up to its Mortgage Charter shows its commitment to offer help to existing homeowners, and it will offer breathing space for those who take it up. Nevertheless, there remains a long tail of underinvestment in housing in this country, and unfortunately, a history of promises to increase supply that have not come fully to fruition.

Past party politics

The situation is arguably way beyond party politics and is akin to a fundamental view of what and how we want our society to be.

We need cross-party support and a credible tactical and long-term strategic approach that supports tenures of all sorts, but is wellthought through and addresses the issues facing the respective parts of the country.

The invisible hand of the markets regularly illustrates that it is less apt to deliver that. We need policy that focuses on new building and new affordability support, and we must take partisan politics out of the picture.

The country needs homes to live in. I think all voters would agree. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 33
STEVE GOODALL is managing director at e.surv
is the policy area that seems to be garnering the most weight”

We will always play our part

It has been 20 years since the Barker Review warned that the country was heading into a housing crisis, and it would appear that many of the issues facing us then are still apparent now.

Inflation, though it appears to be coming down, is at 7.9% at the time of writing. Seeing this start on a downward trend is welcome news, nevertheless. A noticeable, albeit presumptuous, sigh of relief has audibly swept across would-be borrowers, mortgage holders, brokers and lenders alike.

The expectation that the Bank of England would no longer drive interest rates above 6% early next year was responded to with falling financial markets, at least in the shape of 2-year swap rates. The prospect of modest relief for mortgage holders and would-be homeowners is welcome.

For aspiring homeowners, the good news has to be accompanied with the hope that more will come, but further support may be required to really get the market moving again.

The severe rise in the cost of living has seen household budgets stretch –sometimes to snapping point.

It’s one reason why Government discussions under the new Mortgage Charter have resulted in the shortterm relaxation of affordability assessment rules, with temporary interest-only and term extension options to temper the blow.

This doesn’t just affect households with low incomes; this is fast becoming a middle-income problem. Even for high earners, higher mortgage costs cause problems, although the range of options may be wider. For anyone aspiring to take on significant debt at the moment, it’s hard not to be fairly despondent.

The latest Office for National Statistics (ONS) housebuilding data shows that new starts are on the decline. According to building control

figures, between 1st January and 31st March 2023, the number of dwellings where building work had started on-site was 37,810, a fall of 3% on the previous quarter, and down 12% year-on-year.

Completions were also down, with 39,970 new-builds delivered to market in Q1, a 12% drop on the previous quarter and an 8% fall year-on-year, according to Government figures.

Previous economic cycles have shown us that developers tend to limit supply when demand weakens, in order to protect their margins, just as pressure on two-thirds of the housing market reaches boiling point.

Public and private sectors

The pertinent question is: where can we go from here? Just as policymakers have shown in the past few weeks, collaboration between the public and private sectors is fundamental if this situation is not to deteriorate further.

Unlike in other policy areas, where decisions can be made and delivered quickly, building new homes takes years. Developers are commercial organisations and must consider shareholders’ needs as well as those of potential customers.

No ma er the hue of their politics, all MPs understand the acute need for action on housing supply.

From building on green belt land to the reintroduction of a scheme similar to Help to Buy and support for private sector initiatives, politicians are alive to the need for be er, cheaper, easier access to homes – be they in the social, rented, or owner-occupier sectors.

There are lenders, such as ourselves, commi ed to providing finance to buyers keen to purchase the newbuilds still coming to market through schemes including Deposit Unlock and First Homes.

Indeed, from the moment we launched the Deposit Unlock scheme – and we were the very first to do so –we have continued to develop its scope

and range following feedback from our broker panel.

Our offering is now nationwide and currently includes a 5-year product up to 95% loan-to-value (LTV), available to a maximum loan amount of £750,000. Our product is also fee-free and comes with a free standard valuation on properties up to £500,000.

And while First Homes is still in its infancy and only available in England for now, because of our commitment to competitive new-build products, we have already introduced a 30% discount for first-time buyers on a competitive 5-year product. This also comes fee-free and offers a free standard valuation.

These initiatives in the private sector and Government are crucial, but are only part of the solution. There is a limit to what we can do without consensus across the market, and a coherent national housing strategy that has cross-party support and sponsorship.

Affordability is a huge element of our current malaise, but it is matched by under-supply – that props up prices and results in a prohibitively static market.

We can play our part in ensuring people can access new-builds, but we need policymakers to play theirs. ●

Opinion RESIDENTIAL The Intermediary | August 2023 34
Unlike in other policy areas, where decisions can be made and delivered quickly, building new homes takes years”

Collaboration and communication will be essential

The advent of Consumer Duty is creating challenges for everyone. Its higher and clearer standards of consumer protection across financial services mean all firms will need to act to deliver good outcomes for customers. Evidence gathering when it comes to trying to get the best borrower outcome across the life of the loan will be essential.

There’s a lot involved in that, but if we concentrate on the origination process for a moment, there are some unique dynamics to consider.

As the mortgage sales process currently stands, there are a variety of ‘hand off ’ points that perhaps give the impression that there are discrete parts of the process for which one entity or person is responsible at any one time. Indeed, brokers, both directly authorised (DA) and appointed representative (AR), as well as clubs, networks and lenders, will all have to reflect upon their specific part in the process, and what systems and processes will be required to evidence that the best possible outcome was achieved.

Making allowances

However, the objective of Consumer Duty goes much further. In a nutshell, distribution and manufacturing firms need to consider the holistic needs of borrowers, including those in vulnerable circumstances, giving consideration to and making allowances for all of them.

Mortgage products must be fit for purpose, provide fair value, and be sold in the knowledge that the borrower understands how they work and how they are to be supported throughout their time within the mortgage contract.

Perhaps the greater change will be the requirement for brokers to have ongoing involvement in the borrower’s journey, rather than viewing a mortgage as a single transaction. This will be a challenge for certain product manufacturers, too.

Of course, the transaction must be sound, and brokers and lenders must evidence they have done everything possible to make sure this is the case, but the lens on product performance will challenge us all.

What this may mean is that a broker’s work expands – perhaps becoming more akin to that of an independent financial adviser (IFA), as they check in with clients to make sure the product remains the best vehicle over time.

If the borrowers’ circumstances change, or rates change and the borrower is on a tracker, for example, then there may be a case for revisiting the original decision.

Consumer Duty is moving the issue from one of being about the mortgage transaction, to the continuous performance of the mortgage for the borrower.

Focus on the outcome

Of course, as I write, lenders are once again repricing as swap rates fall. Good advice is probably the most difficult to dispense in this climate as it has been in decades. Yet, brokers are intrinsic to improving, advising and helping borrowers be er understand the mortgage market.

Do you fix affordably only to see rates come down in two or three months, or take a discounted variable or tracker? Whichever recommendation you make, the focus on outcome means

borrowers can expect more active advice throughout the life of the loan from all parties.

Lenders must play a key role in this, too, by supporting intermediaries’ delivery of a more extensive advice process and offering clear documentation and a responsive service throughout the life of the mortgage.

Be er communication and collaboration between brokers and lenders will be an essential byproduct of the new view of borrower outcomes. Without improvements, we can all expect more scrutiny and greater regulatory incentives to change. The result is going to mean working hard together to ensure nothing falls through the cracks, or assumptions aren’t erroneously made that one area will pick up the evidence trail of another.

Consumer Duty is the most significant regulatory upgrade since the Mortgage Market Review. Working together is the only way we can guarantee it works well for all. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 35
CARLY NUTKINS is head of lending at Cambridge Building Society Collaborate on a new view of borrower outcomes

Now for something completely di erent

e are, as a nation and an industry, in the main a traditional bunch. In many respects this is with good reason, but recently our habit to go to what we know has perhaps blinded us from seeing what we may need.

If we consider our collective a itude to risk, largely learned through experience, it’s easy to see why it is hard to change ingrained behaviour. Hindsight is a wonderful thing, as they say, but it also regularly stops us looking beyond our own experience.

When we look at the UK mortgage market, we can see an economic model that has been in play for decades now, without significant reform. I suspect that is overdue, and I am not alone. Just recently in April, an All Party Parliamentary Group (APPG) showed that the winds of change were indeed stirring. Leading experts in mortgage policy argued that, with interest rates rising, reform is needed to ensure that lending is based on real affordability rather than arbitrary caps, to ensure that people who can afford to repay a mortgage are able to get one.

Karen Bradley MP, chair of the APPG on Challenger Banks and Building Societies, said: “Due to rapidly rising interest rates the UK housing market is at a turning point.

“We can either decide to carry on with the ‘business as usual’ approach as people struggle with rising interest rates or do something different.”

She went on to point to other countries’ models, which shield their homeowners from the ups and downs of macroeconomic policy, saying: “In countries like Denmark and Holland consumers are not exposed to the vagaries of the financial markets when it comes to a mortgage on their home as many mortgages are at a fixed rate for life.”

WThis line of enquiry has spurred thinking in other quarters. Just last month, Helen Thomas wrote a piece in the FT called ‘The UK mortgage market may need an overhaul, not handouts’, in which James Browne at the Tony Blair Institute reiterated that: “This situation does really demonstrate the need for long-term fixed rate mortgages,” and “a house price correction won’t be enough to reverse falling homeownership without reform of the UK’s mortgage market.”

There is, for some in policy circles, a structural weakness in the mortgage market. With only 2% of mortgages in the UK fixed for more than five years, compared with more than 70% in Germany, 75% in Netherlands, and more than 90% in Belgium and the US, the system means that homeowners take on the interest rate risk. Lenders’ profits improve, yet they are the ones be er placed to manage interest rate risk.

A new model

No one is suggesting we need a US-type model, but there may be a solution that sits between. The potential benefits are clear to the Centre for Policy Studies, which estimates that if renters had access to long-term fixed rate mortgages, then an additional 1.9 million of them would be able to get on the property ladder.

The centre points out that over the past decade, the proportion of housing stock in owner-occupation has dropped by six percentage points, but that the situation for young people is even worse.

Between 1991 and 2016, the proportion of 25 to 39-year-olds who own their own home almost halved, from 67% to 38%.

The consensus of all this outpouring is that, with some de policy moves, we could affect a seismic shi in the market, which would help to expand homeownership.

It will not build more homes, but whatever target we set for that, we will need to address affordability if we are going to get on top of the problem.

Solutions are reportedly under consideration within Government, such as relaxing the loan-to-income (LTI) limit on long-term fixed mortgages, and abolishing it totally for mortgages with fixed rates for the duration of the mortgage.

Likewise, less stringent affordability tests on long-term fixed borrowers could be introduced. Or perhaps we develop a solution for pension funds and insurers that would allow mortgagebacked securities to be less capital intensive, and more a ractive.

Innovate and imagine

My point is that there is room for more innovation in mortgage lending which goes beyond fiscal intervention or stretching loan-to-values (LTVs).

Much more needs to be done if we are serious about addressing the issues we face in housing, but if we do not take the opportunity for ourselves, it will surely be thrust upon us.

Lenders, brokers and industry commentators need to think and act differently. If we can harness our collective energy and imagination into reimagining the art of the possible, we can make a real difference. ●

Opinion RESIDENTIAL The Intermediary | August 2023 36
There is room for more innovation in mortgage lending which goes beyond scal intervention or stretching loan-to-values”

Navigating the challenges of an evolving landscape

In a period of turbulence dominated by the Bank of England’s ba le with inflation, borrowers are in an increasingly complex mortgage landscape. The base rate is expected to reach 5.8% by March 2024, and given these circumstances, the need to seek expert advice has never been more crucial. Lenders and brokers have a responsibility to provide the support borrowers need, helping them capitalise on opportunities in the market with confidence, and facilitating continued investment in the property sector.

Unpacking the challenges

To gain a deeper understanding of the challenges confronting borrowers, Bu erfield Mortgages commissioned a survey of 2,000 adults, 667 with a mortgage, to explore how they are navigating the lending landscape.

The research revealed a noteworthy trend: 27% of mortgage customers are opting for overpayments to alleviate the burden of interest rates. Borrowers are taking a proactive approach to their repayments to mitigate the impact further down the line.

The percentage of borrowers on a tracker or standard variable rate (SVR) mortgage who were making overpayments rose to 49%. Clearly, to offset the additional debt burden that they would encounter if they let interest on their mortgage accrue without intervening, those borrowers who can afford to are overpaying now to save money in the long run.

However, we also found that some have adjusted their investment strategies altogether. One in five (20%) had postponed plans to purchase a new home in the 12 months prior to the survey, while 13% chose to downsize or relocate to a more affordable property

instead. This perhaps goes some way towards explaining why house prices have so ened in recent months, but it’s encouraging to see that borrowers are remaining flexible when it comes to their investment strategies.

Meanwhile, a larger proportion of respondents (22%) admi ed that rising interest rates have actually been a catalyst for them to complete their buying plans quicker than they might have done otherwise. These borrowers recognise that borrowing could become more expensive and have opted to lock in a deal while rates remain at their current level.

Working together

Brokers will be unable to find their clients the low-rate deals that have historically facilitated their property buying strategies since 2008. However, by combining their services with the right kind of lender, there are still ways to assist homeowners and investors in navigating today’s mortgage market.

One effective approach involves fostering collaboration between lenders and brokers to deliver exceptional customer service. Those lenders and brokers that prioritise transparent communication can add significant value to their clients. By proactively discussing and addressing how interest rates may impact their mortgages in the upcoming months, we can deliver a sense of certainty in uncertain times.

Elsewhere, brokers who connect their clients with specialist lenders that take a more personalised approach to lending will be of the most value, as they can o en provide greater flexibility than one might be able to find on the high street.

Already, we have seen the demand for specialist products skyrocket in

Q1, so those with more complicated finances or income streams are turning to alternative lenders.

By recognising the diverse needs of borrowers and fostering a more inclusive and dynamic mortgage landscape, we can encourage a broader range of homeowners and investors to actively engage in the property market as rates rise.

This is particularly valuable in the prime Central London property market, due to the substantial number of high net worth (HNW) individuals and foreign investors, who frequently encounter difficulties in obtaining loans through conventional channels.

Moreover, we have witnessed an unprecedented number of products and mortgage offers being withdrawn in recent months. Borrowers are placing greater emphasis on the need for mortgage providers to provide flexibility. Lenders which can offer a diverse range of products and demonstrate an unwavering commitment to existing customers will assume a pivotal role.

Brokers can also provide certainty by leveraging their expertise to guide borrowers through the process. By offering clear explanations and tailored recommendations, brokers can ensure a smooth mortgage experience that will allow clients to continue to invest with confidence.

The Bank of England’s ba le with inflation will continue to present significant challenges in the coming months, but – amidst ongoing speculation around the impact it will have on the lending and property markets – lenders and brokers must be resolute in their commitment to supporting their clients’ investment plans. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 37

Is the in ationary spiral running out of steam?

ith the unexpected but welcome inflation fall, a few lenders have announced cuts on fixed interest rates. The actual decreases are minimal, but these could be the first signs that we have reached the high point of interest rate rises.

Moneyfacts reports at the time of writing that the average rate on a new 2-year fixed rate deal is 6.79% – down from 6.81%. Meanwhile, the typical rate on a new 5-year fix is down to 6.31%, from 6.33%.

Of course, as they say in the country, ‘a single swallow does not a summer make’ and these moves are, at this stage, no more than a testing of the water. Whether these falls start a definite trend depends largely on the Bank of England deciding not to raise interest rates again, or to limit the rise to a quarter of 1% rather than half.

In what has been considered a likely outcome by many pundits – that the Bank’s only weapon to curb inflation is to raise interest rates again – the recent drop in recorded inflation gives us hope that the worst is behind us, and if it is, it will come as welcome relief to the many thousands looking at big increases in their monthly payments as their current fixed rate deals end. However, it is still too early to tell whether we have reached the peak of interest rate rises.

The Bank of England is also under pressure not to raise interest rates too far, for fear of tipping the country into recession. The message comes from a former governor of the bank, who said that the Monetary Policy Commi ee (MPC) could tighten monetary policy too far if it pushed for further rate increases, which in turn could trigger

Wa recession. He went on to say that signals from the credit markets in 2021 that indicated inflation was about to rocket were now showing that price growth was about to drop sharply.

The evidence of the aggressive Bank of England interest rate rises is shown in the pressure put on homeowners, who have seen their mortgages become more expensive or who are facing a potential doubling of their repayments when their current fixed rate expires. On top of that, some economists have predicted unemployment could increase next year, as more businesses fail and job vacancies fall.

Clearly, the bank, through the MPC, is in a difficult position. On the one hand, it has a duty to combat inflation through controlling interest rates, but on the other it runs the risk of kickstarting a recessionary cycle, which is not an outcome that anyone would want to see.

With the benefit of hindsight, the Bank of England could have acted sooner to raise interest rates when the evidence at the time suggested a steep rise in inflation was imminent, before it then jumped to more than 10% in 2022. However, we are where we are.

If we take a positive stance, it would be plausible to hope that having raised interest rates as far as the Bank of England has, we are seeing the first evidence that the inflationary spiral is indeed running out of steam, and inflation will continue to fall. The alternative view would be that inflation is not beaten, and that we should guard against a false dawn and continue to ba en down the hatches.

Longer-term stability

Yes they have been around for a while now, but are 25-year mortgages the answer for homeowners looking for stability of mortgage repayments

during their mortgage term, given the turmoil in the market?

Michael Gove is definitely of the opinion that longer terms offer borrowers greater certainty over their home loan payments. Admi edly, it has not yet become Government policy, but looking at the pros and cons, it is clear that many people will want to give longer-term mortgages greater scrutiny.

Much more common on the continent and in the United States, 25-year and 30-year terms have only become part of the mortgage landscape in the UK in recent years because of issues stemming from affordability and making incomes stretch further.

However, they still make up a tiny percentage of new mortgages. In the UK, we have been wedded to much shorter fixed rate terms, which have tended to be cheaper and more flexible than longer term offerings.

So, whilst the idea of having a longterm rate that clients can rely on not to change would be comforting in times of rate volatility, being locked into a rate – for 20 years plus – that would be considered high against those on offer just a year ago, without paying swingeing redemption penalties, is not the answer, at least not without substantial modifications. ●

Opinion RESIDENTIAL The Intermediary | August 2023 38
The MPC has a duty to combat in ation...but it runs the risk of kickstarting a recessionary cycle”

Divorcing couples need compassionate support

Divorce is undoubtedly one of the most difficult life changes, and the current economic climate has compounded this with additional burdens. As house prices soar and mortgage rates fluctuate, determining who keeps the family home and how to navigate property division has become a daunting – and sometimes seemingly impossible – task.

Recent articles in The Telegraph and The Times have highlighted how couples are grappling with the question of who gets to keep the lower mortgage when parting ways. Many individuals undergoing divorce find themselves bound by financial constraints, unable to afford separate homes due to skyrocketing property prices and the scarcity of affordable housing. Some couples are forced to continue living together post-divorce, leading to an arrangement known as ‘birdnesting’, where they take turns living in the family home and undertaking primary childcare duties.

For couples divorcing later in life, the stakes can be even higher. With retirement plans intricately intertwined, a lifetime of assets built together and a more limited window to recover financially, they face a unique set of challenges. The prospect of starting anew with reduced income can be daunting, making it essential to find adequate support during this tumultuous time.

Professional guidance

How can we, as an industry, best support couples going through this huge, difficult life change? It is crucial for divorcing couples to find the help they need to navigate the storm and move towards a brighter future,

and the significance of professional guidance cannot be overstated. Engaging with a team of financial advisers and mediators who specialise in divorce can be instrumental in reaching equitable se lements and securing a stable financial future for both parties.

The intertwined nature of joint mortgages can be a significant obstacle when couples seek to separate their financial responsibilities. Lenders o en assess mortgage applications based on the joint income and credit scores of both parties. This can lead to difficulties when one party seeks to buy a new home or take over the existing mortgage.

One potential solution gaining traction is mortgage porting. This option allows one spouse to take over the existing mortgage and remain in the family home while the other seeks alternative accommodation. However, this is subject to stringent lending criteria and may not always be feasible.

Another consideration is whether a buyout is financially viable for one party. This involves one spouse buying out the other’s share of the property. In such cases, seeking the advice of financial advisers and mortgage experts is once again crucial to navigate the complexities of property valuation and ensure a fair se lement for both parties.

Specialised teams of financial experts, such as those at The No ingham, can support divorcing couples as they explore various housing options, understand the tax implications of property division, and negotiate fair mortgage terms.

Additionally, they can provide valuable insights on managing their debts and planning for individual financial independence.

Intermediaries play a vital role in supporting a divorced couple with their mortgage payments. From assessing finances, mediating and negotiating agreements, exploring refinancing options, facilitating property sales, through to offering legal guidance. Intermediaries also provide emotional support, ensuring a smoother transition and helping individuals find the best solutions for their post-divorce arrangements.

Life-changing impact

The mortgage sector must show empathy with the life-changing emotional and financial impacts that a divorce will have on a couple today and offer genuine support. Tailored solutions, flexibility, and clear communication can alleviate some of the burdens, instead of adding to the heartache and difficulties. A compassionate approach can ease the transition and positively impact those experiencing divorce.

Divorce is a challenging journey, especially in the current climate where housing and mortgage challenges compound the difficulties. Whether it’s the housing crisis affecting property division or the financial burden on silver spli ers seeking a fresh start, divorcing couples need support to navigate this tumultuous period successfully.

Accessing legal aid, therapy, financial planning services and community support can prove vital in helping them overcome these challenges and emerge stronger on the other side.

By working together, we can strive to create a more supportive environment for all those going through the process of divorce. ●

Opinion RESIDENTIAL August 2023 | The Intermediary 39
ALISON PALLETT is sales director at Nottingham Building Society

The Inter view.

Jessica Bird speaks with Jonathan Stinton about keeping up a human touch in an ever-evolving market

From his experience starting out with Coventry Building Society as a business development manager (BDM) 15 years ago during its launch into Northern Ireland, to his move into corporate accounts and then head of sales, Jonathan Stinton, now head of intermediary relationships, has seen all sides of this business.

In addition to his time at Coventry dealing with everyone from BDMs to brokers, support and operations teams to networks, Stinton started out as a mortgage broker himself. is makes for a rich understanding of both the business and the market, and e Intermediary sat down with Stinton to tap into this expertise.

A strong place in the market

Like many, Stinton’s rst foray into the property nance market – initially on the broker side –was serendipitous rather than planned. What became apparent, though, was a growing interest in the BDM side of the business.

“I’d always been interested in that part of the market, and then the opportunity came around and it was too good to be true,” he says. “Obviously there’s more freedom as a self-

employed broker, but moving to BDM gave me a more rounded view of the mortgage world. It helped me appreciate what lenders are doing to try and support brokers as well.”

Coventry was an obvious choice for this move. Stinton explains that this is the second biggest building society in the UK, and the eighth largest lender overall. In 2023, it was the rst building society to obtain B Corp status.

“Building societies are really important,” Stinton says. “We are lending our own members’ money, so we want to do that responsibly and prudently. Clearly with a rm of our size, which has almost £49bn worth of mortgage balances, we are a major player.”

Stinton goes on to describe the ethos of the business as centring on a “service is king” approach, adding: “We want to answer your calls and we will answer them quickly. Our average call wait this year is 42 seconds. When you think about some of the turbulent times we’ve been through, we are really proud.” is goes beyond just speed, he adds: “We want to spend as much time as needed with brokers to give them the answers. If we can help facilitate that direction on the rst occasion, it saves phone calls further down the line.”

Lending under pressure

Originally founded in 1884, Coventry has been around for many market uctuations, challenges, and turbulent times. Most recently, it weathered the storms surrounding the Covid-19 pandemic, international uncertainty, and economic turmoil, all while remaining focused on service as a key priority.

Stinton says: “We like to watch, listen and respond to what’s going on in the marketplace. It’s really important for us to watch what’s happening with things like swap rates, competitor moves, house prices, unemployment – the general outlook. We want to listen to brokers and our distribution partners, as well, to understand their challenges and where they see opportunities, and then we respond accordingly.

The Intermediary | August 2023 40
Jonathan Stinton, head of intermediary relationships at Coventry Building Society

“We’re a member-focused organisation. Generating the maximum pro t is not our goal – we want to generate a good return for our members’ money, so that we can then reinvest into other propositions. at’s really important.”

He adds that part of this longevity and service comes from the importance ascribed to values and purpose: “We want to make sure that we can create opportunities that are going to be bene cial for us and for our future members.”

One of the big conversations during the most recent turbulence has been around minimum service levels. Most notably, lenders have been called upon to pledge at least 24 hours’ notice when making product changes.

For Coventry Building Society, which has had a 48-hour pledge in place for more than 16 years, this is an important conversation. However, Stinton points out while the building society stands by these commitments, they can cause di culties, and there is a balance to be struck between providing a fair environment for brokers, and protecting members’ interests.

“We will aim to give brokers two days’ notice whenever we’re withdrawing products, and that works both ways, whether increasing or decreasing rates,” he says. “ ere’s de nitely more focus being shone on brokers’ requirements in this area at the moment.

“I can’t speak on behalf of other lenders, but from our point of view, it’s di cult to manage. We are able to manage that – we factor that into our decisions – but I can understand some of the challenges that other lenders face.

“In turbulent times, things are put under pressure. For example, we occasionally get more business than we were banking on because of our 48-hour notice commitment, if other lenders are pulling products quickly.”

For Coventry, the need for notice periods means it must work to constantly maintain a clear understanding of where it stands in the market, and a forward-looking perspective as to the potential e ects of product changes.

Market advancements

As a building society, there is a signi cant focus on the human touch and personal relationships. However, the mortgage market is evolving at pace, under the constantly changing in uence of technology.

For Stinton, there is a balance to be struck between embracing advancement and understanding the importance of human input. For example, while the building society does o er a web chat service, it’s still human experts sitting the other end, personally responding to broker queries.

He says: “We think tech is there to improve things, it’s not there to replace common sense.

“When we launched our web chat service, we made a conscious decision not to go down the bot route. Brokers contact us because they want to discuss or go through the criteria on a di cult case, or a case that’s got a wrinkle in it. It’s very di cult for [arti cial intelligence (AI)] to replace a human being in that instance.

“While tech is good to speed up processes, we don’t think there’s going to be a replacement for a human being at this stage.”

Stinton points out that Coventry’s net promoter score with intermediaries is +83.

While times are changing and tech advancing rapidly, to the extent that some have argued certain cases might be handled entirely by AI in the near future, Stinton says this would only be relevant for the simplest, most straightforward deals.

He adds: “It’s great to be able to chat to a human expert, get their name and have con dence that what you’ve been told is correct – there’s accountability there, which breeds more con dence in the proposition.

“In 23 years in this business, I don’t think I’ve ever seen an entirely ‘straightforward’ case – there’s always a wrinkle in some shape or form, and certainly now. ere’s creativity behind trying to nd solutions, as well.”

is does not mean that Coventry Building Society is taking a luddite approach. Instead, it is about deploying tech – and yes, even AI –where it is most valuable.

“We think our approach is the best way forward to help brokers and their clients, but AI will become more important from a back o ce point of view,” he explains. “If it can speed up e ciencies that way, then we’ll look to leverage some of those opportunities.”

A wider look at the market

Aside from the advancements being made in mortgage tech, there are various trends taking up the headlines at the moment. One of these is the ongoing debate around Stamp Duty, and whether the tax is due for reform.

Various support initiatives brought in during Covid-19, followed by the nil rate threshold increase and rst-time buyers relief in 2022, have sparked conversations as to whether the system is in need of overhaul. Coventry has been at the centre of this debate.

For Stinton, the housing market needs movement, but Stamp Duty o en serves as a deterrent, especially to those looking to downsize, who play a vital role in freeing up stock for rst-timers and next-steppers.

August 2023 | The Intermediary 41 →

“We all know we have to live with Stamp Duty as an additional cost that has to be borne,” he says.

“But there are lots of people in this market who are being deterred from downsizing because of the additional costs they’re going to have to bear.

“Is there a way the Government can actually incentivise and help people on that journey?”

Stinton goes a step further than this, and even suggests that the Government could nd ways of using Stamp Duty relief as a way of incentivising the move towards net zero and energy e ciency.

“We could use Stamp Duty as a mechanism to get people to make green enhancements to their properties, and to drive that change,” he says.

is is part of a wider green picture, which is only rising in importance, even as the market grapples with arguably more imminent issues such as rising in ation. ere is a push now to focus on creating real, t-for-purpose green products that create lasting change.

is is particularly a ecting landlords, of course. Coventry, through its brand Godiva Mortgages, is highly active in the buy-to-let (BTL) space, dealing with traditional landlords, rather than limited companies or special purpose vehicles.

“Everyone knows that building stock needs to improve, but it’s very di cult to encourage clients to spend signi cant amounts of money on their properties when we’re in the middle of a cost-of-living crisis,” Stinton warns.

“I don’t think lenders and providers are intentionally trying to ‘greenwash’, but I think we’re at the very beginning of a journey.

“As time goes on, more and more products will evolve.

“ e challenge is that there is a massive education gap. We want to do better for the environment, but how? What are the di erent solutions available?

“As a lender, it’s about creating propositions that are going to be t for purpose, but more importantly, it’s about educating brokers so they can educate their clients on what to do and why to do it.”

Part of this must be fuelled by better clarity from the Government. Housing Secretary Michael Gove recently suggested that the Government was demanding too much, too quickly from landlords, and that it should relax the pace of proposed Energy Performance Certi cate (EPC) reforms.

is might elicit a sigh of relief from some, but many – Stinton included – have expressed

concerns that giving landlords more time, but no more clarity, is counterproductive.

He says: “It would be helpful for landlords to know what targets they’re working towards, and the expectation. ey clearly need to have su cient time to invest potentially signi cant amounts of money – but they need clarity and a clear path to what’s required, and by what date. at’s when lenders will be able to step in and provide solutions to help.”

Future trends

Looking ahead, Coventry Building Society is gearing up for growing interest in o set mortgages. ese have become a topic of conversation recently, due to the opportunity they provide to lower interest payments depending on a borrower’s level of savings, which is of course more appealing in times of economic di culty. However, they have been part of Coventry’s repertoire for some time.

“In a low interest rate environment, the bene ts that o set can provide aren’t as obvious as they are in a higher interest rate environment,” Stinton explains.

“We see savings rates going up, and if you mirror that against a mortgage rate, there can be more bene t in having your savings linked to your mortgage account.

“It comes back down to education, because of the intricacies, but it’s an amazing opportunity for clients to save money, save interest, and save time on their mortgage. It’s a great opportunity for brokers to forge a stronger relationship with their clients, as well.”

For these reasons, one of Coventry’s plans for the year ahead is to get out and talk in the market about o set mortgages. Not every lender o ers this product, so education among brokers is particularly important.

Stinton adds: “We’ve always been a major o set player, and this is becoming a bigger and bigger part of the market.”

Other plans include continuing growing its focus on rst-time buyers, further exploring the new-build market, keeping an eye on the ever-evolving worlds of both BTL and residential mortgages, and continuing its consistent trajectory of growth, built over many decades.

Coventry also has the imminent launch of its own mortgage sales and orientation platform. “ is is part of our investment in our capability to help brokers,” Stinton explains.

“Brokers need to stay front and centre, because the service they provide is so valuable, and people could be distracted with everything else that’s going on in the market.” ●

The Intermediary | August 2023 42

Move over Barbie, the

When asked to describe how we got to the current state of the buyto-let (BTL) and private rental sector (PRS), I might previously have suggested it’s something even a script writer would have difficulty making up. However –at least in the US – the writers are on strike, and therefore probably have bigger fish to fry anyway.

The narrative – certainly over the past decade or so – could be described as a ‘tall tale’ of sorts, or a ‘whodunnit’, not least because one of the main protagonists in this story has o en come across as something akin to Inspector Clouseau, bumbling along, oblivious to what is truly going on, making ma ers worse, and relying on others to get themselves out of a hole and solve the case.

Unfortunately, we’ve not yet reached that particular denouement, and I’m starting to believe that to reach any sort of conclusion and clear ma ers up, we may need a wholly new cast and crew entirely.

Mission impossible?

It would be something of an understatement to call this current situation a market ‘blockbuster’. While we aren’t quite at the point where we need Tom Cruise and his ‘Mission Impossible’ team to help us within the private rented sector, we might need their ‘Mission Sort this Mess Out’ equivalent.

Recent figures from TwentyCi show where we are currently, and give plenty of evidence as to why rents have soared in recent times, most notably due to the drop in PRS property supply.

In June this year, 241,000 homes were available to rent in the PRS, compared with 370,000 in June 2019 –that’s a fall of over one-third.

As I’ve said before, this is genuinely one of the Government’s ‘success’ stories – it set out to pull property out of the PRS, and it has achieved this goal. Unfortunately, this was flawed logic in the extreme, because it actually needed to boost supply for both the PRS and homeownership, rather than a acking one and hoping the other would benefit.

Add in all the other challenges facing landlords today – particularly the large increase in mortgage costs triggered by the mini-Budget, and a combined blunt approach to bringing down inflation – and we find ourselves in a market where mortgage costs have increased significantly.

Some refinancing landlords –particularly those with only a small number of properties – have to genuinely ask themselves whether they can continue to operate.

So, while we haven’t seen huge swathes of landlords selling up just yet, one suspects that those who might be deemed ‘amateur’ operators will be thinking now could be the time to make their move.

Of course, a lot of these properties will stay in the PRS. Even if they do,

Opinion BUY-TO-LET The Intermediary | August 2023 44

real blockbuster is in

though, the statistics show that there is still not enough supply to meet tenant demand. When you add in those extra landlord costs, you get to a point where rents go up.

That lack of choice is, of course, difficult for tenants to live with –many might ordinarily look for other places to move to, but with slim pickings and perhaps a fear that they’ll have to find even more money to be able to move, they tend to stay put.

I’m not sure anyone would say this is a market which currently works well, but what I do know is that it would be even worse were it not for the vast swathe of private landlords who have remained invested and are still looking to add to their portfolios.

Opportunity knocks

For advisers, the opportunities clearly lie predominantly in remortgaging, but there will still be those who are looking to buy, if they can get the numbers right.

We should also not forget that a large number of landlords own their properties outright, and they might be willing to leverage this via finance in order to pick up those properties that others are divesting.

For what it’s worth, the narrative within a narrative in the market when it comes to pricing is perhaps not as bad as some might make out.

Yes, we are in a different interest rate environment, that much is obvious, but talk of huge increases in average rates within the buy-tolet market – or indeed any part of

the mortgage market – do need to be taken with a large pinch of salt, not least because they include every single product option, many of which are priced higher for those borrowers who have adverse credit.

So, when I see average 2-year fixed rate mortgages within the buy-tolet space ‘hitting’ 6.97%, I’m acutely aware that many landlords are not taking out 2-year products in the first place, that 2-year product options at this level are much lower than they historically were, and that there are 5-year fixed rate options available at over 150 basis points lower than these ‘average’ 2-year deals.

Landlord affordability

Affordability remains an issue, but there are a growing number of lower fee, higher rate product options, and – touch wood – I’m of the opinion that with swap rates calming a little in recent days, with bank base rate rises built in and perhaps anticipated to not be as high as initially thought, we are likely to see buy-to-let product rates inching down in the weeks ahead.

In that sense, we are still here and absolutely committed to supporting advisers and their landlord borrower clients.

Rates, of course, are higher than any one of us would like. However, much like the choice summer moviegoers currently have – from ‘Barbie’ to ‘Oppenheimer’ and ‘Mission Impossible’ – there is still something for all kinds of different wants and needs. ●

Opinion BUY-TO-LET August 2023 | The Intermediary 45
STEVE COX is chief commercial o cer at Fleet Mortgages

What is happening in the buy-to-let market?

awareness of how the past few years have challenged incomes.


On the flip-side, reports showing how rental yields continue to increase and represent a ‘boom’ have been abound this week.

The maths here isn’t difficult to understand – there is a shortage of housing across the country, to both purchase and rent, and that has driven rental demand to very high levels, while many landlords who took longer-term fixes in 2020, 2021 and the first half of 2022 continue to pay lower mortgage payments.

Depending on what you read, landlords are either experiencing an unprecedented boom in rental yields, or they are on the cusp of mortgage arrears taking over and pulling out. That isn’t an exaggeration for dramatic effect – both of those stories were published on the same day.

We as a company have tried to move on from talking too much about the ‘noise’ and the ‘challenge’ of the past year, to look forward to embracing the new normal in buy-to-let (BTL), and the opportunities that exist.

While such wildly different interpretations of what is happening continue to abound, we’re not alone in wanting clarity on what’s actually going on.

‘14 days from eviction’

One story, coming from the Daily Mail, was about the risk to renters as more landlords enter monitoring for mortgage arrears. According to the

story, 1,740 landlords are in arrears to at least 10% of the loan’s value, and more than 7,000 have upwards of 2.5% of their mortgage balance in the same condition.

Stress factors

What does this tell us about the current BTL market? That it is, in many ways, similar to the residential market, which is also seeing spikes in arrears. The culmination of a lot of stress factors – Brexit, Covid-19, the current interest rate spike – continue to put pressure on budgets.

While this is a challenge, landlords, especially those with portfolios, have extra options that residential homeowners likely do not.

Leveraging across a portfolio with bridging finance, or selling a couple of properties to focus on others, are options open to many landlords looking to mitigate this risk. Lenders, as well, are taking an increasingly flexible view on arrears – much like they now do in the homeowner market – out of

The pressure is coming on landlords remortgaging in the current environment, but that has – by and large – been moved on to their tenants to avoid pressure on their affordability.

What to take seriously

It might sound like a boring middleground answer – and it is – but both elements of this narrative are true.

The unique nature of the current market is one that creates both high risk and also opportunity, which landlords need to be mindful of.

What is required going forward is careful portfolio balancing to mitigate against the changing environment.

At events over the past year, we’ve heard plenty of anecdotes from brokers that “a landlord came in, put his portfolio on my desk and told me to sell them all,” while others have said they will still expand, just at a slower rate.

In truth, the risk and opportunity present now has always been part of being a landlord investor, it is just magnified in the current environment, and needs closer a ention to work through it. ●

Opinion BUY-TO-LET The Intermediary | August 2023 46
SOPHIE MITCHELL-CHARMAN is commercial director at LendInvest e unique nature of the current market is one that creates both high risk and also opportunity

Holiday lets are still a good longterm investment

It’s amazing how quickly investor sentiment can change towards an asset class or a certain area of the market.

Two years ago, holiday lets were en vogue with investors. Booming demand due to Covidrelated travel restrictions, as well as the promise of higher yields and a more favourable tax position, led to a record number of holiday let business incorporations.

While the sector is still growing, it’s fair to say attitudes toward holiday lets have soured somewhat over the past 12 to 18 months.

Chief among investors’ concerns is the recent and targeted clampdown on holiday let owners, which has likely left some wondering whether they are worth the hassle.

The Government is currently consulting on new rules that could force landlords wanting to convert their property into a holiday let to obtain planning permission first.

Recent analysis by the Daily Telegraph also found that as many as 25% of English councils plan to take advantage new laws allowing them to hike council tax rates for owners of second homes.

Of course, this makes navigating the pitfalls of purchasing and running a holiday let even trickier. Regardless, I remain convinced that holiday lets are still an attractive asset class for those who go in with their eyes open. Here are just a few reasons why.

Demand remains strong

Covid-19 put the blocks on foreign travel for a while, leading to a boom in demand for domestic holidays. While those restrictions have long been lifted, the demand for so-called ‘staycations’ has still remained incredibly strong.

The latest data from Visit England, the national tourist board, show that occupancy levels hit a four-year high of 78% in England in May – and they tend to climb even higher during the summer. Gone are the days where holiday let properties remained vacant outside summer months – half terms, Christmas and New Year weekly rates can be nearly as high as ‘peak’ summer months.

Separate research by KPMG in June shows that staycations are, in fact, the most popular form of holiday for Brits. It found that 41% of British holidaymakers planned to holiday at home this summer, with just 29% planning to go abroad. More than a third (36%) said they weren’t planning a holiday at all.

I am a firm believer that where there is demand, supply will follow. For that reason, I believe holiday lets will remain popular, even if they have become more admin and cost-heavy for investors.

Holiday lets are profitable

Holiday accommodation is not just in high demand, it can also be a highly profitable investment.

A recent Freedom of Information request to HMRC by Hamptons revealed that holiday lets have become more profitable than long-term lets for the first time since 2011.

According to the data, buy-to-let (BTL) landlords declared an average income of £13,400 in the 2020-21 financial year.

In contrast, holiday let owners declared an average income of £15,600 – 14% more.

Clearly, despite the costs involved in running a buy-to-let – such as maintenance, marketing, cleaning and an increasing tax burden – profits are still healthy.

In its 2023 Holiday Lets Outlook Report, Sykes Cottages estimated the average running costs to be around £7,400 a year. That makes for a healthy annual profit.

There are tax benefits

The tax system for holiday lets is much more generous than for a standard buy-to-let.

First, holiday let owners can still offset their mortgage interest from their profits, which can significantly lower their tax bills. Buy-to-let landlords haven’t been able to do this since 2020. Holiday let owners are also entitled to capital allowances for things like furniture and white goods, whereas BTL landlords cannot access such tax reliefs.

Finally, when a holiday let owner sells their property, they can pay as little as 10% on any gains they make, due to something known as Business Asset Disposal Relief, which was formerly known as Entrepreneurs’ Relief. This compares with 18% or 28% for a mainstream buy-to-let landlord.

Of course, this may change some day. But, for now, there are still many tax advantages to be had by investing in a holiday let property. ●

Opinion BUY-TO-LET August 2023 | The Intermediary 47
I am a rm believer that where there is demand, supply will follow. For that reason, I believe holiday lets will remain popular”

It’s not easy going green

Recent headlines highlighting the impact of climate change are difficult to ignore, whether it’s wildfires in Greece, record temperatures recorded across Europe, or the UN announcing the onset of the era of ‘global boiling’.

With around 20% of the UK’s CO2 emissions coming from housing, the decarbonisation of our housing stock is a key priority. It’s estimated that, for the UK to reach its target of net zero emissions by 2050, 19 million homes will need to have energy efficient upgrades.

EPC progress

So, on the face of it, the recent Government announcement providing a further extension to the proposed Energy Performance Certificate (EPC) legislation for the private rental sector (PRS) does feel like a backwards step.

It’s widely recognised that the buyto-let (BTL) sector has been decimated by recent rate rises and the current economic backdrop. Meanwhile, the potential spend landlords face in order to improve rental property stock is estimated to be circa £304bn. Some 36% of PRS properties were built before 1940, and 70% of BTL property has a current EPC rating of Band D or worse.

Phased approach

The initial legislation – proposed in late 2020 – set out that the minimum energy efficiency standard (MEES) of BTL properties should be improved. The consultation period for this proposed legislation was extended, and it finally closed in January 2022.

Since then, the sector has been working towards implementing the proposals within the timescales proposed. While it was accepted that the timescales might shift, it clearly established the direction of travel.

It was proposed that all rented properties should have an energy efficiency rating of Band C or above by 2028. A phased approach was proposed, consisting of 2025 for new tenancies and 2028 for existing tenants, with a recommended spend cap of £10,000 for improvements.

Rising pressure

With 20% of all product maturities in 2023 expected to be for BTL mortgages, and a similar percentage for 2024, landlords face increasing mortgage costs, while their tenants face the impacts of the cost-of-living crisis.

A recent survey by Landbay showed that more than 60% of landlords would look to increase rental payments to cover the increases they are facing, with 18% stating they would not look to take action. This is in line with The Mortgage Works’ recent BTL barometer, which showed an increase in landlords looking to sell a BTL property in the next 12 months.

An exodus of landlords from the buy-to-let sector has been widely publicised, but meeting MEES is unlikely to be the main driver. Concerns over tenant arrears, rising interest rates making owning a BTL property commercially unviable, along with the abolishment of Section 21 notices in the Renters Reform Bill, will all play their part in a landlord’s decision-making.

Stock refresh

A recent Rightmove report highlighted that landlords who owned five or more properties were likely to increase their portfolio over the next 12 months; however, a third of landlords with lower EPC properties plan to sell. The flipside for landlords committed to this sector is that tenant demand and annual rental income is continuing to increase.

Professional landlords have been taking action, selling older property stock – such as Victorian terrace

homes – and replacing this with new-build houses or flats, which already have an EPC rating of Band C or above. This approach is also likely to be attractive to younger generations of renters, who will be looking for properties with green credentials and energy efficiency.

Further innovation

Product innovation from lenders is also needed to support landlords looking to fund home improvements. We are definitely seeing progress among the lending community, offering initial ‘green’ products which offer small rate reductions for properties with EPC ratings of Band C or higher. However, more can be done, and further innovation is needed.

This does become more difficult in this higher interest rate environment, which is why a call to Government to support landlords through the reintroduction of green grants would be a positive move.

As the debate continues, advisers will play a vital role in discussions with their landlord clients.

There’s now a wide range of educational material available via the Association of Mortgage Intermediaries (AMI), as well as distributors, to support advisers to upskill and build knowledge, allowing for more informed conversations.

This will help to keep the importance of energy efficient property improvements, and other green issues, firmly on the nation’s agenda. ●

Opinion BUY-TO-LET The Intermediary | August 2023 48
STEPHANIE CHARMAN is strategic relationships director at Sesame Bankhall Group

The moving goalposts of EPCs

Once again, landlords find themselves at the centre of a contentious issue. This time, it’s Energy Performance Certificate (EPC) requirements and the Government’s proposal for all rental properties to have a minimum EPC rating of Band C.

True to form, though, the Government has not made it easy, with Ministers initially proposing a deadline of 2025 for all new tenancies. However, the plans form part of the Minimum Energy Performance of Buildings Bill, which is still working its way through Parliament, and is far from set in stone.

With such a slim window to complete a mammoth task, reports now suggest that the deadline could change to 2028, in line with plans for existing tenancies.

In a recent interview with the Sunday Telegraph, Housing Secretary Michael Gove said the Government was asking “too much, too quickly,” suggesting it should relax the pace of reforms.

With the Government’s proposal remaining just that – a proposal – and plenty of rumour and innuendo forcing the sector to make assumptions in lieu of actual detail, it would be very easy for landlords to be complacent on the entire issue. After all, who’s to say that the can won’t get kicked down the road again.

Instead, our recent quarterly survey found that landlords are not only aware of the proposal and a potential change to the deadline, but they are actually willing to crack on with improvements. Some even plan to start as soon as possible.

Appetite to take action

According to the survey, 78% of landlords were aware of the Government’s proposal and plans to change the date to 2028 for minimum

EPC ratings of Band C. This remains pretty consistent with our findings from last summer, where 79% of landlords said they were aware of the proposals at the time.

Meanwhile, almost two-thirds (65%) said they have properties with an EPC rating of Bands D, E, F or G, highlighting the scale of challenge ahead. However, of those landlords, 73% said they intend to make changes to bring them up to at least a Band C rating. Just above a third (34%) even said they plan to do this as soon as possible.

This is hugely encouraging, especially given the cost implications and the clear pressures landlords currently face. It’s also another reminder that in the face of aggressive rhetoric, landlords remain committed to work with tenants to improve their properties, where realistic.

The task at hand

This is an important point to make, and one that gets easily forgotten. It is a monumental task to upgrade our aging housing stock to a minimum EPC rating of Band C. After all, research by the Building Research Establishment (BRE) found that the UK has the oldest housing stock in Europe, and most likely the world. More than a third of homes in the UK date from before 1946, compared with just 3% in Cyprus, the country with the youngest housing stock.

The latest Government analysis suggests that for nearly half (46%) of all private rented homes, energy efficiency improvements will cost between £5,000 and £9,999. Almost a third can be improved for less than £5,000, while 19% would cost between £10,000 and £14,999 to achieve an EPC rating of Band C.

This puts landlords at a difficult crossroads, at a time when they are already experiencing significant cost pressures. While a delay may give some time to incrementally make

the Building

improvements, others with large portfolios or lower rated properties may not be able to recoup such an outlay. News of rent rises to help pay for such work would certainly not be a popular move, while those forced to dispose of properties will only exacerbate ongoing supply challenges – driving up rents in the process.

As proven by our data, the majority of landlords are in favour of improving the efficiency of their rental properties – with many set to take immediate action.

However, it’s not always as simple as a new boiler, insulation or replacing windows and doors. The bigger picture and current events have to be a consideration when determining the timetable for such a comprehensive piece of legislation. Maintaining an open dialogue with landlords to understand the obstacles and pressures they face should play a critical role, too.

As a specialist buy-to-let lender, our aim is to use the tools at our disposal to support those landlords in making their properties more energy efficient. We relaunched our green mortgage range earlier this year, offering a reduction on our standard 5-year fixed rate products for properties with an EPC rating of least a Band C. ●

Opinion BUY-TO-LET August 2023 | The Intermediary 49
Research by
Research Establishment found that the UK has the oldest housing stock in Europe, and most likely the world”

Holding on

But are there calmer conditions ahead?

There’s no doubt the mortgage market is very difficult still, and swap rates are all over the place. In recent times we’ve seen them come down, go back up, and then drop again, which just goes to reiterate that we’re not on any kind of smooth glide path back down – there will be continued turbulence along the way.

In the wider economy – which drives mortgage market conditions –the inflation figures released in July were more positive than expected. Swaps went down by 20 basis points on the back of that, but then went straight back up again due to betterthan-expected retail figures, before starting to edge down again. It really is a bumpy ride as the market responds to the push and pull of a range of different factors and data points.

At the same time, better high street performance than expected and higher wage rises mean people are still spending money, which is one of the inflation-fuelling elements the Government most wants to stem the flow of. Of course, this is a vicious circle, because inflation coming down might mean people are tempted to spend even more.

The one thing that’s clear is that conditions are still volatile, and are likely to remain so for some time, so no one should expect to see a simple path towards what we hope will be medium-term recovery.

Fixed rate pricing looks set to continue moving around, but as a lender known for its common-sense approach, we remain committed to contributing positively to the

mortgage market with a range of the best value, most flexible products we can offer, to continue giving borrowers the options they need.

The underlying position within the mortgage and housing markets actually remains strong in terms of supply and demand, so we’re not seeing anything like the levels of house price deflation some pundits predicted in the aftermath of the disastrous mini-Budget last year.

Another key underlying indicator of strength is unemployment, which is still in a positive place, while we are also not seeing any significant rise in arrears cases, despite rate increases.

Rising to the challenge

Amidst it all, we remain committed to continuing to support borrowers and the brokers who serve them through this tumultuous period –through ongoing purposeful product innovations like our recentlylaunched joint borrower sole proprietor (JBSP) offering, allowing family members to support customers who might struggle with affordability in their own right.

We have reduced our interest coverage ratios (ICRs) – the stress rates we apply to our buy-to-let (BTL) affordability calculations – to help landlords as they strive to provide much-needed rental properties, as well as offering top-slicing, which allows them to use elements of their earned income for affordability purposes where rental income alone isn’t enough to cover what they need.

These innovations are all designed to help people with common issues invoked by the current market, chief

among them being affordability, and to help in the areas of greatest need. There will be more changes coming from Accord, as we continue to develop our roadmap for the rest of this year, and we are hopeful of seeing similar signals from other lenders, as we support borrowers in challenging market conditions.

Positives emerging

We don’t expect market rates to come down in a straight line, but there are positives emerging.

All of this, though, does mean brokers and lenders are facing immense pressure in terms of servicing demand.

That’s why lenders must help brokers maximise efficiency to help as many people as they possibly can, as well as for their own wellbeing.

At Accord, we’ve made positive changes recently to some of the tools we offer, including our relaunched website with simpler access to criteria, easier navigation, and intuitive search facilities. We also offer an outstanding live chat service manned by the same people who take broker calls.

We actively encourage brokers to self-serve wherever possible for simple queries. This frees up our face-to-face and telephone business development manager (BDM) teams to respond to more complex enquiries faster. Response times are more vital than ever in such a confusing and changeable market environment.

We’d urge brokers to embrace as much of this kind of heavy-lifting technology as they can, to help them ultimately save the time they need to provide more help to more borrowers.

Opinion BUY-TO-LET The Intermediary | August 2023

to our hats

Keep calm

Above all, it remains hugely important for us all to separate the hype from the reality, in terms of what we’re seeing happen in the marketplace at the moment.

Yes it’s turbulent, yes it requires vigilance from lenders and brokers alike, and yes borrowers are worried – fears that we should never underestimate.

However, there are positive signs emerging in relation to factors like house prices, inflation, interest rates and unemployment, and that’s why it’s now time to hold our nerve.

Those of us working within the mortgage industry would do well to use our expertise to help people separate the reality from the hype, and as such, to ensure that the kinds of catastrophic predictions being described by some sources do not become self-fulfilling prophesies.

We have an essential role to play in keeping people calm and allaying the understandable fears they have as a result of what they are seeing in the news.

We have a more important role than ever in building knowledge and using that to be the voice of reason, in order to help borrowers understand what is happening and why, and what it ultimately means for them.

Borrowers must be supported and encouraged in understanding the dynamics at play, in order to make the right choice for their circumstances right now, rather than being tempted to second-guess the market.

While we hope that there will be a settling-out before too long, the reality is that we are not expecting to see a return to the kinds of historically low interest rates we’ve been used to over recent decades.

So, borrowers must base their decisions on what they feel sure

they can afford, in light of their circumstances and rates available right now, in the moment they are in.

All of this points to the need for advice continuing to be as important as it’s ever been, which is good news for the broker market. ●

Opinion BUY-TO-LET
“If we can just get through this tricky summer...”
JEREMY DUNCOMBE is director of intermediaries at Accord Mortgages

Ushering in the age of sustainable housing

At first glance, postponing the implementation of proposed changes to private rented sector (PRS) energy efficiency regulations offers landlords a lifeline. However, while ambiguity on the rule changes remains, the can is just being kicked down the road.

In a recent interview, Michael Gove strongly suggested that proposed changes to PRS minimum energy efficiency standards would be implemented later than the 2025 date originally slated for new tenancies, and 2028 for all. The apparent U-turn comes following more than two years of uncertainty after the proposed changes were first made public in late 2020.

Ever since, we’ve been one of a number of industry organisations to actively engage with policymakers on the issue, and have joined calls for the Government to provide landlords with clear guidance to help them understand their responsibilities, and how best to meet them.

An important part of this was doing so within realistic timeframes, because it was widely accepted that those originally proposed would not give landlords enough time to improve what amounts to approximately 60% of the 4.8 million English PRS properties currently rated below Energy Performance Certificate (EPC) Band C.

If the policy had been confirmed on 1st August this year, with the deadline for compliance set for 1st April 2025, landlords would have had 637 days to bring their portfolios up to meet the new standards.

In this timeframe, 3,742 homes would need to be upgraded each day, a number that rises if non-working days

such as weekends and bank holidays are accounted for.

It’s also worth noting that the number of properties that will need retrofitting to meet new rules may actually be higher that projected. Paragon’s own research among 1,200 landlords found that half (52%) have at least one property that has an EPC certificate set to expire before 2025.

So, at first glance, pushing back the deadline for the policy’s implementation seems like something that we should celebrate. However, as has been the case since the changes were first announced, Gove’s hints remain just that, and the sector is still left wondering when the stricter regulations will come into effect, and what they will mean for the sector.

Portfolio improvements

Despite this uncertainty, we see that the proposals have already started influencing landlord behaviour.

Our research revealed that 15% of landlords have already bought a home that falls into EPC Band A, B or C as a result of the proposed policy change. This builds on the progress that has been made in England during the past decade, where a steady stream of sustainable homes being bought by buy-to-let (BTL) landlords has seen the number of properties with an EPC between Band A and C rise by 165% to 1.92 million.

As well as modifying their portfolios by adding properties that already make the grade, a further 10% of landlords told us that they are targeting EPC D-rated homes with a view to making them more sustainable. Just under one in five (19%) landlords have already made improvements to their portfolios, and 14% are currently in the process of doing so.

This is really encouraging, because the Office for National Statistics’ (ONS) environmental accounts show that households emit more greenhouse gases than any industry sector, accounting for around a quarter of the UK’s total emissions. Although it should be noted that this is on a ‘residency basis’, which includes travel, there is still a clear need to minimise the negative impact that our homes have on the environment. Not only is going green the right thing to do from an ethical standpoint, it can deliver tangible benefits, too. As long as works are carried out to a high standard and approved by relevant professionals, improvements should increase a property’s capital value, while the cold weather and short days of winter will soon remind us of the benefit of any measures that help to offset elevated energy costs.

Analysis for the English Housing Survey (EHS) Energy Report estimated that PRS properties could see energy savings averaging £276 per year after being upgraded to EPC Band C. This means that there are plenty of opportunities for the sector, regardless of the regulations. Landlords need support in terms of advice, and with EHS estimates placing the average cost to improve a home to EPC Band C at £7,737, many will need financial support.

Reducing the carbon footprint of portfolios operated by both new and existing landlords is a key facet of Paragon’s strategic roadmap.

This means that, in the coming months and years, we’ll enhance the support we already offer landlords, while working on some new solutions needed to usher in an age of sustainable housing. ●

Opinion BUY-TO-LET The Intermediary | August 2023 52
LOUISA is commercial director at Paragon Bank

What in ation drop means for investors

July 2023 provided an unexpected boost for the UK economy, as the Office for National Statistics (ONS) announced that inflation had fallen more than expected, to 7.9% in the year to June. This change is encouraging for many reasons, but specifically – I believe – for the opportunities it presents for investors looking to purchase UK property.

So, why does this change ma er, and what exactly could it unlock for property investors?

Historically, inflation has played a significant role in shaping investment decisions. It is widely known that high inflation can erode the value of investments, including property assets. However, the recent decline in UK inflation offers a unique advantage, particularly for those looking to enter the property market or expand their existing portfolios.

As the saying goes, when the tide turns, it turns fast.

First of all, falling inflation means that the purchasing power of the

pound strengthens. As property prices are o en linked to the prevailing economic conditions, this downturn in inflation may lead to more a ractive buying opportunities.

Property investors can now potentially secure prime assets at lower prices, maximising their returns in the long run.

Second, lower inflation rates o en go hand in hand with lower interest rates. This presents an excellent opportunity for property investors who rely on financing to grow their portfolios, presenting more favourable borrowing conditions.

Reduced borrowing costs can significantly improve the profitability of investments, making it easier for individuals to enter the property market or expand their existing holdings. Finally, it pays to consider the longer-term here. As we have witnessed throughout history, the property market tends to be cyclical.

A er an extended period of high inflation, the decline in inflation could indicate an upcoming market upturn. By ge ing in now, property

investors can position themselves to benefit from the inevitable rebound in property prices and rental demand.

In summary, the unexpected fall in UK inflation this summer has created a golden window for property investors. By taking advantage of the current market conditions, the opportunity to seize lucrative opportunities that set investors up for long-term success can and will be explored.

Like any investment, property requires careful consideration and tailored advice from industry experts. Investors must conduct thorough market research, consult with professionals, and evaluate their investment goals and risk appetite before making such decisions.

For those who do, and for the business around that can help them, the recent drop in inflation is certainly a reason to be hopeful. ●

Opinion BUY-TO-LET August 2023 | The Intermediary
STEVEN OLADIPO is property consulting lead at GetGround
Want to share your message with the industry? Advertise with The Intermediary and reach over 10,000 current and next generation property nance business leaders. Contact Claudio Pisciotta on CLAUDIO @ THEINTERMEDIARY.CO.UK to discuss how e Intermediary can help your business achieve its goals. ADVERTISEMENT

Meet The BDM

How and why did you become a business development manager (BDM)?

I fell into sales when I le university. I sold double-glazing as my rst proper job, but moved into nancial services shortly a er.

I have always loved engaging with people, listening and learning about them and their businesses, so sales was perfect for me.

ere is never a dull day in sales, and you get such a buzz when you work with a broker to get complex cases over the line.

What led you to join Landbay?

I was looking for a new challenge and wanted to join a company with a clear goal to penetrate an existing market, as well as being a great, fun place to work. Landbay certainly ticks all the boxes.

I started in our newly formed internal sales team and had the chance to support newer members of the team before I was promoted to business development manager.

Although my background was in pensions and investments, I have really enjoyed learning a new market and moving into buy-to-let (BTL)

The Intermediary | August 2023 54
The Intermediary speaks with Jonathan Braddick, business development manager at Landbay

mortgages has been so rewarding. I still get to learn every day.

What makes Landbay stand out from the crowd?

Aside from our big, bold colours, we pride ourselves on being a great company to work with.

Our broker portal is intuitive and easy to use, making it easy to submit and package applications.

Brokers also have direct access to underwriting throughout, and we take a pragmatic approach to understanding cases, o en winning awards for our service.

We have multiple funding lines, too, which means we have a broad range of products to suit all types of properties and applicants.

What are the main challenges facing BDMs right now?

ere is a requirement to be able to react quickly and always be available in the current market. It can be di cult balancing this with spending quality, face-to-face time with brokers throughout the week and making sure nothing gets missed.

We have a great in-house team that can support our brokers in this fast-paced environment, to further contribute to a business development manager’s e ectiveness and ensure opportunities are not missed.

What are the opportunities?

e number of landlords now using limited companies to purchase properties has grown year-on-year, now making up 50% of the market. is is an area of expertise for Landbay that some brokers are unfamiliar with. It is great being able to discuss packaging

requirements and how we can make these applications as simple as possible.

In addition, given the current conditions, we strongly believe that anyone looking at mortgages should be working with mortgage brokers to secure the best deals available.

As a lender that works only through intermediaries, we see this as a positive.

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

In a market where securing rates is tough, it is important to ensure that brokers know how to secure rates on new applications.

I always encourage everyone I speak to regarding potential cases to select a rate on a decision in principle (DIP). is gives them time should we have to pull rates.

In addition, we have a requirement to ensure cases are progressing in a timely manner. I stay close to submitted cases, covering required documents initially, touching base throughout, and working with our underwriting team to keep cases moving forward.

To support our sales team, I have built a report which allows us all to proactively chase any cases that near their rate expiry dates both pre- and post-o er.

What products does Landbay o er, and do you have a typical customer base?

We lend on buy-to-let properties, with a typical target market of limited companies and portfolio landlords. Although, we are not restricted to these areas.

Our focus over this past year has been on xed rate products with easier stress-test requirements than the high street lenders,

which has really seen our market share increase.

What have been your highlights or achievements over the past year?

Aside from my promotion to business development manager and working towards our ever-growing targets, I have had success in supporting our entire BDM team with a suite of reports that allow us to manage our pipelines and panels more e ciently.

I am also looking to become a mentor within Landbay, in order to support less experienced members of the team. ●

August 2023 | The Intermediary 55 MEET THE BDM
Landbay Established 2014 Products Standard buy-to-let HMO/MUFB First-time landlord HMO/MUFB Trading company Loyalty remortgage  Like-for-like remortgage Contact
We have a great in-house team that can support our brokers in this fast-paced environment, to further contribute to a business development manager’s e ectiveness”

Demand for specialist nance continues to grow

The theory books say there are four stages to every economic cycle: expansion, where the economy is growing; peak; contraction, which o en means recession; and recovery. Where we are exactly in the cycle is up for debate, but you could make a convincing argument that we are currently in – or on the verge of entering – the contraction phase.

While the UK economy has so far managed to avoid a recession, growth is flatlining and millions of households are struggling.

Inflation has been running above the Bank of England’s 2% target for two years, the base rate is at a 15-year high, and the cost-of-living crisis is chipping away at disposable incomes.

Understandably, this less-thandesirable combination of pressures is causing millions of households to struggle to make ends meet.

Financial Conduct Authority (FCA) data reveals that the number of people who have missed a bill in at least three of the past six months has risen by 1.4 million to 5.6 million.

This is causing households to borrow more in order to meet their commitments. Recent Bank of England data reveals that credit card balances have soared by more than 12% over the past year. Separate research by the Joseph Rowntree Foundation shows that 2.3 million households have turned to credit cards and other forms of debt to pay bills during the cost-of-living crisis.

While the level of arrears is still low by historical standards, this is also rising, another indicator that many households are struggling with the increased cost of living. The trade body predicts that the number of borrowers in arrears will soar by

around 23% year-on-year in 2023. Therefore, it was unsurprising to see recent data from Knowledge Bank revealing that ‘debt consolidation’ and ‘missed or late payments’ were among the most common broker searches in June.

O setting payment shock

What does all of this mean for borrowers and those of us working in the mortgage industry?

When the economy is struggling, we tend to see households tighten their belts and work to get control of their outgoings.

With that in mind, it is likely that more remortgage customers will be looking at debt consolidation as a way of offse ing the payment shock of refinancing onto a higher mortgage rate.

This is a trend we’re already starting to see to some extent. In May, 41% of remortgage customers withdrew further equity, up from 36% in January, according to UK Finance.

As any good broker knows, mainstream lenders have historically chased borrowers with the best credit records and who fit perfectly within their criteria.

Those who have missed payments, have low credit scores or who have complicated or irregular income streams have historically been le to the specialist end of the market.

Many of the mainstream players o en have more restrictive criteria for borrowers looking to consolidate. Specialist lenders, however, o en repay the debt directly to unsecured creditors, which means that not only does the borrower eliminate the risk of paying unnecessary interest charges, but also that the debts being discharged are not included for affordability purposes.

Case by case

Given the facts, how many of the 2.4 million borrowers who will need to remortgage by the end of 2024 will fall foul of High Street criteria? Answering that is impossible, of course, but it’s safe to assume there will be more – and probably a lot more, at that.

That’s not a bad thing, as it will mean there will be increased opportunities to help borrowers looking to navigate their way through this period of increased living costs. Specialist lenders are more likely to offer bespoke underwriting, assessing each case on its own merits.

We’re lucky that we have a thriving specialist lending scene in the UK –one that caters for all sorts of borrower types, providing they are deemed a worthy credit risk.

For that reason, while there will be plenty of borrowers out there ruing the position they are in, I am confident there are options out there for the vast majority. Because of that, I can see the specialist sector taking a bigger share of the market over the coming months. ●

Opinion SPECIALIST FINANCE The Intermediary | August 2023 56
We’re lucky that we have a thriving specialist lending scene in the UK –one that caters for all sorts of borrower types”

Commuting and connecting in the capital

Ahuge factor in the London market of late has been the opening of the Elizabeth Line, formerly known as Crossrail. The train line is one of the most ambitious transportation projects the capital has ever seen, and has dramatically improved connectivity across the city.

The Elizabeth Line runs for more than 100km, from Reading and Heathrow in the west of London to Shenfield and Abbey Wood in the east, and it has had a noticeable impact on the housing market, too.

We have seen a significant surge in new-build developments over the past few years in areas served by the new line, as developers have looked to tap into the likely spike in demand from buyers and tenants to make use of the Elizabeth Line for their commute.

That demand is already feeding through. The introduction of Crossrail has had a positive impact on property prices in the vicinity of Elizabeth Line stations, a movement that is only likely to continue as the line becomes fully operational.

Many of these developments would ordinarily have completed some

time ago, but they have been hit by inevitable delays due to the challenges of the past few years.

The pandemic and supply chain issues over the labour and materials used in the developments have caused projects to take longer to reach the finish line, with significant numbers only recently starting to complete.


This, in turn, is sparking greater demand for short-term finance. We have seen interest from all sorts of buyers who have put down deposits on these new-builds – in some cases many years previously – but who are now being served notice to complete.

The situation has provided another excellent insight into the value of short-term finance in the current environment. First and foremost, these deals can be arranged in much shorter timescales, delivering the funds within just a ma er of days –rather than the weeks or even months that it can take for longer-term facilities to be put in place.

There is also the ma er of cost. These buyers have seen the costs of regular mortgages rocket in recent months, making them even less

appealing. As a result, short-term finance becomes even more viable, allowing those buyers to complete on the deal and consider their options, in the hope that mortgage rates begin to se le – and even fall – in the months ahead.

Work to be done

Notable new-build projects to have completed recently include the Filmworks development in Ealing Broadway and One West Point in Acton. These have caught the eye because of their location, delivering commuting times to central London of just 12 minutes.

The Filmworks development, in particular, has demonstrated the increased prevalence of mixed-use developments across new-builds, since it combines not only the properties themselves, but also an eight-screen cinema and mix of restaurants, coffee shops and leisure facilities.

It’s a trend that is becoming more common in developments across the capital, with the builders looking to create a vibrant atmosphere by bringing together commercial, leisure and retail alongside residential units.

For all of the positivity around housing in the capital, however, affordable housing remains a concern. London is the costliest place to purchase a property, and while developers are working to incorporate affordable units into their schemes, there remains work to be done here. ●

Opinion SPECIALIST FINANCE August 2023 | The Intermediary 57
STEPHEN PALFREEMAN is associate director – London at Tuscan Capital e develepment of the Elizabeth Line has had a noticeable impact on the housing market

BDMs are the unsung heroes

At a recent awards dinner, the category for best sourcing system was hotly contested. The winner was justifiably delighted, and the majority of a endees enthusiastically applauded. Technology, not just for sourcing, has been a real gamechanger in the industry, and rightly deserves its place at any industry awards event.

Let’s face it, there wouldn’t be a modern lending market without the use of technology that covers everything from customer relationship management (CRM) and sourcing systems, to online services to assist compliance implementation and application, to completion so ware, among other applications.

In fact, can you now imagine a totally paper-driven lending market? No, neither can I. Few of us would want to return to a paper-only world, compiling packages of application forms along with physical payslips and P60s, and submi ing them to the tender mercies of the Post Office.

Yet, while we can congratulate ourselves on how far the industry has developed with the widespread adoption of technology, the other question is whether it is possible to have a functioning mortgage market without building and maintaining human contact between lender and broker, as well as packager and broker.

Old fashioned relationship building between providers and users is not talked about as o en as I think it should be.

We are seeing much talk of ‘roboadvice’ and access to frequently asked questions (FAQs) and marketing toolboxes full of product details, forms and online submission and twoway internet contact. But just how important is the role of the business development manager (BDM) in today’s market?

In my opinion, the work of BDMs is generally underestimated and underappreciated. Partly, I think, because they are such a fixture in the market that their presence would only be missed if they were not around.

They forge relationships and help maintain them. As far as brokers are concerned, good BDMs remain a vital link between them and their lender or packager. They offer the human face of the business they represent, as trainers, sources of information, or just first port of call when updates on cases are required.

Also, let’s not forget the value they bring by showing brokers how certain products can provide opportunities.

Bridging by BDMs

In the bridging market, the basic concept – a product which was designed originally as a stop-gap funding vehicle for auction purchase –was developed in the most part thanks to BDMs spreading the word about its inherent flexibility, and the ways in which it could be applied to a wide variety of purposes, both business and personal.

Competition for broker business is as fierce as it has ever been. However, with new lenders continually joining the market, the ways in which new and existing lenders can a ract bridging business are limited.

Product innovations or cheap pricing strategies might work in the main mortgage market, but there is much less leeway in bridging. Quite simply, the main differentiator comes down to service, and that service is enhanced by the work of BDMs in the field.

With so many offerings out there to tempt advisers, it is a lender’s commitment to offering a transparent and effective experience to brokers and their clients – not just once, but every time – that generates the kind of loyalty that lenders need to develop their businesses.

BDMs and their face-to-face presence play a significant role in expressing the culture of the lenders they represent.

While we can admire and be thankful for the advantages that technology has brought us, there is no substitute for one-to-one human contact, and the consequent building of lasting relationships. An effective sales team remains the most important resource that lenders and packagers command to put across their message and build their businesses. To those lenders that believe they can do without a sales team and look to rely on other ways of making themselves known to the broker community, I would say that from our experience of running a proactive sales team over the past five years, I know that they are missing a trick.

Where there is a belief that the expense of BDMs cannot be justified by recognisable benefits in terms of new business upli , I would argue that their thinking is too short-term. BDMs are, or should be, part of any longer-term strategy to build a broad introducer base.

I believe we should salute the contribution of the salespeople who take our messages to the intermediary market and forge those all-important relationships. ●

Opinion SPECIALIST FINANCE The Intermediary | August 2023 58
RANJIT NARWAL is head of origination at Ku ink
An e ective sales team remains the most important resource that lenders and packagers command to put across their message”

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

Meet The BDM

The Intermediary speaks with Samantha Brain, BDM at Precise Mortgages and Kent Reliance for Intermediaries

How and why did you become a business development manager (BDM)?

I’ve worked in nancial services for most of my career, so I’ve had exposure to a range of roles and appreciate the key skills needed to perform them successfully.

Business development really appealed to me, as I knew I had the skills and the genuine interest to support people in making the biggest nancial decisions of their lives.

I started as an o ce-based business development manager

(OBDM), which equipped me with in-depth knowledge of the specialist nance industry, including product ranges.

I also built strong relationships in the sector.

e main aims I had when becoming an OBDM was to use the time to develop my skill-set and knowledge, so that if a eld role became available I would be able to evidence that I had the necessary experience.

e ability to support brokers in the eld with complex nancial solutions across both Precise Mortgages and Kent Reliance for Intermediaries was my ultimate aim.

What brought you to OSB Group?

A er completing my CeMap quali cation and working as a broker, my interest in specialist lending grew. As a broker, I already knew the Precise Mortgages brand well, and when an opportunity to join the intermediary sales support team came up, I knew it was a company that I’d enjoy working for, as it shared my passion for great customer service and satisfaction.

Since joining in 2019, my knowledge and expertise have developed even further, and I have always been really well supported in

The Intermediary | August 2023 60

my career objective of becoming a BDM by my line manager.

At OSB Group, which is the parent company of Precise Mortgages and Kent Reliance for Intermediaries, we’re fortunate enough to have a great range of in-house support available, which includes coaching, mentoring and personal development planning, as well as opportunities such as work shadowing and buddy systems.

We’re encouraged to allocate time in our diaries for regular personal and professional development, and it has really helped me achieve my career goals.

What makes this business stand out from the crowd?

I see OSB Group as forward-thinking within the specialist lending market, and as an employer it demonstrates a strong social conscience, encourages and supports a positive working culture, and actively nurtures and promotes the development of its employees.

In April 2022, when the group moved to dual-branded BDMs, it provided the perfect opportunity for me to widen my knowledge. e new approach also allows me to have more impactful conversations with brokers, as I’m able to o er a variety of options – complex residential solutions and more specialist buyto-let (BTL) portfolio queries across Precise Mortgages and Kent Reliance for Intermediaries, even at times referring business to my colleagues at InterBay, who are experts in the commercial sector.

What are the challenges facing BDMs right now?

We have similar challenges to brokers in terms of the market, which are beyond our control and which impact us all. My main focus is trying to support our brokers, who are working extremely hard to

support their clients and are under huge amounts of pressure. Good communication and timely responses are all very much appreciated, and as BDMs working across more than one lending brand, we can help provide a wider range of options.

What are the opportunities for BDMs?

I can’t speak for all BDMs, but at OSB Group, BDMs really can help to shape cases and negotiate approval for more unusual or complex cases. We are able to e ectively ‘pitch’ our cases to senior stakeholders in the business and advocate on behalf of the broker and their client using the Transactional Credit Committee. is regular forum provides a fantastic opportunity for BDMs to actively share feedback, which can be used to in uence changes to our products and services.

A great BDM helps create solutions, values their broker relationships, and spends time building professional business networks, so it’s not a role everyone will enjoy, but if you love to meet new people and help them with their nancial challenges then this is de nitely the role for you!

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

We really value our brokers, and communication works much better when everyone is aligned and committed to the same outcomes. We proactively look at ways we can make the journey smoother, so introducing additional support –such as linking up each eld BDM with an o ce BDM – means there should always be an informed person available that a broker can talk to about their case.

We have access to a wide range of resources across the OSB Group, with group functions such as

underwriting and real estate. By having direct access, this helps us to respond to brokers far more quickly and can also save time in progressing applications or giving early warnings if there are potential challenges.

What advice would you give potential borrowers in the current climate?

Use your broker for their knowledge, experience and advice; it has never been more valuable than during this period, which looks set to continue.

As experts in specialist lending, we really have seen it all, and it’s highly likely that we can provide the right blend of experience and expertise to help you with a broad range of your borrower clients’ needs. ●

OSB Group

Established in 2015


Precise Mortgages:

◆ Buy-to-let mortgages

◆ Residential mortgages

◆ Bridging nance

Kent Reliance For Intermediaries:

◆ Buy-to-let mortgages

◆ Residential mortgages


◆ Commercial

◆ Semi-commercial

◆ Buy-to-let and HMO

◆ Bridging nance

◆ Retentions


0774 957 7564

General enquiries (Precise):

0800 116 4385

General enquiries (KRFI): 01634 835791

August 2023 | The Intermediary 61 MEET THE BDM

Creative solutions needed after rate upheaval

It’s been a time of significant upheaval in the property market. The past month or so has seen an incredible level of product changes, as lenders have felt the need to withdraw and reprice off the back of rising swap rates, amid the expectation of further base rate rises.

This has inevitably had a noticeable impact on transaction levels. As the Bank of England base rate has risen, prospective buyers may have opted to hold off on their purchasing plans. The sums simply don’t add up – at the moment, anyway.

The rising Bank of England rate has also created headaches for some landlords. Passing affordability tests, particularly the interest coverage ratio (ICR), has become rather trickier in this environment.

However, it’s worth remembering that the rate turmoil taking place in the mainstream market actually creates opportunities for property investors. There are quality properties which might ordinarily have been snapped up by owner-occupiers, but which are now available, and at a knock-down price to boot.

With would-be purchasers putting their plans on hold for the foreseeable, that opens the door for investors to step in and either hold the property for themselves on an ongoing basis, or carry out some refurbishments before flipping it for a profit down the line, when the market settles down somewhat.

Getting creative

While traditional funding may not be quite so attractive at the moment, that does not mean that investors are unable to act. Instead, it simply takes a little creativity in embracing alternative options.

are able to take the time to understand them”

Bridging loans are a perfect example here. The market is active right now, with no shortage of interest from investors looking to explore their options.

This is where working with lenders that are truly experts in bridging – and the flexible ways in which it can be utilised – can pay dividends.

For example, we’ve designed a service proposition with the broker in mind, of which a core component is simply being available on the telephone, and not just behind an email address. We understand the need for simplicity and effective communication, so the right people can be accessed at all times; that includes all senior staff. In addition, decision-makers see every case within hours the enquiry coming to us.

The experience in our team means that we can get complex deals done. Brokers will know this firsthand, as they can actually speak to underwriting and credit, as well as

being able to meet with us. We can also bring the end customer onto the call whenever necessary, and invite them into the office for a cup of tea and a chat to discuss the case; ultimately, we’ll do whatever is necessary to help make sense of the deal.

Lenders you can trust

Brokers have no shortage of options when it comes to picking a lender for their bridging clients. This is a sector that has seen substantial growth in recent years, with a host of new entrants.

However, that can lead to some frustrations for brokers. We know that there have been situations where they have felt let down by lenders which could not deliver on promises, and therefore left their clients in the lurch.

That is not just damaging to the client financially, but can also impact the relationship between broker and borrower.

That’s why it’s so important for brokers to work with lenders they can trust, lenders that have the financial backing to ensure that clients are not going to be let down at the last minute.

Tailored solutions

The fact is that the market upheaval has actually created opportunities for savvy investors to improve their portfolios. But, in order to follow through on those plans, they need to work with lenders which are able to take the time to understand them, to build financing solutions that meet the borrower’s individual needs, and which have the resources in place to ensure that everything goes through smoothly. ●

Opinion SPECIALIST FINANCE The Intermediary | August 2023 62
Market upheaval has actually created opportunities for savvy investors to improve their portfolios. But, in order to follow through on those plans, they need to work with lenders which

A dream market for developers

With so much negative news surrounding the housing market

and the UK economy, borrowers can be hesitant to start a project, which in turn impacts brokers’ sales pipeline.

However, we believe that this is exactly the market developers have been waiting for. Higher rates are creating lower land prices, while build costs have stabilised and contractors are keen to secure jobs. Overall, it’s a buyer’s market right now.

Since property development is counter-cyclical, anyone buying land today is 18 months away from selling. By then, interest rates and market sentiment will be better, and improved buying power will drive up demand.

With planning approvals at their lowest levels on record, there will undoubtedly be a huge shortage of new houses in 2024-25, causing a subsequent surge in prices.

If you look past the negative headlines, the data we’ve gleaned confirms that now is the time to start developing.

Lowest figures for projects approved

In Q1 2023, planning authorities in England received just 96,000

applications – 13% lower than Q1 2022. Of those, 75,000 decisions were granted, down 11%.

Planning application submissions have been steadily declining since 2017, and just 3,037 housing projects were granted permission in Q1 2023 –20% fewer than a year earlier, and the lowest quarterly figure on record.

Fewer houses, more people

The UK population has been growing at around 0.34% since 2009, from 62.28 million to 67.7 million. England has increased from 52.2 million to 57 million. In 2022 alone, 606,000 more people arrived for the long-term than left – nearly double pre-pandemic and pre-Brexit levels. The UK’s housing shortage is estimated to be between 1.5 million and, at the higher end of the scale, 4.3 million, according to the Centre for Cities.

In the financial year ending March 2022 there were 204,530 dwellings completed in the UK. Flip-flopping Government policy and scrapping mandatory house building targets caused 58 local authorities to suspend their own development plans.

Easing planning rules

Michael Gove is set to ease rules around converting disused retail units and units such as takeaways and betting shops into housing.

Similarly, the rules are set to ease for building extensions to commercial buildings and repurposing agricultural stock. The focus will be on regenerating cities and brownfield sites. This is great news for small to medium (SME) developers, because most brownfields are too small to be viable for larger scale developers. Potential sites will be made available for development by local authorities, meaning the planning application process should be significantly easier to navigate.

Demand and supply

Come 2024-25, interest rates will inevitably come down and wages go up, so mortgage rates will be lower and relative buying power increased.

Data for Q1 2023 indicates that the number of units that will have already begun – or are about to begin this year – are at eye-wateringly low levels. Demand will far outstrip supply, potentially causing a spike in prices by 2024-25.

The volatile market of 2023 is a great time to acquire better-priced sites and getting into the cyclical development process at exactly the right time. Rented accommodation, affordable homes and social housing in larger cities are in the shortest supply.

During the buying frenzy in 2020 to 2022, spurred by lack of supply, house prices rose by around 26% for detached properties and 13.4% for flats, according to Nationwide.

Housing supply will become even further reduced, meaning prices are likely to spike beyond those fast-paced increases we already experienced. Meanwhile, buyers who have been biding their time, waiting for lowering interest rates, will be desperate to return to the market. ●

Opinion SPECIALIST FINANCE August 2023 | The Intermediary 63
IAN HUMPHREYS is founder and CEO of Brickflow Michael Gove is set to ease rules surrounding the repurposing of agricultural buildings

Q2 Bridging Trends: Plugging a gap in the market

After a recordbreaking first quarter in terms of the volume of bridging transactions, the second quarter saw a sizeable drop in activity. Our latest Bridging Trends data, a quarterly publication which monitors the latest trends in UK bridging finance in order to offer a general snapshot of the industry, shows a fall in transactions in Q2 to £165.7m, a significant decline on Q1’s £227.8m, making it the quietest quarter since Q1 2022.

Market turmoil, stubbornly high inflation – despite moving in the right direction – and interest rates continuing to rise, are all making people more cautious about taking on debt unless there is an absolute need to do so.

It could also be argued that Q1’s figures were so impressive because much of the lending done then was at rates agreed at the end of last year, and as rates have increased, transactions have fallen away. However, this is not something we have seen at MT Finance, where we had a strong Q2.

The Bridging Trends data comes from a dozen specialist introducers operating within the UK bridging market; several reported that they transacted on a number of large deals in the first quarter – a trend which wasn’t repeated in Q2, suggesting a growing element of caution.

Rising rates

The effects of consecutive base rate hikes are bound to be felt in the bridging market, as well as the mainstream residential lending market. The weighted average monthly rate on a bridging loan rose to 0.84% from 0.79% in the first quarter, the highest rate seen

since Q2 2020, when it hit 0.85%. With inflation still rampant, swap rates rising and interest rates also continuing to increase, you would expect the average rate to rise.

Borrower caution

It may also indicate that bridging lenders are being more cautious as to what they are lending on in terms of their risk appetite, owing to the uncertainty in the housing market.

Thankfully, borrowers are not overstretching themselves, and are instead demonstrating caution.

The average loan-to-value (LTV) remained comfortably under 60% at 56.9%, an increase from 54.7% in Q1.

Tellingly, this reluctance to overburden themselves unnecessarily was further demonstrated by the top criteria search made by brokers on Knowledge Bank’s system in Q2, with ‘minimum loan amount’ replacing ‘regulated bridging’.

A matter of confidence

As seen in previous quarters, rising interest rates, combined with mortgage lenders pulling products with little or no notice, have impacted confidence in the mainstream market, resulting in more borrowers turning to bridging finance to complete their purchases.

In Q2, regulated bridging extended its market share to 48.7%, from 46.2% in Q1. This is the highest proportion since the 53% reported during the Stamp Duty holiday in Q3 2020.

Meanwhile, unregulated bridging nearly halved, perhaps because it is less of a necessity, and buyers are postponing non-urgent transactions until the situation becomes clearer.

The uptick in regulated bridging is a case of more ‘need versus want’, as well as a better understanding

among borrowers as to how useful a tool this is.

For the second consecutive quarter, preventing chain-breaks remained the most popular reason for turning to bridging finance, accounting for 24% of loans. This highlights how bridging lenders have stepped in where borrowers have been fearful of missing out on a purchase, providing much-needed funds at short notice in order to hold a transaction together.

Bridging BTL

While the buy-to-let (BTL) market has suffered from rising mortgage rates, tax and regulatory issues, Q2 saw a welcome return to the market from property investors and landlords.

Bridging loans for investment purchase purposes jumped from 15% in Q1 to 22% in Q2, which is likely due to investors and professional landlords taking advantage of a sluggish property market to spot opportunities and purchase assets at a reduced rate.

Clearly, where people need to sell and there are those with the cash in hand who can take advantage of the market, there are bargains to be had.

As thoughts turn to the autumn, what we really need is some stability and consistency in the marketplace. Even with another 25 basis-points rate rise, if rates then remain at that level for an extended period of time without change, this will bring some muchneeded consistency.

Once they know where they stand, buyers will be more comfortable about making a commitment to purchase property, benefiting the market as a whole. ●

Opinion SPECIALIST FINANCE The Intermediary | August 2023 64
GARETH LEWIS is managing director at MT Finance

Di culties exacerbated for the self-employed

ith the costof-living crisis continuing to sit front of mind and interest rates rising, potential buyers and homeowners coming to the end of their fixed terms will be looking to cut costs wherever possible. While all are struggling, the difficulties can be exacerbated should your customer be self-employed.

All homeowners will be facing higher rates this year, yet there are some specific time, administration and financial requirements selfemployed borrowers will need to keep in mind to guarantee the highest chance of mortgage approval.

Indeed, our own research has found that having non-standard income – including multiple and complex incomes or being self-employed – was a key reason for 22% of applicants being rejected for a mortgage in the past.

Growing self-employed

Being self-employed shouldn’t automatically mean securing a mortgage will be a challenge for your customers. With more than 4.2 million British workers now classified as self-employed, and this number growing, according to the Office for National Statistics (ONS), it is more important than ever that brokers know what extra considerations are needed to secure a mortgage.

Although there are many lenders that will consider self-employed customers, some high street lenders with ‘tick box’ processes may struggle to approve applications. If variable income or a short period of trading is an issue in the mortgage application journey, ensure that you and your

Wcustomers consider specialist lenders, which o en take a more bespoke approach to each customer’s income and financial situation.

Your customers need to check their credit score before considering which new mortgage you look for, as their score will likely play an important role in the mortgage rate that a particular bank or lender can offer. If the credit score is lower than expected, your customers should look at closing down credit cards that are no longer in use, or filing for a notice of correction.

That said, some lenders – like Together – won’t factor in credit score when reviewing your mortgage application. Instead, credit history is assessed, as customers with minor financial blips or late payments are still feasible.

Most high street lenders will require at least two or three years of information when completing an application, which can prove tricky for those with less regular income pa erns, or who have recently become self-employed. However, specialist lenders typically require just one year of accounts. Proof of ID and address, bank details, evidence of their business income and expenditure and SA32 forms or a tax-year overview will also be needed.

On top of this, customers may also need to show high street lenders their operating and travel costs, as well as spending on office rental and supplies. Advising them to have all their documents ready will help with a smooth and stress-free mortgage application process.

Remortgaging can be also slightly more complicated, requiring more preparation as there will be different considerations depending on whether they were self-employed when they first applied for their initial mortgage.

Provided your customers can prove their self-employment track record and earnings, they’ll probably be able to access the same options.

Full picture

With mortgage rates as high as they are at the moment, some may prefer to wait to remortgage for the best rates available, but it is key to remember that lenders have different underwriting processes and will consider your client’s income in differing ways. For example, at Together we require just 12 months of trading history and are able to paint a full picture of what the applicant can afford.

It is vital that brokers ensure that they are fully aware of application procedures, potential obstacles and solutions for those who are selfemployed, so they can correctly advise and achieve the best outcomes for their customers. While high street lenders are o en inflexible, specialist lenders tend to take a more bespoke approach to a customer’s situation, so it’s beneficial to explore them as an option. ●

Opinion SPECIALIST FINANCE August 2023 | The Intermediary 65
If variable income or a short period of trading is an issue in the mortgage application journey, ensure that you and your customers consider specialist lenders”

Chaos breeds opportunity

It is often said that out of chaos comes opportunity, and that is certainly true of the bridging sector. This area of the specialist lending market has seen substantial growth amidst the global and domestic uncertainty of the past few years, with enquiries up 64% in the first three months of 2023, compared with the final quarter of 2022, according to recent figures from Bridging Trends.

Regulated bridging, in particular, has seen a surge in popularity, accounting for 46% of all bridging transactions in this time. Awareness of the sector continues to increase, with both brokers and residential homeowners starting to acknowledge the benefits of using short-term financing to help them navigate the challenges of buying a property in the current economic climate.

Navigating obstacles

While recent media attention on rising interest rates and a faltering housing market has been plentiful, talk of the market’s decline are somewhat alarmist. Consumer appetite for property remains high, and there will always be a need to address residential buyers’ home financing requirements.

Admittedly, the current volatility in the mortgage market – coupled

with the squeeze on income due to the cost-of-living crisis – is presenting some challenges for those customers looking to refinance, but the needs of consumers do not stop just because market conditions are considered to be less favourable.

In fact, navigating these obstacles is certainly achievable, and short-term financing solutions such as regulated bridging loans are increasingly being used to help bridge the gap between buying and selling a property, and for chain-break purposes.

The use of regulated bridging for chain purposes alone is now the most common reason why consumers take out the product, accounting for 25% of all transactions in Q1 2023 according to Bridging Trends, a jump from 15% on the previous quarter.

This uptick in demand is unsurprising, as using a bridging loan for chain-break purposes allows homeowners to quickly raise the funds needed to circumvent the problems associated with property chains, as it enables them to purchase a new property outright before repaying the loan when they sell their existing home.

This can help to provide surety around the property purchase, and to prevent the costs and delays that can sometimes come with a sale falling through. It can also help to prevent

the buyer having to sell their current property at a lower price simply to ensure the sale goes ahead.

A regulated bridging loan is also a useful tool for brokers with clients looking to downsize, as it provides them with the opportunity to unlock equity in their current home and use the cash to purchase a smaller property without the pressure of being rushed.

Freedom to choose

It also offers the client the freedom of being able to choose when to sell their current property, rather than reacting to the changes in an increasingly volatile economy. This can prove extremely attractive to those who want to move on their own terms and not feel rushed into making a decision.

The speed at which the funds can be released also makes regulated bridging products an attractive proposition in an ever-changing market as they allow consumers to move quickly as applications are often processed in a matter of weeks. In all cases, the client will need to have a clear strategy for exiting the loan, which is often the sale of an existing property.

Brokers unfamiliar with this area of the market – but with clients who could benefit from a regulated bridging loan – can refer clients to specialist master brokers such as Clever Lending, which can guide you through the process and help you navigate this growing area of the mortgage market while continuing to meet the needs of clients. ●

Opinion SPECIALIST FINANCE The Intermediary | August 2023 66
MATTHEW DILKS is bridging and commercial specialist at Clever Lending Opportunity in disorder: The specialist lending market can provide solutions for any circumstance

Falling inflation welcome but lenders still tread carefully

After three years of perpetual economic crisis, you could almost hear the markets breathe a collective sigh of relief following the recent inflation announcement. Not only did inflation fall again in June, it came in 0.3 percentage points lower than economists had expected.

That may seem like a slim and fairly trivial margin, but its symbolic significance is difficult to overstate.

It means that, finally, the UK is following the same downward inflation path as the US and the Eurozone, whereas previously we had been seen as an international outlier.

Of course, at 7.9%, inflation in the UK is still markedly higher than in other major developed economies, such as the US (3%), Japan (3.3%) and Germany (6.4%).

Let’s also not forget that inflation remains nearly four times higher than the Bank of England’s 2% target.

However, for the first time in months, it feels as if the wind is starting to change direction – even if only slightly – and a marginally more positive narrative is starting to emerge.

The change of pace was so unexpected that markets are now pricing in a terminal rate of 5.8%, rather than the 6.5% predicted before the inflation announcement.

That has brought some muchneeded stability to swap rates, allowing some lenders to sharpen up their product ranges.

I have read in various places recently that this may spur on other lenders to follow suit. However, I think it might be a little early to make that call.

That’s not to say that we won’t see any lenders coming out with rate

reductions in the near future. I just think the movement is more likely to be from those who had previously priced themselves out of the market.

Lenders know better

Despite the improving outlook, we are not out of the woods yet; and anyway, lenders know better than to place too much significance on one set of data.

While the economy has proven remarkably resilient, the inflation genie isn’t back in its bottle yet, and lenders will want to see sustained progress before deciding their next moves.

We only have to go back to January’s inflation to see how quickly the outlook can change.

Back then, the markets celebrated a second consecutive fall in inflation only to be disappointed in the following month when price rises unexpectedly picked up pace once again.

A clearer picture

It’s also worth pointing out that, at the time of writing, swap rates are only slightly lower than they were the month before. In fact, they remain higher than they were immediately before the inflation announcement on 19th July.

That suggests to me that there isn’t actually a great deal of scope for widespread mortgage rate cuts, except maybe from those lenders on the pricier end of the spectrum.

From an operational point of view, there is a cost to lenders when they reprice, meaning they don’t want to constantly chop and change their ranges unless they have to.

Therefore, I suspect they will want to tread carefully over the coming quarter or so, or until the inflation picture becomes a little clearer.

That said, there might be scope for a softening of pricing towards the back end of the year if inflation continues to fall.

No crystal ball

What does that mean for borrowers? Unfortunately, more confusion.

I get asked daily by clients what I predict will happen to interest rates, which I’m sure any broker reading this will be able to identify with.

But the truth is, it’s almost impossible to call. There are simply too many variables at play, and the recovery is far from secure enough to make even an educated guess.

That does mean, however, that mortgage advisers will continue to play a vital role in helping borrowers make sound decisions during what is a highly uncertain time.

Make no mistake, it feels good to finally have some good news on the economy. But we might have to keep the champagne on ice for the time being at least. ●

Opinion SPECIALIST FINANCE August 2023 | The Intermediary 67
From an operational point of view, there is a cost to lenders when they reprice, meaning they don’t want to constantly chop and change their ranges unless they have to”

Evolving to meet the needs of London’s market

London’s property market is in a state of flux, with high demand and limited supply pushing prices ever skyward.

For developers and investors, the need for quick access to capital has made bridging finance an essential tool.

Bridging loans can be secured in days rather than months, providing the agility these players need. As London’s housing challenges mount, bridging has adapted to fill the gaps. With inventory low, London’s insatiable housing appetite has prompted developers both big and small to accelerate their projects.

Fuelling development

Whether it’s a modest terrace house conversion or a high-rise block of flats, bridging finance is fuelling development. Developers use it to acquire sites, kick-start projects, and plug cash shortfalls when delays arise.

Bridging’s flexibility is key – loans can be extended or refinanced if sell-off lags. This has opened up opportunities for smaller developers to compete.

Investors can also leverage bridging loans to flip properties. With London real estate highly coveted, houses renovate and resell swi ly in a normally functioning market. Bridging allows for maximum

efficiency, eliminating the waiting entailed with bank financing.

Bridging permits investors to close quickly, redevelop faster, and bring upgraded properties to market while demand is hot. Consequently, bridging helps spur regeneration of aging housing stock.

However, specialist products aren’t without risks. Property values can fluctuate and make repayments challenging. Shorter terms can also catch borrowers off guard.

Industry organisations have pushed for stronger oversight and transparency standards to ensure appropriate lending. Regulators such as the Financial Conduct Authority (FCA) supply important guides, but further protections may be merited.

Driving progress

Looking ahead, PropTech and alternative data promise to reshape bridging. Streamlined digital processes will reduce friction and costs. Big data analytics can allow more fine-tuned risk assessment and product customisation based on individual borrower needs. This could open bridging to underserved demographics. Though innovations will expand access, it remains critical that the expansion be responsible.

In a property market plagued by stunted inventory, outsized prices and inequality of access, bridging fills

essential demands. Where traditional financing falls short, alternative lending is what fuels the London real estate ecosystem.

Though not without risks, bridging’s evolution reflects an adaptation to changing needs.

Nevertheless, it must balance efficiency with protections that put borrowers, not just profits, first.

If done right, bridging can drive progress – enabling development, advancing sustainability, and promoting inclusive paths to homeownership.

Volatile mainstream

Over the past 12 months we’ve seen increasing delays within the mainstream mortgage market, as increasing rates and volatility have made obtaining mortgages more challenging. This is true for both regulated mortgages and also buy-tolet (BTL), with tightening affordability criteria and stricter income coverage ratio (ICR) calculations making it impossible to obtain a mortgage in some scenarios.

Owner-occupiers and investors alike are encountering obstacles with borrowing via mainstream lenders for both purchases and refinances.

Bridging has filled this gap due to its straightforward and swi application process, and the fact that loans are not subject to the same affordability

Opinion SPECIALIST FINANCE The Intermediary | August 2023 68

criteria. Bridging is such an agile product it can allow purchases to still go ahead and keep the market moving, to some extent.

Bridging still remains a very quick and relatively easy route to secure finance for those who need quick access to capital without the normal barriers faced when working with a mainstream lender.

Chain-breaks have also driven an increase in residential bridging over the past year, as homebuyers look to overcome disruptions to their purchases. This is an increasingly popular use of regulated bridging, as clients struggle to meet stricter affordability criteria for residential mortgages due to sharp rate rises. This type of loan is utilised to release equity from the property which the client is selling and enables them to complete on their onward purchase without relying on the sale of the existing property.

We have also seen an increase in bridging finance being used for investment and auction purchases, which reflects some of the economic uncertainty and potential distress in the market.

Savvy and well-capitalised investors are looking to take advantage of these opportunities, but mainstream mortgage lenders are not able to complete within the 28-day timeframe, which is where bridging can be used for

speed. In addition to this, mainstream lenders are not always able to lend against auction properties, as they tend to require modernisation and are sometimes uninhabitable.

Agility and speed

In summary, the role of bridging finance has filled the gap where mainstream lenders are struggling to meet borrower requirements due to rate rises and affordability criteria. In addition to this, economic uncertainty means investors are looking to take advantage of timesensitive opportunities including auctions, where business is booming. The agility and speed of bridging finance makes it an important and prominent type of finance in today’s cooling market where borrowers o en need quick access to capital, but are facing barriers to entry via mainstream providers due to increasing rates and unfavourable economic conditions. ●

August 2023 | The Intermediary 69

Overcoming a challenging environment

These are challenging times in the property market. According to recent reports, UK house prices have fallen at their sharpest rate for 14 years, and economists expect modest declines in both 2023 and 2024.

At the same time, the Bank of England’s base rate continues to climb in an a empt to curb inflation, and the cost-of-living crisis rumbles on. If you were to spend too much time reading the newspapers, you could be forgiven for being a li le gloomy.

However, those of us in the shortterm lending industry know that it is during times like these – when cashflow is tight, time is of the essence, and the large banks are adopting a more cautious approach –that specialist property finance comes into its own.

The entrepreneurial nature of bridging means that we are quick to adapt. Lenders are set up to take an individual approach to complex cases, and at speed, and we are well-placed to provide vital transitional finance to individuals and businesses to help them to navigate this difficult period.

Bridging lending volumes have grown consistently over recent years, and our sector continues to be vibrant, competitive, and full of opportunity for both businesses within the industry and our customers.

This is not to say that we should take future growth for granted. Reports from the market say that exit routes are proving difficult for customers, as buy-to-let (BTL) interest rate rises have made affordability assessments more challenging, while the faltering property market has lowered expectations on achievable prices. Vigilance and a ention to detail now are crucial, both in the

origination of new loans and the servicing of customers throughout their term right through to redemption.

As an industry, we have always excelled at offering a personal handson service to customers, and now is a time when those customers may need a li le more handholding.

It’s important to for lenders to maintain a robust approach to underwriting and risk control, while maintaining the strong reputation they have gained for providing decisions and advancing funds with clarity and certainty.

Shared experiences

At the ASTL, we continue to support our members in delivering best practice with our Membership Rules and Code of Conduct, and we present them with plenty of opportunity to meet with their peers to share their experiences and learn from each other.

We also give them the chance to learn from external experts. Our Annual Conference, for example, which takes place in London on 9th November, will include an address from Daniel Finkelstein, a former chairman of Policy Exchange and executive editor of The Times, Rob Elder from The Bank of England, and Ed Hampson from Savills.

We are also supporting the ongoing advancement of professional standards. Earlier this summer, in a joint initiative with The Financial Intermediary & Broker Association (FIBA) and The London Institute of Banking & Finance (LIBF), we launched the Certified Practitioner in Specialist Property Finance (CPSP) programme.

The programme includes modules covering bridging, development

finance, and specialist BTL, and was designed specifically to provide a definitive and targeted education option for the specialist lending sector.

In just under two months since its launch, a good number of specialist lending professionals have achieved a pass grade in the e-learning programme, while new registrations for the course continue to grow.

Our intention for this accreditation has always been that it should enhance the skill and knowledge used by advisers, lenders and other professionals associated with the short-term mortgage lending sector, with the ultimate objective of benefi ing the end customer.

Working together

The co-operation shown between the three parties has highlighted the value of working together towards an important common goal. I have no doubt that the enhanced, or re-energised, skill-set will provide benefits for all concerned – and especially the end user.

On top of this, we continue to work with regulators and policymakers to help them be er understand the nuances of specialist short-term finances, in order that any future regulations will be considerate to the particular needs of our customers.

These are challenging times in the property market, but the shortterm lending industry has always risen to the challenge in the past. If we continue to work together and do the best for our customers, we can emerge from this period stronger than ever before. ●

Opinion SPECIALIST FINANCE August 2023 | The Intermediary 71

Pure Panel Management Q&A

of valuations in keeping the market steady

First, can you introduce Pure Panel Management?

JAMES GILLAM: We’ve always held a footing in a variety of specialist markets, particularly equity release and second charge, and more recently bridging and buy-to-let (BTL). We also do some first charge business, mainly dealing with specialist challenger banks.

We like to collaborate with new lenders and products early in the process to help develop them and build the panel they want. We operate nationwide, covering literally every postcode in the UK. This means we have no gaps from a geographical perspective. This has played a key role in facilitating our continued growth over the past couple of years.

HELEN SCORER: Many of the lenders we’re working with now have been with us for a long time, and because we’ve been doing this for so long, we’ve evolved with certain individuals.

Because we’ve always maintained a really good service, the first thing they do if they move is get in touch to continue the relationship. We’ve grown organically because of our reputation, relationships and the quality of our service.

JG: We’ve played an integral role in helping our clients to grow their businesses. So, they don’t have to panic about the valuation side, they can get on with what they know, and treat us almost like their in-house team.

We take a lot of the stress out of things, and they know that when they’ve got deadlines, we’ve already provided all the information they need and can help them with new information as and when.

It’s the strength of those personal relationships, as well as those within businesses, that have allowed us to grow. We also have good relationships with the surveyors that we use.

HS: Covid-19 was a really important time, because when some other firms closed, we kept working. We were able to see through deals that were initiated pre-Covid. We were there at the end of the phone and email, and a lot of brokers

have said that the help we provided during that time was invaluable. We were there to answer questions, and even do some valuations, using things like drive-by and desktops.

This period demonstrated our commitment to supporting our clients, lenders and brokers.

JG: We also grew our relationships with some of the bigger lenders, which had to try to keep ticking over even if they couldn’t provide the full service. Being able to do drive-by valuations, for example, allowed them to lend a certain amount.

How has market volatility affected the business moving forward?

JG: We’re set up to have people working from home now. We also invested into systems which allow us to become more flexible. We’ve continued to provide something different to our competitors, in that when you ring us up you will get an answer within five rings. We’ve always believed that it’s better to have personal relationships. So every one of our clients has a dedicated person who deals with all their cases on the day-to-day basis, so you’re always speaking to the same people.

What makes for a good valuation partner?

JG: Every client and sector of the specialist market is different. In equity release, for example, they really want that personal touch, whereas on the bridging side, they’re more timescale driven and want to avoid post-valuation questions (PVQs). In second charges, it’s about doing up-front checks to make sure that we avoid down valuations.

It’s about understanding what each individual partner wants. We work in partnership to achieve the right results for all parties.

This goes back to dealing with individuals within the businesses. We work with the same lenders day after day, so you get far fewer mistakes and far fewer queries – we understand exactly what

The Intermediary speaks with James Gillam, managing director, and Helen Scorer, operations director at Pure Panel Management, about the role
The Intermediary | August 2023 72

Together or United Trust Bank wants, which is also helpful for the lenders, allowing them to get deals through quicker and more efficiently.

Have you seen any particularly interesting trends across the broad range of markets you’re active in?

JG: Equity release has obviously tailed off a little bit as the market completely changed due to higher interest rates. Although, I do believe that they’ll start to bring out products which will help rectify the situation and regenerate the sector towards the end of this year.

A large part of second charge is debt consolidation and home improvements. This market has seen rapid growth since Covid-19. A lot of people haven’t wanted to move, or been able to, and that has resulted in lots of home improvement loans. Obviously, due to inflationary and wider economic pressures, there is likely to be an increase in debt consolidation.

Otherwise, we’re seeing a lot of houses in multiple occupation (HMOs). There’s a big housing shortage, so HMOs are proving popular with landlords, and there’s an increasing number of relevant products from lenders as a result.

The specialist sector in general has definitely been a growth area. Our volumes grew 44% last year, and we’re up 20% up to June this year. It will continue to grow and more lenders will emerge in the next year or so, especially in the second charge, bridging and specialist spaces.

HS: The main trend for valuations at the minute is around the rapid pace that rates are being changed, as this is putting more pressure on us to turn our reports around. We’ve seen more demand for speedy turnarounds. We are dealing with human beings at the end of the day. The rate changes are so drastic at the minute that if it doesn’t go through, that person may be priced out of the product.

changes are so drastic at the minute that may be priced out of the product. instruction to report returned. It’s

JG: Our average turnaround time for over 8,000 cases completed to June is just 4.5 days from instruction to report returned. It’s all about getting the reports back, and getting them back accurately.

We’ve worked constantly on improving our short-forms so that they are really accurate. The shortform valuation can be turned around in 24 hours, whereas you’re looking at 72-hours or more

for the long-form. So, if you’re pushed and you need a quick turnaround, it really would be worth looking at our short-form option. We believe it’s so good that you won’t notice the difference in terms of the information, but you will notice the turnaround times and the service.

It’s all about getting lenders the right information, understanding what questions are being asked, and getting the right answers. It massively cuts down on PVQs.

What’s on the horizon for Pure Panel Management in the future?

JG: In a turbulent market, there will be less focus on automated valuation models (AVMs) and an over-reliance on technology. We need valuers with experience and local understanding, and who are actually able to speak to estate agents.

HS: I don’t ever see a physical valuation and human being replaced. The money we save people by spotting issues with properties massively outweighs the cost of the valuations in the shortterm. A house is the biggest investment that people ever make, so getting the right advice is absolutely vital. It’s also about lenders’ appetites for risk.

JG: For the business, we hope to continue to grow, working with more lenders and being heavily involved in the launch of new lenders in 2024. From a tech perspective, we’re in the process of designing apps to aid better communication with our valuers, and also getting more of our systems integrated with a number of the big brokers and lenders to allow them to instruct us easier.

Helen and the team have also been working on growing our panel of EPC assessors, which will become more prominent.

Otherwise, we are looking to grow our brand in the specialist markets. It’s looking really positive, as the specialist markets are only going to become more important to the broker community.

more important to the


Data points are the basis of every investment decision

As I write, Europe is in the grip of another searing heatwave. This is heat that kills. Italy, Spain and Greece are recording temperatures in excess of 45°C. Temperatures in California’s Death Valley, meanwhile, hit 53.3°C in mid-July, according to the US National Weather Service – the highest ever recorded on Earth.

Aside from the fear induced by such visceral evidence of the rapid pace of global warming, and the toll it is already taking on human and animal lives, the consequences of climate change are already material. Interspersed between periods of extreme heat in the UK we have seen torrential rain.

Remember that image of the Prime Minister Rishi Sunak standing over a Darlington pothole, promising a “clampdown” on the UK’s crumbling roads ahead of May’s local elections? The same strain is weighing on the UK’s housing stock; investors, whose capital our market – and therefore economy – relies on, are all too aware that climate risk is a threat to the value of their investments.

Pricing in risk

As the past 18 months have shown, even the best of us cannot predict the future. Bank of England forecasts relating to inflation, and thus monetary policy, have been under the spotlight, as rapid changes in the data at its disposal puts it on the back foot.

A report published by the Resolution Foundation in July suggested that house prices would fall 25%, should interest rates keep rising from their current 5%. Markets are pricing that in already. Rightmove recorded a £5,000 fall in asking prices in

the South East between June and July, bringing the average down to £490,386. UK-wide, asking prices fell by more than £900 on the month, to an average of £371,907. In the short-term, the data is variable and highly liable to change. For investors providing wholesale funding to UK mortgage lenders, this is yet one more reason to underwrite credit lines with robust capital valuations.

Using AVMs

Mortgage finance is a long-term game. Investors know this, but increasingly the way that capital valuations are weighted is shi ing to reflect the changing risk environment.

A higher dependence on automated valuation models (AVMs) can give clear, data-driven insight into timely capital valuation of the underlying assets in a mortgage book. It can assess the margin of loss a book can safely tolerate on both capital value and income risk.

Relying solely on AVM valuations – even with a degree of triage for those outliers needing a more detailed physical evaluation – has its limits. Climate change’s effects over the next quarter of a century are hard for an algorithm to predict statistically – at least on a particular property.

Overall, a consensus risk exposure can be estimated for a large enough book of mortgages ready for securitisation or other refinance models. However, investors want more granularity now. The risks are too many and too new to trust solely in necessarily backward-looking models, regardless of how predictive they claim to be.

Additional input

The Royal Institution of Chartered Surveyors (RICS) is of the view that

AVMs can be useful to tease out nuances and aid with statistical analysis that valuers may not be able to observe in the course of their usual investigations. That is a positive and adds robustness to the data we have.

On the other hand, a property is not usually inspected for an AVM. Instead, an average condition is o en used, which RICS admits “could well be inaccurate.” The condition and age of a property, for example, do not necessarily correlate, and location cannot be simplified by flood plain and local soil absorption. Additional data points are key, and understanding how we use them is fundamental to long-term successful investment, funding and lending planning.

AVM providers require large amounts of reliable, detailed descriptive data about properties and market transaction prices to model accurately – this is where the qualitative data obtained through physical property inspection can help algorithms be more sensitive to the risks we are still discovering.

There is still strong investor appetite for exposure to UK residential property – a er all, terms that have averaged 25 years for the best part of half a century are now extending to 30, 35 and even 40. Match-funding the liabilities held by insurers faced with far higher longevity looks well-suited to the asset class.

Physical valuations are incredibly useful for wholesale-funded lenders, where ratings agencies or investors want the security of an inspection.

Data points are becoming the basis of every investment decision. Whether ultimately a human judgment or machine output, the source of those data points is key. ●

Opinion TECHNOLOGY The Intermediary | August 2023 74

E ciency and evidence will steer this ship

In June, the Government met with the heads of the UK’s largest retail banks with the intention of providing meaningful reassurance to the millions of homeowners facing remortgage and the prospect of a major financial shi .

The outcome was the Mortgage Charter, a promise from lenders to offer a range of forbearance options to borrowers. Signatories agreed that from 26th June, a borrower will not be forced to leave their home without their consent – unless in exceptional circumstances – in less than a year from their first missed payment.

Fom 10th July, customers approaching the end of a fixed rate will have the chance to lock in a deal up to six months ahead. They will also be able to request a be er like-for-like deal right up until their new term starts, if one is available.

The agreement also permits customers who are up to date with their payments to switch to interestonly payments for six months, extend their mortgage term to reduce their monthly payments, and revert to their original term within six months. These options can be taken by customers who are up to date with their payments without a new affordability check or affecting their credit score.

At the end of July, the Consumer Duty was implemented, requiring firms to act to deliver good outcomes for retail customers.

Sheldon Mills, executive director, consumers and competition at the Financial Conduct Authority (FCA), said in September of last year: “[The Consumer Duty] means making lasting changes to culture and behaviour to consistently deliver good outcomes.”

Up to lenders

Lest we forget, all of this comes alongside the relentless rise in the base rate in a bid to curb stubbornly high inflation. Consumers are worried, the Government is worried, the regulator is worried, and when it comes to how mortgages fit into this picture, it’s up to lenders to alleviate these concerns.

The Financial Reporting Council (FRC) recently began steps to enable the revision of the Corporate Governance Code by launching a consultation to assess stakeholder views. It follows the council’s whitepaper ‘Restoring trust in audit and corporate governance’, which reasserts company directors’ responsibilities for internal control, risk, audit and corporate reporting as target points.

The words of Sir Jon Thompson, chief executive of the FRC, encapsulate the spirit of this review of good governance.

Announcing the next stage of its plans, he said: “Good corporate governance contributes to long-term company performance by helping to build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity.”

The convergence of the Consumer Duty, a tighter view of what good governance looks like, and the intense pressure on lenders to steer homeowners through stormy waters, is key.

Not only is it a weighty responsibility to support customers, and by extension economic resilience, this is also a moment that will define lenders in years to come. Pu ing the obvious complexity of these dynamics aside for one moment, July has been a watershed for the mortgage industry.

Taxpayers supported financial services in the wake of the Global Financial Crisis, and now it’s time for the banks to support them. This is a promise, turned requirement, to do the right thing by customers. Lenders have been made the stewards in these most complicated circumstances. This is a balancing act even the most skilled of tightrope walkers would find it hard to sustain.

Deep water

For more than a decade, the systems underpinning mortgage transactions, approvals, terms and conditions, due diligence and affordability assessment records, have been about efficiency.

Over the past 18 months, having systems in place that deliver that efficiency has had a material effect on lenders’ bo om lines, as rapid repricing has become fundamental to controlling service levels and maintaining credit risk compliance.

Now, we are in new deep waters, and how lenders serve borrowers will define them.

The Mortgage Charter is an a empt to engender voter trust in the ruling party. The Consumer Duty moves to put consumer trust in financial services into the very fabric of the rules that govern providers. Good governance is about delivering on all regulatory requirements to prove that trust is deserved.

The value that good systems offer here is dual – it will take both efficiency and evidence to steer this ship safely through the coming years, and to protect both the ship and its passengers. ●

Opinion TECHNOLOGY August 2023 | The Intermediary 75

elieve it or not, it is less than a century since the Land Registration Act 1925 put into law the wri en transfer of title – and with it, the registration of title where it did not previously exist.

Given how long property ownership has existed in the UK, the formalisation is relatively recent. Its evolution has been, perhaps unsurprisingly, just as slow to adapt to the times in the 98 years that followed.

Small steps

Today in 2023, even with the extraordinary capacity of the internet and cloud technology, the wri en conveyance of title is largely still that –wri en. The receipt of the Certificate of Title is most o en a manual instruction to another system.

Frequently, these origination systems do not interface efficiently with core banking platforms.

The best the industry has seemed capable of is to digitise that transfer of title by triggering the release of

funds, following a manual exchange with spreadsheets passed between departments.

It’s madness when considered against what’s possible – the technology exists to make this process considerably more efficient, faster and more frictionless. Not only that, the capacity for documents to go missing, fraud to disrupt the process, human error to mislay or misinterpret information is very high when exchanging manually compared to a digital interaction. Then there’s the time, the hassle, the paperwork, the delays caused by document exchange –sometimes still done by post – and the inevitable couple of days si ing in an in-tray. It’s the most complained about part of the housing transaction there is – across the board.

Giant leaps

Last year, the Land Registry announced its Strategy 2022+, supported by the Association of Independent Personal Search Agents, the Chartered Institute of Legal Executives, the Conveyancing Association, the Council for Licensed

Conveyancers, the Council of Property Search Organisations, the Law Society, the Royal Institution of Chartered Surveyors, the Society of Licensed Conveyancers, and UK Finance.

That is a very strong commitment to heaving the conveyancing transaction process into the digital future, which everyone else has occupied for 20 years.

Simon Hayes, chief executive and chief land registrar of HM Land Registry, says: “Property transactions are taking record time to complete, it is imperative that we work as partners to innovate and remove friction so that the process is as quick and painless as possible.

“For HM Land Registry, that means a step-change in our offering to customers so that they receive an outstanding, fully digital service. As we do so, we are placing people – those buying and selling property – at the heart of our transformation.”

His sentiments hold a particularly pertinent resonance given the implementation of the Financial Conduct Authority’s (FCA) new Consumer Duty rules.

Opinion TECHNOLOGY The Intermediary | August 2023 76

The Land Registry’s own data shows that the lack of upfront information can cause up to 8% of property transactions to fall through, costing the buyer a potential £2,700 per transaction. Reducing that is undoubtedly a move towards improving consumer outcomes.

Electronic certificates of title cannot alleviate that single-handedly, but as the Land Registry itself has said: “A new drive to rapidly digitise the information the public and conveyancers need most will allow people to access HM Land Registry’s information on ownership, location, mortgages, local land charges and more in real time, so that when making a decision, people are be er informed and buying and selling property is quicker and less uncertain.”

Automating most changes to the land register by 2025 should result in the end-to-end automation of up to 70% of all updates to the register.

It’s hoped – and expected – that automation will help to support more accurate and fraud-free registers that provide trust and confidence in the property market.

The speed and cost efficiencies that this brings with it are yet another incentive for lenders to invest.

Charting a course

HM Land Registry has confirmed our own experience – that automated applications will be completed within one day – many of them in seconds.

While the current economic outlook includes many challenges facing the UK’s housing market, investing in be er, slicker conveyancing integration is a clear way to cut cost from the bo om line – something all lenders currently have an eye on.

There is strong political and infrastructure support for improving the digitalisation of Britain’s property transfer processes. At last, and facilitated in part by the pandemic accelerating the adoption of more flexible technology and systems, ever more lenders are embracing electronic Certificates of Title.

The conveyancing piece of the mortgage process has long been one of the most underserved, underinvested parts of the process. It is at last evolving with the arrival of the

electronic Certificate of Title, a real efficiency point that will bring some much-needed relief to buyers and their advisers alike.

That the industry is on course to more broadly adopt this kind of innovation is, I believe, beyond doubt. For many, it cannot happen quickly enough. ●

STEVE CARRUTHERS is business development director at Iress
Opinion TECHNOLOGY August 2023 | The Intermediary 77

Capital raising no longer cut and dry

Evolving market

The second charge industry has developed products over the years to suit most circumstances, and at rates that are comparable to firsts at the prime end of the spectrum.

While the latest figures from the Finance & Leasing Association

(FLA) showed reduced lending figures in April and May compared with 2022, second charge lending is still ahead of its first charge sibling in percentages, if not in like-for-like volumes.

The mortgage market is in a slump, and according to a recent report, the number of property transactions fuelled by the mortgage sector has fallen by 42% this year. So why is the second charge market still relatively buoyant in comparison?

Let’s look at the basics. Your clients are as safe in a second charge as they would be in a first, because it falls under the Financial Conduct Authority’s (FCA) oversight, and has done for five years. Apart from some procedural differences, the same rules apply to both.

We understand that customers do not simply get out of bed in the morning with the urge to borrow more money. Instead, some event occurs that creates a need, and the customer seeks to find a solution, usually a empting to seek an unsecured solution, where at certain levels of borrowing – term or purpose – they might be disappointed to find

that there are limited offerings, or that these come at a cost. Alternatively, they find that the need can only be satisfied by a mortgage product –and I include second charges – and contact their adviser. A remortgage might be advised, and in most cases be completely satisfactory. However, there are likely to be those customers for whom this is not the best outcome:

The rate on their current mortgage is low, and rates have moved significantly. Is it in their best interests to reschedule the entire balance, plus additional borrowing, on to a higher rate?

The purpose of the loan may be less palatable for the prime first charge arena.

There may have been some deterioration in their credit profile due to a life event.

They may be subject to early repayment charges (ERCs) that create a switch cost out of the first. Their first charge lender may only allow further advances on an advised basis through their own advisers. Has anyone tried to book an appointment for this?

They may want to borrow this amount over a different term than the first.

Speed – are they in a rush for whatever reason?

Their employment is complex.

The regulator’s overwhelming focus is on knowing that the customer is advised appropriately. That’s not our job as lenders, we are here to provide solutions that are fit for purpose, at the right cost and in the most appropriate way to help you with that. It’s for you as the customer’s adviser to decide what’s best for them. We just need to convince you that there are alternatives out there, and deliver them to you.

A er decades of low interest rates, where a remortgage could look particularly a ractive for capital raising when making a lender swap on a like-for-like basis, that is no longer the case. Interest rates are at a 13-year high, with the likelihood of more to come.

Leaving aside legitimate concerns around having a client absorb the cost of an ERC, many capital raising clients will need more persuasion to agree that swapping a cheap first charge for one that costs considerably more, even if it does give them the extra funds they asked for, is the best solution. Frankly, so will the regulator.

In comparison, a second charge leaves the original mortgage in place, and although in some cases the interest rate is higher than an equivalent first charge, the client knows that the loan is fully under their control to pay off.

Perhaps Consumer Duty will persuade more advisers to give second charge lending an even-handed approach. We’ll wait and see! ●

The Intermediary | August 2023 78 Opinion SECOND CHARGE
Your clients are as safe in a second charge mortgage as they would be in a rst

Rising rates open doors for second charges

Managing money is a hot topic for many households across the country at the moment.

Given the ongoing cost-of-living crisis and the need to get monthly outgoings down, plenty of households are looking at their outstanding debts and thinking carefully about whether it’s time to consolidate them into a single loan.

They aren’t the only households looking to raise funds, though. Others will be considering ways to get the money together to carry out some form of home improvements.

Perhaps they are working from home for part of the week and want a dedicated office space, or it may be that they want to extend their home to meet the needs of a growing family, but don’t want to go through the rigmarole or cost of purchasing a new property.

The big question is, therefore, how to go about raising that money.

Taking a hit

In the past, the first option might have been a remortgage. But the appeal of remortgaging to raise those funds has rarely been lower. The product upheaval in recent weeks has been so pronounced that doing so might mean an enormous jump in monthly repayments, as the borrower parts with their existing rate and moves onto a far pricier deal.

A er all, as industry data has shown, the average interest rate on a 2-year fix is now above 6%, a particularly painful threshold.

There is an even bigger financial hit that could potentially come from raising funds through remortgaging, in the form of early repayment charges (ERCs).

These exit fees can easily run into many thousands of pounds, since they are calculated as a percentage of the outstanding debt.

As a result, raising funds through a remortgage could mean a significant outlay from the outset, as well as a substantial monthly hit to the bank balance courtesy of the new –likely far higher – interest rate on the mortgage.

Given that household budgets are already stretched thanks to rising bills and persistently high inflation, that doesn’t seem like a tempting prospect, although it should still be considered when finding solutions for a borrower looking to capital raise.

Useful alternative

Second charge mortgages have long been a useful alternative for homeowners looking to raise capital, but they are really coming into their own in the current market.

The loan is arranged against the equity held in the property, meaning the first charge mortgage is le untouched. There are no exit fees to worry about, and no need to abandon the existing rate, which will almost inevitably be unbeatable at the moment.

Even with house prices taking a hit of late as rate rises undercut demand among purchasers, average values have grown significantly compared with just a few years ago. As a result, many homeowners are si ing on equity stakes that could comfortably be put to use with a second charge mortgage and allow them to raise funds, whether they are looking to carry out home improvements, consolidate their debts, expand a business, or a combination of all three.

In normal times, the ability to raise funds without having to change the

initial mortgage has been a useful option. In today’s market, where changing that first charge can have such a detrimental impact on the size of the monthly repayments, it’s absolutely essential.

The challenge for lenders

The need for quality second charge mortgages is there for all to see. Lenders need to meet that need and deliver products that will make a real difference to borrowers. That means being a li le more flexible when assessing cases, taking the time to really get to know the client and their situation before making a decision.

We have seen first-hand how this approach can pay dividends for the borrower. At Central Trust we recently helped a self-employed borrower raise the money needed for home improvements, a er they had found it impossible to get a fair hearing at high street banks because of their employment status and some historical adverse credit.

They still represented an excellent borrower, but lenders sticking rigidly to strict criteria meant they could not – or rather would not – help. At Central Trust, we took the time to get a be er understanding of their position, and were able to lend the £50,000 required within 16 days.

This is not an isolated case. There are plenty of borrowers in similar positions, who need to raise funds but are unable to jump through the hoops of traditional lenders.

If brokers work with flexible, specialist lenders then we can support them with those borrowing needs together. ●

August 2023 | The Intermediary 79 Opinion SECOND CHARGE
MAEVE WARD is director of commercial operations at Central Trust

Consolidation of debt could bide borrowers’ time

Given the Bank of England’s (BoE) warning that millions of homeowners will experience a significant increase in their monthly mortgage payments, now is a crucial time for some to review their outgoings.

In its recent Financial Stability Report, the BoE delivered a wakeup call to homeowners by outlining what they can expect in terms of their mortgage payments in the coming years. The a ention-grabbing figure that received significant media coverage was the prediction that around one million homeowners would see their mortgage payments increase by at least £500 by the end of 2026.

The report provides a further breakdown of its projections. At the lower end of the scale, it forecasts that approximately 2.3 million homeowners will experience payment increases ranging from £1 to £99 by the end of 2026. On the higher end of the scale, the report suggests that around 250,000 homeowners could face an increase of £1,000 or more per month.

Falling within the middle range, approximately 700,000 borrowers are expected to see an increase ranging from £300 to £399 by the end of 2026. Additionally, just under 500,000 homeowners can anticipate an increase between £400 and £499, while slightly over 500,000 can expect an increase ranging from £500 to £749.

Monthly outgoings

While some households may be able to absorb this increase in costs, others may need to explore potential solutions to reduce their

monthly outgoings. For those with unsecured credit, a second charge debt consolidation mortgage could be beneficial and help improve their financial situation.

By consolidating debt into a second charge, borrowers may be able to extend the repayment period for their loans, thereby reducing their monthly outgoings and potentially avoiding falling into mortgage arrears.

According to the BoE’s recent Credit Conditions Survey, lenders are already witnessing an increase in borrower defaults, with further increases anticipated in Q3.

Given the significant number of borrowers currently locked into longterm fixed rates, it is likely we are only at the initial stage of borrowers reaching the remortgage period and seeing their repayments rise.

Struggling to keep up Figures from the Office for National Statistics (ONS) reveal that 28% of mortgage holders already found it difficult to afford their mortgage payments between February and May this year. Additionally, the BoE’s Financial Stability Report highlights a 12% annual growth in credit card lending, with 15% of adults increasing their borrowing in response to cost-ofliving pressures.

While borrowing on credit cards and other forms of unsecured credit may be manageable for some, it may prove difficult for others, especially considering the potential for higher mortgage payments.

In June 2023, individual voluntary arrangement (IVA) approvals of homeowners almost doubled from 7% to 13%, according to Creditfix.

It estimates that average debt levels among homeowners currently stand at over £31,000 – 74% higher than the

average among non-homeowners. The figures also show the average level of unsecured debt among homeowners struggling with their personal finances has increased by almost 20% since June 2022.

With reports of homeowners cu ing pension contributions and dipping into their savings to cover the increased cost of their mortgage payments, it is crucial not to overlook the benefits of a second charge. A second charge mortgage might be what borrowers need to get their finances back on track, or help reduce their outgoings for a period while their mortgage payments increase.

While a debt consolidation second charge mortgage may not be the best option for all homeowners, it could be beneficial in certain scenarios. For example, borrowers paying a high interest rate on multiple debts, such as credit cards or loans, or those with a poor credit score for whom an unsecured loan or remortgage would be challenging.

For borrowers who do not have a financial buffer to cover the rising costs, a debt consolidation second charge could extend the repayment period of existing debt by consolidating it and reducing their monthly outgoings, potentially making them more manageable in both the short- and long-term. ●

The Intermediary | August 2023 80 Opinion SECOND CHARGE
It is crucial not to overlook the bene ts of a second charge”

Cost-of-living crisis shines spotlight on second charges

The cost-of-living crisis and interest rate hikes have driven many households to rework their finances. Budgets have been squeezed, exacerbating financial pressures following last winter’s energy shock.

Intermediaries have also had to adapt to shi ing behaviours, with more consumers turning to borrowing and consumer credit to support their current financial situation.

The Office for National Statistics (ONS) stated earlier this year that among all adults, 17% had reported borrowing more money or using more credit than they did a year ago.

Money management tool

For intermediaries, the situation has made the second charge sector a critical tool in their inventory.

First and foremost, we have seen these financial products being used to consolidate household credit and manage finances more efficiently.

The second charge mortgage can be used as a means of repackaging multiple loans into a single, more manageable monthly payment secured against their home.

This has multiple benefits, but primarily it simplifies repayments and gives customers the ability to stretch out the term, helping reduce their monthly payments in the nearterm. It may mean the total amount repaid is higher, but o en at far more competitive rates than other consumer credit products.

Customers may also have the ability to consolidate credit cards – which carry a higher annual percentage rate (APR) than a second charge mortgage – enabling them to create more disposable income and budget more effectively in the current climate.

The greater focus on the cost of borrowing and reduced lender appetite has also seen many consumers look at second charge mortgages as a new way of accessing money as an alternative to other forms of credit.

An alternative to remortgaging

Intermediaries have typically turned to the remortgage market when homeowners are looking to unlock extra capital. However, the soaring cost of fixed rate mortgages over the past year has seen intermediaries and their customers shy away from remortgaging – coming off a relatively cheap rate and onto a higher one for the foreseeable future is not an a ractive proposition.

Instead, homeowners are looking to preserve their existing first charge mortgage rate and instead explore the second charge market.

For some intermediaries, the lending market itself has driven this change of direction – as affordability requirements and eligibility assessments tighten, the option of the second charge mortgage grows ever more relevant.

Innovation has also helped customers, with providers bringing more flexibility to support a wider range of situations. For example, many offer no early repayment charges (ERCs), so customers can repay their loan as and when they choose, potentially reducing total interest.

Customers can also access the cash far faster than with a remortgage. We have been redefining traditional capital raising timeframes, recently supporting a customer to complete within four days, showcasing how the industry is changing to put the homeowner’s needs front and centre.

A versatile product

It is not just the versatility of second charge mortgages as a cash management tool that has a racted the a ention of customers and intermediaries through the cost-ofliving crisis.

Second charge mortgages can support customers to cut bills by allowing them to carry out home improvements that improve the energy efficiency of their homes. Or they can allow parents to free up equity – which may have increased significantly through the pandemic – that can support their children or loved ones if they are struggling with rising costs. Likewise, small business owners may welcome the ability to quickly access cash that may be the difference between ge ing through a difficult economic time or having to shut up shop.

Intermediaries vital

For customers, high-quality advice from intermediaries that understand the capabilities of the second charge sector is absolutely critical. The best intermediaries will be able to assess a customer’s holistic position and help them navigate the complex world of financial services.

The second charge mortgage can be a valuable consideration in providing a flexible borrowing option that can suit a wide range of purposes and help customers through the cost-ofliving crisis.

As such, moving through this current economic cycle we expect second charges to play an increasingly important role in the financial lives of homeowners and the work of intermediaries. ●

Opinion SECOND CHARGE August 2023 | The Intermediary 81

Standing the test of time

orking in Financial Services, we might all be forgiven for breathing a sigh of relief now that the 31st of July has been and gone. Yes, the Consumer Duty legislation we have planned for, worked into our processes and measured ourselves against, has finally arrived.

However, that is not the end, but only the beginning! We will now be measured against how well – or indeed, how poorly – we deliver against these principles and ensure customers receive good outcomes, rather than simply being treated fairly.

What clients want

Given that customers are clearly at the heart of this legislation, Air undertook research to be er understand what over-45s valued the most when it came to the financial products and services they took out. Perhaps unsurprisingly, 49% said that they

Wwanted products and services to meet their individual needs.

They also wanted fair value for money (46%) and good support as well as customer service (43%) from the companies they used. Just over a third (36%) wanted information and the opportunity to develop an understanding of the products and services they used.

The spirit of the thing

While each of these factors is perhaps easy to understand or identify, we need to use them as a challenge.

The lead up to the Consumer Duty implementation encouraged the industry to fully review systems and processes to ensure that our approaches provided real benefits and were not simply something we had always done. So, how do we keep this spirit alive?

Looking through this lens at the idea that products and services need to meet individual customer needs encourages us to consider how we further personalise our approach. We need to ensure that advice is as

personalised as possible, and that we actively challenge customers’ preconceptions. This was highlighted in the Financial Conduct Authority’s (FCA) review of the market in June 2020, so this is not a new challenge.

However, given the findings of this consumer research, it suggests that the people that advisers support on a dayto-day basis also value this.

Personalised processes

Now, I think we can say that we cannot personalise products to such an extent that they are a perfect fit for absolutely everyone. What we can do, however, is ensure the advice is as personalised as possible, and that we clearly document why specific choices were made.

Speaking to advisers, I know that many are already doing this. Indeed, if you look at the number of people who walk away from an appointment with a clear idea of a solution which is not equity release or another later life lending product, you can see the benefits of advice.

New normal

That said, there is more that needs to be done, and we need to remember that client files must stand the test of time. If these are reviewed when the policy needs to be redeemed, does this clearly tell the story of why certain choices were made or discounted? Are there systems and processes – such as Air Sourcing’s WriteRoute – which can help to support this?

These are all questions that advice firms should be asking themselves as they se le into the ‘new normal’ and focus on supporting clients with good outcomes. ●

Opinion LATER LIFE LENDING The Intermediary | August 2023 82
Consumer Duty: Client les need to clearly tell a story

Demand for later life advice likely to grow

‘Jack of all trades, master of none’ is o en bandied about as some sort of insult, particularly to advisers who want to provide an array of services, perhaps in areas which some might feel require fulltime, specialist a ention.

However, in today’s market, is that really the issue that some believe it to be? Wouldn’t you, as an adviser, want to be able to deliver a holistic offering for all types of clients, with all types of wants and needs? It certainly means you are fishing in a bigger client pond.

That focus on the ‘holistic’ advisory approach, specifically with later life customers, is going to be much more important in the future, by nature of all manner of demand drivers.

Home as an asset

As older homeowners become more comfortable with utilising their home as an asset, there is a growing understanding of the potential uses.

For example, while we continue to see borrowers using their equity to pay off costlier debt or to pay off capital following the end of interest-only loans, they are also using equity to help their children, or maintain their standard of living into retirement or long-term care. They could also use it to fund bigger purchases such as cars, holidays, and the like.

Now, of course, there has been a shi away from the la er type of uses, the ‘wants’, to ‘needs’ such as paying off debt. Nevertheless, homeowners still use later life lending for ‘want’ purchases, from the home of their dreams to a summer holiday.

The wider point here is around the nature of lending into retirement, the degree of confidence homeowners have in this now, and where that might lead advisers.

Two sides of the same coin

Traditionally, there was something of a sharp split in terms of, for example,

equity release specialists and those who worked more in the residential mortgage space. Increasingly, though, both sides of this coin recognise that being able to work in both sectors is a real benefit to the customer.

This is helpful not only in terms of the transactional mortgage advice, but also servicing the full needs of that older client base.

Just because they are taking out a later life mortgage, doesn’t mean they are not presenting with other needs, such as general insurance (GI) or protection, or the whole gamut of financial services needs the vast majority of people have, whether they are beyond 55 or not.

Of course, as we touched on, if you are working with an older homeowner – who may well be looking at releasing equity to help family members – then you are certainly in line to help those family and friends who may benefit from this equity in some way, or indeed whose future purchases and activity in the property market are reliant on this case happening.

They, too, will come with an array of financial needs that you as the adviser should be looking to cover, rather than le ing them ‘walk down the road’ to one of your competitors.

Transferable skills

There is much to be said now for advisers having as many strings to their bow as possible.

While we understand that this part of the market is different to the mainstream residential space, it is not a million miles away, despite what some might have you believe. The ‘so skills’ that you have in abundance can be easily transferable, and while you will need to be a specialist in later life lending, this is not a heavily segregated area of the market with huge obstacles that make it difficult to even get a foothold.

Indeed, at The Right Mortgage we have a training academy specifically for non-CAS equity release advisers,

who we can help develop and nurture. We ensure they reach the level of competency required in this area, to provide those services to a client base which is growing in number.

Growth sector

That’s the real heart of this argument for any adviser looking at the future and a empting to get a handle on what will be their growth areas. The traditional 25-year mortgage term, which ends just before retirement and ensures the individual does not take mortgage debt past 65, is not exactly a thing of the past, but it is certainly much less the norm.

Homeowners are far more comfortable now with utilising their home, and indeed for many it is the only solution they have, particularly in a situation where incomes are fixed, and the costs of so many goods and services are rising.

A large number of people won’t have the pension provision to maintain their lifestyles into retirement, while there is also a growing number who want to help family members, or indeed just help themselves in areas such as healthcare or long-term care provision.

That signals to us that demand for later life lending advice is only likely to grow, particularly when you look at the trillions of pounds currently owned – and stored up in –the properties of older individuals in this country.

If you’re considering whether you might be the individual or firm to tap into this space, then please get in contact. It may not be as difficult as you think, and the opportunities that it could open up are likely to be worth the effort. ●

Opinion LATER LIFE LENDING August 2023 | The Intermediary 83

Should you be mentioning equity release?

to struggle to meet those payments, should you not be mentioning equity release?

More options

There is the old adage which says what goes up must come down, but with the Bank of England recently making yet another increase to base rates, this accepted wisdom provides li le solace for struggling mortgage borrowers. With just five changes to the base rate between 2010 and 2020, the 14 increases since December 2021 have proven a shock to many.

Cold comfort

Given the higher inflation environment, the logic behind the action taken to date is clear, but this is likely to be cold comfort for many borrowers accustomed to low monthly repayments, who now have to deal with substantial rate hikes, alongside continued pressure on other household bills.

While equity release plans do not track the Bank of England base rate, but instead are more closely aligned to the UK bond market due to how

they are funded, we’ve seen increases in this sector as well. Economic uncertainty and the potential market correction have all served to see 15-year gilt yields increase to 4.62% as of 10th August, compared with around 2.4% only 12 months ago.

Closing the gap

Now this is no doubt old news to many, but there is an interesting trend in the later life lending market.

In Q2 2023, the average rate of an equity release plan taken out hit 6.30% fixed for life, which was lower than those on 2-year fixed rate residential mortgages (6.39%) and comparable to 5-year fixed rate products (5.96%). In fact, the gap between rates in the equity release and the residential mortgage markets has generally been closing over the past few years.

This raises an interesting and arguably important question: if an older client is facing either a move to the average standard variable rate (SVR) of 7.85%, or a 2-year fixed rate, and you know that they are likely

All new plans allow clients to make ad hoc repayments, and specialist advisers actively encourage clients to service the interest – or repay as much as they can based on their disposable income – to mitigate the impact of compound interest and ensure more options remain available in future. The products also boast features such as downsizing protection, fixed early repayment charges (ERCs) which finish a er as li le as four years, and guaranteed tenure for life.

Lower maximum loan-to-values (LTVs) in the market following the September mini-Budget have made it more challenging for some younger potential customers, but it is not impossible. Indeed, over a third (34%) of the equity released in H1 2023 was used by over-55 homeowners to repay mortgage debt.

Specialist adviser

These products can only be taken out with the help of a specialist equity release adviser, who will encourage your client to consider all their options and help them weigh up both their short-term needs and the longer-term implications.

Equity release, or indeed other later life lending options such as retirement interest-only mortgages, may not be the answer for all older customers, but they need to be considered more o en than is currently the case. ●

Opinion LATER LIFE LENDING The Intermediary | August 2023 84
e gap between rates in the equity release and residential markets has been closing

Good outcomes: Holistic lending in the later life sector

hen the idea for LiveMore was forming in my mind, I was very conscious of the fact that people over a certain age are discriminated against when it comes to mortgage finance.

There is not a one-size-fits-all mortgage product for any age group, but that is even more true for the sector that LiveMore works in: borrowers aged 50 to 90-plus.

Many people, including some brokers, think equity release is the only option for anyone over the age of 55, but this is a misconception, and it is a dangerous one.

It is dangerous because there are alternatives, but if these are not considered, it is unfair to the customer, who then may be stuck with a lifetime product that is unsuitable.

The point is, it should be made crystal clear to customers that there are options, and this is even more essential with the recent introduction of Consumer Duty. The underlying premise of the new rules is ‘good outcomes’ for customers, and that includes exploring all options.

Complete product suite

Don’t get me wrong, I am not against equity release – it has an important part to play in the later life lending sector. In fact, we have just added lifetime mortgages to complete our suite of products, so I am proud to say that LiveMore is now a truly holistic lender for the 50 to 90-plus age group.

Our offering consists of interestonly, retirement interest-only (RIO), capital and interest, and now lifetime mortgages, with mortgage terms from 2-, 5- and 10-year fixed rates up to fixed for life plus lifetime.

WProduct innovation is top of our radar, and we will continue to develop new products responding to client requirements and market conditions.

We also have extensive criteria, such as unusual property, adverse credit, debt consolidation and wide-ranging affordability calculations.

We understand our customers’ changing incomes, both now and in the future, and accept employed and self-employed salaries, pensions, investments, rental and even foreign income.

Good outcomes

‘Products and services’ is one of the four areas of good outcomes within Consumer Duty, but I would flip those to read ‘services and products’.

As a lender, we strive to serve our clients and help them find the best solution for their financial requirements. That is our starting point, rather than pushing a product at them. With our broad proposition, should a customer not qualify for a product, we can suggest another that may suit their needs.

Another of the Consumer Duty’s good outcomes involves ‘customer understanding’. I know from speaking to holistic later life advisers that sometimes people come to see them assuming their only option is equity release.

It o en turns out that a mortgage is more suitable, for example a fixed term interest-only if they intend to downsize in 10 years’ time.

Product assumptions should not be made until a full, in-depth customer fact-find has been carried out.

Then, options can be looked at and discussed, and you have the best chance of finding the right outcome and ensuring your client fully understands the product.

But that is not the end of the story. One of the other Consumer Duty good outcomes is ‘consumer support’ throughout the borrower’s relationship with a firm.

People’s circumstances change throughout their lifetime, especially as they get older. Therefore, keeping in touch is an important part of the LiveMore proposition.

We encourage brokers to make an annual care call to clients in order to see how they are and check the product they have is still suitable, or if they have any new requirements. We pay a 0.13% ongoing care call fee to brokers for doing this.

FCA concerns

I am fully supportive of Consumer Duty and welcome it as a positive step in the right direction. Indeed, I believe it will be a real game changer.

The Financial Conduct Authority (FCA) will, of course, be keeping a close eye on firms conforming to these new rules.

The regulator has also said in its recently published annual report that it is following up on its findings in 2020 of ‘poor advice’ in the lifetime mortgage market.

It highlighted some cases where the personalisation of advice was lacking, with advisers failing to challenge customer assumptions and a lack of evidence to support whether the advice given was suitable.

Situations like this certainly need to be addressed and removed from the later life sector, and Consumer Duty will hopefully bring about a step-change. ●

Opinion LATER LIFE LENDING August 2023 | The Intermediary 85
LEON DIAMOND is CEO and founder of LiveMore

In Pro le.

The Right Mortgage & Protection Network

Jessica Bird speaks with Martin Wilson, CEO of The Right Mortgage & Protection Network, about the importance of protection, and why trust and longevity are primary concerns

Founded in 2015, e Right Mortgage & Protection Network (TRM) works in partnership with its members across mortgages, protection, and general insurance, with specialist propositions for equity release and private medical insurance (PMI).

In the current market, with Consumer Duty regulation now a reality and customer needs becoming more complex, providing this range of expertise is becoming increasingly important.

e Intermediary caught up with CEO Martin Wilson to discuss how TRM has redoubled its focus on supporting its members, and why protection must come in from the side-lines.

Introducing the business

TRM is, at its core, a long-term business, run on the premise that it should still be around in 30 years’ time. Wilson says: “We’re passionate about duty of care. Having been in the business for 40 years, we’ve got younger members of sta who will take our business forward with the culture that we’ve built – giving mortgage brokers a home for the long term, and at the same time working with them to make sure we’re all getting it right.

“Our ambition is not to sell the business, but to be there long-term.”

For TRM, embedding culture even during di cult and turbulent times – fuelled by rising in ation, the cost-of-living crisis, and an increasingly uncertain international stage – means having core values surrounded by a exible approach. It also means working with the right people, and in some cases, not working with those who do not t the bill.

“We’re not a prescriptive type of network,” Wilson explains. “ ere are those who can’t work with us, and I think generally they will go somewhere else. But there’s people who want to work with a network that is there to help and support them – we’re that sort of network. ey understand that we’re very passionate about who our customers are, who we look a er, and who our

members are, both directly authorised [DA] and appointed representative [AR].”

e business is built on the premise that the market is full of good people who thrive on trust, consistency and honesty. Wilson adds: “ at’s how you make a reasonable living in this industry, you look a er your customers well, talk to them on a regular basis, and make sure they’re happy with your advice.”

is is consistent across its dealings with both DA and AR rms, which receive the same package of support, bene ts and resources. Part of that package is the ability to have con dence in referrals, says Wilson: “Trust takes a long time –we get more referrals now than we did three years ago, because we’ve sung the same song, been honest, and stuck to what we’ve said.

“For some of our members, these will be customers they’ve built relationships with over a long time, and we honour that. Trust is not built in a day – saying it means nothing, you have to prove it and that’s what we’re doing day by day.”

The Intermediary | August 2023 86

Training and transitions

Working alongside members goes further than just the day-to-day processes for TRM. Indeed, one of its strengths is in the provision of extensive resources and training.

For those without Complete Adviser Status (CAS), TRM o ers a bespoke academy to help bring them into the market.

Wilson says: “We have seen people come through from being completely outside the industry to becoming quite pro cient, and it’s been quite lucrative for them.”

is is particularly important in an industry where the average age of advisers is increasing, but demand for expert advice is only on the up. Pulling in fresh talent and equipping the next generation with the right tools is paramount.

TRM also helps advisers diversify and gain a wider perspective on a holistic suite of products. is can bolster business at the best of times, creating balance when certain markets take a dip.

Wilson says: “As a market, what we don’t want is dabblers. If someone wants to get into a certain market properly, there is the training to be able to do so, and if not, then it’s better to go for a referral. We can o er both things.”

At the other end of the spectrum, TRM o ers a retirement transition scheme, helping brokers ensure their clients are taken care of long-term.

“People can semi-retire or completely retire with us, and we will look a er their clients for them, and pay them an annual income,” he explains. “ e only issue is that sometimes they think it’s too good to be true.”

Regulation and protection

When TRM was rst formed, it was primarily focused on selling protection, with mortgages taking a somewhat secondary role. Wilson says that brokers need to go back to a mindset where protection is at the centre of the conversation.

He says: “ is whole idea of duty of care – it’s of course about giving them the best advice, but it’s also about understanding that if you’re committing somebody to a mortgage for the majority of their life, it’s proper debt, which should be properly insured. If they can’t a ord the insurance, then they should reconsider whether they should actually buy the house.”

e advent of Consumer Duty should be a welcome change to the regulatory landscape, which Wilson says has so far fallen short of the mark: “I have relatively strong feelings about how regulation has failed the consumer previously. Less people are insured, less people save.

“Wasn’t regulation meant to make things better? I’m not sure it has. However, some of the things

coming in now seem more practical than they have done for a long time.”

While the e ects of economic instability and rising prices on consumers’ nances cannot be taken away, they can be so ened with the right approach – an integral part of which is implementing the correct protection products.

Wilson adds: “What I hope the Consumer Duty will do is press home to advisers that they have a duty of care to be giving this advice, not just signing a person up for a mortgage. Maybe it will be good for the whole industry – we shall see.”

TRM asks its members to clearly document that they have provided protection advice to customers, and Wilson suggests that in the future, consumers who do not opt for a protection product will be asked to sign a disclaimer.

To help its members prepare for changes to the regulatory landscape, TRM reviewed all of its documentation, to ensure it is accessible, easy to read and easy to understand.

Wilson says: “What’s the point of having this regulation to help the consumer, and then giving them ‘War and Peace’, which they won’t read past the rst sentence? Everything should be designed to support and help.”

e business also created a Consumer Duty hub, explaining everything from how it works to TRM’s own perspective. is information is white-labelled, links out to providers, and has gone through readability tests. TRM also worked to identify those partners that particularly need training in this area, where they might not have sold protection products in the past.

TRM is also pushing for understanding through its PMI Summit, which took place on 5th July this year. e event included industry round-tables and presentations, and was open to both DA and AR rms. e rm also launched its enhanced PMI Demand and Needs Statement, to be used by advisers in line with Consumer Duty.

Wilson says: “We wanted to come in and say, we are not just a mortgage network, we are a PMI network. We wanted members to be able to go to an event where all that was being talked about was PMI.”

Other plans include building up members’ protection business, from around 16% to make up 40% or 50% compared with mortgages.

For the future, TRM plans continue to focus on keeping steady and stable in a volatile market, looking towards the long-term.

“We never wanted to grow the network to be absolutely enormous,” Wilson concludes.

“We want to be a reasonable size to get the attention of the providers, where they treat us the same, which sometimes goes with volume rather than quality.” ●

IN PROFILE August 2023 | The Intermediary 87

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

Focus on... Colchester

The mortgage market has been on a rollercoaster ride these past few months. With 13 base rate increases, fluctuating inflation and the ill-fated mini-Budget now behind us – where does this leave local markets? Much like the rest of the UK, Colchester was forced to weather this economic storm, and is now, thankfully, on the road to recovery. Amidst promising signs that the mortgage sector may be settling down, as swap rates slowly begin to stabilise, The Intermediary sheds light on the challenges of the past few months, and asks the question – where to next?

House prices

According to the latest data, the average property price in the Colchester area is approximately £344,000, while the median price sits at £305,000. This is compared with an average and median of £362,000 and £278,000 in England and Wales overall. The average price in the area has increased by £29,200 (9%) over the past 12 months, most likely as a direct result on the ongoing market instability that has been plaguing the sector.

The most affordable place to purchase a property the is in the ‘CO15 2’ postcode, with an average price of £184,000. The most expensive place

Time to manage clients’ expectations

Back in the early 2000s, Colchester was developing and clients could buy their dream three or four-bed for just £100,000 to £120,000. Today, those same properties are going for £400,000 to £450,000. Buyers are struggling to meet affordability requirements.

Unless young couples have a helping hand from parents, it’s tough to get a foot on the ladder. The requirement of a joint or single income of around £80,000 to £100,000 per year isn’t easy. There’s also a serious shortage of affordable houses.

Demand is high for two-bed flats, that would attract more people to the area. Unlike areas closer to London, like Dagenham, development in Colchester hasn’t been as rapid.

There was a trend post-pandemic where homeowners sold properties in the capital and bought larger ones in Colchester. There’s a lot of interest in the residential market, but the required income isn’t always there for potential buyers.

The buy-to-let (BTL) market in Colchester has been struggling, considering it used to be one of our strongest sectors. I’ve had portfolio clients holding six or seven properties scaling back to just one.

The cost of living is eating into renters’ budgets, and many families have looked to the outskirts of Colchester or further for more affordable prices.

Colchester The Intermediary | August 2023 88 LOCAL FOCUS

A busy time for advice

The past couple of years have probably portrayed a false economy where properties sold almost immediately. Now it is taking anywhere between six to eight weeks to secure a sale, so things are definitely taking longer, but properties are still selling!

It is more of a buyer’s market, so someone in a good position – a cash purchaser or first-time buyer – may negotiate a purchase price if they can promise a quicker turnaround time. There are also massive opportunities to focus on protection.

A high volume of people are coming to Colchester from London, Kent and Cambridge, with Stanway, Copford and Prettygate experiencing high demand. A lot of people are currently living in Colchester want to move out to the surrounding villages such as East Bergholt, West Bergholt and Manningtree.

to buy is the ‘CO6 5’ area, where a property can set you back over £1.1m. The average detached property in the region costs around £481,000, while semi-detached homes boast an average of approximately £332,000. Terraced homes will cost buyers an average of £274,000, with the average price of a flat coming in at around £179,000.

Affordability challenges

Overall, there were approximately 5,800 property sales in Colchester last year. This figure marks a significant annual drop of over 35.7%, or around 3,500 transactions.

According to Ali HabibUr, mortgage and protection adviser at Access Financial Services, this substantial drop in property transactions is undoubtedly a symptom of a wider affordability issue.

There are several new-build sites, including East Bergholt, Ardleigh, Great Horkesley and West Bergholt. These are popular, and more sites being built gives us confidence in the Colchester housing market.

The past few months have been the busiest we have seen for a while, with an increase in enquiries from first-time buyers who want to know what they can afford. Although interest rates are higher, first-time buyers know no different. If it’s affordable, we are encouraging them to take that step.

The buy-to-let (BTL) market has had one of the biggest hits, with mortgage stress-tests massively impacting loan amounts. Landlords entering the market are having to put in higher deposits, and those looking to refinance are either having to stay with their current lender or exit the market completely.

Because of the rise in monthly mortgage payments, we have also seen first-time buyers revert back to the more traditional entry-level properties – flats and two-bedroom terraced houses – rather than jumping straight to a three-bedroom semi-detached or detached house.


452k Average

43 Residents per household 2.33

Data source: statistical-data-sets/pricepaid-data-downloads

89 August 2023 | The Intermediary
Price range Market share Sales volumes ● £50k-£100k 2.2% 127 ● £100k-£150k 5.1% 292 ● £150k-£200k 11.1% 638 ● £200k-£250k 13.0% 749 ● £250k-£300k 18.1% 1,000 ● £300k-£400k 25.3% 1,500 ● £ 400k-£500k 12.7% 730 ● £500k-£750k 9.3% 534 ● £750k-£1 m 1.9% 110 ● O ver £1 m 1.2% 70


Price Colchester England & Wales

 A VERAGE £ 344k £ 362k

 M EDIAN £ 305k £ 278k





 DETACHED £ 481k


 TERRACED £ 332k

 FLAT £ 274k

Habib-Ur notes that the Colchester property market is currently suffering from what he characterises as “a serious shortage of affordable houses.”

This issue, in conjunction with the ongoing cost-ofliving crisis, has resulted in a troubled property sector of late. Where once buyers could purchase a three or four-bed property for just £100,000 to £120,000, those same properties are fetching over £400,000 today.

In fact, the latest data reports that most properties sold in the area last year were within the £300,000 to £400,000 price range, with around 1,500 properties sold in this bracket as of July. This was closely followed by

Residential opportunities

Being based in the quiet coastal town of Brightlingsea, the market has noticeably slowed down. There are several developments in surrounding villages that appear to be suffering resistance to sales. First-time buyers and home movers have virtually disappeared. Many properties that have been for sale for several months are not moving, despite prices being dropped. Equally, there are properties that have been ‘sold subject to contract’ for well in excess of six months.

Speaking with local conveyancers, purchase transactions are taking much longer than usual to complete. Moving further afield to the nearby village of Great Bentley, there are currently three major new-build developments underway, but not a lot is moving there at present.

Affordability is perhaps the greatest challenge. The biggest challenge the industry faces is an incompetent Government that has essentially crashed the economy and created a race to the bottom.

Other than movement from my larger portfolio clients, the buy-to-let market has been painfully quiet this year. Fortunately, I have several clients with ‘substantial’ portfolios who are looking to acquire smaller portfolios, so that side of business is holding up.

Current levels of stress-testing are making purchases almost untenable unless the rent is strong and the deposit is at least 40%. The market has noticeably slowed down and will until such time as someone takes control of the economy again.

The Bank of England’s solution of hiking interest rates is only really hitting a small proportion of the public, namely homeowners with mortgages. Something positive needs to be done, but that is not increasing interest rates until mortgage holders squeak!

sales within the £250,000 to £300,000 price range, which recorded more than 1,000 transactions.

John Carter, director of Abode Mortgages, also notes this apparent turbulence, stating that interest rates have made what was once affordable now well out of reach for the majority, with home movers virtually disappearing from market.

Cooling market

Despite this recent price spike, things do seem to be cooling, with impatient sellers dropping prices in order to entice potential buyers.

Gemma Cuff, director at Gemstone Mortgages, maintains an optimistic stance, stating that despite the doom and gloom reported within the media, she has seen a noticeable increase in sales in the past few months.

With property prices in the more sought-after areas remaining strong, Cuff believes that Colchester is currently a buyer’s market, as there continues to be plenty of opportunity for cash buyers and even first-timers. This growing potential is also noted by Austyn Johnson, financial consultant and founder of Mortgages For Actors, who has seen a significant increase in residential clients in recent months.

According to Johnson, where previously he typically serviced a 60:40 split between residential to buyto-let (BTL) clients, this ratio leans more towards 80:20 at the moment.

Private rented sector

According to Carter, aside from larger portfolio clients, the buy-to-let market has been painfully quiet this year. As affordability becomes increasingly challenging, many landlords have struggled to keep up with rising mortgage repayments, resulting in a lack of affordable housing for tenants. The sector accounts for 20.1% of Colchester housing stock, compared with a national average of 23.6%.

Carter notes that with current levels of stress-testing, BTL purchases are now almost untenable, while Joshua Baker, senior mortgage and protection adviser at RB Financial Advisers, agrees portfolio landlords in the area are feeling the squeeze, forced to increase rent and deposit costs.

Habib-Ur reports that some portfolio clients have been forced to scale back to just one property.

The Intermediary | August 2023 90 Colchester LOCAL FOCUS

A great place to live and commute

modernising of many areas locally provides a lifestyle I haven’t noticed in previous years.

Colchester has seen prices drop more than average for the East of England, but remains above average overall. This has not necessarily halted the market, but the number of sales has dropped. As Colchester offers such diversity in the type, age and location of properties, even with market changes, the length of time for sale is progressing at the same level as always.

The main opportunities within the area are targeting first-time buyers and home movers. This includes semi-detached homes as well as detached properties that meet the requirements for this type of buyer.

The high-end properties coming on the market are not selling as quickly, leaving more room for opportunity on the lower end, where a reduction in price brings new options to buyers.

Colchester in its entirety is up-and-coming, since gaining its status as a city, the rebranding and

New developments

According to Johnson, despite reports of developments “left to crumble,” there have actually been a large number of new-builds popping up across Colchester.

The average price of a newly built property comes in at around £412,000, in comparison to £341,000 for an established property, pointing to a strong buyer appetite. Cuff ssays there are several new-build sites being snapped up, most notably in East Bergholt, Ardleigh, Great Horkesley and West Bergholt.


Despite recent challenges, the market in Colchester remains resilient. As a city rich with history and culture, there remains an unflappable demand for residential properties in the area.

Facing down issues with affordability and the rental sector, the pinch of which are being felt across every region of the UK, Colchester’s property market has continued to grow.

With property transactions on the rise and new developments on the horizon, it is evident that there is much more in store for the region during the second half of 2023. ●

Many clients are relocating to live in a rural area that offers better value, and I believe this will only grow. A vast number of home builders are developing areas away from the city centre with great access to transport links, including the two train stations and roads such as the A12.

However, with rates so high, I have noticed a reduction in requests for new residential mortgages as it has left little confidence for buyers to feel that they have the capacity to afford mortgage payments.

Buy-to-let has been a struggle these past few months, and in fact, over the past few years, with the changes in taxation rules on income received.

Portfolio owners have been hit with the stresstesting lenders are applying to new mortgage lending and the hike in interest rates with their existing lenders. There has also been a significant increase in the arrangement fees applicable. I have found most conversations have left many owners with no option but potentially to look at increasing the rent they are charging or increase the deposit to purchase a buy-tolet property in this area.

Difficult, but not impossible

Colchester has always had a strong market. It’s a city with history and culture, so residential transactions are regular, but it’s also a student town, so there are also a lot of buy-to-let (BTL) investments here. This continues to grow, even through the current uncertainty.

At the moment, affordability for both residential and buy-to-let is one of the biggest challenges, although the rumours of a property price correction may mean that sorts itself out.

As much as some papers bang on about developments being left to crumble, we have seen huge amounts of new-builds all over the region, they are all getting

snapped up too. Previously, we saw about a 60:40 split between residential to BTL clients, but it’s probably more 80:20 now –although buy-to-let is still there, residential business has increased nicely.

The buy-to-let market in Colchester is currently difficult, but not impossible. It’s all about finding the right deals now, or putting more into the equity to meet the affordability stress rate needs.

It could just be my type of clients, but there seems to be more interest in flats currently. Maybe flats have better value and houses are getting a bit too high. Most of my clients want to live near or around the centre of the city. My advice for finding opportunities in the current market would be to identify a niche and become it. Make sure it’s a new niche, though, or you will still be fighting your path.

91 August 2023 | The Intermediary Colchester LOCAL FOCUS
JOSHUA BAKER is senior mortgage and protection adviser at RB Financial Advisers

Protection: It could be you…

The National Lo ery requires a small payment in return for potentially a substantial payment, whereas life insurance requires a small regular payment in exchange for a large potential payout you hope not to receive!

I was shocked that around 35% of the population have life insurance, whereas a staggering 70% of the UK’s over-18s take part in the National Lo ery on a regular basis. It seems we are more obsessed with gaining what we don’t have than protecting what we do.

Mortgages and protection go hand in hand, but it has amazed me that mortgage advisers chase more mortgage sales at the expense of doing a proper job with their existing clients, and ultimately earning more commission from lost insurance sales that always get ‘deferred’.

The mortgage landscape has certainly changed, but therein lies the opportunity to maximise the insurance conversions by taking that extra half an hour to really explore what protection a client has, and providing a thorough insight to the risks that the client faces if they continue their financial journey without any insurance along the way.

We have been actively providing protection workshops to our adviser team to instill product and sales knowledge, cultivating a consultative approach that encompasses the complete spectrum of client needs. My focus has been to draw out the valueadded benefits that so many insurers now provide.

Insurance products are, of course, focused on the negative: death, critical illness, accident and sickness. However, rather than being that piece of paper that gets filed away and forgo en about, advisers need to highlight all the benefits that these insurers now give you access to.

Vitality has led the way with a range of discounted incentives to promote a healthy lifestyle, and many other insurers have value-added benefits that need to be clearly explained so that the clients get the maximum value out of their insurance products. The favourite of these is the virtual GP, given the difficulty most of us face ge ing a local GP appointment – download the app, book a time and have your online consultation. How easy is that!

A substantial portion of advisers exhibit a degree of complacency, and rather than develop their knowledge of the product offerings, they choose to be mortgage machines, chasing the next remortgage, purchase or buyto-let deal, and skipping over serious conversations with their clients about protecting their lives, health and incomes. At best, it might be a cursory chat without challenging the client’s needs or a itudes.

Objection handling

Time and time again I hear advisers complain that the premiums are too expensive, but what is your client comparing it to? Are you really handling the objection? I usually retort with ‘does your client want the cheapest parachute in the shop when they do a skydive?’

As an active adviser, only this week in reviewing a new client’s mortgage, I quickly unveiled that they had no life cover, no critical illness cover, and despite a son turning one this week, nothing in place to support the family if mum or dad were no longer here. There was a small income protection plan, but it paid out nowhere near the client’s earnings and was no longer fit for purpose.

While the mortgage will probably end up as a product transfer, there will be a complete suite of protection products in place and I can leave that client and his family in a fully protected situation.

This is addressing foreseeable harm, which is one of the major drivers of Consumer Duty.

Writing policies into trust is a straightforward process, and ‘ge ing the right money in the right hands at the right time’ is of paramount importance to ensure that, if the worst does happen, we have done our job right and alleviated the stress of finances when it is needed most.

I have found insurers to be fully supportive of the intermediary market, and always on hand to support training whether on-site or remote. A huge array of marketing is available, and I believe they can further enhance this with interactive online engagement tools that we can embed on our websites. This should extend beyond the scaremongering statistical calculators. I support a more positive marketing approach – let’s really demonstrate the value-added benefits to our clients.

Clients simply need professional advice. As an industry, we need to do a be er job of educating ourselves and in turn providing expert advice to our clients. Let’s ensure they understand what they can lose. The odds of landing those magical six numbers on the lo ery are stacked against them, whereas encouraging an active lifestyle, protecting your home and your income, must be both their priority and ours. ●

Opinion PROTECTION The Intermediary | August 2023 92
Does your client want the cheapest parachute in the shop when they do a skydive?”

Sell home insurance or refer it, but don’t ignore it!

As market fluctuations become more frequent and pronounced, seeking the best customer outcome has become a much bigger challenge for advisers. Frequent rate changes, product withdrawals, and customers looking to save pennies on the pound all compound to complicate the end-toend process of securing a mortgage.

In turn, it’s understandable that advisers’ time and resources are squeezed, and some simply don’t have the capacity to offer the holistic support – which includes a conversation about home insurance –that they would ideally like to provide.

In the midst of market upheaval and the advent of the Consumer Duty, the pressure continues to build on advisers, who must continue to remain cognisant of their increased responsibility to find the best customer outcome, wherever it may be hiding.

In recognition of this challenge, we’ve recently launched a quote referral option that supports advisers who, like us, share the view that advice is best when it comes to protecting the home, but who don’t have the time to have this conversation themselves.

We’re giving advisers the option to refer their customers to our own dedicated team of in-house experts, who will then call the customer at a time of their choosing. In doing this, we’re ensuring that every customer is given the opportunity to receive expert guidance concerning their home insurance needs.

Missed opportunities

Our 2022 Adviser Survey showed us that 96% of respondents agreed it

was best practice to discuss general insurance (GI) with clients, but 57% said they sometimes miss opportunities to do so.

Our in-house sales team is vastly experienced and able to scale up and down quickly, according to demand. By maintaining this, the team is able to offer advice which ensures continuity of care for customers who are used to receiving advice from their broker on other financial products.

We’ve built up the technology to support this process, too, so advisers never feel out of the loop on where the conversation. A new interface within the Adviser Hub dashboard shows at a glance the status of each lead. This dashboard pulls together all an adviser’s GI activity – whether they discussed insurance directly with the client or passed it over to us – so they can track all their GI business in one place, rather than the data being siloed.

Creating conversions

Initial trials with partner firms have seen great results. So far, we’ve seen an average quote-to-sale conversion rate of 65% where we’ve called the customer and discussed their GI needs. It’s really encouraging to see such positive results in such a short time-frame.

Charlo e Nixon, proposition director for mortgage and protection at Quilter, was part of the trial. She comments: “With the Consumer Duty now here and increasing demands on advisers’ time, advisers need to remember that there are options if they are struggling to do everything themselves. For instance, the technology and experience provided by Paymentshield with their new referral option is something that advisers can leverage for support.”

While our initial results are very encouraging, we’re not standing still. We’re currently exploring ways of developing this option further to offer a variety of experiences to suit the end customer.

If turbulence in the market continues and advisers remain stretched, then referrals are going to become even more important. We’d encourage all advisers to consider adopting this practice to further protect their mortgage clients with GI. Whether advisers have this conversation themselves, or refer it onto us, it’s key that it happens. Given that recent inflationary rises in the cost of goods and services have made rebuilding a property or replacing contents more expensive, reviewing a client’s existing coverage has never been more important.

It’s crucial that access to quality GI advice doesn’t fall by the wayside, particularly in this period of financial uncertainty for many. ●

Opinion PROTECTION August 2023 | The Intermediary 93
EMMA GREEN is distribution director at Paymentshield
In the midst of market upheaval and the advent of the Consumer Duty, the pressure continues to build on advisers, who must continue to remain cognisant of their increased responsibility”

In Pro le.

The Intermediary speaks with Claire Hird, customer service director at The Exeter, about evolving the customer journey in an increasingly complex market

Claire Hird has spent the bulk of her career in the home insurance arm of Legal & General (L&G), growing her considerable experience managing teams at the front line, including moving into the role of operations director, where she looked a er all of the customers and claims side of the business.

When this arm of L&G was acquired by LV=, she did extensive work migrating customers and employees across to the new business.

On 2nd January 2023, Hird made her next big career move, to e Exeter. A er six months in the business, e Intermediary discussed her experiences so far, what makes e Exeter stand out, and her plans for the future.

An exciting trajectory

e Exeter represents a fresh challenge, in which Hird has fast learned the ins and outs of protection, health insurance, and life assurance.

ere are various parts of the role where the skills came naturally, due to Hird’s previous experience.

She says: “Customer service is customer service. It doesn’t matter what product you’re selling, it’s about understanding what your customers need, and what your advisers need in terms of their dayto-day service requirements.”

As for the choice to move to e Exeter, Hird explains: “It was highly recommended, that was the rst thing. It also o ered a completely di erent environment. ere’s about 200 people overall, and about 90 of those are in the customer service function. at’s what appeals – working for a small mutual organisation, where you can a ect change much more quickly and easily.

“ e trajectory of e Exeter was also really interesting to me. We’ve undergone a serious amount of growth over the past few years, and there’s a lot of ambition to grow. ere’s a real drive to do more and better things for our customer base and our advisers – that was another big appeal for me.”

Hird has continued this work to constantly analyse and improve the rm’s customer processes

and adviser journeys. is means focusing on improving the planning and forecasting of workloads, and working closely with the sales function to understand their path and connect this with the work being done in customer service. is year, of course, has been an interesting time to take on a new role, particularly one so steeped in service. With economic challenges coming thick and fast, Hird says recruitment has been a particular challenge.

“A lot of our emphasis is on retention, looking at career paths and making sure people want to stay,” she says. “We’re doing well in that at the moment. e Exeter also has really good processes in place when it comes to hybrid working, which has also improved our capability to recruit, with employees based all over the country.”

Health insurance explosion

Rising demand has been particularly pronounced in the private health insurance space, despite

The Intermediary | August 2023 94

headlines warning about customers faltering in their desire for protection products.

“If you go back to the start of the year, the NHS was headline news, whether it was waiting times, or strikes,” Hird says. “We’re starting to see a younger demographic purchasing health insurance, so we need to understand how that new customer base behaves. People have really stopped to think about what protection they need for themselves and their families, and that’s not really slowing down, even though it’s not forefront in the headlines any more.”

Other factors driving this growth include the ageing population and the legacy of Covid-19, which made people more aware of worstcase scenarios. is conversation, she adds, is particularly important when customers are taking out a mortgage or remortgaging.

Hird says: “ e growth of health insurance has been huge this year, so we’ve had to gear up for that and ensure our service levels can support the level of growth we’ve seen.”

From broker feedback, Hird says, the rm has dealt with this explosion in health insurance business well, she adds: “Our claims teams have really stepped up. We’ve been given feedback that our service stands out. We are very accessible, so our telephone service levels are always green, and we’ve done a lot of planning work so that those service levels remain good in the face of the extra volume. Now it’s about maintaining that and getting even better.”

While some have warned that in ationary pressures could cool customer interest in protection, and particularly health insurance, e Exeter has not seen an impact on its volumes. Hird notes that the cost-of-living crisis is causing people to choose more wisely what they spend their money on – and protection is high on the list.

Fuelling the conversation

A particular concern that pervades conversations with protection professionals is about the secondary nature of this product in many brokers’ eyes, where it should in fact be part of any mortgage or remortgage conversation.

“Consumer Duty will de nitely help that, which is without a doubt a good thing for customers, and for rms and advisers,” says Hird. “ e quality and clarity of conversations will be much more at the forefront of advisers’ minds.”

ese conversations will also be driven by greater consumer understanding. Hird cites TV advertising campaigns that highlight the need to have protection in place.

For the rm itself, while it undertook the necessary prep work ahead of the 31st July implementation deadline, there was little that

needed to change, according to Hird: “We’ve had to review everything, but that was already part of what we were doing as part of our journey mapping work. Whilst that has been an undertaking, we found there weren’t many changes we needed to make, our journeys and documentation were already fairly clear.

“We’ve always worked under the ‘treating customers fairly’ [TCF] principles, which are in line with a lot of the Consumer Duty regulation.”

Finding balance with tech

In order to continually improve customer service and processes, it would be remiss to address the topic of technology. Service users across all industries and sectors increasingly expect rms to be highly tech-enabled – o en known as the ‘Amazon e ect’ – and to be able to access information and products at the tap of a button.

However, not only is this a market that – rightly or wrongly – relies on legacy systems and is wary of hopping on the next tech bandwagon, but the very nature and complexity of protection and the context of a client’s nancial situation, means there is a perennial need for the human touch.

“We’ve got a lot of work to do on the digital side of things – that’s a work in progress at the moment, but customers always want to talk to someone,” says Hird. “ e next six months and into next year are very much about looking at how we bring about these digital services, in a market which is not massively ahead.

“ at’s very much what we’re working on: how we can embrace the digital aspects, while also making sure that our people are valued and interacting with customers when they need to.”

Future evolutions

Whether examining its processes under the remit of Consumer Duty, meeting rising demand in turbulent market conditions, or moving forward with the right balance of tech, what underpins e Exeter’s approach is a constant drive to challenge and improve on its customer service.

“What stands out is that there is a desire to always improve and invest in our services, which will continue,” says Hird. “Everything that we do, we challenge and question it – is it right for the adviser and the customer? Can we improve it? Is this adding value? at has driven a lot of improvements already.”

Part of this is about not losing focus on the people on the front-line, whose experiences are integral to understanding the market, the customer, and how the business could evolve.

“A big driver throughout the rest of this year and beyond is using people’s expertise to improve what we do every day,” Hird concludes. ●

IN PROFILE August 2023 | The Intermediary 95

Rethinking the language of protection

The Consumer Duty requirements around clear communication could give us an opportunity to rethink the language we use across the protection sector.

On an individual level, it has prompted me to think about the language we use today, and how we came to use it in the first place. For me, it starts in my a ic of all places!

In a recent clear-out, I came across my university dissertation and gave it a quick reread. I was shocked to realise that university had trained me to write so formally. The topic was retail store layouts, and how that influenced buyer behaviour. Not exactly a topic that required the level of formality I’d wri en it in.

This led me to question whether there’s a mismatch in the language and communications skills being taught at university, and to many school leavers, and the approach we need for effective customer communications.

Being customer-friendly

Of course, graduates o en then move from academia straight into a world of business language. You might not be encouraged to use ordinary language at all in these two key stages, or certainly not in terms of communications with customers.

This quite typical career background is surely part of the current challenge. I did avoid some of these pitfalls, as my first boss and mentor always encouraged me to write as I spoke.

Over the years, I’ve heard debates about using plain, accessible language. There are excellent communications consultancies that can help, as well.

And yet, when I go to the pub with my friends, it’s still quite difficult to convey exactly what it is I am

marketing, or certainly to give an accurate picture of the industry I work in. They still view protection as something that’s too complicated, or not for them, or that won’t pay. Can these objections be addressed with clearer, easy-to-understand language?

Even terms such as ‘sum assured’ or ‘benefit amount’, which aren’t even at the deeply technical end, are not exactly in everyday use. I am not convinced that the phrase ‘covering your mortgage’, which we hear in industry circles, is quite right either. ‘Protecting your family home’ sounds much closer to what families are concerned about.

I’m not suggesting we change the entire vocabulary. However, it’s interesting to consider communications in great depth given our programme of work on the duty.

Detailed communications

Every single customer or adviser communication has gone through an approval process. Everyone with a role in writing our communications is going through ‘clear language’ training. We intend to introduce clear language champions in every department. This isn’t just in the obvious areas such marketing, but underwriting and operations as well.

We’re also testing our terms and conditions (T&Cs) with both quantitative and qualitative research. We’re surveying 800 customers to test snippets of these, and asking a smaller group of customers about them oneto-one, particularly what they do and don’t understand. All of this will feed back into the next version.

There are some limits. You do need a certain level of detail, because protection involves a legal contract. There are many ‘what ifs?’, and you can’t be too general. So, T&Cs will

still be fuller and more technical than other communications – but they should still be much clearer. You are, a er all, establishing and communicating the legal position. More broadly, a lot of this work will be er equip our adviser partners. For example, we offer a ‘reasons why’ tool with approved paragraphs about all of our covers that can be built into le ers and follow-up communications. The latest set on income protection (IP) was produced with the Consumer Duty’s requirements very much front of mind.

A new foundation

The Consumer Duty has given us a rationale and some significant momentum for change, and we have an opportunity, as an industry, to be more ambitious.We see a huge potential benefit across the sector where, like Guardian, many providers will be reviewing communications and retraining staff.

In the coming weeks and months, I would like to see us all think beyond the wri en communications of websites, client documents and marketing collateral to challenge conversations, vocabulary and perhaps even the terms we use. We may need to challenge some approaches that have been schooled and trained into us over the decades. Given our view that be er understanding helps make the case for protection, and in current circumstances, for customers retaining policies, a big improvement in communications – both wri en and verbal – is a significant prize. We should reach for it. ●

Opinion PROTECTION The Intermediary | August 2023 96
RACHAEL WELSH is head of marketing at Guardian
Advertise with The Intermediary and reach 10,000 current and next-generation property nance business leaders. With commercial opportunities spanning print, digital and events, e Intermediary has a multitude of creative channels that can deliver your marketing message to the people that matter. Contact Claudio Pisciotta on CLAUDIO @ THEINTERMEDIARY.CO.UK to discuss how e Intermediary can help your business achieve its goals. Want to share your message with the industry?

On the move...


JJust Mortgages has promoted John Doughty to managing director for the employed Orion chapter.

Doughty has nearly two decades of experience across estate agency, mortgages, and financial services, and will oversee more than 90 members of staff, including almost 60 brokers. The role will also involve liaison with the Spicerhaart estate agency chains and provide additional support to brokers.

HTB appoints head of portfolio management and sales director

Hampshire Trust Bank (HTB) has appointed Nicola Ledgard as head of portfolio management and Andrea Glasgow as sales director within its specialist mortgages division.

Ledgard has worked for Halifax, Cheshire Building Society, Salt Commercial and Nationwide Building Society, joining from Aldermore Bank. She will set up and lead the portfolio management team for specialist mortgages at HTB.

Ledgard said: “I am delighted to be joining HTB, during what is an interesting period within the mortgage industry. It’s a great opportunity to establish a best-in-class portfolio management team from scratch."

Glasgow will oversee all aspects of the sales process, encompassing broker relationships, origination of new business, and managing pipeline cases. She has held senior specialist sales and origination roles at HTB, Castle Trust, and Glenhawk.

Glasgow said: “Managing all aspects of the sales team to deliver consistent leadership and decision-making for our broker partners is something I am looking forward to. HTB is fortunate to have an array of talented individuals who put the introducer and their customer first. My new role will seek to harness those talents to ensure HTB is at the forefront of the professional property investor lending landscape.”

Doughty said: “I’m thrilled to be taking this next step in my career with Just Mortgages. It’s also a great chance to return to my roots and work closely with the estate agency side."

John Phillips, national operations director at Just Mortgages, added: “[John] is a great example of the opportunities available at Just Mortgages. John’s skills and experience will be a real asset as our employed division and the wider business continues to reach new heights.”

Market Financial Solutions (MFS) has appointed Karen Rodrigues as head of national accounts. She has worked at Halifax, Vida Homeloans, Aldermore Mortgages, Kensington, One Savings Bank, and as director of sales at Smoove.

Rodrigues said: “I am delighted to be joining MFS at a time when the company is expanding at pace.

“As other lenders withdraw their products and frequently adjust their rates, MFS has committed to providing the certainty, speed and flexibility that brokers and borrowers are crying out for in today’s lending market.

"I look forward to taking its market-leading products to the UK’s clubs and networks.”

Paresh Raja, CEO of MFS, added: “[Karen's] extensive understanding of what borrowers and brokers need from lenders will enhance our ability to deliver an exceptional service and products to intermediaries across the UK.”

Pepper Money has appointed Ryan McGrath as second charge sales director.

McGrath was commercial banking officer at Lloyds Banking Group, chief executive at The Loans Engine, and programme manager at Enra Specialist Finance.He will concentrate on driving growth across Pepper Money and its broker partners.

Richard Spinks, chief commercial officer at Pepper Money, said: “We’re delighted to welcome Ryan to the Pepper Money team to lead our continued

growth in the second charge mortgage market."

McGrath added: “I’m looking forward to working with the team to continue growing our lending and exceeding our brokers' expectations when it comes to service and proposition. A second charge mortgage is often the most suitable solution for customers with a capital raising requirement... we will be working alongside our broker partners to ensure their customers benefit from our fast and practical way of financing to achieve the goals they want.”

Mortgages promotes John Doughty to MD of employed Orion chapter Pepper adds McGrath as second charge sales director MFS adds Karen Rodrigues as head of accounts NICOLA LEDGARD
The Intermediary | August 2023
21 Years evolving financial business. expo MORTGAGE BUSINESS 2023 LONDON 12 OCTOBER 2023 DISCUSS YOUR CASES FACE-TO-FACE WITH 50+ DIFFERENT LENDERS ALL UNDER ONE ROOF Register in advance at: Incorporating The Speciality Property Finance Club, hosted by FIBA TOFREE ATTEND Discover the latest products and services on offer Collect hours towards your CPD in the free to attend seminars New! FREE social media sessions from Google Digital Garage FIBA Specialist Property Finance Summit And have lunch on us!

Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.