Liz Truss is back, at least that’s what The Telegraph tells us — the scourge of the economy, and indeed the mortgage market, is plo ing her comeback.
Apparently, the UK’s shortest serving Prime Minister wants to return to high office.
Surely this will be as welcome as the directto-video Titanic II — you all remember that obviously. Clearly every sinking needs a remake.
But despite Truss 2: Electric Boogaloo being potentially on the cards, or even a vaunted return of people’s champion and lockdown partier in chief Boris Johnson, the country appears to be returning to an element of normality and stability.
Inflation seems to have peaked and the base rate looks to be close to topping out.
UK plc, despite the many ongoing economic issues impacting it, appears to have se led into the ‘new normal’ under newish — albeit having served twice as long as his predecessor — Prime Minister Rishi Sunak and his Chancellor Jeremy Hunt.
As such, the Bank of England’s dire predictions of recession have been rowed back, and the slowdown is now expected to be shorter and less severe.
The slump, which Governor Andrew Bailey announced in dramatic style during a televised press conference, is now expected to last for just
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over a year, rather than the almost two that he and his mandarins initially forecast.
Swap Markets have le lenders in a position where they can reduce rates, and as they fight for business this trend looks set to continue.
So, borrowers look set to benefit from substantially be er rates than were seen in the heady days following the disastrous mini-Budget, and interest rates on 5-year fixed mortgages could be set to drop back below 4%
In this issue, Hannah Smith takes our lead feature and looks at what an ideal property market could look like on Page 32.
Our contributors also consider the everevolving mortgage market, what comes next for a hammered buy-to-let sector, and the state of the specialist finance, second charge and protection sectors in an ever-changing landscape.
For me, I’d like to welcome you to the first issue of The Intermediary, which will be coming to you monthly in both print and digital format.
If you haven’t signed up for your print copy you can by scanning the QR code on this page or via the website.
I’d also like to take this moment to thank our readers, contributors and advertisers for their support. I look forward to welcoming you to issue two in March. ●
Andrew Ferguson | Brian West | Carl Graham
Conrad Robins | Dean Anspach | Grant Hendry
Hannah Smith | Harry Hodell | Henry Jordan
Jacqui Gillies | James Briggs | James Miles
Jennifer Gilchrist | Jeremy Duncombe
Jonathan Rubins | Jonathan Stinton
Karen Rodrigues | Kay Westgarth | Leon Diamond
Louise Chapman | Louise Pengelly | Lucy Barrett
Maeve Ward | Mark Blackwell | Mark Gregory
Martese Carton | Matthew Cumber
Matt Tristram | Neal Jannels | Neil Richardson
Paul Brett | Paul Carter | Paul Sprake | Peter Dockar
Ranjit Narwal | Richard Rowntree
Robin Johnson | Shaun Almond | So a Jones
Sophie Mitchell-Charman | Steve Carruthers
Steve Goodall | Stewart Simpson | Stuart Miller
Susan Baldwin | Terry Pritchard
Tom Denman-Molloy | Tony Marshall
Vanessa Hunt Vikki Je ries | Wes Baker | Will
FEATURES & REGULARS
Feature 32
Hannah Smith asks what an ideal property market could look like
This month The Intermediary takes a look at the housing market in Exeter
An eye on the revolving doors of the mortgage market: the latest industry job moves
SECTORS
INTERVIEWS & PROFILES
ACCORD MORTGAGES
Jeremy Duncombe talks about how the lender is poised to develop its propositions
LENDINVEST
Leanne Ardron discusses how technology is nally streamlining the short-term property nance journey
Q&A 72
PROVIDE FINANCE
We speak to Miranda Khadr about the evolution of the company
CLICK2CHECK
David Jones explains how the rm’s o ering puts advisers in the driving seat
Q&A 80
SMARTR365
We ask Nitesh Thandani about how the mortgage market is nally adopting technology, and why advisers need to embrace the future
LEEDS BUILDING SOCIETY
Emma Evenett tells us about the challenges and opportunities she faces as a business development manager
Last September’s miniBudget had a significant impact on the mortgage market. Almost overnight, lenders either pulled products or repriced with much higher rates.
Thankfully, the markets have now stabilised and rate and product availability have normalised, but demand still remains substantially below what we would normally see at this time of year.
The coming weeks will be crucial to seeing if this demand has been paused or fully put on hold.
Despite ongoing increases in the Bank Rate, fixed mortgage rates have continued their downward trend, reflecting the fact that the swap rate market is now less volatile.
The expectation is that Bank Rate will now peak at somewhere between the current level of 4% and 4.5%, lower than first feared after the mini-Budget, which the Swap Rate market has factored in. However, the next Monetary and Policy Committee (MPC) meeting will be key in determining if swaps, and in turn rates, remain stable.
The uncertainty over what will happen next to mortgage rates has led to increased demand for trackers, which provide more flexibility, as typically they don’t have an early repayment charge (ERC) should you want to move deal during the term.
Rates on trackers also tend to be lower than on fixed rates, which many are looking for in the current market, but we expect this demand to soften as rates realign in future.
The extension of the Mortgage Guarantee Scheme has also been useful for ensuring ongoing support for those looking for low deposit mortgages, but first-time buyers are still going to find the current market tough to navigate – more so when the Help to Buy scheme comes to an end in March.
The rising cost of living is stretching household budgets, and while most have so far been protected from rate rises as they are on fixed deals, many will see these come to an end in the coming year.
One of the positives we have seen over this period of uncertainty is an increase in borrowers managing their mortgage and ensuring they know the options open to them.
Many of our members are logging onto our Mortgage Manager tool in order to review their term, and consider their options. This could include making underpayments or overpayments in order to help manage their monthly finances.
However, we recognise that some people may need additional support, and we stand ready to offer them the help they need. ●
Every customer you see is either going to be vulnerable, or they’re going to be one step away from a potential vulnerability.
It sounds unnecessarily jarring, but it’s undoubtedly the assumption we should all be working from. Because ultimately, vulnerability is something we’re all going to experience at some point. It won’t be something we plan — nobody plans to become vulnerable.
It’s likely to be something we have little or no control over, but despite it being something which happens to us, and not something we intended to happen, vulnerability is still a label people struggle to use for themselves.
The Financial Conduct Authority (FCA) even advises us not to use this label in interactions with customers. That’s fair enough, but discussions around vulnerable customers shouldn’t be shied away from.
If anything, conversations around customers with vulnerabilities should become more commonplace.
This is not just because of the fast-approaching Consumer Duty deadline, or because the cost-of-living crisis could mean more people fall into the vulnerable category, but because the situations of vulnerable customers are complex and diverse.
They need to be talked about openly so they can be better understood. After all, becoming vulnerable could, and probably will, happen to any of us.
The definition of vulnerable customers is broader than anyone might initially imagine. The FCA says that to be vulnerable, someone simply has to be susceptible to harm — this is particularly relevant when dealing with a firm which isn’t acting with appropriate care.
It’s easy to assume this is limited to visible vulnerabilities, such as physical disability or illness, but health is just
one of the things the FCA outlines as a potential driver of vulnerability.
The other three are: life events — such as a relationship breakdown; resilience — such as being unable to afford an unexpected cost; and capability — such as simply not having a good understanding of financial matters.
All of these things have the potential to leave someone feeling overwhelmed or experiencing heightened stress levels, which could impact their decision-making and attitude to risk.
The effects may be short-term, and the person could be towards the lower end of the vulnerability spectrum, but they are still going to be susceptible to harm.
This means they may still need extra support and guidance when making important financial decisions.
The first step is recognising the vulnerability, which can be difficult when people may not even see themselves that way. A simple question to ask yourself would be, is this person able to think clearly?
If they seem distracted, rushed, or like they don’t understand what they’re agreeing to, the honest answer to that question is likely to be no — they’re not able to think clearly right now. That’s a clear indicator they may need additional support.
Asking them if there’s anything extra you can help with is a good place to start. Or, consider asking if there’s a better time to talk, or even flipping it around and ask them if you’re making sense — so they don’t feel like they’re the problem.
Essentially, the aim is to make sure people feel safe discussing their circumstances and reassured that showing signs of vulnerability doesn’t mean they won’t get the service or product they want. If anything, they should feel that sharing the
JONATHAN STINTON is head of intermediary relationships at Coventry Building Society
information will actually serve to ensure they receive the appropriate care and attention, as well as the best support possible. Dispelling the perception that firms can’t help, or won’t want to help, is going to go a long way in normalising the conversations around vulnerabilities.
The truth is that lenders, networks, and brokers all want to be sure that customers are getting the best outcome possible. Ineed, a lot of work is being done across the industry to ensure that this happens.
For example, we’ve put together a guide summarising some of the signs to look out for, as well as the services we offer to support those with the characteristics of vulnerability. We have also appointed vulnerable customer experts in departments across the society, including within our intermediary support team.
Our aim is to make it clear that vulnerability is an everyday condition which has the potential to affect us all. It shouldn’t be something which has a stigma attached to it. It is something that the whole industry can, and wants to, help with. One of the most important things we can all do right now is talk about it. ●
Dispelling the perception that rms can’t help, or won’t want to help, is going to go a long way in normalising the conversations around vulnerabilities”
As we ended 2022, a veil of uncertainty hung over the mortgage market. Signs were that borrowers were hunkering down, glad of the distractions presented by the World Cup and the festive season, and seemingly unwilling to make any major decisions.
The impact of the September mini-Budget in shaking market – and therefore consumer – confidence was severe, and neither consumers nor lenders knew quite what to expect in the months that followed.
I’m pleased to see that the fog is showing signs of lifting as we enter the second month of 2023.
The market Swap Rates that signal mortgage pricing have fallen, and are now much more stable than we’ve seen for a long time. We expect the bank base rate to peak closer to the 4.5% mark than the horror predictions of 7% we saw after the mini-Budget.
As a result of this downward trend, we’ve been able to follow suit, with no fewer than 12 downward rate reprices since October, and we continue to monitor things closely to pass on as much of that emerging, positive position as possible.
Well, we know it’s going to be a big year for mortgage maturities, and therefore remortgages – that’s a given.
However, some surprising things have happened in the past couple of months which suggest purchase activity could prove more positive than expected, too. We experienced a strong December for all forms of lending, and that has continued in January, with our telephone business
development adviser team fielding a healthy level of enquiries of all kinds, including buy-to-let (BTL).
External signs are more positive too, with property platforms such as Rightmove reporting high levels of search activity and a decent supply of the stock, which is so vital to fuelling the market. Similarly, Twenty7tec reported record levels of product search activity compared with any previous January.
So, compared with the Autumn, there are signs that both people and mortgages are on the move. And why wouldn’t that be the case? At the end of the day, the UK is an island with a limited housing supply, and it’s a fact of life that people will always need to buy or remortgage homes, due to all kinds of changes in their circumstances.
We’ve seen significant market shocks over the decades — from the double-digit interest rates of the 1980s to a financial crisis in 2008, to a global pandemic which stopped everything in its tracks, and we’re still here to tell the tale. So, although the markets undoubtedly didn’t like the uncertainty caused by September’s unfortunate miniBudget — and we saw the impact of that in lenders, including ourselves, pulling products — more signposting by the Government, unwinding of the proposals in the Budget and reducing rates has helped calm things down.
So, we now have more reason to be positive as we face into the year ahead. That’s not to say there won’t be further challenges to overcome — interest rates, though stabilising, are still significantly higher than the near 1% level borrowers became used to as a result of almost two decades of economic rescue efforts. Of course, they also now face the double-
whammy of high inflation fuelling a cost-of-living crisis to boot.
However, without a doubt, there are hopeful signs as we edge closer to spring, not least the fact that people seem to be settling into the ‘new normal’ centred on mortgage rates closer to long-term historic averages of around 5%, and appear to be learning to cut their cloth accordingly.
They’re proving to be resourceful, as well. We’re seeing applications for mortgages of all types — including healthy levels of BTLs, despite the unique challenges faced by that segment in terms of the impact of higher interest rates on affordability, unfavourable new taxation rules and the looming impact of new energy performance certificate legislation. We’ve also seen a real uplift in tracker mortgage applications, suggesting people are choosing to keep their options open amidst uncertainty around where market mortgage rates will ultimately land — where 95% of our business used to be fixed rate, this has changed significantly since October.
So, while we’re not out of the woods yet, the combined positive forces of lenders like us doing our bit to help with competitive rates, and a common-sense approach to lending where people’s circumstances are less ‘vanilla’, combined with a better Government grip on the economic narrative and a willingness among brokers and borrowers to think outside the box, I am optimistic that 2023 could well turn out nice again. ●
We know that every case is different and whilst some lenders may not be able to help, we see the potential and cut through complexity. Our strength lies in our flexible common sense approach with a willingness to consider cases that fall outside of our standard criteria. Our underwriters individually assess each case enabling us to find tailored solutions for your buy to let and residential clients.
The statistics are worrying. The UK not only has the oldest housing stock in Europe, with around one in five homes failing to meet the Government’s definition of a ‘decent home’, but British homes remain among the least energy efficient in Europe.
Homes in the UK lose heat up to three times faster than energyefficient homes in countries like Germany, and our housing stock contributes around 16% of all the country’s carbon emissions. No wonder there is a growing call for a large-scale retrofit of homes.
In line with its 2050 Net Zero ambitions, the Government has proposed key deadlines — initially for landlords, but eventually for all homeowners — to bring their properties up to minimum standards of energy efficiency. The proposed changes to buy-to-let Energy Performance Certificate (EPC)
legislation are intended to kick-start the retrofit of UK stock.
The Government wants homes in England and Wales to reach a minimum EPC level of Band C by 2025 for any new rental homes in the private rental sector (PRS), and by 2035 for all homes. At present in England, only 42% of assessed homes reach C or above.
Unfortunately, despite making these ambitions public, the legislation proposed initially for the PRS has yet to be passed.
This delay, against a backdrop of political uncertainty, rising energy prices and soaring interest rate increases means there has been little incentive for landlords to start the retrofit revolution.
Indeed, whilst approximately 85% of the public believes that climate change is an important issue, only 35% have themsevles adopted energy efficiency measures, or are planning to adopt them any time soon.
Meanwhile, the costs of meeting the Government’s targets are enormous.
According to the excellent Net Zero Homes Report, published in November last year by UK Finance, it is estimated that it will cost approaching £300bn to reach the proposed EPC rating requirements.
Landlords are already reacting to the planned legislation. Many view the proposed minimum EPC standards as simply another tick-box in the lengthy list of legislation they need to adhere to in order to be able to let their property.
This means landlords are likely to be weighing up if the cost of improving the property is worth it, or whether selling off problematic properties before the legislation comes into force is a better option.
Recent research conducted by BVA/BDRC in conjunction with the National Residential Landlords Association (NRLA) found that more than half (54%) of landlords looking to sell their properties in the next
12 months would consider selling a property with an EPC rating of Band D or below. Similarly, 59% of landlords who are thinking of buying properties in the next 12 months would only consider buying properties rated between A and C.
As the average cost of bringing non-energy efficient properties up to the required standard is currently around £8,300, the impact of the Government’s Net Zero policy is becoming clearer.
The prospect of landlords selling off properties does not solve the key environmental issue and the need for retrofit of existing UK stock.
Instead of sparking a retrofit revolution, the proposed regulation could simply push the problem into the residential space some 10 years
down the line. The result of this is continued carbon emissions, and the resulting impact on our environment.
Instead of landlords, and especially those with large portfolios, it will be residential owners who are ultimately under financial pressure as 2035 approaches, to ensure a minimum EPC C rating of their home.
In the short term, selling and replacing stock might be the easiest approach. However, in the medium to longer term, especially as higher EPC properties start to attract more and more of a premium, retrofitting could become the most economical option once again, especially considering the proposed £10,000 price cap exclusion.
Meanwhile, the approach of waiting for changes to the law to come into place means the chance to combat
climate change is slipping away by the day.
Landlords can act now in order to improve the energy efficiency of their properties, not only to benefit themselves, but also their tenants and the environment. ●
Earlier this month, Gen H made the decision to replace our standard variable rate (SVR) with a Bank of England base rate tracker reversionary rate.
This decision reflects our commitment to creating a fairer housing market, and I hope it will kick-start conversations about transparency in the industry. In periods of economic stress, it’s more important than ever for lenders to keep their customers at heart – even when it comes to profitable products like SVRs.
The standard variable rate is the rate to which a mortgage reverts once the initial interest term ends.
While there are some benefits to holding an SVR – they can create more flexibility for a mortgagor, and typically mean one can avoid early repayment charges (ERCs) if looking to move or remortgage in the next few months – they o en come with unforeseen costs.
These costs can take the form of both monetary expense and uncertainty. This is because lenders determine their own SVRs, and can change them at any time.
This means monthly repayments for homeowners on an SVR may be much higher than is fair, and they could increase significantly without much warning.
The result is a lack of predictability and transparency in what is o en a household’s largest monthly expense. This can undermine a homeowner’s a empts to reach true financial stability.
Our mission as a lender is to be transparent and fair with customers. This is what made our decision to switch from an SVR to a Bank of England base rate tracker so simple. We know that the vast majority of borrowers understand how the base rate works – a recent RFI Global survey found that 98% of borrowers are aware of base rate rises, and 76% understand how a rate rise will impact them.
PETER DOCKAR is commercial director at Gen H
Additionally, this move meant we could revisit our stress assumptions. Longer-term, this could help bolster customer affordability, which could enable us to support more consumers in a challenging economic landscape.
The same RFI survey found that 57% of respondents were very concerned about an increase in their rates – this trend was even more pronounced amongst borrowers under 35.
This underscores the critical role of transparency in lending, as greater transparency enables consumers to be er advocate for themselves as they plan for and make important financial decisions.
All told, I believe the move for us from an SVR to a base rate tracker will not only create a greater sense of control and predictability when it comes to budgeting for monthly outgoings, but it will also encourage customers to develop a greater engagement with the economic policy that impacts them.
In today’s housing market and wider economy, this can only be a good thing.
While we can’t predict what the Bank of England base rate will be down the line, it is clear that customers understand that their Gen H tracker mortgage payments will always reflect a fixed formula of the Bank of England base rate, plus a fixed percentage.
For customers, the tracker also helps demonstrate the fair value of Gen H mortgages, and fosters confidence in our transparency as a lender.
Amidst a crushing cost-ofliving crisis, it is increasingly hard to defend the opacity of SVRs. Homeowners need and deserve more transparency to create and maintain financial security.
I hope Gen H’s move to a tracker will encourage other lenders to frankly evaluate their variable offerings to ensure that those products, be they base rate trackers or SVRs, are truly best for the customer. ●
While we can’t predict what the Bank of England base rate will be, it’s clear that customers understand that their Gen H tracker mortgage payments will always re ect a xed formula of BoE base rate plus a xed percentage”
never heard of)
It’s no coincidence that we’ve lent over £1 billion in BTL mortgages in our short 4 year history.
Speak to us about why we “can do”, where others can’t.
5 Year fixed rates with tiered fees to increase your clients’ leverage, allowing them to borrow more
Low ERC profile 5 year fixed rates allowing borrowers to exit early to a more competitively priced product
ERC-free 2 year trackers giving your clients the option to monitor the market and exit inexpensively to a fixed rate product, when it suits them
Nationwide Building Society’s recent affordability report revealed that between the beginning of the pandemic and the end of 2022, incomes only rose by 9%, whereas house prices increased by 19%, highlighting concerns that affordability will continue to be a real issue for buyers over the next year.
Brokers and lenders have a major role to play in helping customers address these challenges, and must explore ways to find buyers products that work for them.
It is great that we have seen many rates come down at the start of this year, but at the moment, there still needs to be more innovation and a wider consideration of risks when it comes to operating in a more stable market, in order to give a real push in product and rate availability for all.
PRIMIS Mortgage Network offers a lender panel that represents the whole of market, providing access to a wide range across the board, from big high street names to smaller specialists that may be able to help your customers with more complex borrowing needs.
The increasing complexity of the market means that lenders need to continuously innovate to offer rates and products that can work for a variety of home buyers in differing personal financial situations.
For instance, some are already raising loan-to-income (LTI) ratios, to help those looking to buy a home to borrow more.
Elsewhere, products which allow rate changes even a er people have commi ed to a product have been introduced to provide customers with more flexibility.
In today’s market, lenders should also explore offering more niche products, at a time when the economic environment is exhibiting some unique characteristics.
As an example, Virgin Money recently cut rates on its 75% loan-tovalue (LTV) 10-year fixed mortgage by 0.11% to 3.99%. It has been a long time since we have seen a long term fix starting with a 3. Both more traditional products, such as those with longer terms, specialist buyto-let, and retirement interest-only products, as well as new rate models, such as those that take into account a property’s Energy Performance Certificate (EPC), offer the chance for significant savings. As lenders continue to innovate, brokers can add real value by helping buyers navigate.
The imminent end to the Help to Buy scheme is another factor that has strengthened the need for brokers to step in and advise potential buyers with affordability issues. Alternatives to the scheme are less well known, and customers are likely to be looking for guidance as to the most effective options currently available. Brokers should use this opportunity to educate clients on options like lifetime ISAs, the First Homes Scheme, guarantee mortgages, equity loan products and other vehicles.
Finally, in this evolving market brokers must place an emphasis on understanding their customers, taking into account individual circumstances and providing bespoke advice that results in the customer ge ing the mortgage that is right for them in both the short and long-term.
Therefore, know your customer (KYC), fact-finding and regular communication will be increasingly important throughout the year. Brokers should make sure they are
VIKKI JEFFERIES is proposition director at PRIMIS Mortgage Network
investing appropriate resources into these aspects of the process so they have a clear picture of their customer’s financial situation and are fully equipped to help them.
This should not only be done on first contact with the client, but throughout the whole relationship, making sure they are abreast of any change in their customer’s circumstances or buying power.
Broker customer relationship management (CRM) systems can support this goal, ensuring that brokers have the most up to date information, and can contact clients regularly to ensure they are informed and updated on new products.
PRIMIS members who use the network’s exclusive in-house CRM system, Toolbox, can take advantage of a feature which automates client communications as soon as they complete. This is particularly important when there is a growing number of borrowers who do not fit into traditional criteria for many high street deals. For example, following the pandemic, self-employed people or small to medium (SME) business owners whose businesses have been hit hard, or perhaps even closed down.
Then there are those that work part time, have adverse credit, or don’t have a steady stream of income. In fact, according to PwC, there are 20.2 million adults in the UK now defined as financially under-served.
Affordability issues in 2023 will hit this group the hardest, and lenders and brokers need to work together to explore the best ways in which the industry can solve this issue. ●
The past few months have been rocky for the mortgage market. The Liz Truss Government’s mini-Budget sent shockwaves through the financial markets, and this led to effectively the entire market repricing its mortgage deals at a much higher level than was the case just a few weeks previously.
There remain an awful lot of borrowers in a difficult position following this market turmoil. We know that significant numbers of homeowners have fixed rate deals coming to an end during 2023, and they will face a mortgage market in a markedly different position compared with when they took out their initial mortgage deal.
There has been a notable drop off in the number of products available, and therefore the level of choice is much reduced.
Figures from Moneyfacts show that, at the time of writing, there are the best part of 1,000 fewer mortgage products on the market compared
with before the mini-Budget disaster. However, the challenge is not simply about pure product numbers. An awful lot of borrowers will also have seen their circumstances change since they took out that original mortgage. For some, it will be a job change brought about by the pandemic, perhaps leaving them with a different income. Others are simply more stretched financially, having taken on additional debt in order to get through the ongoing cost-of-living crisis, or they may have missed a payment due to the curveball of what has since been termed a ‘permacrisis’.
Many lenders will not look too kindly on these circumstance changes.
A large number of lenders were already rather prescriptive when it comes to criteria and how to assess borrowers whose situations may be less than vanilla, and this overly cautious approach is only likely to be exacerbated by the economic challenges ahead.
If they didn’t want to consider borrowers with the odd complexity when times were good, are lenders really likely to do so as the UK enters a recession?
Reduced risk appetites are being demonstrated through tougher criteria, forcing clients to jump through additional hoops in order to secure the financing they need. In other cases, though, the lenders have essentially put down the shu ers and turned their back on certain areas of the market.
Nevertheless, this is not the case across the market.
Here at Mansfield Building Society, for example, we are determined to embrace a more versatile approach to lending, and to take each case on its merit.
The odd black mark, a change of circumstance or even an unusual form of building construction should not — on its own — be enough to turn away a potential customer.
We prefer to put our trust in our underwriting team, understanding that they are best placed to truly get to grips with the intricacies of an individual case, and therefore make a more informed decision about whether we can help.
Indeed, so central is versatility to our way of operating that it is the name for a range of mortgage products offered by Mansfield Building Society.
There has always been a subset of mortgage borrowers who would benefit from lenders employing a common sense approach, and that group is growing larger by the day as a result of the year’s events.
It’s crucial for brokers to work closely with lenders which operate in this way, to ensure that even clients with specialist circumstances have access to the funds they need.
The specialist residential mortgage market has experienced its fair share of highs and lows over the years.
The mid-1980s to early 1990s were characterised by boom and bust, but the market really came into its own in the 2000s.
A sharp fall in interest rates compared with the previous decade, soaring house prices, an abundance of cheap funding and a thriving economy tempted swathes of new lenders into the market. By the middle of the 2000s, the sector was soaring, with specialist lenders advancing £17bn in 2007 alone, according to Intermediary Mortgage Lenders Association (IMLA).
However, that was to be the crescendo moment. The financial crisis and the regulatory clampdown that followed it nearly killed off the specialist residential market entirely.
It’s been a long road back. A study last year conducted by economist Dr John Glen on behalf of lender Together estimated the specialist resi market to be in the region of £5bn.
While that is a fraction of the market’s 2007 peak, it’s worth pointing out that specialist residential lending has grown 66% in the past five years. Given the economic backdrop, I expect that will be a trend that will continue both in 2023 and in the years to come.
The main reason for that, of course, is that borrowers and households in general are being hammered by a toxic combination of higher mortgage rates, falling real wages and sky-high inflation.
Remember, too, that the financial resilience of households was tested to the hilt by the global pandemic,
which many people are still recovering from financially. If we tip into recession, that resilience will be tested even further.
The trouble is that, as a nation, we had become used – addicted, even – to cheap debt, therefore very few were prepared for rates to rise as high or as quickly as they have done.
A year ago, most borrowers with a decent amount of equity in their property could achieve a rate of around 2% to 3%, according to data firm Moneyfacts. However, the 1.4 million borrowers who, according
UK Finance predicts arrears and possessions cases to leap 23% and 78% to 98,500 and 7,300, respectively, in 2023. The Financial Conduct Authority (FCA) is even more pessimistic, telling a cross-party Treasury Select Commi ee recently that 570,000 homeowners risked falling into arrears over the next two years.
That is only half the story, though. There will be plenty of people out there who manage to keep up to date on their mortgage payments, but fall behind on other loans and credit card payments. As everyone reading this article will know, this can have a hugely negative effect on a borrower’s ability to access credit, and hangs on credit files for years.
to the Office for National Statistics (ONS), will see their fixed rates come up for renewal this year are looking at mortgage rates more in the 5% to 6% range, or even higher.
It’s unsurprising, then, that many people are finding it difficult to make ends meet, and are turning to unsecured debt to make it through the month. Data from the Bank of England (BoE) shows Brits piled £1.2bn of net debt onto their credit cards in November – the most in any single month since March 2004.
That is clearly a sign of financial distress, and unfortunately, many experts believe that will soon translate into higher numbers falling behind on their mortgage payments.
While the situation may seem dire, it is far from hopeless. A er years of steady recovery, the specialist residential market is once again operating at decent scale.
As recently as the middle of the last decade, trying to find a lender willing to advance cash to someone with County Court Judgments (CCJs) was like trying to find a needle in a haystack. While lending volumes are nowhere near their peak, a steady flow of lenders have entered the market with offerings aimed squarely at the very borrowers I am describing. Increased competition has led to a greater number of options for those who, through no fault of their own, have less than perfect credit histories. This year, and in the years that follow, these lenders will be called upon more and more. ●
Increased competition has led to a greater number of options for those who have less than perfect credit histories”LUCY BARRETT is managing director of Aria Finance
In the mortgage market, I was brought up with a completely manual process, physical application forms, sending and receiving supporting documents by post, and don’t let me bore you about how we went about sourcing mortgages!
The amount of real paperwork was staggering. Many advisers practising today have no conception of working without a computer, its associated applications, and access to broadband to do the heavy li ing.
However, look at how the public has adapted to buying products and services online. It is clear that advisers must acknowledge that we no longer have the god given right to expect our customers to come to us when they want or need financial advice. We must be proactive, and up-to-date technology will have a significant impact on how we all cope with the demands of Consumer Duty. It certainly would not be possible using the analogue methods I was familiar with in my younger days.
We have all had to spend time and money, in the shape of the customer relationship management (CRM) systems we have turned to, ensuring that we take care to look a er those customers who have already done business with us, enabling us to manage our existing client banks as well as new business opportunities.
SHAUN ALMOND is managing director of HLPartnership
they choose to engage with you, or risk losing them either now or in the future.
It is interesting to note that some networks have adopted systems that were never designed to cater for the very different needs of brokers specialising in the pensions and investment advice sector and those of their mortgage broker cousins. Experience tells us that adaptation can work, but unless there is a real understanding of the specific needs of the those who actually have to use the system, inevitably it can end up as something that pleases no one.
The reason for my ‘you don’t know you’re born’ routine, apart from showing my age, is simple enough: technology has made possible the sector we have now.
Without listing the innovations we all take for granted, it seems a good moment to issue a word of caution. Just because we have all of this technology, it is worth remembering that there is no such thing as optimum tech. No single provider has a 100% solution – yet.
I am not suggesting we blindly buy into every new innovation, like socalled ‘early adopters’ who feel they must have the latest mobile phone or tablet.
Those of you who are members of forward-thinking networks like HLPartnership (HLP) will already be enjoying access to technology that helps in the day-to-day business of writing mortgages and protection policies, as well as keeping your customers up to date with be er money management ideas, which also serve to keep you, their adviser, fresh in their minds.
But technology never sleeps. Today’s cu ing edge systems can become blunted over time as new services and ways to employ technology are developed.
It is therefore vital to review your technology regularly. Whether it is a sourcing system or CRM so ware, just because it was the best does not mean it has not been superceded by something else.
Let’s face it, being a mortgage broker in today’s market is all about demonstrating to new and existing clients that you can consistently deliver a first class service however
At HLP, having put in place a coordinated technology platform, we are constantly striving to ensure that it delivers what our members need. In essence, we have an integrated data capture system at the front end, linked to mortgage sourcing and protection suites, a compliance module and a sophisticated customer management back end which can be linked to our marketing engine, which can deliver broker-personalised material every month.
When all is said and done, if you strip away the jargon, this is really about being able to capture customer data, make use of it in a way that helps clients achieve their aims, keep them engaged with you over the longer term and maintain GDPR compliance.
Most important of all, whatever suppliers you use, the net result should be that it helps your business be the very best it can be, so your customers achieve the best outcomes, whatever their situation.
Today’s cutting edge systems can become blunted over time as new services and ways to employ technology are developed. It is therefore vital to review your technology regularly”
As I sit down to write this piece, we are around three weeks into the new year. While we still see a lot of activity coming through, the numbers are nowhere near as high as last January.
The ramifications of Truss and Kwarteng’s mini-Budget, and the financial shocks it caused, are now being seen in property transaction numbers. Ultimately, though, brokers can and will make the difference in seeing cases through to completion.
A number of our largest customers, including market-leading lenders in the term and short-term sector, are now allowing brokers to instruct valuations with us directly.
Traditionally, they would have to send their initial application through the lender, which would then make the decision on where to place the valuation instruction, but such is the quality of our panel and processes
that this step has been removed, to huge benefit.
We have seen this move deliver lenders dramatic time savings and improved efficiencies.
Brokers have been happy with the change as well, as they remain in charge of the application all the way up to submi ing to a lender with valuation, which in turn means the broker knows the value and is confident of the specific lender’s requirements, which reduces friction in ge ing a deal over the line.
Of course, the lender also remains confident and completely in the loop through their own dashboard, which gives them an overview of their broker-led deals as they progress, allowing them to look at each stage of the process and manage their pipeline of work.
Estimated versus actual Reporting generically, our estimated to actual value has historically seen a difference of 8% lower than anticipated, a number we’ve reported
in the past as part of our broker education programme. In our direct instructions, though, this has been reduced to under 6%.
This might be in part because we have seen more residential opportunities compared with commercial, but the stats are compelling nonetheless. As finance professionals, we all know that this makes a massive difference to the chances of a deal completing or falling by the wayside. We will continue to monitor this in 2023.
As compared with simply accepting the sale price and pushing forward regardless, a quick call to us to discuss a case is a hugely proactive step, and one which is paying dividends.
For example, if you obtain an idea of how the market may have altered in recent weeks, discussions can begin immediately with all parties to state the potential outcome and whether there is still demand from the buyer and seller to proceed.
As a business, we are always happy to put you in touch with a local valuer directly to discuss a case in advance.
We hugely welcome this change in the instruction path, and the feedback from our customers and brokers has been nothing but hugely positive.
In the current market, there are small steps that can be taken to protect buyers and sellers, which make a big difference. This is where brokers and our panel management services play a key part.
A clear view of a transaction is paramount to proceed to completion, and brokers are in the best position to control the focus, so every piece of the process falls seamlessly into place.
The mini-Budget feels somewhat like a bad dream now, but we should not forget it as a lesson in how not to do public finances.
Markets panicked, bond prices plunged, and the Bank of England was forced to step in to buy billions of pounds worth of assets to prop up pension funds.
Given the turmoil that ensued, the housing market held relatively steady.
Swap rates did not, however, and thanks to the media frenzy that followed the disastrous mini-Budget, borrowers would be forgiven for thinking the mortgage market had closed overnight. It hadn’t, of course, but the furore caused by that one fiscal misstep had dramatic ramifications.
lenders are be er prepared to deal with unexpected crises.
Although almost everyone withdrew product ranges to reprice, most had relaunched within a few days.
It’s not how any lender would have planned to implement meaningful rate rises, but it did serve as a sobering wake-up call for lenders and borrowers alike, that we’re entering a new phase of the market.
For more than a decade, interest rates have been artificially low. Best buy mortgage rates have hovered at or beneath inflation, and borrowers and lenders had to some degree taken such a low interest rate environment for granted.
Rate rises, which we all knew would have to come eventually, have nevertheless taken many people by surprise.
The media is full of personal stories told by homeowners facing mortgage repayment rises of several hundred pounds a month when their fixed deal comes to an end.
On top of eye-watering energy bills and the cost of food going through the roof, having to find even more money just to keep up with living expenses is terrifying for millions of people.
First-time buyers too feel their hopes of becoming homeowners have been thoroughly dashed, thanks to significantly higher mortgage costs. Throughout this storm of emotion – totally justified for many people, I should say – the mortgage market has stepped up.
Lenders and brokers have really come into their own. In spite of many of us feeling the strain of the higher cost of living too, everyone I know working in the mortgage industry has been incredibly resilient and reassuring during all of this, helping families and businesses find their way through.
We have to keep reminding ourselves that there is a way through. The market has started to stabilise, and should continue to do so in the months ahead.
Borrowers facing payment jumps when remortgaging do have options – quite a few, in all probability. They won’t mean life carries on unchanged, but when does it ever? First-time buyers will still become homeowners if they want to and can afford it.
House prices have been through ups and downs before, and it’s possible that what borrowers have lost in purchasing power, they may make up in lower purchase prices.
Market moves such as that happen rarely, but the domino effect caused by that repricing across the entire sector can be alarming. I have to say, though, that I think lenders across the spectrum handled that fallout with considerable calm and a steady hand.
Perhaps a er the Credit Crunch experience back in 2007 and 2008,
I think we should reflect on the fact that our industry coped well. It has been a horrible year for a lot of people, and the worry of losing the roof over your head, as well as feeling unable to afford to feed your family and heat your home, has been overwhelming for many.
As the new year gets into its stride, the outlook does remain uncertain, but now we have a slightly clearer idea of what’s coming down the road. The Government has taken the reins, and for now things seem to have stabilised, even if they do not look rosy.
Financial worry and uncertainty will still be front of mind for clients in the coming year. However, I’m confident that between us, our industry will be there to help ease some of that worry – just as we have always done. ●
In spite of many of us feeling the strain of the higher cost of living too, everyone I know working in the mortgage industry has been incredibly resilient and reassuring during all of this, helping families and businesses nd their way through”
Choose Landbay and you’ll find experts at the end of the line, smart technology designed for you, and fast decisions you can count on.
Despite the dual drags of high inflation and interest rates, and what feels like a never-ending cycle of volatility, the property market has defied the odds and held steady.
Even considering the still waters that the start of any year naturally brings, the property market continues to withstand surmounting macroeconomic challenges.
However, as we enter 2023, more waves could be ahead. This year provides a unique opportunity for mortgage brokers to showcase the fundamental role they play in helping clients navigate the complexities of the market.
For those considering buying or moving home this year, or even reevaluating their mortgage options, the outlook for 2023 is slightly daunting.
The Bank of England’s latest Money and Credit figures showed mortgage approvals for house purchases decreased to 46,100 in November 2022, from 57,900 in October. This was the lowest level since June 2020.
Data from UK Finance also warns that 1.8 million borrowers are due to roll off their fixed-term deal this year, and will be faced with a repayment shock when they next remortgage.
These statistics point to how vital brokers will be this year, and their duty of care towards clients. However, it is still widely underestimated how valuable independent brokers can be in the remortgage process.
Many homeowners incorrectly assume that their cheapest option is via product transfer through their existing lender, when there are several
other options that exist that might cost less, be easier to manage, and have a more beneficial long-term standing.
UK Finance expects to see around £212bn of product transfers to take place this year, compared with an estimated £197bn in 2022.
This increase in product transfers over other methods of remortgaging is symptomatic of a misinformed consumer market and the current economic situation we are in.
The cost-of-living crisis is severely impacting people’s affordability, and many homeowners are choosing product transfers rather than starting a new remortgage application, to avoid having these financially sensitive conversations with their lender or mortgage broker.
However, staying with an existing lender is usually not the best outcome long-term. Using a mortgage broker gives homeowners a holistic overview of products, rather than having tunnel vision with one lender.
Brokers can reach out to their clients to prevent any missed opportunities from slipping through the cracks. These conversations can happen several months before the end of the fixed term, which will not only help the client to prepare, but also allow some to have a remortgage offer locked in, up to six months prior.
Mortgage brokers can also consider the fact that people’s circumstances have changed significantly over the past few years. An increasing number are now self-employed. Others might be more restricted with their personal finances and options compared with when they first secured their mortgage deal, and now need a more affordable rate.
Independent brokers are able to look at an individual’s circumstances on a case-by-case basis, offering bespoke advice and support to get them the best deal possible.
Finally, a defining characteristic of 2023 will be the mortgage market’s ability to adapt and match products with customer demands.
As people look to secure more affordable mortgages, we expect long-term fixed rates to increase in popularity and more innovative mortgage products to enter the market.
We are already seeing some 7- and 10-year fixes with varying break clauses.However, the end of buy-to-let tax relief, for example, will be difficult for those who secured their rates before tax incentives disappeared.
Others, like first-time buyers, will be looking to the Government for help following the end of the Help to Buy scheme, specifically through other security or incentive schemes.
It would be useful to see if there are further plans to incentivise mortgage lenders to reintroduce affordable rates too, perhaps through a Government backed scheme.
Continuing economic volatility in the UK, as well as the predicted recession over the coming months, means the market will inevitably face challenges. Yet as we’ve seen before, the market is resilient and will bounce back. Rates are already coming down quicker than expected.
Through these downturns and periods of instability, mortgage brokers have been there to offer support, guidance, and encouragement that there are wider solutions available.
It’s a new year, new market and new environment. Despite the doom and gloom headlines, there’s still a lot to be positive about when looking at the resilience of our UK housing market and the duty of service mortgage brokers offer. ●
As people look to secure more a ordable mortgages, we expect long-term xed rates to increase in popularity and more innovative mortgage products to enter the market”
For some time, London has reported lower house price growth than elsewhere in the UK.
However, when you consider that the capital boasts the highest value properties in the country, perhaps it is worth pu ing that statistic into perspective. Remember, the rate of growth is a percentage, and 2% of £1m is the same as 10% of £200,000.
For centuries, London has been at the heart of international commerce, as well as financial, scientific, literary, cultural and artistic expertise.
It is no less so today. As well as being the UK’s capital, London ranks in the international network of global cities that includes Tokyo, New York, Hong Kong, Singapore and the rest.
Indeed, recent research by peer-topeer real estate investment platform easyMoney suggests that London sits within the top four most sought a er global property markets.
The city’s a ractiveness to international buyers was unaltered by the pandemic, and importantly, by Brexit.
So, while the capital is home to millions of Brits who live and work in the city on a day-to-day basis, it is also a repository of international money.
There is, therefore, more than one property market in London, in a way that does not really exist in any other city in the UK, marking it out as a global metropolis.
For this reason, it is worth singling out the UK capital from the rest of our domestic property market, because a significant slice of its appeal is contingent on a completely different profile of buyers.
Such is the power of this international pull that, in order to capitalise on it, an all-party parliamentary group has been formed to solidify London’s status as a global city.
The group’s inaugural report suggests that “given the ascendence of information technologies and the mobility and liquidity of capital, global cities have become strategic nodes in a worldwide network, delineating a new organisation architecture that is partly deterritorialised.”
Translated, the report essentially defines a global city as one in which there is a “strong relative dependence upon it from across the world.”
It goes on to note that “London’s ecosystem provides access to growth capital, policy makers, infrastructure, world class universities and talent, all in one city."
The report cites a paper wri en by the Centre for London, which posits that London will remain in the global top tier of world cities.
It explains that “this is because the combination of assets it already possesses are not easy to replicate, and ‘include super-agglomeration, deep talent pools, institutional functions and relationships, established leadership in finance, media and higher education, diversified technology strengths, and a record of openness to ideas and population’.”
The country may be facing a tough couple of years, with the Bank of England forecasting a prolonged recession, but I’d wager that its effects will be felt very differently in London compared with the rest of the country. ●
ROBIN JOHNSON is managing director of professional services at Kinleigh Folkard & Hayward
How fare the streets paved with gold? Analysis from LonRes shows that activity levels fell in the final quarter of 2022. It doesn’t seem to have hurt valuations, though, with the Office for National Statistics (ONS) recording house price inflation of 6.3% in London over the year to November.
e top end of the market recorded the strongest sales performance in 2022, 63% higher than the pre-pandemic average for properties priced at £5m and above. New instructions in the same bracket during Q4 were up 74% from pre-pandemic levels.
e £1m to £2m market saw 23% more sales in 2022 than the 2017 to 2019 average, while the £2m to £5m market recorded a 42% rise over the same period.
Tom Bill, head of UK residential research at Knight Frank, said the number of prime London exchanges in November was 16.2% higher than in 2021, and 15% up on the five-year average.
Mortgage rates may be heading north, but in London the market is supported by buyers o en divorced from the cost of domestic credit. It may seem crass given the rise of households in dire financial circumstances, but it’s also important to keep a level head when it comes to localised market dynamics.
The reality facing the economy is that, for those at the lowest end of the earnings scale, things are very tough. But for most people, the cost-of-living squeeze is unwelcome but not debilitating.
The media has a lot to answer for: headlines suggesting that house prices are falling are not only inaccurate, they’re scaring people into creating the very situation we all want to avoid.
If we stop looking at clickbait and consider the numbers, things aren’t as bad as sentiment suggests.
The latest report from the Office for National Statistics (ONS) showed that the economy grew in November, defying market expectations.
The think tank Resolution Foundation said the “surprising growth” of 0.1% in November, coupled with 0.5% growth in October, means that the UK is much less likely to have fallen into recession in 2022.
Both the Bank of England and Office for Budget Responsibility (OBR) are forecasting that the economy will shrink in the first half of 2023, but the bank’s Governor Andrew Bailey also recently said that while he still believes there will be a contraction, it’ll be long but shallow.
As I write this, the base rate is 3.5%. At the Monetary Policy Commi ee meeting at the start of February, it’s widely anticipated that the Bank of England will hike it again, by 0.25% to 0.5%, taking us up to 4%.
Obviously, this will affect affordability, particularly for those facing the end of their deals this year.
Nevertheless, we should remember that a decade of sub-1% interest rates was exceptional.
Inflation is rampant, in part because of the – again exceptional – public spending to support households and businesses through the pandemic.
As the year ended, consumer price inflation was 10.5%, down from 10.7% the previous month and 11.1% the month before that.
Base rate hikes appear to be working. Indeed, in January, Bailey told Welsh newspaper Western Mail that markets were now pricing in a more realistic future path for interest rates a er going haywire following the now infamous mini-Budget.
That forecast is now 4.5%, down from more than 6%, suggesting that the base rate may rise no further than that this year.
It’s also worth remembering that energy prices went through an, again, exceptional year in 2022 because of Russia’s invasion of Ukraine and its president Vladimir Putin’s decision to cut off oil and gas supplies to Europe.
The Government’s energy price guarantee, applied from October, was designed to protect households; in practice, it has fixed energy costs perhaps higher than they might be otherwise.
Another sign that forecasts for tomorrow are dependent on the information we have today, and that by the time we get there, everything’s changed.
As soon as the economy starts to turn, the UK instantly panics that the housing market will tumble. But the evidence is not yet conclusive.
Zoopla analysed the numbers and found that nine out of 10 UK homes saw their value rise last year.
The report is the most sensible account of the current state of the housing market I’ve seen recently.
Richard Donnell, executive director of Zoopla, said: “The profile of gains and losses varies right across the country, knocking any notion of a single market that moves in unison across the country.”
He was also reported as saying: “Housing markets vary by geography and price band.”
I couldn’t have put it more succinctly, and for those of us in the housing industry, it couldn’t be more obvious.
Local demand, supply and property condition is what determines the price of a home, and the fact is that there aren’t enough homes for sale anywhere.
The conclusion is that things are not as we might have suspected even three months ago – notwithstanding events that have negatively impacted the market in that time.
Headline grabbing prophets of doom have been many, but we are beginning to see consumer sentiment shi .
It may be that it falters again as further interest rate rises feed into that sentiment, but my suspicion is that this market is taking stock and will be back sooner than we think. ●
STEVE GOODALL is managing director of e.surv Chartered Surveyors
As soon as the economy starts to turn the UK instantly panics that the housing market will tumble”
As a leading firm, we have a duty to influence the profession and industry to deliver ever more reliable advice and use the latest tools available. This includes driving the agenda and developing innovative products and approaches. We also recognise that change is, and should be, always on the agenda, but not to the detriment of the quality of what we do.
Status quo is a familiar term, and I’m sure that there are those of us who are old enough that whenever the term is used we have to fight the urge to play air guitar as a certain tune swiftly permeates the brain. But whatever you want – apologies, I couldn’t resist – it’s always worth asking the question, is maintaining the status quo good enough?
As a business, this is something that we certainly don’t consider good enough. We are constantly striving to deliver our services in faster, more efficient and increasingly accurate ways.
This is evident in the launch of two new surveying reports – PropertyFact and EnergyFact – and how we continue to play a critical role in supporting home buyers in making greener choices to reduce emissions from their homes.
We also host regular live webinars hosted by members of the senior Countrywide Surveying team and leading figures from major lenders and other industry experts.
A major factor within all these initiatives is to deepen the level of understanding across the industry around relevant issues which
continue to impact a variety of vital mechanisms within the homebuying process.
Our series of webinars have played a crucial role in this, as they offer the perfect platform to dig that bit deeper into a host of important topics, as well as allowing hundreds of participants to be privy to the insights and experiences of some of the industry’s most vocal and leading specialist voices.
We work with most of the major lenders in the UK to help shape their mortgage and valuation policies and criteria, as well as with trade associations such as UK Finance, the Intermediary Mortgage Lenders Association (IMLA) and the Building Societies Association (BSA).
We also have an influential role within the Royal Institution of Chartered Surveyors (RICS), as John Baguley, our director of risk, technical and compliance, chairs the EWS Working Group and the UK RICS Residential Mortgage Specification Review.
The latter will have far-reaching impacts, and will drive how surveyors value in the mortgage space for years to come.
Our industry is full of innovative approaches, products and services, which are constantly evolving, and pioneering concepts making a real impact on service, delivery and efficiencies. They should all be applauded, but we can’t rest on our laurels.
It’s also prudent to point out that, whilst delivering positive change should always remain high on the agenda, this should not devalue the quality of any given offering or customer experience.
After all, the customer experience should never be compromised, and remains paramount to any successful offering in the modern mortgage and housing markets.
Success comes in many guises. There are many firms spread across the industry which are satisfied with maintaining the status quo, and whilst that might work for them on a certain level, let’s be thankful for those firms with larger agendas.
It will be exciting to chart the journey of such firms over the next 12 months to see how they can push the boundaries further, drive their sector forward, and maybe even get their business rocking all over the world. ●
The Energy Audit Commission (EAC) deployed strong language this month when it called for a national ‘war effort’ mobilisation to reduce household energy bills, cut emissions and reduce imports of fossil fuels.
This rallying cry is welcome, at a time when other geopolitical issues risk displacing the environment as a primary concern. We cannot take our foot off the accelerator. Climate change is here to stay and not cyclical in the way that recessions are.
Regardless of the economic environment, the drive for energyefficiency must take priority. As mortgage lenders, we must be in the vanguard.
At the coalface of the UK mortgage industry, we have perhaps been too narrowly focused on Energy Performance Certificate (EPC) legislation in recent years, rather than looking more broadly at the need to decarbonise the country’s housing stock and upgrade sustainability across the property market. Now real impetus is needed to start affecting real change.
Mortgage lenders have a significant role to play on the UK’s journey towards decarbonisation. We can influence the industry’s direction of travel through thought leadership, education and raising awareness.
At OSB Group, we are also keen to work with third-parties and have already started partnering with other businesses, such as energy suppliers, retrofit companies and data providers, with the aim of ultimately creating a one-stop shop to which brokers and borrowers can turn for help and support when they are thinking about sustainability.
The good news is that growing numbers of consumers appear to be on board with the journey towards net zero carbon. In the second half of 2022, we carried out extensive ‘Landlord Leaders’ research, which revealed that buy-to-let (BTL) investors were far further advanced along the path of upgrading their rental properties than had been previously assumed.
Professional landlords with four or more properties proved particularly up to green speed: 40% said they had already made environmentally-
NEIL RICHARDSON is ESG sustainability director
The value of the property may also a ract a green premium, in an environment where consumer sentiment is fast becoming more sustainability-friendly.
Our research results chime with the findings of a YouGov survey published in November 2022, which revealed that 67% of Britons are now worried about climate change and its effects, while the proportion of people willing to invest to make their own homes more energy efficient rose from 41% to 50% between September 2021 and October 2022.
At OSB Group we want to be leaders in this field, and have shaped our lending strategy for 2023 and beyond accordingly. The £50m Landlord Leaders fund we launched in December, which subsidises green lending products, is one of a ra of measures we will be using to support the evolution of the UK’s housing stock.
friendly upgrades to their property, and 35% planned to do so in future.
The 1,000-plus BTL landlords we interviewed were also more focused on their social responsibilities than might have been expected, with 72% saying they have thought or will think more about the tenant experience.
This approach dovetails neatly with the embrace of energy-efficiency and positive investor outcomes. If landlords improve the environmental credentials of a property, that means happier tenants with improved affordability and fewer voids.
Of course, radically upgrading a huge and diverse property landscape is an enormous undertaking. It will take an industry-wide effort to achieve, in coordination with Government, housebuilders and ancillary markets, but we should not be fazed.
Nationwide property improvements have been implemented before — think about the introduction of central heating in the 1970s, or inside toilets post-1900! When consumer desire for lower energy bills and more planet-friendly properties combines with a commercial appetite for more sustainable and socially responsible assets, genuine change is not just possible, but inevitable. Let’s start to make it happen. ●
We are keen to work with third-parties and have already started partnering with other businesses, such as energy suppliers, retro t companies and data providers”
Following yet another year quite unlike any other, it is fair to say it has been a challenging time in this industry, for both brokers and lenders alike.
Despite the many turbulent ups and downs, though, intermediaryonly lender Accord has not only weathered the storm, but in fact sailed out stronger than ever.
With new launches, such as its Boost Loan-to-Income (LTI) and Cascade Score ranges, as well as the ongoing success of its broker-focused resource project, Accord has seen successes even in the face of ongoing economic uncertainty.
In light of this, e Intermediary sat down with Jeremy Duncombe, managing director at Accord Mortgages, to take stock of this tumultuous year and to talk all things mortgages, from broker support to common sense lending.
As the mini-Budget fallout sent shockwaves across the industry, and the country as a whole, Accord was one of a number of lenders which temporarily withdrew its products altogether. Duncombe, looking back on the “seismic” events, and the “difficult few weeks” that followed, stands by this as the right decision for the business.
“We chose to step out of the market temporarily to allow the market to settle, as a number of lenders put their pricing up significantly,” he says.
“We felt that stepping out of the market for a short period of time, to reassess, was the right choice.”
With Swap Rates moving rapidly, and products coming on and off the market at the speed of light, it seems that Accord made the right call.
Duncombe adds: “It came as a surprise and a
Jessica O’Connor speaks with Jeremy Duncombe about the impact of the infamous mini-Budget, and how the lender is poised to develop its propositions
shock, and what happens when there’s a shock is that the markets react. Thankfully, we were back in relatively quickly with a full range, and we are comfortable with the range as it stands.”
Having withstood the impact of the infamous mini-Budget, Accord continued the year practising what it is known for, namely common sense lending – but what does this mean, exactly?
“We started off calling it ‘principle-based lending’, but I think stripping it right back it is exactly that, having a common sense approach to every single case,” Duncombe explains.
“Because of how we work, our size and flexibility, we are able to move away from yes or no answers. We can view a case holistically, rather than just in black and white.”
This holistic approach is something that Duncombe feels sets Accord apart.
He says: “The way I’ve always looked at it is, if that was your own money, would you lend it? Would you be comfortable to make a decision?”
“Things like unusual income patterns, second jobs, people getting bonuses — if our underwriters can see that track record and really understand the case, they can make a decision based on what’s in front of them, as opposed to what’s on a piece of paper.”
This attention to detail doesn’t end with individual cases, but also extends to the brokers themselves.
“I appreciate how difficult things were last year, it was a really difficult market for brokers to try and secure products and to secure the best deal they could,” Duncombe says.
“What we’ve worked on right from the beginning is trying to make sure that we see the broker as our customer.”
This is where the ‘Growth Series’ comes in – a free library of content produced by Accord, allowing brokers to develop their business in a variety of ways. It is clear that Duncombe and the team hope to put the broker first.
“We’ve now got around 8,500 people subscribed to the Growth Series,” he adds.
“It’s all free, and there’s some fantastic content in there from key spokespeople in the industry, economists, but also hints and tips as to how to, for example, have a fantastic website, or create leads, or have a great customer retention strategy.
“There is loads of stuff on there that if you tried to buy, it would cost tens of thousands of pounds.
“This is all free, and it’s just something incremental that we feel is giving back to the broker.”
Not only is Duncombe driving broker support, but he is also about to enter his third and final year as chair of the Intermediary Mortgage Lenders Association (IMLA).
Lobbying on important topics such as the Help to Buy scheme and energy efficiency, Duncombe feels that IMLA has the power to make positive change, not only to the industry, but also those working within it.
“IMLA is working closely with AMI, the Association of Mortgage Intermediaries, the broker trade body, on their inclusion and diversity agenda,” he says.
“The mortgage and financial services industry is a great place to be, but we need to encourage a more diverse working population into that.”
He adds: “Last year, IMLA put an educational event on, looking at the big topics in the mortgage industry, and invited key business leaders from the intermediary sector to come along. In 2023 we’re going to do that again, but also bring in another event aimed at new starters in the industry.
“So, we’re really trying to raise issues that are important to the intermediary sector, and also lobby regulators for topics that are, again, important to our sector.”
After a year full of unpredictability, Duncombe says that while some things are perennial, it might be foolish to make concrete predictions for the year ahead.
“What we do know is that we’re a small country with not enough houses and more demand than there is supply,” he says.
“People still want to move, people still have new jobs, new relationships, so there is a demand.
“However, I think after the last few years, trying to give predictions can be foolish and almost impossible.”
The picture is a little clearer for Accord, however, and Duncombe is looking ahead to a productive year on the horizon.
He concludes: “We will continue to focus on the areas that we do really well — our common sense approach, our service, and also developing our propositions.
“We had a fantastic year last year, with lots of new products and propositions, but 2023 doesn’t mean that we’re standing still.”
The UK property market is grappling with several big challenges, all leading to a growing housing crisis.
One in three property sales falls through, home ownership rates are trending down over the longterm, young people cannot make the first step onto the property ladder, and there is not enough social housing.
Meanwhile, mortgage approvals are at a prepandemic low, as borrowing costs rise.
To fix these problems, we need creative solutions. What would an ideal property and mortgage process look like, with the right intervention from the Government and regulators? What can the industry itself do to help shape a system that works better for everyone? The Intermediary asks property experts for their best ideas on how to reshape things for the better.
One of the biggest challenges is a lack of available properties for rent or purchase.
New houses are not being built on the scale needed – the Government’s manifesto pledge to build 300,000 new homes a year has so far fallen short. It has also cut tax breaks for landlords, resulting in some leaving the sector. Planned changes such as Energy Performance Certificate (EPC) regulations could cause yet more to sell up rather than spend the money required to bring older properties up to new green standards.
Meanwhile, more than one million households are currently on the waiting list for social housing. In 2021, 29,000 social homes were demolished or sold, while fewer than 7,000 were built. There are simply not enough social homes available, so
millions of people who would qualify are instead in the private rented sector. The Government’s Right to Buy scheme, which lets people buy their council homes at a discount, is one of the reasons there is now not enough social housing, and it should be scrapped, argues Graham Cox, director at Self Employed Mortgage Hub (SEMH).
Incentives to encourage the older generation to downsize could also help free up properties that are currently under-occupied.
The Government should also place a temporary moratorium on overseas buyers snapping up UK real estate, especially in London. As sterling has weakened against other currencies, buyers from overseas have bought up large swathes of property in the capital, pricing out locals. Many of these will be investment properties, standing empty.
Cox points out that house prices in London are 13 times an average woman's income, compared with eight times across the UK as a whole.
“This shows how distorted the market has become,” he adds.
The Government will ban ‘no-fault’ evictions to protect tenants who may fear they cannot report a problem in their rental property in case it results in an eviction notice. But Zaid Patel, director at East London sales and lettings agency Highcastle Estates, argues that it should be made easier get rid of problem tenants to “keep landlords happier. [Then] they will be less likely to sell up, more landlords will enter the market, and there will be more housing supply.”
The English Housing Survey found 3% of private renters were in rent arrears in
“I can manipulate matter, transcend space and bend time, but get a young person onto the property ladder...”
“So, we’re agreed – let’s just paper over the cracks”
2021-22, and Patel says landlords deserve more protection from non-paying tenants.
“As agents, we feel that the Government has got very biased laws towards tenants, so where the landlords have to go through licensing and will be punished for non-compliance, as they should, tenants can stay in a property without paying rent," he explains.
"We had a non-paying tenant who was supplied to us by the local authority. We applied for a possession order and the whole process took nine months, during which time the landlord didn’t get any rent. He trusted the local authority, which then left him to deal with the problem, so I think central Government and local authorities have to take more responsibility.”
The consensus among many experts is that, to help younger generations buy homes of their own, schools should lay the groundwork. Better financial education could prepare them for the realities of borrowing, budgeting and saving, and the housebuying process. It could also help them understand the importance of their credit record, and paying rent on time.
Some mortgage brokers think bringing back 100% or even 125% mortgages for first-time buyers could help, or at the very least a bold scheme to replace the now-defunct Help to Buy. Creative solutions such as rent to buy and co-ownership schemes could help young people on to the ladder.
However, Kylie-Ann Gatecliffe, director at mortgage broker KAG Financial, is concerned that shared ownership has a sting in the tail in the form of high rents and service charges.
Indeed, Gatecliffe calls for a reworking of the system, having seen people pay more in rent and mortgage on shared ownership properties than they would on a normal mortgage.
“That needs to be reassessed, because buying a share rather than the whole amount should always be cheaper than buying a property in the traditional way,” she adds.
With wage growth stagnant, house prices need to find a lower level to be within reach. In the 14 years Gatecliffe has advised clients, it has become ever harder to save a deposit and borrow enough relative to their wages to buy a home.
“Affordability is the biggest issue we are seeing,” she says. “We are really pushing the envelope in the prices we are seeing, and what that works out at as multiples of income.”
It is unclear what would need to happen for the situation to change, and this change certainly is not going to happen soon.
Gatecliffe explains: "I don’t even know how the Government would tackle house prices, because if
There are 15.6 million owner-occupied households in the UK, representing 64% of all households in 2021-22.
Since 2013-14 there have been more outright owners than mortgagors. In 2021-22, 35% of households were outright owners, while a further 30% were mortgagors. After nearly doubling in size since the early 2000s, the private rented sector has accounted for about one fth of households in England since 2013-14. In 2021, 29,000 social homes were demolished or sold, while fewer than 7,000 were built.
Home ownership has been in decline in the UK, falling from an all-time high of 70.9% in 2003 to 63.9% in 2018. The gure is forecast to edge up to 64.5% in 2024.
A UK home cost eight times the average salary in 2021.
The average UK house price was £295,000 in October 2022.
The total value of outstanding residential mortgages hit £1.67trn at the end of Q3 2022, 4.1% higher than one year earlier.
The average interest rate on a 75% loan-to-value (LTV) 5-year xed-rate mortgage was 5.06% in January 2023.
demand is still there and people are still managing to buy, it’s not going to slow down. There’s a lot of talk about a big crash happening this year, but judging by how busy we’ve been this January, I’m not sure we are going to see much of a dip at all."
Cox does expect house prices to fall from here, but he does not think we need more Government initiatives, which keep prices inflated.
“We’re certainly going to see lower house prices, which is a good thing for many people. Hopefully the Government won’t step in with further schemes to try and prop up prices, which is what they have always done traditionally," he explains.
“They need to realise there’s not much more they can do and just let prices drift down and find a level – I think they could fall 15% to 20% this year.”
The Bank of England could curb rampant house price growth to allow more first-time buyers on to the property ladder by including house price inflation within its 2% inflation target, he suggests. In 2003, the consumer price index (CPI) replaced the retail price index (RPI) as the Government’s official inflation measure, removing the mortgage interest costs element. From 2030, the Government will align RPI with CPI plus owneroccupier housing costs (CPIH).
“I absolutely think house prices should be included in the inflation target, basically to restrict house price growth. I think it’s doing enormous damage to the economy and people’s living standards. It is not really benefiting anyone other than the banks, the housebuilders and people with multiple properties.”
Paul Davies, owner and director of mortgage broker About Mortgages and At Home Estate and Lettings Agency, says the best thing the Government could do to improve the sector would be to properly regulate estate agents.
Estate agents do operate under the Estate Agents Act 1979, and the Consumer Protection from Unfair Trading Regulations 2008, and must belong to an approved consumer redress scheme, but they are not currently required by law to be licensed or qualified, whereas mortgage advisers must provide a Criminal Records Bureau (CRB) check to the regulator, which will make a decision on authorisation according to the level of dishonesty shown.
“A financial adviser or a mortgage adviser needs several years’ worth of qualifications, training
and [continued professional development (CPD)]. There’s no requirement in estate agency whatsoever. I find it insane that people are advising on such a huge asset and there’s no overarching standard, qualification or licensing required. I could be convicted criminal and be an estate agent, and there are people that I’m aware of that are operating under that banner.”
The 2019 working group Regulation of Property Agents (RoPA) advised the Government on ways to raise professional standards within the sector, recommending licensing, qualifications, a new regulator, and a ‘fit and proper person’ test. Four years later, the Government is still considering the RoPA's proposed reforms.
Property market analyst Kate Faulkner OBE, founder of Propertychecklists.co.uk, agrees that bringing in these changes would have huge benefits to the industry.
“Everybody around us is regulated,” she says. “Part of the problem is that we‘ve had so many housing ministers that there’s never been one in the post long enough to really understand the key issues in the market.”
While the solutions to some of these big problems can only come from Government, there is a lot the industry can do from the ground up, if key players work together. During the pandemic, industry representatives gathered and quickly agreed a strategy to keep the sector doing business safely, says Faulkner. Surveyors, estate agents, buyers, and everyone involved in visiting properties followed the same set of rules. Faulkner says “collaboration on a colossal scale” was key to that success, and that it is a formula that can be repeated.
She adds: “There was a massive issue about some new electrical rules, and the National Residential Landlords Association (NRLA) and one of the national trade groups solved it over a coffee. Nobody will know about it, but it was all sorted. How lovely is that?”
In the same vein, Faulkner would like to see local taskforces led by MPs responsible for delivering homes in their local area, in collaboration with private landlords, social housing providers and developers. Data from Savills shows that one in five local authorities still don’t have a National Planning Policy Framework (NPPF) compliant local plan for housing after 10 years.
“We need everybody to come together, and it can work. Politicians don’t believe they can solve the housing crisis but I do,” she says.
“I’m confident we can because I know the industry and it’s a good industry. We could get this done.” ●
hile the festive break may seem a distant memory now, it’s still early enough in the year to ask: what is the biggest challenge facing landlords in 2023?
Ask that to a room of mortgage professionals and the discussion will still be in full flow as the lights are being turned off: never ending regulatory creep, a hostile tax regime, and costly energy-efficiency legislation are all major challenges.
However, there is an emerging issue which, for me, trumps all of these. That is, of course, the fallout effect of higher mortgage rates.
Unless you have been living under a rock, you will be all too aware how much mortgage rates have risen in the buy-to-let (BTL) sector over the past 12 months. A gloomy economic outlook, high inflation, base rate rises, the disastrous mini-Budget – these have all caused swap rates to spiral.
At the end of January last year, 2- and 5-year swaps were around 1.15% and 1.19%, respectively. At the end of last month they stood at around 4% and 3.6%, although both are noticeably lower than they were in December.
As we know, swap rates directly influence fixed-rate pricing, and so the cost of borrowing has risen in tandem.
According to data provider Moneyfacts, the average 60% loan-tovalue (LTV) buy-to-let product was around 2.5% a year ago, whereas today it’s more like 5.6%.
This causes a raft of problems for landlords and, like I said, for me this is perhaps the biggest challenge problem landlords are facing at present.
WWhy? Well, because it is likely to cause many landlords to fall foul of lenders’ debt service coverage ratio (DSCR) criteria.
The issue is that rents have failed to keep pace with the rise in mortgage rates, and so landlords in low-yielding areas are unable to pass the additional cost onto tenants. If landlords can’t charge higher rents, they may not be able to borrow as much, because they cannot pass lenders’ DSCR requirements.
ANDREW FERGUSON is managing director of buy-to-let at West One Loans
The first is taking a more flexible approach to the DSCR itself. West One, for example, has recently launched a series of limited edition deals where the interest cover ratio (ICR) is 100%, instead of 125% or more.
You may ask yourself if this is a wise, and of course, this is not a mass market option. But for high-quality borrowers with good long-term track records, it can be a low risk solution.
For that reason, I expect we will not see mainstream lenders adopt this approach. Instead, it will be specialist lenders, which offer bespoke underwriting and are more tolerant to risk.
The second thing lenders can do is become more flexible with their rate and fee options.
As a result, there will be a raft of high-quality borrowers out there at the moment who will find it difficult or impossible to refinance at the same level of leverage they did a few years ago.
The only two options these landlords have is either to move onto their existing lender’s pricey reversion rate, or stump up extra cash to get the purchase or remortgage over the line.
That is fine if you are a wealthier landlord with a large property portfolio, but what about those who are using their one or two property portfolio as their pension? In effect, they become mortgage prisoners.
Thankfully, there are a couple of levers open to lenders that allow them to continue lending to borrowers in this position.
For years, the standard buy-tolet mortgage arrangement fee has been around 2%, particularly in the specialist end of the market.
However, what if lenders were instead to charge a lower rate but higher fee of, say, 5%? That way, the borrower has a better chance of getting the leverage they need.
One of the benefits to lenders is that the approach is entirely flexible, and the rate or fee can be set at such a level that they don’t lose money.
We’re in a very difficult phase in the economic cycle, and so landlords will need plenty of support from the lender community. It’s important, therefore, that lenders innovate sensibly to ease a bit of the pressure.
As the old saying goes: in the midst of every crisis, lies great opportunity. For us, that opportunity is to innovate. ●
The average 60% LTV buy-to-let product was around 2.5% a year ago, today it’s more like 5.6%. This causes a raft of problems for landlords”
Many landlords across the UK are facing some big decisions in 2023. Questions also continue to be asked of the private rented sector, as this vital component within the wider housing market faces an increasing amount of pressure from all links in the chain.
In the current market, it’s evident that rising mortgage costs are placing additional pressure on many landlords, which is inevitably leading to further considerations over the levels of rent being charged, and how yields are stacking up across a variety of investment types.
Thankfully, a er a highly turbulent few months from both a landlord and lender perspective, we are experiencing some sustained market stability, helping to bolster confidence levels across a number of key sectors.
The rapid mortgage rate rises of late 2022 are also now subject to a positive downward trend, and increased levels of competition are likely to emerge across the buy-to-let market to signify further encouraging signs for landlords and their tenants.
It’s certainly been a tricky period for landlords and advisers to keep track of events and influencing factors in and around the buy-to-let sector, which makes this an opportune time to outline some selected trends heading into 2023.
For this, we can use the latest BVA BDRC Landlord Panel research for Q4 2022, as this offers an array of pertinent insights into performance, sentiment and outlying tendencies across the buy-to-let marketplace.
I’ll try to focus on some of the more positive elements, as I firmly believe that this is a sector which will
continue to generate opportunities for forward-thinking landlords, and for those advisers who maintain a strong understanding of such a dynamic landscape.
According to the research, perceived tenant demand remained stable in Q4, holding firm at 65% reporting ‘increased’ or ‘slightly increased’ demand, with a recent low of only 14% reporting that they were unsure of the current demand situation.
Interestingly, landlords in Central London reported the strongest increase in demand, and also the highest strength of current demand.
Tenant demand in the North West was suggested to have remained relatively constrained, although it has reportedly fallen on a net basis in a number of regions, including the West Midlands, the South East and outer London. Those le ing rental property in the West Midlands had the lowest net demand strength.
The impact of these price pressures on rent is already evident. Rental yields held firm in Q4 2022 at 5.7%, and landlords report that they have increased, and will continue to increase, rents in H1 of 2023.
Larger landlords were deemed to be the most aggressive when it comes to planned rental increases across their portfolios, and are 20% more likely than average to levy a H1 increase.
The most common driving force behind these rental rises were increased running costs. Significantly, the contribution of rising mortgage costs has increased from 40% in Q3 to 47% in Q4. Landlords also appear inclined to increase rents to align with local market rents (61%).
In terms of opportunities for mortgage advisers, three in
GRANT HENDRY is director of sales at Foundation Home Loans
10 leveraged landlords plan to remortgage in the next 12 months.
Unsurprisingly, due to having more properties on average, portfolio landlords with four or more buyto-let mortgages are more likely to intend to remortgage in the next year compared with their ‘consumer’ buy-to-let landlord counterparts (46% versus 17%).
Most landlords intending to remortgage in the next year either plan to do so as an individual (50%) or within a limited company (25%), with a minority either unsure at this current moment (14%) or intending to remortgage in the name or their partner or spouse (6%).The remaining 7% responded ‘other’ or ‘don’t know’.
Advisers are also relied upon for the type of rate chosen in these times; three in 10 plan to remortgage with a preference for a fixed rate product, whereas a year ago in Q4 of 2021, 55% of landlords were aiming for a 5-year fix. One landlord in three was unsure at this stage what kind of a product they would select, with one in 10 deferring to their broker’s advice.
Finally, there is a huge amount of remortgage business set to be completed in 2023. With some lingering economic uncertainty combined with additional complexity around lending criteria, policy, affordability and interest cover ratios (ICRs) there are plenty of opportunities for proactive advisers to demonstrate their expertise and value to even the most experienced landlords. Working closely with specialist lenders will provide many of the answers they and their clients require over the course of Q1 and beyond. ●
The final buy-to-let industry lending figures for 2022 are not yet available at the time of writing, but it was a strong year for the sector and a record year for us.
UK Finance has lowered its lending forecasts for 2023 in comparison with 2022, for both residential and buy-tolet lending, but I think the market will still be buoyant.
This is despite the buy-to-let sector ge ing some stick in both the trade press and national newspapers, which have tended to focus on landlords selling up. While it is true some landlords are selling, many are also buying.
What we are seeing is portfolio landlords, those with four or more properties, expanding their businesses and looking for opportunities to invest further. Intermediaries should be aware that the buy-to-let market is still strong, and landlords want to add to their portfolios, despite what the press would have you believe.
While mortgage rates are higher than a year ago, they are coming down, following the rate hikes and removal of products a er the mini-Budget last September. Swap rates have been falling and competition among lenders means intermediaries will be seeing some good rates coming through. Even though the Bank of England base rate is forecast to rise further, it’s what happens in the money markets, and having strong, diverse funding to tap into ma ers for non-bank lenders like us.
The various house price indices are all predicting a fall in home values this
year, ranging from 5% to 30%. That is a big difference, although the majority appear to be somewhere around the -10% mark.
A fall in house prices means there will be properties for sale that landlords could consider value for money. We know there are landlords waiting for the right opportunities to come along, and others are taking a ‘wait and see’ approach as to what happens. These landlords are watching the housing market, the economy, mortgage rates, inflation, rents, yields and regulation.
We recently carried out research among buy-to-let landlords and found positivity among the vast majority, with medium to larger landlords actively looking to increase their portfolios (see table). Our survey found that 42% of landlords intend to buy property in the next 12 months, 21% don’t know and 37% are not looking to purchase.
The main reason for 54% of landlords considering buying is
the potential drop in house prices. The second biggest reason, cited by 30%, was the increase in demand as the supply of rental properties has lowered.
Almost four out of five landlords (79%) who intend to buy more property do not intend to sell any of their existing properties.
The rest said they may sell some property and the main reason given by three quarters was dependent on remortgage costs. The other quarter said they will sell less efficient property in order to raise the capital to buy others.
One in five landlords don’t know if they will buy more property, with most of those saying the reason for hesitancy is because they are waiting to see how the market pans out. There are also those in the unsure category who will buy if the right opportunity arises.
Meanwhile, 37% of landlords said they don’t intend to buy more property, but 64% of those don’t intend to sell any either.
PAUL BRETT is managing director of intermediaries at LandbayWhat we are seeing is portfolio landlords, those with four or more properties, expanding their businesses and looking for opportunities to invest further”
According to our survey, 70% of landlords do not intend to sell any of their properties in the next 12 months. For those who do intend to sell, it’s more of a policy of managing their portfolio, as 28% will dispose of some of their properties, and only 2% intend to sell them all.
Buy-to-let is a long-term investment, and buying and selling has always been an everyday occurrence of property investment.
For many landlords, it is a full-time business, but there are plenty of people who invest in property to boost their pension, regard it as an investment for their children’s future, or just to provide some extra income.
Whatever their reasons, intermediaries should be prepared for buy-to-let purchase business, especially from portfolio landlords, as well as large numbers of remortgaging due this year.
One in five landlords don’t know if they will buy more property, with most of those saying the reason for hesitancy is because they are waiting to see how the market pans out. There are also those in the unsure category who will buy if the right opportunity arises”
ates and fees will always be important when selecting a buy-to-let mortgage, but with the sector facing operational challenges brought on by surges in business in recent years, I would argue that cheapest isn’t always best. Service should also be considered an essential facet of finding the right deal.
In all industries, providing a first class service has always been central to successful business, but this has been heightened since the pandemic. In today’s fluid property market, it could be argued that it’s more important than ever.
The pandemic set the property market alight, as lockdown led us to dream of living in bigger homes in be er locations, and the Stamp Duty holiday provided a financial incentive to turn those dreams into reality.
With house prices swelling, homeowners enjoyed healthy equity, which combined with historically low interest rates to drive record levels of mortgage lending.
While the surges in activity were great for business, they tested service levels, and delays were seen with lenders, surveyors, conveyancers, Land Registry and local authorities.
At Paragon, record volumes of business challenged us operationally, but this helped us to improve. Pu ing so much pressure through the pipes shows where you spring leaks.
We fixed the leaks by streamlining processes while doubling our capacity, through a combination of recruitment and nurturing our existing talent.
Continued growth in lending volumes and a challenging economic environment mean that service has remained an essential part of the process.
Last year, we saw the mini-Budget leave lenders with li le option but
to withdraw mortgage products. On occasion, this was done with li le notice given to the market, as lenders tried to minimise the resulting surges in business that they would struggle to efficiently process.
Many intermediaries understood the difficult position that lenders were in, but were understandably frustrated as deals fell through, sometimes at the eleventh hour.
Judging by comments posted in forums and trade publications, there was a sense that some lenders could have handled the situation more effectively. I think these experiences will stick in the memory, leading brokers to be reluctant to place business where they have been burned in the past.
Despite this, the nature of the market which is quite different to what many are used to means that it is in everyone’s best interest for lenders and intermediaries to forge strong relationships.
The economic climate has ushered in a shi away from fixed rates, so brokers are now offering advice on a broader range of products.
For example, we have seen an increased number of borrowers opting for variable rate mortgages, but with rates still so fluid, borrowers have been surprised to find that their first mortgage repayment is higher than they expected.
Here, we have worked with our intermediaries to provide borrowers with an explanation as to why this is the case, and help them be er understand the implications of these types of options.
Lenders will need to innovate and provide borrowers with products that enable much-needed investment in rented homes through economically uncertain times.
The ‘track to fix’ feature we made available on our discounted variable rate mortgages is one example of this, offering landlords the flexibility of tracking rates before switching to one of our fixed-rate mortgages once they reach a level that works for them.
While it’s important not to patronise people, the novel nature of this type of product and the dominance of fixed-rate mortgages for many years mean that borrowers and brokers may have li le experience of anything like it, and will need extra support to understand how it works.
Of course, providing finance product education is just one small step, but it forms part of a greater emphasis on providing borrowers with a be er service, something that both brokers and lenders should be striving to do. ●
RICHARD ROWNTREE is managing director at mortgages at Paragon BankWe have seen an increased number opting for variable rate mortgages, but with rates still so fluid, borrowers have been surprised to find that their first mortgage repayment is higher than they expected”
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with commercial properties. As part of a balanced portfolio, and as long as the residential units continue to make up the majority of the portfolio by value, then HTB is able to support these professional investors.
Diversification is a key strategy for investors in all forms of assets, and that’s certainly true for property. Having different types of property in a portfolio can offer a landlord some protection should the prospects for a particular sector become less attractive.
At HTB, we are seeing a renewed focus on diversification from the landlords we work with in the North of England. That drive to diversify and spread the risk within a portfolio is taking form in a couple of key ways.
The first is that significant numbers of our landlord borrowers are looking at the challenges ahead, and making the decision to part with their lower yielding properties.
This isn’t a case of leaving the market, though while there has been plenty of speculation that landlords may look to exit as a result of measures such as the new Energy Performance Certificate (EPC) rating minimums, which will come into force in 2025, in practice we are seeing that demand for property remains as strong as ever. No, these investors
are actively looking to replace lower yielding properties with ones from a different part of the market which deliver a more eye-catching yield.
A good example here is the holiday let, which has become much more popular with investors over the last couple of years as greater numbers of Brits have opted for staycations.
It’s not just the demand from holidaymakers which has been such a boon though the fact that they do not require an assured shorthold tenancy (AST), as well as allowing the landlord to reside in the property for one month of the year, have also added to their appeal.
Another tactic to note from professional landlords in the North who are looking to diversify, has been to look towards the commercial property sector. Over the past few years we have seen no shortage of landlords snapping up semicommercial properties as a means of spreading risk, dipping their toes into a different form of asset which could potentially deliver a greater return over the long-term. This trend has developed still further, to the point that some landlords are looking to supplement their residential portfolio
This isn’t something all lenders are able to help with, but it’s an area of the market that HTB understands well. That’s why when portfolio landlords plan to diversify, beyond the traditional next steps of houses in multiple occupancy (HMOs) or holiday lets and into whole different classes of property, brokers know that HTB can assist those clients with their plans.
One of our brokers, Brian Walters at Newsource Commercial Finance Limited, adds: “We believe that the current market is providing a number of challenges to brokers, particularly where property finance is their main focus. These primarily relate to the recent interest rate rises, which are impacting on the ability of loans to meet lenders’ serviceability criteria. Inevitably, this has had a negative impact on loan-to-values (LTVs), whilst at the same time causing a drop in enquiries and applications. We have also seen many of the challenger bank lenders failing to deliver because of poor service levels.
“There are, however, opportunities for brokers prepared to move their focus towards those areas of the market where there has been less of an impact; for example, holiday lets and HMOs, developer exit finance and bridging.
“These are all areas where we find HTB provides great support for us whilst also delivering market leading service level agreements (SLAs).” ●
The start of 2023 has been off to a busy start for both the residential and buy-to-let mortgage markets. Although interest rates from lenders have decreased since the end of 2022, the higher rental stress rates continue to be a major concern among landlords.
Those looking to remortgage in 2023 will need to plan and budget; not only for the interest rates, but for the impact the current interest rates will have on the stress rates.
an investment. Interest-only mortgage payments are a lower monthly cost than the same mortgage on a capital repayment basis; by choosing an interest-only mortgage, it can maximise monthly cashflow on buyto-let properties.
Those who have been using the surplus to pay down the capital on the mortgage balance may be in a stronger position when they come to remortgage in the current climate.
However, with other challenges facing buy-to-let landlords, the surplus may have been used for other expenses, such as energy performance improvements, or other property maintenance. However, the case for many looking to remortgage will be that their balance has not decreased since the last time they mortgaged.
so en the blow and go some way towards compensating against the higher stress rate.
Other funding options could be used to cover the shortfall offered by the buy-to-let lender. For example, second charge lending on one property could be used against another.
Alternatively, a mortgage on another property with additional borrowing may be the most costeffective answer.
This will all be case by case, and landlords should speak to a mortgage broker — a buy-to-let specialist — to consider all of their options.
For those who might not know, stress rates mean that the rental income received must exceed the cost of the mortgage. These are normally set at either 125% or 145% of the expected rental income.
Lenders do this to ensure there is a surplus in rental income and to protect against defaults. As an example, landlords who mortgaged in the last few years may have been offered a product based on a 5% at 125% or 145% stress rate. If this moves to 6% or 7% at 125% or 145%, then the same landlord with the same rental income will typically be able to borrow less on a mortgage than they originally did.
Many landlords choose to mortgage their buy-to-lets on an interest-only basis. This is because it is not their principal home and is seen as
If this is the case, and the mortgage was high based on a stress test of 4% or 5%, then these landlords need to plan how they will pay a potential shortfall in the new mortgage.
The rental market is strong, so an increase in the rental income may
Those landlords who do not need to remortgage this year can breathe a small sigh of relief, but should still take note of the above.
Landlords need to speak to a broker and find out what the current stress rates mean for them and their portfolio. Planning in advance could save a stressful situation at the time of remortgage. ●
SOFIA JONES is managing director of Penny HouseThose landlords who do not need to remortgage this year can breathe a small sigh of relief”
property that would have previously been labelled a consumer buy-to-let as a holiday let, qualifying for the more a ractive criteria that come with this lending category.
The domestic travel market is a growing sector, with spending estimated at over £15bn last year, considerably higher than the prepandemic level.
Alongside this surge in spending and the general popularity of holidaying closer to home, the UK holiday let market continues to thrive.
As a result, mortgage brokers have a great opportunity to build business as investors look to buy suitable properties and capitalise on the trend.
A rm favourite Holiday company Away Resorts is forecasting another bumper year for staycations, a er recording increased demand for holidays here in the UK. Year-on-year bookings reportedly climbed by 30% in 2022, with the trend set to continue in 2023.
The reasons why staycations remain popular are many. The cost-of-living crisis is one factor, as inflation levels continue to leave a damaging effect on the value of incomes. Holidaying closer to home can significantly reduce travel costs, and a self-catering option gives further cost saving
opportunities, avoiding the expense of eating out.
Commentary from Mintel indicates that many families missed out on important family celebrations during Covid-19 due to lockdowns and social restrictions, a factor no doubt boosting current domestic holiday bookings. Their findings also indicate that the staycation trend is here to stay, leading to further investment in accommodation and family-focused experiences.
In general, the demand for staycation holiday options is strong, and bookings for UK-based holiday let accommodation are no different, with healthy rental yields continuing to provide a solid return for many investors.
As a leading holiday let mortgage provider, both in regard to pricing and criteria, we’re seeing high levels of interest from brokers working on behalf of customers who want to buy a holiday let property for investment purposes. As well as standard features, Harpenden’s specialist product range includes the ability to purchase a
Additionally, there are no restrictions on location for the property purchase, giving wider buying options within England and Wales, there are 90 days of personal usage allowance per annum, Airbnb is considered, and we lend in town and city centres as well as coastal areas and on properties above commercial units. Other features include: top slicing; up to three properties on one title considered; Holiday Let/ Second Home - max loan-to-value (LTV) 80%, repayment 75% interestonly, with a minimum income of £30,000 required.
Manual underwriting provides a more in-depth review of the customer’s financial position and a greater opportunity for complex applications to be accepted, whereas many high street lenders solely rely on the use of algorithms.
Ideally, the let property will be self-funding from the rental income, but in some cases we can also look into an applicant’s income in more detail, so there is greater opportunity to say ‘yes’!
The customer’s earned income is considered from a range of sources in addition to salary, including their savings, investments and pension income when a lending decision is made.
When it comes to holiday let financing, the current market provides considerable opportunities for both brokers and their investor customers. ●
is key account manager at Harpenden Building Society
s every unimaginative intro will tell you, now is the time to look forward and make your plans for the year to come.
A er a hectic few months in the buy-to-let market, we’re seeing some stability and confidence return.
We’ve ushered in the New Year with a broad repricing of our range, and the reintroduction of holiday lets, as well as large houses in multiple occupation (HMOs) for student lets.
A er a couple of booming years for this part of the market, 2023 looks like a very different environment for holiday let investments, so what should brokers and their landlords expect?
The holiday let and Airbnb boom really took off in 2020 and 2021 as the pandemic hit overseas travel hard, but this had been a growing section of the holiday market for years.
Landlords who got into the sector in those boom years on 2-year deals, as well as those who took on longerterm fixes before, will be approaching remortgage in 2023.
This will be a key juncture for many landlords, as the booming market they joined at a low price point now looks very different, even if rates are beginning to move back down a er the highs of autumn 2022.
This could look very different depending on landlord confidence, but could mean several outcomes: Selling: It could be a strong buyer’s market — more on this later — if holiday home investors decide to exit, deciding the cost-of-living impact on holiday spending is too much to risk, especially with higher rates. Refinancing into regular Buy-to-Lets: Regardless of the relative strengths and weaknesses of the holiday let market, the need for
long-term homes never goes down, so landlords could look to refinance their home into a longer-term let.
Evaluating the market with a tracker mortgage: It bears repeating that the holiday let market has boomed in the past few years, with data showing that 11,000 properties became second homes or holiday lets in between 2021 and 2022. The demand is there for this type of shortterm let, for business or pleasure, and many landlords will look to keep faith even in a challenging rate environment, at which point flexible tracker mortgages will be very valuable
Whatever outcome your clients end up following, there will be demand for these homes throughout the year, which should continue encouraging property investors.
One of the key advantages to portfolio landlords of investing in holiday lets was the diversification it offered in managing risk. In this environment, managing risk is on everyone’s mind.
Therefore we could see more investment in the holiday let market, especially as other regions in the UK see more opportunities.
Our business development manager (BDM) for the North East, Chris Dolan, said in September that demand for holiday lets was increasing as landlords looked to take advantage of lower house prices.
If we see landlords leaving the market, and if house prices fall as they are expected to, this could be the best year to expand portfolios and diversify income streams. ●
The demand is there for this type of short-term let, for business or pleasure, and many landlords will look to keep faith even in a challenging rate environment, at which point flexible tracker mortgages will be very valuable”
The numbers don’t lie. In Knowledge Bank’s monthly criteria index, maximum age at end of term was the most searched for topic every single month in 2022.
That just goes to show the huge demand for mortgage options from those who, whether they’re 50 or in their 90s, want to be able to keep living the lives they love. But why is it that so many borrowers and intermediaries are dying to know the maximum age you could be when your mortgage term ends?
Part of the answer lies in the immediate concerns of people across the UK. Knowledge Bank says that a “perfect storm of high inflation, a cost-of-living crisis and a changing government” has driven more people to explore their financial options.
However, this is certainly not the full picture. A mortgage can help with all kinds of big life plans – helping your kids or grandkids to get on the property ladder, downsizing to that dream apartment by the sea, and so much more.
With the right help, people can do anything, and with typical terms stretching from the traditional 20 or 25 years to 30 or even 40, there’s no reason why age should be a barrier to anyone who could benefit from a mortgage from 50 to 90-plus.
As a lender that designs mortgages specifically for this age group, it’s sadly something we see all too o en.
For example, imagine a 50-yearold wants to take out a mortgage with a 30-year term. They will be 80 when the loan matures and likely
to be se led into retirement, so will they be able to afford the mortgage? They might, but for many high street lenders, a case like this is just a plain ‘no’.
This is where intermediaries, working closely beside a lender with a ‘can-do’ approach, can really make a difference. There are excellent mortgage options out there for borrowers aged 50 to 90-plus, and when lenders can bridge this gap in the market, it leads to truly special outcomes.
In fact, the oldest customer we’ve helped was 92 when she completed on her mortgage. Despite being retired with several incomes, we were able to prove plausible income, which meant she could secure a mortgage for the penthouse apartment of her dreams.
Being able to help like this is exactly why we founded LiveMore. People work hard and spend decades managing their money wisely – if they can afford to pay for a mortgage, they should have the opportunity to do so.
Since forming LiveMore in 2020, we have developed a broad range of products to cater for the 50 to 90plus age group, from interest-only to capital repayment.
It’s more important than ever that the industry understands borrowers and has the right solutions for their needs. New Treating Customers Fairly and Consumer Duty rules mean that customers should be offered the best product for their individual circumstances. Advisers must have a holistic view of their client’s needs, and they need lending partners they can trust to offer suitable options.
We’re always working behind the scenes to develop new options that reflect the needs of our customer base.
In the next couple of months, we will move into the next phase of our lending journey with equity release.
At the same time, we bring a ‘can-do’ approach to each case that ensures that when an intermediary has a 50 to 90-plus case on their desk, they know they can call us.
We welcome all incomes to provide maximum borrowing power, which could be a self-invested personal pension (SIPP) or state pension, rental or overseas income, and more.
This is how we’re able to help so many borrowers who are selfemployed, which was another popular search topic on Knowledge Bank’s index throughout much of last year.
So, as more people keep discovering the power of mortgages to transform lives aged 50 to 90-plus, lenders and intermediaries should partner up to secure great outcomes. ●
LEON DIAMOND is CEO and founder of LiveMore
With typical terms stretching from the traditional 20 or 25 years to 30 or even 40, there’s no reason why age should be a barrier to anyone who could bene t from a mortgage”
More than ever before, consumers dictate what they want and need from a product or service. Companies are having to lean into this by providing the tools and resources needed to be successful. Being transparent and giving consumers information to make well-informed decisions that put them one step closer to achieving their goals will help achieve this, motivating the industry to be an innovative, driving force for consumer choice.
Due to the impact of the pandemic, the past couple of years have accelerated the role of technology within the sector, inspiring firms to invest in innovations to support the essential step of seeking regulated financial advice, personalised to people’s circumstances.
The vibrant competition of today’s market offers older homeowners an unprecedented choice of products for secure, flexible finance. Bringing these choices, knowledge and information direct to the consumer helps display the benefits of accessing property wealth in later life.
Until the launch of Equity Release Supermarket’s ‘people first’ equity release search engine – smartER™ –consumers had never been able to take control and research their own later life lending options.
Now, using the smartER™ platform, it’s straightforward for potential borrowers to get whole-of-market understanding of the plans available to them, and a general understanding of their financial options in real time before speaking to an adviser.
The tech invites borrowers with a thirst for knowledge to share information about their requirements – such as purpose of the loan, lump sum or monthly income, details of
the property – before being presented with a shortlist of plans based solely on their personal circumstances.
This allows for full transparency, empowering customers to conduct their own research, and opens a new window of opportunity for the industry. This also ensures that when consumers do feel the time is right to speak with an adviser, they have the confidence, and the reassurance that equity release is the right solution for them.
Information provided by the customer to generate results is subsequently shared with their adviser, so that when they begin initial conversations, the adviser already has a detailed understanding of the consumer and what they are looking to achieve financially through equity release – complementing the advice process, as opposed to replacing it.
Indeed, to quote a phrase being used a lot recently: “Artificial intelligence won’t replace jobs, people who use artificial intelligence will.”
The smartER™ platform gives consumers the information they need at the right time, presented in a way they can understand. This is particularly important due to the Financial Conduct Authority’s (FCA) ‘Consumer Duty’ principles, which set out higher and clearer standards of consumer protection, requiring firms to put customers’ needs first. The equity release landscape has increasingly become a mainstream financial planning solution over the years. Lenders and advisers alike understand the importance of offering customers as much information as possible to help them enter the advice process with the ability to make informed decisions. Simplifying the whole research process for customers through the use of smart tech seeks to add greater benefit to all parties involved, which smartER™ achieves.
MARK GREGORY is CEO and founder of Equity Release Supermarket
This technology is already thriving and has been well received by consumers since launch. Those who use smartER are six times more likely to complete on a product versus traditional customer acquisition strategies. More than a third of customers also tend to revisit the platform to gain different quotes due to fluctuating rates, or changing their parameters, showing that consumers are confident in conducting their own research prior to speaking to a financial adviser.
Technology doesn’t stand still, there is a constant need to innovate and evolve. This sophisticated mortgage sourcing platform – equivalent to the mortgage industry’s popular online digital sourcing solutions – is the first part of a front-end user experience that feeds into an end-to-end customer relationship management (CRM) solution for specialist advisers, and the industry’s first bespoke equity release CRM system.
It offers a solution that allows for seamless integration of the entire advice journey, enhances the customer experience for those who have already entered through smartER™, and improves advisers’ productivity with digital fact-finds and research tools, all topped and tailed by a much shorter product confirmation le er, or suitability report.
Every element of the CRM and smartER™ platform plug into one unified and fully integrated solution, set to have a big and valuable impact on the industry.
A transformation has begun, through technology. ●
Context is important! Being presented with a birthday cake that looks like it has been sat on is not ideal. However, if you know your eight-year-old niece spent hours making it, you are likely to be far more appreciative than if the courier dropped it before leaving it behind your wheelie bin.
Context is perhaps what we need more of in the residential property market, as well as the later life lending market. We are in a higher interest rate environment – whether you are governed by the Bank of England base rate or the numerous factors which impact equity release pricing.
In the equity release market, the average rate in Q4 2022 was 5.70%. This is higher than the 3.07% (Q4 2021) and 2.85% (Q4 2020) recorded in previous years, but more modest than Q1 2016 (5.80%) or Q1 2015 (6.10%).
Between 2004 and 2016, the typical interest rate started with a six rather than a five or indeed a four.
While this will no doubt be cold comfort to some customers who delayed their borrowing decisions last summer, advisers can take some solace in the fact that the products are more flexible than they have ever been, as there is a clear customer need.
Indeed, rates across the residential market are higher and affordability is tighter, with Moneyfacts suggesting that the average lender’s standard variable rate (SVR) is 5.63%. For an older homeowner who visits their adviser with the challenge that they are on their lender’s current SVR and are looking for some surety knowing they don’t have the income to pass affordability checks, equity release would seem a natural consideration.
Speaking to advisers, we know those in-depth conversations around what a customer wants and needs – now and
in the future – are more important than ever.
Should you be using equity release to borrow to pay for home improvements? On paper, in the current higher interest rate environment it may seem less sensible but – to use that word again – in context, when someone is using this to release funds to install double glazing and rewire their home, this raises important questions about quality of life.
Quite obviously in this market, we need to continue to encourage people to think about their options, speak to their families and consider the long-term cost of borrowing, as well as what flexibilities they need from products. This is clearly recognised by advisers, who find this personalised approach is paying dividends, as they can find the right solution to their client’s problem.
While rates may currently be higher, customers have more opportunity to manage their borrowing than when rates were 2.85%, as well as benefi ing from protections such as the no negative equity guarantee, and the independent legal advice which forms part of the process. Lifetime mortgages are also no longer necessarily ‘for life’ and should lower rates return, re-broking is a possibility in future for customers in the right circumstances.
The latest Equity Release Council standard launched in April 2022 is also designed to support customers, as it guarantees all new borrowers the opportunity to make ad hoc capital repayments within lenders’ criteria. Finally, many lenders also allow ongoing interest payments, and brands like Standard Life Home Finance include downsizing protection for all customers.
Looking forward to what 2023 will bring, I suggest that we will see some
KAY WESTGARTH is director of sales at Standard Life Home Finance
discretionary clients waiting until either the want becomes a need, or the interest rate environment becomes more favourable.
However, we know there will also be other clients who need our support, as they find that rising interest rates, as well as inflation rates, place extra stress on their budgeting.
All things considered, 2023 is likely to be tougher than 2022, but I certainly do not think we are the only part of the residential market contemplating this.
If we focus on seeing the current environment in context, while also providing consistently high standards of advice and service, we will continue to thrive by offering customers options that truly work for them in the right scenarios. ●
For an older homeowner who visits their adviser with the challenge that they are on their lender’s current SVR and are looking for some surety knowing they don’t have the income to pass a ordability checks, equity release would seem a natural consideration”
e recently unveiled our ‘Full Year 2022’ market monitor, which highlighted that we had seen a record £6.3bn worth of equity released last year. Of this, £5.5bn was new borrowing, while £200m of further advances and £500m worth of drawdown was also taken.
While 2023’s prospects are somewhat more subdued due to the challenges of the September miniBudget, the figures do reveal some interesting trends. Of the £5.5bn worth of new borrowing, £3.3bn
Wwas used to refinance debt. This is a significant amount, and whilst debt consolidation advice should always be approached with caution, it is no doubt a huge positive for the customers impacted.
However, some commentators have suggested that repayment of debt, rather than refinancing, was the be er approach for these customers.
While there is li le question that they are right, our experience of advising in this sector is that many of our customers live in a very different reality, where their financial circumstances simply don’t allow them the flexibility to make this choice. We speak to people every day
who are worried about repaying a maturing interest-only mortgage, or who are finding the jump between a fixed-rate deal and standard variable rate (SVR) tough given the increase in monthly payments required.
We listen to customers whose health, employment opportunities or family circumstances mean that they have built up debt which is becoming increasingly difficult to service.They don’t want to downsize, or find that they can’t without stepping off the property ladder entirely.
This borrowing may have been perfectly sustainable in a lower interest and inflation rate environment, but the combination
of the two means that they need to rethink their options. They are not financing exotic holidays or a new conservatory, but investing in double glazing and essential repairs.
When our advisers speak to them and explain they do have options – including, where appropriate, speaking to the debt management charity we work with – they are relieved. Fewer than 10% of those who contact us about equity release go on to take out one of these products, so this is certainly not a hard sell commission driven environment, or you would imagine that the conversion figures would be far higher.
There is no doubt that many within the industry can tell similar stories – including ones where benefit entitlement checks have uncovered unknown sources of income or forgo en pension assets.
It is understandable, during a costof-living crisis, that there are concerns around financially vulnerable customers taking products that may not be right in the long-term.
It is right that the equity release sector faces scrutiny around the profile of customers being served and the outcomes they are receiving. However, in the same vein it should be acknowledged that modern lifetime mortgages with flexible repayment features and valuable protections, such as a no-negative equity guarantee and guarantee of tenure, can be suitable options for some, delivering life-changing benefits.
Advisers in this sector are, in my experience, typically not snake oil salespeople chasing a quick buck, as is sometimes the stereotype presented, but instead local heroes who want to help as many customers as they can to enjoy a secure and fulfilling later life.
Mintel research suggests that 43% of over-55 homeowners don’t know you can use equity release to repay a mortgage. At a time when we know
that those over-55s on a fixed income with ambitions to carefully manage their borrowing into retirement are feeling the pressure, should we not be working to educate them on the options that may be available?
Key’s recent adverts recognise the challenges some older customers are facing, highlighting an option which many may be unaware of, and a call to action to “please speak to one of our advisers or your own broker” – recognising the need to start the conversation with a qualified professional.
In an imperfect world, where people do not have sufficient pension provision and may find they are carrying unsustainable borrowing into retirement, specialist later life advisers and mortgage brokers have an important role to play in engaging customers about all their options.
Equity release will not be a suitable solution for all, but it needs to be considered more o en than is currently the case.
As a sector we must stand tall to criticism and scrutiny, and exhibit confidence in the quality of the products and the advice we offer.
We speak to people every day who are worried about repaying a maturing interestonly mortgage or who are nding the jump between a xed-rate deal and SVR tough”
Like most industries, the later life lending sector was undoubtedly caught somewhat off guard by the effects of the Government’s mini-Budget, which caused shockwaves throughout the financial markets, and drastically affected the personal circumstances of the average consumer.
While quarterly figures from the Equity Release Council for Q3 showed a record summer, with a record 13,452 new plans agreed – an 8% quarterly upli , and 32% up year-onyear – there were already signs of a slight slowdown in September as the first signs of economic uncertainty began to show.
While final figures for Q4 have yet to be released at the time of writing, it’s safe to assume that, with rising rates and product withdrawals in response to the effects of the miniBudget, it’s unlikely that the market will see an upward trajectory just yet.
It’s worth noting that Q4 tends to see a drop in activity at the best of times, with anecdotal evidence pointing to consumers tending to postpone major financial decisions until they’ve discussed their options with family over the holiday season, before going ahead in Q1 of the following year.
Nonetheless, there are signs of market stabilisation with product rates – such as our Classic range –now starting to sit at a sub-6% level again, and expectations within the market pointing towards at least a partial return to normality over Q1 of this year.
Additionally, there are reasons to remain cautiously optimistic given the later life lending sector’s track record of resilience and adaptation when it comes to external factors.
We witnessed it around Brexit uncertainty in 2019, and more comprehensively around the first year of the pandemic, and in each instance the lifetime mortgage market and its key players have found a way to continue delivering the best outcomes for advisers and their clients.
Much of this has come from product innovation, which in turn has made equity release a viable and a ractive option for ever more people, and has diversified the sector’s customer base.
No longer are lifetime mortgages and other similar retirement planning tools viewed as options of last resort, but rather an increasingly mainstream avenue being used for a wide array of reasons — be it paying off mortgages or funding home improvements, through to gi ing and supporting applicants’ families.
The extent to which the customer profile has changed is best illustrated by the uptick in custom coming from owners of £1m-plus properties — our analysis has shown that levels of business from this particular customer profile rose 500% between 2018 and 2022, with many in the market reporting seeing similar trends.
The ongoing development of products has seen the addition of features such as flexible pricing structures – allowing for applicants to receive a personalised interest rate quote based on their individual circumstances, including age, loan amount, property type and postcode –21-day rate guarantees post-key facts illustration (KFI) to allow applicants to assess their options without fear of rate increases, and penalty-free optional repayment facilities.
It’s largely this ongoing culture of continuous product evolution that has
PAUL CARTER is CEO of Pure Retirement
contributed to the sector’s ongoing growth and resilience.
It almost goes without saying that the cost-of-living crisis has the potential to disproportionately affect the over-55 cohort, and the Pension and Lifetime Savings Association (PLSA) has pointed to an 18% annual increase in the minimum lifestyle cost in retirement, with a 12% rise in what would constitute a moderate income level.
With it also becoming increasingly prevalent for people to reduce or cease their pension contributions in order to secure their immediate finances, many will be looking to explore all available options when it comes to funding their retirement.
While the market will undoubtedly echo the messaging that came out during the initial stages of the pandemic, where caution was urged about people turning to long-term products to solve short-term issues, it nonetheless remains commi ed to delivering best outcomes through the ongoing enhanceent of products and services.
Ultimately, as the market continues to open up, the later life sector needs to be able to demonstrate that it’s ready to provide appropriate solutions for those who will continue to view lifetime mortgages as the right solution for them, and as an industry, continue to deliver best outcomes.
It has undoubtedly done so before, and hopefully this will deliver a strong 2023, built on helping customers to achieve their financial objectives. ●
For some time, one of my personal bugbears has been the use of teaser rates by some lenders, which understandably attract brokers who want the best deal for their clients, but are in many cases just a method to draw clients in.
As time is always a factor in bridging, days or even weeks are allowed to elapse, excuses are made as to why that case does not fit the criteria, and a rate is then offered when there is little chance of switching to a different lender. Strangely, the new rate bears no resemblance to the original headline.
Leading on from this is the growing phenomenon of slow bridging, which should really be a contradiction in terms. The number of clients who come to us because of their chosen lender’s lack of speed or reluctance to provide an offer – in many cases until it is too late – is becoming more common, and is a hard and costly lesson for a client to learn.
A recent case of ours highlights the danger of automatically expecting a bank to provide funds on time. Wanting to expand his hairdressing business, the client wished to purchase the vacant commercial premises next to his business. However, his bank, having initially turned him down, reviewed their decision but could not deliver the funds in the time allowed.
When the client was referred to us, during the underwriting process some light adverse credit data came to light which the borrower hadn’t been aware of. This was evidenced as satisfied prior to our loan completing, to allow the borrower to refinance at the end of the loan term to exit our loan.
The loan-to-value (LTV) was just under 63% and the term was for one year with an exit built around a full commercial refinance, once the refurbishment to accommodate his existing hairdressing business had been completed. The deal was completed within 14 days.
At a time when headlines are showing multi-million pound deals being done in 48 hours, the truth is that bridging lending times are not now, in the main, all they are cracked up to be.
We are finding that clients and their brokers opt for a best rate bridging solution, then find in many instances that the process is not as fast as they were led to believe, with the inevitable consequence that clients are in danger of losing the deal. This is why they come to us at Kuflink.
Brokers need to look again at what is important to their clients — speed or rate. Some will say that both are equally important, which I do agree with, but what we must remember is that this is short-term finance. The money ‘saved’ in applying for the best rate tends to be marginal when the term is taken into account, and completely wasted if the client misses the deal they were after because the process takes too long.
The good news is that there are bridging lenders which still believe that speed and service are more important than unobtainable ‘pie in the sky’ headline rates, and Kuflink is one of those!
Brokers will be better served by ditching some of the show ponies of the bridging market and coming straight to those lenders which understand the importance of delivering a sustainable product offering, backed by a service which produces what their clients need. ●
NARWALI do not want to be seen to be provocative, but isn’t it time to abandon our parallel system of regulated and non-regulated short-term finance?
The argument for a two speed process is predicated on the understanding that there is a difference between dealing with Joe Public and a business entity, and that the latter requires less regulatory oversight because they have, among other advantages, access to more professional advice from their legal and accountancy advisers.
In light of the imminent arrival of Consumer Duty and the added emphasis on customer outcomes, this is one of the topics that had been pushed into the background but will, sooner or later, become an issue again for bridging. More advisers expect lenders to be regulated, and are questioning the old arguments that funding for business can be less regulated. The question remains over whether, regardless of background, the same formal regulatory scrutiny should apply to all short-term property backed lending.
Following last year’s market turmoil, brokers are prioritising efficiency and ease when it comes to placing cases, which is perhaps now more important than ever. This ease, according to Leanne Ardron, is what sets LendInvest apart. For more than 12 years, the lender has been championing ways to streamline property finance.
Building its online platform from the ground up, LendInvest has always sought ways to make the mortgage journey quicker and easier for brokers, and in turn, for the borrowers themselves.
The Intermediary sat down with Ardron, head of bridging finance, in order to delve further into LendInvest’s evolving proposition, its effective use of technology, and how regulated bridging might be a viable option for borrowers in the current climate.
According to Ardron, what makes LendInvest convenient and user-friendly is a combination of its innovative technology, and its experts working behind the scenes.
“Something that has been very key for us in terms of enquiries has been the technology we have built; we have streamlined it so much now that the broker feedback is getting better and better,” she says.
“It’s now about 10 clicks and you get an instant heads of terms, and we also have live updates from the underwriter in the portal.”
She adds: “We’re also really aware that bridging does need that human touch.
“So yes, we’ve built all this technology, but we’ve also got real people in the background, and they are really experienced.
“We’re not being that typical ‘tick-box’ lender. Obviously there will be criteria and product guidelines to follow, but if we can make a deal work because we’re happy with the security or the borrower, we try to get it done.”
Following the chaotic aftermath of the Liz Truss mini-Budget, the market has not been an easy place for anyone to navigate.
However, despite these challenges, Ardron says LendInvest has weathered the storm, even finishing the year on a stronger note than ever.
“We broke records in November for bridging, and in December also exceeded our planned targets,” she says.
“You’re always wondering what December will be like — normally it’s either really busy or a bit quiet, but for us we had a really strong month.”
“We also just launched our [automated valuation model (AVM)] proposition right before Christmas as well, so I think that helped spark up interest for January.”
Ardron adds: “With the enquiries remaining really strong, and with our appetite for being that ‘sensible’ lender, we’re always ensuring that we provide the best opportunity to all of our brokers and clients.”
In light of the aforementioned market turmoil, bridging has recently gained ground as an attractive option for borrowers.
Hailed by many over the past couple of months as a solution for those looking for short-term security, it looks set for a steep rise in popularity.
Ardron, a staunch advocate for bridging, agrees that appetite for regulated short-term finance will be strong in 2023.
“Using a regulated bridge for a chain break is perfect at the moment for those buyers who are unsure where those long-term rates are going to end up”, she says.
“If you have a regulated bridge, you have that comfort for 12 months, there’s no exit fee, and you can refinance out when the time is right.
“A lot of borrowers that are on their fixed periods will be coming up for renewal this year, and they’re in for a shock if they’ve been on a 0% Bank of England base rate.”
She advises: “It might be a case where they would rather get a regulated bridge, have that comfort that their fixed rate will remain the same for 12 months, and they can then see where the market settles.”
However, with many borrowers — and brokers — still wary, or perhaps even unaware of how bridging works, Ardron says there is still work to be done when it comes to bridging education.
“With bridging in general, you’ve probably still got to debunk the myth that it’s expensive or that lenders try and rip you off,” Ardron explains.
“A lot of investors and developers should look at it like a business plan — if you’ve got your exit strategy, and you know what plan you’re going for, I think bridging is definitely the perfect opportunity.”
Aside from its bridging division and streamlined online portal, LendInvest also has a strong record in development.
This is a sector currently plagued with issues surrounding supply and labour, but Ardron has some tentatively positive predictions for the development market moving into 2023.
“We’ve still got a really strong appetite for the right deals,” she says.
“Obviously it is a difficult market at the moment, but construction prices have steadied from the heights of last year, which is good.
“There’s likely to be a slow-down in property prices, which we’ve all been told, but what that drop will be? Who knows. We’ll have to get our crystal ball out.
“It’s a difficult trading environment for housebuilders at the minute, especially with the addition of the loss of Help to Buy.
“Housebuilders have started to look at build to rent schemes, given the rental growth, and I think that this might be their exit strategy as opposed to sales this year.”
Ardron adds: “I think there needs to be a big shift in the planning, and the Government really has to bring that to life in the next couple of years because otherwise we’re never going to meet the housing shortage.”
Considering the prospect of a stabilising market ahead, it is clear that Ardron and the LendInvest team hope to build upon last year’s successes. Indeed, with bridging on the rise and a solid online
platform on their side, she suggests that brokers should take a look at LendInvest’s proposition moving forward.
Ardron concludes: “If brokers haven’t used us, they should give us a try — especially if they haven’t used the portal.
“We always want to take feedback from our brokers to strive and make us that go-to lender.
“We have huge targets this year that we are very confident that we will be able to meet, exceed and increase our market share, so we’ve got lots to look forward to for 2023.” ●
LEANNE ARDRON is head of bridging finance at LendInvest
Using a regulated bridge for a chain break is perfect at the moment for those buyers who are unsure where those long-term rates are going to end up”
The North West of England is a vast and diverse region of the UK, spreading from Cheshire to Cumbria and encompassing the varied and exciting cities of Manchester, Liverpool and Carlisle.
Home to more than seven million people, the North West has long been a drawcard for those seeking culture, diversity, or adventure in one of the region’s many areas of outstanding natural beauty.
Despite this, years of underinvestment in transport, infrastructure, and research and development in the region has created a North-South divide across the UK, particularly in the housing sector, where undersupply and high demand are thwarting the area’s aspirations for economic growth.
The North of England receives one of the lowest levels of investment among advanced Organisation for Economic Cooperation and Development (OECD) economies, placing ahead of only Greece in terms of private and public investment, according to recent research from think tank IPPR, while the rising cost of living, higher interest rates, and soaring inflation have also all had an impact on the local economy.
Nevertheless, the region offers significant value for money in terms of rental costs and property purchase prices, particularly in comparison with areas in the South. The housing sector is also extremely diverse, with a sizeable spread of average prices, ranging from £117,800 in places like Burnley to £375,600 in Trafford.
Currently, global economic challenges are driving up rents,
impacting the private rental sector, with higher valued areas likely to suffer from compressed yields, ultimately limiting the ability of buy-to-let landlords to leverage higher loan-to-value (LTV) products.
However, the opposite can be said for areas where capital appreciation isn’t so prolific, but where rental demand is still strong. With this in mind, professional landlords are likely to continue to focus on assets where capital appreciation and strong rental demand are available. This is something we are seeing at Tuscan.
There are also plenty of opportunities for growth in the serviced accommodation sector, where we continue to see demand from developers and landlords looking to convert hotels and B&Bs into selfcontained serviced accommodation.
The region is also set to receive a proposed share of the Government’s £600bn Housing Infrastructure Fund, designed to provide support for new and existing communities, and make more land available for housing in high demand areas.
While it is hoped the funding will help stimulate housing and infrastructure growth across the region, it still remains unclear how far this will reach, and the benefits it will bring to the local economy.
The continued infrastructure upgrades to the electrification of the Outer Manchester railway lines, however, is a positive move, creating more opportunities for peripheral towns and villages to capture the commuter market, and for improved connectivity between key Northern towns and cities.
Unfortunately, the injection of cash into the North now looks to be less than previously anticipated, despite Lancashire City Council being given the green light to construct the proposed Eden Project Morecambe.
While the win is an exciting opportunity for the region, its creation is dependent on further capital raising, and perhaps the backing of private equity or venture capitalist firms. ●
CARL GRAHAM is regional director at Tuscan Capital The North West is set to receive a proposed share of the Government’s £600bn Housing Infrastructure Fund
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hilst the impact of Kwasi Kwarteng’s paradoxically named “Growth Budget” in September has largely abated, we are still facing many challenges as we enter 2023.
Inflation remains close to a 40year high, despite interest rates having been increased 10 times since December 2021.
Added to this, UK workers have seen the biggest drop in their real earnings since records began, houses prices are falling – and are predicted to keep doing so until 2024 – and levels of industrial action in the public sector are now reminiscent of the famous 1979 Winter of Discontent.
The outlook is far from rosy as we stand poised on the brink of recession,
and with war still raging in Ukraine macro-economic prospects look tough. In truth, you probably don’t need to read this here, as the bad news is rammed home relentlessly in the press and on TV. Indeed, some sections of the media, instead of simply reporting on the economy, seem keen to drive it in a certain direction. Perpetually focusing on gloomy economic forecasts and dire predictions, the only good news that’s ever reported is the token snippet at the end of the bulletin celebrating Winnie’s 110th birthday or the rescue of a pony stuck in a bog. Is it any wonder that so many people have stopped watching the 10pm news?
It’s time for some balance. Despite the likelihood of above target inflation persisting, the Bank of England
(BOE) is probably nearing the end of its tightening cycle. There is a growing consensus that labour market indicators, demand and gradually declining inflation will see a pause – and very possibly an end – to the run of base rate increases very soon. Thereafter, the markets appear to think rates could even start to decline. At the pumps we’ve seen fuel prices falling fast in recent months. Less visible, but equally positive, wholesale gas prices, trading at more than £5.00 per therm last August, had dropped to £1.58 per therm by the middle of January – lower than before Russia invaded Ukraine. In time this will feed through into falling consumer bills. Of course, many sections of the media continue to highlight the ‘disastrous’ impact of us leaving the EU, whilst simultaneously ignoring that our exports to EU countries
reached a record £17.4bn in July 2022. Maybe that additional red tape is not so onerous after all…
Add to this the potential for 300,000 UK workers to rejoin the labour market in 2023, reducing staff shortages in highly skilled sectors, as well as targeted schemes for Ukrainians, Afghans and Hong Kong residents, which will help immigrants contribute £19bn to £30bn to real GDP in 2023, and the picture is suddenly not looking quite so gloomy.
There is much more, but of course the BBC is unlikely to mention it. Why report that Birmingham based National Express have just won an £878m contract to run two regional train lines in Germany – that’s far too positive!
Our positivity as an industry is hardly surprising, given that the specialist lending industry effectively grew out of the Credit Crunch and subsequent recession. Consequently, we are extremely well placed to offer support in a challenging trading environment. There are many lenders with highly experienced teams and strong, diverse funding lines, ready to meet borrowers’ funding needs.
Whether it’s opportunistic investors in what is increasingly a buyer’s
market, entrepreneurial SMEs seeking to take advantage of timesensitive opportunities, or developers doing their bit to address the perennial structural shortage of new homes, lenders such as Saxon Trust stand ready to assist.
Crucially, housing starts are now picking up. Whilst concerns about the planning system, a lingering post-pandemic supply squeeze and increased borrowing, material and labour costs can’t be ignored, developers remain very positive given the Government’s continued commitment to hit its target of 300,000 new homes annually.
Underpinning this confidence is a growing focus by both developers and lenders on the UK’s exacting net-zero carbon target for 2050. With investors increasingly refusing to put their money into projects that are harmful to the environment, developers are focusing more on environmental, social and governance (ESG) principles, not least because it helps them to raise finance.
With top-down pressure from Government, investors, lenders, and insurers, as well as demand from below, with potential buyers and renters – particularly among younger demographics – insisting on sustainable, eco-friendly homes and the lower energy bills that come
with them, it’s not hard to see the huge opportunities that still exist, even in the face of short-term market uncertainty and upheaval.
Innovative specialist lenders like Saxon Trust, born out of adversity in the last recession, are now bigger and better funded. As an industry, we are well placed to emerge from the current downturn stronger than ever, continuing to win market share from more traditional, high street lenders. Opportunity, as they say, knocks!
BRIAN WEST is head of sales and marketing at Saxon Truste’ve braved a somewhat turbulent time over the past few years. Whilst trying to avoid the pitfalls of dwelling on the past, we storm-resilient, weathered survivors of the property world will undoubtedly agree that we’ve endured a great deal of change in relatively short succession.
The back end of last year gifted us yet another hand-grenade, with clown-worthy political policy sampling and astute lack of knowledge towards governance of any sort.
Consequently, the closing out of 2022 saw a widely accepted pipeline view of a decline in property prices, an increase in interest rates and inflation, and not to forget, a cost-of-living crisis that continues to rear its ugly head in the form of monthly gas and electric bills and the total cost at your supermarket checkout.
So, where do the past few months position the industry, and what does this year have in store, for us, the property community?
At the end of last year, I, an optimist by nature, could be forgiven for having momentarily felt a little more dejected about my outlook than I have been before. After some consideration and discussion with colleagues and clients, coming into this year I am convinced that the reality is that opportunity presents itself in even the most trying of times.
With 2023 in its infancy, the increase in interest rates indicates a probable decrease in property prices across the country, with some areas being worse hit than others.
We might also expect to see both demand and supply fall for the foreseeable future across the board, with the incentive to supply new housing hindered by developers’ profit
Wmargins being quashed by lower property values, and compounded by the already higher cost of funds, materials, and labour outlay.
All the while demand finds itself retracting – for the masses – with an ever-increasing cost of living, and mortgage rates higher than they have been in more than a decade.
However, there are opportunities here for this world’s keen-eyed and fast-moving market makers.
For instance, interest rates, though higher than we have encountered for a number of years, seem to have sight of where they might peak in the short- to mid-term. With this, we can expect rates to cautiously return to more manageable levels for borrowing parties.
There will also be opportunities to purchase assets ‘well’, with a shift from the sellers’ market which we have traded in for several years, to a buyers’ market. Although an unfortunate outcome of the many stresses faced by the industry in recent years, this does present distressed assets opportunities for sale to active developers.
As aforementioned, the cost of finance will not be returning to previous lows for the foreseeable. Additionally, with the increased associated costs, we might see development sites or land dropping to more affordable levels after a potentially relatively stagnant purchasing period.
This delivers opportunities for upcoming projects to be purchased at lower prices, and gives a boost to developers’ profit margins.
Also, developments that see themselves completed 12 to 18 months down the line could be benefitting from the property boom that has historically followed a period of economic downturn – forever the optimist!
HARRY HODELL is a director at Pure Structured Finance
We’re also looking at the many ways in which developers –metaphorically – repurpose their tools in this period. A cost-of-living crisis and a cold winter certainly help to emphasise the requirement of higher-grade Energy Performance Certificate (EPC) rated housing.
Whether that’s upscaling future or ongoing developments or existing buildings, developers can benefit from the less expensive cost of financing available for such builds, while end users benefit from higher EPC-graded housing, reducing their costs in extremely testing times.
I expect to see diligent property professionals continue to thrive in the environment in which we now find ourselves. Certainly, our funding partners have continued to be inventive and evolve to deal with ever-present curveballs.
We’re certainly looking forward to navigating the many challenges alongside our developer partners, who remain agile and patient looking for new avenues and opportunities within our industry to implement.
Whilst it is clear to most that there will be pains over the coming year in our sector as we advance through a period of change within the greater cycle, the specialist finance industry was born in the fires of uncertainty and tempered in the aftermath of the 2008 crash.
Our specialist industry continues to hold a firm focus on the opportunities that present themselves in the more difficult times, and intends to wield itself through any adversity that it encounters on its way. ●
The housing market has long been characterised by demand significantly exceeding supply, and the situation is ge ing worse. The National Housing Federation says that 340,000 new homes need to be built annually to meet the current demand, as the past pledges of 300,000 new homes being built each year by the mid2020s have yet to come to fruition. This dynamic presents an ongoing opportunity for property developers to meet the housing needs of the nation, whilst also growing their investment.
However, looking at the immediate outlook for the property market, developers may feel a li le less than optimistic. December 2022 figures from HMRC on property transactions showed a 3% decrease compared with the previous month, in both the seasonally and nonseasonally adjusted estimate of UK residential transactions.
With the cost-of-living crisis and increasing rates impacting mortgage affordability, transactions are expected to fall further in 2023.
Even before the market slowdown took effect, the Home Movers Report from Smoove said that more than a third of housing transactions fall through. In addition, those property transactions that do complete successfully are taking longer to do so. The Smoove report said that in 2022, the average time to buy a home was 153 days, rising by nearly a quarter since 2019, when the average time was 124 days.
It’s this combination of growing long-term opportunity for property developers, combined with a challenging short-term outlook, that has inspired our latest product innovation at Alternative
Bridging Corporation.
The product was actually borne out of the Chancellor’s Autumn Statement and the forecast for the economy. It was clear from this statement that the property market would be detrimentally affected during 2023, due to the increased cost of home loans and affordability issues because of the cost-of-living crisis, with an associated slowdown in house sales and lengthening of transaction times. So, our team decided to see if we could create a product which could alleviate some of these pressures. The solution we came up with is PartX Property Finance.
PartX Property Finance is designed to help small to medium-sized (SME) developers and estate agents by allowing for the quick sale of newly developed properties.
The proposition consists of a pre-agreed part exchange facility that can expedite sales and mitigate against chain breaks on new home developments.
With an agreed facility, developers will have the finance they need to complete a part exchange purchase with the buyer of one of their developed properties.
This will help to accelerate the sales process at a time when sales are taking longer and are not as certain as they were 12 to 18 months ago.
In addition, PartX Property Finance can be utilised to offer extra funds for light refurbishment for developers that want to make improvements to the part exchanged property to maximise resale potential.
The facility offers support to our developer clients, many whom we have worked with for a number years, but it is also available to developer
JONATHAN RUBINSclients of other lenders.
As a rule of thumb, it takes about as long as a standard unregulated bridging loan to arrange, and terms are agreed at the outset, with all due diligence completed in advance. This benefits the developer as it means the facility can be completed quickly and easily when required, utilising a short form of valuation, title insurance and a standard legal charge.
Put simply, PartX Property Finance takes the aggravation out of moving home. Developers will benefit as the product facilitates the fast sale of a property, at its full value. In addition, the owners of the part exchange property will also be selling at full value, and completing the purchase of their new home without waiting to find a buyer.
PartX Property Finance is a product innovation developed to meet the demands of today’s economic environment. It enables developers to maintain the rate of sale on their sites, and importantly, to repay their development facilities on time.
A further benefit is that the PartX interest rate is likely to be lower than the rate on the development loan that the client has at the time. ●
is director at Alternative Bridging Corporation
Developers will have the nance they need to complete a part exchange purchase with the buyer of one of their properties”
So, we are all si ing here contemplating what the next 11 months bring, what with the news about rail strikes, energy bills and interest rate increases dominating the press, and with no good news following it, unless you class the Royal Family’s comedy disaster show as good news!
The thing is, no ma er what occurs, we have no choice other than to face up and deal with it. I am not going to pretend to be a prophet and give you a glimpse of the future through my unbounded wisdom, as I have no idea what’s going on other than it’s a train smash, if you’ll pardon the poor taste pun...
Truth is, we have never been busier as a corporate finance introducer and due diligence company, because despite comments by colleagues to the contrary, the high street is saying ‘yes’, but doing very li le to support that affirmative statement in reality, which appears to be something that is happening across the board.
Take the Ukraine war, which is sucking the European economy of billions of dollars daily, while we do very li le in reality to speed up the process to end the conflict.
This issue with the tanks is too li le way to late, as Putin is amassing 500,000 more troops on the Belarussian border, and others, for a second invasion on or around 24 Feb — the day a er my birthday for those without it in the diary. That may be a huge turning point that we will regret forever.
We cannot, for very practical reasons, allow Putin to win, but this short piece will not go into those reasons, as it’s just too big a topic.
The second point is that the unions brought this country to its knees once, and they will do the same again
unless we take a very hard line with them now.
Again, this is a problem that cannot be allowed to drag on. Despite each union’s arguments, which may at points be true, the pain the country is going through is purely down to a mixture of their lack of thought and their stubborn a itude, plus the Government’s unwillingness to properly engage.
The final point is that the Bank of England’s process of interest rate rises will kill the housing market eventually, especially the buy-tolet sector, as landlords just cannot sustain the constant pressure of higher mortgages, and tenants will start feeling the effects as well, including those on a low income and Government support.
That’s another thing we cannot allow to continue. As a landlord myself, I cannot make the portfolio work profitably, and my mortgage payments have now gone up 100%.
I am one of the lucky ones who has a core business that can swallow the losses, whereas many others do not have that luxury, and will need to either to rapidly increase income or quickly sell, or risk repossession and bankruptcy. Yes, it could get that bad if we sit still playing with our belly bu on fluff.
The current Government has no real answer, and Labour has something that sounds great but is equally lacking in detail, and also means eventually it will stop having any effect because of the structure and metrics involved.
Meanwhile, we are the slowest growing economy in the western world right now, and have become a tax driven country because of our own funding process, and there seems to be no way out.
TERRY PRITCHARD is director of Charter HCP
It’s depressing I know, and as I said in my opening, I personally don’t have an answer, but I do know that continued interest rate increases bludgeoning away unsuccessfully month a er month is just making things considerably worse, plus there is no real evidence this is having an effect.
There needs to be a cap on this now, and some support for the whole sector to avoid an issue that could be worse than the crises of 2008, including on mass portfolio defaults — we are already seeing the start of this now, with some real panic se ing in.
I hope lenders start looking at their business models and creating an environment that helps larger landlords, otherwise it will cause more suffering necessary.
Anyway, on a more positive note, I have come up with my own individual and unique plan, set out below. Those who want to join can phone my 24hr booking hotline ‘Terryair’. It’s only £50 per minute — I have to subsidise the property portfolio somehow.
The plan is to move to either Asia or South America, where there is no immediate threat of fall-out from nuclear war, no train strikes, as they shoot those not working, no serious taxes, and no buy-to-let market.
I am block booking planes to all destinations, so jump on now.
See you all on the other side. ●
Jessica O’Connor speaks to Miranda Khadr about the evolution of Provide Finance, the complexity of sourcing specialist products, and her future plans for the firm
The Provide Finance brand was launched last year. What was the thinking behind the launch, and how is it going so far?
The way that we work as a business, and what we deliver to our intermediary partners, has evolved over the years. When we first launched back in 2020, it was under the name Pitch 4 Finance, and that name really encapsulated the way that arranging specialist loans would tend to work. Brokers would approach lenders with a case, and the lenders would then pitch for that business, outlining the terms they could offer the applicant.
But the reality is that pitching in this way was a slog for everyone involved — the borrower, the broker and the lender. When our platform first launched, it was simple but effective in connecting brokers with lenders when looking to place cases, but over time it has become more sophisticated, to the point that pitching isn’t really accurate as a description for how the process works.
Instead, we provide brokers with the ability to immediately match their client with suitable lenders based on the criteria of the case, filtering out any lenders for which the case would simply not be feasible, which is a huge timesaver.
Given that, Provide Finance is a much more accurate name for what we do, and because of that, the rebrand has had a really positive reception from brokers and lenders alike.
What is the outlook for specialist fi nance this year? Is there demand from borrowers, and do lenders have an appetite to lend?
It’s certainly true that it’s a challenging time for the property market. Demand from regular
MIRANDA KHADR is founder of Provide FinanceWe provide brokers with the ability to immediately match their client with suitable lenders based on the criteria of the case, filtering out any lenders for which the case would simply not be feasible, which is a huge timesaver”
borrowers has obviously dropped noticeably since the fallout from the mini-Budget, which is why we have seen house price indices from both Nationwide and Halifax reporting successive drops in the value of property.
However, things are rather more positive in the specialist market. It’s true that some investors are happy to play the waiting game and see how things shake out, but there are others who have recognised that the underlying attractiveness of the British housing market — namely the fact that we simply don’t have enough homes — is very much still in place.
There are real opportunities for investors to pick up properties at lower prices this year, and there is no shortage of lenders that are keen to help them do just that.
The process of identifying the right product for a specialist borrower can be particularly challenging. There can be significant variations in criteria between different lenders, and the pricing can be more bespoke than is the norm in the regular mortgage market.
This is why sourcing products could be so time consuming in years past, with brokers having to contact lenders individually to run them through the facts of the case, in order to get an idea of what a lender could offer.
Many of those challenges have been stripped away by our platform, meaning that brokers can source a product for their specialist clients much more quickly.
It’s not just about being more efficient, but delivering a better experience to the client as well.
It’s absolutely crucial. We know from feedback we’ve received from brokers that one of the features they value most is the ability to speak with experts when using the Provide Finance platform.
Technology has an enormous role to play in the mortgage market, in delivering time savings and helping everyone involved in the property purchase work more efficiently.
Nevertheless, it is there to supplement and support the human interaction, and there are times when you simply need to get an answer or talk through an issue with a specialist.
When it comes to sourcing specialist products, we know that brokers want to have all of the options open to them — when the case is fairly straightforward, they can move straight to the application stage once they have found the right deal, but when there are questions and queries, they want to have the ability to speak to someone quickly who can deliver an informed answer.
That understanding has driven the way that we have built the Provide Finance platform.
I’m extremely proud of our journey so far. The mortgage market has long been crying out for innovation, particularly in the specialist space, and the growing number of brokers working with us shows that there is real recognition that our system can support them and their businesses. But we can’t sit still. Our commitment to pushing forward and finding better ways to support brokers is why we have grown from Pitch 4 Finance into the more comprehensive offering delivered by Provide Finance today, and we will continue to work with brokers to find further ways to support them. We have come a long way, but there is more that can be done to deliver tangible improvements to the workloads of brokers, and we intend to identify those solutions. ●
When it comes to sourcing specialist products, we know that brokers want to have all of the options open to them”
hen faced with the knowledge that you have to transform your business, technology and systems, it’s pre y normal to feel u erly overwhelmed.
Where do you start? What’s your destination? How do you get there?
I won’t pretend these are easy questions to answer, but I would say it’s worth remembering that when you plan a journey — especially a long one — you do it in legs.
Driving to Scotland from the South West? Which service stations are you going to stop at? Which junctions do you need to exit to switch from M5 to M6 to M74 (trick question)?
The point is that your journey doesn’t have to match up to Google Maps’ time to destination — when does it ever?
Transformation is possible, and the strategy is to take it one step at a time.
In the world of start-ups, innovators and IT development there is usually insufficient capital, a theoretical business case and a lack of practical experience doing specifically what you’re about to a empt.
Business school speak has an approach that many companies adopt when faced with the launch of a new product or service. It’s not dissimilar to the concept of piloting but it breaks that model into even smaller pieces.
A minimum viable product (MVP) is the definition of doing one thing
at a time, and it’s an invaluable way of approaching business or system transformation.
In a more established business or market, an MVP focuses on one key change that could deliver improvement, and develops that change using the least amount of time and money.
It won’t be perfect, it’s not trying to be. But it will tell you whether it’s a change worth investing in further.
We could rewire conveyancing, valuations and mortgage broking finance. As it is, all of the component processes progress independently.
In spite of more than a decade of industry suggesting everything in a property transaction would just work be er if there was slicker integration, possibly amalgamation, no one’s cracked it.
I think there’s a reason. Jack of all trades is master of none.
There’s a wisdom in knowing your part of the process, and in having the time to ensure it’s done properly.
The conveyance of a property is the single largest transaction most individuals do in their lifetimes.
This said, the direction of travel needs to have the elasticity to embrace further infrastructure and data source changes.
That only underlines why using the MVP model makes such sense; investing in a huge project which by its nature fixes your journey has the potential to leave you out of pocket and no be er placed to serve your market.
This is about data. Without data, you’re driving blind. Imagine trying to find your way to Scotland without a map, signage, a road or a compass. For lenders, every lending decision has to be based on what that decision adds to the overall security, stability and profitability of the business.
That means understanding the risk in your back book, the risk across your geographical reach, the risk associated with property type, age and construction, and the risk a ached to specific types of borrowing.
Data products and services can support lending decisions and give brokers the ‘heads up’ on decisions earlier in the process, improving the broker and borrower experience.
The MVP model is all about maximum understanding of return for the minimum upfront investment using that data.
Once you know your position, you know your strengths and you know
your weaknesses. This will give you the information you need to map your journey — remember those junctions: where are you trying to get to, where are the steps, and what’s the one thing you need to test before you commit?
Making the most of data and infrastructure is critical as companies look for efficiencies with margins under pressure.
If you know the first step you need to take to improve your use of data, it will inform what infrastructure will get you there.
Application programming interfaces (APIs) and interoperability are now widely available through cloud implementation to every type of organisation.
Speak to providers — and of course we are one — and ask how they’d approach helping you to achieve your goals. The way they answer your questions will tell you all you need to know about whether their solution is going to work for you. ●
There’s a wisdom in knowing your part of the process and in having the time to ensure it’s done properly”
n a post mini-Budget world, the last thing advisers need to worry about is excess admin, but often, waiting around for a client’s credit and banking reports can be a long and arduous process.
Providing advisers with an easier and alternative route is Click2Check, which aims to completely streamline the way advisers background check their clients, allowing them to obtain consumer credit and banking information in mere minutes.
David Jones, director and co-founder of Click2Check, sat down with The Intermediary to discuss this innovative service, and all things credit scores and open banking.
With its unique proposition and swift service, Click2Check certainly fills a gap in the market where advisers are concerned. But what was it that inspired Jones to launch the business, and why now?
“I have been involved in the mortgage industry for over 18 years”, he says.
“I have been exposed to a mortgage adviser’s role since 1987, with my brother working for John Charcol, and my wife, who was also a mortgage adviser. They both remonstrated, on many occasions, about chasing their clients for documentation, be that credit reports or bank statements.
“So, when technology had matured, it was time to create Click2Check. The idea was to supply the technology and tools for advisers to be in the driving seat, obtaining summarised digital reports and a no-friction process for their client.”
Jones continues: “Our tools give them control and remove the time and effort of working out the client’s affordability. This in turn gives the adviser a quick and efficient solution, allowing them to service more opportunities and leads than they had done before.”
We supply a credit and banking report solution without having to go through the hoops of due diligence, lawyers, and compliance, and at a low subscription cost to enter”
DAVID JONES is founder of Click2Check
One of the main components of Click2Check’s suite is its white-labelled hub.
The feature collects a client’s credit and expenditure reports, and expedites them to one convenient place — the adviser’s white-labelled hub — keeping it all in one location.
Jones explains that it is this expedited offering, and more, that sets Click2Check apart in the business-to-business marketplace.
“I’m sure all other companies supplying credit services would say they are unique, but we are”, he says.
“We are an independent company, allowing Click2Check to integrate with any third-party software and proprietary services the companies have in-house, with our [application programming interfaces (APIs)] giving them all the functionality without the pain.
“We supply a credit and banking report solution without having to go through the hoops of due diligence, lawyers, and compliance, and at a low subscription cost to enter.
“We are the only company dealing solely with the mortgage industry that has three solutions under one roof — credit reporting, bank reporting and an anti-money laundering (AML) solution with Open Banking.”
He adds: “It’s a one-stop shop.”
A mid-pandemic launch might have been make or break for any business. The turmoil of the past couple of years have posed challenges for all businesses, not least new ones, but Click2Check may also have benefitted from an increased uptake of and reliance on technology.
“The pandemic was a once in a lifetime moment we hope will never happen again”, Jones says.
“But what it did do was accelerate the use of technology and the number of companies looking to use it. We went live during the pandemic, which was really tough, but some early adopters saw the benefits straight away.”
He adds: “We could sell and support them via Teams or Zoom without leaving the house. Conversely, our new clients use the software to obtain the credit and banking information using the same forums, making the process more efficient.”
Having overcome the initial challenges that resulted from the pandemic, and turning them into benefits, Click2Check is still going strong.
However, given the pandemonium in the mortgage market over the past few months, Jones
does have some advice for advisers: “Austerity is the biggest challenge for advisers and consumers.
“The utilities and mortgage hikes have been sudden for all of us, with no additional monies coming into balance it off.
“2022 was an inconsistent year, from the famine to feast deals early on and then the Truss debacle that crippled them.”
He continues: “2023 will see a more consistent year, but advisers will struggle to place cases because of clients’ management of their finances, and due to tougher criteria from lenders, with products being taken off the shelf at a moment’s notice.
“They need to secure rates quickly before they are removed.
“The quicker you have the information to place the case, the quicker you can secure that rate for the client.”
It is clear that although the Click2Check brand hinges on ‘less work’ for advisers, the team behind the scenes is doing quite the opposite.
So, with the new year upon us, what is on the horizon for the future of Click2Check?
Jones concludes: “We want to do more of the same and never sit still.
“We have upgraded the system, which allows us to be more dynamic with third-party integration.
“We are rolling out an upgrade enabling advisers to submit the Open Banking documents to a select group of lenders, again helping the adviser to submit the application quickly.
“The cradle-to-grave application is coming, and the documentation via Open Banking that Click2Check supplies will be accepted by all lenders, in time.
“Open APIs are available, and we have a few potential clients moving in that direction in Q2. This will enable those companies looking to move away from the manual process to have that automated.
“In 2023, we will be rolling out modules, complementing and enhancing our successful proposition, and making the job of the adviser easier and slicker.
“Our ultimate selling point is: see what the lenders see before the lenders see it.” ●
We have upgraded the system, which allows us to be more dynamic with third-party integration”
Your call is important to us. Six incredibly annoying words that we are all subjected to from time to time, and sometimes for a very long time.
For most of us, two things make our experience of customer service good or bad: speed and resolution.
The latest Mortgage Lender Benchmark survey from Smart Money People records broker satisfaction with lenders’ customer service and, unfortunately, they’re not a happy bunch.
In the second half of the year, overall broker satisfaction with lenders fell, down 1.9% to 79.3%, falling below 80% for the first time since H2 2020, when it was 77.8%.
Meanwhile, broker satisfaction with relationship managers fell by 1.1% and now stands at 77.8%.
It’s perhaps unsurprising – the second half of last year was pre y miserable. Energy bills and mortgage rates going up, affordability shocks facing huge numbers of clients needing to remortgage, strikes, strikes and more strikes, not to mention the omnishambles created by Liz Truss and Kwasi Kwarteng.
I think it’s fairly safe to say we were all irritated by things, but I also think that brokers have had it worse than any other profession – in the financial services sector, at least.
The very real financial disaster facing swathes of homeowners whose deals need to be refinanced has put a huge strain on brokers, who sit at the coalface of our market and have to manage the fear, disappointment and anxiety that clients are dealing with.
They’re also the intermediary, and consequently have to manage the lender as well. It’s never a plain sailing process, but as the Bank of England raised rates and the pain started to really bite in August, the dam broke. There has been a flood of cases requiring far more work than is usual. Add to that the fact that lenders are restricting lending volumes, which triggers more criteria and product changes than normal, and I’m amazed there aren’t more bald brokers around.
Smart Money People’s survey also, perhaps unsurprisingly, showed that brokers are struggling to keep up to date with rapidly changing criteria and rates.
Jacqueline Dewey, the firm’s chief executive, acknowledged that it’s not all lenders’ fault. The market has been all over the shop since October, and funding costs have necessitated the rapidity of those changes.
Lenders are struggling to cope, but do brokers care? They might sympathise, but ultimately the fact remains that a poor experience with a lender is going to hurt that lender’s volumes.
The survey revealed that Net Promoter Score (NPS) is down 5.8 points on H1 2022 at +21, ranging from -54.5 to +59.3 for the lenders in the report.
Dewey noted that brokers are frustrated by the situation they find themselves and their clients in, with constant changes and products being withdrawn a er applications have been submi ed.
She said: “Our analysis has found brokers are craving some stability within the market, and that brokers need support from lenders – they need to be able to rely on and have confidence in lenders, and whilst
processes adapt, communication remains key.”
The survey also showed that 43% of brokers are relying on emails to stay up to date with criteria and product changes. That’s quite something in this day and age.
Multiply the number of changes – and therefore emails – by lenders across the market, and you can see why brokers are so frustrated.
The shape of the mortgage market is changing, and lenders are already having to adapt their processes to cope with increased uncertainty and more struggling customers.
Patching existing systems in order to achieve the service levels brokers expect will rapidly become untenable. Updates and redesigns can take days to implement. Indeed, it took most lenders four days to reprice and relaunch product suites when the bond market collapsed.
Distribution and mortgage efficiency are vital for lenders hoping to compete – key reasons for rethinking processes and technology. Dissatisfaction with customer service, communication and a lender’s tech systems have the most significant downward pull on NPS.
Brokers are frustrated by slow service timescales, the inability to get hold of relevant staff and the inability to get the information and answers they need.
It all comes back to speed and resolution. Brokers value service, and the right platform will mean lenders can deliver it. ●
e o en hear the term ‘disrupter’ being bandied around a variety of business sectors, o en with a strong tech influence a ached to it.
On a global scale, huge brands such as Uber, Airbnb and Netflix – to name just a few – have emerged over the years as leading disrupters in their respective spaces.
They are now industry giants, with their own targets on their backs for the next wave of disrupters to knock off their pedestals.
Some will do this more successfully than others, but let’s remember that there was a time when they were simply a business plan with a dream to challenge the perceived ‘norm’.
They are also good examples of brands which are not necessarily known as being tech companies, but which do rely on cu ing edge technology to make them stand out from a proposition, engagement, distribution and service standpoint.
Technology will always be a major focal point for disrupters due to its speed of progression and ability to blaze new trails, generate greater levels of efficiency, solve complex as well as simple problems, and provide the capacity and capability to question the status quo.
In the past, being termed a disrupter might have come with something of a negative connotation. People have long tended to become easily accustomed to the ‘norm’, and those who challenge this can sometimes be thought of as intruders into a space that many consider to be familiar and comfortable.
This was especially apparent in a mortgage market which was
Wsomewhat slow to embrace the potential impact of technology.
For many years, the intermediary market in particular o en saw technology as a threat rather than an opportunity. In its defence, there were valid reasons for this, as some of the early technologies appeared to undermine and even look to replace the advice process.
I like to think we have moved on from those times gone by, and now operate in a place where the vast majority of the most successful technology has been created to support the best elements of the advice process rather than usurp it. This trend has broken down the fear factor for many intermediary firms.
Lenders have long understood the benefits of technology when it comes to streamlining a variety of processes and procedures. However, some larger, more established institutions have struggled to keep up to date with an ever-evolving tech landscape, and have even been le behind due to limited systems not built with the capacity to grow and overcome legacy issues in a fast, seamless manner.
In contrast, new entrants –sometimes disrupters in their own right – or smaller, more flexible providers, have learned these lessons from the past and come to market with far slicker, more userfriendly systems, open to further enhancements and integrations which allow them stay ahead of the game.
Being a tech provider, this makes the lending landscape very interesting from multiple angles. It provides us an opportunity to work closely with new entrants at an early stage, to help shape their tech proposition. It also enables us to work with other
forward-thinking lenders to provide them with a fresh and dynamic offering which will disrupt the current offerings across various sectors.
I say this on the back of new partnership we’ve just signed with specialist bridging and buy-to-let lender Market Financial Solutions (MFS) to become its primary origination platform partner. This partnership will enable effective landlord and broker interaction, as well as providing an efficient and agile platform to deliver a variety of lending facilities to its brokers and landlords quickly and effectively.
Being chosen to provide a set of advanced, customised solutions for a lender such as MFS is testament to the quality and efficiency of our platform. It also demonstrates how tech-savvy lenders are approaching the modern mortgage market, as any successful proposition – no ma er the sector – requires the highest service standards supported by a range of robust, effective, and innovative technology solutions.
Partnerships such as these enable lenders to provide their intermediary partners with access to solutions which help meet the needs of their clients swi ly, effectively and seamlessly. These will remain key elements in 2023 and beyond.
There remain plenty of challenges for lenders to overcome in order to be er service the needs of their intermediary partners and their clients. Establishing more transformative and collaborative tech partnerships will certainly go a long way to successfully disrupting what remains an o en outdated mortgage journey. ●
The Intermediary speaks with Nitesh Thandani about how the mortgage market is nally adopting technology, and why advisers need to embrace the future
One of the biggest changes in mortgage technology witnessed in the past year is the rapid adoption of Open Banking. e Open Banking Implementation Entity recently reported that there were 21.1 million Open Banking payments in the six months to March 2022, up from just 6.1m in the same period in 2021. It also found that monthon-month growth measures around 10%, which is quite outstanding.
We partnered with Experian to implement its Open Banking technology back in 2021, and have been re ning it ever since. is partnership provides Smartr365 users with access to a single view of income, expenditure, and nancial behaviour, streamlining the homebuying journey for all parties.
e most outdated aspect of the mortgage process is probably how it starts for many customers; walking into their local high street bank branch. However, Which? suggests that 5,355 branches of banks and building societies have closed, or have been scheduled to close, since January 2015. is is an average of 54 per month. e digitisation of the mortgage journey is therefore certainly underway, but not complete by any means.
e most outdated aspect of the mortgage process is probably how it starts for many customers; walking into their local high street bank branch”
e nancial services industry is growing from strength-to-strength, with new innovations time and again.
e necessary tools – including integrated credit checks, Open Banking for a ordability, connectivity with banks, and digital ID – are already here, and these bring accuracy, e ciency and transparency within the mortgage process. With this, we not only optimise the process and keep the customer informed and in control, but we also speed up the process. One day, we could be doing this in minutes rather than weeks.
Digital ID veri cation is a mortgage tech tool that o en goes under the radar of both advisers and their customers.
Smartr365 was the rst mortgage platform to integrate Digidentity’s digital ID veri cation service, which also underpins the Government’s GOV.UK Verify service, way back in 2020.
Providing homebuyers with the opportunity to verify their identity online and outside of traditional working hours removes the need for physical ID veri cation, which brings added hassle and cost to both brokers and customers.
Moving away from cumbersome ID veri cation processes – photocopying passports and the like – is absolutely critical to improving our industry’s e ciency and output.
While initially it might seem that the digital homebuying journey is more impersonal than its face-to-face equivalent, the reality is far from it. Attitudes towards homebuying have changed considerably in the past three years alone, and digital aspects of the journey have very much become the norm.
Buyers have increasingly valued speedy transactions – all kickstarted by the Stamp Duty Land Tax break back in July 2020 – making e cient processes more important than ever.
Virtual home tours became a go-to service in the pandemic, enabling properties to be viewed quickly and safely.
Advisers have also increasingly relied on virtual meetings – both with lenders and customers –
again, providing the same level of personal contact without the added time and expense involved with an in-person meet.
Digital tools are so advanced that they can o er the ‘white glove’ feel, without the unnecessary complications involved in face-to-face operations.
is year is all about boosting the adoption and usage of our tools. We have already doubled the number of users in a year, taking us past 4,000, but we are by no means nished.
We also remain committed to our ‘you ask, we build’ policy, and will continue to speak to our users and implement the changes they want to see. We already have a strong pipeline, but always retain capacity to react to feedback and uctuations in our fast-paced market.
I would urge new starters to not be scared by legacy attitudes, and instead use them to motivate you to introduce new ideas and processes. e act of buying a home is one of the oldest nancial transactions on record, but that certainly doesn’t mean we can’t improve the way it’s done. ●
While initially it might seem that the digital homebuying journey is more impersonal than its faceto-face equivalent, the reality is far from it”
Like most regions over the past few months, Exeter is feeling the effects of the mini-Budget fallout which rocked the markets in September last year.
While plenty of opportunity still exists, like many others around the country, it is being stymied by rising rates, high house prices, and not enough supply to meet demand.
But with prices gradually falling, and a slow in inflation on the horizon, what is the mortgage market really like in Exeter, according to those on the ground?
£194,000, respectively. The most affordable area in the Exeter region was ‘EX4 3’ in central Exeter, with properties averaging £211,000. Conversely, the most expensive area to purchase a home was in ‘EX3 0’, an area just east of Topsham, where the average property costs an average of £694,000.
While there is opportunity for homebuyers to invest in a new-build home in Exeter, the price gap between older and newer properties has closed over the past couple of years.
The Intermediary sat down with local brokers and experts to find out just that.
According to the latest data, the average sold price for a property in Exeter and its surrounding postcodes between January and December 2022 was £361,000.
This figure marks a 10.5% price increase over with the 12 months before, a top end growth rate for the UK, and one that is comparable with that seen in North and North West London.
Detached houses fetched an average of £534,000 in 2022, semi-detached homes came in at £334,000, while terraced houses and flats trailed behind, costing £280,000 and
Having fetched some £20,000 less than comparative older properties just a few years ago the price gap has now been reversed.
The average new-build property was sold for around £365,000 last year, while the average established property cost approximately £361,000.
This difference of over £4,000 suggests that the historically strong buyer preference for pre-existing homes has now been eclipsed. This is something that has been gradually changing within the local market, according to Dean Anspach, director at Awesome Mortgages Exeter.
Anspach, said that there had been continued demand from first-time buyers, a group that tends to gravitate towards new-builds, especially as rising rental and living costs bite.
JESSICA O’CONNOR is a reporter at e Intermediary
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
The price gap between older and newer properties has closed over the past couple of years”
Exeter is still proving to be a city with many opportunities for commercial and business investment.
Supply of finance is not scarce, and plenty of lenders are looking to support property investors and business owners with commercial mortgages, cash flow, working capital and expansion finance.
Current terms are favourable, despite interest rates rising still, so an agile broker is worth their weight in gold to navigate potentially choppy waters ahead.
The key is to work with a broker whose priority is to ensure the finance package works for the client, not just the lender.
Exeter postcode region Residents 590k
Average age 44 www.plumplot.co.uk.
Exeter city Residents 130.7k
Average age 35 www.ons.gov.uk
My brokerage covers Exeter and the wider area. We generally attract day-to-day residential clients, with a healthy mix of first-time buyers, remortgages, and home movers.
Leading up to the base rate increases, I saw a hike in people wanting to fix rates well ahead of time, and more willingness to pay early repayment charges (ERCs) to secure rates.
Coming into 2023, I have seen no slowdown in first-time buyers.
Renters are increasingly concerned with rising rent and living costs, making new-builds in Exeter more appealing than ever.
Clients that previously stated they would never buy a new-build are now enquiring about purchasing them, in no small part due to the huge energy savings they offer.
Clients want more reassurance during the process now, we have also resubmitted a number of applications where the rate fell significantly. As a broker of six years, that’s the first time I’ve done that.
Despite general public perceptions of the market, I am optimistic about the future. After all, it’s in these times people need brokers more than ever.
He now believes that new-build properties in Exeter are becoming “more appealing than ever.”
Indeed, Anspach has noticed clients who might previously have been against the idea of buying a new-build looking to make a purchase.
This is a fact he attributes, at least in part, to the “huge energy saving” benefits on offer from living in such a home.
So, with the first-time buyer market still going strong, what of Exeter’s
buy-to-let sector? The proportion of private rented homes in the region currently stands at around 18.1%, just below last year’s national average of 19.2%.
However, the buy-to-let sector in Exeter and the surrounds has seen a significant decline following the market turmoil of late last year.
James Miles, director and mortgage and protection adviser at The Mortgage Quarter, has noted this decline in Exeter’s buy-to-let business over the past couple of months.
Exeter, according to Miles, was traditionally a property investment hotspot, in line with many university towns and cities. Houses in multiple occupation (HMOs) performed particularly well, with the local hospital also helping to bump up demand.
However, Liz Truss and Kwasi Kwarteng’s botched mini-Budget impacted Exeter as badly as anywhere else, dampening demand.
Nevertheless, the picture is not necessaruly all bad. Indeed, looking ahead, Miles says these events have given “a welcome reset to house prices,” including encouraging new investors to start looking at property throughout Exeter.
Meanwhile, Exeter’s capacity for commercial development seems to be creating plenty of opportunity, according Conrad Robins, director of local financial advisory firm, ASC Finance for Business.
Despite the obvious economic challenges and ever-rising interest rates, Robins says there continue to be favourable conditions.
The picture is similar when considering Exeter’s equity release market. Paul Sprake, area manager at Giraffe Equity Release, believes that despite ongoing interest rate challenges, equity release will prove to be a popular choice throughout 2023.
Over-55s account for 40% of Devon’s population, and with Consumer Duty coming into force in July 2023, this flourishing market could grow even further.
It is clear that while the housing market in Exeter, like any, took a hit in 2022, things are on the up.
Although the past few years have taught many to be cautious in making predictions, brokers and advisers are confident that the market will remain stable and even grow in 2023. Whether buyers are interested in commercial development, a buy-to-let opportunity, equity release, or simply considering purchasing a new home, market conditions seem to be moving in their favour. ●
Typically a hotbed for property investors, with HMOs thriving due to the high performing university and well renowned hospital, the market took a hit during 2022 following on from the Tory government missmanagement of fiscal policies. However, this has given us a welcomed reset to house prices, and opened up 2023 to be a buyers’ market.
With mortgage interest rates settling, we are seeing new investors still looking for longerterm, safe investment into property throughout Exeter, whilst we’re seeing older investors dispose of their assets due to their yields reducing in the immediate short-term.
With estate agents seeing more listings, and enquiries coming back to normal levels, buy-to-let will continue to grow, particularly with rent increasing due to lack of housing supply.
2023 will bring many challenges and opportunities in the equity release markets. 2022 figures showed £5.8bn of equity release lending completed, with industry experts expecting similar in 2023. The challenges for 2023 will be similar to last year — high interest rates, reduced loan-to-values (LTVs), high inflation and rising living costs.
I expect needs-based borrowing to increase as people get to grips with the cost of living increases and pension income potentially reducing. We expect products to come back, along with downward trends in lifetime fixed rates. This should help stimulate the market.
Exeter and the surrounding areas should continue to grow, due to both housing development and the increasing population of over-55s accounting for 40% of Devon’s population.
Consumer Duty rules should also help with business retention, with the first phase coming into force in July 2023.
source: www.gov.uk/government/ statistical-data-sets/pricepaid-data-downloads
The number of private rented homes in the region currently stands at around 18.1%, just below last year’s national average of 19.2%”
I’ve worked in nancial services for 18 years, and I started in HSBC straight out of university.
Before I was a BDM I worked as a broker, so I was with the same rm for nine years.
A er I had my second child, my daughter, I just thought it was a good time for a new challenge and a bit of a change. e BDM role was something I was familiar with as a broker, and I thought it was quite an exciting option.
I joined Leeds in June of 2020. Locationally, it wasn’t an obvious choice as I live down in Southampton, so I’m probably the furthest southern Leeds employee that they ever had, or that they certainly have now.
I’d had positive experiences with Leeds when I dealt with them as a broker submitting cases, every time I spoke to anyone there, they were always really friendly.
Also, when I was researching the role itself, I was impressed with the things I found out, because in all honesty I didn’t know as much as I know now about Leeds.
So, when I was doing the interview research, I found out that they are very well capitalised, they’ve got the fair tax mark, they’ve got strong environmental ethics, and they really want to help people to get onto the housing ladder.
The Intermediary speaks with Emma Evenett about the challenges and opportunities she faces as a BDM, and the importance of working with brokers to ensure the best results for borrowersEmma Evenett is business development manager at Leeds Building Society
It is a role I love, it’s taught me lots of new skills, and I really like it, having been there three years this year.
It’s very purpose led. It has genuinely got a really strong desire to help more people to achieve the goal of homeownership.
We are the market leader in Shared Ownership, a proposition which allows people to get onto the ladder and to purchase a property, who might otherwise only have the alternative of renting long-term.
We’ve won the best Shared Ownership lender now for seven years in a row, and it’s because we give potential borrowers the option just to put down a small deposit –5% of their share – not too dissimilar from the deposit needed to go into the private rental market.
ere are just some really great options available for buyers, and a real genuine care from the society to help people to move forward and own a home.
Leeds also takes broker feedback really seriously. We encourage it because it helps us to improve.
For example, before Christmas last year, brokers were asking us for tracker rates with no early repayment charges (ERCs), and then on 3 January we launched just that.
Generally, the industry is at a challenging point.
Housing is now at its least a ordable since records began. e average home costs over nine times people’s salary, so there’s a real challenge there in terms of helping to support brokers.
We just need to work together really well so that we can help brokers to help homeowners to get onto that housing ladder.
It’s really nice to be able to support intermediaries at the moment, because it’s the rst full year that we’ve been back on the road in a January since Covid-19, especially for me starting in 2020.
It’s fantastic to be able to go out and meet face-to-face and talk to brokers about their experiences, their predictions, their plans over the next few months, and just to nd out how best we can support them. ere’s de nitely plenty of opportunities there – everything that brokers and rms have been saying is really positive.
Leeds has a ‘can-do’ attitude to nd solutions and to help. is involves asking how we can help, and just being curious enough to fully understand each enquiry that we get.
If brokers have any concerns around applications they have submitted to us, it’s important to support them and borrowers.
Brokers are at the ‘sharp’ end of it all really, so I always try and make it as easy as possible for them to do business with us, I want them to be happy that they’ll get honest and straightforward answers.
It’s important to set up your own budget as an individual – to understand what you’ve got coming in, your outgoings, how much you want to spend on a mortgage, and make sure there’s a budget there to protect that mortgage.
Also, one of the main barriers to obtaining a mortgage can be credit
le discrepancies that borrowers aren’t even aware of. Technology now means that you can nd your credit le information relatively simply, so I would encourage potential borrowers to check their credit and keep an eye on it.
Of course, I also de nitely recommend speaking to a broker. ey’re invaluable and so knowledgeable on the market as a whole – the buying process, the costs involved, products, rates and obviously what you can borrow.
It really is worth nding and speaking to a broker and getting as much advice as possible. ●
For most, the cost-ofliving crisis has meant reining in spending on non-essential items and watching the pennies a li le more closely. For others, however, life goes on much the same, and there is a reluctance to curb discretionary spending.
Amidst news stories about soaring energy bills and inflation came Nationwide Building Society’s December Spending Report, which painted an interesting picture of consumer spending habits.
It analysed more than 238 million debit card, credit card and direct debit transactions made by the society’s members, and found that rather than non-essential spending decreasing, it actually increased.
While heightened levels of spending in December are to be expected given the Christmas period, the findings show non-essential spending was not only up 4% on November 2022, but also up 9% on December 2021.
Inflation will have played a part in the rising cost of goods, but it cannot account for the 8% annual growth in the volume of transactions in December, which were also up 7% on November 2022.
The findings show the annual growth in non-essential spending in December was largely driven by airline travel and holidays, no doubt helped by the easing of Covid-19 restrictions.
While travel experienced the highest growth, the society’s data shows the volume of non-essential spending was up almost across the board.
Home improvements and DIY, health and beauty, clothing, and
leisure or recreational activities were all up compared with December 2021.
Just before Christmas, the Bank of England released its survey of British household finances, which also showed the differing ways households are responding to the cost-ofliving squeeze.
It found that lower-income households have mostly tried to limit the rise in their expenditure by reducing the amount of goods and services they buy, or by switching towards cheaper alternatives. Meanwhile, higher-income households have continued to consume the same goods, or have increased their purchases and spent more overall.
The Bank of England says households which have spent more money have generally funded this extra cost by saving less, while around 5% of households have increased borrowing to spend more.
This corresponds with Nationwide’s data, which shows the amount spent on credit cards was up 7% on December last year. More than a fi h (22%) admit they have more outstanding debt on their credit card this January than they did last January.
Interestingly, those with a household income between £65,001 and £75,000 are most likely to have more credit card debt this January, its findings revealed. The survey also showed that one in ten (10% ) did not have a credit card last January, but do this year.
For a portion of homeowners, the cost-of-living crisis won’t cause them to cut their spending, and for some it shouldn’t necessarily mean they have to. Although we are currently seeing an increased need for second charge mortgages for debt
consolidation purposes, we are also still seeing demand for discretionary spending, such as weddings and home improvements. For example, a prime borrower looking to convert their lo or build an extension may turn to a second charge to fund the renovation. This could be because they are tied into a competitive 5-year fixed rate mortgage, and it might work out cheaper to obtain a second charge compared with remortgaging onto a higher rate and potentially paying a he y early repayment charge.
Using a regulated second charge to release equity in a property may also work out cheaper and more prudent than other forms of finance, such as a personal loan, or spending substantial amounts over numerous credit cards.
As long as the borrower can afford the second charge mortgage repayments throughout the course of the loan, and they meet the affordability assessment, the costof-living crisis may not mean they need to curb their discretionary spending altogether. ●
Higher-income households have continued to consume the same goods, or have increased their purchases and spent more overall”
I’m no economist. I don’t follow the stock markets, in fact, I rarely watch the news — not that I think you learn many actual facts from what’s reported these days — but I’ve been around in this industry for over 20 years, so I hope my opinion on second charge lending is at least educated.
Figures published in the latest Secured Loan Index evidenced a bumper year for second charge lending, with £1.71bn lent in 2022, an increase of 45% year-on-year, and the biggest year of lending since 2006. That’s despite a dip in the la er part of the year, whichc coincided with former Chancellor Kwasi Kwarteng’s tax-cu ing September mini-Budget.
So, what does the horizon for second charge lending look like?
With over a decade of historic low Bank of England base rates, how many of your clients are enjoying fixed rates for the next two, five, maybe even 10 years?
Would a remortgage increase — significantly — your client’s rates? It would be suicide to touch it, right?
I think we’re going to start hearing the phrase ‘blended average’ a lot more. Is it cheaper to maintain a lowrate mortgage and borrow elsewhere, or does the increase in the mortgage rate still represent a be er saving?
Is it a case of awareness? Surely not. Mortgage brokers understand second charges by now, so is the onus more on second charge lenders and brokers to gain confidence from the wider mortgage market? A er all, we all operate under the same regulator and maintain the same professional standards, and we are all trying to get the best for our customers.
New lenders are due to enter the market in 2023, including the muchanticipated launch of Scroll Finance into the regulated sector.
Several existing lenders have mulled over for some time the addition of a buy-to-let second charge product — can this product finally become more affordable? To date, the number of lenders and the rates offered have been historically poor.
Second charge rates have increased. For the most part, this has been in line with first charge mortgages, but for many clients there is a ‘rate shock’ a er many years of unprecedentedly low rates.
Customers are still expecting to hear rates from 4%, not 7%. The secured loan industry was lending in excess of £400m per month back in 2006 when rates last started at this level, but the difference then was we weren’t consolidating a decade of lowrate credit — the majority of second charges still have an element of debt consolidation in them.
In recent years, lenders like Masthaven and Paragon have ceased second charge lending, and it’s clear this has led to a lack of competition.
With this lack of competition comes complacency, and as a result, service in this industry has slipped considerably.
If we go back just a few years, a lender wouldn’t have dared fall behind, and submi ed applications were worked within 24 hours or heads would roll. In 2022, however, it was clear that the expectation had dropped along with service.
Even the best lenders, which built their business on service, no
MATT TRISTRAM is co-founder and director of Loans Warehouse
longer made that a priority. And the answer? Change the service level agreements (SLAs)!
We need a wake-up call in 2023 — let’s not repeat the cycle. When the busiest of periods come, let’s roll up our sleeves, travel to the office where we’re most productive, and work harder and longer, not just cry ‘work, life balance’. Let’s have pride in being the best and accept nothing less.
Loans Warehouse’s mo o is ‘no one works harder’. We want more competition for this tagline! Let’s be be er, let’s not accept anything but the best, and once again stand tall as an industry with the best service. ●
Let’s have pride in being the best and accept nothing less. Loans Warehouse’s motto is ‘no one works harder’. We want more competition for this tagline!”
For those new to the industry, as well as veterans, it’s good to remember that if your customers are looking to release funds, they have other options other than a further advance, remortgage, or having to rely on unsecured borrowing, which can be restrictive in terms of loan size and credit eligibility
In simple terms, a second charge loan — also known as a secured loan — is very similar to a further advance, but offers more flexibility. They can typically be used for a wider range of purposes and allow for more diverse income situations and credit profiles.
Second charge lending originated from unsecured debt consolidation. Since the nation has steadily returned to normality following the pandemic, we have been seeing a broader and more interesting mix of uses for second charge lending.
This could include clients building additions such as home offices and gyms, as well as home improvements – single story rear kitchen extensions completed under permi ed development are something we see a lot. We also see the classic ‘bank of mum and dad’ lending, using second charge loans to raise the funds to assist children onto the property ladder.
At Together, we have been seeing a rise in the number of self-employed borrowers. A key driver for this, we believe, is the rising number of self-employed individuals following Covid-19 who decided to branch out and set up their own business.
Unlike some mainstream lenders, we can take a flexible approach to underwriting these cases,
and can consider cases by using accountant forecasted income, subject to a minimum of one year’s trading history.
An example of this in action is a customer of ours who recently borrowed funds to carry out some home improvements on her £425,000 detached home, whilst paying off credit card debt.
The self-employed businesswoman had a favourable rate on her mortgage with her bank and had originally contacted them to extend her borrowing, which was not available.
Using a second charge loan, she protected her low first charge rate and consolidated her unsecured debt, allowing her to complete the refurbishments and create the kitchen, bathroom and garden of her dreams.
I believe it is essential for brokers to have a firm understanding of second charge lending for their clients, as it’s now a truly viable alternative.
Many high street lenders have tightened their lending criteria — given the cost-of-living challenges — and continue a one-size-fits-all approach to affordability. Because second charge underwriting is typically more bespoke to the client’s actual circumstances, they are more likely to be able to achieve the level of borrowing required.
Second charges empower customers with their flexibility, and typically give the ability to borrow at higher income multiples, compared to a remortgage or further advance.
Many clients can benefit from them, including those who need to capital raise mid-way into a fixed period.
At Together, we also assist many clients whose circumstances have changed since taking their current first charge. For example, a relationship may have broken down, their employment status may have changed, or they may have experienced a blip in their credit record. While it’s always important to seek independent financial advice, a second charge could prove a way of reorganising clients’ finances by consolidating debt and releasing extra funds, while protecting their first charge rate, rather than remortgaging the full amount remaining on their first charge mortgage.
It’s worth remembering that if you have not wri en a second charge for a few years, or ever, the process and documentation is aligned to that of the first charge process; this makes comparison between the products far easier for clients to understand.
Also, in nearly all cases there’s no requirement for the client to employ a conveyancing solicitor, as the lenders take care of the legal process in-house. ●
A second charge could prove a way of reorganising clients’ nances by consolidating debt and releasing extra funds, while protecting their rst charge rate”
Much of the press about the mortgage market in 2023 makes for gloomy reading for mortgage brokers. However, where there is challenge, there is opportunity.
The home mover market is likely to be quieter than it has been in recent years, and lenders are increasingly targeting borrowers with product transfers that threaten to eat into brokers’ share of the remortgage market. As brokers, you now have a choice. You can respond to the situation and take a proactive approach with your clients, or you can risk watching your business wither in the coming years.
Faced with higher mortgage rates, many homeowners currently within the fixed rate will simply sit on their hands in the hope that rates come down by the time their next remortgage is due. During this time, though, life goes on. People get married, divorced, have babies, and change the course of their life, which o en requires access to finance.
Many of your clients’ lives have probably changed beyond description since you last arranged their mortgage. If you just wait for renewal before contacting them again, you could be sleepwalking towards a drop off in your client base.
Taking a proactive approach to engaging with your clients, on the other hand, could open up opportunities to grow your business this year. Many homeowners will be unaware that they are able to access finance secured on their home without having to remortgage.
Second charge mortgage lending remains an area of relatively low customer awareness, and where
people do know about the product, there are o en a lot of misconceptions. However, a competitive lender environment means that access to second charge lending becomes a much more prominent consideration for many homeowners who want to finance their life plans, or even just consolidate their debts and streamline their monthly outgoings.
Borrowing on consumer credit hit record levels in 2022, and many households have used credit to help them tackle the cost-of-living crisis.
Customers with open accounts on revolving credit have the potential to significantly increase their borrowing in the future, without the need to apply for further credit. So, by paying off these accounts and then closing them, borrowers can put themselves in a stronger position to secure the right remortgage.
Significant balances on rolling credit, such as credit cards and overdra s, can negatively impact affordability when it comes to taking their next mortgage, but taking action to consolidate those debts can overcome this.
If a borrower holds a number of disparate debts, they are likely paying interest on each, not to mention dealing with the pressure of managing various monthly payments.
By using a second charge to release equity from their home, borrowers can streamline their debts into one monthly amount, helping to lower their monthly outgoings as well as decreasing the chance of missed payments. As mortgage affordability is based on monthly outgoings, reducing the amount spent on servicing credit reduces those outgoings.
In addition, a second charge mortgage is a known quantity.
Brokers who open a conversation with their clients about their current circumstances and plans can play an important role in helping them to achieve those plans, making them aware of the options available to them that they may have previously been unaware of, or considered unsuitable for their circumstances.
The second charge market can open up the opportunity for homeowners to take their lives off hold and open up an opportunity for brokers to diversify and grow their business.
It’s the responsibility of a good broker to be proactive with clients and open up a conversation about their finance needs. However, it’s not the responsibility of a good broker to be an expert in every area of the market – that would be impossible. By partnering with a specialist distributor, you can access their expertise, which means you can provide your clients with a more complete set of potential solutions.
2023 is likely to be a challenging period for the mortgage market, but brokers who see this challenge as an opportunity and take a proactive approach to working with their clients can deliver them extra value and create stronger, longer lasting relationships. ●
By partnering with a specialist distributor, you can access their expertise”
nderwriting has always been a balancing act between the application of lending criteria and the importance a ached to customers’ circumstances, their past history, and how it informs their potential as good payers.
In these days of lending by algorithm, it is refreshing to see more lenders across the spectrum no longer being reliant on the ‘computer says no’ school of underwriting. In the second charge sector particularly, underwriting generally remains a more human-dominated experience, with the accent on looking at the client’s individual financial experience, as much as slavishly following the criteria guide.
Leaving aside the property being sound and valued correctly, underwriting still boils down to two main elements: ability to repay, namely affordability, and intent to repay, looking at past and present creditworthiness.
With a property market looking decidedly different compared with the post-lockdown boom period, many prospective buyers, struggling with cost-of-living rises, pose a different underwriting challenge to lenders.
I always try to ask myself whether, if it was my own money, I would lend in certain circumstances. Lenders must satisfy themselves not only that the customer has the ability to repay, but also the intent to do so. Those who deferred payments during lockdown must also be taken into consideration when underwriting, even though taking a break from payments might just be a sign that a customer simply did it because they were allowed to.
Lenders have to consider normal affordability protocols, but also how that changes with the current circumstances of higher living costs, and before that, when furlough or payment deferrals ‘helped’ clients.
We have to predict how this extra dimension feeds into the likelihood of future negative events, and how this might affect affordability going forward. At the same time, we need to look at the historical credit profile of the applicant and see what, if anything, caused them to seek a deferral scheme.
There is an argument that — provided the customer qualifies on current surplus requirements and stress tests — the lender is theoretically
TONY MARSHALL is managing director of Equi nance
customer’s responsibility for their decision to borrow, this situation sums up how the scales are tipped against the lender.
Funding is certainly not a problem in today’s market, and lenders and their funders are keen to lend. Underwriting, though, is key to make sure that ‘good’ lending is paramount, and that caution is at the forefront of lenders’ minds.
With the housing market cooling, the next challenge is almost upon us. If house prices drop — and some pundits have claimed that a drop of 10% is not beyond a reasonable estimate — it poses an added challenge on top of the affordability and intent to repay.
It could be argued theoretically that this is a clear indication of potential financial stress with which lenders are going to have to contend, and all without the benefit of a crystal ball.
entitled to lend, with all else being equal and without a foreseeable event that may cause financial distress.
But it’s not as simple as that. Lenders see many cases where the customers can evidence affordability at the time of their application, but what about their ability to repay when household costs are increasing? If the lender was to lend under the circumstances above, based on current affordability tests, there is a high probability that it could be challenged at a later date for irresponsible lending, even though the future is not yet wri en.
If ever there was a case for levelling the playing field in respect of a
However, the further lenders go down that particular rabbit hole, there is a danger that good cases can get flushed away with the ones that really might cause problems further down the line.
Our a itude is to take a common sense approach and rely on the experience and knowledge of our underwriters, backed up by the increasingly effective credit checking facilities available to lenders.
By not relying slavishly on affordability tests, we can steer a more consistent course by which advisers can feel that their clients are being assessed fairly without compromising underwriting integrity. ●
Those who deferred payments during lockdown must also be taken into consideration when underwriting, even though taking a break from payments might just be a sign that a customer simply did it because they were allowed to”
Since the start of the global pandemic, the financial pressures faced by many borrowers has increased significantly. Whether due to job and income loss as a result of the pandemic, or the subsequent rise in inflation, interest rates and the cost-of-living, more borrowers than ever are facing increased financial challenges.
This has resulted in a significant upli in the number of borrowers falling outside the parameters of mainstream mortgage lending, due to a blip on their credit rating because of a missed payment, default or County Court Judgment (CCJ), or simply because of affordability constraints. As a result, their ability to capital raise may now be impacted as they no longer meet the lending criteria of mainstream lenders that use automated decision engines when underwriting loans.
In this situation, a second charge mortgage could be the most suitable option, as the specialist lending sector was created with these borrowers in mind. Yet many brokers still fail to consider a second charge mortgage alongside a remortgage in any capital raising situation, either because they are unfamiliar with the market or they simply don’t feel comfortable giving second charge advice.
The fact is, though, that a client will very rarely ask for a second charge mortgage when needing to capital raise, so it is the broker’s responsibility to ensure it is always considered as an option. In some cases, it may actually be the most suitable solution for their needs, and not just when there might be an adverse credit rating.
This is even more pertinent in the current climate, where affordability constraints are leading to an upli in
product transfers. Some customers, finding themselves locked into fixed or preferential rate deals, may need to consider capital raising as an option to get back onto an even keel.
The introduction of the Mortgage Credit Directive in 2016 dictated that, in order to provide the best customer outcome, a second charge mortgage should always be considered alongside a remortgage in any capital raising situation. This means seconds should form an essential part of every broker’s toolkit. However, the lack of knowledge around these products means there is a very real need for be er education around second charge mortgages and the role they play in the market.
Dispelling the myths associated with the sector is a good place to start. Second charge mortgages have come a long way in the past 15 to 20 years, yet the stigma a ached to the market remains. However, both the regulatory environment and the market itself have evolved significantly in that time, which means not advising on second charge mortgages could result in your client not receiving the best advice at a time when they need it most.
One of the main misconceptions around second charge mortgages is that they are more expensive or a product of last resort, but this is not the case.
In the current economic climate of rising interest rates, taking out a second charge mortgage can enable a client to keep the preferential rate on their first charge loan while still accessing short-term finance, which makes financial sense given the increasing costs associated with fixed term loans.
For example, clients looking to consolidate debt or carry out home renovations are all potentially suitable for a second charge as well as a remortgage product, so considering both options is imperative.
In fact, a second charge may be the preferred option for some borrowers who need to access to finance immediately, as the speed with which the funds can be released makes them more suitable than a remortgage.
Similarly, for those looking to restructure their finances, a second charge can help to repair their credit rating by consolidating their debt into a more manageable monthly payment, allowing them to return to the mainstream market at a later date.
Obviously, brokers advising in this space will need to ensure that they research the market first, and that they focus on client outcomes, not just the headline rate, as this will help them to be er manage their customers’ expectations.
In the current economic climate, not advising on second charge mortgages could not only be detrimental to the financial needs of your client, but also the broker, as turning away a client could result in the loss of the capital raise, any ancillary sale and future remortgage, as well as the customer themselves.
Brokers unfamiliar with the second charge market should seek to establish relationships with specialist brokers working in the sector, as their experience and expertise will prove invaluable in ensuring your customer’s needs are met while making sure you are also remunerated for the referral. ●
It’s good to talk. It may have been made famous by BT campaigns in the 1990s, but the slogan applies just as much to those with mental health issues. Speaking up and seeking help can be the first step towards getting and staying well, rather than individuals trying to handle the situation themselves. Unfortunately, having taken the decision to reach out for support, often a massive step, many are finding help is difficult to access.
Appointments for mental health support are difficult to come by, with almost a quarter (23%) of adults waiting more than 12 weeks to be seen. Delays further exacerbate the situation, with a deterioration of mental health being reported by twofifths of adults waiting for treatment.
The situation has reached the point where people with mental health problems are abandoning the search for help through their GPs, and resorting to calling 999 or presenting themselves at Accident & Emergency departments, often multiple times.
The health crisis has been building over time, and while there are no quick fixes, access to help is more readily available than many realise for those with protection policies.
Added value services that come with protection insurance have been offered for years, with Royal London’s Bright Grey brand baking in a value-added service in the form of Helping Hand into its overall proposition nearly 20 years ago.
At its core, this is a partnership with nursing service, RedArc. Through Helping Hand referrals, mental health support has become the number one issue on the services Royal London provides.
Mental health is often an underlying issue, with customers seeking support for another illness
or condition, or for bereavement; for example, if there has been a diagnosis and treatment for cancer, or a traumatic incident in a family’s life with resulting mental health challenges.
Helping Hand is all about holistic support; it covers all the person’s illnesses and/or conditions, providing support unique to them, their circumstances, and their family.
People tend to struggle with situations in their life rather than reach out for help. They see asking for help like they have failed in some way, or feel no one will be able to help them in the situation they are in.
But Helping Hand is there to help. Behind its concept was the very recognition that when people need help, it’s more than just a cheque that’s required to help them get back on their feet.
The first interaction with the service is speaking to a RedArc Mental Health nurse. This allows individual circumstances to be assessed, and the best support to be evaluated. Levels of anxiety and depression are assessed using the same scoring method as a GP – PHQ9 and GAD7 – with more than 76% of people registering a moderate to severe mental health condition when they first ask for help.
Where a course of therapy is assessed as beneficial, it will be provided almost immediately. With therapy, counselling, and ongoing support from a nurse, results can be delivered relatively quickly, with 94% of people with moderate or severe anxiety or depression improving their condition to mild or no anxiety or depression within three months. It also helps support people as they come off their anti-depressants, and early intervention may even prevent them being prescribed in the first place.
In circumstances where more comprehensive mental health
treatment is required, the service acts as a vital bridge until NHS services are available, so that the individual is supported in the interim. While Helping Hand has been instrumental in supporting people with mental illness for years, there’s been a marked rise in the number of individuals seeking help for their mental health since 2019.
Rather unfairly, prior to this, some thought of it as simply a counselling service. However, as can be seen, there’s much more to it than that:
ɐ Counselling and cognitive behavioural therapy (CBT) – 55% of people asking for Helping Hand support accessed either face-to-face or virtual counselling sessions.
ɐ Acupuncture, hypnotherapy, and complementary therapies –specialist help provided in some individual circumstances.
ɐ Sleeping, exercise and nutrition –helping people lead more healthy lifestyles, which in turn supports better mental health.
ɐ Access to support material – this could be pointing someone to YouTube videos or TED talks, or providing reading material such
as ‘The monster handbook’ for kids’ relaxation, ‘The book you wish your parents had read (and your children will be glad that you did)’, a guide for parents, ‘The stress solution - The 4 steps to a calmer, happier, healthier you’, and ‘The worry tree workbook’ for children.
ɐ Signposting to support groups and charities – the most recent include Mind, MH Foundation, PTSD charity, and an eating disorder charity.
What is clear is that we are getting people back to work quicker – we
don’t have waiting lists or wait times, which means we can target help immediately and stop conditions deteriorating further.
The service options are extensive –with wide ranging and varied support targeted at what the individual needs.
The BT campaign was based on four simple words, but it highlighted the power of good communications.
So advisers, it is time to talk to your clients and remind them of what their protection policies offer – help when they need it most, but so much more than just financial support. ●
The pressure on household budgets, along with the average 2-year fixed rate mortgage now being over 3% higher than it was before autumn 2022, is a challenge for the protection sector.
We know from conversations with mortgage intermediaries that the cost-of-living is at the front of clients’ minds. That said, we’re also hearing, from survey data and anecdotally, that clients still have an appetite to talk about protection as a result of events of the last few years.
It seems they’re entering into 2023 with increased awareness of financial risk and the need for resilience, albeit with lower budgets. Together, these factors present us with a complicated picture for protection.
It probably won’t surprise you that our view within Guardian is that, despite the economic context, the case for protection remains strong.
Individuals and families are much more resilient if they insure their biggest debt in the event of illness, an inability to work, or worse. This is a view many intermediaries share.
At the same time, we must be mindful of the financial pressures on households, and adapt our messaging and approach accordingly.
Our job, as an industry, is to get clients the protection they need, and keep them protected. This is more important than ever when financial resilience is pushed to its limit.
At Guardian, we wanted to do something to help intermediaries navigate this situation and maintain and grow their protection business. But rather than just provide the ‘insurer view’, we wanted to hear what they had to say. So, in the latter half of 2022, we ran a survey of 701
advisers. What was interesting was that, despite the economic challenges, intermediary experiences and opinion on the outlook for protection was divided.
In fact, answers were so varied that we decided to approach a number of intermediaries to discuss our results and test them against their own recent experiences. We spoke to more than a dozen, across all spectrums of advice.
Their insights proved to be so useful that, with their permission, we pulled together all of our findings into a white paper, called On the Front Foot
Distilling our survey data and contributors’ views, we’ve summarised the findings into 10 key takeaways, to provide intermediaries with a useful reminder of how to get on the front foot when talking to their clients about protection in the current climate.
One of the most important takeaways for me was the need to explain to clients that, when the cost-of-living goes up, so does the need for protection; against the backdrop of rising prices, the financial implications of a loss of household income are even greater.
With inflation hitting family essentials like food and energy hardest, savings will deplete sooner, and debt will build up faster. So, despite the budgetary pressures, protection has never been more vital.
Another key takeaway is that intermediaries can use the fact-find to help them in their protection conversations; giving a better understanding of clients’ financial resilience, and reaffirming the value of protection.
Rising mortgage rates are said to have slowed the housing market, resulting in a shift from new purchases to remortgages.
In this context, the fact-find and resulting protection conversations can help offset falls in mortgage activity.
For those intermediaries who have moved clients to longer-term fixedrate mortgages, short-term renewals can no longer be the catalyst for regular client contact. Protection can form the basis of annual reviews, giving advisers the opportunity to highlight the benefits of cover, make sure existing cover keeps pace with their lives, and keeping clients close.
These are just some of the insights featured. As any intermediary will tell you, every client is different, with unique circumstances, and they may react differently to similar challenges.
That said, there are significant areas of agreement, too. Unsurprisingly, much of this is about good communication, helping clients understand the importance of protection, as well as giving practical tips, such as actively helping clients work to a realistic budget.
The white paper can be found on our adviser website (see QR code). Whether intermediaries choose to read the full 60 pages, or just dip into specific sections, we hope it’s useful.
We’re open to feedback, along with any other thoughts on what we should be doing in our industry to better help clients.
What’s clear is that this is not the time to shrink away from protection conversations. Good advice is more vital now than ever, and if our paper proves anything, it’s that intermediaries are determined to deliver it.
Few of us are expecting anything other than a tough market this year, with high interest rates slowing down new mortgages and putting pressure on remortgage customers alike.
However, we know that in tough times the intermediary businesses that do well are those that have built the best customer relationships – because loyalty equals longevity.
It starts with just one factor: outcomes. Ultimately, we need to make sure the customer is properly looked after and sticks around, and hence so does our business.
So, we consider what the best outcomes look like in terms of service and value, and then work backwards from there to make the process as easy and transparent as possible.
We know there are firms starting to focus on selling general insurance (GI) to diversify their business, where they aren’t already. Yet we also know from regular Paymentshield market research that a lot still aren’t making the most of this opportunity.
Given that the main focus for this year is highly likely to be remortgage and product transfer activity, our adviser survey data shows that about one in five still don’t discuss GI with remortgage clients.
Examining the research, there are a number of reasons why this is the case, including the remortgage process working slightly differently from a new mortgage application, which means there are fewer opportunities to have a discussion around GI if it’s missed at the initial client meeting.
However, it often boils down to the fact that advisers don’t always
understand the long-term mutual value that having the conversation about general insurance presents.
We recognise that there are certain things the industry needs to focus on to help unlock this untapped potential, to add value to the customer, enhance customer loyalty and create new touchpoints for the relationship – not to mention create opportunity for the broker to add value to their own business.
It’s encouraging to see that there are already success stories of how easily some intermediary firms have been able to implement general insurance into their sales process, and what outcomes different advisers are achieving on the back of their changes.
For example, one of the intermediary firms that already discusses Paymentshield’s insurance with its clients has the philosophy that selling insurance in general makes perfect sense, because the more services you are able to provide to the customer, the more loyal they’re going to be.
They report that nearly half of their customers naturally make the decision to finalise their GI as part of the process, because it’s the logical time and place to do it.
The adviser, having helped someone with their mortgage, has by definition created a relationship of mutual trust, and the protection conversation can only strengthen this.
It’s not about ‘selling’, but about adding real value. This, of course, leads to positive outcomes for the adviser’s business.
We therefore believe that if advisers had access to all the information about what value they could create and how, they might be able to
make a better informed decision on whether it is a mutually worthwhile conversation to have.
In order to make this clearer for the brokers we support, we’ve added a commission calculator to our website, and have made it readily accessible to all who might be considering starting to advise on general insurance, or increasing the frequency of those conversations. We’re also up front about how commissions are calculated.
If an adviser starts selling general insurance alongside their remortgage cases, their customers are receiving a more holistic service with enhanced customer satisfaction, loyalty and trust.
When it comes to claims, the customer is going to be glad of having received that service, every time.
Finally, it is equally important to all of us – the insurer, the intermediary and the customer – that getting to those outcomes is as quick and easy as possible for the customer.
We’ve worked with intermediaries to refine our technology, so the quote itself takes just a matter of minutes.
The adviser should signpost up front that the client needs to have insurance, whether from them or elsewhere, so that they expect it’s going to be part of the conversation.
The customer derives so much benefit from that conversation, while the advisers can also derive benefit in sustaining their business.●
Market Financial Solutions (MFS) has made 16 internal promotions over recent months, and is actively hiring across 11 new roles.
Sco Lord, Richard D’Souza and Omkar Hushing have been promoted from underwriting manager positions Lord to head of bridging underwriting, direct brokers and clients, D’Souza to head of bridging underwriting, business development and networks, and Hushing to head of buy-to-let and specialist lending underwriting. Zahira Fayyaz, regional sales manager for the South East, and Paul Ratcliffe, regional sales manager for the North, have been promoted from business development manager roles.
Emma Roberts has been promoted to head of intermediary relationships at Connect for Intermediaries. She will support Connect’s network members and advocate its proposition as a specialist network of choice for new and established mortgage advisers. Having first joined Connect in May 2020 as a relationship manager, Roberts has become an integral part of the business relationship team.
Martin Cli has been appointed as the head of intermediary services and transformation at Barclays.
Cli has worked within Barclays for over 35 years, holding a variety of roles specialising in large scale distribution, operations leadership and strategic transformation.
He has also led global operations teams supporting secured retail lending, business banking and wealth, and provided pan-business leadership for key support services, including workforce management, operational rigour and controls, plus service and supplier management.
Cli said: “It’s a real privilege to take on this role at such a pivotal moment for the mortgage market. As a lender who is firmly commi ed to the intermediary market, this marks an extremely exciting time for Barclays, and we view this period as an opportunity to drive transformation and make a real difference for our intermediary partners from a product, service and operations perspective in 2023 and beyond.”
Cli is now tasked with driving transformation across Barclays' intermediary proposition, and will manage all Barclays-related mortgage activity across this highly valued channel.
Paresh Raja, CEO, said: “We always prioritise professional development, promoting from within whenever possible. We seek out problem solvers; people ready to take an extra step make a deal happen and deliver an exceptional service for clients, even when challenges arise or other lenders may turn away.”
MFS has grown over the past two years, with £1bn currently available in funding and a target loan book of £1.5bn for 2023. It doubled its employee headcount since the start of 2022, with Maria Gilbert promoted to chief of staff to manage its increased headcount.
Mortgage and protection network HLPartnership (HLP) has appointed Bob Sco as recruitment manager. He has over 25 years of experience, having established Domain and PMP, been an award-winning regional sales director at LSL/Primis, managing director of the Right DA Club and sales development director of the Right Mortgage Network.
Shaun Almond, managing director, said: “His extensive experience in the industry and proven ability within the intermediary space will be a valuable asset."
Sco said: “[I] look forward to working with the team to continue building a strong and successful network.”
