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OPINION ▮The latest word in residential, buy-to-let, specialist finance, and more

INTERVIEW ▮Richard Deacon on specialist lending in times of crisis

BROKER ▮Experts weigh in, from placing tricky cases to marketing tips

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www.theintermediary.co.uk | Issue 12 | January 2024 | £6

STATE OF THE NATION The expert view on 2024

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From the editor...

f I had to choose a mo o for 2024 so far, it would be this: what a difference a day makes. This probably rings true for anyone who has been paying a ention over the past year or so, but it has felt especially pertinent in the short time since the Christmas break. In December, we reported that inflation had fallen to 3.9% in November, down from October’s 4.6%. Seemingly only moments later, however, the headlines were focused once again on an increase. It was only minimal, rising to 4.0% in December, but enough for all those sighs of relief to become tentative groans of trepidation. The optimists among us might have felt we were seeing the start of a downward trend, but even those with the fullest of half-full glasses were reminded that things can turn on a dime – or perhaps a penny. Recovery will not be steady, as we are acutely aware, and any oscillation in inflation or unwanted shi in swap rates will have many concerned for the cost of borrowing. While this small uptick does not shake my optimism entirely, what happens if the trend continues, or – heaven forfend – escalates? We all celebrated the end of the Bank of England’s base rate rises, but it may have to wade back in and readjust. A disheartening thought, especially when so many have been gleefully predicting a shi downwards in the near future. This is not to mention the myriad other factors that might give the ‘table mountain’ recovery model a wobbly leg – we are all too aware of the destabilising effect of events on the global

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The Team

stage. Then there are those closer to home, with the prospect of a General Election looming particularly large. Let’s be honest, while the near-certain prospect of Labour booting the Tories out of Government warms my le y heart, even I know that any change likely spells upset for the mortgage market. Nevertheless, while many in this market are quick to resort to doomsaying, there are also hordes who remain positive. It is important to remember that the numbers aren’t everything, and that the UK’s diverse and dynamic property market cannot be boiled down to catchy, broadstrokes headlines – no ma er how much we journalists may try. In the meantime, speaking of headlines, lenders across the market have been racing to keep up with one another and be the next to release an eye-catching rate in 2024. This month, we focus on the State of the Nation, whereby Just Mortgages’ John Phillips and an army of brokers look at a market that emerged from 2023 bruised, ba ered, but still raring for a fight. Imagine my surprise when, instead of sturm and drang, these comments showed an incredible sense of optimism. Yes, this is tempered by sensible discussions of the challenges ahead, but the message is clear: borrowers want to borrow, lenders want to lend, and neither can do so effectively without the tireless work of brokers. ●

Jessica Bird @jess_jbird

@IntermediaryUK

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OPINION ▮The latest word in residential, buy-to-let, specialist finance, and more

INTERVIEW ▮Richard Deacon on specialist lending in times of crisis

BROKER ▮Experts weigh in, from placing tricky cases to marketing tips

Intermediary. The

www.theintermediary.co.uk | Issue 12 | January 2024 | £6

STATE OF THE NATION The expert view on 2024

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Contents

INTERVIEWS & PROFILES

Feature 42

O CTANE

State of the Nation: Just Mortgages gathers the expert view from advisers as we move into 2024

The Interview 26 Richard Deacon on the rise of specialist lending and taking a personal approach

Q&As 16, 70 THE CUMBERLAND

Grant Seaton discusses the lender’s expanding intermediary proposition

REGULARS

J O H N C H A RC O L

Broker business 64

Simon Walklin-Knight talks about the outlook for brokers in 2024

A look at the practical realities of being a broker, from marketing to diversification

Local focus 86

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

On the Move 90

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

SECTORS AT-A-GLANCE

Residential 6 Buy-to-let 30 Specialist Finance 50 Second Charge 72 Later Life 76 Technology 78 Protection 84

Profiles 56, 82 W H I T E H A L L C A P I TA L

Anthony Bodenstein on thriving in the specialist lending market METLIFE

Rich Horner considers a protection market ripe for innovation in 2024

Meet the BDM 62 O S B G RO U P

Pete Coombes on the challenges and opportunities for business development managers

The Intermediary | February 2023

RESIDENTIAL Opinion

Looking ahead to 2024

s we bid farewell to the challenges and triumphs of 2023, I am looking forward to a new year, brimming with possibilities. The resilience, responsiveness, and unwavering commitment shown within the broker community during a sometimes turbulent 2023 laid the foundation for what looks to be a more stable and positive 2024. First-time buyers in 2023 faced challenges incomparable to those of previous generations: affordability pressures from higher interest rates, the increased cost of living, and house prices at elevated levels relative to income. In the face of these challenges, borrowing for house purchase has been constrained. For those looking to enter or move in the housing market, higher living costs and interest rate rises seen since the start of 2022 significantly raised the bar to pass affordability tests for mortgages. UK Finance data shows a 28% fall in gross lending to £226bn and a 23% fall in lending for house purchase to £130bn. However, within the mortgage community we worked together to help more first-time buyers get a foothold on the property ladder, and we helped existing borrowers to stay there.

Routes to homeownership As the market leader in Shared Ownership, we feel that this is a great option for those for whom full ownership is just out of reach. In 2023 we did more to support Shared Ownership borrowers by launching the Staircase Saver account to help our members staircase their ownership percentage. We also launched our Home Deposit Saver, awarding a bonus for eligible savers when they take a mortgage with the society, with the aim of helping with moving costs.

The Intermediary | January 2024

To help first-time buyers get a mortgage, we also looked at opportunities surrounding credit scoring. We partnered with Experian Boost to factor in monthly subscriptions like Spotify and Netflix into mortgage applications. Most recently, we launched a range of Reach Mortgages, aimed at customers with a lower credit score who might not otherwise be approved for a mortgage.

Mixed messages for 2024 Although the main pressures on affordability look to be peaking, the outlook for 2024 is one of continuing challenges. We’ve enjoyed a lot more stability in the economy over recent months compared with this time last year, but there are still a lot of mixed messages.

Our collective efforts within the mortgage community will be the driving force behind a successful start to the year” The Bank of England is still cautious over base rate reductions, even hinting at further increases, money markets are pricing in 1.25% of interest cuts next year, with the first in May, and the Office for Budget Responsibility (OBR) long-term forecasts paint a bleak picture for affordability. Nevertheless, as house prices navigate beyond their peak pain period, we can anticipate a revitalised housing market. Past uncertainties are gradually making way for a more optimistic environment, paving the way for increased activity in the real estate sector. This shi in momentum bodes well for both first-time

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

buyers and existing homeowners considering a change. A crucial aspect that brokers should keep in mind in 2024 is the dynamic between remortgaging and product transfers. As the market evolves, so do the needs of our customers. The key lies in understanding and addressing these evolving needs.

Protecting borrowers At Leeds Building Society, we are commi ed to assisting our customers in navigating this landscape, offering tailored solutions that align with their financial goals. I know we will do all we can to help those struggling with repayment, because the right thing to do is to remove uncertainty and protect something people have worked their life to buy. Lenders acted quickly and collectively this year to minimise the number of customers who struggle with their mortgage payments. However, Financial Conduct Authority (FCA) data shows more than 500,000 fixed-rate mortgages ending between 1st November 2023 and 31st January 2024, which will be sobering for many. The average rate for a 2-year fixed rate in December 2021 was 2.34%; in early December 2023 it was 5.99%, according to Moneyfacts, meaning a £200,000 20year mortgage will increase by £388 a month, or over £4,500 a year. Despite the economic uncertainties, our collective efforts within the mortgage community will be the driving force behind a successful start to the year. As mortgage brokers, we must rally together to more people to step onto and up the property ladder. By staying a uned to market dynamics and providing innovative solutions, we can work together towards a prosperous year ahead. ●

RESIDENTIAL Opinion

The time has come for a national housing strategy

or a Prime Minister who stated unequivocally how much he admires Margaret Thatcher, responsible for bringing in the Right to Buy scheme in the 1980s, Rishi Sunak has been muted on his plans for the housing market, despite saying he considers homeownership to be a Conservative cornerstone. Renters and those still living with parents should be supported to be able to buy their own homes. Policy that can deliver this objective was conspicuously absent from the Chancellor’s Autumn Statement, however. To be truthful, the market was expecting there to be li le in the way of a boost for housing. The cost-of-living crisis continues to blight the economy and families across the country, maintaining pressure on the Bank of England to keep the base rate where it is – perhaps even hike it further. Given just how material rate rises have been for the health of household finances, too much focus on extending borrowers’ affordability potential could be considered unwise.

Short-term strategies A much-mooted resurrection of the Help to Buy scheme did not materialise during Jeremy Hunt’s statement to the House of Commons. This is probably not a bad thing. Tactical short-term fixes are not what we need, a national housing strategy is. Unsurprising, yet the lack of a ention afforded to the housing market in the Autumn Statement is cause for concern. For all its shortcomings, Help to Buy has been instrumental in the newbuild sector. The final set of statistics from the Government confirmed that over the decade-long scheme, 387,195

properties were bought with a Help to Buy equity loan. The vast majority – 328,346 properties – were purchased by first-time buyers. The total value of these equity loans is £24.7bn, and the value of the properties totals £109.2bn. Now, the UK new homes market is facing a period of adjustment as it adapts to changing market conditions. Our monthly Property Watch report confirmed that supply is slowing down, with recent net additional dwellings data indicating that just 235,000 new homes have been added. This falls short of the Government's annual target by 21%. The slowdown can be partially a ributed to the end of Help to Buy, which was a significant driver of sales. According to our survey, buyers are becoming more discerning and prioritising their needs as affordability remains a key concern, especially for first-time buyers. This shi has increasingly prompted builders to offer incentives to a ract and retain customers. These are o en designed to assist buyers in overcoming upfront costs, such as land taxes, legal fees, and deposits. However, there is only so much that developers can do without support themselves. This shows in the broader profile of borrowing. Cash buyers accounted for a third of all transactions in the 12 months to September 2023. Our own analysis of buyer demand across the four main buyer groups confirms this, with one in 10 surveyors seeing a rise in demand from cash buyers. This shi is important.

Searching for support We a ended both the New Homes Conference and the Future Homes Conference this year. What was clear is that this key market needs

STEVE GOODALL is managing director at e.surv

support. We cannot resurrect Help to Buy, easy enough as that might be to implement. It’s not just about that aspirational dream of homeownership and the political weight it holds. The provision of new homes ma ers to the 1.2 million households currently on the council housing waiting list. It ma ers to would-be first-time buyers priced out of existing markets. It ma ers if the UK is to deliver on its net zero promises. David Thomas, chief executive of Barra Developments and chair of the Future Homes Hub, articulated this at this year’s conference. He told delegates: “The housebuilding industry is facing a significant period of change as it transitions to designing and building zero carbon, nature-friendly new homes and communities. “If we are to achieve an effective and progressive transition, the whole industry will need to work together to develop a shared roadmap that delivers high quality sustainable homes and places at the pace and scale required.” Access to the funding needed to support further developments is key, and so is confidence in new-build values and buyer affordability. A recent report from PwC spoke of an 8% decline in total new-build output during 2023, primarily driven by a 21% decline in residential output. We must be careful not to talk new-builds down at such a critical time. Maintaining the provision of new housing is vital for those seeking homeownership, those needing accommodation from Housing Associations, local authorities and in the private rented sector. A national housing strategy is a must. ● January 2024 | The Intermediary

2024: A marathon,

ecently I was asked in an interview whether I saw the UK mortgage market’s journey back to ‘normal’ as a marathon or a sprint. A er careful consideration, my response was that it’s probably more akin to an Ultra Marathon! The past 18 months have certainly seen the industry tackle some fairly steep gradients and undulating hills, with the final few months of 2023 being particularly tough. However, looking to the horizon, I see fla er terrain ahead. Negative headlines permeated the trade and national press for much of last year – whether it was successive base rate hikes, the impact of the costof-living crisis, or the decline of net mortgage approvals. Nevertheless, there have also been some positive signs. Reflecting on some quick positives, both the UK mortgage market and the housing market remained active, with nearly all lenders wanting to lend. If – as expected – we see approximately a £220bn gross market for 2023 and a retention market

The Intermediary | January 2024

up around 10%, to circa £210bn to £220bn, then it won’t be far off the ‘normality’ of 2018 and 2019. This was before the distorted years of 2021 and 2022, when we witnessed the race for space and Stamp Duty deadlines.

Challenge and opportunity Despite the relative resilience of the housing market, we cannot ignore that mortgage lending was markedly weaker in 2023 in the face of significantly higher mortgage rates, and 2024 is also likely to be a challenging market – but not one without opportunity. The Bank of England paused base rate increases in September for the first time since December 2021, potentially signalling some stability ahead. This interest rate respite also appears to have accelerated a price war among lenders, with the reappearance of rates starting with a four, and even ones starting with a three! Nevertheless, mortgage intermediaries will have to help their clients adjust their expectations of what a ‘new normal’ looks like, as it is very unlikely that rates will return

to the historic lows of 1% and 2% any time soon. A word of caution, here: many borrowers will be coming off cheaper fixed rates and could face a payment shock, making it more important than ever to plan ahead. Feedback from brokers towards the end of the year confirmed that it was a tough market, but one that appeared to be growing marginally busier. A continuation of stable, lower rates could encourage greater activity this year than many initially anticipated – particularly as we see a glimmer of consumer confidence returning. Looking at inflation, it’s great to see it reducing faster than analysts expected; however, it continues to be almost double the target that the Bank of England has set. Further measures may still need to be taken, but it means that base rates are unlikely to fall just yet. Nevertheless, decreases may well be on the horizon by the second quarter of this year, on the assumption inflation continues its current trajectory. The markets already appear to be pricing this into mortgage rates, which have been dropping significantly over the past few weeks.

RESIDENTIAL Opinion

not a sprint This will undoubtedly be welcome news for the more than one million customers still due to come off their 5-year fixed rate mortgages in 2024.

Playing to your strengths If I was to think of a word to sum up what 2024 will look like, it would be complexity. Customers’ needs and requirements have altered drastically, especially around affordability, as the desire for lenders to be more creative with their solutions becomes paramount. Examples of the changing dynamics of the market are further highlighted by Legal & General through its research, which demonstrated that younger buyers are increasingly held back by high interest rates, a lower availability of mortgage deals, and inflationary pressures making it tougher to save for a deposit. The ‘Bank of Family’ will become even more prominent than we saw last year, and we’ll see even more money provided by family members to help loved ones get on the housing ladder. According to Legal & General, families were already set to support almost half (47%) of all homes

purchased by buyers under the age of 55 in 2023. Much of this current market dynamic plays to the strengths of mortgage intermediaries, and reinforces the need for customers to seek out good quality advice. I would say that now is the time to look closely at your business and remember that the market is cyclical. Easier times will return, but it may be very different, and brokers should start planning for the future now. Even a modest rate reduction will really kick-start the market and return consumer confidence. So please use your time wisely to invest in technology, the skill set of your business, your leads, your brand, and ultimately your purpose. We work in a great sector that provides real value to the UK population and helps to fulfil their dreams and aspirations. In keeping with the ultra-marathon theme, now is the time for mortgage intermediaries to take their gels and isotonic drinks and bulk up on electrolytes, and get ready for the tough but hopefully hugely rewarding journey that lies ahead. ●

CHARLES MORLEY is director of mortgage distribution at Metro Bank

January 2024 | The Intermediary

RESIDENTIAL Opinion

Navigating the new year

he mortgage market, like any other financial landscape, is subject to the ebb and flow of economic tides. As we set our sights on the rest of 2024, it's crucial to anticipate the headwinds and tailwinds that will shape the industry. Here are my predictions for the mortgage market, looking at the challenges and opportunities that await lenders, brokers, and customers alike. 2023 brought a number of challenges, and I expect these will continue this year. Higher-for-longer interest rates, a gentle contraction in house prices, and a rise in unemployment from historically low levels will create a trio of challenges. Adding to this complexity, the volatility in swap markets will pose hurdles for lenders a empting to recalibrate their pricing strategies effectively.

Turbulence and transformation On the buy-to-let (BTL) front, the landscape remains turbulent. Legislative changes and modest yields for landlords persist as challenges, and while energy efficiency rule changes have been postponed, the market may witness an exodus of amateur landlords due to the inherent limitations in scale and high reliance on individual tenants. In this environment, the competitive landscape of the mortgage market is poised for transformation. Lenders nationwide are gearing up to unveil refreshed pricing strategies, signalling an era of heightened affordability competition. Simultaneously, a seismic shi is underway as a wave of technological advancements and customer experience overhauls permeates the industry. This technological revolution is not merely cosmetic; it's a strategic response to the evolving

The Intermediary | January 2024

demands and expectations of the modern customer. As financial technology evolves, lenders are leveraging innovative solutions to streamline processes, enhance operational efficiency, and deliver a more seamless experience. As economic difficulties persist, the mortgage market's focus is expected to shi toward arrears and back-book management. With most mortgages still maturing from the sharp rate increases during 2022 and 2023, lenders are compelled to intensify their efforts in controls and customer outcome management, particularly with Consumer Duty requirements. The macroeconomic environment, while still gloomy, offers silver linings. An anticipated 8% to 10% peak-to-trough contraction in house prices may pave the way for first-time buyers, injecting a sense of opportunity for those who face struggles in 2023 with the end of Government support schemes like Help to Buy and fast-rising rents. Despite hurdles like intensified competition and higher interest rates throughout 2023, this potential downturn provides hope for a more accessible entry into first homeownership. The trends of mortgage retention and product transfers are set to continue their upward trajectory. I wouldn’t be surprised if we see more customers remain with their current lenders to sidestep new credit checks, a trend that may persist as mortgage interest rates are expected to decline. Simultaneously, the buoyant product transfer market will thrive, fuelled by a significant number of fixed-rate mortgages reaching the end of their promotional periods.

Challenge and competition As we navigate the uncertainties of 2024, the mortgage market will be shaped by competition, economic

ALISON PALLETT is sales director at Nottingham Building Society

Lenders and brokers have an opening to customise their services, ensuring inclusivity” challenges, and the ever-present need for innovation. Lenders must be agile, and that includes the way we think about customers. In 2023, we saw more clearly than ever how the nature of today’s prospective homebuyer has changed. More and more, year-on-year we are seeing that applicants do not fit into a traditional mould of one full-time, employed position. We’re seeing freelancers, small business owners and side hustlers who are working hard to realise their dream of owning their own home. This evolving demographic is an opportunity for the mortgage industry – both lenders and brokers – to reassess and adapt their offerings in 2024. As more buyers defy conventional norms, there is a crucial need for the industry to cater to the diverse needs of this cohort. Recognising that a one-size-fits-all approach no longer suffices, lenders and brokers have an opening to customise their services, ensuring inclusivity for a broader range of aspiring homeowners. By embracing this adaptability and refining our understanding of the evolving buyer profiles, the industry can play a pivotal role in facilitating the realisation of homeownership dreams for a more diverse and dynamic group of individuals in the upcoming year. ●

RESIDENTIAL Opinion

Innovating then and now

nnovation is very o en wrapped up in the language of technological change. Understandably so, because all lenders want to deliver lending decisions to intermediaries quickly. However, to assume that technology is where innovation starts and ends is wrong. Product and criteria innovation are key to any lending proposition. As significant as any technological innovation is our ability to create pathways for homeowners today to purchase their own home. Understanding and facilitating the renting to homeowning journey is an integral part of that. Our Rent to Home programme really is a social innovation, albeit on a small scale, which reflects our purpose today – a purpose that has not changed for almost two centuries. In 1850, savers clubbed together to fund one another to build or buy their own homes. The order was decided by ballot – randomly allo ing finance to members in turn, while all members paid into the society’s savings pot.

Innovators What we stand for has remained. It is how we do it that has changed, just as the dynamics and nuances in society have. We were, in many respects, the original innovators. What we have on our side is agility and the ability to think and innovate in a way that big organisations cannot. Rent to Home is a one-of-a-kind scheme to help first-time buyers who can afford to rent but can’t also save a deposit to purchase a home. Successful applicants rent a newly refurbished property from us for a minimum of one year and a maximum of three years. During this time, if they’re ready to purchase their own home, 70% of the rent they've paid is returned to them, boosting their cash deposit and helping them into homeownership.

In 1850, savers clubbed together to fund one another... The order was decided by ballot – randomly allotting finance to members in turn, while all members paid into the society’s savings pot”

KATHY BOWES is intermediary manager at The Cambridge Building Society

In June this year, we marked the beginning of the Cambridge’s long history of supporting our community by holding a ballot to allot the scheme’s recipients. Our compliance senior manager Hannah Gladwell used a replica of the wooden ballot box we first used in 1850 when we were founded to help local people have a home. As we head into 2024, we will be taking our commitment to our purpose further. ●

Case study one

Paul Barnes, 38, and James Hope, 35, are the latest Cambridge Building Society members to benefit from the Rent to Home initiative, first launched in 2019. The scheme offers applicants the opportunity to rent a home from the society for between one and three years, with up to 70% of the rent paid during that time returned to them as a deposit to buy their first home with a Cambridge Building Society mortgage. James said: “I had given up on the idea of owning my own home until I saw how the Cambridge is making a difference for first-time buyers in its yearly newsletter. “I can’t believe that schemes like this aren’t widely available up and down the country. It’s a massive opportunity for people like us, who might otherwise be struggling due to the cost of living, inflation, and fierce rental market, to get a foot on the housing ladder.” Paul said: “We applied online, it was very straightforward, and I was surprised at how easy it was. You never think you’ll be the lucky one that gets selected, it’s like winning the lottery in many ways.”

Case study two

Sophie Rhead, 20, and Jamie Bladen, 23, were overjoyed to discover they had been selected for the Cambridge’s Rent to Home scheme. The couple received the good news the day Jamie turned 23, learning they’d soon be moving into a home in Northstowe. Jamie said: “Getting the call on my birthday was an incredible surprise and I couldn’t have asked for a better present. Thank you so much.” Joint applicant Sophie said the couple had been looking at properties “for a while.” She added: “We’ve been saving as much as we can but it’s just really hard to find something suitable in the Cambridge area. This is life changing for us, I don’t think we can put into words how grateful we are.”

January 2024 | The Intermediary

RESIDENTIAL Opinion

Getting match fit for 2024

Treating every borrower individually

023 was a challenging year. Inflation, rising interest rates, falling transactions, affordability challenges, new regulatory expectations and scrutiny, and a more general cost-of-living crisis, all mean that understanding and looking a er borrowers’ wellbeing, both financial and otherwise, is an essential part of good lending. 2024 and beyond would appear to herald more of the same as we turn through the credit cycle. UK Finance recently published its expectations for the coming year and beyond – noting the continuing challenges in the market. UK Finance takes the view that the current pressure on household finances will recede as we move into 2025, and that prudent lending standards and extensive lender forbearance will minimise the number of customers who struggle with their mortgage payments through this period. Nevertheless, it is forecasting lending across the board to fall, but of particular note was the uptick in arrears to 128,800 cases by the end of 2024. We already know – from Q3 figures from the

The Intermediary | January 2024

Bank of England – that borrowers who are nearing the end of extremely low fixed rates are still finding it difficult to make up the occasionally enormous difference between their prior monthly payments and their refinancing expenses. New borrowing was 41.4% less than a year ago and decreased by 16.5% from the previous quarter to £51.5bn. In the meantime, the percentage of loans made to borrowers with high loan-toincome (LTI) ratios rose to 49.3% from the prior quarter, an increase of 3.9 percentage points. The percentage of new cases of arrears, at 15.8% of all outstanding amounts with arrears, was 5.1 percentage points higher than a year earlier, and 0.3 percentage points lower than in the preceding quarter. The total amount of outstanding mortgage amounts with arrears increased by 11.4% from the previous quarter to £18.8bn. In contrast with the previous year, this indicates a 44% rise. Furthermore, over the course of the quarter, the proportion of all outstanding mortgage balances that are in arrears increased from 1.02% to 1.14%, a record high since Q2 of 2017.

Lender scrutiny All of that hugely impacts our role in servicing mortgage borrowers – whether in origination, servicing, or ultimately the funding support we offer. But against – or rather alongside – this tide is the swelling volume of requirements to treat every borrower individually, particularly if they are vulnerable. This began in earnest a er the review of the Financial Conduct Authority’s (FCA) Guidance on the Fair Treatment of Vulnerable Customers and the Borrowers in Financial Difficulty (BiFD) paper (FG21/1). However, if BiFD was the start of a renewed focus on borrower distress and vulnerability, it was by no means an end.

MARK DAVIES is MD at BCMGlobal Mortgage Services

The total amount of outstanding mortgage amounts with arrears increased by 11.4% from the previous quarter to £18.8bn. In contrast with the previous year, this indicates a 44% rise” The arrival of Consumer Duty in July last year meant that regulatory expectations and scrutiny of lender behaviour were once again raised. Our responses to all these initiatives has been manifold. From ensuring our front line can understand, listen, and signpost further support, to making sure all this can be evidenced, we have innovated in people training and how we use technology – such as voice analytics to identify and monitor borrowers expressing financial stress or vulnerability, and to help further with training. We have also built a customer advocacy team and eight fixed scorecards to give oversight across arrears, forbearance, vulnerability, account progression, signposting, record keeping, and borrower conversations. It's all a work in progress, but our customer satisfaction scores and award wins make me hopeful that we are doing the right things. 2024 will bring commercial pressures upon everyone in the value chain, but heaven help those that do not put the considerations of borrowers first. ●

RESIDENTIAL Opinion

Let’s find a way to improve property conditions for all

longside my day job, I am also a visiting industry fellow at Oxford Brookes University, and in that role I have been working closely with some of the larger social housing providers. This has really opened my eyes on a number of fronts, not least regarding the inescapable link between property condition and the health of residents. Although not a new concept, it is widely accepted that inadequate quality housing can impact negatively on both physical and mental health, causing or worsening conditions such as respiratory disease, depression and anxiety. The UK has the oldest and most inefficient housing stock in Europe, with more than four million homes that do not meet basic standards. The majority are in the private rented and owner-occupied sectors. No doubt the situation will be made worse by recent increases in energy prices, mortgage repayments and the wider cost-ofliving crisis, which is likely to cause delays in improvements including net zero retrofits. To add some context, a 30-year cost-benefit analysis published by the Building Research Establishment (BRE) of England’s housing stock alone highlighted the potential health impact of ignoring inadequate quality homes. It said: “It is costing the NHS more than £1bn per year to treat those people who are affected by poor housing. These are the first-year treatment costs alone. For many hazards there may be ongoing treatment beyond the first year. “There will also be the mental health cost of suffering and trauma associated with living in an unsafe and unhealthy home. There will be

‘societal costs,’ such as those relating to care, sometimes for the rest of the victim’s lifetime. There will be a loss of economic potential (poorer educational achievement, loss of productivity, career prospects) for victims, family carers and employers.” The Resolution Foundation also reported in April that one in 10 people across the UK – 6.5 million in total – live in poor quality housing, namely where heating, electrics or plumbing are not in good working order and damp is present. Inadequate quality housing is concentrated among young people, low-income families, and those from ethnic minority backgrounds, with 18% of those aged 18 to 34 affected, rising to 26% among 18 to 24-yearolds. This is triple the rate of those aged 45 and over (6%), although encouragingly, the report found that just 3% of people aged 65 and over reported living in poor quality homes. Unsurprisingly, the poorest fi h of households are more than five-times as likely to be affected than middle or higher-income households (22% versus 4%).

Working to do better The exam question is, therefore, whether we as an industry are collectively doing enough to tackle this pressing issue? First, while it is fully appreciated that there is a need to save costs and maximise speed of service, the continuing growth of non-physical mortgage valuations means that many purchasers continue to buy without properties being visited by a professionally qualified surveyor, and may not be fully aware of the potential health and financial implications. Second, there is a growing view that – under the auspices of Consumer

MARTYN STONES is director of technical services at Countrywide Surveying Services

Duty and environmental, social and corporate governance (ESG) risk assessment requirements – lenders should also be considering the longerterm implications and ‘customer outcomes’ for borrowers of occupying the homes they have in mortgage. Third, as chartered surveyors we have an obligation under the terms of our Royal Charter to act in the public interest. Finally, there is an increasing level of Government interest in presale property condition advice. The National Trading Standards Estate and Le ing Agency Team (NTSELAT) recently published requirements for the additional ‘material information’ that sales and le ings agents should include in property listings. This will go some way to help, but as the Royal Institution of Chartered Surveyors (RICS) noted: “Material information is no substitute for professional advice, and consumers should be aware that the information collected as part of the new guidance may not accurately reflect the full extent of the property condition which would be covered through a home survey.” So, how should we get ahead of the curve and do the right thing? At Countrywide, we would be very pleased to support sector-wide collaboration and help lead the debate; if you are interested in being involved, please feel free to email me at martyn. stones@cwsurveyors.co.uk so that collectively we may deliver good outcomes. A er all, what could be more important than the health and wellbeing of our mutual customers and fellow citizens, while also helping to ease the strain on our NHS? ● January 2024 | The Intermediary

RESIDENTIAL Opinion

Explain the savings, deliver the change

t the inaugural Green Mortgage Summit in Manchester in July, Richard Rothwell, commercial development director at Leeds Building Society, said: “There’s far more data available to us now. [Energy Performance Certificates (EPCs)] never used to mean anything to us or a purchaser of a home. It absolutely means everything now. We have all these new data points that we’re factoring into decisioning and our pricing for mortgages.” This recognises the fact that – no ma er how quickly the housing and mortgage industry tackles climate issues – the public mood has turned. The cost-of-living crisis and inexorable rise in domestic energy costs mean people want be er energy performance from their properties. There are tell-tale signs in every market. The recent uptick in the equity release market has prompted some to speculate whether homeowners in older, less energy efficient homes are taking the product to cope or make repairs. Fuel poverty affects the old and the young alike. The event was born out of the Green Finance Institute’s (GFI) local partnership with the Greater Manchester Combined Authority, bringing together more than 60 key industry stakeholders to explore what the green mortgage market needs to scale, and how the market can collaborate to enable the decarbonisation of more homes. Without data, there is no starting point and no yardstick to measure progress. In the months since the event, more lenders are moving into the process of quantifying their exposure to emissions not directly under their control. The National Grid defines Scope 3 emissions as those not produced by a company itself, and which are not the result of activities from assets

The Intermediary | January 2024

owned or controlled by it, but by those that it is indirectly responsible for up and down its value chain. Analysis by Nationwide suggests that the 29 million residential homes in the UK account for around a fi h of the country’s greenhouse gas emissions. If we are to meet the Government's commitment to net zero emissions by 2050, the mortgage industry must undertake an enormous task. Newbuild minimum efficiency standards will help, but they cannot come near to solving the problem. Retrofi ing

Between 2019 and today, the number of green mortgage products has risen from four to more than 60” existing housing stock must make up the bulk of strategy to decarbonise the sector. This puts the onus squarely on lenders, and by far their biggest footprint is the climate risk si ing in their mortgage back books. Until now, the focus has been on developing green mortgage products to facilitate homeowners who want to retrofit their properties. Between 2019 and today, the number of green mortgage products has risen from four to more than 60, according to GFI. That said, take-up has been slower than hoped, hampered by the cost-of-living crisis, along with a lack of awareness among homeowners.

Economies of scale More meaningful scale is needed. In November, the GFI published a report looking at the potential for a Property Linked Finance (PLF) scheme. Given that the UK has some of the oldest and least energy efficient homes in Europe, with buildings responsible

MARK BLACKWELL is COO at CoreLogic UK

for around 23% of annual greenhouse gas emissions, the GFI estimated that £360bn of investment is required to upgrade inefficient buildings by 2050. PLF is not currently available in the UK, but is based on the US Property Assessed Clean Energy (PACE) model, which has unlocked investment of over $13bn to make homes and commercial buildings greener and more resilient, according to US trade body PACENation. The report states: “Developing and introducing PLF to the UK market in collaboration with the finance and retrofit industries has the potential to enable between £52bn and £70bn of private capital into upgrading 2.1 million EPC D rated and below owneroccupied homes.” PLF allows property owners to fund up to 100% of energy efficiency upgrades upfront. The finance is linked to the property rather than the owner, so the obligation transfers to the new owner when it is sold. Property owners only pay for energy efficiency measures until they sell their property, while new buyers benefit from a more energy efficient, potentially more valuable property, in return for continuing to make regular payments toward the upgrades. People are increasingly interested in improving the energy efficiency of their homes. With energy bills set to go up again in January, according to Cornwall Insights, cu ing energy waste in homes with poor insulation has the potential to save families hundreds of pounds a year. To motivate that behaviour change, the industry must show customers how they benefit in a meaningful way, and that means pu ing a figure on the possible savings. It also means accurate data, and more of it. ●

RESIDENTIAL Opinion

Service, efficiency, governance: Nonnegotiable in 2024

023 was filled with challenges for the mortgage market. The full impact of rising interest rates really began to show, with borrower affordability becoming the single most important consideration. Q3 figures from the Bank of England paint a clear picture. The value of gross mortgage advances increased by 18.6% from the previous quarter, to £62.2bn – the first increase since 2022 Q3 – but remained 27.6% lower than a year earlier. That shows signs of recovery, reassuringly reflecting the slight lowering of mortgage rates since the summer. However, borrowers coming to the end of very cheap fixed rates are still struggling to bridge the sometimes huge gap between previous monthly payments and remortgage costs. New borrowing is also down by 16.5% from the previous quarter, to £51.5bn – 41.4% lower than a year earlier. Meanwhile, the proportion of lending to borrowers with a high loanto-income (LTI) ratio increased by 3.9 percentage points from the previous quarter to 49.3%. New arrears cases decreased by 0.3 percentage points from the previous quarter, to 15.8% of the total outstanding balances with arrears, some 5.1 percentage points higher than a year earlier. The value of outstanding mortgage balances with arrears increased by 11.4% from the previous quarter, to £18.8bn. This is up 44% over the previous 12 months. The proportion of the total loan balances with arrears – relative to all outstanding mortgage balances – increased on the quarter from 1.02% to 1.14%, the highest since Q2 2017. Lenders are clearly being cautious that borrowers do not overextend

themselves. However, the direction of travel indicates that things are set to become increasingly complex, with more than a million borrowers still to remortgage over the coming year. Next year will also see the expansion of the Consumer Duty rules to include closed products or services. This second stage of rules comes into force on 31st July 2024.

Lender priorities Last year, we interviewed 36 mortgage lenders for our annual ‘Mortgage Efficiency Survey’ (MES). It showed that mortgage affordability is the new ba leground when it comes to market share. We’ve already seen a surge in product transfers. According to UK Finance, in Q2 2023 84% of remortgagers remained with their current lender. This marked a significant increase, as the average for 2022 as a whole was 77%. Product transfers are o en a ractive, because the solution allows consumers to avoid prepayment penalties should they refinance with a new lender, can offer greater speed and stability, and reduce paperwork. However, this shi is inevitably going to have a significant impact on the way that lenders compete. Combine this with the Consumer Duty expectations, and it’s clear that lenders are going to need to think innovatively. UK Finance recently published a paper considering how lenders might do this. It found that advanced technology and strong communication are key to responsible lending. “Lenders can use sophisticated sourcing tools to match borrowers with mortgage deals available on the market, tailored to their unique financial circumstances,” the report states.

STEVE CARRUTHERS is business development director at Iress

“Consumers may be tempted to speed through the remortgage process as quickly as possible, however, the consequences of a rushed remortgage can be damaging, and lenders should guide consumers carefully to the most well-informed decisions possible – using technology to do the heavy li ing.” The trade body said lenders “should invest in communications tools to boost customers’ awareness of their financial options.” Our MES report showed that lenders are only too aware of the importance of ge ing this right. From a governance perspective, lenders have placed a renewed focus on addressing risk through affordability considerations. However, there has been li le investment in technology across the origination piece, as lenders have ba led to understand how to protect themselves and borrowers from unsound lending decisions. Calculators reside for most on their sites, with some links to external parties, or screen scraping occurring with others. Reviews of Office for National Statistics (ONS) data, the most commonly used external source to check against expenditure, are now almost across the board quarterly, if not monthly. UK Finance is of the view that much more thought must be given to how nuanced a specific borrower’s affordability is. It’s going to be an interesting year, with the economic and market environment requiring improved lending service, efficiency and risk governance. We look forward to seeing how 2024 plays out. ● January 2024 | The Intermediary

Q&A

The Cumberland

The Intermediary sits down with Grant Seaton, head of intermediary lending at The Cumberland, to discuss its expanding intermediary proposition As someone with a long view of the business, how has it changed over the years?

which impacted our customers massively, we were always thinking about how we can make things easier for the customer. It was the same during Covid-19. We were extremely proactive.

I’ve been at The Cumberland man and boy, starting How have these lessons served you in 1997. I took a traditional route, starting in in the past year? the estate agency subsidiary before the branch network. I worked my way through from cashier to It has not been an easy time to predict what’s branch management, then the commercial team. going to happen. That uncertainty then plays That was great ground to enhance my knowledge through in the money market and causes real of the market and look at lending in a totally difficulties for organisations to get the price different way. In March of this year I took on point right and to support customers. the role of head of intermediary lending. There are people coming off low fixed The Cumberland has probably gone rates, and all of a sudden their biggest through two or three major cultural outgoing is going to be massively changes in that period. More recently, higher. So, there’s going to be tough we’ve been named one of the top 100 decisions and discussions there. large companies to work for in the The other group to think about is UK, through Best Companies. That’s first-time buyers – these people must be testament to all the work that’s been very sceptical at the moment about being going on culturally. able to get onto the ladder. They’re obviously It is an organisation that really cares. Other also feeling the pinch because of the cost-ofplaces just don’t match the ethics and values. GRANT SEATON living crisis. It really cares about its people, and about the It’s very difficult for a lot of people to make customer. That buys into my own values. I those dreams come true. That’s why we always wouldn’t like to work for an organisation that just look at the end customer, and when they want to sees its next customer as a number. achieve something, we really break it down and have conversations about how we can support What lessons have you learned them. It goes back to just looking at each case on from the market in that time? its merits. We’ve made quite good inroads with selfThe human touch is really important, it just brings employed customers, in particular, and a lot of things to life. You can quite easily get information intermediary partners like to come to us on that through a case file or have someone send in an basis. It’s representative of us having a commercial application and do the sums, but it’s nothing until element to our organisation. We are good at you really get under the skin and speak to your understanding small to medium enterprises client or the broker. (SMEs), so we can take a view on how much we There’s a lot of business we could have just can lend to these customers. Where others might walked away from, but sometimes you have just ask for two or three years’ income, we can to take that additional step to try and support take a holistic view of the performance of these people, look at alternative ways to deal with them. types of business. We have an excellent record of supporting When it comes to first-time buyers, we don’t people when times are tough. Take the Foot & use a credit score system. That’s sometimes where Mouth outbreak, or the floodings in Cumbria, they can get lost or trip up, because they don’t 16

The Intermediary | January 2024

Q&A

have a repayment history, they score low and don’t get through the origination systems. We’re happy to take people on their merits. This is also why lenders need to get the right balance between automation and the human touch. You’ve got things like artificial intelligence (AI), machine learning, chatbots, as a backdrop to all the challenges we’ve talked about. It makes it even more important that you’ve got somebody who is able to look at these scenarios individually and take the cases on their merits.

How does the society approach working with intermediaries? The Cumberland has been involved in intermediated lending since 2010, but then only on a relatively small scale. Since 2021, we’ve brought in the intermediary function, based in our heartland at the moment. We are going into a controlled expansion of that soon, working closely with our intermediary partners to try and map out what our journey should look like for them. So, it’s quite exciting for us, in that we can design it around this collaborative approach, and feedback from intermediaries. Over the past two years we have been working relatively manual processes with our broker partners. We have some self-serve elements coming in, as well as an affordability calculator, with a brand new portal coming in as well. This will not take away from the human touch, and that’s the important part for us. It’s exciting that we’re starting to really ramp up what we’re doing in this space. The first two years have been about proving the concept and the part we play in the intermediated market. That’s proven now, so we have real support from the board to push on. Because we are growing in this challenging time, we’re creating a solution which is fit for purpose for this era. There will be a lot of organisations with legacy systems that are difficult to change. We will be able to make decisions quickly and have that agility because of the tech transformation that we’re going through. 2024 will be another big year for us to push forward again, but we’ve got to do it in a controlled manner. We don’t want to lose the special touch we’ve got. It’s all about doing what’s right for both the intermediary and the customer.

How does that work day-to-day? Across the sector, businesses want to drive people into centralised call centres or chat facilities. We want to encourage people to chat with us, as

old-fashioned as that sounds. We want to have a discussion, be accessible. The other part of that is providing people they can speak to who have actually got the knowledge to answer a question. We’ve all heard the horror stories of people sitting on online for hours, or waiting days for a call back. Here, they can have one point of contact and get to know each other. Underneath that is a caring and empathic nature, which understands the end user’s objectives and goals. A customer is not just a name – there is somebody relying on us to do the best we can and make their dream a reality. You should have pride when any of these cases complete.

What are some of the challenges ahead in the coming year? As an industry, the challenge is in the margins at the moment, because of the balance of savings and mortgage books. At the mutual end of the sector, it’s going to be particularly tough, considering the uncertainty within the mortgage markets. It’s difficult to predict what’s going to happen with swap rates – has the market reached its peak with regards to the base rate? Will it remain where it is, and for how long? If anything else happens in the wider world, all that could change again. I’ve never had so many meetings in my life to talk about our position in the market and how we manage our volumes and tweak rates on a more regular basis. Every lender will have felt that last year, it’s a constant struggle to find your place. In terms of the role of the mutual, what we’ve seen historically is the importance of finding your niche, where mainstream lenders are concentrating on the mass market and the most straightforward cases. Then, it’s about looking at certain communities to support, like first-time buyers. We want to work in order to make it a reality that these people can get in the market. Even then, though, there’s no avoiding that we need more housing to create these opportunities, and more affordable housing schemes.

Do you have a final message? People will start to hear more about The Cumberland as we expand our distribution. We are going to be controlled about it, rather than just turning the switch on and being mass market overnight. That said, we are looking forward to working with ever more brokers, and signing with networks and mortgage clubs as well. We aren’t going to rush at this – making sure that we’re offering the right service is very important. ● January 2024 | The Intermediary

RESIDENTIAL Opinion

Bright spots ahead after a tough 12 months

he past 12 months have been challenging for the mortgage industry. Lenders have been contending with reduced demand among borrowers as interest rates have steadily risen, and high inflation has squeezed household finances. The impact is clear, with recent figures published by UK Finance revealing a 28% fall in gross lending year-on-year in 2023, and analysis by Kensington Mortgages of data from Zoopla and HMRC identifying a 23% drop in housing sales. While rates have been stabilising – with the Bank of England holding the base rate at 5.25% for the third consecutive time in December – aspiring homeowners remain wary, with many choosing to delay.

Opportunity from crisis While the conditions have been challenging, there have been some opportunities for lenders. Specialist providers benefi ed from some buyto-let (BTL) customers shi ing away from the high street and towards the specialist market, partly due to many mainstream lenders not offering BTL limited company products, which have been subject to growing demand due to tax advantages. More broadly, 2023 was a strong year for product switches, with 800,000 fixed rate deals ending in the second half alone, according to UK Finance. Against the challenging economic backdrop, 2023 was also an important year for improving customer outcomes. Approximately 90% of the mortgage market signed up to the Government’s Mortgage Charter, in a sign of widespread commitment to supporting borrowers struggling

The Intermediary | January 2024

with their mortgage repayments. The introduction of Consumer Duty in July also heightened the focus on delivering fair value, supporting vulnerable clients, and ensuring that it continues to meet the specific requirements of borrowers. As we enter 2024, we are anticipating market activity in the first half of the year to remain relatively subdued. The key challenges that were weighing on the mortgage market in 2023, such as higher inflation and interest rates, are likely to continue, although their effects should be less acute. With the Bank of England expected by some economists to begin cu ing rates during 2024, the market outlook could begin to improve as mortgages become more affordable. In addition, if inflation continues in its current downward trajectory, there is potential for some of the financial strain experienced by households to li . The General Election could also produce positive outcomes for the market from a policy perspective, with housing likely to be a key area of focus for both parties.

Gathering strength As the market gradually regains strength, lenders have a unique opportunity develop their operational capabilities, laying foundations that will help them provide more efficient service when demand increases. At Kensington, we are exploring how new technologies – such as artificial intelligence (AI) – can help us to offer even be er customer and broker service. From other parts of the industry, we hear about AI tools that automate repetitive tasks, freeing up time for advisers to provide high quality customer service, and streamline customer engagement

VICKI HARRIS is chief commercial officer at Kensington Mortgages

through the rapid creation of customer communications. 2024 also presents new opportunities. First-time buyers (FTBs), for instance, have been under considerable pressure, with Lloyds Banking Group revealing that the number of FTBs fell by 22% between January and August 2023 compared with the same period in 2022. This group is likely to be a key market going forward, with our analysis of Zoopla data estimating that 40% of people hoping to buy a home in the next two years will be FTBs. Specialist lenders have a unique role to play in serving this market, due to their manual underwriting capabilities and ability to consider a wider range of information when assessing applications. This is valuable for many younger prospective buyers who may have a shorter credit history or require greater product flexibility. The next 12 months may also see an increase in borrowers with complex circumstances, from the growing number of self-employed or those with more than one source of income, through to people who have experienced a credit blip. The manual underwriting capabilities offered by specialist lenders can again be critical in helping to secure a mortgage that addresses their needs. While 2024 is certain to be challenging, the gradually improving economic picture suggests that market conditions could brighten. Lenders that improve their operations and remain a entive to evolving customer needs will be in a strong position for when the market fully recovers. ●

RESIDENTIAL Opinion

Providing truly versatile solutions for remortgage

ast year posed considerable challenges for the mortgage market, marked by the complexities of navigating a landscape dominated by soaring inflation and escalating living costs. These factors contributed to an increase in the overall cost of borrowing, leading to a notable slowdown in the housing sector. Consequently, a pervasive atmosphere of economic uncertainty has taken root, impacting the landscape for many homeowners. Mortgage rates rose consecutively and consistently during the first half of the year, from 3.5% in January 2023 to 5.25% in August, prompting a flurry of rate rises and product withdrawals that created a sense of uncertainty not seen in the market for many years. As we head into 2024, however, the tide may finally be turning. The Bank of England base rate has remained at 5.25% since August 2023, inflation is falling, and interest rates have started to follow suit, all of which points towards a more stable environment.

Affordability squeeze According to UK Finance, 1.6 million borrowers are expected to come off fixed rate mortgage deals in the next year, and the downward trend in rates will be welcome news. Nevertheless, owing to the rapid escalation of interest rates in the past year, a substantial number of these borrowers are poised to witness a considerable surge in their monthly mortgage repayments upon remortgaging. Despite the recent decline in interest rates, these borrowers, who secured fixed rate mortgage deals during a period of historically low

Flexible solutions could meet your clients' needs best

rates, are anticipated to encounter a degree of rate shock during the remortgaging process.

Exploring all the options Brokers are going to have to work harder than ever to ensure they scour the market for the best solution for their clients’ needs. The days of simply opting for a low rate fixed mortgage are a thing of the past, and many clients may now find themselves faced with affordability challenges as they seek to navigate a higher interest rate environment. As a result, solutions such as lending into retirement, interestonly and discounted rate mortgages could see a resurgence in popularity as brokers seek the most affordable solutions for their clients. While the Government’s Mortgage Charter accounts for some flexibility, we know that the main high street lenders can be much more rigid than local building societies, and the last thing a borrower needs is to feel constrained by the criteria of their existing lender. Extending the term, which may include repayment in retirement, or allowing property downsizing as an interest-only repayment strategy, are

TOM DENMAN-MOLLOY is intermediary sales manager at Mansfield Building Society

examples of where thinking creatively can really help. They can provide borrowers with more affordable and lower monthly mortgage repayments, helping them navigate any current affordability challenges they may face, while still ge ing the best deal for their circumstances. Similarly, the flexibility and use of tapered early repayment charges (ERCs) on many discounted mortgage products means there may be an option for those clients that can afford to take a risk on the possible fall in interest rates over the next 12 months, or afford to exit the deal early further down the line.

Flexible lenders The need for brokers to explore a wider range of mortgage options for their clients has never been greater. With interest rates still at a higher level than before the pandemic, the purchase market is likely to remain subdued over the next 12 months. For borrowers looking to remortgage, navigating affordability challenges will remain top of mind. As a result, flexible solutions that help borrowers reduce their monthly payments, such as lending into retirement, interest-only and discounted rate mortgages could be alternatives that best meet the needs of your clients. By working with lenders that can offer versatile criteria and a common-sense approach, brokers can help provide the critical versatility that many remortgage borrowers will need. ● January 2024 | The Intermediary

RESIDENTIAL Opinion

Finding those

ou might have reached the end of last year feeling everything was a bit of a blur. Who could blame you, given the chopping and changing we all had to navigate over the year, affecting everything from interest rates to product availability – not to mention the soaring price of essential daily items we used to take for granted. Who would have dreamed we’d face paying so much for Lurpak? I don’t mean to be flippant. In an environment where consumers’ budgets are so tightly squeezed just getting by day-to-day, it is harder to help them achieve their homeownership aspirations than it has been for a long while. Even during Covid-19, when mortgage supply and processing times were the biggest issues, we didn’t have this vicious circle of high house prices, high bills, soaring inflation and interest rates, in many cases, four-times higher than has been seen for a decade and a half. As if it wasn’t enough of a challenge for brokers and lenders to find answers

The Intermediary | January 2024

to the resulting affordability gap, the goalposts fundamentally changed, too. Borrowers concerned they could lose out amid interest rate volatility can now switch to a better deal multiple times between offer and firming up their mortgage contract, meaning repeated case rework for under-pressure brokers and lenders, and the potential costs for both. To recap on some of the main economic and market influences we saw last year, inflation remained stubbornly high after reaching its post-mini Budget peak in October 2022 – manifesting in record high prices for energy, food, fuel and other essentials. Meanwhile, the Bank of England steadily increased the base rate to what we hope is now its peak to try to reduce inflation, sparking market mortgage rates averaging between 5% and 6%, a far cry from those that everyone had become so used to. Thanks to these factors – and income tax bands frozen until 2028 – consumers are not feeling any real benefit from the higher-thanusual pay increases we saw during

2023, of 7% on average. This perhaps explains why December figures from the British Retail Consortium trade body suggested retail sales rose by an annual rate of just 2.7% in November, less than inflation and well below the 12-month average of 4.1%, as shoppers showed unseasonal restraint in the build-up to Christmas.

Glimmers of hope for 2024 There is now hope on the horizon for several reasons. As well as a growing consensus that the base rate has peaked, inflation fell further than market predictions in November, to 3.9% – in line with the Government’s aim of halving it by the end of 2023, though still above the 2% target. The positive impact of higher interest rates for people with savings is further reason to be cheerful. We shouldn’t get too carried away, though, as there’ll no doubt be further challenges to overcome as this year unfolds. Inflation ticked up slightly to 4.0% in December, and to get it under the sub-2% finish line the powers that be will likely have to keep the

RESIDENTIAL Opinion

last reserves

base rate high for at least a few more months, though we think it may start to gradually reduce between June and August if positive overall progress continues. However, we’re very unlikely to see rates starting with ones and twos again, unless something unpredictable happens. While inflation is the figure grabbing everyone’s attention, real costs continue to sting in consumers’ daily lives. Energy prices have reduced since regulator Ofgem cut its price cap by 7%, but remain high – and vulnerable to further rises fuelled by any escalation in the Middle East and Ukrainian conflicts. Core inflation – reflecting the prices of basic goods and services – is still above 5%, meaning the cost of everything we purchase continues to rise, despite the price increases we have already had to endure. Our fortunes also hang on how the economy holds up amid the higher interest rate environment. Unemployment is one trend to keep an eye on, while another is

the growth and productivity which drives us forward. For now, the Government has sacrificed growth in favour of tackling the bigger priority of inflation, but getting the balance wrong could tip us into recession if gross domestic product (GDP) falls below 0% for two consecutive quarters, which could become a much bigger and longer-lasting issue. There are signs this threat could be receding, though – with the Oﬃce for Budget Responsibility (OBR) changing its predictions from expected recession in 2024, to a gentle increase in growth to between 0% and 0.5%. While tiny, anything over ‘ground zero’ has to be a better prospect than heading the other way. House prices have defied the worst case predictions of 10% or 20% falls, with the Halifax and Nationwide indexes resting on a 3% year-onyear fall and the Oﬃce for National Statistics (ONS) reporting them as flat. Taking all trends into account, we’re forecasting a fall during 2024, of between 2% and 4%, followed by modest rises in 2025. Any reduction needs to be viewed in the context of the double-digit growth we saw post-Covid, thanks to Government stimuli to get the market flowing again. If everything continues like this, we should see less market volatility as 2024 unfolds. It will be interesting to see how national policy evolves, too, with politicians on all sides getting General Election-ready, and likely to be inventing financial sweeteners to win over voters. The Government’s 2% National Insurance (NI) reduction, announced in November’s Autumn Statement, is among the first examples, though there is widespread scepticism over its true value to the population – given the tax thresholds frozen until 2028 and the growing number of ordinary professionals such as nurses and teachers who are being dragged into paying the higher 40% rate as a result. Meanwhile, questions around who will win and the kinds of policies

JEREMY DUNCOMBE is managing director of Accord Mortgages

they will bring with them, and indeed whether the election will go ahead within the course of next year, abound. What’s certain is that consumers will need to continue prioritising their mortgages over other spending to give them the best chance of achieving their homeownership aspirations. Indeed, our ‘Home Truths’ mortgage research report showed many are doing just that: putting off major life milestones from weddings to starting a family. If they can maintain this frugal approach for just a while longer – albeit hard – they will emerge more financially resilient once the current economic issues recede. It’s not all doom and gloom, either. Anyone with savings can now earn around 5% interest on their cash, although considering tax-eﬃcient vehicles like ISAs or offset mortgages is more important than ever, given the fact that the personal savings allowance is also frozen, creating a new tax liability for many. Increased mortgage rates mean most people with a home loan face a rise in their payments sooner or later. However, if we all work together – lenders offering the kinds of products and common-sense underwriting that will create opportunities for more customers, borrowers cutting their cloth, and brokers providing that vital guidance – we can get through this together. ● January 2024 | The Intermediary

RESIDENTIAL Opinion

Flexibility is crucial to support foreign national buyers

etting onto the property ladder in the UK is not only an aspiration among Brits, but plenty of foreign nationals, too. There are all sorts of foreign nationals who might be keen to purchase a property here. Many will have moved to the UK for work, with certain sectors particularly reliant on employees coming from overseas. While the NHS is a great example of this, there are many other industries where skills from abroad are highly sought after, opening up a host of job opportunities. Others may simply want to put down roots here for the long-term, attracted by the prospect of a good education for their children and a stable job market for the future. While some of those moving to the UK will be happy to rely on the rental market, this won’t be the right option for everyone. The shortage of rental properties has driven up rents significantly in recent years, while the lack of certainty around whether you will be able to stay in the rental period for the long-term also undermines its appeal.

Ownership compelling In contrast, the fundamentals of the UK housing market mean that ownership is compelling, whether you are a British resident or a foreign national. While it’s true that house prices have taken a dip over the past year, driven by rising interest rates across the market, the reality is that we still do not have enough of a supply to meet usual levels of demand. As a result, when rates settle down once more and demand grows, it’s likely that we will see further house price growth, offering foreign

The Intermediary | January 2024

SAKEEB ZAMAN is CEO and co-founder at StrideUp

national buyers an excellent return on their money whether they choose to live here indefinitely or return home when they sell up.

The mortgage challenge Given this situation, we know there are plenty of foreign nationals keen to purchase property in the UK. Yet they can often find that doing so diﬃcult, in large part due to the attitude of mortgage lenders. Frequently there are barriers that may seem unnecessarily complicated for foreign buyers to overcome. This not only demonstrates a lack of understanding or engagement with this market, but it also acts as a barrier to homeownership from a community that is keen to own bricks and mortar within the UK. It’s an issue that we have recognised at StrideUp, and which has driven our recent changes in criteria for foreign national buyers. As a result of those amendments, we can now consider applicants who have at least one year left on their visa for working in the UK, a move which has received a warm welcome from intermediaries already. With many providers insisting on buyers having at least two years remaining on their visa, this change lowers the barriers to homeownership, opening up a more straightforward route onto the housing ladder for such clients.

Where’s the deposit? The length of time left on the visa is just one area in which the requirements can exclude wouldbe buyers – another big issue is the deposit. It’s not uncommon for traditional mortgage lenders to look for much more substantial deposits for foreign

national buyers than they do when lending to British nationals, often upwards of 25%. Given the price of property in the UK, even allowing for recent falls, that is an enormous sum of money the buyer needs to put down at the outset, even more if the lender is then overly strict in how it approaches gifted deposits. Again, this is an area in which StrideUp has been keen to take a more flexible approach, since we will consider 100% gifted deposits even from those who are not blood relatives. By being more open-minded and agile around not only the size of the deposit but where it is coming from, we can support greater numbers of foreign nationals in achieving their home ownership dreams.

What buyers need Of course, it is not just foreign nationals who may find it surprisingly diﬃcult to access the funding they need for a house purchase. Those who are self-employed or have complex income arrangements can also find traditional providers unexpectedly restrictive, leaving them unable to actually go through with a purchase. It’s important for mortgage brokers to understand that not all funding providers act in such a close-minded manner, though. Working with firms like StrideUp, which embrace manual underwriting and the ability to get to know an individual client’s circumstances, can ensure that clients who are underserved by high street names can still get the funding they require. ●

RESIDENTIAL Opinion

A recovery is coming

eading the runes of the property market has always been fraught with peril – not least because the constant lack of supply has meant that affordability has long been the only game in town for homebuyers requiring mortgage finance. From a borrower's point of view, access to finance has been key for so long. When that access is constrained, we see tumultuous effects upon transaction volumes. The truth is that the financial environment has long controlled the property market. From the fiscal incentives of past Governments such as Help to Buy, or further back Right to Buy, as well as Stamp Duty holidays and more recently payment deferral schemes, the Treasury has possibly had more impact on our national housing market than any Housing Minister. We may bemoan the turnover of Housing Ministers, but in reality it is the Treasury that oversees the UK housing market. This is important, because we have a Budget looming, in advance of a very likely Spring or early Autumn election. Governments rarely have elections in the cold months when the nights are short, because their turnout can be impacted. So, the incentives to get the market moving again may well be unleashed in the Spring of next year, given they were entirely absent from the Autumn Statement. In advance of all this, better news is dripping into the market. Research by Benham and Reeves – analysing current property listings across the capital at each price threshold, and which currently boasts the greatest degree of for-sale stock – highlights the strength of the £1m-plus market across the capital. This part of the market accounts for both the highest levels of buyer demand and available for-sale stock.

Spring bloom Headline forecasts might be gloomier overall, but London is showing signs of improvement. Inflation has dropped below 5%; it is entirely possible for borrowers to fix a mortgage for under 4.5%. It has all given buyers a lift in spirits in recent months, leading to a 5% increase in offers made in prime postcodes in late 2023, compared with the five-year average. For those sellers who are waiting on the fence, the warmer months and a slightly more benign economic environment may push more of them to embrace the Spring. Prime areas of London have been doing a lot better recently, which generally heralds a push further out in due course. International investors recognise that things are improving, and that if buyers return to the market their window for real bargains may be closing. Both time and stock are running low, and the current exchange rates and the cash buyer advantage might not be around in a year’s time if interest rates decline as anticipated. Equally, as an election approaches, we may yet see changes to the tax system to disadvantage international buyers. All these considerations will encourage activity. Of note from a political point of view is the fact that Labour appears to have ruled out a wealth tax, which might otherwise have disincentivised buyers looking at high value properties. London still holds the crown as the most expensive area to buy in the UK. The average London house price is currently £537,000, according to the Oﬃce for National Statistics (ONS). While much of the market has been falling, commentators suggest London isn’t being hit as hard. This is, in part, attributed to prices not rising by as much in the capital during the pandemic, as many buyers looked outside London

ROBIN JOHNSON is MD of KFH Professional Services

Of note from a political point of view is the fact that Labour appears to have ruled out a wealth tax, which might otherwise have disincentivised buyers looking at high value properties” amid the race for space. So, while predictions are a tricky business, there is a growing consensus that London is emerging again from the travails of the past three or four years to look like good value for investors and homeowners alike. Savills says prime central London is expected to outperform most other UK residential markets over the next five years. Prime property values may still be well below historic peaks in central London, but a recovery looks well overdue. They are not alone. Other recent studies concur that the top end of London’s homes sales market is predicted to bounce back faster than anywhere else in the country. So, while there has been talk of falls between 2% and 5% next year across the country, there is a bit more positivity about London. And as I alluded to, what happens in Central London ultimately drips out into adjacent regions. We are not out of the woods yet, but the initial green shoots of recovery are showing. ● January 2024 | The Intermediary

RESIDENTIAL Opinion

How things play out for borrowers is in lenders’ hands

ovember’s Autumn Statement was full of surprises, almost certainly to set the stage for a General Election in 2024. Rishi Sunak had pledged to halve inflation, and lucky for him, October’s 4.6% figure delivered. Pensioners got their triple lock rise, and workers got a 2% cut to National Insurance (NI). The day before, Andrew Bailey, governor of the Bank of England, issued a more sombre statement. He said: "Let me be very clear, it is far too early to be thinking about rate cuts." The Bank of England expects inflation to continue to fall in 2024, with November forecasts expecting consumer price inflation (CPI) to average at 4.6% in Q4 2023 and 3.1% in Q4 2024. The Office for Budget Responsibility (OBR) published its own outlook, expecting inflation to average 4.8% in Q4 2023 and 2.8% in Q4 2024. Bailey said another thing during his lecture: the 2.1 percentage point drop in inflation in October was "welcome news," but it is "much too early to declare victory." While the economy may be responding to far tighter monetary policy, this warning says much about the coming year. Inflation may be back under 5%, but that still represents a significant rise in prices over the past 12 months. Over the past 24 months, the effect on household finances has been devastating at the lower end of the income scale. The cost-of-living crisis persists, and it’s likely that 2024 will be a tough year. While the worst hit have been families reliant on welfare – and at the mercy of rising rents – next year we may start to see the true impact on more comfortable households. UK Finance estimates that around 1.6

The Intermediary | January 2024

MICHAEL CONVILLE is chief customer officer at Newcastle Building Society

million fixed rate mortgage deals are due to end in 2024, hot on the heels of 800,000 in H2 2023.

Mortgages in arrears Arrears, while nothing like those experienced a er the Global Financial Crisis, are creeping up. There were 87,930 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q3 2023, 7% greater than the previous quarter. There were 34,110 homeowner mortgages in the lightest arrears band, 10% more than the previous quarter, according to UK Finance. These are low numbers, but we can already see the effect that much higher mortgage rates are having. In March, the Financial Conduct Authority (FCA) said it expected 356,000 to be at risk of facing payment difficulties by the end of June 2024. Those most likely to be financially stretched live in London and the South East, and tend to be in the 18 to 34 age group. The effect of ultra-low interest rates for a prolonged period was to enable high income borrowers to max out affordability to an extent that is now unsustainable. First-time buyers who scrimped for their deposits, young families moving from flats to houses – these are the people with the least wriggle room. The impact of monthly payments rising by several hundred pounds on those whose budgets are already stretched is going to be painful. That’s the bo om line, but it’s not the hard line. How things play out for borrowers is in lenders’ hands. Adhering to the principles laid out in the Government’s Mortgage Charter offers borrowers a degree of protection from payment shock. But rates are staying where they are, and the challenges already faced by so

many coming off their fixed rate deals in 2023 are still in store many.

Not just a number 2024 looks set to be a seminal year. The lenders striving to find flexible ways to support clients will set themselves apart. That means creative and innovative thinking, common sense, and seeing borrowers as people, not numbers. It’s an approach we live by every day. With our brokers’ help, we launched and improved our Shared Ownership range to include remortgage and staircasing. In July, we reintroduced our joint mortgage sole proprietor (JMSP) proposition, assisting firsttime buyers and home movers. The maximum age at the end of term for the oldest buyer is 80, because it is not only first-time purchasers who need support. We increased our large loans max amount to £3m and revised our criteria for downsizing. We introduced 85-year leasehold terms for new-builds, and are one of a handful of lenders still offering 95% loanto-value (LTV) deals. We continue to support new Deposit Unlock customers, First Homes, and gi ed deposits, and made improvements for lending into retirement. Lenders will play a significant role in supporting borrowers over the coming year. Even if there is a housing market giveaway in the Budget, the reality for rates and affordability will not change, and innovative thinking will have to complement policy. Our track record should give brokers encouragement that we will continue to deliver on that brief. ●

RESIDENTIAL Opinion

2024 will keep us on our toes TONI SMITH is chief distribution officer at Primis Mortgage Network

From global events to local markets, 2024 is set to be another year of flux for the mortgage market

irst off, may I wish everyone a Happy New Year. Having spent some time at Christmas reflecting on last year’s highlights, it is time now to look forward to what the mortgage market and broader economy have in store for us all. This year there is as much to ponder. Everyone now knows that interest rates are a global phenomenon. What happens in one part of the world can quickly play out elsewhere. The US is awaiting the trial date set for Donald Trump, which will inevitably impact market and investor confidence around the world. Closer to home, our own political landscape will also be under the magnifying glass. I imagine we will all be looking for housing market support in the pre-election Budget in March, following the underwhelming Autumn Statement last year. But everyone will have an eye on the promises made for the housing sector in forthcoming election manifestos. Regarding housing, the major political parties are already clearly at odds, and we should anticipate more in the days leading up to the election.

While the Labour Party has stated that it intends to use ‘greybelt land’ for new housing, the Conservatives have backed off from their housebuilding ambitions, which would affect the location of new construction projects. Even if that's reason for hope, as the General Election approaches we will probably witness both major parties start to promote construction.

Rising rates While politicians and policymakers offer promises for the future, the market will undoubtedly see an increase in product transfers and remortgaging. Even if the transition is less unpleasant now than it was six months ago when rates were substantially higher, we know that more than a million borrowers are still scheduled to go from rates of about 2% to over 5%. UK Finance reported a 7% increase in homeowner mortgage arrears of 2.5% or more of the outstanding balance in the third quarter of 2023. Arrears for buy-to-let (BTL) have increased more sharply; in the third quarter of 2023, arrears of 2.5% or more of the outstanding balance were almost 29% higher than in the same

quarter the previous year. Brokers will need to be as vigilant as ever in securing the right deals for clients. House prices may be forecast to fall between 2% and 5%, but this could be swi ly reversed in the second half of the year if confidence continues to improve. 2025 is expected to see a reversal to any losses in 2024. The lack of new housing will mean new purchasers will continue to require policy assistance in some shape or form, and many stretched homeowners will need support just to stay where they are. From a regulatory point of view, I anticipate that as lenders, networks and brokers work more closely together we will see improvement in service levels, along with greater integration in systems that not only fulfill and support Consumer Duty obligations, but also provide evidence of best practice. As we begin to understand how the expectations of Consumer Duty rules really do work in practice, investment will grow. As we exit a year in which we saw the UK markets start to recover from recent setbacks in the economy, and enter a year which will no doubt be important from a political and policy standpoint, we want to make sure our members are covered. We will be driving an ever-evolving focus on customer excellence, utilising our team and innovation within the industry to help us refine the service experience for brokers to trade effectively and safely, and ensuring our members can maximise the opportunities on the horizon. It’s going to be eventful, and we can’t wait to dive in. ● January 2024 | The Intermediary

The Interview. Octane Capital

Understanding the story

Jessica Bird speaks with Richard Deacon, managing director – sales at Octane Capital, about the rise of specialist lending and the firm’s personal approach

rom the Credit Crunch almost two decades ago, through to the turmoil of the Covid-19 pandemic, and now as the world faces numerous crises around the costof-living, inflation, and geopolitical instability, specialist lenders have consistently worked hard to step into the breach. With experience in both the mainstream financial market, including on the retail side at Santander, as well as at various specialist institutions since 2004, when Richard Deacon took over as managing director – sales at Octane Capital a year ago, he was well-versed in all aspects of this complex market. The Intermediary sat down with Deacon to take a look back at 2023, consider what is on the cards for this year, and understand more about the role of specialist lenders in keeping property finance fit for purpose.

The Intermediary | January 2024

Octane Capital was founded around seven years ago, and since then has lent £1.5bn, with £1bn paid back and, as Deacon reports, a solid and stable loan book. More than just the numbers, though, Deacon made the decision to move to Octane Capital in part due to the firm’s clear branding and values. “What it stands for is more people-based than anything else,” he explains, adding that this is reflected in the longevity of many of the members of staff. “Some have been here since inception, and they’ve all got the team spirit. Culture is a big thing at Octane.” This culture goes beyond the working environment, and also affects the way the lender approaches deals. Deacon explains: “They also genuinely look at deals in a different way. Even with a deal that might not fit with our criteria, you speak to the introducer and the borrower and get a sense of the back story. “If it makes sense and you can see the profitability, we work to get our heads around whatever the quirk is.” He adds that this is where the firm’s credit managers come in. Rather than a deal being shifted from one department to the next at each stage, Octane Capital has team members who see a case through to not only completion, but also redemption.

Open ears

This approach is particularly important now, when landlords in particular are facing growing uncertainty, to say the least. “Some are panicking, some are worried, and some have given up entirely, while others are putting real thought into what they want to do next,” Deacon says. “You’ve got to have an open ear, talk to people and think about their raison d’être.” A substantial number of landlords are due to come out of 3-year and 5-year fixes in the coming year, and depending on how their loan is geared, will likely be facing a nasty shock in terms of rising payments. If the experts in the property finance market understand each borrower’s end goals and

I N T E RV I E W

Bridging is a real part of people’s portfolios now – they want to buy on a bridge because it’s quick and easy, they can potentially buy under-value or property that needs work to enhance its value, where your normal high street lenders won’t lend against it” appetite, they will be increasingly able to find a solution – and perhaps one not previously considered – to help them get through this difficult time. For example, in some instances the cost of short-term finance might be comparable to the rates being offered by a buy-to-let (BTL) lender, and therefore provide time for the market to shift back down to a more manageable level. Deacon says: “Borrowers can access products with a similar rate and without the huge arrangement fees, and then later get out of their bridge with no [early repayment charges (ERCs)], and get a much better deal for the next five years than if they’d gone headfirst out of panic or desperation. This isn’t a product that we push, necessarily, but it’s about having options for people.” In other instances, landlords will be looking to add value to their properties in order to meet rising costs long-term. This might mean converting larger single dwellings into houses in multiple occupation (HMOs) or flats, necessitating short-term specialist finance in order to do so. With HMO conversions making up 20% of Octane Capital’s business alone, this is certainly an area where specialist lenders will be able to support savvy investors, and the brokers who serve them, all while adding value to the rental market. Deacon says this is part of a wider trend: “Bridging is a real part of people’s portfolios now – they want to buy on a bridge because it’s quick and easy, they can potentially buy under-value or property that needs work to enhance its value, where your normal high street lenders won’t lend against it.” Although Octane Capital does not do ground-up development projects, it also has

a significant role to play in helping borrowers face down challenges in the development market. To this end, for example, the firm made its development exit products more malleable, in order to help those facing rising costs, material shortages, and delays to projects that are otherwise a good prospect. Deacon says: “We’re conscious that developments are increasingly going overbudget or over-time, or both. Many of them just need an old-fashioned development exit to give them more time to get it over the line.” However, there are others that have gone so far past the goalposts that the client may struggle to gain funding from most lenders. In addition, many investors will be thinking about future projects – keeping teams employed and ensuring continued success by starting work on the next development, despite delays to the current one, particularly when those delays were not caused by any incompetence on their part. In these instances, Octane Capital has seen the need to take a flexible approach to decision-making, and to step in and understand why a project has not worked, and what can be done to help. In addition to buying a client time to move through the process, sell properties and pay off their loan, Octane is able to offer the chance to take a portion of the profits and, instead of paying the lender back straight away, invest it into the next project. Deacon explains that this benefits the lender as well. With the amount of work that goes into setting up with a new client, it is always worthwhile keeping solid prospects on board and supporting their future endeavours. “This is where we show our flexibility – we can take 80% or 70% of those first sales, rather than 100%,” he adds. “We understand cash is king. It depends on the customer and the deal, but it’s an example of how we look at things differently.”

Getting the word out

If the specialist and short-term markets are to continue their growing role in keeping this industry stable and profitable, an important factor is the matter of education. Awareness is higher than ever, and bridging in particular is becoming more of a go-to product, rather than being seen as a last resort. However, Deacon says there is still more work to be done. Octane Capital did a lot in this area in 2023, and plans to continue, not just attending industry expos, but with its own contributions, such as roadshows and breakfast events. → January 2024 | The Intermediary

I N T E RV I E W

“Crucially, it’s not just us speaking about Octane,” Deacon says. “What we want to do is educate people on how to make the most of this market.” This means speakers at the firm’s events include industry experts like solicitors and surveyors, who might discuss aspects such as ensuring a deal is not held up by the client’s legal representation, or giving the real details of what it is like to work through an HMO conversion, how a valuer will look at these properties, and some of the common mistakes. For Deacon, industry education is about ensuring brokers and their clients are armed with the ability to ask the right questions, and find agile, flexible solutions to any potential issues that might arise. When it comes to practical tips for those looking toward the specialist market for the first time, Deacon says people must first be clear on what the security is that they are dealing with. They also have to consider exit routes, which have of course been tricky in the past several years. Then, Deacon says brokers must be sure to have a proper understanding of the client themselves – their skills, goals and previous experience. “Knowing the client is absolutely key in all of this,” he says. “That includes knowing why they are opting for bridging over a different form of finance. There are 100 different reasons why the high street or big specialist banks say no, but it’s specialist lenders like us who can get comfortable and spend time information gathering. It’s not just a numbers game.”

Specialists in 2024

Looking back at his first year with Octane Capital, Deacon reflects that the business had a successful 2023, despite the challenges facing the market around the cost of living, base rate, and various other pressures. Deacon has increased the sales team by 50% over that time, including external and internal business development managers (BDM). Other areas of the market have seen less success, and Deacon points to conversations with many brokers who are concerned about hitting their targets. This, he says, is an opportunity to turn their attention to new avenues, and to build on that education piece to help more people diversify. In turn, this helps clients find the right solution for their circumstances. Deacon says: “Where people haven’t been able to bank a lot of, BTL business, for example, that has actually been a good opportunity for us, as they have turned to other 28

The Intermediary | January 2024

Knowing the client is absolutely key in all of this. That includes knowing why they are opting for bridging over a different form of finance. There are 100 different reasons why the high street or big specialist banks say no, but it’s specialist lenders like us who can get comfortable and spend time information gathering. It’s not just a numbers game” areas, including refurb, development exits, commercial, second charges. It’s not all stuff we do necessarily, but it has made people more open in general. That has helped us reach our milestones in 2023.” In fact, Deacon says issues such as the rising base rate have had less of an effect on specialist, non-fixed rate lenders like Octane Capital, which has further allowed for this sector to flourish. “We’ve re-established ourselves as one of the top non-regulated lenders in the UK,” Deacon says. “There are also others, including the big specialist banks, doing phenomenal things. For me that’s great for the industry, and shows that there is a tremendous amount of business out there.” He adds that this has also driven market growth in recent years: “There’s an absolute plethora of specialist lenders out there. As time goes on, it’s becoming a wider phenomenon.” While awareness is still likely low among the wider public, Deacon says that knowledgeable brokers are key to the spread and growth of this market. Looking ahead, Deacon notes that 2024 will, of course, bring its own challenges. For example, with a projected change of Government could come increased uncertainty, with a left turn potentially scaring clients, and turbulence of any kind causing caution around property buying decisions. He explains: “The actual decision of an election is one thing, but there’s also the uncertainty beforehand.”

I N T E RV I E W

Overall, Deacon suggests taking a realistically optimistic approach to the year ahead. The catastrophic house price drops previously predicted by some for 2023 did not come into being, and Deacon says there is a good chance for equilibrium in 2024, as people work hard to ensure the property market – and particularly BTL – survives safely into 2025. For the market, Deacon expects that brokers who have faced a downward trend year-onyear will look more toward the specialist side, and he reaffirms the importance of being openminded to new solutions. For the business, the year will see further growth, with the potential to move into new

areas in need of specialist support, such as expanding its 2-year BTL bridge proposition, as long as the movements are worthwhile and helpful for the real end users. In addition, Deacon looks forward to further getting out in the market at events and having face-to-face conversations with brokers. He concludes: “Then in 2025, the Government will have been in for perhaps a few quarters, interest rates might start to come down, and the housing market may come back to some form of normal again. “There’s no magic bullet, or not a realistic one. 2024 will be a year of pulling up your bootstraps once again.” ●

C A S E S T U DY

his deal involved the acquisition and transformation of a lower ground floor flat in a period building located on the borders of Primrose Hill and Swiss Cottage in London. The borrower’s objective was to capitalise on planning gains by expanding and refurbishing the property, ultimately resulting in a substantial increase in its market value. The property was an attractive 999 square foot two-bedroom lower ground floor flat, located in close proximity of Regents Park, with the added advantage of a spacious private garden. The borrower was a repeat client of Octane, with a proven track record of successfully executing planning gain bridges, refurbishments, and developer exit projects. The borrower was a UK national and resident with a robust property asset portfolio, specialising in developments within the prime central London location. Their extensive experience in similar and more substantial conversions and developments ensured the successful execution of this project and gave comfort to the lender. Octane structured the financing in two phases to facilitate the borrower’s objectives. Initially, the planning gain purchase bridge loan was provided at 70% loan-to-value (LTV), enabling the borrower to secure the property and initiate the planning process. Simultaneously, Octane underwrote the subsequent refurbishment and conversion facility that would be implemented upon receiving planning consent. This approach ensured a smooth transition from the planning gain bridge loan to the refurbishment phase, having already onboarded the client. It is worth noting that the borrower only paid a fee on the new monies borrowed when this facility was refinanced. Several months later, planning consent was granted for an extensive refurbishment project. The approved plans included a double-storey side extension, a single-storey rear extension, partial excavation to achieve higher ceiling heights, and an overall highquality refurbishment in line with the area’s standards. These alterations resulted in a significant increase

in the property’s floor plate area, transforming it into a spacious three-bedroom, three-bathroom garden apartment. Comfort was also given by the valuer having commented on the strong demand for this type of prime central location asset. A national valuer provided a monetary value of £1.1m, taking into account the planning gain value. Octane’s new loan covered 70% of this value, amounting to £770,000, with an additional provision of approximately £500,000 to fund the refurbishment work. Octane’s internal asset manager was appointed for the project’s drawdowns and monitoring, helping to control costs by not using a formal quantity surveyor. The gross development value (GDV) was £2.3m. An 18-month loan term allowed ample time for the refurbishment and subsequent property sale to exit Octane’s facility. Octane Capital offered a rate of 0.36% margin, plus the BBR, giving a total rate of 0.80% per month for a heavy refurb and conversion facility. The lender rolls interest, and clients are only charged interest on the actual amounts drawn, minimising financing costs. Furthermore, Octane does not impose any exit fees on its facilities and charges interest daily, instead of monthly. This approach ensures that borrowers can exit the financing arrangement without incurring additional charges, providing flexibility and costeffectiveness throughout the project lifecycle. This case study illustrates the effective collaboration between Octane and an experienced borrower in realising the potential of a prime Central London property through careful planning, refurbishment, and strategic financing. The project’s success was driven by Octane’s flexible lending approach and the borrower’s expertise in property development within the generally highdemand London market. The property transformation resulted in significant value appreciation, highlighting the potential for planning gain projects in well-established urban areas.

January 2024 | The Intermediary

B U Y - TO - L E T Opinion

Evolving to help landlords and tenants

ver the course of 2023, we saw a huge amount of column inches devoted to the additional financial pressure being placed on both homeowners and tenants across the UK. While this attention is certainly warranted, I don’t think I’m out of place in saying that we have seen precious little coverage or emphasis on the struggles of landlords in maintaining a supply of good quality, aﬀordable housing in a private rented sector (PRS) which accounts for around 20% of households across the country. This sentiment was echoed in commentary from Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), when analysing the trade body’s latest landlord survey. The survey showed that many landlords are small businesses with modest financial turnover and trading profits, facing rapidly rising costs. Upon this subject, she suggested that reality dictates that many mortgaged landlords will have no choice but to increase rents in order to keep their businesses viable, while debt-free landlords may well do the same in order to make an adequate return, even if that is lower than current returns available elsewhere. It's diﬃcult to argue with these observations, and anyone with any vested interest in the housing and mortgage market – from the highest Government levels down – needs to appreciate the extra weight being placed on the PRS and all types of landlords in the current economic climate. However, one heartening takeaway from this survey is that the majority of landlords appear committed to

The Intermediary | January 2024

GRANT HENDRY is director of sales at Foundation Home Loans

Darwinesque: The buy-to-let sector has had to evolve and reinvent itself on numerous occasions

remaining in the PRS for the longer term. In contrast with widespread predictions of a mass exodus, 53% of mortgaged landlords plan to buy more rental property over the next five years, as do 25% of unmortgaged investors. Only 21% and 17%, respectively, said they will sell property in that timeframe. This may reflect a desire to meet rising tenant demand and is welcome news in a sector which desperately needs to bolster supply levels.

Portfolio shift It was also interesting to note that, despite a surge in the number of landlords setting up corporate structures since the removal of tax deductions for interest rates in 2017, only 10% of all rented property is held in limited companies, with 90% still held in personal names, while just 3% of the UK's PRS is owned by institutional investors. This proportion of limited company properties is likely to increase, though, as the transition into a more portfolio-centric landlord buy-to-let sector continues. This is a shift which was evident in further data from the Deposit Protection Service (DPS), which

highlighted that double the proportion of landlords with two or fewer properties are planning to sell up and leave the rental market, compared with those who have portfolios comprising more than 10 properties (24.47%, compared with 12.16%). Almost three-times the proportion of landlords with portfolios larger than 10 properties intend to buy more compared with those who own one or two (13.51%, compared with 5.63%). The survey also revealed that, among those intending to leave the market, more than twice the proportion of landlords who are not set up as a business for the purposes of renting intend to sell all of their properties and leave the PRS altogether, compared wiith those operating a limited company (21.72%, compared with 10.34%). The buy-to-let sector has had to evolve and reinvent itself on numerous occasions over the years and its resilience has continued to shine through in even the darkest of times. I, for one, can see plenty of hope and encouragement for the BTL marketplace in 2024, but I’m sure that landlords and their tenants would also welcome all the help they can get along the way. ●

B U Y - TO - L E T Opinion

Optimism and realism

he start of any new year always feels like it presents an opportunity to be grasped, and after a challenging year like 2023, I have a strong sense of optimism about what the next 12 months and beyond can bring. That is not false optimism, either, because I think we had already started to see a more positive shift in the last couple of months of 2023, and it’s my belief that this can be maintained in both our sector and the wider mortgage market over the year ahead. This is not to say that we’re going to have a ‘gangbusting’ year of crazy buy-to-let (BTL) activity which matches those we saw during 2021 and 2022. We can be both optimists and realists about what the market is likely to deliver.

A different environment Let’s face facts, according to the latest figures from UK Finance, buy-to-let activity is clearly some way down on what we were able to achieve a couple of years ago. It’s anticipated that gross mortgage lending for buy-to-let purchases in 2023 was down from £17bn to £8bn, while the corresponding figures for remortgaging were down from £38bn to £20bn. UK Finance anticipates little change over the next two years, suggesting that purchasing will be £7bn, then down to £6bn, while remortgaging will also drop to £19bn before returning to £20bn next year. The dial is not anticipated to be moving sharply or rapidly, and I can of course understand the reticence of those who are in a position where they have to make predictions. Clearly, we are in the middle of a very diﬀerent rate environment to that which borrowers and advisers were fortunate to be dealing with back in the early 2020s, and we had that major post-Covid lockdown

demand, fuelled by Stamp Duty holidays, working its way through the market in a way we just haven’t witnessed since. It was perhaps a little surprising, therefore, that we didn’t see more housing or mortgage-related incentives laid out in last year’s Autumn Statement. It’s my belief that any Stamp Duty changes, cuts or holidays would have been welcomed by landlords, and I’m sure if any are to come out of this March’s Budget, then they will be utilised fully. We’re acutely aware that – where possible, and where they can make the mortgage, value or rental numbers add up – landlords are still very interested in adding to portfolios, not least because the fundamentals of the market are so sound. House prices dipping off more recent highs provides landlords with a keener opportunity to buy at lower levels, while at the same time there's some of the strongest tenant demand we’ve ever seen, coupled with low supply, feeding into higher rents and, correspondingly, better yields. Of course, it’s about marrying this up with the cost of finance, and certainly through 2023 we saw rates at much higher levels than we would have wished to. It added up to those drops in purchase and remortgage lending, because clearly existing buyto-let landlord borrowers coming off deals were also having to cope with a higher rate environment, which meant it was more difficult to get over the affordability constraints. However, as the year progressed – and certainly as we saw more interest rate stability and a belief that a peak may well have been reached – swap rates started to fall, and this fed through into product rates. Plus, lenders worked hard to ensure there were other options available; we saw a greater number of lower rate or higher fee products, which no doubt will continue to play their part.

STEVE COX is chief commercial officer at Fleet Mortgages

As I write, swap rates are all down on a month ago, and are not a million miles away from what they were at this time last year. The hope is that we’re over the worst of higher inflation, and that the need for increases to Bank Base Rate (BBR) has dissipated. Whether we actually see any cuts to BBR does remain to be seen, though, and I know there are some commentators and economists who feel our current level is likely to stay the same throughout the entire year and beyond.

Continuing trend Overall, however, we have seen large numbers of buy-to-let lenders – including Fleet – dropping rates in recent weeks. If the money markets follow the same route as recently, we might expect this trend to continue, regardless of whether BBR falls. As always, advisers will have a strong amount of BTL mortgage maturities to aim for, and lower rates means more options for remortgaging borrowers, rather than having to accept a product transfer. My own belief is that portfolio landlords, in particular, will want to continue adding to portfolios and lower house prices or lower rates will encourage them to do this much more. 2024 stretches out before us, and despite some of the predictions for the year being downbeat, nothing is written in stone, and certainly for individual adviser firms, there remain opportunities to help and support great swathes of landlords, whether purchasers or those coming to the end of their existing deals. ● January 2024 | The Intermediary

B U Y - TO - L E T Opinion

Buy-to-let is here to stay

here can be no denying that the property market had a challenging 2023. Aﬀordability issues, high interest rates, and stalling house price growth all led to gloomy headlines throughout the year, particularly regarding the buyto-let (BTL) market. However, much of what we have been seeing at Shawbrook – and what our data is showing us – is the exact opposite. Landlords are bullish, and the BTL market has never been more essential. At Shawbrook, we believe that buy-to-let is here to stay, and we remain committed to supporting landlords and their brokers.

Buying and selling There has been plenty of movement within the buy-to-let market in recent months; indeed, nearly nine in 10 (88%) of portfolio landlords – those with four or more BTL properties – have added to their portfolios in the past six months, despite market uncertainty. Smaller landlords – with fewer than four properties – are slightly less bullish, but almost three-fifths (58%) still added to their portfolio in the same time. This research directly contradicts fears of landlords selling their rental properties due to rising mortgage costs. Indeed, while some landlords have sold in the past six months, 21%

of those that had, did so to free up capital to invest in a better property. Landlords also have further plans to buy in the coming year, indicating that many remain confident. One in four (25%) portfolio landlords intend to invest in an additional property within the next year, with one in five (22%) planning to buy multiple properties. A substantial number of those looking to add at least one property to their portfolio were looking to diversify by location (39%), while 37% were actively exploring diﬀerent types of residential property. In addition, 26% of portfolio landlords said they are turning their attention towards student housing. Our research clearly identifies a cohort of savvy professional landlords continuing to invest and add quality rental stock to the market. This is backed up by our own conversations with landlords and their brokers, many of whom understand – and have experienced – the natural peaks and troughs of the property market. Among those that said they were diversifying their property portfolios, a third (33%) had done so to respond to tenant demand. In addition, of the 88% who were planning to add at least one property to their portfolio, 36% wanted to capitalise on good deals currently in the market, with 35% already having capital ready to invest.

Landlords will need support as they consider diversifying the type and location of their purchases

EMMA COX is MD of real estate at Shawbrook

Meeting demand Demand has been rising in recent months within the private rental sector (PRS), with landlords reporting an average 33% increase in demand for their properties from tenants. For landlords in popular rental areas, such as London, this rises to 37%. Across Scotland, demand is also soaring, with Scottish landlords reporting an average increase in demand of 41%. Overall, 72% of landlords reported that demand has risen, with 31% saying that it has risen ‘significantly’. This clearly highlights the need for quality housing within the PRS, which is only possible with a professionalised buy-to-let market. With aﬀordability still a significant obstacle for first-time buyers trying to enter the market, it is vital there are well-managed, safe and secure properties to support the growing population of private renters.

Supporting professionals At Shawbrook, we are committed to supporting professional landlords as they meet the needs of the private rental sector. We work closely with our broker partners to ensure landlords have access to the finance they need to realise their ambitions and build quality BTL portfolios. With many landlords considering diversifying the type and location of their next property purchase, they may need extra support from their brokers to understand the finance options available to them. Our experts are on hand to support our broker partners, no matter how complex the case. For more information on our specialist approach, or to place a case, please contact our team on 0330 123 4521. ●

The Intermediary | January 2024

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Three wishes

here have been so many challenges for those working within lending over the past 12 months, especially those dedicated specialists within the complex sphere of buy-to-let (BTL), but perhaps the most challenging of all was being asked to summarise and review this year of commercial tumult! Rather than make this a technical piece, there is more value perhaps

The Intermediary | January 2024

in exploring how some of the changes during the past year have commercially influenced landlords, and as a result directly impacted buyto-let lending. Accordingly, we can also look at how some of these trends in economic conditions – on a micro and macro level – may determine the commercial currents through 2024. On 14th December, the Bank of England held interest rates for the third time in a row, following a welldocumented run of 14 consecutive

increases since December 2021. Although the bank base rate still remained at its highest level for 15 years, this brought welcome stability for both homeowners and landlords, potentially providing some calculated foresight into what may lay ahead in 2024.

PRS exodus The relatively sudden and dramatic increase to landlords’ finance costs, stimulated by the well-documented

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for 2024 Truss-Kwarteng mini-Budget, in tandem with the dual impact of Section 24, and indeed the impact of increases in finance costs on lenders’ stress rates and interest coverage ratio (ICR) calculations, meant that there was an exodus of property stock from the private rented sector (PRS) in 2023, which was already creaking at the seams. Many smaller landlords, especially those who had not structured their property portfolio within a taxeﬃcient holding structure – or for whom the financial burden of doing so retrospectively was deemed too much – stimulated an unsustainable supply-demand environment where, on average across the UK, there are reportedly currently circa 26 applicants per property on the market for rentals, driving huge increases in rents. The widely held perception is that interest rates may soften in 2024, especially with the encroachment of a General Election, and there is a strong reason to believe that with cautious optimism one can perhaps anticipate a bank base rate beginning with a four next year. Anecdotally, it is this cautious stability that has seen the dissipation of the swathes of apathy displayed from many landlords in 2023. Many are reticent to fix into longerterm fixed rates, often with higher arrangement fees, while there was a widely held perception that rates may drop. This new pragmatism may mean we are at a ‘new normal’. There are myriad reasons to believe that 2024 will be a much stronger year for BTL lending, and indeed lending in general. It was also in September that we witnessed an unexpected U-turn from the Government, with Rishi Sunak scrapping the proposed changes to minimum Energy Performance Certificate (EPC) requirements for BTL properties – for now at least. The removal of what was a wholly

unrealistic deadline will have undoubtedly fuelled further positivity among portfolio landlords, who will be able to manage the refurbishment of their property stock with organic urgency, but without the immediate pressure and cost. It must be noted, though, that while policies shift, climate change is going nowhere and energy eﬃcient buildings will remain central to the Government’s net zero plans. Professional landlords with modern, energy eﬃcient stock will be in the best position to attract tenants, as well as reduce potential voids, and importantly, they will be prepared for future legislative change. Accordingly, we expect to see the continued trend in 2024 of landlords purchasing more new-build housing stock, or stock where they utilise short-term finance to make immediate improvements, futureproofing their property business for the expected legislation ahead, and attracting greater yields and return on investment (ROI) on their investments long-term.

Leading lenders Lenders will continue to be innovative in 2024, and the leading specialist lenders will continue to work collaboratively with key partners, oﬀering lending solutions that provide landlords with options – an eﬀective life jacket to the PRS, in the face of inequitable Governmental obstacles facing the modern landlord. As a specialist brokerage, our business is essentially built on supporting landlords, but we have a significant vested interest, and a relentless, ethically driven desire to ensure that we have a fit for purpose PRS, enabling wealth distribution, and equal opportunity through generations, regardless of class or privilege. My well-documented belief is that landlords are the unsung heroes of the housing sector, acting as an ethical indemnity to the Government’s

MATTHEW ROWNE is director at The Buy to Let Broker

woeful lack of social housing, providing shelter and housing to society's most vulnerable.

Wishful thinking Rather than make a conjectured hypothesis for the year ahead, I will make three – optimistic – wishes for 2024:

hichever political party is triumphant in next year’s General Election, we see a collaborative strategic approach between the Prime Minister, the Housing Minister, and the Chancellor, where dialogue and feedback from local councils and large banks help influence and shape policy within the housing sector – avoiding some of the ill thought-out, ethically blunt, short-termist policies that continue to blight the PRS.

he lazy media narrative, and the general bias of the layman in respect of landlords, finally dissipates. As a result, I hope that the modern landlord’s contribution towards the wider economy, and the preservation of the social housing status quo, is properly recognised.

pecialist brokerages and lenders remain dynamic and agile, and work collaboratively with lenders and peers alike. Understanding their role in educating the modern landlord to the ever shifting economic and regulatory vista, staying relevant to their clients, and oﬀering support to the muchbuﬀeted PRS has never been more critical. ● January 2024 | The Intermediary

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The evolving landscape of expat mortgages

n the ever-evolving landscape of the mortgage industry, the importance of catering for the unique needs of expatriates has become paramount. For many individuals who live and work abroad, maintaining ties to the UK property market is not just a strategic financial move, it's also a way to secure a foundation for a potential return or eventual retirement. This is where expat mortgages play a valuable role, serving as a critical link between overseas opportunities and the enduring appeal of owning property in the UK. This approach to financial planning aligns perfectly with the dynamic lifestyles of expats. The flexibility and strategic foresight it oﬀers make it an attractive option for those navigating the complexities of living abroad while investing in the UK property market. One of the significant advantages of expat buy-to-let (BTL) mortgages is the opportunity they provide for investment in the UK's robust property market. However, these mortgages come with their own set of unique challenges for applicants, brokers, and lenders.

Addressing challenges One such challenge is gathering the necessary documentation for a successful credit assessment. Diverging from traditional methods, we have tailored our approach to suit the diverse financial backgrounds of expats. Unlike many lenders, we do not require applicants to have three active credit lines in the UK. This flexibility in our credit assessment criteria simplifies the application process, making property investment more accessible to those seeking to do so from afar.

The Intermediary | January 2024

We do, however, require the applicant to hold a UK bank account to receive the rental income and make the contractual monthly mortgage repayments. We encourage brokers to secure UK bank statements early in the process. This step, often overlooked, is crucial for eﬃcient and swift processing of mortgage applications. I believe it's a common practice across most lenders, and informing applicants early on can streamline the application process significantly. Another challenge is the proof of address, especially when expatriates use PO box addresses, which is common in many overseas situations. At Buckinghamshire Building Society, we adopt a flexible approach by accepting a simple letter from an employer to verify the actual residential address. This method fosters a collaborative and less cumbersome application process.

Fresh investment Beyond these challenges lie unique opportunities for expatriates in the buy-to-let mortgage market. For example, we actively support expat holiday let mortgages, opening new investment avenues for potential overseas buyers interested in properties along the British coastline. Moreover, we welcome applications for consumer buy-to-let mortgages from expatriates who have previously resided in the property. This nuanced oﬀering broadens the investment possibilities for those exploring opportunities from abroad, allowing them to leverage their previous residences as investment properties.

Common misconceptions When discussing the ins and outs of expat buy-to-let mortgages, it's crucial

CLAIRE ASKHAM is head of mortgage sales at Buckinghamshire Building Society

to address common misconceptions. A regular misunderstanding we encounter in our interactions with brokers, both over the phone and at face-to-face events, is the assumption that all lenders have identical criteria for expat mortgages. This assumption is far from reality. Lenders’ criteria varies significantly, considering factors such as the length of time an applicant has lived outside the UK, their current country of residence, and many other aspects. Therefore, it's important for brokers to familiarise themselves with each lender's specific criteria and build strong relationships with their local business development managers (BDMs). These relationships are key to preventing delays and ensuring applications align with the lender's policies, ultimately smoothing the customer journey. In conclusion, the expat mortgage market presents a landscape filled with unique opportunities, but also numerous challenges. Understanding these intricacies and adapting to the diverse needs of expatriates are crucial for both lenders and brokers. By oﬀering tailored solutions, flexibility in criteria, and a deep understanding of the expat lifestyle, the mortgage industry can eﬀectively bridge the gap for those seeking to maintain a foothold in the UK property market from abroad. This approach not only benefits the applicants, but also enriches the mortgage industry by embracing the diversity and dynamics of global living. ●

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The year of the product transfer

f 2022 was the year of remortgages, then 2023 has been the year of product transfers, despite the early expectation that it would be another busy year for remortgages. At that point, we were still relatively early on in the Bank of England’s run of successive rate hikes, but in the space of just a few months, the picture changed quite dramatically. The average 2-year buy-to-let (BTL) fixed rate mortgage went from 2.9% at the start of December 2022 to 5.95% by the following February, according to UK Finance.

Rising rates Rising interest rates were becoming an ever-growing problem for landlords, who were already grappling with the eﬀects of increased taxation and tightening regulation. The cause, as is well documented, was swap rate volatility and rising inflation. Although both started to settle down in the Spring, it didn’t stop the Bank of England from hiking the base rate even higher. What we eventually saw was a record-breaking run of 14 successive hikes, reaching 5.25% at the Monetary Policy Committee (MPC) meeting on 3rd August. This caused a major problem for landlords, particularly those with lower levels of equity, as higher interest rates made it harder to generate the leverage they required. Increased stress-testing was not only making purchases harder, but also impacting remortgages.

Tailored products This is where specialist lenders, such as Keystone, were able to step in, with products tailored to landlords’ changing needs. Higher completion fee products were the solution for many. They enabled landlords who were

DAVID WHITTAKER is CEO of Keystone Property Finance

The general mood in the buy-to-let market has improved

struggling to pass the interest coverage ratio (ICR) requirements to access the loans they needed. Crucially, however, what we also saw was more specialist lenders adapting product transfers as they responded to the changing needs of the market. Landlords coming to the end of fixed rate deals, of which there were many this year, were finding that a product transfer was their best – if not only – option. Earlier on in 2023, the availability of product transfers was not widespread, but this changed as the year progressed, giving landlords far more choice and flexibility. This change in approach by lenders is evidence of a well-functioning market. The only downside in the shift away from remortgages to product transfers is that there is greater pressure on lenders to make the numbers work.

What to expect What we are therefore likely to see now is further innovation by lenders as they look to adapt to change. We have already seen signs of this happening, with one lender introducing further advances alongside its product transfer oﬀering. This is where the broker’s guiding

hand is imperative, to ensure that borrowers acknowledge the changes in the market and the options available to them. Looking ahead to 2024, there is still plenty of speculation over rates, and the timing of any potential rate cuts by the Bank of England. In the past fortnight, I have seen emphatic predictions of the first reduction by two large institutions in February, the only problem was that one was in 2024 and the other in 2025! Given the preponderance of most landlord borrowing being on fixed rates, and swap rates reducing, there should be further rate reductions as we head into early 2024. The extent to which these will push further down in the spring will be governed by the outlook on inflation, and whether it gets stuck in the 3% to 4% range longer-term.

Moods improving Despite facing these challenges, the general mood in the buy-to-let market has improved from 12 months ago. Lenders can start to ‘retire’ products with high fees and low rates as they are no longer needed, nor is there market appetite for them; after this, perhaps we should see things begin to settle down into a ‘new normal’. That is likely to mean a more nuanced approach to product transfers next year, and a greater focus on remortgaging once again. If I’m sat here in another 12 months penning a follow-up piece, it would be nice to be able to write that while still successful, product transfers have returned to being a smaller share of the market. ● January 2024 | The Intermediary

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2024: Year of the BTL

e are beginning to see positive indicators for 2024. In early January, we have already seen several buy-to-let (BTL) lenders drop their rates. There are real opportunities for ambitious landlords to realise the potential of property investment and support overwhelming demand in the rental market. Lenders stand ready to lend and brokers are there to support them. Could this be the year to invest in – and even expand – buy-to-let portfolios? Despite some welldocumented challenges, there are several reasons why the sector is looking rosier this year.

Demand remains high High demand for rental properties remains one of the biggest opportunities. Recent research by the National Residential Landlords Association (NRLA) found that 71% of landlords reported increased tenant demand in Q3 2023 – a record high. Not only was this an increase of 6% compared with the previous year, but it was three-times higher than before the pandemic. Given the diﬃculties of the past 12 to 18 months, which pushed some landlords to dispose of rental properties, the ratio of tenants to available properties has increased. This has resulted in significant opportunities to not only enter the market, but for existing landlords to expand their portfolios to help meet this demand.

Purchases struggle The challenges of the past year or so continue to have a profound impact on the purchasing power of residential buyers. Diﬃculties saving for a deposit, higher interest rates, and tougher aﬀordability all make it harder for first-time

The Intermediary | January 2024

buyers in particular to get onto the property ladder. Nevertheless, the ongoing housing shortage means that property prices remain resilient. Not all parts of the country have fared so well, with some areas seeing a steeper correction. In these areas, sellers are seeing properties listed for longer, with asking prices reduced. As a result, many investors are taking the opportunity to purchase at a more competitive price, which only improves the potential yield. As residential mortgage rates continue to fall, there’s every chance buying power could improve further into the year – especially if there’s any change in Bank of England policy. This presents a window of opportunity for savvy investors to negotiate hard to secure new properties ahead of a potential return of residential buyers.

Rates continue to improve Alongside residential mortgages, BTL mortgages continue to see improvements too, a clear positive for landlords. All eyes are on the Bank of England as it balances its cautious ‘Table Mountain’ philosophy of rates being higher for longer against improving inflation and a weaker economy. There’s growing consensus

among economists that rates could fall this year, which will help to improve mortgage rates and borrowing conditions overall. Landbay, along with other BTL lenders, has made several significant reductions across its product range. A key driver for this trend has been the stabilisation of swap rates as inflation has continued to ease and exceed expectations. We use our own technology and broker portal to make reductions and introduce new products swiftly in response to changing economic conditions and a fast-moving market. This not only applies to our fixedrate and variable products, but also to our houses in multiple occupation (HMO) and multi-unit freehold blocks (MUFB) range, as well as our remortgage options.

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property investor? In a last ditch attempt to attract voters, the Conservatives are likely to use the upcoming Spring Budget to unveil some pre-election giveaways. Support for buyers and the housing market has already been trailed, but could we also see a much-needed lifeline for landlords?”

Lenders such as Landbay continue to innovate. This is not just in terms of rates and criteria, but through the likes of a variable fee structure. Even as conditions improve this year, there’s no question that this will remain a popular mechanism for landlords to maximise their borrowing potential and achieve a competitive rate.

Pre-election giveaways For landlords, the biggest cause of uncertainty this year will be the upcoming General Election. If Shadow Cabinet Minister Emily Thornberry is to be believed, a May 2024 election is the “worst kept secret in Westminster.” Others believe, however, that Rishi Sunak will delay any election until the eleventh hour and the end of the year, but much depends on the Government’s approval ratings. The most likely outcome is a Labour victory. This may concern some, given the party’s stance towards landlords and its proposed rental reforms. In a last ditch attempt to attract voters, the Conservatives are likely to use the upcoming Spring Budget to unveil some pre-election giveaways.

Support for buyers and the housing market has already been trailed, but could we also see a much-needed lifeline for landlords? Alongside higher operating costs, changes to mortgage interest relief, Stamp Duty and Capital Gains Tax have made conditions much harder for landlords and disincentivised many to expand. Labour has previously said all tax reliefs are under review ahead of the next election. Relieving the pressure felt by landlords would certainly be a vote winner for either Conservatives or Labour. Despite some uncertainty, there are many positive indicators for the year ahead. Buy-to-let is a resilient sector that has survived countless crises, doubters and changes in Government. There are lenders and brokers ready to support landlords of all sizes, valuable investment opportunities, and tenants needing to rent. I fully expect buy-to-let to continue to thrive. ●

ROB STANTON is sales and distribution director at Landbay

January 2024 | The Intermediary

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Maturities – key feature of an improved market

t this time of year, we often look forward and anticipate what the next 12 months is likely to bring. If it’s like the last, 2024 will be anything but boring, and while the unusually dynamic market we’ve experienced over the past couple of years makes it diﬃcult to make predictions with any real certainty, some standout features look set to have a telling influence on the market. Data suggests that maturities will again be a key source of business throughout the year, but returning economic stability will help to bring a broader mix of opportunities for intermediaries.

Reaching maturity Maturities are one of the most prominent of these – a characteristic we’ve seen in the market during the past couple of years, after regulatory revisions made in 2017 increased the proportions of landlords opting for 5-year fixes. Industry data reveals that 2,973 5-year fixed-rate buy-to-let (BTL) mortgages were written in December 2016. After the Prudential Regulation Authority’s (PRA) new underwriting standards were introduced to coincide with the start of the new year, January 2017 saw 4,086 5-year fixes written. This number swelled in the months that followed, reaching 10,902 by January 2018, and rarely dropping much below since, with relative economic stability providing the conditions for landlords to benefit from low and stable rates. This means that we expected a steady stream of business from borrowers with 5-year fixes reaching maturity from 2022. In anticipation, we changed our credit policy to enable

The Intermediary | January 2024

landlords to switch to a new Paragon product six months ahead of mortgage maturity, and increased the proc fee we pay brokers. Data released by CACI at the end of last year confirms that maturities will again be a key source of business over the next 12 months, with 261,000 fixed-rate buy-to-let mortgages set to mature between December 2023 and December 2024.

Product transfers are not subject to stress testing, so offer a way to... avoid borrowers having to revert on to standard variable rates (SVRs)" The research also reveals that the average rate of these maturities sits somewhere between 2% and 3%. This is important, because despite swap rates coming down over the past month or so, landlords financing properties are almost certainly going to have to opt for a product with a higher rate than their current mortgage. As part of its underwriting reforms, the PRA also introduced stress testing, something that becomes an increasingly important consideration on product choice as rates rise. Higher interest rates mean higher interest coverage ratio (ICR) calculation rates, and in some circumstances landlords have struggled to adjust their portfolios to meet these. Product transfers are not subject to stress testing, so oﬀer a way to

LOUISA SEDGWICK is commercial director for mortgages at Paragon Bank

mitigate this and avoid borrowers having to revert on to standard variable rates (SVRs). With UK Finance figures revealing that product transfers increased by 11% throughout 2023, we can see that it can be wise for brokers to consider a lender’s product transfer proposition when sourcing mortgages, especially because not all lenders offer them. That said, what I really want to see is a market where lenders are competing against each other to offer landlords more choice, enabling them to select the finance that best supports their investment strategies instead of something dictated by affordability constraints. Such scenarios leave less risk of customer apathy, helping to avoid stagnation and creating a healthy market where innovation and good service is rewarded.

Easing pressure With inflation heading towards the Bank of England’s 2% target, this is something that will seem increasingly likely as we go through 2024 and into 2025. Swap rates fell rapidly towards the end of 2023, as economic indicators pointed to an earlier base rate cut than anticipated. This has helped lenders oﬀer lower rates, easing the pressure on landlords looking to purchase or remortgage a property. While the events of the past few years show us that we can’t become complacent, the new year does feel like it’s oﬀering something of a new and improved outlook for the market, and I look forward to seeing what it brings. ●

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Buy-to-let tech: Opportunities for advisers in 2024

MARC RANDALL is CEO of Property Circle

lthough there remains uncertainty in the economic outlook, the similarities between today and the beginning of 2023 are diverging. Interest rates are looking a lot more rosy, with lenders currently bending over themselves to cut rates in a complete reversal of the upward trend at the beginning of last year. In the buy-to-let (BTL) market, there has been a lot of talk about private BTL landlords pulling out of the market, and a general feeling of negativity in the sector after changes to tax relief in 2016 and the requirements under Energy Performance Certificate (EPC) rules to spend money to bring properties up to a higher energy specification. What has also been noticeable is the negative reporting around the role of private landlords in the mainstream media and the subsequent demonisation of private landlords generally. So, what can advisers do to help private landlords in 2024? Proactivity will be very important on the part of advisers and those who manage property portfolios on behalf of landlords. Landlords need to feel the love, and that there is someone really looking out for their best interests during a diﬃcult time. In pursuit of this goal, the primary function of today’s landlord adviser will be, more than ever, to accurately monitor their property portfolios. In 2024, keeping track of each property and creating a baseline of the level of profitability that is constantly updated is going to be the best way to ensure that all portfolios are properly managed, and that all possibilities for positive change are brought to the attention of landlords.

Portfolios are managed more efficiently when the right technology is used

For example, it is every adviser’s responsibility to ensure clients always have the most appropriate mortgage deal for their needs.

Key components In today’s volatile market, managing larger portfolios on a manual spreadsheet is no longer practical. Keeping track of even basic things such as the ability to track client mortgages accurately against the market on a daily basis is just not practical any more. Not only interest rates, but property and rental valuations, all require technology that can keep track of every single mortgage. Technology will become even more of a key component in the management of client banks, and will be of particular assistance in the managing of landlord BTL portfolios. The key element is to be able to track landlord clients’ mortgages immediately against the market, as well as looking at current trends in value. This will help with stress testing properties in a portfolio accurately on a 24/7 basis, to ensure

that they are meeting profit targets, making it easier to identify properties that need to be moved on more eﬃciently. On the other side of the equation, over the past 10 years, the price of the average property has increased from £167,000 to £290,000, so the value of portfolios will have risen considerably, allowing the potential to remortgage and use the built-up equity to help finance new purchases. Having an accurate means of keeping up with changes means that portfolios are managed more eﬃciently when the right technology is used, rather than via the old manual method. The kind of technology we are talking about needs to be user-friendly and, with one eye on Consumer Duty compliance, help to enhance the service provided to clients in the long-term. This technology exists today and could revolutionise the services brokers and advisers provide to their landlord clients, by making sure that data on properties and their associated mortgages are always up to date. ● January 2024 | The Intermediary

S TAT E O F T H E NAT I O N Feature

STATE OF THE NATION JUST MORTGAGES GATHERS THE EXPERT VIEW FROM ADVISERS AS WE MOVE INTO 2024 Introduction by John Phillips, CEO of Just Mortgages

2023 was a year that can best

be described as challenging, perhaps closely followed by tumultuous. In my 35 years in the mortgage industry, this is the fifth downturn I’ve seen, and most follow the same pattern. When rates started to rise, you could predict what was going to happen, and unfortunately, the effects of the downturn are exacerbated by reporting in the mainstream media. To manage this, we stepped in to explain to our brokers how the year was likely to pan out and the challenges they might face, so that they could in turn share that with their clients to manage their expectations. We also helped guide the steps each person could

The Intermediary | January 2024

put in place to ensure they still did as well as they could do. Actually, every downturn often leads to more positive behaviours in brokers. When the housing market is booming, it becomes too easy to just take the mortgage business coming in. During a downturn, it is necessary to change these behaviours, reaching out to existing clients more frequently. Even though we constantly talk about the importance of protection for every client, for example, it is interesting that protection sales always increase at the point that mortgage business is scarcer. We have done a lot of work to make sure all brokers do

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the right thing in contacting the customer and embracing Consumer Duty. The team at Just Mortgages has been amazing, and everyone has stepped up. There has been a lot of customer follow-up, and even the really good processes have been improved. The challenge will be to get people to keep these good habits, even when the mortgage market picks up again. On the positive side, even though interest rates rose, the availability of houses remained high. House prices have not dropped, and I don’t believe they are going to. I believe 2024 is going to be a better year than predicted. I expect the market to stabilise, and even this will feel good compared to 2023. I expect the Bank of England to start cutting the base rate in Q2 and Q3, and expect it to drop to 3.5%. I believe that inflation will also come down to about 2.5%, but no lower, as there are too many factors – such as the price of oil – that are beyond the control of the UK Government and the Bank of England. What we do not want are rates to be cut too much or too quickly, as this just leads to a cycle

of boom and bust. Instead, it is better to stabilise things. We need the current changes to be given time to work their way through the system. That said, within the mortgage market lenders need to lend, so rates will remain competitive, which can only be a good thing for borrowers. What I would like to see now is the Government doing something on Help to Buy, or something similar. While Shared Ownership is popular, this is not necessarily the right way to go for all clients. We also need the Government to do something to help the buy-to-let (BTL) sector. Landlords with three or four properties are selling up, because taxes are just too high. While this may not be a vote-winner, if the current tax regime stays in place rents are going to keep going up, which is not good for anyone. Thinking of vote-winners, we are likely to see more measures implemented in the upcoming Budget to appeal to voters, but my bet would be that the General Election will not be held until January 2025. 2023 was a real rollercoaster, so for 2024, stability would actually be a positive for all of us.

January 2024 | The Intermediary

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Aneal Chohan

Area director Division: Self-employed Location: West Midlands

owards the end of last year, things had started to pick up, with the percentage of house purchases higher than at any other time in 2023. Confidence was returning as mortgage rates came down, and borrowers could see the long-term benefits of taking up new fixed rate deals. We are seeing a more positive market, but unfortunately, the mainstream press tends to focus on the negatives. The good news for brokers is that the public is becoming more aware of Consumer Duty and what that means for them. This is giving a real boost to the number of people seeking advice, as they understand that our job is to help them get the best results and make the best decisions. As a result, people are looking for face-toface meetings again. This gives our advisers the opportunity to impress on clients how important protection is, especially when the cost of living is increasing. This year, we are introducing new initiatives to support advisers, both personally and for their businesses, and I believe this will give them more tools to deal with, whatever the market throws at them next. I am very positive about 2024, as much as you can be – you can’t control what you can’t control, after all.

Antony Flynn

Mortgage and protection adviser Division: Self-employed Location: Lancashire

e predominantly deal with first-time buyers (FTBs), and the biggest change we’re seeing is that, where before clients were often closer to their goals than they thought, now they’re actually further away. Not only are deposits smaller, but the maximum loan available has reduced as interest rates reach a new normal. Nonetheless, we continue to make the most of

The Intermediary | January 2024

the available chances, and continue to put a lot of work into our estate agency partnerships, social media and lead sources, which is paying dividends, particularly in new purchase enquiries. Overall, I’m optimistic about 2024 and expect to see an influx of home movers, especially those that held off due to higher rates. Any correction or slight drop in house prices will encourage activity, helping to take the bite out of higher rates. While lenders are trying, it will be great to see more innovation around both products and criteria, particularly for first-time buyers. As a business, we continue to broaden our horizons with new locations and new advisers, bringing specialism in areas such as equity release and commercial advice. There’s no question that brokers will remain important – yet there are those borrowers scared or daunted by advice. In reality, many offer advice for free and in the worst case scenario when the client is not quite there yet, at least they’ll leave with a plan ahead.

Atthar Kazmi

Mortgage and protection adviser Division: Self-employed Location: East London

e’re seeing more remortgage and product transfer business, especially in BTL where purchases have dropped off. Many are at the mercy of lenders, deciding whether to sell or carry on in a higher rate environment. For those sticking it out, product transfers will continue throughout 2024. While clients can go to lenders direct, it’s up to advisers to still offer value and determine whether it’s the best option. It’s important that we look at the bigger picture and any restructuring to make it fit for future plans. My expectation is that swap rates will continue to drop, making fixed rate products cheaper. I also expect the Bank of England to cut the base rate at some stage, which will help. It should mean we see cheaper products in the middle of the year, giving buyers confidence to return. Compare this with rising rents, and it may become more feasible to buy. We may also see more purchase activity among landlords through limited companies, although

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Chris Leach

Senior mortgage and protection adviser Division: Mortgages Location: Pontypridd, South Wales

he Rhondda Valley area is very popular with first-time buyers. Last year saw this market go from strength to strength. We are experiencing an influx of first-time buyers moving here, not only from Cardiff but from Bristol and as far as South East England. As prices are low, it’s easy to get on the property ladder. Working from home and hybrid working frees people to move here, which also helps this market. As the BTL market has pushed up rents,

there will be those still looking to dispose of properties – particularly amateur landlords feeling the most pain. As a business, we’re gearing up for residential occupier business, working with local estate agents to expand beyond just the investment market. Above all, our focus is continuing to offer good advice, making contact early, supporting our back book and being available for clients.

Helen Whitehead Division sales director Division: Employed Location: South

orking with our newbuild advisers, Shared Ownership is currently 70% of our business. Given the current climate and the difficulties facing first-time buyers, we fully expect that to continue throughout 2024. Not only is the number of properties increasing across new-build and resale, but recent news of Vistry shifting its entire stock to affordable housing is very positive. Unless the Government introduces something similar to Help to Buy, I can only see Shared Ownership continuing to grow. Alongside this, developers are continuing to innovate and introduce incentives, and even their own equity loan schemes. Whether this will expand will very much depend on the appetite of developers to

buying here is cheaper than renting. Rent for a two-bed terrace house costs between £800 to £900 a month, compared with the average monthly mortgage payment, which is £600, even with a 5% deposit. This means that many people are buying these properties as starter homes. When they have families, they are then moving on to semi-detached, larger homes but still in the area. This year, prospects look strong for this market. While there has been concern about interest rates over the past year, conditions can only improve. Hopefully, this will encourage more people to move into their own homes. We need to get the message out there to those in rental properties that it’s easier than they think to get a mortgage and own your own home.

gain a credit licence and to administer such a scheme. There’s definitely still work to be done on educating clients that the low interest rates previously seen were the exception, especially as more people come off these favourable rates this year. While the stigma around Shared Ownership has improved massively, improving awareness and education is key here, too. A priority for my team is approaching clients and discussing staircasing opportunities. Sometimes, clients will buy and then not take those further steps to greater ownership, so being available to have those conversations is top of our list.

Iain McKechnie

Mortgage and protection adviser Division: Self-employed Location: Wales

quity release remains a big area for my business – through my own clients and referrals from other Just Mortgages brokers. That’s likely to continue this year as the need for parents or grandparents to help out with deposits only grows. Later life is very busy in general, and like other areas of the market, has seen activity increase as rates improve. As part of my plans for the year ahead, I’ve been focused on complex buy-to-let and gaining my

January 2024 | The Intermediary

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commercial advice licence. My primary reason is that I foresee a scenario where higher rates call for greater demand for the likes of bridging and short-term finance. Whether that comes to fruition or not, commercial advice has always been intriguing to me, and presents another opportunity where I can say yes. Looking ahead, I don’t expect to see an early drop to the base rate – if anything, this will most likely come later in the year. Inflation is on the way down, but there’s the General Election and signs of pressure on economy, which will worry the Bank of England. Even as rates improve, payment shocks will continue to be commonplace – a phrase which until recently hadn’t been used for years. Still, I expect business levels to be higher than 2023, with improved rates between 3.75% and 4.75% by the end of the year.

Jon Leyshon

Mortgage and protection adviser Division: Employed Location: Cardiff

y main focus is first-time buyers and buy-to-let, which are both feeling real pressure. For landlords, we’re seeing lender valuers being very reactive and generating rental figures much lower than landlords are already achieving. It’s then much harder to

Jon-Luigi Maio

New-build mortgage and protection adviser Division: Employed Location: Milton Keynes

ow buyer confidence is certainly having an impact, although lower rates are starting to encourage enquiries from people wondering whether the timing is now right. There is a bit more confidence shining through, which I’m hoping will be a trend as we carry on through 2024. Like many, I’m hoping for stability to help people get off the fence and dip their toe back into buying. With house prices not matching income, Shared Ownership continues to provide a valuable route to homeownership. In particular, it’s the flexibility the scheme

The Intermediary | January 2024

meet interest coverage ratio (ICR) and stress test requirements, which pushes some to dispose of properties. With the recent changes to legislation and stress testing being significantly higher than in the past, it’s hard to see a light at the end of the tunnel. As a result, I expect an increase in product transfers this year. Rates falling is clearly good news and hopefully this continues. However, we’re still likely to see withdrawals from the ‘Bank of Family’, especially as high rents make it difficult to save. I’d fully expect to see terms continue to increase to improve affordability. In buy-to-let, we’re likely to see more landlords opt for 5-year fixes to stress at a lower rate and maximise both yield and affordability. I’m incredibly optimistic about the year ahead. I’m in a busy estate agency in Cardiff and we’re seeing properties sell near, at or above asking price, often with multiple offers. Some areas may find it tougher than others, but in the main, we should expect a slight correction, rather than a crash. Even so, prices will still remain much higher than they were pre-pandemic. provides which is what buyers need now. While both demand and availability nationwide is really good, my hope moving forward is that more lenders join the party to enable us to offer more to clients. In a similar vein, the upcoming General Election could provide some insight as to whether we may see any future help or stimulation for the market. Greater awareness is definitely needed about what’s actually going on, with news headlines often sensationalised. Education is massive focus for me, giving clients all the information to make an informed decision. On Shared Ownership, we’re expecting to have more conversations around staircasing, all while continuing our momentum with protection and general insurance. Health and meeting costs are key priorities for clients, encouraging more to explore income protection in particular.

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Kirsty Dudek

Mortgage and protection adviser Division: Self-employed Location: Gloucester

hile we’ve always been strong in newbuild, we have seen a massive shift in the market to more home movers, first-time buyers and the second-time market. Interest rates and affordability have a big role to play, with the price difference between new-build and a second-time home only growing in the current climate. Ultimately, when people are comparing costs, it’s less about what you want and more about what you need. Without bigger discounts or more incentives, this is likely to continue throughout 2024. Shared Ownership remains popular, especially for individuals getting on the ladder. But while there is good availability, the higher rents of new-build creates more competition for resale properties. It would be good to see the likes of Deposit Unlock expand, as for now it only includes a handful of mortgage lenders – with little take up in our area across new-build sites. More broadly, we’re expecting growth this year as interest rates continue to improve and encourage more buyers to enter the market. We’re also seeing more lenders supporting firsttime buyers with an uplift in affordability, longer terms and better criteria for higher loan-tovalues (LTVs). Our priority is keeping clients in the loop and meeting renewed demand for faceto-face appointments. Hosting local open days will be key to strengthening relationships and increasing both knowledge and understanding.

Laura Tilbury

Executive mortgage and protection adviser Division: Employed Location: Braintree

hile it’s certainly tough, we’ve seen promising signs with lots of movement in the market. Product transfers are more apparent, more than remortgaging or purchases. More people are staying with mortgage companies as lenders get competitive and focus on retaining and looking after

existing clients. In the current climate, there’s been a real shift from focusing on interest rates to monthly payments – what clients can afford as their monthly payment budget. With everything monthly payment-based, the response has been so much better as it’s framed alongside Sky, Netflix or Council Tax. Moving forward, protection and protecting families remains a real priority. Family and personal income protection plans have become more apparent, especially with the losses potentially involved. No one ever talks about this and it’s not on TV adverts, but this is a growing part of our protection reviews. Annual reviews are a real focus this year, creating frequent touchpoints with clients to not only maintain protection policies but make sure they fit their needs and any changes to clients’ circumstances. I expect interest rates to come down – not dramatically, but to reduce. People still need to move and remortgage, so it all comes down to maintaining a five-star service and giving clients reasons to refer and increase opportunities.

Lee Whatman

Senior training manager Division: L&D Location: South

onsumer Duty really focused the mind and provided a line in the sand to re-approach the protection conversation. With it likely to be quality over quantity this year, this will only continue as advisers look to maximise opportunities, all while keeping clients at the forefront of every decision. Working across our self-employed division, advisers remain receptive to how they can look after clients and have detailed conversations not driven by cost. The proof has been in the pudding, with average case sizes increasing. We expect our Business Principal training to be a big focus point this year, helping good advisers gain the necessary skills to become good managers. Our three modules focus on key management skills including recruitment, reviews, coaching and observations. In the self-employed world, our advisers are our customers, so we will be looking to offer support and fill any gaps in training or knowledge.

January 2024 | The Intermediary

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Business protection is a good example of a great opportunity which is currently untapped, helping advisers gain the necessary licences to enter and explore new markets. Rather than doom and gloom, and being Eeyore from Winnie the Pooh, my hope is for decent weather and for the home nations to do well at the Euros! Opportunities are out there – it’s all about working together to help clients increase education and their confidence.

Liz Yates

Head of compliance Division: Compliance Location: Colchester

n terms of compliance, Consumer Duty must remain a clear focus, ensuring that all areas of our business and our processes have the customer at heart and deliver good outcomes. The regulator is seeking an enduring shift in attitude and approach, and brokers have a critical role to play in that. To help avoid foreseeable harm, it’s important we continue to treat protection as much as a compliance process as a sales process. We have seen positive steps so far, with case sizes increasing, demonstrating that brokers are having the right conversations and looking after clients in a much deeper way. Going forward, brokers will definitely need to keep clients close and support them in their adjustment to the current market. It’s not just higher rates, but educating clients about how changes in the market can have a significant impact on their application. Holding their hand through this process is more important now than in previous years, and is key to minimising opportunities for complaints and delivering a positive experience. The year ahead looks like a tough one to predict. While changing rates reduce the pressure on clients, it makes brokers much busier – with rates changing regularly, how long before clients settle? We also have the prospect of an election, leaving us and the housing market at the mercy of Government whims.

The Intermediary | January 2024

Luke Senior

Mortgage and protection adviser Division: Self-employed Location: Wakefield

ersonally, 2023 saw strong remortgage and product transfer activity, while purchases were down hugely. Alongside regular referrals, I have a good number of clients to revisit for remortgages, so this will give me a foundation to build on through the year. I’m hopeful that the trend of rate reductions will continue, providing confidence across our whole sector. While I expect the purchase market will gradually improve, I’m not expecting a return to 2020-21 levels of demand. The emphasis will be on brokers to go out there and find the business – so customer service and added value will be key. With the purchase market being subdued, I produced a presentation that I give to employees of local businesses, outlining the service that we offer and the value of connecting with a mortgage adviser. My first visit to a local solicitor generated protection sales and some remortgage appointments for this year, so I believe this is a potential growth area. Looking ahead to 2024, it is likely there will be a change of Government – which could impact the economy and housing policy, too. I’m fairly optimistic for a good year. I have withstood two challenging years with notable peaks and troughs, so hopefully calmer times lie ahead!

Wayne Saker

Area director Division: Self-employed Location: South

owards the end of 2023, we began to see some really clear signals for a positive 2024, whether it’s rate reductions, changes in house prices helping potential purchasers, or a fall in core inflation, which is a key factor in any base rate decision the Bank of England makes. Of course, there’s always cause for concern, especially if

S TAT E O F T H E NAT I O N Feature

Shanaz Parbin

Mortgage and protection adviser Division: Employed Location: Northampton

work predominantly within new-build and Shared Ownership, which is proving buoyant, with lots of enquiries and reservations happening. Such is the demand that we are often seeing lots of applications for each property marketed. This does highlight some of the supply issues we are seeing within Shared Ownership in areas across the country, as the scheme outperforms standard new-build sales in terms of volume. With higher rates and fewer incentives, particularly without Help to Buy, many developers are

another geopolitical crisis derails inflation and sends costs soaring. However, we’re seeing some really positive indicators that make me believe that 2024 has the potential to be the year of the house buyer. Running in parallel, we’ve seen an uptick in the number of advisers looking to go selfemployed. Ambitious advisers are seeing the rate reductions and the same positive indicators, and realising that the move that seemed too risky early last year now seems really attractive. That’s especially clear as their eyes widen as we discuss the opportunities at their fingertips. We fully expect to see more advisers explore equity release, business protection or commercial advice to increase their value to clients and maximise their earning potential. A key priority for us is continuing to grow the division, providing that launchpad for more advisers to control their destiny, write more business and expand their own team, all while accessing expert support and clear training routes.

Marcus Docker

Business principal Division: Self-employed Location: London

n 2023, Providence Global Finance tripled its business head count, streamlined processes, upskilled its team and invested into an operations and marketing team all in

finding it harder to sell plots. For this reason, and given the current climate, I fully expect the Shared Ownership market to continue to grow. I also think that second hand property sales will improve, especially as lenders continue to reduce rates and become more competitive. This will certainly give purchasers much more confidence. Of course, the cost of living is still a big factor moving forward, with lots of potential buyers concerned about increasing outgoings such as utilities and the cost of food. Advisers are well placed to support clients in determining their monthly budget and finding a solution that is right for them. For many clients, they are determining that Shared Ownership is the best way forward to achieve their goals.

preparation for further growth in 2024. 2023 presented itself as arguably one of the most difficult market conditions seen in over a decade, but I’m optimistic that, having grown through turbulent markets, we can have a fantastic 2024. With demand for more specialist and multiservice requirements, a key growth area has been in the international, commercial and specialist lending spaces. Appetite within the high street has diminished, but we’ve utilised our expertise and diverse variety of services to place cases with more bespoke lenders and add further value to our clients. As swaps fall, I’m expecting lending conditions and market sentiment to improve. We must highlight to clients that now is the time to invest or buy. In preparation for more buyers returning to the market, we are ready to support clients negotiating their bargains before house prices rise again and interest rates decrease. We will be focusing on increasing education and brand awareness among our clients, partners and introducers to help them in the current market and minimise their pain – especially as we continue to meet demand for property investment from clients globally. ● January 2024 | The Intermediary

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

Three trends in 2024

he American memoirist and poet Maya Angelou once said: “Each person deserves a day away in which no problems are confronted, no solutions searched for.” A er the chaos and volatility of the past year, I hope my friends and colleagues in the mortgage industry managed to rest and recharge over the festive season. But now that Christmas has come and gone, our a ention naturally turns to the year ahead. In December’s issue of The Intermediary, I explained that I am much more confident going into 2024 than I was going into 2023. Today, I want to discuss three trends that I think will emerge over the coming 12 months. As we found out last year, crystal ball gazing can be a thankless task, given how quickly things can change in the mortgage market. But here it goes anyway.

Interest rates may fall A er two years of increases, it looks as though we have almost certainly reached peak interest rates. Now, finally, talk is switching to when rates will fall. At the time of writing, markets are pricing in four quarter-point cuts this year, starting in the summer. That would take base rate down from 5.25% to 4.25%. Given recent economic data, that seems a li le overoptimistic at present. Inflation is receding rapidly, and while economic growth has been up and down, private sector activity hit a six-month high in December, suggesting we may dodge a recession – for now at least. However, as we know, things can change quickly. If inflation proves to be stubborn or it looks as though the economy is being hobbled by higher rates, the Bank of England

The Intermediary | January 2024

LUCY WATERS is managing director of Aria Finance

Three predictions for 2024

will intervene. I can’t see the Bank of England reducing rates until at least the second half of the year. Even if it does, those rates cuts will be smaller than the increases we witnessed last year. Whether that translates into even lower mortgage rates remains to be seen. The cost of borrowing has already come down a lot over the past few weeks. It’ll be a relief to borrowers that many of the best residential are now well under 5%, which is a world away from where we were even a few months ago. Will we see a sub-3% mortgage this year? I think that’s probably unlikely, although we can’t rule it out, especially if the Bank of England starts signalling that it’s ready to cut rates. Regardless, the mere fact we are talking about interest rate cuts is a positive for borrowers a er two years where they have been rising.

Lending flat at best Trade body UK Finance predicts that gross lending will be 5% lower in 2024 than it was in 2023. My gut tells me that is probably about right, although we may well be pleasantly surprised if the Bank of England intervenes and cuts rates. In terms of volumes, 2023 came as a shock. Lending was down 28%

overall, according to UK Finance. While lending is tipped to edge lower again this year, it’ll feel like a calmer market. Psychologically, it feels as though we are over the worst, even if that isn’t borne out in the data yet. Borrowers are expecting rates to fall, so I expect transaction levels will remain anaemic in the first half of the year as they bide their time. Should that happen, we can expect a flurry of activity in the second half of the year as borrowers rush to snap up cheaper deals.

Specialist lenders busy While I expect 2024 to be calmer, it will still be a challenging market and many borrowers will continue to struggle in a higher rate environment. At the end of 2023 there were 105,000 people in arrears – a 30% year-on-year increase, according to UK Finance. The trade body predicts that figure will rise a further 23% this year. Bluestone Mortgages revealed last month that nearly a fi h (18%) of UK adults had missed a mortgage repayment, utility bill or credit card payment over the previous 12 months. If this trend continues, ever more borrowers will fall foul of high street credit scoring criteria, meaning it will be a busy year for specialist lenders. Thankfully, we have a thriving specialist mortgage market these days. Therefore, I’m confident there are solutions available for most borrowers. Brokers will play an increasingly important role in finding them. ●

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

Big plans for the year ahead

s you may already be aware, the Association of Short Term Lenders (ASTL) is the only trade association that represents the interests of mortgage lenders specifically engaged in bridging, development and commercial finance. Currently, the value of shortterm mortgage loans under the management of our 40-plus lender members exceeds £7.5bn, and even during these recent difficult times, applications and completion levels continue to remain very strong. So, a er a great year, what are our plans for 2024? One of the main objectives of the ASTL in the next 12 months is to support the further growth of our sector, engaging with a wider group of intermediaries and journalists to raise awareness and consideration of bridging as a go-to solution for customers. We are also in dialogue with some networks to identify the barriers they have regarding giving access to bridging finance to their members, and work on solutions to

One of the main objectives of the ASTL in the next 12 months is to support the further growth of our sector, engaging with a wider group of intermediaries and journalists to raise awareness and consideration of bridging”

overcome these. We are investigating ways in which we can do more to bring people together and encourage more younger people into the market. The number of younger people already entering the market is encouraging, helped of course by the launch of the Certified Practitioner in Specialist Property Finance (CPSP), which has been developed to enhance the skill and knowledge for all professionals associated with the short-term mortgage lending sector. With the ultimate objective of benefi ing the end customer, CPSP provides anyone interested in taking the accreditation – younger people included – with the opportunity to learn from experts and discover the potential of specialist property finance.

Nobody wants bridging Property lending is no longer centred solely on the high street. As customer circumstances become more complex, alternative solutions present an opportunity for brokers to take a more creative, and o en more rewarding, approach to delivering advice. It has been said that ‘nobody wants a mortgage, what they want is a home’, and a similar principle is true for bridging finance. Nobody walks into a broker’s office demanding a bridging loan. However, it’s highly likely that brokers will encounter clients who have long-term objectives for which transitional finance is required to help overcome a short-term hurdle. In an uncertain economic environment like the one we have today, those short-term hurdles are ever more prevalent. This is precisely the type of solution that bridging finance can provide. For example, the client may be refurbishing or converting a property, or perhaps they are using the time and money to address the lease extension required on a flat where the

VIC JANNELS is CEO at the ASTL

remaining lease term might otherwise be considered unmortgageable. For home movers, it could simply be the case that they are in a position where they need to complete on the dream home they want to purchase before the funds are released from the sale of their existing property. Protracted conveyancing times are leading to more broken chains, and bridging finance can help save a transaction and secure a home while they remarket their property. One trend that is growing in prominence is buyers using bridging to put themselves in a stronger position when choosing to downsize from their current property. The wave of multiple interest rate rises in recent months have made servicing a mortgage more expensive for everyone taking out a new deal. For those homeowners who may not have considered downsizing previously, remortgaging onto a higher rate – with much higher monthly payments than they are used to – may provide the stimulus to make them think about a move to a smaller property. All of these circumstances are situations where ‘transitional’ shortterm finance can play a key role in helping clients to achieve their objectives, and ultimately result in good customer outcomes as a result. The reasons behind this growth are the versatility and resilience of bridging finance lenders, which can be deployed to fund a transition period for an almost limitless array of circumstances. Our job at the ASTL is to help more brokers and customers to recognise this fact, and to support the ongoing growth of the market in both size and reputation. ● January 2024 | The Intermediary

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

Is there a storm

et me start by declaring that I’m very much a ‘glass half full’ kind of girl. Nevertheless, while I’m always inclined to err on the positive, I do get why some believe that 2024 could be a stormy year for the UK economy and mortgage industry. This is a storm which has been two years in the brewing. 2023 was a tough year. House sales fell. Remortgage applications fell. Seconds applications fell. House prices fell. According to UK Finance, 40% of mortgage holders are finding their mortgage payments to be a financial burden, and 20% are struggling to keep up with them. Mortgage arrears cases could reach nearly 130,000 by the end of the year. Does anyone’s glass need a top-up?

The positives I must give a shoutout to brokers, who worked tirelessly to find their customers the mortgages they needed, while trying to keep up with myriad rate and criteria changes and submi ing and managing applications. Respect. According to research from Pegasus, intermediaries look set to play an even bigger role in the mortgage market. Just under half of consumers surveyed expressed their intent to use a broker when looking for a new mortgage. The research also suggested that more than a million borrowers used a broker to find the best mortgage or remortgage deal in 2023. House prices have not fallen by as much as first feared. Predictions of a 5% drop in 2023 now look to have been overly bleak, with 2% more likely. Many commentators suggest a further 2% to 4% fall in 2024, although GoCompare has bucked the trend and suggested that if mortgage interest rates stay around

The Intermediary | January 2024

current levels, prices could increase by more than 5% this year. Savills expect prices to start going up again in 2025 as affordability pressures decrease. Time will tell who is right, but even the worst case isn’t a catastrophe. There’s more good news from the funding markets, with swap rates starting with a three at the time of writing. Lenders are cu ing rates accordingly to stay competitive, and relaxing lending criteria to a ract more applications, which means cheaper deals for more customers and affordability a li le less daunting. The Mortgage Charter was beefed up to encourage lenders to provide more support to vulnerable and struggling residential customers. Financial Conduct Authority (FCA) definitions significantly expanded the reach, and this should be good for consumer confidence. UK Finance expects gross mortgage lending to reach circa £215bn in 2024, a contraction of 5%. Remortgage and product transfer activity will

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

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

brewing? Intermediaries look set to play an even bigger role in the mortgage market. Just under half of consumers surveyed expressed their intent to use a broker when looking for a new mortgage”

be a big opportunity for brokers and lenders, with the remortgage market continuing to grow, driven by the maturity of 5-year fixed rate deals taken out in 2016 and 2017. According to Kensington, an additional 1.6 million mortgage customers are expected to reach the end of their terms in 2024, and these numbers do not reflect any tracker, variable or buy-to-let (BTL) customers with product deadlines so the opportunity could be greater. Specialist mortgage business will continue to move closer to the mainstream as customers’ profiles become more complex, with various employment structures, incomes, impaired credit, and non-standard property types being some of the factors typically avoided by high street lenders.

Buy-to-let In the le ings market, the lack of supply that we have seen in the past few years is set to continue, with

recent stats from Paradigm Mortgage Services showing there are on average 26 people waiting for every tenancy. Rents for new le ings are expected to keep rising in 2024. Zoopla suggests rental growth of 5% to 6%, with momentum deriving from regional cities, so this may add a raction to the rental market. The predicted wave of landlords exiting the business isn’t happening. We are seeing landlords diversifying and restructuring their portfolios, incorporating houses in multiple occupation (HMOs), multi-unit freehold blocks (MUFBs) and serviced accommodation. Some smaller landlords are even growing their businesses, but we believe most of the activity this year will be driven by larger, established professional landlords.

Second charge There’s huge potential to grow the second charge market. Brokers will need to adapt to the restraints of the broker fee challenges set by the FCA, but in the main we believe there will be a lot of customers who could benefit from a second charge, particularly if they have an a ractive first charge they want to keep and release some equity for debt consolidation or home improvements.

Technology Tech shouldn’t be a four-le er word, but it’s no secret that rekeying is becoming a major headache for brokers. Lenders need to invest in technology to improve efficiency, not just for them, but for brokers and customers too. Overcoming clunky process inefficiencies which create more work for brokers, but not more business, should sit squarely at the top of lenders’ priorities.

A brighter outlook It’s not going to be an easy year, but I think we’ll avoid a storm. Rates are likely to stay high compared with two years ago, and affordability is a key hurdle to overcome, but people still need homes to live in, whether their own or rented. As stability increases and confidence grows, the outlook is ge ing brighter. That gives me confidence that 2024 will bring opportunities for brokers and lenders alike. ● January 2024 | The Intermediary

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

Pivot quickly and embrace change

“P

rogress is impossible without change.” These are the wise words of Walt Disney. Anyone who knows me well, will know my love of all things Disney. But regardless, this quote – and the idea that small changes can have a big impact – has always stuck with me. So, why am I talking about Disney in this context? While 2023 was a challenging year, if you take time to stop and reflect, it also showed that we are a resilient and adaptable sector, with lenders, providers, distributors and advice firms acting to pivot quickly and embrace change. This is already changing the sector for the be er.

Customer outcomes One of the most fundamental changes for our industry was the implementation of Consumer Duty. A focus on customer outcomes meant advisers now need to take a more holistic approach, ensuring they signpost or refer customers to a potential solution. Given the current economic climate, this has never been more important, especially where protection is concerned. With avoiding foreseeable harm as one of the duty’s cross-cu ing rules, arranging a mortgage and not having a conversation around protecting your home and income is no longer tenable. This means there are only two considerations for a mortgage advice business where protection is concerned: advise or refer.

Product transfers UK Finance has announced its predictions for a marginal year-onyear decline in mortgage lending this year, with overall gross lending forecast to be circa £215bn, and with

The Intermediary | January 2024

reductions across home purchase and remortgage lending. The core focus for mortgage advisers continues to be product transfers, but the outlook is starting to change. There is a lower number of customers with product maturities in 2024; 1.3 million customers, with outstanding mortgage balances of approximately £257bn.

With volatility in swap rates having stabilised and rates now declining... continuing turbulent market conditions and consumer confusion is driving more and more people to seek out the benefits of professional advice” While historically the intermediary share of product transfers was approximately 30%, this year we’ve seen that increase to 50% with some lenders. To me, that highlights the changes and improvements advisers have made in their proactive client engagement strategies. Given that across purchase business the intermediary share is circa 90%, it shows that there is still opportunity for further growth.

Seeking out specialists Indeed, with volatility in swap rates having stabilised and rates now declining and resulting in mortgage rate reductions, continuing turbulent market conditions and consumer confusion is driving ever more

STEPHANIE CHARMAN is strategic relationships director at Sesame Bankhall Group

people to seek out the benefits of professional advice. Specialist lending is another area I expect to see significantly increase in 2024. Changing requirements alongside the current economic backdrop will drive the need for consumers to access a wider range of solutions. It could be a change in borrowing profile for a customer who is selfemployed or has adverse credit issues in the background, or interest rate rises affecting the commerciality of buy-to-let (BTL) with landlords. Other scenarios could be increased product transfers creating opportunities for second charge lending, or the cost-ofliving crisis impacting older borrowers looking at equity release as a solution to raise funds. From a lender's perspective we have seen innovation, with new products launched that are focused on these specific target markets, with an increase in educational awareness of the solutions available. Advisers have embraced this, recognising a need to upskill and build a wider knowledge base to ensure they have an awareness of and access to all the potential solutions available. This recognition of the need for further knowledge and education – and demand for it – will only continue into 2024. In summary, 2023 was a year in which the industry embraced change, and 2024 gives the opportunity to make significant progress, even against a continuing uncertain economic landscape. Just remember, like Disney himself said, even the smallest of changes reflect progress and can make a real difference. ●

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

Investors up North look for homes under the hammer

hile overall activity in the property market was down in 2023, this does not tell the whole story. For instance, property auctions saw substantial interest from investors and residential buyers alike, particularly in the North of England. Recent figures from Essential Information Group found that October had seen an 8.7% jump in the number of lots offered, and a 7.8% rise in the number of properties sold. The level of interest is pushing up the amount sold, too, which has risen by 14.2% to £380.8m. There’s a clear trend here, of investors recognising the opportunities that auctions offer in picking up assets which are perhaps in need of a li le love and a ention, but which have the potential to deliver a long-term return on investment.

Auction hotspots It’s worth reflecting on the fact that the properties appearing at auction are not spread evenly across the country. Instead, there are certain hotspots that have emerged – regions where investors have more lots from which to choose, and more opportunities to add to their portfolios. This was highlighted by a study earlier this year from Moverly, which pinpointed the North West and Yorkshire and the Humber as being particular hubs of auction activity, given that these two regions accounted for more properties going under the hammer than anywhere else. There are good reasons why the North is standing out as such a strong option for property auctions, not least the potential to secure stronger yields.

Investors are increasingly turning their a ention northwards precisely because of the yields on offer – the potential to enjoy a more significant return on the money they put in compared with areas in the South, which are held back by the higher initial costs. The ability to secure a property at a heavy discount through an auction – perhaps because it’s a distressed sale and a quick result is needed by the vendor – only further improves the financials on the deal.

Diversification is key Another feature of auction activity in this region is the interest in diversification. It’s not just about investors expanding the geographic reach of their property portfolio, but adding different types of properties into the mix. For example, we have seen a host of investors taking a closer look at mixed use assets. These properties are increasingly present at auction, and offer a useful route for landlords to add an element of the commercial property market to their portfolio. The fact that such properties qualify for our residential auction product means that Tuscan has been able to support greater numbers of auction purchasers, as this sidesteps some of the funding issues that investors have traditionally faced with mixed use assets.

Being prepared Given the appetite for auction purchases, it pays to be prepared. Rather than leaving it until the day itself, and courting the potential stress of auction finance falling through, it’s instead worthwhile ge ing the necessary funding lined up in advance. That way, the client can go

CARL GRAHAM is regional director for the North at Tuscan Capital

to the auction with a pre-approved offer, and clarity over exactly where they stand before the lots even go up for auction. Trust is a crucial element here. All brokers in this industry will have had experiences where lenders have not been able to live up to their word, leaving clients in a difficult spot. This risk is only heightened when we are talking about auction purchases, where there is a hard and fast completion date, a deadline that is always going to be testing for some. Working with lenders that can be relied upon to deliver what they promise and provide the required funds promptly is therefore absolutely crucial.

Need for speed What is clear among investor buyers in the North is the need for lenders who can move quickly. Speed is always a priority for property investors, but this is only heightened when it comes to auction purchases, given the restrictive deadlines in place. Lenders have to respond to that, showing that they have the processes which can ensure funds are delivered swi ly. At Tuscan, for example, we have seen a host of investors make use of our Fast Track Process, which utilises automated valuation models (AVMs) and desktop valuations, since it means they can move swi ly with confidence. If lenders are to service this market, recognising the importance of having a dedicated process for delivering funds quickly is absolutely vital. ● January 2024 | The Intermediary

In Profile. Whitehall Capital

The Intermediary speaks with Anthony Bodenstein, founder and managing director at Whitehall Capital, about thriving in the specialist lending market

hitehall Capital was born 10 years ago, and was one of the first in the UK to set up a fund dedicated solely to bridging in 2017. Despite the proliferation of bridging lenders since, there are still relatively few of these funds. The decision emerged from Anthony Bodenstein’s wide-ranging experience, from law in the US, through to the HSBC trading floor and Swiss banks. After founding wealth management firm Amram Capital 15 years ago, his approach to lending evolved from this existing work, and the understanding of property as a solid asset class. The fund is up 65% over five years, with a return of 10.4%, and with a low level of volatility which has proven vital for investors. In the past couple of years, the firm has also added a couple of funding lines to further strengthen its proposition. At the start of a year with myriad challenges in store, The Intermediary sat down with Bodenstein to look back at how this business model has helped Whitehall through a turbulent market.

Cool in a crisis

One of the unique selling points for the business, and something that has carried it through the market shocks of the past few years, has been its self-funded model. Bodenstein says: “There are very few mid to large lenders which have the capital on their own balance sheets. There are even some lenders that are bigger than us that still depend on funding lines, so when the broker gets a term sheet, it’s not actually approved by the funder, which could pull out at the last minute and doesn’t have that relationship with the broker. For us, any decision is made in this office.” This also allows Whitehall Capital to be pragmatic and flexible, which has come into play during rapid market changes. Indeed, during the onset of Covid-19, Whitehall powered ahead. Bodenstein says: “We really shine when there’s volatility in the market, when there’s a bit of nervousness and it’s harder to get funding.” 56

The Intermediary | January 2024

In 2023, Whitehall Capital continued to prove that its approach was the key to facing down diverse challenges. Bodenstein says: “We all have experience in big banks, and the capital availability of a larger institution, but the service of a more dynamically run operation. “The fact that we control our money has been hugely important over the past couple of years as the UK has gone from one crisis to another. The world hasn’t moved in 20 years like it has in the past three, and having that flexibility and ability to control our own destiny is probably the single most important point for us.” While financial markets and wider macro environments have worsened, and the property market has become riskier in the past few years, Whitehall Capital has been at the centre of a movement that has kept specialist lending steady. In 2023, Bodenstein says the year started with a ‘risk on’ attitude from lenders trying to grow their books and fight for good loans. As the year progressed, there emerged a more ‘risk off’ approach as interest rate increases started to filter through. Rate rises did then seep through into the specialist finance market, but much later. The difficulties have also caused shifts for the specialist and short-term market, which has moved into the mainstream, further than at any other point in Bodenstein’s experience. “It’s a big, substantial market that is no longer on the fringes or the margins,” he says. “It’s also much more professional as a market.” The increased difficulty of access to funding from mainstream banks last year, in particular, has spurred on this movement. “The market continues to grow, and we’ve never been busier than this year,” says Bodenstein. “Quality matters more than it did a year ago. We’ve never had any loss on our books – we have never lost a Pound on a single transaction.” While the core focus is on the bridging side, the firm also caters for development finance. However, Bodenstein explains that the lender’s focus on low volatility and sustainability means it is much more

I N P RO F I L E

selective and tailored in this area, particularly now, adding: “Developers have had to cope with the rise in interest rates, massive material cost inflation, shortages of labour – it’s really been quite difficult to fund their projects, and to deliver on them.” “If you’re not a quality developer or investor with a good track record, it will be difficult to fund your project. However, good projects get funded, and if the security levels are there, it will get funded.”

New avenues

In addition to pushing the profile of specialist and short-term finance more generally, 2023 was a year of new developments for Whitehall Capital. This included one new funding line and a significant increase in funding on another. The firm also entered the Sharia-compliant lending space, once again making it one of only a few firms. “We spent a lot of time setting that up, including implementing a Sharia compliance board advising us on religious law – we have specialist lawyers involved,” Bodenstein explains. “It’s an interesting product, a market that has a lot of potential, and it’s underserved. Brokers who diversify can use this as a hook to attract new business.” Entering this market, he notes, is about encouraging more investors and ensuring there is space for every borrower. In addition, Bodenstein says that where traditional Islamic banks can be slower, there is undeniable demand for Shariacompliant short-term finance. Beyond this, the firm continued to grow its team and enhanced its operational and customer relationship management (CRM) systems. However, Bodenstein says: “[Whitehall is] certainly not a proptech business like some other lenders like to try to be. We like to do some things old-school, like underwriting, looking at the valuation, at the asset, and talking to borrowers. So, there’s very little tech involved in the actual underwriting, though we do have systems to calculate the value of assets as a data point for us to use. “Where tech has a role to play is in how we communicate with brokers, and the ease for them of doing business with us.” While making sure to draw a line in the sand, Whitehall Capital is not stuck in the past. Indeed, the firm is in the ANTHONY BODENSTEIN process of developing

an app for brokers, and has worked to ensure its ‘know your customer’ and anti-money laundering systems are available on one platform and linked with its internal systems.

Sustainable business

Whether it is the considered use of technology, the care taken to work with the right developers, or the entry into high-demand markets such as Islamic finance, one thread runs through Whitehall Capital’s movements: sustainable business. This can also be seen in the efforts made with regards to environmental, social and corporate governance (ESG), for example when deciding which projects to fund. This, Bodenstein says, is also just a matter of common sense: “ESG is very often also an indicator of a good project. We very much like businesses that fit with ESG, particularly when it comes to development funding.” Nevertheless, he notes that it has become something of a buzzword, with some funders interested more in ESG credentials than the actual performance of a loan book, due to increased shareholder pressure. While this upsurge in concern for ESG factors has “put it on the map,” Bodenstein believes that the next stage will be increased scrutiny and regulation, clamping down on things like ‘greenwashing’ and making sure that this is not just performative. Looking ahead, Bodenstein says 2024 will likely be a year of two halves, with H1 typified by nervousness as the geopolitical impact on the financial markets continues, and H2 likely to see a return of more optimism. Either way, times will get harder initially, particularly considering the large number of borrowers – both residential and on the professional investment side – whose rates are due to expire. To this end, he notes: “Brokers really are our customers, they are our clients. We are there to satisfy their needs and make them look good in a tough, competitive market.” Whitehall Capital plans to continue deploying its pragmatic and solution-oriented approach to weather this year’s storms. The firm will continue to focus on serving its niche, as well increasing staff and adding more funding to cement its war chests. Bodenstein concludes: “We simply want to continue doing what we do. We don’t necessarily want to be the biggest at what we do, we want to be the best.” ● | The Intermediary

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

Is a two-tier market for commercial real estate inevitable?

ince 1st April 2023, MEES Regulations have made it unlawful for landlords to continue to let a commercial property that has an Energy Performance Certificate (EPC) rating of Band F or G, unless an exemption applies. For those savvy enough or with sufficient funds to invest, creating office spaces that offer the very best amenities and green credentials could present good potential yields. There is an ever-increasing swathe of businesses seeking to secure desirable premises to achieve greater environmental and social operational standards. They appear willing to pay higher rents for that privilege. But what does this mean for the long-term prospects of less desirable stock? If the rental demand isn’t there, especially in the current economic environment, is it even viable to commit the investment required to upgrade units to meet greener expectations? If not, will this inability to fund the necessary improvements diminish the sale value? Although the office le ings sector continues to provide opportunities for investors, a divide is appearing, and there is a danger we are heading towards a two-tier market, where the more affluent or audacious investors reap the rewards while smaller landlords struggle to compete.

The current market In 2021, the Government introduced dra proposals to enhance the energy performance of properties, aligning with the goal of achieving net zero in the UK by 2050. From 1st April 2027 all non-domestic rented properties would be required to a ain a minimum EPC rating of C; then from 1st April 2030,

The Intermediary | January 2024

B. Earlier deadlines – of 1st April 2025 and 1st April 2028 – were also mentioned for domestic properties. However, on 20th September 2023, Rishi Sunak announced that the 2021 proposals had been discarded, citing concerns about property owners facing high expenses in a short time. While this brought relief to those facing costly improvements, those who had already invested in expensive upgrades have found it frustrating. Institutional landlords will have been preparing for some time for the harsher MEES regime by gradually upgrading their stock across their portfolios. However, despite any misgivings about the change in direction, those who have invested remain at a competitive advantage.

Green premiums The office sector has seen the emergence of a ‘green premium’. Buildings in London with green credentials, for example, cost 26% more than those without, according to a study by MSCI. Conversely, there is now a ‘brown discount’ associated with older, less eco-friendly structures. Owners of such buildings now face lower rental rates or selling prices, and difficulty securing investments. This places landlords and investors in a predicament, as they must choose between lower overheads or lower emissions. Yet there is a willingness among tenants to invest in green working spaces. According to the global JLL Future of Work Survey 2022, 74% of surveyed companies would pay more for green credentials, with 56% planning to do so by 2025. There are numerous benefits associated, including lower energy and operational costs, enhanced social responsibility, and improved recruitment and retention.

KAREN MASON is co-founder of Newmanor Law

Trophy buildings will always be in demand. However, there is a shortage of both these high-end renovated or new-build properties. This creates a Catch-22. Short-term, rent from secondary-grade buildings in need of improvement will be lower, meaning landlords will have less money to spend on upgrades at a time of rising mortgage rates. Some will be able to secure the finances necessary to draw in higher-paying tenants, but others won’t. Their pool of possible tenants will consequently be much smaller. This has led to an increase in vacant space that is simply not moving. A survey in 2023 found that 84% of landlords' occupancy was less than 70%, and 53% said offices were just half full. However, of those with the strongest green credentials, 56% had offices that were over 70% occupied.

The future The demand for well-located and sustainable buildings, fuelled by the rise of hybrid working, exceeded supply in 2023 and is expected to continue in 2024. Of those set for completion in 2024, 37% were already leased off-plan by the end of 2023. This leads to competitive tension and higher rents in the high-end market. Some tenants may invest in remote tech instead of lower-grade premises, meaning the issue of vacant office units remains unresolved. Landlords must assess their position in the market and may need to make some investment just to stay afloat, even if they don’t want to compete in the top tier. ●

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

Necessity is the mother of invention

t was Plato who first coined the incredibly prescient adage: necessity is the mother of invention. Nothing turbocharges the pace of invention like a full-blown crisis, or even more seriously, a war. World War 2 is a case in point. The pace of scientific and technological progress on both sides was simply staggering. Military technological advances saw the first turbojet planes take to the sky, the first long-range ballistic missiles, the introduction of microwave radar and the detonation of the world’s first atomic bombs. These and so many more inventions have shaped the modern world. While wars are perhaps the fastest agents of change, crises – and in our industry, economic crises in particular – have also consistently driven innovation and evolution. Back in 2008, the Credit Crunch was rapidly tightening its grip. The UK specialist lending sector was dominated by a small number of banks, be they high street lenders or American banks, funded largely by the securitisation model. When the US housing bubble burst, those of us working in the industry remember just how quickly funding lines evaporated and the American Banks disappeared back across the Atlantic. A void was le , but into this space – slowly at first but then with building momentum – grew a strong, vibrant specialist lending sector underpinned by unprecedented diversity of funding sources. New lenders quickly proved they could thrive and grow in any macro-economic environment, with many founded in a period of huge economic uncertainty. This new breed of lender played a massive role, backing the inherent dynamism of our property investors and small to medium enterprises (SMEs), and ensuring we bounced back strongly from the worst recession in living memory.

Modern challenges Fast-forward 15 years, and several commentators have suggested that 2023 was the most challenging year for the specialist finance sector since the Credit Crunch. It was certainly turbulent, as we grappled with the lingering impact of the Covid-19 pandemic and war in Europe, but in no sense was last year comparable to the market in 2007-8, when liquidity disappeared almost overnight. That’s not to diminish the impact of rising inflation and interest rates, nor the declines in property prices and living standards, let alone all the turbulence caused by the infamous autumn mini-Budget in 2022. Market conditions have been tough, but an industry that was effectively born out of the 2008-9 recession was always going to be well placed to deal with this latest turbulent period. Thus, many bridging and development lenders have focused on driving efficiency by streamlining their processes, procedures, and documentation. Products have become more targeted, particularly in areas of the market that have seen increased traction in 2023. Refurbishment loans and investment property purchases, particularly for the buy-to-let market, have been in strong demand, and

Market conditions have been tough, but an industry that was effectively born out of the 2008-9 recession was always going to be well placed to deal with this latest turbulent period”

BRIAN WEST is head of sales and marketing at Saxon Trust

consequently the strength and diversity of products catering for these uses has increased significantly. Equally, ground-up development products have been developed with a stronger emphasis on sustainability and eco-friendly practices. Innovation in the face of market turmoil has once again been the order of the day. With inflation returning closer to normal levels, real incomes improving as a result, and mortgage costs falling sharply in recent months, there is a very real hope that we have reached the top of the interest rate cycle. Even Bank of England governor Andrew Bailey has cautiously welcomed the recent fall in the cost of mortgages and signs that the housing market and prices are beginning to stabilise. Markets even seem to have factored in a change of Government, a change which could bring a positive new focus on the development sector, in particular. The signs are positive, but as ever we remain hostages to fortune in respect of macro-economic threats. Energy prices have been falling, but volatility in global energy prices remains a threat, one that’s come into even sharper focus with the actions of Houthi rebels in the Red Sea and the dreadful ongoing conflict in Gaza. It would be a brave man that predicts serene progress in 2024, but the landscape is looking more promising than it was 12 months ago. Whatever happens, however, it seems likely that the specialist finance industry will navigate a path through any challenges with its usual dynamism and agility Change will be embraced, innovative solutions found, and even if the sector is a li le leaner by the year end it, will be fi er. ● January 2024 | The Intermediary

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

The complex world of commercial mortgages

he intermediary market has always played a crucial role in helping open the doors to a range of funding needs for businesses of all shapes, sizes and structures. In such a complex economic climate, this support is even more evident as businesses continue to navigate inflationary pressures, higher interest rates and ongoing uncertainty. As such, it was fascinating to delve into the findings of new research from Thincats to understand the significant differences in how small to medium enterprises (SMEs) source external funding, and their plans for seeking funding over the next 12 months.

The research This revealed that 75% of small businesses had never applied for external debt funding, compared with 38% of mid-sized businesses, which are also three-times as likely (17% versus 5%) to seek external debt in the next 12 months compared with small companies, suggesting a higher degree of resilience and business confidence among mid-sized firms. Mid-sized businesses were also more likely to seek advice about funding options than their smaller counterparts. 56% of SMEs did not seek any advice, whereas among mid-sized businesses 24% spoke to a commercial finance broker, 23% spoke to an accountant, and 17% to a corporate finance or debt adviser. Of those companies that have secured finance most recently, the largest number were looking for working capital (42%), followed by asset backed finance (33%), then growth capital (21%). When comparing the needs between small and mid-sized businesses, there is a

The Intermediary | January 2024

significantly greater take up of growth capital among mid-sized businesses (27% against 13%). High street banks were the most frequently used source of external debt finance, used by 56% of SMEs for their most recent funding, followed by alternative lenders (11%), asset-backed lenders (8%) and challenger banks (6%). 60% of small companies used a traditional high street bank compared with 54% of mid-sized businesses. This data offers some great insights into current funding demands. So let’s now explore how brokers can be er understand the nuances of commercial mortgage lending, uncover hidden commercial mortgage opportunities, and identify the key factors in successfully converting these opportunities.

Commercial nuances Many pointers here are articleworthy in their own right, but the key thing to note is the difference between commercial investment and commercial owner-occupied transactions. Once realised, this will feed into how commercial finance is assessed. Location, business use, property type, any resale factor, turnover, profit and many other factors are important considerations for lenders. Generating a strong overall business picture will then lead to finding what is the best product type for the individual business. Similar to a residential option, these products are generally based on fixed rates and variable rates, and tend to be on an interest-only or capital repayment basis.

Uncovering opportunities As in any area of the advice process, good communication is key. Over

DONNA WELLS is managing director at Envelop

the past few years, we’ve seen huge numbers of people transition from employed to self-employed, and we’ve all seen the stories where people have turned side hustles spawned from the pandemic into their main hustle, and have built some seriously impressive businesses. This means that those all-too-elusive commercial mortgage opportunities could already be hiding in your existing client base. All you have to do is ask the question.

Converting opportunities As always, converting can be the tricky bit, especially for less experienced advisers, as cases can o en be complex in terms of really ge ing to grips with the applicant's requirements, generating a strong understanding of each step in the process, and helping them to deliver their business plan and ambitions over the coming years. Then, there is each lender’s unique approach to policy, criteria and product requirements. Having operated in the commercial lending space for many years, we understand what type of case each lender will and will not accept, what documents they need, and how to best package all this information so that applications are accepted. Not to mention supporting these cases right through to completion. This is where a specialist packaging partner can add real value in any commercial transaction, and that’s why our intermediary partners trust us to deliver their clients' commercial needs, so they can concentrate on their own areas of expertise. ●

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

A note of caution for the new year

ast month, I predicted that technology would be a dominant factor in 2024. Its successful adoption, driven by expectation of increased efficiencies in processing, will be uppermost in the thoughts of lenders as they strive to show a competitive advantage. However, in the rush to innovate lenders must not lose sight of the need to maintain underwriting standards, and must not use technology to cut corners over credit policy. 2024 will be notable for new technology adoption, and that is to be applauded, but it must not be seen as a substitute for intelligent underwriting with a human interface at the centre of the process. There are a number of issues that still face the housing and lending market. Principally, these revolve round property prices and the continuing effect of the cost of living on household budgets. We are nowhere near a point where the economy is yet stable. Inflation will continue to be an issue in 2024, and although the headline rate may come down during the year, we have yet to see any sign of a real-world reduction in the costs of staples like food, and essential services like energy. In an unstable market, property valuations are an issue for lenders, and no ma er how loan-to-values (LTVs) are restricted, there is always a danger in a market that is depressed across the UK that under certain circumstances the current ‘gentle’ downward trend could turn into something altogether more unpalatable. Interest rates are, however, stabilising. As I write, the Bank of England’s Monetary Policy Commi ee (MPC) has le interest rates at 5.25% for the third consecutive month, probably influenced by the headline rate of inflation coming down to 4.6%.

However, uncertainty remains. It was reported that GDP fell by 0.3% in October 2023, while the Government’s inflation target of 2% still looks a long way off.

Inflation will continue to be an issue in 2024, and although the headline rate may come down during the year, we have yet to see any sign of a real-world reduction in the costs of staples like food, and essential services like energy”

RANJIT NARWAL is head of origination at Kuflink

Choose the right partners It is very easy to get hung up on potential bad news, and yes, 2024 will be a challenge, but we all need to look for the positives. Your choice of lending partners is going to be crucial to your success. As a broker, you will inevitably have customers who need to move quickly to secure a deal, so there will always be a need for a facility when the deal absolutely must be done. Here at Kuflink, we can facilitate even the most complex deals quickly and efficiently, where other providers cannot. It’s this speed and efficiency that means growing numbers of clients are ge ing the deal done because of Kuflink Bridging. ●

Here are a couple of case studies which illustrate the need for speed. In both of these cases, the customers were able to secure immediate funding for what they needed in a timeframe that suited their circumstances. Our involvement provided the time needed to find the funds to repay the bridging loan and arrange suitable long-term financing.

Funds in five days

With a customer requiring £230,000 to repay an outstanding debt within a week, speed became the key consideration. Having liaised with the introducer and customer, we were able to look at their property portfolio and were able to secure a loan for the full amount on a first charge basis against eight two-bed flats with a combined value of £405,000. From application to completion, the process took just five days.

Auction purchase of commercial premises

A successful online entrepreneur had paid a deposit on a commercial premises and needed to complete the purchase ahead of the auction deadline. With a purchase price of £400,000, he needed to borrow £268,000 at a loan-to-value (LTV) of 67%. Kuflink took a first charge against the property. By completing the transaction in just 12 days, we were able to beat the auction deadline and help the customer to open his store for business on time.

January 2024 | The Intermediary

Meet The BDM Precise Mortgages and Kent Reliance for Intermediaries

The Intermediary speaks with Pete Coombes, BDM at Precise Mortgages and Kent Reliance for Intermediaries (part of OSB Group) Why did you become a business development manager (BDM)? I was actually working as a broker. Having regular visits from the BDM for Precise Mortgages and speaking with them provided me with invaluable insight into the role and the opportunities available. In February 2019, I took the leap over to becoming a BDM with Precise Mortgages prior to the introduction of the dual-branded

sales team, and I’ve never looked back! This provides me with endless opportunities to learn and develop.

What brought you to OSB Group? As I mentioned above, talking to the Precise Mortgages’ BDM as a broker, they helped me to understand how the company operated. As well as becoming a BDM being my next aim, Precise Mortgages also seemed to be the perfect fit for me as an employer.

I feel the culture at OSB Group is really different to anywhere else I’ve worked previously. As an employer of more than 2,000 people across different locations, there’s such a strong sense of community” 62

The Intermediary | January 2024

What makes OSB Group stand out from the crowd? There are a few main points that I feel really set us apart from others. First, for brokers, having dual branded BDMs really helps assist with our offering to them and their customers. Having both brands as part of our toolkit means we’re likely to be able to offer more options and find the most suitable product to meet their customers’ requirements and circumstances. Second, it’s often said that it’s not a business that makes a workplace but the people working within it, and the people working across all brands and services at OSB Group really do make it a great place to work. I’m part of a volunteer group called ‘One Voice’, which is a community of

MEET THE BDM

people across different departments in the group who come together to be the voice of all employees. During these meetings, representatives have the opportunity to discuss matters that are important to them and their colleagues, ensuring an enhanced level of Board and ExCo awareness. It also provides a forum for us to ensure consistent and meaningful dialogue with employees, and that the views of the workforce are fairly represented and considered when making high-level strategic decisions. Finally, leading on from this, I feel the culture at OSB Group is really different to anywhere else I’ve worked previously. As an employer of more than 2,000 people across different locations, there’s such a strong sense of community and a positive, supportive culture. We all pull together and work as a collective to achieve the best outcome for brokers and their clients, as well as all stakeholders within projects and services.

What are the challenges facing BDMs right now? We’re all only too aware of how uncertain the market has been in recent years, which has meant adaptability has been key for everyone. Most businesses have had to adjust their business models accordingly, and as a BDM that means we’ve had to be more flexible than ever and ensure we’re there for our brokers in whatever way works best for them and their customers. I don’t want to tempt fate at all, but it does feel as if the choppy waters have started to calm, and I think it’s all about working to the new ‘norm’, which will continue as we step into 2024.

What are the opportunities for BDMs? 2023 was a year of a lot of product transfers, with fixed rate periods

coming to an end. Even though this is set to continue into 2024, hopefully as things have started to calm we’ll see new business continue to increase too. With everyone working differently nowadays too, it’s all about getting the right blend of communications with our brokers – everyone is different and has their own preferences, so it’s about getting it right for each of them.

How do you work with brokers to ensure the best outcomes for borrowers? As BDMs, we all have own way of working with our brokers, but I think this is an area where our dualbranded aspect really comes into its own. Working over both Precise Mortgages and Kent Reliance for Intermediaries provides knowledge of both brands’ selling points, and the understanding of what cases sit better with what brand. We’ve bolstered support from our dedicated office-based BDMs too, and I work very closely with Nathan Chand, who was previously an underwriter. Between the two of us, we have vast knowledge and skills of cases and the ability to look at cases with a wider lens. Also, being in a team with Nathan means one of us is always contactable, and as we share the same patch, it means we both know our brokers and cases inside out, so we’re always on hand to answer any questions, managing cases from the offset to completion.

What advice would you give potential borrowers in the current climate? Mortgage brokers are vital to a borrower’s journey. Reach out to a broker who has knowledge and experience in the area of lending you require. They have a vast range of contacts with lenders and can help

We’re all only too aware of how uncertain the market has been in recent years, which has meant adaptability has been key for everyone. Most businesses have had to adjust their business models accordingly, and as a BDM that means we’ve had to be more flexible than ever and ensure we’re there for our brokers” find and arrange the most suitable product to fit your needs. Also, make sure you have all the documents needed for the application up front, as this saves the broker and the lender a lot of time and helps to avoid any potential delays. ●

OSB Group

Established 2015 Precise Mortgages: ◆ Buy-to-let mortgages ◆ Residential mortgages ◆ Bridging finance Kent Reliance For Intermediaries: ◆ Buy-to-let mortgages ◆ Residential mortgages Contact Pete.coombes@osb.co.uk 07827 820470 General enquiries (Precise): 0800 116 4385 General enquiries (KRFI): 01634 835 791

January 2024 | The Intermediary

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

A year of growth for brokers willing to diversify

e recorded two videos in December with various leaders from specialist lenders, mortgage clubs and networks, where we collectively reflected on the challenges faced in 2023, and most importantly, the opportunities that 2024 presents. What came across loud and clear is that the specialist market is perfectly positioned to grow, and those brokers who are not actively involved in it, should be. The drivers behind the experts’ belief that specialist lending will see an upward trajectory are many and varied, ranging from the continued pressures borrowers will face with affordability to the growing numbers that are falling outside the high street lenders’ criteria.

Non-standard criteria Recent research highlighted that 28% of people with non-typical incomes have had a mortgage application rejected. Of these, 46% were on zerohour contracts. These numbers back up a separate report, which revealed that more than half of borrowers have one or more ‘non-standard’ – read specialist – criteria and one in four struggle to get a mortgage. High street lenders don’t, and won’t, serve the gig economy, although many of these borrowers are creditworthy and have earned the opportunity to purchase property just as much as those in permanent employment. In the residential space alone, specialist lending is forecast to rise from £5bn to £16bn by 2030, with an estimated 500,000 borrowers. That’s 4% of a projected £400bn market. Other opportunities include a trend we started to see in Q3 and Q4

The Intermediary | January 2024

220% specialist lending growth by 2030.

500,000

borrowers will need specialist help.

53%

of borrowers have specialist criteria.

73%

of brokers plan to use a distributor.

66%

of brokers plan to diversify.

last year, of professional investors snapping up property as prices continued to fall and they push to diversify, buying semi-commercial and converting commercial property. While the wider buy-to-let market suffered in 2023, many professional landlords thrived due to liquidity, lower loan-to-values (LTVs), and the desire to expand their portfolios with a long-term view. While there was some Christmas cheer in the media with lower than expected headline inflation figures, and some commentators immediately jumped on the ‘this signals a rate drop’ bandwagon, the consensus view is that this year is again going to be tough in the mortgage market. UK Finance released its forecasts just before Christmas, that gross lending will be £215bn this year, and almost static at £216bn in 2025 – the lowest since 2014.

Time to wake up There’s a clear picture developing here. A rapidly growing specialist market within a broader, flat wider

JASON BERRY is group sales director at Crystal Specialist Finance

property market. Brokers who haven’t woken up to this already should be looking to expand their businesses. Crystal’s own Annual Broker Survey, conducted in December, showed again that brokers are indeed looking to do just that. 66% used a distributor like Crystal in 2023 and 73% planned to this year. 66% will continue considering other product areas this year. However, there are still many misunderstandings of the various ways we can help borrowers, from simple criteria to lower than ever fees. We must do more to bang the drum. For their part, brokers should continue their own personal development journey, and certainly consider becoming a Certified Practitioner in Specialist Property Finance (CPSP). This excellent qualification was launched last year by the Association of Short Term Lenders (ASTL) and Financial Intermediary and Broker Association (FIBA). At Crystal, we are passionate about deepening broker understanding and supporting them in finding the right property finance solution or their clients. Time and again, we get feedback from brokers that they thought a deal couldn’t be done – as delighted as we are to help, that just shouldn’t be happening. While we produce a lot of educational content at Crystal – from daily e-marketing to our almost 20,000 broker database, to webinars regularly a ended by more than 100 – we haven’t yet structured that into a programme with a recognised qualification at the end. We will address this in 2024, so watch this space. ●

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

The importance of tech in today’s sales processes

aving access to the absolute best that tech can offer will be beneficial to any mortgage and protection business. In an age where speed of communication is ever more important, working in an industry which reputationally has always been a li le slow has been an eye opener. A successful business has had to adapt to take advantage of what modern technologies can offer. This can then help make sure the business is on the front foot to meet customer expectations, rip out unnecessary administration and become more efficient. This has become even more important as the housing market has so ened over the past 12 to 15 months. So, ensuring your business is geared up and ready for 2024 and beyond is particularly important. Additionally, being prepared to change and adapt is even more important, not simply relying on old practices and old customer habits. Help yourself get ahead of game. Having systems that enable you easy, safe and secure access to client files, documents and data is essential. Being able to keep track of what your clients have, what they want and having access to key dates – such as when existing mortgage products expire, current deal information, and anniversaries – is common sense. Having access to systems that allow you to quickly and proactively access key information at the touch of a bu on, run a report, identify key activities for the business for the day, week or month should be the norm. Staying connected with your hard won over customers is, likewise, a no-brainer. Keeping an existing client should be easy through great

service, regular communication, and professionalism, and is by comparison easier than hunting down new business opportunities. Do your systems allow you access to that level of data, and allow you to easily communicate with clients whether through e-mail, text, notes and record that communication against a client file? Do your systems allow you to record those key dates and run those key reports?

Systems in place At a time of heightened security as scamming, the of data and similar become more high profile, does your system allow your clients to communicate with you securely and send you their important personal documents in a secure and efficient manner? If not, why not? Why create additional workload and increased administration time by not having such technologies and systems in place? Integrated sourcing, whether for mortgages or protection, has been around for some time. Having such systems fully integrated within your customer relationship management (CRM) systems should be well established. Ensuring that those integrations work as well as they can, and that all relevant documents including research, illustrations and key product documents, are available and automatically against a client file seems sensible. Having those documents available from within your technology to send out – again securely – to a customer at the touch of bu on with accompanying communication, and recording that activity, would surely be a great idea. Receiving such information quickly and efficiently has become a common

IAN MERRIMAN is recruitment manager at Try Mortgage Network

expectation of customers. Allowing the customer to acknowledge receipt of such documents and provide you with confirmation to proceed at key points electronically, provides quicker and more efficient processing and will become the industry norm. Of course, systems would be able to evidence and record such permissions. Covid-19 and subsequent lockdowns focused people’s minds on using tech, either at home or for business purposes, so any aversion from a customer perspective has dropped significantly, and we shouldn’t be afraid to also to keep up with the technology available to us. Remote business is now the norm, although face-to-face business, I am sure, will still be favoured by some. Increasingly though, more business is transacted remotely by phone or by video call. Having not only the technology but also the ability and permission to do so from your network or compliance functions is crucial. In a similar vein, marketing and the use of social media is exceptionally important. Using your client data, keeping in line of course with GDPR and compliance, is an ever-increasing part of a successful business. Receiving training and guidance in these areas as part of a successful business plan and using your technology to record such communications is key. Having an a ractive, clear and easy to use website is also o en a valuable part of the successful businesses armoury. As the New Year is now upon us, perhaps now is the time for you to review your technology and processes, and build on your successes to date. ● January 2024 | The Intermediary

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

PAUL THOMAS is head of news and content at MRM

imagine many of you will have spent the past few weeks reflecting on the year that has just passed, and now you’re in the process of executing your 2024 growth plans. If part of that growth plan doesn’t include PR, then it should. As someone who works for a communications consultancy, of course, I would say this. But there is no doubt a well-executed PR plan is a vital part component of the market mix. Good PR not only helps you reach the people who ma er most to you, it also helps improve brand awareness and – sometimes – opens doors you thought were closed. For those less familiar with PR, it can be difficult to figure out how to get started, or which of the many levers are most effective. This is by no means an exhaustive guide, but here are a couple of pointers to ensure your PR is more effective in 2024.

Understand your audience If you have had PR and comms campaigns that have fallen flat in the past, it may be that you need to get to know your target audience be er. That’s not a criticism, it may be that the assumptions you once made about your target audience have changed as

The Intermediary | January 2024

If something can be measured and is backwards looking, use your own data. For things that can’t be measured, such as aspirations...use a survey” the economic backdrop has become more challenging. Ask yourself: who is it you really want to target and why? What are their interests, fears and ambitions? What type of interactions and content do they want and expect from your firm? The best way to find out the answers to these questions, of course, is to ask your customers – or the people you want to target – directly and o en.

Harness your firm’s data The classic consumer survey has been a staple of PR strategies for as long as anyone can remember. You know the ones, those stories based on a poll of 2,000 people that claim, ‘Seven in 10 Brits have a secret crush on their mortgage broker’. Wishful thinking there, perhaps. But as popular as

they are for PR and marketing types, the truth is they achieve far less cut-through with the media than they used to, particularly with the national press. The main reason is they o en cover well-trodden ground, and therefore both the questions and ‘insights’ are predictable and, well, boring. Second, there are o en concerns about the integrity of survey data. There is no way of determining if participants are telling the truth, or if they feel obliged to give the ‘correct’ answer in a pressured environment. That’s why a lot of journalists don’t place a lot of value in polls. So, what do they want? Cold, hard customer data that they can draw trends from, plain and simple. That’s not to say consumer surveys don’t have a place. Sometimes you may hit upon the zeitgeist perfectly and your survey-based story goes viral. However, most of the time a survey should supplement the story, not star in it. As a rule of thumb, if something can be measured and is backwards looking, use your own data. For things that can’t be measured, such as aspirations, opinions, and future intentions, use a survey.

Create a campaign Securing a regular blog in a key trade

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

Securing a regular blog in a key trade title and regularly firing out press releases to journalists can be good for brand recognition”

title and regularly firing out press releases to journalists can be good for brand recognition and media profile. However, a well thought out PR campaign can turbocharge your coverage and achieve much greater cut-through with your target audience. If it’s done in the correct way, of course. What is a PR campaign? As the name suggests, it is a series of activities aimed at driving awareness of an issue or theme in the market. By driving awareness of the issue, you position yourself as a go-to expert on the ma er. For example, if you want to be known as the fountain of all knowledge when it comes to green or contractor mortgages, you might plan a series of social media posts, events, press releases and research reports around those issues. However, it is also important to avoid being ‘salesy’. For a PR campaign to land it must be authentic and provide genuine insights.

new audiences easily and for minimal cost. Quite literally, everyone can be their own publisher these days. So, why not host a series of podcasts, Q&As or roundtables about a subject, or even a series of subjects, that you think will resonate with your audiences? For example, if a large part of your client bank is older or have children, you may want to discuss how they can best help their young ones onto the housing ladder. Want to target more first-time buyers? Perhaps you should host a session looking at the common mistakes younger buyers make when trying to get onto the housing ladder. If you have a big black book of

industry contacts with large social media followings, that can help you reach a bigger audience, you may decide to invite them to share their expertise, too. ●

Why not host a series of podcasts, Q&As or roundtables about a subject [that] will resonate with your audiences?”

Be your own publisher PR campaigns require a lot of time, commitment, and co-ordination, and so you may decide that a more lowkey approach is be er suited to the resources you have available. Thanks to technology, you can reach January October 2024 2023 | The Intermediary

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

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

CASE ONE Non-EU citizens looking for a mortgage

couple are both non-EU citizens, having lived in the UK for 11 months, one on a skilled worker visa and one on a dependant visa. Neither has indefinite leave to remain. In addition, the property is located in an apartment block of more than 10 storeys with no valid External Wall System Fire Review (EWS1) in place.

to assess based on a limited credit history. The good news is that some lenders have removed the requirement for an EWS1 for properties over five storeys, so it is likely to be mortgageable.”

BUCKINGHAMSHIRE

“Although we don’t require applicants to have indefinite leave to remain as long as they have a visa to work in the UK, they would need to have lived here for a minimum of two years. The loanto-value (LTV) would then be restricted to 80%. “The second issue is that we cannot consider lending above six storeys. If the applicants wanted to look for another property that meets our credit criteria, we could consider an application once they have been in the UK for two years.”

MPOWERED MORTGAGES

“MPowered is happy for customers to be on a skilled visa and a spousal visa. However, we would want them to have been in the UK for a minimum of two years. This is a good indicator of stability in employment and personal circumstances. Also, the longer an applicant has been in the UK, the more there is to assess when determining risk. “Not having an EWS1 certificate is a challenge, and we would want customers to be fully aware of the impact. We would want assurances that the building meets certain fire safety standards. Safety concerns to one side, both lenders and buyers should know of factors that could impact value and future resale. I would advise caution to anyone considering a property without an EWS1.”

WEST ONE LOANS

“Some lenders may consider borrowers without indefinite leave to remain. The additional challenge is that it is combined with a relatively short time in the UK. This is likely to be more difficult for lenders 68

The Intermediary | January 2024

CASE TWO Finance after a difficult domestic history

client wants to remortgage their home in the hopes of keeping it. They took out finance a few years ago after leaving a controlling relationship, where an ex had secretly taken out debts in their name. The finance should have provided a clean slate, but the ex also borrowed from loan sharks. The client is struggling to meet the payments and the costs regularly increase. They have missed payments on their mortgage and have a low credit score. However, they started a new job in March, and have additional income from a police widow’s pension.

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

WEST ONE LOANS

“This borrower is a victim of circumstance. This is where borrowers can benefit from specialist lenders’ more bespoke approach to underwriting. “There may be an option to consider a remortgage with capital raising to repay the unsecured credit, particularly where there are debts incurring excessive interest charges, if it is clear this puts the borrower back into an affordable position and will mean they can continue to afford their household expenditure. “The missed mortgage payments may still mean the borrower can remortgage, but this will depend on how recent the arrears are and the number of missed payments. “West One does not rely on credit scoring, and instead takes the time to understand the background to a credit profile. The positive news is that their financial position is improving, which can be factored into the affordability assessment.”

BUCKINGHAMSHIRE

“The Bucks Solution Range helps support applicants who have experienced credit blips due to a life event. As our DIP is based on credit search and not credit score, each case is manually underwritten and assessed on an individual basis. “We would need to understand if the applicant is currently in a probationary period, but even so, we would progress and add a condition that we cannot complete until this is passed. “The maximum LTV would depend on the level of credit blips. An explanation as to what caused these would need to be provided at DIP stage. “Additional income from a pension can be considered to support the affordability.”

CASE THREE High profits but an unsteady income

young barrister has a 25% deposit for a property worth £1m. A sole trader with a rapid increase in income, she wants to keep contractual payments low, as income flow can be lumpy – three months’ business bank statements could have zero income. The client would prefer interest-only for the whole or part of the loan. Her deposit is part savings, part gift, with potentially more funds during the term from the sale of her

mother’s property – so she may want to pay off a lump sum in the future.

WEST ONE LOANS

“This borrower has a substantial deposit and would meet our eligibility for an interest-only mortgage based on earnings in excess of £50,000, loan-toincome (LTI) below five-times income, and LTV not exceeding 75%. However, we would need to be comfortable that there was a plausible exit strategy in place. An alternative would be to consider a part-and-part mortgage, particularly if the sale proceeds from her mother’s property would cover any interest-only element. “We would want to ensure that the income is sustainable, but even taking an average of the last three years may be sufficient to meet the required affordability to support the mortgage payments. “West One allows overpayments of up to 10% per annum, which would allow lump sum payments.”

BUCKINGHAMSHIRE

“We would consider this case, but would need to understand how her income is received and see a track record – then we could review the case alongside the two years SA302 / Signed off Account and three months’ business bank statements. “Interest-only could be an option. For sale of main residence as a repayment vehicle, we would require £135,000 equity at the start of the mortgage and the max LTV would be 60% based on a four-bedroom property. The applicant can then take the remaining 15% on part-and-part. If the applicant has another acceptable repayment vehicle other than sale of main residence, we could consider 75% on interest-only. “The gifted deposit from her mother is acceptable, and an overpayment of up to 10% of the mortgage balance can be made every year.”

LEEDS BUILDING SOCIETY

“We could consider this, providing our underwriters are satisfied that the customer will retain sufficient savings to offset her fluctuating income position. “We can accept a gifted deposit from immediate family, providing the mother is a UK resident and completes a gifted deposit declaration form. “Our interest-only range could be considered to a maximum of 60% LTV, with up to an additional 15% on a capital and interest basis. “We would need to be satisfied that the planned repayment strategy is plausible and meets our criteria to protect borrowers. I would recommend the broker contact one of our BDMs to discuss. “The customer would usually have the benefit of making a 10% capital repayment each year without incurring an ERC. This might be a suitable option if she wishes to pay off a lump sum in the future.” ● January 2024 | The Intermediary

Q&A

John Charcol

The Intermediary speaks with Simon Walklin-Knight, head of Interim Network at John Charcol, about the benefits and challenges of self-employment

First, can you introduce yourself for our readers?

What are the pros and cons of being self-employed as a broker?

I have been an adviser since 2001, and was aware of John Charcol for before working here, having listened to Ray Boulger on the BBC’s Moneybox for many years before that. In 2016, the company I worked for was bought by John Charcol and I stayed for a further year. In 2022, I returned as the coaching and development manager and was promoted to head of Interim Network last year, with the responsibility of growing and developing this part of the John Charcol brand. The Interim Network is the part of the business that offers lead, marketing and sales support to the more than 100 experienced, self-employed mortgage advisers that work under the John Charcol banner. Apart from the cost of an administrator, all fees, such as Financial Conduct Authority (FCA) costs and professional indemnity insurance (PII) fees, are included, and we don’t set minimum business thresholds either. If an adviser doesn’t need the additional support we offer, we also have a full network proposition which allows them to self-brand and take on additional advisers. Having said that, most advisers work within the full network, maintaining the John Charcol name, due to the value, strength and security of the nearly 50-year-old brand. Often, our advisers join the supported network to build a client bank, and once they feel confident their bank is large enough, they choose to move to the unsupported network with their clients, so they can enjoy a larger commission split. However, it’s a testament to the support that we offer that many of brokers stay within the Interim Network, because they like the security and peace of mind of lead support, especially where the market has been more uncertain in recent times.

If you’re employed, while you’ll get a salary, you’re often tied to a single place of work, with fixed hours and targets. For an experienced adviser, a self-employed role is the logical progression. There’s far more flexibility around where and when you work, coupled with a much greater earning potential. Our advisers are located across the UK, and so we ensure all our meetings are held via Teams. The model just wouldn’t work if we asked people to travel to our offices in Southampton or London, but technology has allowed us to maintain our culture whilst operating more remotely. Post-Covid, people are very much looking at their work-life balance, and going self-employed has become a more popular option. Of course, it has its obstacles to a point, particularly when it comes to maintaining working relationships. However, we still have regular meetings to foster a team mindset and ensure our advisers know each other and support one another as colleagues. Being self-employed is an amazing opportunity to grow your own business. You have greater autonomy and control over your work-life balance, along with the potential for a much greater income, with one of the largest, best known national mortgage brokers.

The Intermediary | January 2024

Is there more value to having the backing of an established brand? Absolutely. John Charcol will be celebrating its 50th year this year. That’s a testament to the track record we have in delivering outstanding solutions for our clients, throughout our heritage. Our longevity instils confidence in our clients. Many

Q&A

of our enquiries come from people that have been recommended by family or friends that dealt with us 10 or 20 years ago. It also instils confidence in our advisers, something I personally value, having previously worked under a network that went into liquidation. We have amazing relationships with our partners and we’re frequently the go-to broker for new products and exclusive rates. We also have access to lenders and products not available to other brokers and networks.

How would you encapsulate John Charcol’s culture? We’re a team and a people business first and foremost. We all work together to deliver solutions to our clients’ unique needs and financial goals, and we pride ourselves on our professionalism, integrity, and transparency. We are committed to building long-term relationships with our clients and being their trusted mortgage partner for life, and in many cases their children’s lives too. We are also committed to building long-term relationships with our advisers, some of whom have been with us for 15-plus years.

whether that’s right for you. While we do pay our new advisers ‘on offer’ for the first six months, you need to consider whether you can financially support yourself while you build your pipeline. In my opinion, in the long-term, the benefits of being self-employed far outweigh any obstacles.

How has the market changed in 50 years? The mortgage market has undergone significant changes over the past 50 years, primarily due to advancements in technology. Technology has streamlined processes, increased convenience and enhanced the borrower experience, all of which has made obtaining a mortgage more accessible and efficient. However, while technological advancement has had a significant impact on the market, due to the individual nature of the client’s circumstances, automated platforms are not right for everyone. For clients with more complex situations, there is still a place for brokers that offer a personal and bespoke service. ●

How does the business approach lead generation? Most of our enquiries are driven organically due to awareness of the brand and we’re often one of the go-to market commentators for the BBC, The Guardian, The Times and The Sun. Another large proportion of enquires also come from recommendations and referrals from clients that have previously worked with us throughout our 50 years’. We work hard for that brand recognition so that when prospective clients contact us, they know who we are and the standard of service we provide.

Do you have tips for brokers on moving to self-employment? One thing to consider is self-discipline and making sure you are fostering your relationships with clients and managing your time as effectively as possible. Your client base is going to be key to your growth, and cultivating those relationships while delivering outstanding service is key. Income can also fluctuate when you’re self-employed, so you need to consider

SIMON WALKLIN-KNIGHT

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

Resilience last year to be followed by growth in 2024

t the start of last year, I discussed in this magazine how the second charge market was booming. Back then, lending was up around 40% year-on-year, and appetite for second mortgages looked very healthy indeed, quickly bouncing back from the economic effects of Covid-19. Not unexpectedly, however, in 2023 this growth has not continued at the same pace. According to the Finance & Leasing Association (FLA), second charge lending was down 13% year-on-year in October 2023. However, the second charge market has shown resilience in tougher market conditions, especially when you consider that gross residential lending is predicted to fall by almost a quarter this year. So, what does the outlook for seconds look like for the year ahead? I'm certain that demand for second mortgages will build as we go through 2024.

Driving growth One standout growth driver is the rapid rise of the residential product transfers (PTs). According to UK Finance, PTs accounted for £219bn of lending last year, versus £65bn of remortgage transactions. To put that into content, total gross lending excluding PTs was only £226bn. This is unsurprising. PTs have continued to increase in popularity in recent years, largely because they are typically easy to arrange, o en via an online application without affordability checks. Now that rates have increased, there is increased affordability compression, adding to the appeal of PTs to borrowers concerned they might not meet a new lender's affordability

The Intermediary | January 2024

assessment, even though this might not actually be the case. PTs are great if you're a er convenience and are worried about meeting affordability. But they may not be appropriate for homeowners who want to borrow more. They are simply pound-for-pound transactions. How many of the thousands of borrowers who opted for a rate-switch last year do you think had or have further borrowing needs? It’s difficult to know for sure, though I imagine it would be a significant proportion. For many, a second charge mortgage could be the most viable option to increase their borrowing. That's one reason I am confident we will see lending pick up again this year. One of the benefits of a second charge loan, of course, is that the first charge rate is not disturbed. That’s highly a ractive for borrowers who are part way through an ultra-low residential first charge mortgage. Also, unlike the majority of further advances, this process is intermediated, allowing advisers to make sure that all suitable products are presented to the client.

Changing preferences We are certainly seeing growing interest from mortgage firms in second charge mortgages, as advisers become more alive to the shi in the preferences of borrowers. It is clear there is increased recognition from firms that they need to update their business models and advice processes to accommodate this. Another reason I expect an uptick in lending is the expectation that purchase activity will remain muted in 2024, while house prices will be at best static, and at worst fall. If borrowers begin to feel that there is still some uncertainty surrounding

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

the housing market, then we may see more decide to improvement their existing property rather than move. Currently, 12% of second charge loans are for home improvements, with a further 23% where the loan purpose is for both debt consolidation and home improvements, in line with 2022 trends, according to the FLA. Typically, though, we tend to see increased demand for home improvement loans when there is a drop in purchase activity. The speed and ease of processing a second charge mortgage can o en provide a flexible option for borrowers looking to make improvements to their property, accommodating standard home improvements all the way through to high-end projects where a larger loan size of £100,000 and above is required. As an example, we offer an interest-only product targeting higher earning borrowers who need access to larger loan sizes exactly for this sort of purpose. The coming year should also be a be er time to borrow – we’re not heading back to 2% interest rates any time soon, but the cost of borrowing has fallen significantly. For brokers, advising on second charges makes good business sense. This is especially the case if purchase lending remains muted, and more borrowers are opting for PTs. It’s an opportunity to extend the services you can offer to your customer base and demonstrate your value to clients. So, while there has been a dip, I expect to see continued interest in the second charge market. Conditions are ripe for growth this year. ●

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

An option for everyone DAVID BINNEY is head of sales at Norton Home Loans

Many borrowers remain unaware of the benefits of second charge lending

espite following what can only be described as another challenging year for the UK economy, there are signs that 2024 may well usher in some degree of stability.

Brighter outlook The Bank of England held the base rate at 5.25% at its December meeting, a position it has maintained since August 2023, and inflation fell to its lowest level in two years, reaching 4.6% in October. On the back of this, mortgage lenders have started to reduce the interest rates on fixed rate products, living costs have also started to slowly come down, and the measures designed to control soaring inflation have begun to take effect. Predictions of a brighter economic outlook in 2024 will certainly come as welcome news to the majority of households across the UK, many of which have cut back on spending as they felt the squeeze on disposable income over the past 12 months. Similarly, those still suffering the financial effects of the pandemic, as well as those on lower incomes, will have felt enormous financial pressure over the last few years, with many taking on increased debt in order

to meet the heightened demands of everyday living costs. According to figures from The Money Charity, debt levels among UK borrowers rose to £1,845.6bn at the end of September 2023, an increase of £25.6bn on the previous year and the equivalent of an extra £481 per adult. As a result, many borrowers may have entered the new year looking for ways to pay down debt and get their finances back on an even keel, which is where a second charge mortgage can prove a useful alternative to remortgaging.

Consolidating loans Second charge mortgages allow borrowers to take out a second mortgage on their home while keeping their existing first charge mortgage intact. The capital raised can then be used to pay off any debt and consolidate the loans into one single payment. Recent figures from the Finance & Leasing Association (FLA) show that debt consolidation is the biggest driver for demand of the product, accounting for 59% of all new transactions in September. However, the money raised can actually be used for a variety of purposes, including home improvements, purchasing property, paying a tax bill or financing a wedding.

The speed at which the funds can be released – coupled with the ease of the application process – also makes second charge mortgages a potentially more a ractive option than remortgaging for those borrowers looking for swi access to finance, or for those on lower incomes who may find themselves locked out of other forms of credit because they only work reduced or part-time hours due to age, ill health or family commitments. Norton Home Loans recently extended the lending criteria on its second charge mortgages to include those on lower incomes, presenting brokers with a viable capital raising solution for those borrowers earning a minimum of £15,000 a year from all sources, provided they meet the lending criteria.

Second benefits Joint applications with incomes of between £15,000 to £19,999 will be considered, provided the applicants have a minimum Equifax credit score of 350. This is reduced to 200 for those borrowers with a joint income of £20,000 and over. Despite the uptick in demand for second charge mortgages in recent years, many borrowers – particularly those on lower incomes – remain unaware of the benefits of using the product, and of the circumstances in which a second charge may prove beneficial to their capital raising needs. This presents brokers with the ideal opportunity to educate their clients on the benefits of the sector, as well as offering them the chance to tap into this lucrative area of the specialist lending market and boost their revenue stream. ● January 2024 | The Intermediary

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

SECOND CHARGE

efore the pandemic, the second charge mortgage market was on the rise. The Finance and Leasing Association (FLA) highlighted that, in the 12 months leading up to December 2019, the sector had grown by 19% throughout the year. Inevitably, though, the pandemic drew a halt to this and the industry was hit by a significant contraction. However, recovery in a postpandemic era has been strong. The FLA reported the growth of second charge mortgages between June 2022 and June 2023, albeit still down in terms of value by 10%. There are, of course, numerous reasons behind this slowed growth, including economic pressures, with rising inflation rates caused by wider global events. Against this backdrop of financial instability, there is an increasing focus from lenders on making sure consumers can continue to repay their first mortgages before taking on new debts. Nevertheless, in the ever-shi ing landscape of personal finance, second charge mortgages have emerged as a resilient force, weathering economic storms and challenging consumer perceptions. As the market adapts to post-Covid realities, it's critical that lenders begin to explore the factors influencing this resilience, and champion the untapped potential of these financial tools. Despite their advantages, many potential customers are oblivious to the existence and benefits of second charge mortgages. The challenge lies in bridging the gap between the financial tool and the consumer, undoing preconceived ideas, and fostering a broader understanding of the product's value.

Consumer confusion The largest barrier to broader adoption of second charge mortgages is the stigma that exists around them. It

The Intermediary | January 2024

Changing the name of a product for the entire industry isn’t going to be easy. But these loans are needed by consumers now more than ever before, and taking small steps to change perceptions could go a long way” doesn’t help that most people have a visceral reaction to any conversations relating to first charge mortgages and loans, given they can be sensitive topics. It’s important to note that a second charge mortgage isn't just another mortgage; it's a financial strategy that can unlock opportunities for homeowners, helping them to consolidate existing debts, and also

make significant home improvements that could prove to be financially beneficial in the long run. This confusion extends to the way the product has historically been named and described. Titles such as 'homeowner loan' or 'secured loan’ have made it difficult to understand what the loan’s actual purpose is. What’s missing is a united consensus on how it should be described.

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

RENAISSANCE Of course, changing the name of a product for the entire industry isn’t going to be easy. But these loans are needed by consumers now more than ever before, and taking small steps to change perceptions could go a long way in cu ing unsecured consumer debt and improving financial health for all. That said, addressing consumer confusion requires a multi-faceted approach by lenders, financial advisers and brokers that extends further than just renaming the products. As part of the Government’s Consumer Duty legislation, lenders have a responsibility to educate and inform consumers for the best possible outcomes, and by offering up content and education that demystifies the industry and reveals the tangible benefits of second charge mortgages, we can start to take down some of the current barriers.

Dispelling misinformation The financial landscape is o en fraught with myths and misinformation. The media has portrayed debt negatively, making the term itself a source of anxiety for many, especially during the current cost-of-living crisis. However, the reality is that almost everyone carries some form of debt. The key lies in how it is managed. Whether it is a car loan, a buynow-pay-later purchase, a sofa on interest or your entire home, debt is present for most people throughout their entire lifetime. Second charge mortgages can be powerful tools to enable consumers to effectively manage their financial health. Despite popular belief, second charge mortgages aren’t for people who spend beyond their means. Instead, they're about restructuring existing debts, reducing interest rates, and creating a manageable financial plan. What’s more, given that second charge mortgages are advised products, individuals can only buy a product that they have been

advised on and which works for them, further contributing to the Financial Conduct Authority’s (FCA) Consumer Duty requirements for good customer outcomes. One of the most critical challenges consumers face is the affordability checks of loans, which can o en encourage them to opt for highinterest rate, non-advised products because of their ease of access. A second charge mortgage, when properly understood and utilised, can alleviate these challenges, providing a viable path to financial stability

The resilience of second charge mortgages is not just a testament to their durability, but an invitation for industry players to shape their trajectory" at a consistent rate and with a clear repayment model. Without the need to consult solicitors, the ease of se ing up a second charge mortgage can be far quicker than its elder sister.

Innovation, automation, renaissance The competitive landscape of the second charge mortgage industry is evolving. New entrants, innovative approaches, and automation are reshaping the market, making it more a ractive for both lenders and consumers. The relationship between the two will continue to evolve, as it becomes less transactional and instead more focused on having insightful and supportive conversations. Open Banking is critical to this, and will form an essential part of the

RICHARD SHARP is managing director at Aro Money

market. By leveraging open banking application programming interfaces (APIs), lenders and intermediaries can gain access to a comprehensive and real-time view of applicants' financial data, exceeding traditional credit scoring methods. Using the technology, lenders can analyse an individual's spending pa erns, income sources, and overall financial behaviour, and offer them a far more personalised loan suited to their circumstances – not to mention fostering financial inclusivity and fair lending practices. The resilience of second charge mortgages is not just a testament to their durability, but an invitation for industry players to shape their trajectory. As the market transforms, unlocking the true potential of second charge mortgages, empowering homeowners, and redefining the narrative surrounding these resilient financial tools, seems all too possible. The second charge mortgage renaissance is well underway, and with the right support and technical innovation, lenders can make sure they’re at the forefront of change. ● January 2024 | The Intermediary

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

Celebrating advisers, driving good outcomes

n the wake of Consumer Duty there have been significant efforts from advisers to become more customerfocused and offer more options to ensure they are providing the best possible advice. This is particularly true for later life advisers, who o en deal with vulnerable customers needing ample and tailored support. Not only have the new rules been swi ly implemented across the sector, but the subsequent shi s in training initiatives, use of technology, and dayto-day practices illustrate an eagerness to embrace long-term change.

Advisers adapt Over the past few years there has been a general acceptance that change in the industry is needed, with Consumer Duty representing a new era for the financial services sector. In later life lending much of the change began well before the rules were enforced. Discussions regarding vulnerable customers have been prominent for several years, with efforts to accommodate and adjust in line with internal industry debates and changing customer needs. Many advisers were eager to adapt their approach, developing an understanding of how to identify a vulnerable client and acting accordingly. The industry was well-equipped to adopt the new regulations in July. Rather than seeing Consumer Duty as a ‘box-ticking’ exercise, the industry is invested in ensuring customers have access to advice over all suitable products, allowing advisers to secure good outcomes for all customers in the same way they have for vulnerable clients. Many advisers a ended training initiatives, including Air

The Intermediary | January 2024

Academy’s own vulnerability module, where they learned how to identify potential signs of distress and interact with clients appropriately through comprehensive conversations discussing the range of solutions available, whether a later life product, a traditional mortgage product or nonproduct related options. This is not to say that the transition was seamless, though. In reality, advisers had to overcome multiple challenges. In September 2023, the Financial Conduct Authority (FCA) reported that some firms in the sector were still not aligned with Consumer Duty regulations. Both lenders and advisers quickly sprang into action, working closely to ensure customers were receiving the best support and outcomes. The use of resources and training programmes was crucial in filling this gap, and we have seen great improvement to align with expectations in the industry. As we look to the future, advisers should be prepared to undergo further training to keep on top of the existing rules and new regulations. In more2life’s bi-annual vulnerability report, only 21% of respondents felt that current training was sufficient, while only one in eight found it ‘easy to spot a vulnerable client.’ The cost-of-living crisis has also resulted in a new group of vulnerable clients emerging. It is important for advisers to stay up to date with how to best provide tailored support. Routine and regular training, adapted to changing client needs and circumstances, is vital to ensure the industry stays up to date.

Technology toolbox The use of data and analytics technologies has become more

MIKE TAYLOR is managing director at Air

prevalent, with advisers using them to assess a borrower’s financial situation and offer tailored solutions. Technology can also help to source products in real time and provide details on the full range of options available, with Air Sourcing’s cu ingedge solutions allowing advisers to source later life lending products, including lifetime, retirement, and retirement interest-only solutions. Not only does this allow advisers to secure an outcome best suited to the customer’s needs, it also frees up more time to spend advising clients. Technology can also help with the storing of information to align with accountability and transparency regulations, while other tools can be used for reporting exercises, to help identify which customers are vulnerable and why. One way in which we can ensure a more customer-centric approach in the future is by keeping up to date with new technologies, which are likely to expand and improve over the next few years. The advisers that embrace these tools will be best placed to comply with new regulations, offering them a competitive advantage. It is clear there have been sweeping changes made to the industry since the Consumer Duty regulations came into effect, and our sector has largely been successful in adapting. Through the continued use of new technology, training initiatives, and changes to day-to-day interactions with clients, advisers can ensure they stay in line with any future changes, so they can continue to support their customers with the best possible outcomes. ●

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

Challenges when lending in retirement

ne of the many misconceptions held by mortgage borrowers and potential homeowners is that ge ing a mortgage past the age of 60 is almost impossible. However, this couldn’t be further from the truth. Rising house prices over the past few decades have seen the average age of first-time buyers increase, while greater longevity means people are also living and working longer than ever before. As a result, many people are taking their first step onto the property ladder later in life and therefore entering their 60s and 70s still repaying the debt, as the traditional concept of retiring at 65 becomes less common. On the back of these shi ing demographics, the mortgage market has also continued to evolve, with lenders increasingly adapting their criteria in order to cater for the ever-changing needs of borrowers, particularly those in and approaching retirement age.

Recently, we’ve seen increased demand from borrowers of retirement age looking to secure a mortgage for other reasons, such as purchasing a buy-to-let (BTL) property or helping younger family members navigate the financial complexities of divorce. In other cases, some borrowers have also wanted to continue on an interest-only mortgage to make their mortgage repayments more affordable and enable them to free up some disposable cash to maintain their current lifestyle.

Making moves

The lending community has a duty of care to deliver a range of innovative solutions and flexible approaches which can help those applicants in or approaching retirement to navigate affordability challenges”

There are a number of reasons why someone in or approaching retirement age would consider taking out a mortgage. This includes downsizing to a more manageable property, or selling up and moving closer to children and grandchildren living in a new and perhaps more expensive part of the country. Some older borrowers may also take out a mortgage in order to access money from their home to make improvements, fund social care, or provide their families with a financial gi to help their children or grandchildren get onto the property ladder.

Options available At the Loughborough, we offer borrowers the option to take out a standard mortgage on an interest-only basis, with the sale of the property an acceptable method of repayment, provided the mortgage is taken past the age of 80. Mortgages are also available on a capital repayment or part and part basis, with a maximum loan-to-value (LTV) of 60%. As there is no upper age limit on our lending criteria, borrowers have the capacity to take

ASHLEY PEARSON is head of intermediaries at Loughborough Building Society

out a mortgage for up to 35 years, regardless of their age at the time of the application. While it is o en common practice to assess affordability based on the lowest earner or sole survivor basis for joint borrower applications, the Loughborough calculates affordability slightly differently, at 4.5-times income up to the applicant’s retirement age. A er this, it is calculated according to the balance of the mortgage and the applicant’s projected pensionable income, to ensure it is still affordable at the new balance, again at 4.5-times income. Once the applicant reaches the age of 80, the projected pensionable income is then reviewed to ensure it fits on the new balance at 3.5-times income. In cases where affordability on an interest-only mortgage cannot be met, there is the option to move part of the loan onto a capital repayment plan so some of the balance reduces over time.

Duty of care Given the growing demand for later life lending over the past few years, the lending community has a duty of care to deliver a range of innovative solutions and flexible approaches to help those applicants in or approaching retirement navigate affordability challenges responsibly. Not only can this approach help those older clients to be er address their individual borrowing needs, it also enables intermediaries to tap into additional revenue streams by offering access to specialist lending solutions which are specifically designed for this demographic. This represents a winwin for everyone involved. ● January 2024 | The Intermediary

T E C H NO L O GY Opinion

Technology risk makes us all vulnerable

oardrooms have a lot to mull over at the moment, and as artificial intelligence (AI) is adopted faster and starts to influence decisions in a tight labour market, the prognosis for job security is uncertain. Vulnerable customers are part of the arrears issue, but we are all vulnerable to AI. Technology risk is less about whether it performs well, and increasingly about what and who it replaces. The Organisation for Economic Co-operation and Development (OECD) recently published its annual Economic Outlook – a key indicator of what to expect in the coming 12 months. The question on all our minds is whether we can dodge recession: the consequences for lender and intermediary businesses all hinge on this, to greater or lesser degrees. This year’s forecasts suggest global growth is set to remain modest, with the impact of monetary policy tightening, weak trade and lower business and consumer confidence being increasingly felt. In the UK, GDP growth is projected to be subdued as fiscal drag caused by freezing income tax thresholds puts further pressure on real household income. This said, the OECD is currently projecting GDP growth to improve from 0.5% in 2023, to 0.7% in 2024 and 1.2% in 2025. There are many variables affecting this – the stability of household finances in particular. The cost-of-living crisis has become ubiquitous over the past 18 months, and there are several factors that will mean it drags on. OECD data shows that as interest rates have risen, the proportion of UK households’ gross disposable income spent on interest

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payments has risen from 1.9% in 2019 to 4.7% – a significant jump. The Bank of England has indicated that no further base rate rises are planned, but neither are any cuts. October’s significant fall in consumer price inflation (CPI) from 6.7% the month before to 4.6% can be a ributed largely to the huge spike in energy costs in September last year falling out of the comparison.

Core inflation high Core inflation is still stubbornly high. The Office for National Statistics (ONS) data shows core CPI si ing at 5.7% in the 12 months to October 2023, down from 6.1% in September. Things in the labour market are uncertain. The number of companies going to the wall in the first half of last year outpaced that seen in the same period in 2008, when the Global Financial Crisis was nearing its peak. Redundancies recorded by the ONS are elevated year-on-year, with the rate per thousand employees in May to July at 3.6, up from 2.3 a year earlier. The labour market shows signs of easing, though, with unemployment picking up steadily since the spring, and vacancies continuing to fall. The OECD is of the view that UK unemployment will increase steadily to about 4.9%. The implications for mortgage arrears are already beginning to show. Bank of England data show new arrears cases decreased by 0.3 percentage points from the previous quarter, to 15.8% of the total outstanding balances with arrears, some 5.1 percentage points higher than a year earlier. The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.02% to 1.14%, the highest since 2017 Q2.

TONY WARD is non-executive chairman at Fortrum

Broader economic indicators also look like things could go either way. Retail sales volumes are falling and were 2.7% lower in October than in the same month a year earlier. Consumer confidence remains depressed, although it is markedly higher than a year ago. Rumours abound of an uptick in broker enquiries and applications as rates continue to tumble and many thousands roll off historic low fixed rate mortgages. In reality, new mortgage lending has continued to decline, with fewer than 45,000 new approvals for house purchase in September, down from almost 100,000 in January 2021 when the monetary tightening cycle started, based on Bank of England figures. A er a short-lived pick up, business sentiment in services deteriorated again. Lending to businesses fell by 1.5% in the year to September. How the economy fares over the coming year is fundamental, but as the Financial Policy Commi ee raised in its December summary and record report, it is not the only risk facing the UK’s financial system. Sam Woods, deputy governor for prudential regulation at the Bank of England, said: “Machine learning is quite commonly in use by many firms that we oversee, but as for generative AI, firms are in the exploring stage.” As firms increasingly adopt this type of technology, it is not just financial stability and the veracity of data that AI produces that present risk. AI has the potential to put further pressure on unemployment. We are all vulnerable to that. ●

T E C H NO L O GY Opinion

Old MacDonald had a data farm

f 2019 was all about Brexit, 2020 Covid-19, 2021 Trump versus Biden, 2022 Russia and Ukraine, then 2023 was all about artificial intelligence (AI). I doubt most people in the pub had really heard of AI until 2023, but it was the topic on everybody’s lips during the year. Even my mum mentioned it, and she’s 74 and still on a Nokia 3310. From Sam Altham and ChatGPT to The Beatles releasing their latest single, it was the talk of the town. But what does it all mean? Well, AI has been around for a long time – so why all the fuss now, and what’s the big difference between now and then?

Free from limitations It was way back on 11th May 1997 that Deep Blue, an AI-powered computer, beat the chess World Grandmaster Kasparov. In 2011, IBM Watson won the £1m prize fund by beating the champions of gameshow ‘Jeopardy’. These systems had limited power, they were limited by the data sets that had to be preloaded into them. Today’s generative AI systems can do so much more. They feed off enormous data sets. In fact, Open AI feeds off the entire internet – think about that. It's impossible to visualise all that data and information. The entire internet, all the right stuff, and the wrong stuff. Humane’s AI Pin launch video is a great example of the wrong stuff – their AI assistance gave out the wrong detail to a question about the best place to see April’s Solar eclipse in their launch marketing video. A major gaff, indeed. Here at 360 Lifecycle, we have a huge data set which generative AI can use to help build benefits for customers, advisers and their businesses. We have been collecting data since 2010 and now have almost four million case records, and have processed almost £300bn mortgage

applications. That’s an enormous data set for generative AI to farm, see pa erns in, and learn from.

DAVID SMITH is commercial director at 360 Dotnet

AI in 2024 2024 will be the year when we start to build concepts and real outputs powered by generative AI. We have already started to think about how AI can reduce time, effort, and expense for compliance teams to perform case checking tasks. That’s one area where AI can quickly be deployed with real business benefits. Today’s AI computation power can open, read, and understand documents – 100% case checking, in the blink of an eye. I had the pleasure of experiencing the customer journey of ge ing a mortgage in 2023, and it was so awful – duplication, pain points, poor processes and stress – that I really didn’t understand what was going on. If generative AI can accelerate the absolute destruction of that process

in 2024, then customers will be happier, advisers less stressed, and businesses more productive. We can all concentrate on the one thing AI will never be able to do: build and maintain human relationships. ●

It was way back on 11th May 1997 that Deep Blue, an AIpowered computer, beat the chess World Grandmaster Kasparov”

Deep Blue (left) and Gary Kasparov: Today’s AI can open, read, and understand documents in the blink of an eye

January 2024 | The Intermediary

T E C H NO L O GY Opinion

Operational agility is essential in 2024

024 promises more change. If the US Primaries and Super Tuesday in March do not set the markets into a spin, we have a preelection Budget at the same time to look forward to. As the country gears up for a General Election in 2024, we’re in for another major political reshuffle – the third in as many years. The constantly revolving doors in Westminster’s halls of power have seen names and faces change at breakneck speed. Over the same period, we have seen a panoply of different housing schemes in the shape of Shared Ownership, Rent to Buy, First Buy, Help to Buy Guarantee, Help to Buy Equity Loan, Housing Association Right to Shared Ownership, First Homes – the list goes on. Operational agility in the face of these kinds of changes is difficult, but also necessary. Major lenders, saddled with legacy systems, would probably applaud the return of Help to Buy, because it is easy to implement. Their systems are part of the reason they not only want change but o en on their terms. But we should not expect any help to fall in our laps. New help will undoubtedly mean more change.

Wreaking havoc This is why the changes made on the supply side are as challenging for lenders and their operational models as anything that the market may throw at them. Yes, the economy is volatile, and the cost of living presents myriad challenges in servicing vulnerable and distressed customers – not least proving they are being helped in accordance with regulatory expectations. However, the scrapping of the net zero targets to retrofit private rented properties up to an Energy Performance Certificate (EPC) Band

The Intermediary | January 2024

C minimum is a good example of what happens when policymakers make decisions that affect the market. They have wrought considerable uncertainty, particularly as it’s really anyone’s guess whether that target will stay scrapped. The industry is overwhelmingly in favour of retrofi ing energy inefficient homes, and it is not impossible that pressure to reinstate the targets will result in yet another U-turn.

Designing operational processes for a future that could go in any one of a hundred ways must focus on the ability to flex those processes” Policy-led change is abundant, in part because we are running into a General Election cycle. We hear many in the industry crying out for more policy help, but when it arrives it is seldom in the shape or scale we would all want. For now, the positioning has started in advance of what could be a voting date in May. Current Prime Minister Rishi Sunak is in favour of simplifying planning and ge ing more first-time buyers onto the property ladder; indeed, he has said in various interviews that homeownership is absolutely central to being Conservative. “We can’t expect future generations to share our belief in capitalism if they can’t get their hands on capital,” he told Sky News. The question is: how? There were rumblings back in the spring that Sunak might bring back Help to Buy. I think that’s unlikely to happen –

JERRY MULLE is UK managing director at Ohpen

politically, it’s toxic. It’s set to get worse. Estate agent Benham and Reeves recently pointed out that – as ever more equity loans start to incur interest charges that rise annually by RPI + 1% – affordability is going to become a serious issue pre y quickly. Then again, these decisions may not even be in Sunak’s hands. With deepening divisions visible in the Conservative Party, and public despair in the midst of a cost-of-living crisis, it looks increasingly possible that the next Government will be Labour. Should Angela Rayner put her net zero money where her mouth is, then we are in for another wholesale shi , which will have material risk implications for mortgage lenders.

Future-proof design On broader housing policy, Labour leader Sir Kier Starmer has suggested a ‘housing recovery plan’ and made more promises to deregulate planning rules during his Party Conference speech earlier in the year. Governments are notorious for bringing in brand new ideas. How can lenders be expected to plan and prepare with virtually no warning on what they’ll be required to deliver? As lenders o en say in private, the biggest issue will be implementing the systems changes needed to provide any new scheme. Designing operational processes for a future that could go in any one of a hundred ways must focus on the ability to flex those processes. If you really want to make a difference you need the operational wherewithal to affect be er propositions. ●

T E C H NO L O GY Opinion

The growth and importance of AI

id you know that, at the time of writing at least, ChatGPT from OpenAI has become the most-viewed English article on Wikipedia in 2023, amassing an impressive 49.5 million page views. Launched in November 2022, ChatGPT has been one of the most talked-about tech enhancements in recent years, and its user base has grown to such an extent that it has exceeded 100 million in its first year. This is quite a remarkable rise to prominence, and reflects the growing profile and debate over the positive – and potentially negative – impact of artificial intelligence (AI) in some areas. So much so that AI has been presented with the title of ‘word of the year’ by Collins Dictionary. In fact, the publisher went as far as suggesting that the use of the term has quadrupled this year, and has been the ‘talking point of 2023’. To add further weight to the AI revolution, it was recently announced that Microso plans to pump £2.5bn into Britain over the next three years, its single largest investment in the country to date, to further underpin future AI growth. The funding will more than double Microso 's datacentre footprint in Britain, providing the infrastructure crucial for new AI models to work. This funding has been cited as “a turning point for the future of AI infrastructure and development in the UK” by the Prime Minister. And let’s not ignore Google’s recently launched Gemini, which it claims is the first to outperform human experts on Massive Multitask Language Understanding (MMLU).

about how and where they use it, while others find any implementation overtly intimidating, and struggle with the concept. There are others who appreciate its potential benefits, but don’t know where to start, and then there are those who think they are experts, but in reality are far from it. What we do know for sure is that we – as an industry – have an abundance of data at our fingertips, and that gaining a be er understanding of this data can open the door to more business, as well as access to streamlined processing, greater accuracy, and accountability throughout many aspects of the business.

Driven by data It’s been said many times before, but data really is king, and it needs to be treated accordingly by the various links in the mortgage chain. The correct implementation and management of AI will be a key driving force in making the most of all data requirements going forward, as it possesses the ability to assess and analyse vast amounts of data to identify both potential opportunities and potential risks.

MELANIE SPENCER is business partnership and growth director at One Mortgage System (OMS)

For lenders, this will provide the opportunity to deliver instant approvals to not only streamline the time taken within the underwriting process, but also help speed up the overall application to completion journey. By monitoring data in real-time, lenders can respond promptly to changing economic conditions and ensure a more stable lending environment. Online platforms and cloud-based systems like OMS enable seamless collaboration between intermediaries and lenders to improve the customer experience and create more personalised and bespoke offerings. AI will play an increasingly prominent role, delivering even greater efficiency and insight throughout the mortgage journey, and is an element of the modern tech world which should be embraced rather than ignored. ●

Mixed reactions The initial reaction to the subject of AI across the intermediary market can o en be something of a mixed bag. Some people are highly enthused

Gaining a better understanding of industry data can open the door to more business

January 2024 | The Intermediary

In Profile. MetLife UK

The Intermediary speaks with Rich Horner, head of individual protection at MetLife UK, about a protection market that is ripe for innovation in 2024

hen Rich Horner joined MetLife 14 years ago, it was yet to enter the UK’s protection market. He was involved from the start of the firm’s move into the intermediated protection market in 2015. Horner, now head of individual protection at MetLife UK, says: “In a protection sense, MetLife is probably still quite new for a lot of advisers, despite being one of the largest insurance firms in the world.” As a firm with relative youth in this market, The Intermediary sat down with Horner to discuss MetLife’s approach to innovation, and how he feels the protection sector must change with the times.

Evolution of protection

In the years since launching into this market, MetLife UK has made numerous steps to evolve its protection offering. This fits with Horner’s approach, he explains: “Across 18 years working in insurance firms, it has always been with different, innovative products. I’ve never worked with anything that could be called ‘vanilla’ or was just based on price – it has always been about launching to market and establishing differentiated propositions.” He adds: “The longer you have a product running in the market, the more feedback you get from customers and distribution partners. Like anything, you can take that on board and understand where the value is being driven.” This has helped MetLife UK understand that customers – particularly in younger demographics – tend to have an ‘optimism bias’, whereby the worst-case scenario is largely unthinkable, leaving many without protection. This, Horner explains, means shifting the narrative away from the worst case, and instead focusing more on the everyday. “People want a product that is affordable, accessible and easy to understand,” he says. “That’s why we’ve EveryDayProtect – a product that covers things like broken bones, 24-hour stays in hospital – customers can see that happening.” 82

The Intermediary | January 2024

This is also a lesson in how brokers should consider speaking to their clients about protection. Horner says: “We talk about building the right ‘protection puzzle’ for the customer. Good advisers will look at the person, understand what risks are pertinent for them. Yes, life cover is important, but what if you’re a self-employed builder and you break your leg and can’t work?”

Post-pandemic

For Horner, protection allows the chance to get closer to the customer and feel the difference a product is making to their lives. This has only increased in a post-Covid landscape. Whether it is the growth of income protection, spurred on by harsh realities faced during the pandemic, or a growing understanding of the importance of health and the strains on the NHS, the past few years have certainly seen a seachange in the understanding of protection. Where some predicted a drop in take-up due to cost-of-living challenges, the period post-Covid has not – from MetLife’s perspective – brought about more cancellations. “People really saw the value,” Horner explains. “We’re on track for another record year in terms of both retention rates and number of new policyholders taken on. For us, the trends show people are valuing protection, particularly while Covid-19 is still fresh in their memories.” This value can also be seen in the high number of claims being paid by the industry – though misconceptions still linger among consumers on this front. This is despite the fact that the Association of British Insurers (ABI) reports that 97.5% of all claims are paid in the individual and group protection market. “It’s a shame, because it’s actually an incredibly high amount,” says Horner. “We need to get out there and fight the good fight, explain the statistics, and make sure customers can understand what the products are there for.” To this end, MetLife has developed an ethos over the years: protection made simple.

I N P RO F I L E

Horner explains: “It’s about stripping away all the unnecessary parts of the proposition, so that someone can sit down on their own, even before getting advice, and understand the product themselves in minutes. The market needs to do a better job of simplifying things.” He adds that Consumer Duty will spur on these shifts, and has already had some benefits. Horner says: “Broker firms that have previously said ‘not for us’ are now coming to us and saying, ‘you’ve got products that are a little different’. They can’t ignore this market any longer, and they see the value in offering something different.”

Taking on 2023

MetLife UK reached several important milestones over the past year, which have fed into its ambitious growth plans. Part of that approach included focusing on new technology, and the launch of the first product – ChildShield – to be hosted on the new platform. “We’re in a period of technological revolution,” says Horner. “We knew that to continue our growth, we had to do something different. We’ve now got a platform that is adaptive and quick to develop. The tech will enable us to provide better service through online portals, and with that we believe we’ve launched a product that can help many thousands of customers, but also help advisers grow their business by giving them something different for those conversations.” These movements have been made alongside the firm’s distribution partners and with stringent customer research. Technology has allowed for speed of change, as well as integration with the other links in the protection chain. Nevertheless, Horner warns against overreliance on tech. He says: “Where you might happily go into a supermarket these days and not speak to a person, people still want a financial adviser who will see you as an individual.” Horner adds that, with the influx of new tech into the market, it behoves product providers to “be very smart” when picking the right systems, and recommends extensive due diligence and stress testing.

Future-proof market As customer needs evolve, Horner says the market must do so as well, particularly in areas of increased demand, such as income protection, which he feels is “ripe for innovation.” For example, critical

RICH HORNER

illness (CI) was launched 40 years ago, and while having “done an awful lot of good,” will continue to be reviewed to ensure it is the best it can be for the next 40 years. Horner adds: “We’ve seen lots of value-added services come into the market, which is brilliant. The products are better and we’re doing a lot more, but we can do even more, and we should be challenging ourselves.” Consumer Duty could be the catalyst, but the push will also come from those, like MetLife, that work to improve the industry from within. Horner says: “Once that bar is raised, you suddenly find extra reserve – at a time when the technology is there to help us achieve continual innovation. It’s quite exciting.” Healthy competition will be a key element of this, he adds: “We don’t want to just do like-forlike – doing that means the market doesn’t grow. It’s more exciting to try and launch new products, which can help everyone grow.” For 2024, Horner points to a continued push to improve the market, with Consumer Duty as a start, not an end point, saying: “It’s clear that protection has to be included in the advice process, that’s mandatory. That makes me excited for 2024, because the trends will be improved knowledge of the products among advisers and distributors, going out to customers. Hopefully we can create that groundswell.” This will be where the right digital options, deployed with care, will come in handy, particularly in creating more access for potential customers. Indeed, Horner even says social media – with a pinch of salt – could welcome the next generation of consumers. “The regulator needs to keep an eye out, but where it’s creating an interest in protection, as long as it’s then recommending a good route to the product, it can be great. The more conversations we have about protection, the better.” Following foundational moves in 2023, MetLife is set for an exciting 2024. Horner says: “Our flagship products will be moving onto new systems, bringing potential new benefits and greater accessibility. He concludes: “We see opportunity everywhere now. We look at the market and think: where are the trends, where is the customer need, and where can we help our advisers grow their businesses? “It’s got to be easy to access, affordable, high value. But really, our aim remains the same: protection made simple.” ● January 2024 | The Intermediary

P RO T E C T I O N Opinion

Making life easier for portfolio landlords

here’s nothing new in the statement that mortgage intermediaries could, and arguably should, be writing more protection business. 2023 was a thorny year for landlords, with doubling buy-to-let (BTL) mortgage arrears, higher costs, and reduced profitability never far from the headlines. Economic uncertainty was a huge factor, of course, with the looming threat of recession and higher interest rates enacting damage on the rental market. However, landlords also faced off against stringent regulations, as well as increased scrutiny and affordability testing by lenders, making it harder to secure buy-to-let mortgages and competitive rates, and thereby making it tougher to generate the kind of return on investment they have previously enjoyed. 2023 also saw pressure on insurance premiums, driven in part by increased claims costs due to claims inflation on labour costs and materials, lengthier repair periods due to labour shortages and delays in obtaining the materials, and the knock-on impact on rebuild sums insured, which have seen index linking increasing to keep in line with rebuild sums insured. Landlords have been hit with the unpleasant combination of insurers needing to review the rates they charge, and applying those rates on the increasing sums insured to keep in line with inflation. That is not to say insurers have been profiteering from the market conditions – far from it – but insurers aren’t charities, and they have to produce a profit and return for their investors, otherwise the capital that

The Intermediary | January 2024

backs those insurers moves to other sectors of the economy where returns are be er, which then reduces the capacity within the insurance market, which in turn would force up prices. The rule of supply and demand applies within insurance like it does in any other market. The outlook for 2024 looks a li le brighter, however, with many commentators predicting significant growth in demand for rental properties and increased rental prices. In support of this positive view, we are hearing many advisers saying that their professional landlords are, in the main, looking to expand their portfolios rather than reduce them.

Rise of portfolio landlords Savvy business-minded landlords could seek to take advantage of the lack of supply in the market and expand their portfolios. Savvy advisers could therefore look at new ways to help them. Portfolio landlords – in the insurance world, this means those with more than one BTL property – are by no means having an easy life. Managing a portfolio of properties, each with their own mortgage and insurance arrangements, contracts, tenant support, and maintenance issues, is a full-time job, to say the least. You can make their life a li le easier, at least when it comes to the insurance. Landlords will be looking to save money on their premiums, especially if they are seeing these premiums increase for no apparent reason. You can also streamline their insurance arrangements into one policy rather than a separate policy for each property, saving them time and energy.

GEOFF HALL is chairman at Berkeley Alexander

Fit for purpose Portfolio or multi-property landlord insurance policies offer a fantastic opportunity to not only deliver these clients with fit-for-purpose cover and peace of mind, but also a slightly easier life – one policy, one payment, one renewal – a time saver that I am sure they will thank you for. These policies offer single policy protection for all properties within a portfolio, regardless of the types of property or tenancies included. This is a win-win: they are invariably cheaper for landlords as well as easier to manage, and for insurers they spread the risk, as they are less likely to receive large claims on several properties within a block. At Berkeley Alexander, we’re used to protecting commercial and residential properties with tailored multi-property landlord insurance, and with our panel you can compare prices from a range of insurers so you get the right multi-property landlord insurance for your clients, at the right price.

New year, new opportunities Kick off 2024 by contacting your portfolio landlords. Ask them about their plans for the year ahead and discuss how you can make their life a li le easier. They will certainly appreciate the added value consultative approach, and the provision of a simple solution that not only cuts down the paperwork and saves money, but also helps them manage the multiple, complex, and ever-evolving risks associated with owning multiple properties. ●

P RO T E C T I O N Opinion

Why 2024 could be a successful year for advisers

Brokers should utilise the support that exists around them and diversify their revenue streams

023 was an incredibly tough year for us all. The market was characterised by rising interest rates and a stark drop in mortgage approvals, creating a severe knock-on effect for advisers and their ability to do business. On top of this, the introduction of Consumer Duty at the end of July brought in a more formal framework for advisers to ensure that good customer outcomes were always at the forefront of their business. From the consumer’s perspective, we know that the cost-of-living crisis has raised questions about expenditure. For example, our research with YouGov, conducted with more than 2,000 UK adults, revealed that 51% of respondents would were looking at their financial products more in 2023, with a view to saving money. To compound this, the implications of the cost-of-living crisis are likely to continue this year. Sales strategies that may have worked in the past will

likely be outdated now. Consequently, it’s important that advisers explore the entirety of the revenue streams available to them to ensure that 2024 offers the best chance of success. This being the case, where do advisers go from here? Well, it’s important that the sector gets back to the basics. We believe the true value that we deliver for our clients comes in the form of advice. At Paymentshield, we’ve worked hard to create our all-encompassing GI Academy, to provide advisers with simple, highly effective tips for the best ways in which they should go about their business and provide their clients with the gold-standard service they expect.

GI reflection So, before you begin to think about where you want to be by the end of this year, perhaps spend some time to reflect on the past 12 months, and where you are now. Advisers may wish to ask themselves: is my general insurance (GI) business up or down, what

LOUISE PENGELLY is proposition director at Paymentshield

percentage of my remortgage clients do I provide a GI quote to, and what percentage of my GI policies include optional extras? We know from our network of advisers that the average mortgage to GI penetration is 20%. If conversion is way below that figure, then consider how it can be improved. It might be as simple as dedicating your annual continued professional development (CPD) time within our accredited GI Academy to improve the fundamentals of your sales technique. Equally, it might be a case of using our referral option to get sales over the line. With a dedicated team of in-house sales experts to help convert leads, average sale conversion rates have hit as high as 65% when our team have called the customer and discussed their GI needs. It’s an incredibly valuable tool to fall back on, and one I’d encourage all advisers to consider as we progress through 2024.

Adviser resources Our team at Paymentshield have worked incredibly hard to provide advisers with a comprehensive bank of materials and resources to help them make the most of their conversations with clients. This isn’t to obscure the difficulty of the next year. It will challenge us all and require some really innovative thinking and a willingness to depart from the mainstream to get business done. Our top tips for advisers would be to utilise the support that exists around you and diversify your revenue streams. Don’t be afraid to try something different! ● January 2024 | The Intermediary

L O C A L FO C U S Newcastle

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

Focus on ...

JESSICA O’CONNOR is a reporter at The Intermediary

Newcastle

ith the new year oﬃcially in full swing, and along with it a fresh rate war very much underway, the mortgage market in 2024 promises to be unpredictable. Despite major lenders such as Halifax, Santander and NatWest showing positive signs and cutting rates, many commentators remain cautious in their market optimism, perhaps still jaded from 2023’s period of tumult. Indeed, there remain pressing questions surrounding first-time buyer affordability, a severe lack of housing stock and increasing pressure on landlords – and with a General Election on the horizon, the issues facing the property market are set to be propelled onto the national stage once more. With this in mind, The Intermediary set its sights more locally, asking Newcastle-based property professionals how real borrowers are interacting with the current market, and what trends are affecting business on the ground. With the North East widely considered as one of the most affordable places to buy in the UK, brokers take stock of the trends, discuss how the market turmoil of last year affected local markets, and outline what buyer appetites look like going into 2024.

The Intermediary | January 2024

Property values According to the latest data, the average property price in the Newcastle-Upon-Tyne postcode area is approximately £205,000, with the median price sitting at around £161,000. This is in comparison with a national average of £351,000 and £270,000 respectively in England and Wales. Prices in Newcastle have shown an average decline of £1,900 over the past 12 months, a relatively modest figure which demonstrates the area’s overall resilience in light of the issues which plagued the sector in 2023. The most affordable postcode in which to purchase a property is ‘NE37 3’, with the average price of £43,300. On the other hand, the most expensive place to buy is currently in the ‘NE47 0’ area, where properties can fetch over £777,000. The average detached property in the Newcastle area currently costs approximately £383,000, while semidetached homes sell for £210,000. Terraced homes cost an average of £179,000, while a typical ﬂat in the area could set buyers back £116,000.

The current market Last year, there were approximately 12,000 property sales in the Newcastle postcode. This marks an annual drop of around 32.6%, or 6,500 transactions. This dip was undoubtedly a result of the ongoing

economic and political pressures that squeezed the mortgage and property market last year. Nevertheless, local mortgage brokers report that the market in Newcastle and the surrounding areas remained resilient throughout 2023. Fraser Greenwell, director and mortgage and protection specialist at Northern Standard Mortgages, says that even in the face of rising mortgage rates, the housing market remained surprisingly steady from his perspective. Greenwell attributes this to the region’s lower than average property prices, which has resulted in many buyers remaining comparatively unaffected by rising mortgage costs.

Steady as it goes

FRASER GREENWELL is director and mortgage and protection specialist at Northern Standard Mortgages

he housing market in Newcastle has been steady. From what we have seen, the rising interest rates last year have not had as big an impact on the market here as in other parts of the country, probably due to the lower average property prices. Residential demand has still been very strong. Property prices mean that purchasing is still achievable for a wide range of buyers, and with rents increasing, purchasing is still an attractive proposition for renters. Great Park continues to be a high demand development, especially with the upgrade works now mostly completed on the A1, improving the transport links to the area. Given the huge range of properties available in the development, I expect it to continue to be high in demand for the foreseeable future. I find that more first-time buyers are buying with a partner rather than as single applicants, and have even seen quite a few instances of friends looking to purchase together to get themselves onto the property In fact, data shows that during the period, the most properties sold in the area were within the £100,000 to £150,000 price bracket, with more than 2,984 properties sold, or 24.9% of the overall total. Mohammed Usman Khalid, founder of Mortgages 4 U, corroborates this sense of stability, noting that even though rising rates initially scared off potential buyers, the market has remained constant overall. With housing stock coming onto the market and selling at what he

ladder rather than renting. Buying with another purchaser can be beneficial in terms of affordability, as two incomes could be taken into account rather than just one, increasing the maximum mortgage available. There are also new options this year for renters looking to buy, such as Skipton Building Society’s track record mortgage, which allows renters to purchase without a deposit, so long as they can evidence paying rent for over 12 months. This has opened the door for a lot of renters to purchase their first property. We deal with any lender who will work with a broker. Our most used lenders this year have been HSBC, Halifax, NatWest and Nationwide on the residential side of things. They are probably the most established lenders in the area as they are lenient on criteria and affordability calculations, which is particularly important with the ongoing cost-of-living situation. We have a very wide demographic of clients. The biggest change this year, I would say, is an increase in landlords looking to purchase via limited company → structures due to tax changes. The buy-to-let (BTL) market has still been strong, especially on lower value properties as with the rate of increase in rents, landlords can achieve very high yields on these properties. We have helped a lot of landlords this year with purchasing and remortgaging BTL properties, but the increase in the number of landlords purchasing via limited company structures is certainly noticeable.

describes as a “reasonable” rate, he believes that 2024 is set to be a positive year, particularly as many lenders have already chosen to lower product rates.

Popular lenders Greenwell reports the popularity of the big banks in this area, with borrowers often opting for household names such as Halifax, HSBC and NatWest. However, the area is also widely serviced by locally-based Newcastle Building Society.

Franco Di Pietro, head of intermediary mortgages at the society, says that despite being a national lender that services borrowers across the UK, the society takes a greater share of its work the North East given its location. He reports that, contrary to national trends, over the past year the Newcastle Building Society has seen the average mortgage term size decrease for buyers in the North East, most likely due to the region’s uniquely affordable housing stock. → January 2024 | The Intermediary

L O C A L FO C U S Newcastle

COST COMPARISON OF HOUSES AND FLATS

 DETACHED

£383k

 SEMI-DETACHED

£210k

 TERRACED

£179k

 FLAT

£116k

NEWCASTLE PROPERTY PRICES

Price

Newcastle England & Wales

 AVERAGE

£205k

£351k

 MEDIAN

£161k

£270k

First-time buyer appetite

Di Pietro also notes a strong first-time buyer presence in the area. With the society’s average borrower age coming in at around 39, comparable with the region’s average age, which stands at 41.1 years old, it is clear that Newcastle has a relatively young population, but one that is eager to enter the housing market. Indeed, Di Pietro cites the city and surrounding postcodes as a prime location for first-timers looking to get onto the property ladder. Last year in particular, the society saw a huge amount of interest in its high loan-to-value (LTV) products from this age demographic, as well as a strong appetite for joint mortgage sole proprietor (JMSP) and Shared Ownership products, and First Home and Deposit Unlock schemes. Khalid also notes this healthy demand from first-time buyers, stating that he has observed many first

timers opting for longer-term fixed rates over the past few months. What’s more, he also reports a marked increase in enquires from younger buyers so far this year. Following recent rate reductions from a number of lenders, first-time buyers have been even more eager to enter the market.

New developments With the average price of older, pre-existing property standing at an average of £203,000, and the price of a newly built home coming in at £318,000, current data indicates a strong buyer preference for newbuilds. While more expensive, newbuilds in this area still come in lower than the national average (£432,000). However, new-builds make up only 1.6% of the market, creating a healthy appetite for new developments. According to Khalid, there are

Resilient first-time buyers FRANCO DI PIETRO is head of intermediary mortgages at Newcastle Building Society

n 2023, higher interest rates and pressures on household finances have limited affordability for many borrowers. We’re experiencing many of the same trends felt by lenders throughout the UK. However, although the residential mortgage market is tight, the lower than average house prices in Newcastle means we’re still experiencing strong demand from first-time buyers and borrowers with smaller deposits in particular. Shared Ownership has now become a significant part of our growth. With affordability challenges accelerated by the cost-of-living crisis, Shared Ownership remains a realistic option for people in order to own a home sooner than they traditionally would have. All borrowers’ circumstances are different, and it’s important to Newcastle Building Society that our approach to affordability adapts accordingly. We’re also experiencing a good appetite for our bespoke propositions, such as joint mortgage sole proprietor (JMSP). This product is designed to support first-time buyers onto the property ladder. In addition, we have seen borrowers purchasing a home later in life or following a change in circumstances, or by using the income of a family member to increase their borrowing capacity. We have a very balanced spread of lending across the UK, but given our location we do take a greater share

The Intermediary | January 2024

of the North East market than other regions. The average age of our mortgage applicants is 39, with an average loan-to-value (LTV) of 65% and average term of around 27 years. Given that we are a building society whose roots are in helping people onto the housing ladder, our lending proposition is strongly geared toward the first-time buyer market, which is a key demographic in Newcastle. Despite pressure in the wider first-time buyer market this year, we’ve seen growth in that segment across all regions. Higher LTVs of 90% to 95% are obviously popular with this demographic, and in 2023 more than one fifth of all mortgage applications were on an LTV higher that 90%, which includes first-time buyer schemes such as First Homes and Deposit Unlock. In the first part of 2023 we saw an increase in interest for our longer-term fixed rates, such as our 5-year fixed rate products, from borrowers looking for payment certainty amid the rate rises. Nationally, we’ve seen term extensions on the rise, with borrowers choosing to pay back over a longer period of time. However, within the North East we’ve actually observed the average term size reduce. In Newcastle this again reflects the more affordable house prices compared with the rest of the UK, as well as the stability and resilience of the housing market, particularly in the first-time buyer space. As we move into 2024, given the lower than average house prices and younger demographic in Newcastle, we anticipate that the strong demand we’ve witnessed from the first-time buyer market will continue.

L O C A L FO C U S Newcastle

Positive developments MOHAMMED USMAN KHALID is founder of Mortgages 4 U

he current housing market is stable in Newcastle, with prices remaining stable. Property prices are cheaper up North generally than down South, so you do get more for your money in Newcastle, but the property prices also seem to be quite stable at present. Interest rates in 2023 were at a recent all-time high, so this did scare off house purchases. However, 2024 has started with many lenders reducing their rates, which has led to an increase in enquiries, so 2024 is looking positive at this moment in time. Houses are still coming on the market and selling at a reasonable rate. There are a number of housing developments being built in the area, and have been for a number of years, currently a number of housing developments popping up in the area, continuing a trend seen for a number of years to meet this demand. In fact, he believes this is set to further increase opportunities in the region, as a growing number of homes are continually being made available to potential buyers. Greenwell agrees, citing the Green Park area in particular as a location of significant development. Given the ongoing construction of the new A1 Road, he also expects this demand for new development and infrastructure to continue.

Buy-to-let opportunities When it comes to the area’s buyto-let (BTL) market, this too seems to be bucking the more bleak national trends. With a private rental sector (PRS) that takes up 21.5% of the region’s housing stock – a reasonable figure when compared with the national average of 23.6% – Newcastle displays a clear demand for rental property. Indeed, Khalid notes that the North East has always been notoriously popular with landlords, once again due to the area’s cheaper house prices, which can result in higher rental yields for local property investors. According to Greenwell, he has seen an increased number of landlord buyers looking to purchase via a

so the number of houses that are available on the market is increasing. With 2024 starting off with many lenders cutting their rates, I have noticed an increase in enquiries already from first-time buyers and those looking to move homes. In 2023, first-time buyers fixed in for longer than those who were remortgaging, due to their appetite to risk. I deal with a variety of high street lenders as well as specialist lenders that are tailored towards specific clientele, such as clients with bad credit. Due to the nature and variety of clients I deal with, there aren’t any specific lenders that are better established, as I always look to match the best lender to the clients’ specific requirements. The North East is notoriously popular with buy-to-let landlords, due to the cheaper house prices and higher rental yields. However, even with this in mind 2023 was slow; nevertheless, I am anticipating 2024 to be better.

limited company structure due to recent tax changes. In light of this, he says that the rental market in the area has been relatively healthy as of late, with highyield opportunities enticing many landlords to join the market.

A dynamic sector With lower than average property prices and new stock coming to the market, Newcastle has remained largely undeterred by the economic

turmoil of last year. Boasting a solid first-time buyer appetite, numerous new developments and a vibrant rental space, the region presents plenty of opportunities for borrowers and brokers alike. With the dawn of 2024 ushering in a wave of new lender rate reductions and more competitive mortgage products coming into the market, Newcastle’s dynamic mortgage sector is unlikely to slow down any time soon. ●

PROPERTY SALES SHARE BY PRICE RANGE Price range

Market share

Sales volumes

● Under £50k

2.9%

343

● £50k-£100k

17.9%

2,200

● £100k-£150k

24.9%

3,000

● £150k-£200k

18.4%

2,200

● £200k-£250k

11.2%

1,300

● £250k-£300k

7.6%

916

● £300k-£400k

8.8%

1,000

● £400k-£500k

4.1%

497

● £500k-£750k

3.1%

366

● £750k-£1m

0.8%

● Over £1m

0.3%

Newcastle Postcode area Residents

1.2m Average age

41.4

Residents per household

2.28

www.plumplot.co.uk Data source: www.gov.uk/government/statisticaldata-sets/price-paid-data-downloads

January 2024 | The Intermediary

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SB Group has welcomed Kelly Iles as group customer and Consumer Duty director, to focus on enhancing customercentric practices across its operations. Iles, who specialises in customer experience, digital transformation and customer journey management, said: “I can already see a clarity of strategy and a real desire[...]to ensure customers receive the right outcomes. I am incredibly passionate KELLY ILES

Loans Warehouse welcomes new head of network growth and distribution

oans Warehouse has appointed Natalie McNamara as head of network growth and distribution. Previously at Finova, she has experience in roles such as mortgage club manager and national sales manager, and most recently as head of relationships. Ma Tristram, co-founder of Loans Warehouse, said: “We have very ambitious plans for this year and many rest on growing our panel of mortgage networks we have relationships with. To achieve this goal we needed the right person and we’ve been waiting over a year for the opportunity for Natalie to join and lead that growth. McNamara said: “I had the unique experience of beginning my career during a time of unprecedented growth and subsequent volatility, this pushed me to strive for the best results[...] I’ve been lucky enough to meet many senior people from many networks over the NATALIE MCNAMARA last 18 months, I can’t wait to have the opportunity to introduce Loans Warehouse and deliver the best proposition for second charge and bridging loans in KELLY ILES the UK.”

The Intermediary | January 2024

about inspiring others to identify opportunities to improve the overall customer experience, delivering the right improvements that will make a difference to the lives of our customers. John Hall, group managing director, said: “Positive customer outcomes are absolutely vital and central to everything we do and with Kelly onboard I’m confident with her wealth of expertise across strategy, delivery and insight that we will continue to innovate and adapt our service to meet the multiple and sometimes complex needs of our customers."

Together appoints personal finance CEO

ogether has appointed David Broadbent as CEO of its personal finance division. Broadbent has more than 25 years’ experience in financial services, and will head up all aspects of personal finance lending. Broadbent said: “I’ve known the business for some time as a lender which challenges and disrupts the status quo and have been really impressed with its growth to become one of the UK’s biggest non-bank lenders. My brief is to grow the personal finance business, something I’ve particularly enjoyed throughout my career in financial services." DAVID BROADBENT

Roma Finance makes raft of new appointments

oma Finance has appointed Amer Watson and Shahed Popat as business development managers (BDMs). Watson will cover Yorkshire, the North East and Scotland, while Popat will cover the South East and London. Claudine Reynolds and Alan Collins will also move into relationship management roles to focus on partnerships and growing business with affiliates. Michael Allison, commercial director, said: “We had huge success in 2023 with multiple record-breaking months and we are starting 2024 by strengthening our commercial team in line with the needs of our customers and brokers. We have ambitious targets which we have communicated with transparency. As we grow, we need to bring in exceptional talent to execute our sales strategy and take advantage of every opportunity."

CII confirms appointment of new chief executive

he Chartered of our organisation’s staff, Insurance will enable the CII Group Institute (CII) to achieve the goals and has named ambitions set out in our Ma hew Hill as chief five-year Strategic Plan executive. launched last year. Hill is currently chief Hill said: “I have been very executive of the Legal impressed by the CII’s very MATTHEW HILL Services Board, a position he clear intent to provide first-rate has held since August 2019. sector leadership on behalf Dr Helen Phillips, chair of the of its commi ed and passionate CII Group Board, said: “[Ma hew's] membership, and to deliver the leadership, combined with the highest professional standards for energy of our members and the the benefit of public trust in the commitment, hard work and deep insurance, financial planning and technical and sectoral expertise mortgage advice professions."

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