The Intermediary – July 2024

From the editor...

Of course, the conversation on everybody’s lips is the General Election, and in case I haven’t quite exhausted the topic of politics across my recent editor’s comments, it’s only right that we take a moment to ponder the result.

It’s not Labour’s victory that I’d necessarily like to discuss – if nothing else we did that one to death before it even came to pass.

At one point, it was with great discomfort I found myself spouting rhetoric post-election that only moments later came pouring out of Nigel Farage’s mouth as he did the circuit for anyone who would give him a platform.

No, I haven’t abandoned my bleeding-heart liberal roots, but I have always had serious reservations about the ‘first past the post’ system. Or at least I did, until the horror of hearing him echo my own words made me think twice.

While I will be pondering the disturbing point that, under a more representative form of democracy, Reform would have done even be er, a er the initial shock of agreeing with a man I think represents some of the worst of elements of this country, I do still stand by my conviction that we’re working with a broken system.

You only have to look back at Corbyn’s ‘crushing defeat’ compared with Starmer’s ‘storming success’ – and tally the actual votes – to see that it’s all a bit laughable. Insulated from the rabid right, maybe, but if I am a true fan of democracy I have to quote Evelyn Beatrice Hall – o en misquoted as Voltaire, before you start

writing that email – and say that “I disapprove of what you say, but I will defend to the death your right to say it.” So to Farage – a reader, I’m sure – I say, I too stand by the right of the British public to have their votes, and their views, fairly represented, even if it makes me deeply uncomfortable.

Regardless, Labour is in. It remains to be seen if its promises come to fruition – who in this market is not a bit jaded about all these ‘build, build, build’ promises? – but there does seem to be a palpable sense of relief in stability, and perhaps even positive growth.

Speaking of growth, and moving on from politics – hopefully for a while – this month our special focus homes in on the second charge market. A thriving sector o en not given its due, we hand over the reins to the experts – new entrants and old hats alike – to walk us through its myriad uses, bust the myths, and outline the blueprints of a market on the rise.

Far more than adverse credit and a last resort, second charges form an important part of the diverse tapestry of the property finance market, even more so as borrowers’ needs evolve.

In honour of the importance of this sector, The Intermediary has launched our very own industry awards, with the inaugural event dedicated entirely to seconds. Keep an eye on the site and socials to get involved. ●

Jessica Bird

@jess_jbird

www.theintermediary.co.uk www.uk.linkedin.com/company/the-intermediary @IntermediaryUK www.facebook.com/IntermediaryUK

The Team

Jessica Bird Managing Editor

Jessica O’Connor Reporter

editorial@theintermediary.co.uk

Stephen Watson BDM

stephen@theintermediary.co.uk

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Helen Thorne Accounts

nance@theintermediary.co.uk

Barbara Prada Designer

Bryan Hay Associate Editor

Subscriptions

subscriptions@theintermediary.co.uk

Contributors

Ahmed Bawa | Alan Fitzpatrick | Alex Willis

Anna Lewis | Ashley Pearson | Averil Leimon

Brian West | Caroline Mirakian | Christopher Tanner

Colin McArdle | David Kingham | David Whittaker

Geo Hall | Graham Jones | Ian Leyden

Ian Merriman | Jason Berry | Jay Naylor

Jerry Mulle | Joe Grace | John Price | Kathy Bowes

Katie Wilsher-Garratt | Kelly Melville-Kelly

Laura Sneddon | Lisa Martin | Lucy Waters

Luke Loveridge | Marcus Dussard | Marie Grundy

Mark Blackwell | Mark Eaton | Martese Carton

Matt Tristram | Michael Conville | Michael Craig

Mike Walters | Narinder Khattoare | Natalie omas

Neal Jannels | Neil Leitch | Nicky Kay | Paul Hilton

Richard Rowntree | Rob Barnard | Rob Oliver

Rob Stanton | Robin Johnson | Roger Churaman

Roger Morris | Sam Clark | Simon Martin | Stephanie

Charman | Steve Carruthers | Steve Goodall | Tony

Hall | Tony Marshall | Will Calito | Will Shackleton

SECOND CHARGE

FOCUS ISSUE JULY 2024

Feature 6

Blueprint for growth

Natalie Thomas looks at a market in the next stage of its evolution

Opinion 14

Insights into the second charge market from Admiral, Pepper Money, UTB, Interbridge and more

REGULARS

Rapid reaction 48

Thoughts from across the market in the wake of the General Election

Broker business 70

A look at the practical realities of being a broker, from e ective communication to the monthly case clinic

Local focus 90

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

On the move 94

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

SECTORS

Local Focus 86

INTERVIEWS

The Interview 26

LOANS WAREHOUSE AND ROGER MORRIS

Matt Tristram and Roger Morris discuss the bright future of second charge

In Pro le 18

BRILLIANT SOLUTIONS

Michael Craig on the challenges and opportunities in secured loans

Q&As 60, 68

MT FINANCE

David Kingham and Joe Grace take a look at the latest Bridging Trends report

HAMPSHIRE TRUST BANK

Neil Leitch discusses the current state of development nance

Meet the BDM 54

PARAGON

Roger Churaman on the challenges and opportunities facing business development managers

Blueprint for growth

NEXT STEPS FOR A SECTOR PRIMED FOR SUCCESS

Natalie Thomas for The Intermediary

The second charge mortgage market is currently worth around £1.5bn, according to the latest figures from the Finance & Leasing Association (FLA). While this is an impressive number, at its peak it reached around £6bn. So, how can the sector ensure it makes the most of the UK’s economic recovery, and the growth opportunities available, to return to and surpass those heights?

Approximately one in three borrowers raising capital are using a second charge, illustrating that this market is already a powerhouse in its own right. With innovation in the sector, new entrants spurring competition, and wider economic conditions supporting demand, there is plenty to be positive about in the second charge sector.

However, a significant portion of secured loan business comes to master brokers through direct online channels. If the market is set for substantial growth, more must be done to ensure that mortgage brokers get a piece of the pie.

Increasing awareness

To capitalise on opportunities for growth, those in the second charge market must continue with the positive work that has already been done to establish it as a strong tool in a broker’s arsenal.

“The second charge market has experienced strong growth recently, but I think the market still has plenty more potential,” says Marie Grundy, managing director of residential mortgages and second charge at West One.

“Part of the reason for that growth is down to increasing awareness. While there are still brokers who hold misconceptions about second charge loans, an increasing number are becoming alive to their benefits,” she adds.

“But longer-term, if this market is to grow – and I am very confident that it will – then education is key. Specialist distributors and second charge lenders have done a great job in preaching the benefits of these loans in recent years, but we have to keep banging the drum.”

Mike Walters, sales director at Admiral Mortgages, which is set to launch into the seconds market this year, says that the industry has often talked about the potential of second charge mortgages without taking the action needed to help the market truly grow.

“The fact is that everyone in this industry needs to act as advocates for the products, go further in showcasing how they can be used, and the flexibility they offer,” Walters says.

“We also need to do a better job in tackling head-on the perception issues that homeowner

loans have always suffered from, and which have acted as a brake on the growth of the sector.

“If we all champion homeowner loans properly, then we can ensure that intermediaries are better able to promote the full range of circumstances where they can be beneficial. They could – and should – be a more central aspect of the adviser’s toolkit.”

Jimmy Allen, broker account manager at Norton Broker Services, believes there is a huge appetite from lenders to support consumers in

“Speaking with brokers on a daily basis and helping them gain a better understanding of the second charge mortgage market will help the sector evolve, and enable greater diversity in

The industry has spent the past decade educating mortgage brokers about the benefits of second charges. While the progress has been exponential, misconceptions do still persist”

product development,” he says. “Over the past decade, there has been a real push to change the sector’s image through the innovation and improvement of products, many of which are now being offered with a direct focus on addressing the specific needs of consumers.

“From a compliance perspective, working closely with regulators also ensures that second charge mortgage products meet high standards of consumer protection and transparency.

“This has instilled further confidence in the product and the overall market.”

Busting myths

The industry has spent the past decade educating mortgage brokers about the benefits of second charges. While the progress has been exponential, misconceptions do still persist.

Grundy says that in the past, second charge mortgages were widely associated with sub-prime borrowers or those with credit issues.

“That’s not the case anymore, if it ever was,” she

says. “These days, second charge lenders have ranges and criteria to suit all sorts of borrowers, from those who have poor credit all the way to high net worth [HNW] borrowers with perfect credit scores.

“Second charge lenders also tend to have more accommodative criteria than the high street, offer quick turnaround times, and have keenly priced rates.

“Some brokers still need convincing, of course. I sometimes hear from brokers that they feel they don’t have any clients on their books for whom a second charge would be appropriate.

“However, they are surprised when I say that a sizeable portion of our borrowers are HNW individuals raising extra capital for high-end home renovations, or to buy an additional property.”

Caroline Mirakian, sales and marketing director at United Trust Bank (UTB), agrees that the market can still carry the image of being one of ‘last resort’ – which is not the reality.

“We went into the roof because they invented this thing called ‘second charge’”

“The majority of borrowers we see do not wish to touch their existing first charge and may require swift funding without losing a great low rate on the main mortgage. They are a prime borrower, not near-prime,” she explains.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI) says affordability assessments for a second can sometimes work out better if a borrower is paying off existing debts.

“On the first charge, a broker would have to take the cost of the existing credit card debt or loan into account in the affordability calculation,” he says.

“However, if you’re going to pay off some of that debt through a second charge, the debt wouldn’t need to be included. You would then consolidate the second and the first charge mortgage further down the line, potentially when the borrower’s credit score has improved.”

Allen says that, historically, the majority of second charge mortgages were used for debt consolidation and home improvement purposes; however, the higher interest rate environment has changed that, and it looks set to continue shifting as more customers and brokers embrace the product’s many uses.

“The use of second charge mortgages has increased due to borrowers looking to avoid remortgaging their existing preferential rates,” he says.

“We come across a number of borrowers looking to capital raise for other reasons, including business purposes and investment purposes, such as purchasing additional properties to expand a buy-to-let portfolio.

“Other reasons include paying school fees, buying a caravan or motorhome, or to cover the cost of legal fees.”

The issue of fees

Consumer Duty and other regulations by the Financial Conduct Authority (FCA) have helped, alongside work done within the industry, to put the sector on a regulatory par with first charge mortgages. Nevertheless, the misunderstood issue of fees also continues to be a sticking point for some mortgage brokers.

“I think there are people who believe the fees are higher than they should be, but that’s because they don’t necessarily understand all the work involved,” says Sinclair.

“From a fair value assessment viewpoint, the packager has to pay for the valuation, complete all the legal work and all of the documentation to get the transaction across the line, which is often more complex than a mortgage.”

p

What must be done to grow the seconds market further?

Ryan McGrath is second charge sales director at Pepper Money

We live in an environment where household finances continue to be squeezed, unsecured credit levels are increasing, and higher mortgage rates provide an incentive against remortgaging to raise capital. This is particularly true for any mortgage customers who still have time remaining on their current deal, or who are benefitting from a low lifetime rate.

The second charge mortgage market is growing, but set against this backdrop there is an argument to say that it should be growing at a faster rate. There are many customers who definitely have an appetite to raise finance, and second charge lending can provide a fast and cost-effective way of doing this.

To grow the seconds market further, we need to continue to raise awareness and understanding among both brokers and borrowers.

Education is key. Brokers need to be fully informed about the benefits and appropriate uses of second charge mortgages so they can confidently advise their clients. Additionally, lenders should simplify and streamline the application processes to make second charges more accessible and attractive.

There is certainly an awareness problem among customers. According to the most recent Pepper Money Specialist Lending Study, only 12% of people would consider a second charge mortgage if they wanted additional borrowing secured on their home. We would certainly benefit as an industry from working to ensure that customers are better informed about second charge mortgages.

A typical customer for a second charge mortgage is anyone looking to raise additional funds without disturbing their existing mortgage. This includes individuals who are locked into a favourable rate on their first mortgage, those facing early repayment charges, or those who might choose a product transfer rather than a remortgage because their circumstances have become more complex since they took their previous deal.

We lend to customers who need funds for home improvements, debt consolidation, or significant personal expenses. A second charge could even be used to release equity to help family members onto the property ladder or purchase an investment property, and the funds could also be used for business investment or paying a tax bill.

Within the industry, we need to stress the importance of considering all available options for customers, and where a customer has a capital raising requirement, a second charge may well be the most appropriate product. Brokers who do not, at the very least, make their customers aware of this option are failing them. I think we need to be very clear about that.

Mirakian emphasises that the level of fees should not deter brokers from conducting their assessments, saying: “These fees, reflecting the additional work and perceived risk, can impact the overall affordability and attractiveness of second charge loans.

“Nonetheless, the benefits – such as access to funds for home improvements or debt consolidation – should not be overlooked.”

Mirakian explains that brokers can endeavour to address this issue by properly assessing and explaining the value and benefits to their borrower clients.

Jonny Jones, chief executive officer of Interbridge Mortgages, another new player in the seconds market, believes Consumer Duty has ensured that everyone sets fees that reflect the benefit to the customer, as well as the cost of delivering the product and the service.

“In many cases, the value delivered to customers by the product is so compelling that the fair value assessment conducted under Consumer Duty confirmed that the product was already

New lenders are already stirring up competition and innovation, while industry stalwarts continue to work hard to improve their processes and products”

working well, but a structured approach to the assessment provides transparency and ensures that value is delivered consistently to all borrowers,” he says.

“I’ve worked in the second charge industry for many years, and from a lender’s perspective we’ve always worked hard to deliver good outcomes. What Consumer Duty has done is ensure that best practice and good behaviour is formalised and measured.

“Consumer Duty has made it very transparent,

“You didn’t even show him the top hat department!”

where it is and isn’t the right product for a customer, which can only be a good thing.”

A greater push

Matt Tristram, co-founder of master broker Loans Warehouse, believes that for the market to continue to grow, mortgage networks must be more supportive.

“One of the biggest changes needed is for networks to treat second charge mortgages with the same importance as first charge mortgages,” he says.

“This requires a shift in mindset to see the long-term potential for income and improved customer outcomes from a second charge.”

This market has already done plenty of work to ensure that brokers understand the value and uses of second charge mortgages.

Now, Tristram suggests, the focus should be less on education, and more on promotion –keeping second charge mortgages at the forefront of brokers’ minds.

“Mortgage lenders on a network’s panel often have multiple business development managers [BDMs] covering the country, consistently promoting their products, and it’s hard for seconds to compete,” he says.

“In the mortgage market, 84% of business is introduced to lenders through brokers, whereas for our second charge business, under 10% comes from mortgage brokers.”

Tristram believes that some brokers turn borrowers away incorrectly, thinking that there are no options to fit their particular needs, without seriously considering a second charge.

Some of those borrowers, still looking for a solution, will then go online through a comparison site and submit a secured loan application that way. This is clearly a loss for the original broker, who loses the opportunity to provide a valuable service to their client and build on their existing relationship.

Matthew Arena, managing director at Brilliant Solutions, also warns that one of the dangers of a borrower going online – beyond the loss of potential additional business and a strengthened relationship for the broker – is that they risk not receiving first charge mortgage advice.

“We always insist that clients have had first charge mortgage options assessed, or are having them assessed, in order to ensure the best outcome for clients,” he says.

“What I mean by this is that clients seeking a secured loan will find one, whether that is the most appropriate outcome for them or not.

Clients talking to a mortgage adviser about raising funds are far more likely to get the best possible outcome if that adviser considers

secured loans and specialist mortgage options.”

Arena also highlights the long-term impact on the broker-client relationship when a borrower goes online and finds a solution for themselves that their broker could have helped them reach.

“All parties involved, from the search aggregators, comparison sites, and master brokers, will be using the client data and marketing to them ongoing,” he says.

“Master brokers have mortgage advice arms too, and we know comparison sites are all well catered for on that side as well.

“This means that brokers risk losing clients that they turn away for specialist solutions; they risk the ongoing relationship, not just the loan itself.”

The near future

Looking ahead to the next 12 months or so, there is likely to be substantial movement within the second charge market. New lenders are already stirring up competition and innovation, while industry stalwarts continue to work hard to improve their processes and products.

Beyond this, those with an interest in furthering the progress of this market are working hard to ensure it remains at the forefront of people’s minds, for the sake of the sector, the broker, and ultimately the borrower.

Through all of this work, the stage looks set for a positive future.

Tristram says: “Since the start of the year, we’ve presented to hundreds of mortgage brokers and received positive responses from 99% of them, yet we’ve only scratched the surface.

“We notice an uptick in inquiries after presentations, and word-of-mouth referrals increase once deals are completed.

“Many firms have approached us saying they want to include second charges on their panel because they believe it’s important to offer this option to customers – especially in light of Consumer Duty.”

He concludes: “I think Admiral Money will be a game-changer for the market when it launches later this year, due to its market reach, strong brand and positive profile.

“A well-known brand provides reassurance to borrowers, and the same can go for a referral to a master broker from a borrower’s trusted broker.

“If every mortgage broker had to consider a second charge when capital raising for a client, the customer would engage with the second charge market more trustfully.”

With this combination of growing brand recognition, increased awareness and promotion, and ongoing innovation across the market, this is certainly a sector that deserves a second look. ●

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No longer niche products

It is o en forgo en, but Facebook hasn’t always been a social media platform for everyone and anyone as it is today. It started life in 2004 with a much narrower focus –to allow Harvard University students to connect with one another within a walled garden.

A er some initial success, it soon spread to other universities, then workplaces, before opening its doors to anyone aged 13 and over in 2006. In other words, it had gone mainstream.

In a way, when I think of Facebook I can’t help but see parallels with the evolution of the second charge mortgage market here in the UK.

Mainstream mainstay

We’ll never see second charge mortgages match Facebook for popularity – 2.8 billion borrowers might be a bit of a stretch – but like the social media network, these loans were once considered a niche proposition.

For years, many people – perhaps unfairly – lumped second charges in with sub-prime and bad credit. I’d argue that today, however, second charge loans should be considered mainstream products and a mainstay of any broker’s armoury.

Data from the Finance & Leasing Association (FLA) shows that second charge lending soared 40% year-onyear in April.

In the previous 12 months, second charge lenders wrote nearly £1.5bn worth of business. This alone shows that this is no longer a small, peripheral market.

One of the main drivers of that growth is, of course, the rise of the product transfer (PT), accouning for more than eight in 10 residential refinance cases in Q1, according to UK Finance. The benefit of a product transfer is that the borrower doesn’t have to go through an affordability assessment. The drawback is that they

are pound-for-pound transactions, meaning the borrower cannot release further capital.

Therefore, those borrowers who have additional borrowing needs must look at a further advance, a personal loan or a second charge. The growth of the second charge market over the past few years suggests they are increasingly choosing the la er.

In our experience, most second charge borrowers are people who have additional borrowing needs and have an a ractive first charge rate that they don’t want to disturb. Importantly, they are not typically the type of borrower you would associate with sub-prime or bad credit – far from it.

Our own data shows more than 80% of our borrowers currently have a high street mortgage and typically qualify for one of our top-tier products. The vast majority of these are employed, rather than self-employed, and have good to excellent credit scores.

We have also seen a sharp rise in the number of borrowers with high incomes who want to raise additional capital to make high-end home improvements or invest in another property, such as a holiday let. That shows there is demand for this type of finance among high-net-worth (HNW) borrowers, which is why we recently developed an interest-only product aimed at these people.

Flexible and generous

Once borrowers and brokers take the time to learn a li le about second charge loans, the a raction of using them becomes obvious.

The difference between first and second charge rates has narrowed over the years, removing one of the barriers to taking out one of these loans.

Borrowers also find that second charge lending criteria is o en far more accommodative than what’s on offer in the mainstream mortgage market. For a start, loan sizes tend to be generous, with borrowers o en able

MARIE GRUNDY is managing director

of residential mortgages and second charges at West One Loans

to borrow up to £1m with a number of lenders.

Second charge providers are also o en more flexible to the needs of self-employed borrowers, who could be eligible for a second charge with a minimum of just 12 months’ trading history.

Fast process

Another a raction is the speed of the second transaction. Second charges are arranged with streamlined legal requirements and o en can proceed with an automated valuation. For expertly packaged cases, it is not uncommon for cases to reach offer stage within a ma er of days.

Over the years, I have o en heard from brokers that they would explore a further advance before entertaining the idea of recommending a second charge.

That’s fine. In some cases, a further advance may be the best option for a borrower. But o en, the criteria are more restrictive, transaction times are slower, and the broker loses control over the process.

Other brokers have told me that they don’t have any clients on their books for whom a second charge mortgage would be appropriate.

In the past, that may have been the case. But second charge lenders’ offerings have come a long way over the past decade, to the point where they have a solution for most UK homeowners. Like Facebook, the second charge market has gone mainstream. ●

A concerted effort to truly reach the potential

Speak to anyone in the second charge market – or ‘homeowner loans’ as we prefer to call them – and they will tell you now is the time for the market to reach its full potential.

The trouble is, we’ve been saying the same thing for years. If you go back through the trade titles over the past five or even 10 years, all sorts of opinion pieces from those in the industry suggest homeowner loans are about to break through, but the truth is they have never quite had their moment.

This market could – and frankly should – be much bigger. These loans serve a crucial purpose, supporting those with borrowing needs who don’t want to remortgage, for example to consolidate debt or carry out home improvements. The case for remortgaging has become even less compelling given interest rate movements, with homeowner loans offering the perfect alternative option.

But it isn’t going to reach its potential without a concerted effort; talking it up alone isn’t going to do the job, it’s about action and innovation.

The right direction

It has been a positive year so far for homeowner loans, as demonstrated by the latest figures from the Finance & Leasing Association (FLA). The value of new agreements in April grew by 40% compared to the same month last year, to £138m, while the number of agreements rose by 36%.

This isn’t a one-off, either. New business has increased each month this year, putting the subdued nature of much of 2023 behind us.

The economic situation has played its part here. The challenges of recent years have led households to take on

various credit lines in order to keep up, and they now want to take better control of those debts.

But it’s the aspirational side that is often overlooked. There are significant numbers of borrowers who want to use equity to improve their home instead of moving. According to the FLA, around 37% of homeowner loans in April had a component of home improvement.

This is encouraging, but I believe the market has far greater potential. I see that potential not just for new entrants that want to approach things differently, and their partners, but for homeowners who want to use their equity for more than settling debts.

A different perspective

The homeowner loan market has struggled for a long time now with perception issues. An awful lot of intermediaries historically would have classed these loans as a last resort, used only when a client couldn’t remortgage, get a further advance, or turn to unsecured borrowing.

This is problematic in a few ways. First and foremost, it’s a pretty unhelpful mis-characterisation of the position of homeowner loans – they are far more flexible and useful than this gives them credit for. Obviously they won’t be appropriate for everyone – there’s no financial product that is – but they can work for far greater numbers of borrowers than have utilised them to date.

What’s more, that impression of seconds has held back the development of the sector itself. There will be intermediaries, lenders and others who have opted against moving into homeowner loans precisely because of this inaccurate impression. How can the market possibly reach its potential, and deliver for a greater

MIKE WALTERS is sales director at Admiral Mortgages

proportion of homeowners, when it is being viewed in this way?

Thankfully, this is changing, with new intermediaries becoming clearer about the role of these products every day. Some lenders have invested substantial time and energy into highlighting how homeowner loans can work for borrowers, working closely with clubs and networks. Progress has been made, but significant work remains to be done to really break through into becoming a central feature of most advice toolkits.

This isn’t just about one lender. We must advocate for the sector as a whole. If homeowner loans reach what we know is their potential and become a more prominent feature in finance, everyone benefits: intermediaries, other lenders, and most importantly, customers.

Good times lie ahead

Seconds as a first consideration is where we need to get to. With more options to cater to customers’ changing needs and efficient technology to make the process smoother, we can be much more approachable and engaging.

Even those who do consider homeowner loans are perhaps not grasping the full range of circumstances where they can make a tangible difference to their clients.

Across the industry, we can showcase what homeowner loans can do, so they are considered at the very outset. Ultimately, everyone – from intermediaries and their clients to lenders active in this market – will benefit from a bigger, more impactful homeowner loan sector. ●

In Profile.

The Intermediary speaks with Michael Craig, managing director at Brilliant Solutions, about the challenges and opportunities in secured loans

Michael Craig has worked with Brilliant Solutions for the past decade, becoming managing director in February, having worked his way through the ranks all the way from packager.

The firm itself has been running since 1994, but it was only post-Credit Crunch that Brilliant Solutions took steps to diversify outside of the standard mortgage market where it found its initial success. As part of its expanded reach, the firm launched Brilliant Loans, catering for second charge.

Holistic proposition

While the changing business model was largely about surviving a difficult time, it has since equipped Brilliant Solutions to handle the changing market.

“The vision was to have a one-stop shop for all mortgage brokers, rather than looking after one part of the market, in case anything like the Credit Crunch ever happened again,” Craig explains.

the business, particularly with interest rates and other macro-economic factors as they are.

However, being whole of market does not mean taking a uniform approach. For seconds, Craig says, the process is by necessity “very manual compared with other areas.”

“It’s more manually underwritten, to dive into the crux of the case and make sure it definitely is the right option for the client,” he explains.

MICHAEL CRAIG

“It’s got nuances and quirks – what does it look like when the first charge is up, for example? – and it’s very forwardthinking.”

Perhaps counter-intuitively, in a sector that is typified by speed, it can be this manual approach that helps keep cases moving at pace. Whereas Craig says firsts can be “very start stop” by the nature of the product, in seconds, it is important to stay on top of the nuances and potential pitfalls in order to keep the deal running smoothly the finish line.

“We’ve tried to build on that one-stop vision, where brokers can come to us for anything and we will find a home for their client, whether that’s bridging, seconds, high street options, adverse, expats, equity release, and more. Then, we have specialised experts within each of those departments to support.”

While industry-shocking events have continued to arise, Craig says the business “has gone from strength to strength since Covid-19” under this model, dealing with the biggest directly authorised (DA) firms and networks in the country, despite facing “struggles outside of the industry’s hands.”

When it comes to second charges, this holistic model has helped face down one of the market’s hurdles, which is the struggle to get brokers to consider seconds as an option in all relevant instances. For Brilliant Solutions, any enquiry gets looked at by all relevant departments in the first instance, to ensure all options are considered.

Homing in to seconds specifically, Craig says there is “always room to grow,” and is positive about the potential to tap further into this part of

There are also other benefits to having a human oversight, such as the fact that if a second is being used for debt consolidation, there is a raised chance of vulnerability, and it is important to be able to “check the history and the reasons” to ensure that a client is not going to be put at a greater disadvantage.

Craig adds: “We’ve invested massively in our systems to keep the gears moving, but we stick to those manual principles. Talking to humans is important in the second charge market.”

Education and awareness

To take the next step in this market, Craig calls for more education from master brokers and lenders.

“We need the industry as a whole to say ‘this is what a second charge looks like’,” he explains. “Up until very recently, brokers would just stumble across it rather than thinking of it as an option for their client.”

Brilliant Solutions plays its part via a wide range of initiatives, from face-to-face events to webinars and online briefings. Importantly, Craig explains, these conversations – particularly when they are done alongside lenders – cannot

simply focus on criteria. Instead, those trying to promote this product should ensure conversations cover the market, key statistics, and the various uses of second charges, in order to help people understand the full picture, the strength of the product, and its potential relevance.

He adds: "It's important to make the most of opportunities via our regional educational events, held across the UK, while continuing to support the London-based brokers."

It is also important to strike a balance between clear, structured education and the equally important art of relationship building.

“We do as much as we can as a business, turning up at as many events as we can,” Craig says.

“It has to be done in a structured way, but at the same time, you don’t want there to be too much structure and sticking to an agenda when actually it’s as much about and having a conversation. We don’t have enough adult conversations about how we can make things better.”

Keeping up appearances

Looking back at the launch of Consumer Duty, and previously the Financial Conduct Authority’s (FCA) review of the seconds market, Craig says that there has been a marked improvement in ensuring that brokers outside of seconds consider this product more deliberately.

“Brokers are getting a lot more interested in the second charge market, because of some of the education coming from those of us in the sector,” he says.

This is also important in a market that can still face misconceptions and caution because of “the name that it has had,” albeit one that Craig points out was likely not warranted in the first place.

“Education is the main point, to get away from the misconceptions about this market,” he adds.

“The same thing can be a problem for packagers in general, where brokers simply will not use them because of experiences from years ago.”

Consumer Duty is part of this, according to Craig. He says: “Any regulation that puts a spotlight on selling what I believe is an under-serviced market is a step in the right direction.”

While he notes that it “always takes time for the market to settle,” and that the full effects of the new regulation will not be seen for some time, Craig says the duty will drive greater transparency with elements like fees, and create a more positive environment for borrowers where they are more likely to get access to all the options.

Looking ahead, he says: “Has it raised a few questions? Yes. But Rome wasn’t built in a day, and we have to buy into these developments, even if some of it hasn’t gone as well as we might have wanted it to.”

Ultimately, Craig has confidence that the duty’s “main aim and purpose” – namely, to get brokers taking a more holistic view of the market – will come to fruition, and that brokers and networks will “get on board” and give greater consideration to seconds.

Broker bubble

One of the things that Craig feels has held brokers back – quite understandably – been a reluctance to pass off their hard-earned clients.

While the message that they do not have to advise on a product they are not au fait with is clear, Craig says many are unwilling to burst their “broker bubble” to partner with an expert.

“As a broker, I don’t want to send my client out of that bubble, unless I am recommending them out of it, and it’s to someone I trust, am willing to partner with, and more importantly that isn’t going to take a part of my business,” he explains.

“What third-parties can sometimes forget is that these clients are the broker’s bread and butter, putting food on their table. We have to treat them as we would treat our own customers, but more importantly, we have to understand the reasons why brokers are reluctant to hand these clients off – they are the biggest asset they have as a business. One bad experience with someone you refer to, for example, could cause you to lose a client you’ve had for years.”

All change in the market

2024 is set to see a shake-up in terms of new entrants, including a household name in Admiral.

“The more the merrier in the second charge space,” says Craig. “All new entrants are a positive, and competition is healthy. More lenders means more potential awareness of the market, more people talking about seconds, which pushes positivity. Working together as third-parties and lenders means we grow the sector, so more lenders coming in can only be a positive.”

Craig points to competition on price, as well as innovation around both products and processes, all of which for part of a healthy market, and provide “the flexibility to help more clients.”

He adds that brokers and lenders – new and old – should be aware of the balance between speed and terms. While securing fast funds is often important, speed is only one factor in securing the right deal for the borrower’s circumstances.

Craig looks ahead to an education and awareness drive, highlighting seconds in the right way – but he says the challenge will be ensuring that people “have the foresight to listen.”

Nevertheless, he feels the future holds product innovation, an influx of more advisers, the banishing of stigma, and greater collaboration. ●

Why ‘seconds are for adverse’ is an outdated notion

Those of us of a certain age may recall that on 24th November 1977, Virgin Records was put on trial at Nottingham Magistrates Court for using what was considered to be an obscenity on an advertisement for the Sex Pistols’ upcoming album.

I am inclined to use the same word here; however, I shall refrain from doing so in the interests of professionalism. But you get the message: never mind the nonsense!

Second charge products are designed to offer solutions to all types of consumers. Yes, there are products that cater for consumers who are disenfranchised from mainstream lending solutions by virtue of their credit profile, but this segment is relatively small; around 10% of market share involves lending to consumers with credit profiles that exclude them from mainstream solutions.

embarrassingly high rates either –some as low as 6.5% per annum. This is not a new thing, it’s been like this for as long as I can remember. So, why do customers find their way into the second charge sector? Consider some of these options:

o To avoid early redemption charges (ERCs) on their first charge. If a client has an existing mortgage, remortgaging might lead to paying an early redemption fee which can be an unwelcome extra expense.

o An existing mortgage might have particularly low rates. Remortgaging to a new product runs the risk of losing a good rate and increasing a client’s repayments.

o If a client’s first mortgage is on an interest-only basis, remortgaging could mean they have to move to a repayment mortgage with more costly monthly payments.

TONY MARSHALL is CEO at Equi nance

self-employed they might want to consider a second charge option to help them grow and expand. Being self-employed can make it difficult to obtain a remortgage.

o Tax bills: raising funds to cover an upcoming tax bill is not a purpose that high street lenders will accept as a valid loan purpose, making a second charge mortgage a more popular option.

o Paying school fees.

o Purchase of a second home.

At the more unusual end, we have also provided funding to purchase dogs, horses – not betting on them of course – and even an ecoholiday development, along with many others.

of the second charge market, income, and not at

In fact, if we take a closer look, the ‘prime’ segment represents circa 70% of the second charge market, and when we say prime, I really mean prime customers: high credit score, good stable employment, and disposable income, and not at

o When a client has suffered a change in circumstances such as loss of a job, their credit score might mean that a remortgage becomes more difficult to obtain.

The right solution

difficult to obtain.

o have gaps in income, variable remortgage harder.

Self-employed clients can have gaps in income, variable income or various income sources. This makes securing a remortgage harder.

In addition, a large proportion of

slightly, because we know that a

In addition, a large proportion of our loans are used for consolidation of debt. This has always puzzled me slightly, because we know that a second charge mortgage can be used for many other purposes such as: Home improvements: loft conversions, basements, conservatories, new central heating systems, bathrooms, new kitchens, and property redecoration or

o

o Home improvements: loft systems, bathrooms, new kitchens, refurbishment.

All of these require funding, but does a client want to change mortgages with all the upheaval and added costs that can include, when the second charge option is available? One other factor to consider is whether clients want to have the cost of the home improvements spread over the same period as the remortgage.

Today’s advisers have to consider the best ways to provide the right funding solutions for clients wishing to raise capital. The view that second charge mortgages are only to be entertained for clients with adverse credit is clearly out of date.

Investing in business: if a client is

The second charge option covers so many different scenarios, and as I have demonstrated, is an especially versatile alternative funding source for advisers to consider. ●

A second chance to make life better

Rationalise this: a second charge mortgage isn’t something most homeowners have given a second – or even first – thought to. Despite many aspirational or needs-based financial goals, and the vast reserves of housing equity at homeowners’ fingertips, we know from Pepper Money’s Specialist Lending Study that 65% of respondents wouldn’t consider a second charge mortgage as a funding option.

Whether due to an incorrect view that it will impact their current mortgage rate, or the misconception that it is a last resort, consumers are missing the opportunity to make their lives better through the financial flexibility and new opportunities these secured loans can offer. This is where brokers can make all the difference.

The basics of secured loans

At its core, a secured loan allows homeowners to borrow against the equity they’ve built up in their home, keeping their existing first mortgage intact.

These secured loans are versatile, being used for consolidating highinterest credit card debts, funding home renovations, covering education costs, or even investing in business ventures.

Financial flexibility

Why is it important for you to know about these products now? Well, this is a burgeoning market. The latest data from the Finance & Leasing Association (FLA) revealed a 36% increase in new business volumes in second charge lending in April 2024.

This growth signifies untapped potential for brokers willing to diversify their product range to meet evolving customer needs.

By addressing these evolving needs, brokers can work to retain existing

clients and strengthen long-term relationships, while also increasing customer engagement. For instance, even if a client has a 5-year fixed-rate first charge mortgage, it’s beneficial to discuss the potential advantages of a secured loan option.

As many readers will know, without insights from these varied interactions, it’s challenging to understand how your client’s needs have evolved, limiting your ability to enhance their financial wellbeing.

Secured loans can also provide a competitive advantage. Having this alternative available can provide homeowners with invaluable peace of mind, breathing room, and financial flexibility during major life events or unexpected circumstances, which can otherwise derail their finances.

Who wouldn’t want to have this card up their sleeve when they’re sitting down with a client?

Making lives better

This secured loan option can be particularly empowering for homeowners who have faced credit issues or financial troubles in the past that have damaged their credit rating. This may apply to more of your client base than you think; Pepper estimates that more than 15 million adults in the UK have a history of adverse credit.

Of course, these products are not just for those clients with credit issues. There is an ever-growing list of reasons people seek out second charges, including aspirational and proactive priorities, getting their house in order with existing debt, or simply because they’ve maxed out the amount of unsecured credit available to them over time.

Consider a homeowner with a first mortgage fixed at a sub-2% rate from a few years ago. They need funds for an unexpected expense or home improvement, but don’t want to remortgage at current rates, which will start with a four, at best. A

ROB BARNARD is intermediary relationship director at Pepper Money

secured loan lets them borrow without losing their low fixed rate on the first mortgage. That’s no last resort; it’s savvy money management.

What’s more, the admin for a secured loan may be easier than your clients initially think. Turnaround times have never been quicker, financial checks are smoother, and debt management is easier by consolidating it into one monthly payment.

Do your due diligence

A secured loan isn’t right for everyone, but where there is a potential suitable fit, prospective customers should be provided with the facts and figures to make a responsible and informed decision as to whether they could make their lives better.

Of course, as with any lending product, secured loans need to be very carefully considered and responsibly managed. At Pepper Money, we work closely alongside our broker partners to ensure more customers recognise the benefits and understand the considerations and commitments involved in taking out a second charge against their property as a practical way to fund their goals.

In an era of sluggish wage growth and soaring living costs – encompassing food, energy, education, healthcare and other major expenses – this financial tool gives prudent homeowners a route to pursue new opportunities and handle major life events with less stress and financial hardship.

Brokers who can diversify to meet customers’ changing needs in a higher interest rate environment could – and should – use this tool to make their customers’ lives better. ●

Unlocking the potential of S

econd charge loans present significant growth opportunities in a market that is riddled with challenges for brokers, such as shifting consumer profiles and demands, base rate swaps and fixed rate changes, complex regulatory changes and technology shifts – not to mention a change of Government, house price movement and lender appetite.

Contrary to the notion that mortgage networks are overlooking this product, I am firmly of the belief that networks continuously educate their advisers to successfully enable them to offer holistic advice options and identify when customers may benefit from a second charge solution.

I think where a gap still exists is broker confidence to submit a second charge case themselves, as there are a couple of variances in the process from a first charge. There may also be a fear that if the customer is handed off to a specialist distributor to assist with the loan, they may lose that customer.

Diversification and usage of this product is certainly a lever not to be missed, and how difficult the process is deemed to be is relative to how difficult someone makes it appear.

There is a vast array of support from both networks and lenders walking through how to assist and provide a seamless service. It’s another opportunity to speak with a customer – what’s not to embrace?

The market for second charge loans has shown encouraging growth. According to the Finance and Leasing Association’s (FLA) most recent figures, in March 2024, second charge lending reached £137m, contributing to an annual market size of approximately £1.6bn. Over the previous 12 months, that’s nearly 34,000 customers who used a second charge loan to fund home improvements, sort out their finances by consolidating debt, or used the money released from their home in a myriad of other ways.

Despite this growth, many mortgage introducers still do not fully consider

a second charge loan as a viable alternative to remortgaging and other financing options when the circumstances might actually be very well suited to one.

As consumer financial profiles become more complex and the costof-living crisis continues, the industry should be taking a better look at this product.

Addressing fair value

Fair value is a pivotal concern in lending decisions. Second charge mortgages often come with higher interest rates and fees, perceived as offering less fair value compared to traditional first charge mortgages.

However, these products can be the most suitable option for certain borrowers, providing necessary funds without the need to refinance completely. This suitability can align with Consumer Duty benefits, requiring mortgage distributors to act in the best interests of their clients by offering comprehensive advice and suitable options.

The Financial Conduct Authority (FCA) has increased its scrutiny on the fair value and fees associated with financial products. This regulatory attention can make brokers cautious about offering second charge mortgages, due to the compliance measures required.

However, by ensuring fair value and transparent fees, brokers can meet regulatory standards while providing suitable financial solutions to clients.

Broker fees

Higher broker fees for second charge mortgages also contribute to reluctance for wider adoption in the market. These fees, reflecting the additional work and perceived risk, can impact the overall affordability and attractiveness of second charge loans.

Nonetheless, the benefits –such as access to funds for home improvements or debt consolidation –should not be overlooked. Brokers can address this issue by properly assessing the value and benefits for borrowers,

potentially finding ways to reduce fees and make second charge products more accessible.

Conversions

Anecdotally, it has been raised that networks say they have experienced a lower conversion rate for second charge mortgages compared to first charge, and this may deter brokers from allocating resources to promotion and education for brokers and consumers.

There are various reasons why they might have experienced this, which for me stems from not fully understanding the use of the product or what is required by the customer in the process.

The irony is that our experience at UTB shows conversions of seconds are higher than conversions of firsts, and that a second charge deal can progress to an offer within hours if all the necessary paperwork is in hand. Which leads me nicely on to technology.

Enhancing tech integration

A lack of technological tools to effectively source and process second charge mortgages is another barrier. Streamlined and automated processes are essential for quickly and efficiently handling sourcing, decisions, applications and completions.

There is room for further investment in technology from all parties to improve the accessibility and appeal of second charge products. At UTB, we have embraced digital ID verification (EID) on documents so less paperwork is needed.

Educate and support

So, what can we do as an industry to overcome the challenges and seize more opportunities in the second charge market?

1Educating brokers and consumers

Increasing awareness and understanding of second charge mortgages through informative

the second charge market

articles, online resources, and brokers providing personalised advice can help consumers appreciate their benefits.

2 Providing transparent information

Clear and transparent communication about terms, fees and repayment options is essential. This helps consumers make informed decisions and choose products that best suit their needs.

3 Improving accessibility

Leveraging technology to develop userfriendly platforms can streamline the comparison, affordability calculation, and application processes, a racting more brokers and consumers.

4 Tailoring products

Designing second charge mortgages to cater to specific consumer needs with flexible repayment options, competitive interest rates, and tailored loan amounts can increase their appeal.

5 Enhancing customer support

Knowledgeable mortgage advisers plus useful support from lenders throughout the application process helps to build trust and confidence among consumers.

6 Exploring partnerships

Collaborations with other financial institutions can expand the availability of second charge mortgages, potentially offering more competitive rates and terms.

Concerns about fair value and broker fees are valid, and the industry should work together to overcome them. However, there are also demonstrable Consumer Duty benefits in considering second charges when customers’ needs fit the criteria.

Working together, networks, lenders, and regulators can ensure consumers have access to flexible, transparent, and competitive second

charge mortgage products as part of a diverse range of options designed to meet the needs of consumers and help them achieve their financial and property goals.

The potential of the second charge loan market deserves to be unlocked. ●

is sales and marketing director –mortgages at United Trust Bank

CAROLINE MIRAKIAN

Nothing will change if networks don’t

When it comes to the difference between how second charges are promoted within networks, compared to insurance or mortgages, the gap is a chasm.

The distribution platform for second charges among networks is flawed. First, it relies on a small panel of brokers, not lenders, who are given li le to no support. Yes, of course, we’re afforded an invitation to come to a conference, sponsor an awards ceremony or a end a roadshow, but it’s a considerable expense, and one that is costed based on lenders a ending that earn a repeat income.

Traditionally, networks have a panel. You’re given the occasional platform to promote your brand, sometimes the opportunity is more frequent but the cost is preventative, and o en there is reluctance to let you contact the members.

You can a end an annual conference and roadshows, but again, this comes at considerable expense, and let’s be honest, these are o en profit-making activities for networks. There’s nothing wrong with that, but we get classed in the same category as Barclays, Halifax and HSBC, and the cost is far more of a dent in Loans Warehouse’s budget. Of course, these events also come with no guarantee of numbers. You’ll rock up in York on a Tuesday to a room with seven brokers. Lenders, meanwhile, are on the panel directly and have deep pockets, because origination leads to repeat income, unlike a broker, who receives a single payment.

Overlooked, undersold

Second charge lending is constantly talked down – the overlooked second cousin of the mighty mortgage market – but when you do a like-for-like comparison, it’s not that far apart. Let me explain.

Second charge lending finished 2023 at £1.4bn, and according to the Intermediary Mortgage Lenders Association (IMLA), total mortgage borrowing in 2023 was £225.5bn – big difference, right?

However, that figure includes first-time buyers and movers, so that’s not a comparison. Remove them, and now it’s £82bn in 2023 through remortgaging, compared with £1.4bn.

But that includes product transfers and like-for-like mortgages.

According to an article published by Claire Flynn, senior content editor at Confused.com, only 33% of remortgages include addition borrowing. So, when it comes to a comparison with seconds, we’re now at £27bn versus £1.4bn.

Let’s dispel the myth that second charges are too small to count”

Now we have to look at how much of that £27bn was for additional funds. The average mortgage granted last year was £189,000 – so that equates to 144,525 borrowers raising funds in 2023 through a remortgage. But how much of that is actually additional borrowing?

According to a report by LMS, published by Which?, the average homeowner borrowed an additional £16,389 when refinancing their deals. £16,398 multiplied by 144,500, and we’re at £2.36bn in additional borrowing through remortgage in 2023, compared to £1.4bn through second charges.

So, 63% of additional borrowing in 2023 was through remortgaging, versus 37% borrowed in second charges.

Let’s dispel the myth that second charges are too small to count –they are a very real option when

MATT TRISTRAM is co-founder and director at Loans Warehouse

looking to raise additional funds against the equity in your property.

Distribution

If 84% of remortgages are completed through an intermediary, as published by IMLA, what percentage of second charges are referred by a mortgage intermediary?

It might surprise you to know that, according to Pepper Money – the largest second mortgage lender in the UK with over 28% market share in 2023 – fewer than 1% of cases and just 1.3% of lending volume was delivered via an introduction from a mortgage intermediary.

This figure will vary from lender to lender. Together, for example, has a smaller market share, but a higher proportion of that comes from mortgage intermediaries.

There isn’t, in our experience, a lack of knowledge. Most brokers know that second charges exist – they just don’t remember to consider them.

So, who leads distribution in second charge lending? Second charge mortgage brokers do.

We’re given the opportunities offered to lenders, invited to take a stand at expos and a end roadshows; but breaking news, Loans Warehouse doesn’t have the marketing budget of a lender, and I doubt that Brilliant, Brightstar or Promise do either. How can a small panel of brokers promote an entire industry on their own?

Until the a itude towards seconds changes, and until people stop comparing lending against the mortgage lending total and start thinking of seconds as a mandatory consideration alongside a remortgage, nothing will change and the market won’t grow. ●

Why does this market need another lender?

In May 2024, Interbridge Mortgages entered the second charge market, driven by a combination of frustration at the lack of innovation in the seconds market, and the opportunity to deliver great outcomes for customers and brokers alike.

Interbridge Mortgages isn’t just another start-up lender. The team’s pedigree, depth of experience and knowledge really can stimulate growth and innovation in the second charge market.

With a business full of highly experienced professional second charge specialists, and a senior team with over 65 years of operation in the sector, Interbridge was keen to hit the ground running and to make a positive difference. It was this determination and experience that led to regulatory approval from the Financial Conduct Authority (FCA) and the market launch shortly after.

The right solution

Our mission is simple: give customers the best outcome with greater certainty and less friction. We all know that a second charge is a great solution for lots of customers, so why isn’t the market bigger? For so long it’s been considered a complex, niche area, poorly understood and thought only suitable for a few customers with poor credit, that is simply not the case.

A lack of understanding of the sector may have led to a second charge not being considered for a customer, when in fact it might have been the perfect solution to enable them to fulfil their financial aspirations – be that undertaking home improvements, debt consolidation or managing a life changing event.

At Interbridge Mortgages, we can play a pivotal role in the second

charge sector, make a positive impact and address the evolving needs of a growing segment of the population. We want to grow and innovate, not replicate what has gone before.

Whatever we call it – secured loan, seconds or a second charge mortgage – it’s a sector that deserves to be discussed as a great option for a growing segment of customers.

How will we do that? Well, it’s not just one thing, and we can’t do it on our own. Interbridge is a team, and like the best teams, you have to look at the culture and values to understand them. We may be a new player, but with the extensive experience of the individuals making up Interbridge, we are passionate about putting the customer at the heart of what we do.

Diverse landscape

A diverse lender landscape is instrumental in promoting innovation, enhancing customer choice, and driving competitive products. Healthy competition helps to raise the profile of the sector and make more brokers and customers aware of the benefits, stimulating growth for all in the sector to benefit from.

By entering the second charge market, Interbridge aims to contribute to this diversity, providing customers with more options tailored to their unique financial needs.

The current economic climate has increased the demand for flexible solutions, and second charge mortgages present an excellent opportunity for homeowners to leverage the equity in their properties without altering their primary mortgage terms. For many homeowners, this can be a gamechanger. It offers a viable alternative to remortgaging, which might come

with high early repayment charges (ERCs) or less favourable rates. By adding second charge mortgages into the financial options for a customer, a broker is enhancing the array of choices available to their customers, empowering them to make decisions that best suit their financial circumstances.

The market is on the rise – May saw the fifth month-on-month increase in business written in the sector, and this doesn’t look like it’s abating. As the sector grows, so does awareness and consideration, which then attracts more customers. This momentum is great for all of us that feel passionately about the second charge industry.

Collaboration and tech

Brokers play a crucial role in connecting borrowers with the right financial solutions, and are key to the growth of the sector.

The reductions to outgoings when consolidating debt or the freedom of a lump sum for home improvement can be life changing. Customer needs are paramount, and our technological innovations will enable brokers to access quicker decision-making, more personalised offerings, and a more efficient application process. By embracing technology, we can set new industry standards and improve the overall experience for both brokers and customers.

Interbridge Mortgages’ entry into the market represents a significant milestone for us and the industry. By diversifying the product offerings available to customers and deploying innovative technologies, together with strong broker relationships, we can play our part in driving positive change in the market to enable it to grow and flourish. ●

SIMON MARTIN is chief commercial o cer at Interbridge

The Inter view.

The Intermediary speaks with Matt Tristram, co-founder and director at Loans Warehouse, and Roger Morris about the bright future of the second charge market

In the UK property finance market, it is often the case that everyone knows everyone. Matt Tristram and Roger Morris certainly live up to this image, having worked together for a long time, but this is not to say that those relationships never change.

Indeed, having been originally introduced by Tristram to “the value, efficacy and knowledge when it comes to second charge mortgages,” Morris explains that in recent months, he has seen a shift that is directly affecting the sector.

He says: “I’ve seen a rebirth, a new, cleaner engaged energy, as Matt has made a commitment to go on a brand new journey.”

The Intermediary sat down with Tristram and Morris to understand this change, and consider the future of a second charge market primed for the next stage of its evolution.

Loans Warehouse and Roger Morris

Next generation

Over the past seven years, Morris says, the next generation of mortgage advisers seem to have “come in quite large volume” with “no real practical understanding of second charges.”

Now, however, is a key moment to combat the issue of distribution. Tristram notes that, for example, rates have never been closer between firsts and seconds, with the headline rate for a mortgage around 4.5%, and for a second, 6.5%.

Tristram says: “That is closer than I’ve seen it in over 20 years. This has brought, over the past two years, a new scenario. You’ve got a lot of people who have got fixed rate mortgages beginning with a one – we had many years of enjoying them, almost to the point we took them for granted – and they’re only two years into a 5-year fix, but they want to raise money.

“A further advance might be fine, but that isn’t going to be for everyone – their income might not stretch, they might have had a bump in their credit profile, or be at [a loan-to-value (LTV)] point where they can’t borrow anymore.

“It makes sense to leave that existing 1% rate in place. So, if you’re looking to raise money, a second charge is now an option that maybe wasn’t there before, because certainly in my time working in mortgages, I’ve never seen the rates jump so much so quickly.”

He adds: “A second charge will allow the borrower to do those home improvements, consolidation or whatever the purpose is. Then, when their fixed rate expires, the mortgage adviser will have run the second charge fixed rate to fit in with that, and they can look to remortgage without a large penalty.”

While these scenarios are relatively new, he says the second charge market is evolving to meet the change – not least via the addition of new lenders to the mix.

This will only make the proposition more appealing for the next wave of borrowers.

“New lenders entering have already had an impact – most of them before they’ve even come into the market,” Tristram explains.

“The launch of Interbridge, and later this year of Admiral and Scroll, has led to existing lenders that have led the industry looking at their whole proposition again, and they have made some fantastic changes.

“While ‘rate war’ is probably a bit strong, there are certainly improvements coming through, and you’ve got lenders fighting to make particular markets cheaper.”

It is not just price being affected. Where the market’s well-known service capabilities may have “dipped a bit over recent years with the change to remote working,” Tristram points to process improvements at key lenders that mean “getting from the point of applying to having a binding offer approved has never been quicker.” This includes elements such as e-signatures, which is just one of many recent advancements.

Rate fluctuations

The first charge market has become a place of volatile rate changes, seemingly with every minute shift in the macro-economic headwinds; there have been some similar trends in the second charge sector, albeit nowhere near as frequent or extreme. Now, though, the trend seems to be steadily downward.

Tristram says: “Several lenders do base rate tracking, and over a two-year period we watched rates go up, and then of course there was the mini-Budget, and then ‘boom’.

“Then, what we’ve seen over probably the past nine months is that, because of competition, rates are going down. Interbridge only launched three or four weeks ago, so its impact is only just being known now.

“We are going to see the likes of Pepper and UTB make changes for different LTV points, different products, and it’s only going to get cheaper.”

Morris adds: “It’s surprising how many lenders are able to monitor volume and then move levers – the sophistication of the second charge market is pretty immense for the big players, where they can control flow purely by rate, with the same sophistication as the mainstream lenders.

“It’s breathtaking how sophisticated the second charge market is when it comes to dynamic pricing and volume control.”

Tristram notes that an increasing number of second charge lenders are also engaging with dynamic pricing, meaning “changing rates is a lot easier, and every customer gets a dynamic rate.”

“This means there are people sitting behind the scenes looking at the amount of offers going out from their particular products and seeing a dip,” he continues.

“The industry’s not massive, and they know if there’s a dip now maybe it is because of a

new entrant or because a lender’s changed a rate. They can see where they’re losing out and make adjustments, so there’s constant changing, without it being headline news because they do it behind the scenes.

“That didn’t happen overnight, that’s happened over several years of the industry embracing technology and using more and more data.”

Charm offensive

A key factor alongside all of these developments to grow and improve the second charge market is the matter of education and promotion, which has ramped up recently.

Morris says: “Matt has gone on a huge charm offensive for the industry to really promote the good of second charge lending.

“We’ve been on tours all over the country over the years, we’ve been to network events and all sorts, but I’ve seen a huge change in this approach recently.”

For Tristram, while this follows from work he has always endeavoured to do, this was in part a matter of finding the right moment where, “professionally and personally, all the stars have aligned.”

He says: “Sam [Busfield] and I have run this business for 18 years, and you get to a point where you reflect on what you want to achieve. I have a clear outlook on what I want to achieve over the next few years, and where I see growth areas and opportunities for Loans Warehouse.

“I personally have a real purpose, I like what I do, and we’re at a point where the market aligns, the product aligns and Loans Warehouse has a good reputation, so now is the time.”

He adds that this has come at a point when the market is also primed for change: “New lenders are raising the bar, new products are coming out and there’s more to follow. It’s a kick that the industry needed.

“This is an industry backed by service, which means you can’t ever take that for granted. I do believe, over the past few years, that’s been lost a little bit. With a shortage of lenders, it became easy to sit on your laurels and to take things for granted.”

While Tristram initially has his sights set on the next couple of years as being full of opportunities for seconds, there is also a longer-term view. This hinges on establishing an even stronger platform for seconds over the next couple of years.

He says: “Then, hopefully, it can continue to evolve and improve longer-term. The outlook is that there is a second charge market as long as →

there is a first charge market. There will always be that need for alternatives.

“Maybe in the longer term it will become more mainstream, getting to the point where the process is so straightforward that more first mortgage brokers can arrange seconds, and that will only improve the reach.”

Working with networks

One of the key messages from Tristram’s second charge “charm offensive” has been to encourage networks to take a more active role in promoting and facilitating second charges.

In some cases, networks cite a lack of members doing seconds as a reason, but Tristram says that this is something of a selffulfilling prophecy.

“Maybe the brokers that they have on panel have taken the opportunity for granted,” he says. “There are a lot of second charge brokers that are on a lot of panels, and they only have a small number of staff in a sales role out and about. There’s only so far those brokers can go.

“So, for networks that don’t see a lot of second charges being written, maybe that’s because they’re working with the wrong people.”

Now, though, is the time to take advantage of market conditions and make the push.

Tristram says: “The product has never been more valuable, and we now need to establish Loans Warehouse, and by association the industry, within these networks.”

This is not just about establishing relationships and panel presences and leaving it at that, he adds, but instead applying “focus, attention and nurturing” to this part of the business.

“It helps if second charge lenders are on panels with networks, but at the moment there aren’t any second charge lenders on panel directly for seconds,” Tristram continues.

“You have 100 mortgage lenders out there and they’re all on panels with networks, you’ve got 14 or 15 second charge lenders out there, but they aren’t on panels, the brokers are.

“As the industry continues to grow and the process becomes smoother and slicker, you’ll find more mortgage brokers want to do seconds themselves, more networks will allow seconds to go on panels.

“As a broker, I’m not afraid of that in any shape or form, as it will just raise awareness.

“They still won’t be for everyone, but networks accepting second charge lenders onto the panel is what will cause massive growth, because of the budgets that banks and lenders have over a broker.”

One way in which Loans Warehouse has geared up for change is by bringing in head of network growth and distribution Natalie McNamara, who Tristram says “opens different doors and brings a different approach,” particularly as she has the fresh perspective of someone not native to seconds.

Promoting the product

When it comes to distributing the actual product of second charge loans, Tristram says he has seen “absolute positivity,” and that his firm is “not meeting barriers with second charges” in terms of lenders and their products.

The challenge, he explains, is “making it someone’s priority.” To this end, he suggests that seconds should be given “the same platform as protection” as a go-to option when borrowers are looking to capital raise.

Tristram says: “It might not always be the best option, but it still should be considered. With individual brokers, we are not seeing resistance at all – they are engaging and they’re happy to listen, and we’re being invited in.

“But there’s only me and Natalie, and there’s a lot of mortgage brokers and networks out there, and getting the message across consistently and repeatedly is a challenge.”

This reinforces the need to have second charge lenders directly involved with networks, as they bring further resources to bear on distribution, rather than leaving it up to firms like Loans Warehouse alone.

Fundamentally, though, this is a matter of network attitude in many cases.

Tristram adds: “You’ve got to be out there working it and spreading the word about seconds, and you’re missing a trick if you think the problem is the product. The distribution is wrong if you are not, as a network, seeing a lot

Roger Morris (left) and Matt Tristram

of engagement with second charges. Networks need to look at how they view second charges, and give them more of a platform.

“If they do that and they help grow the market, then they’ll see the benefits through better customer outcomes, the product will grow, and more opportunities will come.”

Changing this attitude should also go hand in hand with brushing away any lingering misconceptions about the product, such as that it is primarily for those with adverse credit profiles.

Tristram says: “In the current market, about 80% of second charges are written for people with good clean credit. There is a whole range of products out there, and lots of reasons someone may need a second charge.”

Looking ahead at the work yet to be done to promote this product, Morris calls on his own previous experience helping brokers wake up to the value and uses of bridging finance as an example of what might be the next steps.

“I would go to the networks and to the clubs, but specifically to the networks, and conduct specific education as to the value of second charges, the uses, and the types of prime customers,” he says.

“If you were to look at demographics, you’d find that many of the customers coming for seconds are highly qualified individuals that understand the value of second charge, but who got the information and the connections through something like MoneySupermarket, not through their mortgage adviser.

“So, these highly engaged individuals are finding their way to second charges, but not through the mortgage advisers, because the advisers don’t understand it.

“We should do educational workshops to get rid of the myths.

“With bridging, the myth is that it’s too expensive, with seconds it’s that it’s for subprime customers and there’s massive fees –none of this is true.”

Morris says that, over the next year or so, it is time to “widen that educational piece” so that more brokers can understand the various tools available to them, some of which are currently being under-utilised.

Once this initial barrier has been overcome, Morris says that the product can speak for itself. He cites having helped someone, through a master broker, to get a second charge, only for that person to then become “one of the biggest advocates,” adding that “it was transformative.”

Awarding excellence

In order to centre the second charge conversation, as well as highlight the strong work being done in this market, which should stand out in its own right, The Intermediary has launched the National Mortgage Awards: Second Charge. With the inaugural event taking place on 14th November 2024, this event aims to bring seconds to the forefront.

Tristram’s passion for the second charge industry, and his clear conviction that this was an important gap to fill in the awards circuit, in part inspired the development of this concept, though it is now entirely in The Intermediary’s charge.

Tristram says: “There are consistently awards in mortgage lending and I’ve attended some fantastic events, but there may be 40 categories, and buried in the middle is ‘best second charge broker’, if you’re lucky, and ‘best second charge lender’.”

With more than 20 categories tailored specifically to this market, the event aims to support, promote and celebrate all the moving parts that form this industry, rather than making it a passing thought within the wider mortgage market.

“People can see the best of the industry, and it can be a celebration of some amazing people who don’t get mentioned,” Tristram says.

“A focus on seconds done in the right way will show what the industry’s got to offer. Also, internally it will be good for the industry to come together and celebrate the great work it does, and will do going forward. There is no single event, to the best of my knowledge, where the whole second charge industry gets together to talk about seconds. It will be fantastic celebration of the industry, viewed from the outside as a great celebration, and will raise the profile of this market.” ●

Surveys will help in the next Consumer Duty wave

On 31st July 2024, a second wave of the Financial Conduct Authority’s (FCA) Consumer Duty rules come into force, requiring mortgage intermediaries to work to a higher set of standards for closed products and services.

This follows the introduction of the first wave of changes, introduced in 2023, establishing a new set of regulations on consumer protection in the UK.

For brokers, this second set of rules will mean an obligation to review the relevance and suitability of the products that their clients have entered into.

In the regulator’s ‘Dear CEO’ le ers, sent out in May, it reminded industry figures that particular a ention should be paid to gaps in firms’ client data, value assessments, treatment of clients with vulnerable characteristics and ‘gone-away’ or disengaged customers.

Brokers should consider recommending a fresh survey”

The requirement to address any material gaps in customer data is a key consideration for mortgage brokers, as it requires firms to “assess, test, understand and evidence” the outcomes that clients are receiving as a result of the products they have historically bought.

This new obligation also presents brokers with an opportunity to engage with their current and former clients to ensure they are benefiting from the best possible products on the market.

It is possible, indeed likely, that some of these clients will be paying higher mortgage rates than they need to.

To ascertain whether this is the case, and what further options may be available to their clients, brokers should consider recommending a fresh survey of the mortgaged property. Doing so could potentially improve the loan-to-value (LTV) ratio, offering clients a host of be er deals than they previously thought possible. Many borrowers to date who have been paying higher standard variable rates (SVRs), have historically been regarded as proverbial good margin ‘sleeping dogs’.

FCA guidance stipulates that all brokers should encourage clients to have the most current and accurate data if it could result in them ge ing a be er deal than the one they currently have.

Guardians

While clients may have historically considered their mortgage broker to be the facilitator of one-time property finance, the new FCA rules establish their role as much more of a guardian figure. This change has been welcomed by the industry.

A 2023 report from This is Money suggested that “hundreds of thousands” of mortgage holders are currently on reversion rates, where people have failed to remortgage to a new deal.

The Government’s Money & Pensions Service recommends that mortgage holders review the suitability of their product on a regular basis, particularly when interest rates change, when mortgage deals come to an end, or once a year if they are not tied into any early repayment penalties.

ALEX WILLIS is chief sales o cer at GOTO Group

Investing in a new survey is another good way to ensure homeowners have the most suitable deal, and many homeowners do not have certainty over the value of their house.

Over the past three years, house prices have risen considerably, despite recent fluctuations. The price of the average home grew by 12.4% between February 2021 (£250,000) and February 2024 (£281,000) according to the Office for National Statistics (ONS).

More recently in the year to May 2024, UK property prices nudged upwards more modestly, by 1.5%, according to the Halifax House Price Index, with homes in North West of England and Northern Ireland growing most notably by 3.8% and 3.2% respectively.

For brokers looking to fulfil their Consumer Duty obligations, GoTo offers a host of options covering regular, older and larger properties including comprehensive structural assessments and defect analysis. All surveys are conducted by a RICSregistered surveyor, who can visit the property.

Importantly, these independent surveys are additionally commissioned by the client, which means that GoTo’s surveyor is working for the customer and not the lender.

GoTo’s surveys offer a detailed and in-depth analysis of a property and are particularly useful for homes that are larger, older or unusual, or if they’ve been modified in some way.

Whether a directly authorised broker, mortgage club member or network affiliate, we offer a pricematch guarantee to ensure clients get the best possible price. ●

The case for shortterm products

The ‘2-year or 5-year fixed rate’ debate has been constant over almost 20 years. When rates were low, a longer-term fix seemed a no brainer. As they have increased in line with the base rate, they’ve continued to offer a competitive prospect in terms of pricing, along with giving customers certainty for longer.

The latest figures from Moneyfacts show that the average 2-year fixed rate rose to 5.91% at the start of May – up from 5.80% in April. Meanwhile, the average 5-year fixed rate increased from 5.39% to 5.48% across the same period. For clients not intending to move in the near future, affordability on a 5-year deal makes borrowing marginally easier.

Yet, looking at the data from Twenty7tec, most borrowers are opting for 2-year deals. In its April residential search activity monitor, there was a sharp rise in the number of searches across the market, with trackers, 2-year and 5-year fixed rates all seeing a significant increase since December 2023.

Over the past six months, the volume of searches for both 2-year and 5-year deals has more than doubled, and tracker search volumes are up 50%. The most popular search by far, though, is for 2-year fixed rates. In April, brokers searched for these almost 750,000 times, and 5-year fixed rate searches were around 423,000. This reflects what we’re seeing in our own book – the flexibility of a 2-year commitment still has a strong appeal.

Looking for a cut

Clients’ preference for shorter-term deals may also be related to the expectation of a cut to the base rate, and how that will positively impact swaps, which is what mortgage pricing is based on.

In the European Union (EU), the European Central Bank (ECB) has

just made its first cut in five years, taking its main interest rate from an all-time high of 4% down to 3.75%. In the same week, Canada cut its official lending rate.

Christine Lagarde, president of the ECB, said the outlook for inflation had improved “markedly,” justifying the decision to loosen monetary policy. That language is not dissimilar to our own central bank’s. Following the June Monetary Policy Commi ee

Over the past six months, the volume of searches for both 2-year and 5-year deals has more than doubled, and tracker search volumes are up 50%”

(MPC) meeting, at which the base rate was held at 5.25%, Bank of England governor Andrew Bailey said policymakers “need to be sure that inflation will stay low, and that’s why we’ve decided to hold rates at 5.25% for now.”

Interest rates were held for the seventh time in a row, despite official figures released in June showing inflation had fallen to the Bank’s target of 2% for the first time in nearly three years, according to the Office for National Statistics (ONS).

The MPC voted by a majority of 7–2 to maintain the base rate at 5.25%. Two members preferred to reduce the rate to 5%.

Given this context, conversations with clients are likely to focus even more on the need to carefully consider the pros and cons of taking a lower rate over a longer term or paying a

MICHAEL CONVILLE is chief customer o cer at Newcastle Building Society

slight premium for the flexibility of a 2-year deal. Rates are keenly priced at the moment, and though swap rates are still jumpy, it’s plausible that we’ll see them come down moving into the autumn, when buyer demand traditionally picks up and lenders’ H2 targets kick in.

Finding balance

Over the past year, brokers have become increasingly conscious of the balance between certainty and cost. It’s easy for borrowers to focus too much on rate and not enough on the full cost implications of taking a longer-term fixed rate.

Product fees on the best 2-year fixed rates may well exceed those on 5-year deals. But when you factor in the possibility of paying a higher rate for three out of the next five years, along with the risk of having to pay early repayment charges (ERCs), it’s not hard to see why most brokers believe the majority of people need the certainty and flexibility of a 2-year deal.

Let’s also remember that the ‘certainty’ of a long-term deal doesn’t necessarily match the unpredictability of modern life. Lest we forget autumn 2022, when the UK had three different Prime Ministers. The effect of politics and economic and fiscal policy on mortgage rates can be huge.

The recent change in Government could bring a different direction across some key policy areas.

Against this backdrop and to comply with Consumer Duty, and considering ‘foreseeable harm’, the popularity of 2-year fixed rates looks set to continue. ●

Supporting new-build homes

As the country hurtled headlong towards the General Election over the past few months, people across the UK were holding out hope that the issue of housing would be high on the agenda of every single party manifesto.

Given the economic challenges of recent years, coupled with the ongoing issues around supply and demand of housing stock, any new incentives that influence and encourage build volumes, restore consumer confidence and encourage market growth will be broadly welcomed.

New-build homes are an essential component of the mortgage and housing market, as they help to relieve pressure on existing housing stock and represent an a ractive proposition for many borrowers, including first-time buyers, those with a growing family, or existing homeowners seeking a more suitable sized home in their later years.

Yet according to figures released by the National House Building Council, only 133,213 new homes were completed during 2023, down 12% on 2022, and well below the Government’s target of 300,000 new homes per year.

New-build bene ts

These are disappointing figures, especially when you consider the fact that new-builds offer greater energy efficiency, lower property maintenance and renovation requirements, and a speedier chainfree purchasing process.

As a lender commi ed to the newbuild property market, we’re always seeking ways to develop and enhance product offerings that address the needs of any borrower purchasing a new-build property.

Products offering a higher loan-tovalue (LTV) are one way of achieving this, which is why we offer solutions

with a loan-to-value (LTV) of up to 95% to borrowers purchasing a newbuild house, and also for those buying a new-build through the Shared Ownership scheme.

Higher LTV products can prove to be an a ractive proposition for those borrowers with a smaller initial outlay of 5%, and can also be a useful tool for those borrowers taking their first steps onto the property ladder.

One of the other a ractions of the new-build sector is that some property developers have recently started to offer discount incentives to homebuyers to help them with the associated costs of purchasing a newbuild home.

Hitting the annual building target for new properties should be a key priority for the new Government”

These vary across the board, but can include up to £1,000 towards the cost of the mortgage, free carpeting and tiling within the property, or the offer of free household appliances such as a fridge freezer.

Selected lenders will accept applications from borrowers using these builders’ deposits and incentives, provided the client also puts down the 5% deposit themselves and the details of any of these incentives are disclosed to the surveyor at the outset.

Builders’ cashback may also be acceptable, provided the deposit has been paid by the applicant from their own sources and the money is repaid by the builder on completion of the build. Nevertheless, it’s prudent to point out that this is not widespread practice from all lenders, especially among those with more prescriptive

ASHLEY PEARSON is head of intermediaries at Loughborough Building Society

underwriting requirements. There are many other solutions available for borrowers looking to buy a new-build property, including joint borrower sole proprietor (JBSP) and Family Assist mortgages, which aim to boost the borrowing power of the purchaser by using the income of up to four family members.

LTV criteria

These mortgages are available with a 100% LTV on new-build flats, while our Buy for Uni product is also available up to 100% LTV, provided the property is within a 10-mile radius of a local university.

Another option is to take out a lowcost homeownership product through the Discounted Market Value scheme, which is aimed at supporting local people in the purchase of a new-build at a discounted price of up to 30% from local councils participating in the scheme. The number of new-build properties available is agreed between the local authority and property developer and will be available for qualifying borrowers. This is usually people who live, work or are from the local area or in a specific occupation.

With so many mortgage options available to people looking to purchase a new-build home, hi ing the annual building target for new properties should be a key priority for the new Government.

Addressing the housing demand issue through the creation of new homes will not only help to alleviate pressure on current housing stock, it will also provide the platform for borrowers to benefit from a range of solutions which match their unique requirements. ●

Why GCC customers would buy a house in the UK

ALAN FITZPATRICK is head of property nance at Nomo

The next few months will likely see a growing number of Gulf Cooperation Council (GCC) nationals looking for UK homes to purchase. The Gulf’s hot season has begun, bringing average daily temperatures of 45°C. It’s no surprise, therefore, that many will be escaping the heat with a trip abroad – and Britain’s temperate climate makes it an especially popular destination. Projections show that there will likely be around 1.2 million visits from the GCC to the UK in 2024, with the majority arriving during the Gulf’s summer season from May to September.

The UK’s leading schools and universities make it particularly a ractive to GCC nationals, many of whom graduated from one themselves. It’s also common for the region’s residents to send their children to school or university in the UK – and with the academic year kicking off in the coming months, many will be using the opportunity to look at properties.

The current economic environment, too, signals an optimistic picture for GCC buyers looking to purchase a UK home. British house prices fell at their fastest pace in over a decade during 2023, recovering only marginally since then. House prices in one of the GCC’s largest housing markets of Dubai, on the other hand, increased to record highs last year. It’s a marked distinction to the slowdown in house price growth across the developed world, including in Britain, a er the cost of homes soared in many countries during the pandemic.

This contrasting picture on house prices is a key factor driving GCC

nationals’ appetite for UK property assets – so is the rate of economic growth in the Gulf, which will put more of its residents in a position to purchase.

Deeper appeal

GCC economies are projected to grow faster in 2024 than they did last year, according to Reuters, and eight out of 10 GCC organisations plan to increase employee salary and benefits, according to Procapita Group.

The UK’s housing market will become even more a ractive to GCC buyers if and when the Bank of England cuts the base rate – which it is likely to do if inflation drops further. The market, by and large, expects that to happen: the FTSE 100 index of bluechip stocks recently rose 0.3% on hopes of rate cuts this summer.

The Bank of England itself has not dampened this optimism. A er its latest announcement, governor Andrew Bailey said there had been “encouraging news” on inflation, and

that it would fall close to the 2% target in the next couple of months.

“We need to see more evidence that inflation will stay low before we can cut interest rates,” he said. “I’m optimistic that things are moving in the right direction.”

Commercial factors are making it more a ractive for GCC customers to buy a house in Britain. But the UK market’s appeal is broader still. One of its lesser-known strengths is the Islamic finance sector, which is larger and more diverse than that of any other Western country. Britain has more Islamic lenders than any other comparable country, and that makes it especially appealing to customers from the Middle East – where around nine in 10 people are Muslim.

As a place to live, Britain holds a wide range of a ractions to customers from the Gulf, and it’s clear that the next couple of months are going to be a busy time for Shariacompliant property finance providers in the UK. ●

Britain holds a wide range of attractions to customers from the Gulf

Knowing yourself is the beginning of all wisdom

Aristotle’s words, “knowing yourself is the beginning of all wisdom,” could have been wri en for modern lenders. Understanding risk and its impact on capital and conduct is now driving much of the change due to evolve the lending world over the next few years.

Twenty years on from ‘M-Day’, and the Financial Conduct Authority (FCA) continues to build on the ‘treating customers fairly’ (TCF) principle. The Consumer Duty rules – first implemented on 31st July 2023 for new products and services – will be enforced on closed lines across regulated financial services firms from 31st July this year.

Basel 3.1

This comes a year before another piece of legislation comes into force for UK lenders. From 1st July 2025, both banks and building societies will be subject to the new Basel 3.1 capital adequacy rules, overseen by the Prudential Regulation Authority (PRA).

There are two approaches lenders can take when calculating how much cash they must hold on balance sheet as a capital buffer, in the event there’s a liquidity crisis – either market-wide or at a firm level.

The first is standardised, which allocates how much capital a lender must hold based on standard riskweightings determined by product a ributes. For example, high loanto-value (LTV) loans require a higher capital buffer to protect the lender – and thus the wider economy – from loss in the event that a borrower defaults on payments or property values fall below the outstanding mortgage balance.

Low LTV loans require less onbalance sheet cash, making them a more profitable line of business for lenders, which can lend out more of their capital and generate more margin on a higher volume of lending.

The Basel 3.1 rule changes propose to make capital adequacy standards more nuanced, in theory making it more commercially a ractive for lenders to fund traditionally ‘higher’ risk loans.

The aim is to bring the standardised approach – used most commonly by smaller banks, building societies and non-bank lenders – more into line with the internal ratings-based approach used by the biggest banks, which allows them to fund higher LTV mortgages more cost-effectively. So far, so good.

Both sets of regulations have the capacity to make a big difference to borrowers in under-served parts of the market, where capital adequacy has ruled out competitive pricing for customer segments such as the credit impaired, small deposit borrowers, high loan-to-income (LTI) ratios, and the newly self-employed.

This ma ers, given how many existing borrowers have either already remortgaged to much higher rates or are set to over the coming year or two. Millions of borrowers have the financial scope to cut down spending elsewhere to cover monthly repayments that become several hundred pounds higher overnight. Others have not, and will not.

Lenders face having to identify those borrowers proactively before arrears become problematic, and to assess the best way to support them under the Consumer Duty rules.

Those likely to be most under duress are probably those in higher risk brackets, with lenders therefore having to support payment arrears

STEVE GOODALL is managing director at e.surv

alongside potential asset value depreciation and higher capital buffer requirements.

Point of no return

Managing this over the coming years is as much of a wholesale change to the way the mortgage market operates as M-Day was 20 years ago. Perhaps more so, given it requires a careful balancing act between consumer and commercial risk and responsibilities. Back-book management must necessarily become more dynamic. Origination strategies will have to reflect that.

To achieve a happy medium between the two requires a meticulous understanding of where risk lies. Knowing your security exposures today is key, and data solutions and inspections will be part of this property assessment.

In turn, these changes will impact originations thinking. Certain securities will be more expensive than others and some risks less expensive than previously thought. While lenders work on what this means for their own lending appetites, knowing the value of the asset you have today will be critical. Ge ing it wrong will incur the wrath of the PRA and arguably may even be deemed to have caused ‘foreseeable harm’.

Knowing a property’s value, current condition and subsequent LTV will be important in managing conduct and prudential risk. Understanding how the security will impact these areas, and its influence ultimately on originations, will require a forensic knowledge of some of these assets. Understanding current value accurately will be imperative. ●

Tackling the rise of mortgage fraud

Mortgage fraud in total rose by approximately 33% between April 2022 and March 2023, with conveyancing fraud being one of the biggest growth areas, with a 29% rise, according to Lloyds Bank. This involves criminals ge ing access to client or solicitor email accounts and then mimicking official requests for clients to send deposit money for a house purchase to a fake account controlled by the fraudsters, rather than the conveyancer.

Hacking email accounts allows criminals to monitor email exchanges between client and conveyancer as the house buying process builds to the point where they can send fictitious payment details to the client. Typical deposits can be between £50,000 and £250,000, and once the payment has been made, the fraudsters clear out the account and transfer the money to other accounts under their control.

As advisers, it is imperative that we make sure that clients are told of the potential pitfalls and consequences of failing to be aware of the danger.

While we are not responsible for the actions of clients and their conveyancers, it is incumbent on us to advise them of the issue.

Questions to ask a client:

Is your conveyancing company or solicitor registered with the Council for Licenced Conveyancers or the Solicitors Regulation Authority? If not, they’re likely to be bogus firms. When was the last time you checked that your email account was free of potential malware that could compromise the security of your email?

Do you use any anti-virus so ware to counter online threats and keep it up to date?

Make sure you double-check the email addresses you or your

conveyancer are using. Check for slight changes in the email from the firm or company your conveyancer works for.

Better safe than sorry

Most importantly, tell them to independently validate any payment requests before transferring funds. If clients are unsure, it is be er for them to be safe than sorry.

Make sure you tell them that it is always best to check the company’s credentials and email address by calling the company back on what you know to be their valid and correct phone number, in order to validate and verify any payment requests, so they are 100% sure before they make a transfer.

Perhaps part of your discussion with clients could include a

CHRISTOPHER TANNER is CEO at HLPartnership

As advisers, it is imperative that we make sure that clients are told of the potential pitfalls and consequences of failing to be aware of the danger”

recommendation to a firm of conveyancers that you have used before, and can vouch for their trustworthiness because they take their digital security very seriously. ●

New rules for mortgagors in payment di culties

According to gures from the Financial Conduct Authority (FCA), 7.4 million people were struggling to pay bills and credit repayments in January 2024, and it is likely that mortgage advisers will have had contact with more clients facing payment di culties. One of the rst actions to take is to refer them to their lenders, as the Mortgage Charter introduced in June 2023 binds lenders to certain commitments concerning the treatment of clients who fall into di culties.

Among the lenders’ commitments is not to force a borrower to leave their home without their consent, unless in exceptional circumstances, in less than a year from their rst missed payment. While this is not a solution, it does provide breathing space and a backstop for those in di culties.

e Mortgage Charter also allows customers to increase their mortgage term or reduce their monthly payments by opting to switch to paying on an interest-only basis. More than 150,000 have reached agreement with their lenders on this basis.

Now the FCA has con rmed that it is bringing in stronger protections for consumers in nancial di culties. From November 4th, not only will people already in di culties be formally protected, but the new rules from the regulator will expand protections to those at risk of payment di culty, and also widen the forbearance options that mortgage and loan providers should consider.

As advisers, our duty is that in any case of nancial hardship we should always recommend that in the rst instance, assuming a full fact nd has been undertaken, clients talk to their existing lenders to see if an equitable solution can be found, before looking at alternative solutions such as remortgaging or consolidation.

Mutuals step up to ll lending voids

It wasn’t a surprise to read recent research from the Building Societies Association (BSA) revealing that, while mortgage balances are decreasing elsewhere, building societies are bucking the trend and increasing theirs.

The latest lending data from the BSA shows that mortgage balances at building societies increased by £8.6bn in the six months to March 2024. In the same period, mortgage balances at other lenders reduced by £10bn. This, the BSA says, continues the trend seen throughout 2023, in which building societies accounted for all growth in the mortgage market.

While some of this growth was a ributed to first-time buyers (FTBs), which accounted for 37% of all building society residential lending, a significant portion, I suspect, also came from specialist lending.

The industry has long discussed the rise of the specialist sector, and it’s fair to say we are now fully in the midst of it, with building societies helping to fill the void le by some mainstream lenders.

For some time now, a number of building societies have positioned themselves away from the competition at the vanilla end of the mortgage market, and sought out niches to help underserved borrowers.

When I talk about underserved borrowers, this could mean anyone who falls outside the mainstream –such as those with complex incomes or older borrowers needing to borrow into retirement, to name a few.

While those within the industry may be aware, there can still be a perception outside the industry that bigger high street banks offer a larger product selection and cater for such borrowers because of their size. We know this isn’t necessarily the case. Nevertheless, we can still be met with surprise among some brokers – and especially the public – when they

discover the breadth of mortgage options building societies can offer.

Recently, we were thrilled to receive the award for ‘Best Smaller Lender –up to £100m in lending’ at the Legal & General Mortgage Club Awards. We were incredibly proud of this, especially given that we operate at the specialist end of the market.

This also highlights that brokers’ and clients’ needs are changing; brokers are seeking solutions for clients with diverse circumstances and appreciate this shi from lenders.

Sign of things to come

For a while now, we have been seeing shi s in borrowers’ needs, as well as signs that these changes are here to stay. We saw this recently with figures from the Bank of England, which showed an increasing trend of borrowers opting for longer terms that will likely extend into retirement.

While such borrowers may not reach retirement for some time, the figures quoted – one million borrowers over the past three years –suggest that lending into retirement is an area where lenders may need to refocus their efforts in the future.

As a mutual that has been lending to borrowers in or approaching retirement for some time, we know this cohort can come from all walks of life. They are o en not just borrowers who need a mortgage out of necessity, but rather by choice. This could be an expat wanting to buy a holiday let in the UK, or an older borrower who doesn’t wish to disturb their savings and opts to obtain a mortgage instead.

The personal approach to underwriting adopted by many building societies – including ourselves – means we are wellequipped to handle specialist cases, whether it be a self-employed borrower with a complex income or an expat being paid in a foreign currency.

It appears that building societies are ge ing it right. The latest YouGov

ROB OLIVER is director of distribution at Dudley Building Society

customer service survey shows that mutuals once again outperformed their banking competitors across various customer service metrics.

The BSA highlights that 92% of building society customers agreed that their provider offers good customer service, compared to 87% of bank customers. Additionally, 75% of building society customers consider theirs an important part of the community, significantly higher than the 49% among bank customers.

Building societies also continue to lead in broker satisfaction, with the sector achieving the top rating of 85.7% in the recent Smart Money People Mortgage Lender Benchmark survey for the first half of the year. This compares with 82.7% for banks.

Interestingly, the BSA data also highlights how arrears rates at building societies are lower compared to the rest of the market. The latest figures show that 0.25% of building societies’ balances were in arrears at the end of Q4 2023, compared with 0.69% across the total market.

Traditional, not ordinary

Building societies have historically, and even now, faced the challenge of balancing their traditional image alongside their modern approach to lending. There can still be a misconception that because our roots are very traditional, our lending might be mundane. This is far from the truth. We fund everything from mortgages for expats based in Dubai or Hong Kong to million-pound eco self-build mortgages. Looking ahead, as the specialist sector continues to grow, I’m confident building societies will continue to compete with larger banks and increasingly step in where they can’t. ●

Don’t make complexity complicated

As society changes, so do building societies. We came into being in the 19th Century to meet the needs of society, and today we find ourselves as relevant as ever, even though society itself is unrecognisable by comparison.

Our aging population reflects our success as a society. The most recent Census, performed on March 21st 2021, illustrates how British society changed over the previous 10 years.

Census gures

The Census figures show that the size of the usual resident population in England and Wales was 59,597,300 – the largest population in this jurisdiction on record, with more than 3.5 million more people living in England and Wales than in 2011.

Our move towards more flexibility, more self-employment and multiple incomes is also changing what we do. In the a ermath of the 2008 Global Financial Crisis, the need for work drove a huge uptake in temporary and

part-time positions. The pandemic and accompanying lockdowns further increased this shi – just look at the explosion of home delivery services.

The changes in self-employment have also been profound. As of March 2024, there were around 4.25 million self-employed workers in the UK.

During this provided time-period, self-employment in the UK has grown steadily, from a low of just 3.2 million in December 2000, to a peak of more than five million at the start of 2020, according to Statista.

Changing times

However, even though our economy has dramatically changed, it doesn’t mean that ge ing a mortgage as a selfemployed person has got any easier. Historically, many large lenders have preferred the reassurance, predictability and ease of calculation that comes from a regular income easily evidenced by a payslip

These examples are not exhaustive, and changes are apparent in many markets – self-build, new-build, firsttime buyer, buy-to-let and more.

KATHY BOWES is intermediary manager at Cambridge Building Society

There is also the issue of technological change. How will artificial intelligence (AI) impact the employment market? How will the demand for digital interfaces grow as younger generations become homeowners?

We can’t – and do not – profess to know the answers to all this, but we will continue to offer a pragmatic response to our evolving economy. We have worked hard to take a broader view of elements like income sources.

Pension income today is an essential contributor to affordability for older borrowers, for example, and looking more broadly at income is relevant in every market as income types diversify. Lodger income, second jobs, stipends and bursaries are much more common, and the ability to understand all self-employment types – not just dividend and salary income – is essential when assessing a customer’s affordability.

We must be realistic and responsible, but to not acknowledge the changes in society and address them is to misunderstand our purpose of helping people own their own homes

That purpose, combined with a commitment to pragmatic, manual underwriting and access to the people who make the decisions, means that we can understand and consider a customer’s full circumstances, and thus make the right decisions for the people we are commi ed to supporting.

Our strength of purpose is now more relevant than ever to our customers and communities. ●

Navigating the complex maze: Consider a customer’s full circumstances and make the right decisions

Long-term loans: Advice value has never been greater

Recent research from UK Finance revealed that the proportion of loans with terms up to 40-years is much higher now than it was just a few years ago, particularly among first-time buyers (FTBs). This mirrors what we are seeing throughout the Rosemount network, with more clients seeking to extend terms to keep monthly payments affordable.

It’s completely understandable that existing and aspiring homeowners are going down this route – for some, it currently represents their only hope of ge ing a mortgage, or of refixing on a new deal at a rate they can afford.

That being said, while ultralong mortgages might improve affordability in the short-term, it’s more expensive over the long-term and could have other ramifications for the future financial security of homeowners.

Advisers therefore have a key role to play in making sure any clients considering extended mortgage terms fully understand all the potential disadvantages, as well as the advantages.

UK Finance figures show the proportion of new mortgages taken out with a 36 to 40-year term has been rising sharply across first-time buyers, movers and those remortgaging since the end of December 2022. The most notable increase was among first-time buyers. By the end of 2023, almost a fi h of those trying to get on the ladder were borrowing with terms over 35-years, compared with fewer than 10% a year earlier.

As well as the struggles for firsttime buyers, we’re seeing homeowners coming off product rates of maybe 1% or 2%, facing new rates of 4% or

5%, and potentially doubling their mortgage payments. Wages have generally not followed that same rate of increase, and other bills have gone up. Some people therefore feel they have no other option than to select a longer term to keep the monthly repayments affordable.

It falls to advisers to make sure clients understand this will result in them paying more over the longer term and could see them taking the mortgage into retirement with them.

There may be other lifestyle changes they can consider instead; the key is making sure they have all the information they need to make an informed choice.

Subsequent mortgage transactions

It’s likely that most people going into a 40-year mortgage will do so with the intention of reducing that during future transactions, when rates have hopefully come down or other financial pressures have eased.

However, this is not a given, and more people are needing to do this in subsequent mortgages. Finding products for people who have already stretched a mortgage term in the past creates a further challenge. To take a mortgage over the age of 70, many lenders will want to see evidence of expected retirement income – which can be an issue for those who do not currently pay into a pension.

Some lenders will look at employed income alone beyond the age of 70, but will then assess the likelihood of the individual being able to work until that age, depending on their job role and so on.

We know this trend of borrowing over longer terms is playing out through the homeowner journey, because more people are taking

AHMED BAWA is CEO at Rosemount Financial Solutions (IFA) Ltd

Using a longer mortgage term to manage current nances is an expensive short-term strategy. Where it’s the only option, it’s important for advisers to talk to their clients”

mortgages into retirement. While it’s therefore not as uncommon as it once was, it could prompt the need for some form of later life lending.

As affordability challenges continue to bite, we’re seeing the market react through the products and options available. Securing a mortgage isn’t as straightforward as it once was, and advice from knowledgeable mortgage brokers and financial planners is vital to ensuring that people choose the best possible route available to them.

Using a longer mortgage term to manage current finances is an expensive short-term strategy. Where it’s the only option, it’s important for advisers to talk to their clients about their future financial planning and potential exit strategies.

At Rosemount, our advisers can easily access a full holistic financial planning solution for their clients, using our centrally managed referral system, to help them achieve financial security now and for the future. ●

The ‘bamboo moment’ may be 12 months away

In China, the bamboo tree has long been seen as a symbol of patience and perseverance.

Even if you planted a seed today, fertilised the soil and watered it regularly, it might be at least five years before any sprouts begin to emerge.

However, once a bamboo tree starts growing, it grows fast – as much as 80 feet in six weeks. In other words, you need to be patient, but eventually that patience is rewarded.

This metaphor feels apt for the current state of the mortgage market. It has been a difficult couple of years, but history tells us that the market will eventually come good again.

Halfway there

If the past 18 months are anything to go by, the ride may be a li le bumpy before we return to something resembling a healthy market.

The year started on an optimistic note: swap rates were falling, borrower enquiries increasing and everything seemed to be ramping up again.

Unfortunately, that didn’t last. By the start of the second quarter, swaps were once again rising, originations slowed, and since then the market has been treading water.

20 years in this industry has taught me not to dwell on the negatives too much, and to appreciate the positives when they arise. In that vein, there is no denying that the market is in a far be er place at the halfway point of 2024 than it was a year earlier.

In the residential market, volumes are up 26.8% year-on-year for first-time buyers and 20.4% for homeowners, according to UK Finance.

What’s interesting is that the number of product transfers fell 10.1%

year-on-year, to 120,580 in April, while the number of remortgage cases remortgage cases spiked 48.2% to 28,370.

While the total number of product transfers and remortgages is down nearly 3% year-on-year, the fact that remortgages have grown so much will be good for brokers’ top lines.

This is a welcome development, as for the past few years the rise of product transfers has meant brokers have had to do virtually the same level of work for less pay.

Even in the buy-to-let (BTL) market, which has felt the brunt of the pain from higher rates, things are looking much rosier, with purchase volumes up 29.5% year-on-year and remortgage volumes by 48.5%.

A long way to go

Despite the improvement these past 12 months, there remains much less of what I would call ‘aspirational borrowing’ compared to when rates were lower.

LUCY WATERS is managing director of Aria Finance

It feels as if the only borrowers who are acting are those who have no other choice. By that I mean landlords who rely on their portfolios to make a living, those forced to move for work, or borrowers acting to avoid their lender’s eye-watering standard variable rate (SVR).

With rates static for nearly a year, it feels as though most borrowers are waiting for borrowing costs to fall before taking action. This has been the case for a while.

Going into 2024, the consensus was that we would see three – perhaps even four – rate cuts this year. Now, we’ll be lucky to see two.

While inflation is back at the Bank of England’s 2% target, core inflation – which strips out volatile food and energy prices – and wage growth are still running hot. These are the measures the Bank of England cares most about, and it’s unlikely to make a move until both are much nearer to 2%. When that will be is anyone’s guess, but I would say at least a couple of months.

Let’s not forget also that there is always a lag between a rate cut and an uptick in activity, meaning a full market recovery may be anything up to a year away. That, of course, assumes that interest rates come down to around 3% to 3.5% and mortgage rates fall to a level where people think transacting is worth it again.

I am positive that will happen at some point in the near future, but like the bamboo tree, we may need to be patient for a while before we are rewarded with a more buoyant market. ●

Patience and perseverance

Supporting a smooth

The number of people a racted by the idea of building their own home has grown over the past few years, inspired by the emotional appeal of taking on a project, and ability to design their home to suit their personal taste. The financial incentives of self-build can also be appealing, with costs o en lower when compared to buying an equivalent property on the market.

Despite a growing appetite for these kinds of projects, many wouldbe builders are still wary of bringing their dreams to life”

Buyers are also increasingly looking to build eco-friendly homes, rather than invest in existing housing stock, to help lower energy bills and do their bit to protect the planet. In fact, the UK has some of the oldest and leakiest housing stock in western Europe, so it’s no surprise that self-builders are looking to fund their own, more energy-efficient alternatives.

However, despite a growing appetite for these kinds of projects, many would-be builders are still wary of bringing their dreams to life, largely because of the perceived complexities around financing a self-build project.

UK, and it can be relatively simple to finance, as long as clients are supported by advisers who are wellversed and prepared to walk them through the process step by step.

Traditional vs self-build

One of the key differences between mortgages for self-build projects and traditional mortgages is that selfbuild projects require funding to be available in stages as the house is built.

In order to understand how much funding is needed at each stage, self-builders will likely have to work alongside a range of contractors and quantity surveyors, undertaking the necessary research and due diligence to ensure they have selected the right people for the project.

The self-build process can be simpler than it initially seems, particularly with the help of a professional financial adviser.

So, what steps can advisers take to ensure their self-build clients avoid any hiccups on the road to building, or rebuilding, their new home?

The perception of a convoluted, long-winded process is definitely not helped by shows such as ‘Grand Designs’. There is also a common misconception that self-build always means starting from scratch, but barn conversions, renovations, and rebuilds all fall under this umbrella, and can be good alternatives to starting with a hole in the ground!

More than 12,000 people now build their own home every year in the

should recommend their clients work on one as a priority from the very beginning of the mortgage process.

1 Creating a detailed cash ow budget

With a detailed cashflow, the lender can easily ascertain the total cost of the mortgage, and the borrower can ensure that enough money is available during each stage of the building process.

Financial advisers should ensure their customers have outlined the different stages of their project that require funding, usually including: purchasing the land; initial project costs and laying foundations; construction to wall plate level; making the building wind and watertight; fixing and plastering; and the second fix through to completion.

A comprehensive cashflow budget can alleviate much of the stress of securing a self-build mortgage, and advisers

2 Avoiding ‘budget creep’

As with most large projects, there are substantial costs that may arise outside of the original scope of work. This is o en referred to as ‘budget creep’, which occurs when costs start to climb due to unforeseen factors and expenses. This can range from anything between furniture and fixture fi ings, potential setbacks due to weather conditions, and the impact of global issues.

Advisers should ensure their customers allow for a contingency fund in their cashflow budget to help avoid preventable stress and delays down the line. Clients should also be reminded to factor in incremental increases in mortgage repayments as more funds are released throughout the different stages of the building process. Though lenders may offer a period of repaying interest-only to support cost control during the build, they will want to understand the proposed repayment strategy a er the grace period.

All of these nuances should be clearly outlined by advisers from the outset to ensure clients are not in the dark at any point.

3 Preparing documentation in advance

With all of this in mind, self-builders should

self-build journey

Advisers

should ensure their customers allow for a contingency fund in their cash ow budget, to help avoid preventable stress and delays”

prioritise organisation from the beginning. Although there are more considerations to be made while applying for a self-build mortgage, the process can be very smooth if documentation is prepared well ahead of when it is needed.

well-equipped to take on their projects effectively.

While the prospect of building a house can o en appear daunting, the process can be fairly straightforward – and extremely rewarding – when financial advisers expertly guide customers through the process.

At Saffron for Intermediaries, borrowers are asked for the same documentation to support any ‘typical’ mortgage, alongside a copy of full planning permission, approved building regulations, architectural drawings, a breakdown of the work to be undertaken, cashflow projection and an approved building warranty.

By helping customers prepare all of these documents in a timely fashion, advisers can ensure their clients are

Thorough planning that accounts for deadlines will place self-build clients in a great position to secure tailored mortgage products that provide funds at each stage of the building process, and secure a smooth transaction from start to end. ●

TONY HALL is head of business development at Sa ron for Intermediaries

Bringing peace of mind to advisers as well as borrowers

MARK EATON is chief operating o cer at April Mortgages

You only have to speak to mortgage advisers to get a sense of just how full-on the past few years have been. Mortgage advice has never been a classic nine-to-five job, but all too o en it has become a roundthe-clock role, with advisers working every hour under the sun to deliver for their clients.

This hit its apex in the chaos following the mini-Budget, but the truth is that it hasn’t eased all that much since then.

Advisers are well aware that in this unpredictable economic climate their role is not only to help their clients buy, but keep, their home.

Our mission at April Mortgages is to provide advisers with the tools they need to adjust to this change, and with it bring greater peace of mind to the mortgage market.

Advisers bene t from longer xed rates

Obviously, longer-term fixed rates, lasting 5 to 15-years, will deliver greater peace of mind for borrowers. They will have true certainty over what their mortgage will cost them, removing them from the worries that come from trying to predict the future of interest rates and whether they will be able to avoid the new monthly costs.

Borrowers are a racted to this certainty, but have understandably also told us about the need to retain some flexibility on their mortgage position – which is why we have introduced our unique position of no early repayment charges (ERCs) or overpayment caps.

But advisers benefit, too. They can escape the same old 2-year remortgage treadmill, where they are not only

constantly having to navigate pricing changes with li le notice, but also engage in a never-ending tug-of-war with the lender over ownership of the client.

Peace of mind is coming to the UK mortgage market”

At April, we offer an alternative – advisers can do the right thing for their client, secure them a product that works for them, and also enjoy a rewarding repeat commission structure in the process. What’s more, any time the borrower comes to April Mortgages with further borrowing needs, they will be directed straight back to the adviser.

The value of advice

The vast majority of mortgage borrowers in the UK use an intermediary, and with good reason. Yet all too o en, advisers tell us they don’t feel particularly valued by lenders – a huge mistake given the vital role they play.

We are determined to work closely with advisers, ensuring that the value they provide is acknowledged through our ongoing commission structure.

As mortgage advisers will know only too well, there’s no shortage of lenders active in this industry. Their email inbox – and likely their spam folder too – will be full of messages from this lender and that, trying to catch the adviser’s eye. You’d be forgiven for thinking that this would make it really difficult to get an audience with advisers, but the reality has been completely different since April Mortgages launched earlier

this year. That’s because our message clearly resonates with advisers –they know be er than anyone how stressful and fraught the last few years, for both them and their clients, and they understand how longerterm fixed rates can deliver greater peace of mind.

Building momentum

There is a real sense of momentum growing behind April Mortgages now, with a host of exciting developments to come.

We have also made great progress in expanding our distribution. This is one of the most crucial considerations for any new lender.

To start with, our products were exclusively available to members of the HLPartnership and Stonebridge networks, through the Legal & General Mortgage Club, but we have broadened that out through a partnership with SPF Private Clients.

This partnership means we will be able to reach far more advisers and borrowers, as SPF is a member of the L&G Referral Pro panel. As a result, L&G Mortgage Club users can refer suitable clients. Crucially, the adviser receives not only a referral fee, but also no risk of cross or repeat sales from the adviser the client has been referred to.

In summary, I can say with confidence that peace of mind is coming to the UK mortgage market, and advisers will be central in helping us ensure it’s here to stay.

To that end, I’d love to talk to any parties who – like me – think there are ways in which we can work together to build a be er mortgage market for both borrowers and advisers. ●

Moving towards an a ordable London

Is affordability as big an issue as we think? It’s easy to fall into step with the market’s received wisdom – particularly given the significant change in mortgage rates over the past two and a half years.

But to do so ignores the fact that the reality is far more nuanced. This is especially true when it comes to housing. Affordability is predicated on the price of property, the amount you earn and the cost of borrowing.

To consider these factors in average terms is helpful if you’re working at the Bank of England, because you’re se ing monetary policy for households across the country, covering all financial walks of life. It’s helpful to get a sense of the health and direction of the economy.

It’s not so helpful if you’re talking about people’s access to homes – that question depends on where they are, what they do for a living, and their existing financial circumstances.

Varied circumstances

There are parts of the country where affordability is a huge barrier to homeownership because it’s nigh on impossible to earn a sufficient wage to support the monthly repayment of a mortgage. There are other parts of the country where people cannot afford to get on the housing ladder because the types of homes available where they need to live are a mismatch for their needs. A single young professional does not need a five-bedroom executive home – yet, at least.

There are streets of semi-detached homes with smart cars in driveways situated less than 500 metres from other streets where no one owns their own home and has no hope of ever doing so. Housing markets are not uniform, they are hyper-localised.

In London, this hyper-localisation is probably the most varied in the country. Chelsea, Knightsbridge and parts of Kensington where flats sell for

tens of millions of pounds sit under a mile from dilapidated high-rise blocks still owned mainly by the council.

Crisis or no crisis?

This brings me back to my question on affordability – is it really in the crisis the news headlines would have us believe? I think there is more than one answer to this, and it depends on where you are, who you are and what you earn.

Rather than considering the mean average, it’s perhaps more helpful to consider the people who are still active in the housing market at the moment.

Every quarter, the Greater London Authority (GLA) publishes its Housing and Land London Housing Market Report. May’s edition showed the average price of homes sold in London in Q1 fell to the lowest seen since 2021. Asking prices, meanwhile, have seen a marginal increase in recent months.

According to the Office for National Statistics (ONS), average completion prices in London fell by 0.9% in March 2024 to £499,000, the third consecutive month of decline.

March’s average house price was also the lowest house price seen since mid-2021, although the year-on-year rate of decline slowed from its recent peak of 4.7% in January to a 3.4% fall in the year to March 2024.

More recent data from Rightmove shows that the average price of London homes coming to market increased by 0.1% over the year to May.

At borough level, Rightmove reported the annual growth in asking prices was highest in a mix of inner and outer London boroughs, led by Hammersmith and Fulham and Camden at 6.5%, followed by Merton (6.3%).

The biggest drops were in Hackney (3.3%), Wandsworth (1.6%) and Barking and Dagenham (1.1%).

The GLA report also noted a changing balance of new buyer enquiries compared to seller

Average completion prices in London fell by 0.9% in March 2024 to £499,000, the third consecutive month of decline”

instructions, which indicates increased activity within the market. Between mid-2022 and late 2023, the majority of Royal Institution of Chartered Surveyors (RICS) members surveyed in April reported falling demand as measured by new enquiries.

Complex narrative

Since the start of 2024 demand has stabilised. At the same time, a growing majority of RICS survey respondents reported a rise in the supply of homes for sale, such that supply is still outpacing demand.

It’s a picture that mirrors our own experience of the market in recent months. New registrations continue unabated and activity is buoyant.

The demand to purchase homes in London and the South East is as strong as ever, perhaps with the added a raction that there’s more value to be had in certain pockets of the city a er the anaemic house price growth we’ve seen over the past three or so years.

Wage inflation is strong UK-wide, but especially so in the City.

The story may not be the same in all parts of the country, but it’s worth remembering that housing affordability is a more complicated narrative than it might seem. ●

ROBIN JOHNSON is MD at KFH Professional Services

Opportunities for brokers in the Home Counties

Property within the Home Counties has long been an a ractive option for buyers and investors. The region – encompassing towns that offer direct rail services into London – appeals to professionals and families seeking a balanced urban-rural lifestyle. For brokers, understanding the nuances of this market is crucial for supporting property investor and landlord clients effectively.

The Home Counties region boasts a rich tapestry of history, nature, culture, excellent education facilities, and extensive amenities. Postpandemic, there has been a notable shi in demand as London residents – seeking a be er work-life balance and a more relaxed pace of life – have sought out these areas.

The allure of these counties remains undiminished, providing a unique combination of accessibility to the capital and a superior quality of life.

At the same time, gradual pressures to return to offices, limited supply of homes and high demand, have all led to an increase in value in areas such as Hertfordshire. Bedfordshire has seen an even higher increase, as it is seen as an alternative to Herts, which is considered more affluent.

While prices are not cheap when compared with the country as a whole, these areas are still o en considered as a cheaper alternative to London without the associated costs of city life.

Opportunities for investors

The current market dynamics in the Home Counties offer various investment opportunities. Here are some key areas for investors:

Houses in multiple occupation (HMOs): Converting larger properties into HMOs can increase yield and provide professionals with affordable, commutable housing options. This strategy is particularly effective in towns with excellent transport links to London.

New-build investments: Investing in new developments accessible to local amenities is a ractive not only to professionals working in London, but also families seeking good schools and community connections. These developments cater for the growing demand for modern, convenient housing options.

Family home renovations:

Renovating family homes to increase their value is a profitable strategy. Investors can choose to sell these enhanced properties at a higher price or retain them as rental options, catering to families looking for homes in both towns and rural locations. Commercial to residential conversions: Converting properties addresses housing demand in the region. This approach not only meets the need for more housing but also revitalises under-utilised commercial spaces.

Signi cant projects

The Home Counties are witnessing substantial investment across various sectors, enhancing their appeal to investors. Projects include:

East West Rail: This project is set to enhance train lines, improving connectivity and making the region even more a ractive for commuters.

Hertford Gas Works: A significant housing project, demonstrating the region’s commitment to expanding residential options.

Thames Valley Science Park: With £35m previously invested, this

KATIE WILSHER-GARRATT is regional sales director for the

Home Counties at Tuscan Capital

project exemplifies the economic opportunities available, making the area appealing for high-skilled professionals and their families.

The role of brokers

Brokers can clearly play a pivotal role in guiding property investors and landlords through the complexities of the Home Counties market. By staying informed about regional developments, price trends, and investment opportunities, brokers can provide tailored advice that maximises their clients’ returns.

Key actions for advisers include: Market analysis: Regularly analyse trends and property values to offer clients the most current insights. Networking: Build relationships with local developers, estate agents, and councils to stay ahead of upcoming opportunities.

Client education: Educate clients on the benefits and risks of different investment strategies, ensuring they make informed decisions.

Customised advice: Provide personalised advice based on clients’ financial goals, whether they are looking to purchase, renovate, or convert properties.

The Home Counties remains a vibrant and lucrative market for property investors. For brokers, understanding the region’s unique dynamics is essential.

Ongoing investments in the Home Counties promise sustained growth and profitability, making it an ideal focus area for property professionals. Tuscan can help brokers secure the funding arrangements to ensure they get the most out of this region and the opportunities that exist within it. ●

Innovation is needed in the mortgage market

Innovation is a word o en used within financial services, especially when we see new product solutions launched to market.

Since the first fixed-rate mortgage was launched 36 years ago, revolutionising the mortgage sector, evolution and innovation in the sector has been steady and consistent. In the past few years, we’ve seen innovation in back-office mortgage application processing such as digital mortgage platforms, automated valuation (AVM) and underwriting models –all aimed at making the mortgage process not only more accessible and transparent for borrowers, but also more efficient for lenders.

However, there are areas that are still lacking in innovation, particularly when it comes to mortgage products. The mortgage market has been impacted by changing market dynamics and regulation, but could we happily say that there aren’t product solutions out there which, if dusted off and reviewed – especially under the spotlight of Consumer Duty – would be relevant for today’s consumers?

A key question to consider in all of this is: has today’s mortgage borrower changed significantly in the past 10 years? I guess once on the housing ladder, probably not, but for firsttime buyers, we know the struggle is all too real.

I bought my first property with a mortgage which had an eye-watering 114% loan-to-value (LTV). While it seemed a good idea at the time, it wasn’t easy for me financially; the day I picked up the keys I sat on a beanbag eating beans on toast, and did this for the next six months – and this was pre y much the norm for most firsttime homeowners back then.

What can we learn from propositions of the past and adapt for today’s borrowers, to ensure we’re delivering the best outcome for them?”

STEPHANIE

CHARMAN is group partnerships and propositions director at Sesame Bankhall Group

To be clear, I am not advocating that products such as these should be bought back to market – 100%plus LTVs wouldn’t be acceptable today – but it got me thinking more widely about product innovation and helping first-time buyers into the housing market.

What can we learn from propositions of the past and adapt for today’s borrowers, to ensure we’re delivering the best outcome for them?

New solutions

Virgin Money’s Fix and Switch product is a real example of how a small adaptation can provide a positive impact. The product provides a 5-year fixed rate at outset, but the option to switch to another product at the end of the first two years with no early repayment charge (ERC). This provides a potential solution to the question most consumers have today around whether they should fix for 2 or 5-years.

Over the past 18 months, we have seen lenders work hard to bring new solutions to market.

For first-time buyers we’ve seen Skipton’s Track Record product, which provides a no deposit option

for renters, Accord’s £5,000 Deposit Mortgage with a maximum 99% LTV, and the Own New scheme, which looks to provide an alternative offering to the now defunct Government Help to Buy scheme.

We’ve also seen other offers including long-term fixed rates from Kensington – flexi fix for term – and also the arrival of new lenders to market, such as Perenna Bank.

In the later life sector, lenders have launched hybrid products – such as the L&G Home Finance Payment Term mortgage – that are looking to bridge the gap between mainstream later life lending and equity release.

Timings and dynamics

While there are various product solutions out there for a range of target markets, it does seem that there is slow adoption in places by both borrowers and to some extent advisers, which could be to the detriment of some consumers, and I’m curious as to why this may be.

Could it be that timings just aren’t quite right for the launch of such offers, or are the market dynamics not in lenders’ favour?

We’ve built a solid foundation with a variety of solutions, but with a stalling housing market, it begs the urgent question of how best to innovate and support consumers at all stages of homeownership.

While revisiting the past may offer inspiration, is simply adapting and refining what’s available today enough, or do we need to be brave and truly innovative to create the market’s next big, fixed-rate product solution? ●

The opportunity of duty

There is not long le before the Financial Conduct Authority’s (FCA) Consumer Duty rules extend to cover closed products in addition to new products and services.

The rules, which have been phased in for new products and services since 31st July 2023, should now be fully bedded in for the majority of firms. With the anniversary nearly upon us, it’s time to take stock.

All firms are required to document how they’ve adapted their processes to deliver good outcomes for clients under the duty so far, and to show how it’s working in their annual assessment board report by the end of July.

We’re still relatively early on in this journey, but over the next 12 months, how mortgage advisers develop their understanding and application of the duty has the potential to create competitive advantages for firms that do it well.

As with all new regulation, there’s a learning curve. It can feel onerous while people get used to a different way of thinking.

It would be complacent to think of the Consumer Duty as a compliance chore, though – ultimately, the rule provides the impetus to reframe the way mortgage advice fits into the financial fitness of the client.

Given that the industry has been eased into the new mindset through advice on new products and services, the bulk of change is still to come.

UK Finance figures suggest there are around 780,000 borrowers currently on their existing lender’s standard variable rate (SVR).

Opportunity knocks

Around 1.6 million fixed rate deals will expire by the end of the year and most of those will likely have to transfer to a new product with their existing lender due to affordability changes since they last remortgaged.

Brokers dealing with product transfers for their own existing client bases have a real opportunity here, and the Consumer Duty offers a framework to guide that so clients are be er served and advisers can be proud of providing that full service.

In its final guidance on the Consumer Duty rules, the FCA notes

LISA MARTIN is development director at LSL Financial Services

that product and service features can change over time; for example, introductory rates might come to an end, or variations be made to contracts.

Customers’ circumstances can also change over time. Both factors can result in products and services that no longer meet their needs and objectives.

The guidance states: “Firms should be mindful of this and communicate at appropriate points, including any relevant changes, to prompt customers to consider if products and services continue to meet their needs and objectives.”

While sending out prompts before the end of an introductory offer period is already required in the mortgage market, the regulator has been candid in its wish to see firms consider if there is more they can do to deliver good outcomes by “enabling customers to make effective decisions and pursue their financial objectives.”

In practice, this means taking things back to basics. The objective of advice is to find the best way to help clients achieve what they want to.

Ask most of your clients what that is, and it’s unlikely to be simply “finding the best mortgage rate.”

Finding a way to make their personal financial circumstances work to allow them to offer their families stability as a result of owning a home near a good school is a financial objective, for example. The best mortgage rate is just one mechanism used to get there. What are the others?

Extending the duty out from the objective opens up a much wider opportunity for advisers to support clients – and as a consequence, build a stronger business foundation for themselves. ●

Finding the best mortgage rate is just a mechanism to get to deeper nancial goals

Enhancing a ordability on greener homes

Despite a wet start to the summer, temperatures soared throughout June with some of the warmest days on record. Of course, it’s difficult to compare dayto-day conditions with longer-term trends, but the unpredictable weather conditions across the world are a tangible reminder that climate change is a very real problem.

There is a broader understanding that there’s a need for change, and although this change is slow, borrowers are becoming increasingly aware of the need to take control of their energy consumption and the environmental impact of their home.

In response to this, we created a dedicated space on our website to support members in reducing their carbon footprint. As brokers and lenders, it’s clear that we need to do everything in our power to make processes simpler and more straightforward for borrowers, and help them to find the property and the mortgage that is right for them.

The UK has some of the oldest housing stock in Europe, meaning Britain’s homes remain among the least energy efficient as a whole, and housing contributes to around 17% of all carbon dioxide emissions in the UK.

At Leeds Building Society, we’re driven by our purpose to put homeownership within reach of more people, and protecting the planet and preserving the opportunity into the future is integral to that. That’s why we became the first provider to offer enhanced affordability for mortgages on the most energy-efficient new homes. We projected lower fuel bills for new-build homes with an A or B Energy Performance Certificate (EPC)

versus a less energy efficient property. We’ve started to see other lenders come out with similar initiatives as we work together towards building a greener planet.

Building the future

Being responsive and innovative in this area is important to us, so when housebuilder Keepmoat Homes approached us about a progressive development of properties they were planning to build near No ingham, we instantly knew that we wanted to be involved.

These homes would be built to the anticipated Future Homes Standard which is due to be introduced as part of building regulations for all new properties in the UK from 2025. The Future Homes Standard aims to decarbonise new homes by focusing on improving heating and hot water systems.

The Keepmoat homes will be heated using state-of-the-art air source heat pumps, use smart water storage, and come with under floor heating and PV panels to provide renewable energy. It is estimated that homes built to this standard will deliver a 90% reduction in carbon from previous standards implemented in 2013.

For us, it’s a no-brainer to factor in the reduced monthly outgoings associated with living in a home like this into mortgage affordability calculations. We knew there would be lots we could learn to apply to our lending across the board, and agreed to become a primary lender on these homes of the future, factoring the anticipated reduction in energy bills into our affordability assessments for mortgage applicants.

Fast-forward two years from our initial conversation, and the first homes on the development at the

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

Gedling Green site near No ingham are now on sale.

It’s estimated that the residents of these homes will use 57% less energy than those living in an equivalent standard basic new-build property, and the cost of running one of these homes will be around 45% less than similar second-hand properties.

Through this project, we’re also working in partnership with research teams from Birmingham City University. We’ll be able to access realtime learnings from these new homes on their energy usage, so we can continue to develop our understanding of what it’s like to live in one of these homes, how it affects energy bills, and the positive impact Future Homes can have on carbon emissions.

Opening opportunity

As a lender, we feel strongly that the additional costs associated with building a home to this standard should not run the risk of pricing people out of the market for more sustainable homes.

As a mortgage industry, it is crucially important that we all work together to recognise the mutual benefit to our housing stock and industry, and factor in energy efficiency into affordability calculations to open up the opportunity for more buyers to invest in a property built for the future.

We’re passionate about exploring ways we can help with affordability to ensure that we are pu ing homeownership within reach of more people, and protecting our planet for future generations. ●

General Election Rapid reaction

Labour’s landslide victory in the General Election could signify a new era for the housing and mortgage markets.

Not yet a month into the role, PM Keir Starmer and his party have reaffirmed their commitment to building 1.5 million homes this Parliamentary term in order to address the national housing shortage, and to introduce comprehensive planning reform to what is a notoriously cumbersome process.

Labour also plans to introduce rent controls and strengthen tenants’ rights, which could serve to reshape the market dynamics of the private rented sector (PRS) – for better or worse – along with providing additional support for first-time buyers struggling to enter the market.

Mortgage brokers and lenders alike now wait with bated breath to find out if this Government will impact the market for the better – boosting demand and affordability – or bring with it yet more unfulfilled promises and shortterm strategies.

John Phillips CEO of Just Mortgages and Spicerhaart:

Labour’s election victory wasn’t just convincing, it was absolutely crushing. It is important to note, though, that competition from secondary parties such as Reform and the Lib Dems has really impacted Labour’s vote share – which was lower than both 1997 and 2017. While Starmer will find comfort in his party’s significant majority, and with tactical voting certainly playing a role, this will still be something to watch in the years to come.

Attention now turns to how the new Government will answer the clear challenges facing both the housing sector and the mortgage market.

A key focus of its manifesto was increasing supply and reintroducing mandatory building targets. While this should quite rightly be a priority, we also need measures that actually help buyers get onto the ladder, while answering the clear affordability pressures we are seeing.

Maria Harris chair of the Open Property Data Association (OPDA):

With a solid majority now behind it, the Government must take the lead on urgently reforming our embarrassingly broken homebuying process. Digitisation, shareable data, improved technology and cyber standards must be at the centre of any reform, and the entire process should be digitised within three years.

Instead of the revolving door of Housing Ministers, we need ownership of the homebuying process at the highest level of Government, such as the Treasury or the Cabinet Office. Alternatively, homebuying could be owned and led by an independent body or figure such as a housing commissioner with buyers’ and sellers’ best interests at heart.

Fortunately for Labour, we could see a base rate cut as early as next month, which will certainly help towards the latter. Even so, we must do more to expand affordable housing and increase support for schemes that are actually helping buyers get onto the ladder – such as Shared Ownership or other low-deposit schemes.

The focus for brokers must now turn to helping clients get their plans back on track. The prospects for the second half of the year look positive, and brokers must seize this.

Karl Wilkinson CEO of Access Financial Services:

With the Labour win, some landlords will be reconsidering their options. Labour said they will immediately ban Section 21 no-fault evictions, which could push portfolio landlords out of the buy-to-let (BTL) market, resulting in rental accommodation becoming even more scarce and expensive.

That said, Labour’s ambitious house-building plans are good news for landlords, especially if it increases the supply of affordable social housing so that low-income households don’t have to rely on the private rental sector.

Richard Pike

chief sales and marketing officer at Phoebus:

We’re sincerely hoping the Government takes a good hard look at the property industry and mandates changes to digitise the buying and selling process, which is currently so stressful that people are loath to do it unless they have to.

Before Parliament was dissolved, we saw signs of progress with the DPDI legislation, which we need to underpin digitisation, and with the Levelling Up, Housing and Communities Select Committee’s inquiry into ‘Improving the home buying and selling process’.

We need both of these resurrected quickly to keep momentum on improving the customer experience moving in the right direction. Clarity is now needed on whether this vital work will continue.

For the housing market to function efficiently, the Government must put reform of the homebuying process at the top of its to-do list.

In May, the Levelling up, Housing and Communities Committee started seriously looking into how the process could be improved. They were talking to organisations like the OPDA, which is calling for the whole process to be digitised in three years.

Nick Hale

chief

executive

officer at Movera:

This pivotal change will inevitably bring a wave of new opportunities and challenges for the housing sector. Labour’s commitment to addressing the housing crisis is promising, particularly the focus on increasing the availability of affordable homes and investing in public housing projects. However, with change comes the need for adaptability. The Government should ensure it consults with the industry first to prevent shocks to the system, and the industry in turn must be prepared to align with new regulations and take advantage of emerging opportunities.

Kate Davies executive director at IMLA: Labour’s win is unlikely to translate into dramatically lower mortgage rates in the short-term. The money markets already priced in anticipated base rate cuts later this year, so we are unlikely to see any significant falls in mortgage rates this side of Christmas.

The impact on rates will be felt in the longerterm if Government succeeds in putting the economy on a more stable footing.

Labour’s mooted ‘Freedom to Buy’ scheme, aimed at encouraging more high loan-to-value (LTV) lending, may increase first-time buyer lending slightly – if it is structured more flexibly than the existing scheme, priced attractively for lenders to use and appeals to a wide range of mortgage providers. But nothing the new Government has outlined so far points to a concerted boost for first-time buyers.

IMLA would like to see a review of the loan-toincome (LTI) flow limits, which restrict providers to lending a maximum of 15% of their book at more than 4.5-times income.

Chancellor Rachel Reeves has been keen to assert Labour’s genuine political will to deliver 1.5 million homes over five years, and says the party will take early action to change the National Planning Policy Framework and restore housing targets.

The focus on housebuilding is welcome –indeed, shares in the major housebuilders rose immediately. But planning reform will not be quick or easy – the loss of 3,100 planning officers between 2010 and 2020 indicates the scale of the challenge.

The construction industry is struggling with a lack of skilled tradespeople, supply chain issues and raw material costs. For Labour’s housing strategy to succeed, it needs to confront these

Martin Reynolds

chair of FIBA and CEO of SimplyBiz Mortgages:

What does this mean for the residential and commercial mortgage market? Nothing too dramatic yet, but there are some positive noises. What we will have to wait to see, as always, is the finer detail, which will allow us to have greater confidence in delivery.

Rachel Reeves made a very positive speech on what she is looking to do. This included loosening planning permission, bringing back house building targets, and an increase in planning officers to hit the 1.5 million new homes target for the next five years.

We do need to remain positive, as achieving these targets is important to help with the housing challenges we face. However, we have seen these targets many times before from various Governments, and they never get hit. More importantly, there is no real kickback when they are not.

Local councils will have the ability to set out where new houses are built, but I do like the fact that this can be overridden centrally if they feel issues are not moving fast enough.

realities and provide a stable framework that encourages both public and private sector participation in the housing market, and develops the associated necessary infrastructure.

A new version of the Renter’s Reform Bill must be carefully thought through and reflect the needs of tenants and landlords alike, to avoid undermining confidence in this vital sector.

Landlords have expressed nervousness about a Labour Government potentially making the tax and regulatory regimes even more punitive. It would be wise to act early and clearly to demonstrate it understands the challenges facing the landlords who provide homes for almost 20% of our population.

We are not expecting any Liz Truss-like drama from this administration, which is reassuring. Lenders and funders expect the next five years to be better than the last five – but how much of that improvement will be down to the new administration remains unknown.

Simon Webb managing director of capital markets and finance at LiveMore: Labour’s commitment to addressing housing affordability could bring positive changes for older borrowers. We might see increased support for those struggling with high mortgage

Looking to build in brownfield and grey belt sites could help to rejuvenate city centres, and their suburbs, which are changing shape postCovid. This could be very good news for the specialist property finance sector in relation to refurbishment and development finance needs.

More planning officers will take time to recruit and get up to speed, but we do need to have a focus on not just the time planning takes, but also the vagaries of decisions.

The markets seem to like a new Government, but this was expected, so most of the positive pricing was baked in weeks before.

Stability will be key to give everyone the confidence that the market is recovering, allow the Bank of England to start to reduce base rate, and for lenders to be able to keep rates out longer with surety of stable funding.

The first big test for the housing market will be the October Budget.

I will watch with interest as to how they will utilise any flexibility in their finances to help the housing market.

repayments, potentially leading to more favourable terms and conditions.

It would also be positive to see mortgage prisoners finally receive the attention they deserve. Labour’s focus on consumer protection and financial fairness could suggest regulatory reforms aimed at alleviating the burdens on these individuals.

This could mean more opportunities for older homeowners to refinance their mortgages, thus improving their financial stability and quality of life.

However, it’s essential to consider the broader economic implications of Labour’s policies. Increased Government spending on housing and social programs could impact inflation and interest rates, which in turn affects mortgage affordability. While the intention is commendable, the execution will need to be carefully balanced.

Duncan Kreeger

founder and CEO at TAB:

Labour has a once-in-a-generation opportunity to pass laws and impact the sector for the longterm. The relatively small majority of recent Governments meant that the Conservatives were somewhat limited, but now is the time to act.

The Chancellor immediately reimposed housing targets, and the Secretary of State for Housing backed this up by calling in applications for data centres that had previously been stuck in the planning process.

The message was clear: we are going to take action. But working within the current broken system is only so helpful. We need the Government to rip apart the current frameworks and lay the foundations for a fit-for-purpose planning system.

A changed planning framework, together with the New Towns initiative, could accelerate development projects, stimulating economic growth, invigorating the construction sector and simultaneously boosting employment.

However, we must be cautious about the potential strain on infrastructure and the environmental impact of large-scale development.

Labour’s focus on affordable housing and local buyer priority could reshape the market dynamics. The 40% affordable housing target and the Freedom to Buy scheme may increase mortgage lending to previously underserved demographics. This could lead to a more inclusive property market, but may also prompt adjustments in the BTL sector as landlords reassess their portfolios.

While Labour’s Government has not explicitly stated it will raise Capital Gains Tax (CGT), uncertainty could influence investor behaviour.

The proposed increase in Stamp Duty for non-UK residents could cool the high-end property market, particularly in London. While this might create opportunities for domestic buyers, it could also lead to a short-term dip in property values in certain areas. However, the potential for interest rate cuts and the historical trend of post-election market boosts could counterbalance this effect.

Labour’s emphasis on sustainable housing and retrofitting existing stock aligns well with growing environmental concerns. This could spur innovation in green lending products and create opportunities for eco-friendly developers. It may also lead to a surge in home improvement lending.

The shift towards institutional investment in the build-to-rent sector, coupled with the expansion of Shared Ownership schemes, could alter the rental landscape. This might provide more stable, high-quality rental options while also offering alternative routes to ownership.

While Labour’s plans promise a reshaping of the market, success will hinge on effective implementation and the ability to navigate economic headwinds.

The ambitious house-building targets will require significant investment and a boost in construction sector skills and capacity.

Labour’s victory could mark the beginning of a transformative period for UK property finance. While challenges remain, the potential for increased stability, affordability and a more inclusive market offers a good reason for cautious optimism.

Jonathan Stinton head of intermediary relationships at Coventry Building Society:

The housing market is high on the priority list for the new administration, but trust in the Government’s plan hinges on how quickly it can convert policies into results. Building 1.5 million homes is a bold ambition – especially given how challenging it has been to achieve similar targets under previous Governments.

Success relies on effective collaboration and engagement with all market stakeholders, including planning authorities, housebuilders and lenders. Stability will also have a big impact, and we need a Housing Minister who can stay long enough to make a real difference.

The focus on green policies is another significant part of Labour’s manifesto, with p

the party aiming to achieve a transition to clean energy by 2030. Sustainable development is essential for futureproofing our housing infrastructure.

Chancellor Reeves has pledged £7.3bn of investment for priority green sectors, but there are questions over how these initiatives will be funded and implemented. Green policies are necessary, but must be built alongside a clear financial plan to maintain market confidence.

So far, there have been no adverse market reactions to Labour’s victory, despite policies that have raised questions in some corners. Plans to abolish Section 21 evictions, give tenants the power to challenge unreasonable rent rises, and ban rent ‘bidding wars’, for example. While these proposals do offer protection for renters, many landlords may not have time to adjust and be able to make rapid, extensive changes.

Labour’s proactivity in putting housing at the front and centre of its policy objectives is promising, but a clear, balanced and fair approach will be necessary to be effective.

Chris Little

chief revenue officer at finova:

With 16 Housing Ministers since 2010, the industry has been craving certainty for the past decade. Labour’s landslide victory is a golden opportunity to make significant strides towards addressing key issues affecting the market.

While recent upticks in house prices and mortgage approvals are promising, we’re still far from a full recovery.

The previous administration consistently missed the 300,000 annual housebuilding targets, and an overhaul of the planning system reforms is more critical than ever to increase market activity and bring us closer to meeting targets. Handled effectively, Labour’s planning reform could significantly boost lender confidence, lowering borrowing costs and creating a more stable environment.

Given that new Governments often miss their housing targets, it’s encouraging to see the Chancellor’s early support, with key measures like the reform of the National Planning Policy Framework expected by the end of this month.

In the lead-up to the election, Peter Kyle promised that Labour would place technology at the heart of the economy. The mortgage market will also benefit from this. Should the Chancellor’s planning reforms spark renewed activity in the housing market, lenders must plan ahead and harness the right digital tools to make the most of this opportunity.

Ryan Davies strategy director at Bluestone Mortgages:

In an era of new policies and political change it is fantastic to see housing at the heart of Labour’s agenda. The pledges for the provision of so many new homes through radical change is a great start. It is this, combined with buying initiatives, that will help make homeownership a reality. We need to see more affordable homes built, more innovation in helping people save, and more innovation from lenders in helping access funds in a secure yet aspirational way.

First-time buyers are feeling the squeeze of both the cost-of-living crisis and the removal of schemes such as Help to Buy when they look to save their deposit.

Looking ahead, we would like to see greater collaboration between Government and the mortgage industry. While housing stock should be a priority, just as important is providing innovative solutions that help buyers get onto the property ladder, as well as answer affordability pressures.

Schemes such as Deposit Unlock could prove to be the lifeline people need to achieve their homeownership dreams.

Uma Rajah CEO at CapitalRise:

From the very beginning, the Labour Party was unequivocal that reform to planning rules was a central pillar of the electoral offering.

Any change to planning rules will have an effect across the entire property industry, and the sector must be prepared to seize new opportunities in a potential new age of regulatory reform.

The Labour Government has committed to a range of day-one promises, including undoing recent changes to the NPPF and taking tougher measures to ensure local governments have defined plans.

It is true that a streamlined planning system will be embraced by developers and funders alike. A recent report confirmed that only 19% of planning applications are being processed in the statutory agreed timeframe. Labour promised to recruit planning officers to speed up the process.

London will remain one of the globe’s most desirable metropolitan locations, but we also see a marked increase in demand for prime property development finance across the wider South East. With a more dynamic planning system, this will further encourage a range of exciting and promising projects across this lucrative part of the residential market. ●

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Meet The BDM

Paragon Bank

The Intermediary speaks with Roger Churaman, business development manager (BDM) at Paragon Bank

How and why did you become a BDM?

Like many, it was a little by accident. I studied nancial services at university and saw an advert in the Daily Telegraph advertising for a new business representative at First National Bank. I secured the role within a month of graduating. It involved meeting brokers, building relationships and gaining their commitment to place business with us. From that moment, it seemed like my path was destined.

I loved the variety that the role o ered. Not constantly at a desk, meeting lots of di erent introducers with varied types of backgrounds kept me interested. I was always

fascinated at the pace of the industry and I also loved the di erent types of lending that I got involved in, learning more and more about di erent markets within mortgages.

What brought you to Paragon?

My rst lender in the mortgage market was Intelligent Finance. I then moved to a couple more lenders before Paragon. I was working at a competitor lender and was not necessarily looking for a move. However, when I was approached by the recruiter, and I found out that the opportunity was with Paragon, this excited me.

I have always enjoyed the buyto-let (BTL) marketplace, and the opportunity to represent Paragon was one that I couldn’t turn down. Being part of Paragon’s continued growth strategy and representing one of the founding buy-to-let specialist lenders meant I jumped at the chance.

What makes Paragon stand out?

Paragon was one of the pioneers of BTL, so has been operating in the space since the mid-90s. is experience helps it stand out from the crowd and provides brokers and borrowers with a level of trust. During our decades of lending, we’ve

become expert in many aspects of buy-to-let, including limited companies and houses in multiple occupation (HMOs) and multi-unit blocks (MUBs).

We have no rigid background interest coverage ratio (ICR) hurdles, and o er landlords retention products at the end of their mortgage term, whether they are in a limited company structure or personally owned. ey can even incorporate their personally owned properties while a customer with Paragon, and not have to terminate their products or incur early repayment charges (ERCs) as a result. is allows Paragon to be true partners with brokers and customers throughout their growth.

Looking forward, we are on the cusp of an exciting phase where technology development will help us to stand out from the crowd even more. e project is truly transformative, as we are changing the way we work, streamlining processes and, ultimately, enhancing the brokers’ and customers’ experience.

I also think the culture helps Paragon to stand out. We’re among only 3% of UK companies to achieve platinum Investor in People status, and have lots of initiatives to help make it a great place to work.

One of these that I’m passionate about is the Equality, Diversity and Inclusion Network. I recently joined the network because I want to learn about the impact that equality and diversity can have in a highperforming environment. I also want to be able to hear the experiences of others – both good and bad – that can impact our working and living environment and show where we can learn.

What are the challenges facing BDMs right now?

Over recent years we have witnessed an uptick in legislation which has meant that clients have had to be savvier in terms of getting the right advice to ensure that they are

maximising their returns. is has seen a growth in more complex ownership structures, something that BDMs must stay on top of. e interest rate volatility of the past few years has also been a challenge for BDMs and brokers alike, because frequent repricing – necessary for lenders to remain competitive and o er value to customers while making a pro t – means we’re o en trying to hit moving targets.

In ation appears to be aligning with expectations though, and a sense of optimism does seem to be returning to the market.

Hopefully, we will see base rate cuts later in 2024.

What are the opportunities for BDMs?

I would hope that political and scal stability will mean that the rest of 2024 and into 2025 will see further optimism as interest rate pressure eases on the back of a better economic environment.

e buy-to-let marketplace remains in a healthy position, with demand for rental homes still outstripping supply.

As the economic outlook improves, I would expect more landlords to look again at growing their existing portfolios.

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

However long I have worked within this industry, it remains clear that communication is the key to brokers. It’s about getting back to brokers e ciently and giving them the con dence either way – I always think that a quick ‘no’ is better than trying make a case t that will only cause issues later in the process. Service is also key – and I like to get back to brokers the same day, within reason.

With complex cases where I am looking for underwriter opinion, I will always leave the broker with an email trail to upload as evidence of our conversations. It’s a healthy way to ensure a smooth underwriting process.

What

advice would you give potential borrowers in the current climate?

I would always tell potential borrowers to do their research thoroughly. is may sound obvious, but there has been a rise in so-called experts o ering some questionable advice on social media, so it is important that potential borrowers gain as much knowledge as possible and ensure they have the right professionals assisting them – broker, tax specialist, accountant. ey should think about their long-term plans and communicate these e ectively with their professional advisers, so that these can be planned in early rather than further down the line at greater expense.  ●

Paragon Bank

Established in 1985

Products

Single self-contained properties

Limited company

Consumer BTL Refurb-to-let

HMOs and MUFBs

Contact Mobile: 07794 030 219 Tel: 0345 849 4040

Roger.Churaman@paragonbank.co.uk

Why landlords are continuing to invest in portfolios

Our latest survey has revealed that more landlords are intending to buy properties than when we last asked them about their future plans in our survey at the end of 2023.

On the face of it, this is a li le surprising. There is no doubt that conditions are challenging for landlords. The situation is not helped by political uncertainty, in particular about whether the next Government will bring in rental reforms.

But as a dedicated buy-to-let (BTL) lender, we are finding that landlords are growing their portfolios, despite some concerns about the buy-tolet market.

So, why are landlords still looking to invest?

In early May, we surveyed our landlords. One of the key questions we posed was whether they intended to buy any properties in the next 12 months. Fewer than half (44.1%) said they would, up from 32% in the

previous survey at the end of last year. Why did landlords say they were taking this step? The most popular answer was that many were aiming to build their property portfolios – just over 60%. This is very encouraging, and points to a confidence in the continued resilience of the buy-tolet sector.

Nearly a third said they would buy because they were seeing an increase in the number of tenants, while some based their intentions on a change in house prices.

We also asked whether landlords intended to sell any properties in the next 12 months.

Encouragingly, the answer was largely no – 70% said they had no intention of selling any of their properties, up from 66% in the previous survey. For those intending to sell, fluctuations in mortgage rates were the biggest reason, followed by worries about evicting difficult tenants. More than a third (34.6%) listed landlord taxation as a key reason to dispose of properties.

STANTON is sales and distribution director at Landbay

Resilience and opportunity

What the answers about buying in particular show is that the buy-to-let market is tremendously resilient. The sector has survived many economic crises, political turmoil and regulation changes throughout the years, but continues to thrive.

Of course, challenges other than political uncertainty still remain, particularly around affordability and tougher stress-testing requirements.

Despite this, at Landbay we’ve seen a busy first quarter as landlords continue to seize opportunities and see the value in investing in property.

The sector is supported by a whole range of lenders, including Landbay, that are ready and willing to lend, and able to support the wealth of talented brokers in meeting a broad range of landlord requirements.

Among our landlords there is a feeling of ‘watch and see’ about what the short-term holds, but this is accompanied by a quiet confidence in the longer-term future of the sector. Landlords will get on with growing their portfolios and supplying much-needed rental properties in a continuing housing shortage.

It is clear that there is still an appetite for further house purchases. Our landlords are voting with their feet in demonstrating the continued a ractiveness of buy-to-let as a longterm investment strategy. Strong demand for rental properties remains.

We will continue to support the sector by providing innovative solutions that meet the evolving needs of both landlords and brokers. With our expanding product range, Landbay is well positioned to help drive the continued growth of the buyto-let sector. ●

ROB

Landlords continue to seize opportunities and see the value in investing

How can we judge the market’s health without all the data?

In medicine, misdiagnosis can be fatal. But the outcome can be equally disastrous in other walks of life, too. We are currently living with the consequences of a real-life example of misdiagnosis that is still fresh in the memory.

Let’s rewind three years to 2021, when much of the world was emerging from the strict lockdowns of the pandemic.

Having been locked up indoors for several months, many households were able to build up a sizeable amount in savings. What happened when the restrictions were eased? We went out and spent that money, as one would expect.

But supply chains were still reeling from Covid-19, meaning that too much money was chasing too few goods. Combine that with food and energy price shocks, and it leads to the worst bout of inflation in 40 years, and a once-in-a-generation cost-ofliving crisis.

Whether you agree it could have done more or not, the Bank of England has come under fire for failing to stamp out the inflation problem before it took hold. Critics argue that the central bank’s failure to

Data from our own book shows that six in 10 re nance transactions are currently PTs, rather than from borrowers re nancing from other lenders”

diagnose how sticky inflation would become meant it dithered when it came to hiking interest rates.

For me, apportioning blame is never black and white, and in most cases, it’s unhelpful. However, we do now know – thanks to a review by Ben Bernanke former chair of the Federal Reserve –that the Bank of England had “serious deficiencies” in its forecasting.

He concluded that faulty economic models and outdated systems ultimately meant that the bank didn’t have an accurate picture of the health of the economy.

The rub

Why am I telling you all of this? Because the same thing is happening to the buy to let (BTL) market.

The doom-mongers are happy to predict the slow death of BTL, but they are basing their assumptions on incomplete data sets. In their minds, the slump in purchase and remortgage BTL lending is evidence that this is a market in terminal decline. However, there are a few gaping holes in their assumptions.

First, they ignore the fact that purchase lending is down in the residential market, thanks to higher rates. Nobody is predicting the demise of the residential market, I notice.

Whether you’re a landlord or a homeowner wanting to move property, why would you do so when borrowing costs are high? Surely you would wait until borrowing costs ease.

With regards the fall in remortgage lending, it’s easy to assume that this money has simply le the market. But where is the evidence of that? The number of outstanding BTL loans is only 3.6% off its Q3 2022 peak, according to UK Finance.

While a relatively small number of landlords exited the sector over the

DAVID WHITTAKER is CEO of Keystone Property Finance

past few years, the overwhelming majority of those have simply retired. This has been proven by the excellent data team at Hamptons International.

Surely, a more sensible conclusion would be that, given the conditions, landlords are increasingly opting for product transfers (PTs) over a traditional remortgage.

This is a trend which is playing out in the residential market, where more than eight in 10 borrowers coming to the end of their fixed rate term currently select a PT. Why shouldn’t the same be true of BTL?

Unfortunately, we can’t say for sure whether this is the case, as the data isn’t collected. However, data from our own book shows that six in 10 refinance transactions are currently PTs, rather than from borrowers refinancing from other lenders.

This is further supported by the published accounts of BTL stalwarts Paragon Bank and One Savings Bank, with long established PT programmes, identifying retention rates of 70% and 78%, respectively.

This completely changes the narrative surrounding the health of the BTL market. If PTs make up for the drop off in remortgage lending, then the market is in much be er shape than the naysayers will have us believe. In other words, money is not leaving the market; it’s just staying still, and importantly, out of the gaze of the data gatherers, something akin to a black hole.Until we know the size of the PT BTL market, we can’t know for sure either way. Might I suggest that we hold off on the doomsday predictions until we have data to assess the true health of the market? ●

Can Labour help x Scotland’s housing emergency?

While housing is a devolved ma er, ESPC hopes that the promises made by Labour in the recent General Election might help to bring about changes in policy in Scotland too.

For example, Labour’s manifesto spoke of building 1.5 million new homes in England over the next Parliament, and housebuilding commitments have already been announced by the new Chancellor. For comparison, in 2021 the Sco ish Government set out a target to deliver 110,000 affordable homes by 2032.

At a time when a housing emergency has been declared in Scotland, the topic merits renewed focus and joined-up thinking, and it’s encouraging to hear First Minister John Swinney saying that “there is common ground to be achieved by working collaboratively with the United Kingdom Government” a er his first meeting with the new Prime Minister Sir Keir Starmer.

Over the past few months, ESPC has had the privilege of meeting with members of the Sco ish Parliament from across the political parties to discuss the challenges of the housing market, and the concerns we have about aspects of current policy.

In my opinion, supply of housing is the fundamental issue underpinning most of the other problems we face, and there is a particular lack of housing stock in the areas that people most want to live in.

In East Central Scotland, for example, we have a distinct lack of affordable new-build homes, rental properties are in extremely high demand, and there’s just not enough stock to satisfy that demand.

Supply underpins Scotland’s property problems

Thought should be given to how more properties can be provided, and I would hope to see the Government use real creativity to come up with effective solutions.

Perhaps the Government could build its own properties, filling the gap created when the Rent to Buy initiative was introduced in the 1980s?

Could the Sco ish Government set up a fund to acquire or build properties, with people investing in the fund for an annual return?

Cause for concern

The Sco ish rental sector has been a particular cause for concern recently. We’ve seen massive increases in rental rates across the country, including the period when rent controls were introduced. Why?

Many landlords have been unable to bridge the gap between the frozen rental rate offered to their tenants and the rising mortgages rates they themselves faced, leaving them no

PAUL HILTON is CEO of ESPC

option but to sell properties on and exit the rental sector entirely.

That has created a cycle of a lack of available stock, heightened demand and increasing rental rates, particularly in those areas which were already popular.

ESPC Le ings has seen a 20% reduction in the number of its landlords over the last 12 months, and we are not alone in this – the Sco ish Association of Landlords estimates that 22,000 landlords have le the market in recent times.

We need these landlords to come back, and I believe that the time has come to revisit the Additional Dwelling Supplement.

The current 6% rate is almost certainly a barrier to purchasing property for most, and is undoubtedly discouraging prospective landlords from purchasing a buy-to-let property.

It’s my belief that this should be re-examined and brought more in line with the English market – where 3% Stamp Duty is paid on second homes, including buy-to-let properties. Or perhaps a more nuanced system could be created, whereby buy-tolet properties are exempt from the Additional Dwelling Supplement.

It will be interesting to watch the actions of the Labour party, now that it is firmly in charge. The decisions will have funding consequences for Scotland through the Barne Formula, of course, but we also hope that any big announcements on housing and housebuilding in England will also make those issues a greater focus here in Scotland. ●

The power to bring about positive change

Rachel Reeves’ first official speech as Chancellor detailed the Government’s ambitious housebuilding targets and planning system reforms, strongly suggesting that housing is a priority for the party.

With rented homes a vital facet of the UK’s housing provision, it is likely that the new Government’s long to-do list will extend to rental reform in the coming weeks and months.

While in opposition, Labour’s shadow housing team were critical of the Renters Reform Bill proposed by the Tories. Now they have the power to bring about positive change in the private rented sector (PRS), it is important that Labour policymakers evaluate the potential repercussions of hastily passing a butchered version of the legislation.

Labour Ministers were against delaying the scrapping of Section 21 until court capacity was increased. While it seems clear that so-called ‘no fault’ evictions will be abolished, many across the industry will be hoping that the party so ens its stance in acknowledgement of concerns voiced by landlord groups. An already stretched court system will be overwhelmed by an inevitable increase in cases arising from the rule change.

Commitment to change

Labour’s manifesto majored on the need for change, and the party sought to distance itself from the previous regime at every opportunity. It would do well, however, to recognise that the previous Bill, which failed to pass through Parliament before the previous Government was dissolved ahead of the General Election, largely addressed these concerns.

While few would argue against the need to legislate to provide renters with security of tenure in safe and good quality, affordable homes, it is important to deliver a Bill that recognises landlords’ interests too.

Investing in buy-to-let (BTL) represents a sizeable financial commitment, so landlords naturally need to be confident that their investments will be protected.

With the highest proportion of tenants in employment, the PRS is the tenure of the working population and facilitates economic fluidity, providing the workforce with the agility needed for companies to rapidly respond to opportunities and threats.

This workforce flexibility is an important element in supporting Labour’s economic growth plans, because as new jobs are created, a transient housing option is required to provide homes for those who move for employment opportunities.

A Bill that further exacerbates a congested court system could see landlords unable to regain possession of their properties and potentially le counting the cost of rent arrears and repairs, o en cited as the most common reason for evictions. This could undermine confidence among landlords, resulting in a reduction in PRS stock levels. This would come at a time when Zoopla’s recent rental market report reveals that tenant demand has doubled the level from before the pandemic, while rental stock availability is down by a third.

Reduce and in ate

When we consider simple supplydemand dynamics, we see that the result of reduced private investment is predictable: further rental inflation.

If we’re to avoid this, it is crucial that we create conditions for the

Landlords... need to be con dent that their investments will be protected”

current crop of landlords to invest, while looking forward to the next generation who can take the baton from those early investors who may be reaching retirement age.

Our recent analysis of industry data unveils a positive trend in this area, with the average age of buy-to-let landlords purchasing with a mortgage falling from 46.4 a decade ago to 42.9 last year.

Drilling down into the data shows that landlords in their 30s accounted for 31% of buy-to-let property purchases last year, up from 21% in 2014.

Notably, three-quarters of mortgaged buy-to-let purchases last year were made by individuals under 50.

This highlights how property remains an a ractive investment, but like all businesses, these investors seek economic and regulatory stability.

If it’s developed in a way that recognises the needs of both renters and landlords, our new Government’s iteration of the Renters’ Reform Bill can help to provide this certainty, as well as nurturing much-needed investment in rented homes, benefi ing both individual tenants and society more broadly.

We look forward to working with the Government as it progresses this Bill. ●

RICHARD ROWNTREE is managing director of mortgages at Paragon Bank

MT Finance Q&A

David Kingham and Joe Grace, BDMs for London and the South East at MT Finance, discuss the latest Bridging Trends report, and what it means for the market

Demand for business funding surged in Q1 2024, why do you think that is?

Joe Grace: Business owners are attracted to bridging because of its exibility and speed, especially given the stricter requirements of high street lenders. Plus, there’s the added incentive of securing a larger amount of funds in a shorter amount of time.

David Kingham: With the base rate being higher for so long, it’s harder for landlords to make money. Where they’d usually invest in buy-to-let (BTL) properties, some are seeking opportunities outside of the property market. A bridging loan can quickly provide them with the capital injection they need to pursue other ventures.

How does the specialist nance sector support business owners?

JG: Not only can we move quickly, but we also o er increased exibility. is is particularly useful for those who don’t have multiple years of accounts to support their business funding application. Specialist lenders can also consider an accountant’s projection of the borrower’s potential earnings next year and make a decision based on that information.

DK: We can support business owners by assessing each individual application manually. Specialist lenders can also look at income in a more exible way compared to those on the high street, including not needing evidence of trading history, accounts or proof of income.

Instead, the decision is made based on the security asset and the borrower’s future plans.

Does the increase in demand for business funding show that borrowers are becoming more aware of bridging’s versatility?

100%. Brokers have worked very hard to educate borrowers and inform them of their options, and as a result we’re seeing more choice on the market and more borrowers utilising bridging.

DK:

I agree. anks to brokers’ hard work, a lot of the negative stigma around bridging has been eroded in recent years.

Plus, while the base rate remains higher than many are used to, bridging rates haven’t jumped in the same way, which has narrowed the gap between the cost of long-term and short-term nance. is has made bridging loans more attractive to an increased number of borrowers.

DAVID KINGHAM

Regulated bridging loans soared to 51% of the market in Q1 – the highest since Q3 2020 – what is contributing to this?

JG: Speed is almost always the key factor when people are looking to use a regulated bridging loan to purchase a home. ere’s more emotional attachment, and if they can’t obtain high street nance in time, then bridging nance becomes their go-to option.

e conveyancing delays we witnessed at the end of last year and start of 2024 could well have contributed to this increase as well.

DK: In addition to what Joe said, these gures suggest that there is an increasing level of con dence in the market, and that we’re now getting to a stage where borrowers are becoming more accepting of the higher interest rate environment.

is in turn is seeing more competition among buyers, so by taking out a regulated bridging loan, borrowers are positioning themselves as more attractive purchasers thanks to the speed at which they can move.

For example, we’ve seen how savvy landlords and investors are utilising bridging loans to pick up auction purchases at a lower value before renovating and reselling them. ey need to act quickly, and this is an e cient way to borrow money to meet their end goal.

DK: e ability to have manual underwriting and a human touch can’t be underestimated. Instead of going to a high street bank and getting a ‘computer says no’ answer, borrowers and brokers know that they can pick up the phone to a specialist lender and discuss the deal with a decision-maker.

What do you think is next for bridging nance in 2024?

JG: I think there will be a further increase in business funding and auction purchases, and also second charge bridging loans. We’re seeing more second charges being used for business purposes anyway and I expect that to continue.

DK: I’m hopeful that we’ll have at least one base rate reduction by the end of the year, which should stimulate growth in the property sector and create more demand. Specialist lenders will be able to work with borrowers to provide funds very quickly to give them the edge they need against

Could this also be why we’ve seen demand for chain-break bridging loans jump from 16% in Q4 2023 to 19% in Q1?

JG: De nitely. People are wanting to compete with cash buyers, and an o er in principle from a bridging lender puts them in good stead for their onward purchase.

competitive bidders. ●

DK: I also think that the volatility we have seen recently has resulted in more people getting halfway through a transaction then backing out to wait until the market is more stable. With deadlines tight, there o en isn’t time for the other party in the chain to secure a high street mortgage, which is where bridging lenders step in.

Flexibility is one reason, but why else do you think borrowers are tapping into the product?

JG: Speed is o en one of the main reasons people use bridging loans. Opportunities are another.

JOE GRACE

Can Labour get Britain building again?

The simple answer to my titular question is an emphatic ‘no’ –because Britain has never stopped building. 231,100 new homes were built in 2023, following hard on the heels of 252,500 in 2022 – the second highest annual total since the Global Financial Crisis. Now, ‘can Labour get Britain building smarter?’ would be a be er question, but as a soundbite it’s much less sexy!

Of course, politicians – such as our new Chancellor of the Exchequer Rachel Reeves – are never ones to let the truth get in the way of a good slogan, but it is important that those of us at the sharp end of the construction industry don’t get blinded by the rhetoric.

Down to the root

The new Chancellor has hit the ground running by announcing a range of strategies to boost construction and alleviate the housing crisis, but just like her Conservative predecessors, she is doomed to fail unless she addresses the root causes of the problem.

First and foremost among these is the current unprecedented level of inward migration to the UK. Last year, approximately 1.2 million people moved to the UK, while fewer than half of this (532,000) emigrated, leaving a net migration figure of 685,000. The 2022 numbers were even higher, with a record 764,000 net migration number. That’s nearly 1.45 million more people in the country in just two years from migration alone –all needing to be housed.

This is a staggering number, and the problem is exacerbated further by the fact that many of these migrants head for London and the South East,

the economic powerhouse of the UK, for work. Successive Governments have historically favoured investment policies and incentives in the South East, with big infrastructure projects like Crossrail improving connectivity and making the region even more a ractive for new developments. Consequently, one small corner of the country has seen a rapid rise in population levels and skyrocketing property values, rental yields and higher levels of investment from both domestic and international investors. It all sounds great until you look at the consequences, with massive levels of housebuilding accompanied by woefully inadequate infrastructure spending, and the subsequent strain on roads, healthcare, schools and so much more.

Inhabitants of towns such as Maidstone in Kent, having witnessed a housing boom that has seen the population more than double in the past 20 years, will therefore view Reeves’ commitments to relaxing planning laws and building more houses on green belt land with considerable trepidation.

For them, regional inequality is a commute to work, that used to take 10 minutes just five years ago, now taking anywhere between 30 and 60. It is about the near impossibility of ge ing a doctor’s appointment because services are so stretched, of their kids being forced away if they ever want to get on the housing ladder, and the list goes on. For them, the Northern Powerhouse, the Midlands Engine and other regional initiatives offer just a faint hope that the growing population burden might be shared across the country a li le more evenly.

If Reeves and Labour want to tackle the housing crisis, they will need to reform planning laws, provide

targeted financial incentive schemes and increase the involvement of the public sector. They will also need to spend more on infrastructure to ensure there are jobs in places where people want to live, while promoting sustainable and energy efficient homes.

To do all of this they will also need to address skills shortages in the construction sector with training and apprenticeships. You can set ambitious targets, but if you haven’t got enough builders you are going to fail!

The bigger picture

It’s a big ask, and even if Labour get all this right, frankly it still won’t be enough. To really solve the housing crisis, net inward migration must be reduced from the current unsustainable levels. With measures taken by the last Conservative Government, net migration is likely to fall over the next year or two, but ultimately the UK must break its addiction to low-wage labour.

Higher wages would a ract British workers, allowing immigration policy to focus on a racting the sort of highly skilled workers who have traditionally integrated superbly and who enhance and enrich our society. Ultimately, a new economic model is required, with higher wages matched by increased productivity, more automation and a comprehensive industrial strategy designed to provide top job opportunities right across the UK.

Only then will we, as a relatively small nation geographically speaking, be able to stop chasing una ainable build targets and claiming, somewhat ridiculously, that building nearly half a million houses in the last two years is somehow not building at all. ●

BRIAN WEST is head of sales and marketing at Saxon Trust

An outlook on barn conversions

Considering the recent amendments to permi ed development rights (PDR) on 21st May 2024 on Class Q, which saw the limit of dwellings increased from five to 10, and an increase in maximum total floorspace from 865 square metres (sqm) to 1,000, a major improvement is the ability to extend from the rear on any existing hardstanding up to four metres. This could open many smaller barns, previously too small, to now be redesigned into a home.

OK, so now you have planning for your barn. Congratulations, you beat the ‘not in my back yards’ (NIMBYs) and council planners – now what?”

Time to build

OK, so now you have planning for your barn. Congratulations, you beat the ‘not in my back yards’ (NIMBYs) and council planners –now what? With barn conversions varying so much in their technicality and complexity, it is not advisable undertake them without the experience and knowledge specific to a barn conversion.

As with all developments, the challenges developers are facing holistically are the same.

The biggest precaution is around the structural soundness and ability to be converted. Remedial works such as the underpinning or rebuilding of sections are not uncommon, and depending on its listed status, can require going back to planning.

From a personal view, having grown up in Sussex, I am a country boy at heart and a li le old-fashioned in what I like. Growing up in that area and then moving to London made me really appreciate how important that lifestyle is.

WILL CALITO is development nance executive at Magnet Capital

because at their heart is versatility. As our living needs change it is o en far easier to adapt to life in a barn conversion than a conventional home.”

Intrinsic character

Berry added: “In addition, they have intrinsic character from the start. We find demand for barn conversions in the area remain stable, but o en are in close proximity to other buildings, and as long as privacy is considered when converted they always prove popular.”

Due to the complexity of these projects, it is imperative developers work alongside a professional team that is clued up on the difficulties a barn conversion can hold.

I spoke to George Berry, area director of Durrants Estate Agents in Norfolk and Suffolk,

Unfortunately, one aspect of the changes which is counter-productive is the limit on unit size. The previous limit on floorspace per converted unit was 465sqm, reduced now to 150sqm – a good sized three-bed. Understandably, what they are trying to avoid is an influx in large, higher end units, but going from one extreme to the other here feels overkill.

in Norfolk and Suffolk, about his outlook on today’s market.

Overall, despite their challenges, it’s clear there are some great opportunities across the rural landscapes for developing and retaining these buildings in another life for many

it’s clear there are some great opportunities across the rural retaining these buildings in another years to come. ●

He said: “Barn conversions always prove a er, barn conversion can hold.

is the limit on unit size. The previous locations. You can still apply under from the new increases, and you will building has ‘existing suitable access to

From an architectural design point of view, this could become quite restrictive, as chopping up a large steel-framed barn into a terrace is not always its best use, especially in rural locations. You can still apply under the previous larger limit until 20th May 2025; however, this won’t benefit from the new increases, and you will still be required to demonstrate the building has ‘existing suitable access to a public highway’.

Renovation opportunities for property investors

Demand for housing may be increasing, but housebuilding activity fell in April by the steepest amount for three months, according to the S&P Global/ CIPS UK Construction Purchasing Managers’ Index. The index shows that housebuilding was at 47.6 in April, with any reading below 50 indicating an overall contraction of output. At the same time, statistics from Local Data Company say that one in seven British shops stand empty.

Commercial to residential

With housebuilding continuing to fall behind housing needs – and so many empty commercial properties – investors have an opportunity to provide new homes by converting commercial buildings to residential use through permi ed development rights (PDR).

For those investors who choose to carry out a commercial-to-residential

conversion on a property to let out, analysis of Office for National Statistics (ONS) data by Property Beacon casts a light on the types of property that are most in demand.

The data shows that the average age of a tenant in the private rental market is 41 years old – which is perhaps older than you might think. As the average household in the UK has 2.36 people, the conclusion is that the average privately rented household will most likely have around three people including a child, so properties with two or three bedrooms will, on average, a ract higher tenant demand. These properties will be wanted by both families and couples that need that extra bit of space.

Of course, location is an important factor in considering the most appropriate property type and size. Generally, in city centres the predominant type of tenant will be young professionals and couples with no children. So, one and two-bedroom properties will have more appeal.

These properties generally offer be er rental yields, but also have a higher turnover than larger properties, where tenants might stay for longer.

In university towns and cities, student accommodation is also in high demand, and so three to five-bedroom properties that can be let out as houses in multiple occupation (HMOs) can be a popular choice.

Courting appeal

For any investment, the key is to provide housing that is appropriate to the local area, so investors should speak to le ing agents and estate agents to find out which types of property are most in demand.

Even if your clients aren’t looking to carry out a commercial-to-residential conversion, purchasing an existing property and renovating it – to perhaps add more bedrooms – can help to broaden its appeal for the local market.

Whether it is a conversion using PDR or a refurbishment to add more space, bridging finance can provide the funds that enable an investor to purchase the property and complete the required works.

At Castle Trust Bank, we offer bridging loans up to 80% loan-tovalue (LTV) net for both light and heavy refurbishments. Our Heavy Refurbishment Drawdown Bridging product enables borrowers to draw down funds as and when they need them to reduce their costs, and interest and fees on our refurbishment range can be added above the maximum LTV, which increases the amount of leverage available to investors. ●

ANNA LEWIS is commercial director at Castle Trust Bank

Bridging and the bene ts of buying at auction

Today we tend to look at bridging finance rather like a Swiss Army knife. It can fund a wide variety of shortterm needs in the same way that the knife has so many more uses than just cu ing string. Yet, 20 or more years ago, if you asked advisers what bridging finance was most used for, the chances are the answer would be auction finance.

While not the most glamorous of purposes, auctions and the use of short-term bridging finance were meant for each other, and provided the first big boost to the use of bridging loans.

It is imperative that clients going to auction have the nance agreed in principle before they step into the auction house”

Property auctions have become more popular in recent years, as the demographic has widened from firsttime buyers looking for a bargain to professional investors, developers and buy-to-let (BTL) landlords. Auction sales represent circa 2% of the total market – roughly 20,000 properties per annum – and bridging finance needs to be given more coverage in order to make sure that advisers are sufficiently briefed on advising clients by giving them a clear and concise summary of the auction process.

Properties – including unusual ones that estate agents find difficult to

market – at auction can be up to 30% cheaper than those bought through a regular sale.

The most important aspect to understand when advising clients about auctions is that any purchase must be completed within 28 days. So, as soon as the successful bidder is announced the clock is ticking down. Naturally, those who are able to pay in full at the time are fine, but anyone who needs finance will have had to put down 10% of the purchase price at the time of sale, as well as having the task of finding the balance.

Potential bene ts include:

It is likely clients will face less competition, and unlike making an offer through an estate agent, clients get a chance to bid in person, even if they have struggled to make an offer in the normal time allowed.

Properties at auction tend to carry a lower reserve than on the open market.

Being present at an auction means that clients can see their fellow bidders and can counterbid quickly if needed.

Deals don’t fall through due to delays.

There are now flexible methods of bidding by phone or online. The client can also appoint a proxy to act for them at the auction, but personally a ending an auction event in person is the most popular way to buy property.

The drawbacks include: Auctions can move quickly, and it is easy for clients to get carried away and go beyond their budget. Don’t forget that, should your client be successful and have the winning bid, they are contractually obliged to buy the property. The fact that they

have overbid does not change their responsibility to complete the sale.

The guide price on a listed property will change depending on the number of interested parties. If the price rises it is a sure sign that there is more interest in a particular property and clients might need to adjust their expectations. There are no guarantees that the property does not have structural problems or defective or restrictive covenants. Make sure your clients are aware that it is always best to have a survey on the property and have a solicitor check any covenants. Make sure your client has given you enough time to arrange funding and has the 10% deposit, which must be lodged on the receipt of a winning bid.

That is where bridging finance comes in. With the majority of properties selling for upwards of six figures, it is imperative that clients going to auction have the finance agreed in principle before they step into the auction house.

30 days is not a long time to come up with an offer from a lender to give your client the finance to complete the deal.

Unless they have come to you with plenty of time to organise the mortgage, your client is going to be at a considerable disadvantage if they want to bid at auction.

One solution is to arrange a bridging loan, which is faster to agree and gives you time to arrange longer-term finance at a speed which means that clients get a be er deal. ●

NARINDER KHATTOARE is CEO at Ku ink

Rebranding bridging is now necessary

The term ‘bridging’ has long had negative connotations when applied to finance – and this must now evolve. Bridging loans are o en perceived as complicated, expensive and associated with high fees offered by opportunistic high net worth (HNW) individuals or wealthy private family offices.

This perception is outdated and hinders the growth and acceptance of what is actually a viable, professional and ethical funding solution.

It is therefore time for the market to come together and replace the term ‘bridging’ with the phrase ‘short-term lending’ to accurately reflect the current landscape and help this funding solution gain greater mainstream acceptance.

Myths versus reality

The misconceptions surrounding bridging stem from a time when these loans were indeed extremely complex to source and costly to service.

However, the market has evolved significantly. Today, bridging loans are o en no more difficult to place, administer and fund than a standard mainstream mortgage. Indeed, funding is now widely available through reputable banks, specialist lenders, and distributors like Crystal Specialist Finance.

According to trade association UK Finance, the bridging market has grown substantially, reflecting increased competition and a broader range of available products. Market commentators vary in agreeing the size of the UK market, but the most reliable source – the Bridging & Development Lenders Association (BDLA) – quotes £4bn from its

members. Market growth has led to more consumer-friendly options and a decrease in the overall cost of bridging loans.

The Bank of England’s current base rate of 5.25% is only marginally higher than the starting rates for bridging loans, which are around 0.68% per month.This is a stark contrast to previous years, when the Bank of England base rate was as low as 0.25%, and the annualised difference between standard and bridging rates was much more significant.

Bene ts of short-term lending

By rebranding bridging loans as shortterm lending, we can help change the perception of this funding solution. Short-term lending more accurately describes the nature of these loans and aligns them with other mainstream financial products.

Here are some key benefits of this rebranding:

1Ethical and

professional image

The phrase conveys a sense of professionalism and ethics, distancing itself from the negative image of high fees and opportunistic lending practices.

2 Accessibility

and simplicity

Short-term lending is more straightforward and accessible, encouraging more potential borrowers to consider it as a viable option.

JASON BERRY is group sales director at Crystal Specialist Finance

The term ‘bridging’ no longer re ects the reality”

3 Consumer-friendly market

Increased competition in the market has made short-term lending more consumer-friendly than ever before. Borrowers now have access to be er rates, more transparent terms and a wider range of lenders.

4 Mainstream acceptance

Rebranding can help this solution become more mainstream, normalising it as a common financial tool rather than a niche or lastresort option.

The term ‘bridging’ no longer reflects the reality of the modern, competitive and consumer-friendly short-term lending market. By rebranding, we can help change outdated perceptions and encourage more borrowers to consider this flexible funding solution.

The shi will help the market evolve, making these loans a normal, mainstream option for borrowers in need of temporary financial solutions. It’s time to leave behind the legacy of high fees and complexity, and embrace the future of ethical, professional, and accessible short-term lending. ●

Saving time and money with a development exit

In the current economic climate, higher building costs and protracted transaction times are making it harder for developers to market and sell properties within the term of their existing development finance arrangement.

Uncertainty around the General Election only made the situation more difficult, with many consumers having adopted a wait-and-see approach and holding off making major financial decisions until a er 4th July.

Unforeseen delays due to operational and supply challenges can also cause contingency funds to rapidly deplete and building costs to escalate, all of which can cause unnecessary stress and significantly impact on the planning of any future projects.

Planning the next build

For developers approaching the end of their current development finance agreement, this combination of factors can present a real challenge when it comes to paying off their debt and planning their next build.

In which case, a short-term development exit bridging loan can prove to be a useful financial tool in helping them navigate these challenges.

Development exit bridging loans work by enabling the developer to pay off any outstanding development finance loans within the allocated term with a lower rate short-term exit loan, before a property is sold. The capital released can then be put towards future projects.

Not only does this help the developer navigate the pressure of sales deadlines, it can also help them save on costs and maximise their profit

opportunity mid-way or towards the end of a development.

For example, a development exit bridging loan can prove useful in situations where it is unlikely that the property will complete and sell before the end of the loan term, or in cases where a developer is selling a bespoke, high value property aimed at a smaller pool of potential buyers.

Ful lling potential

By taking out a development exit bridging loan to pay off an existing development finance loan, the developer can gain the flexibility and financial security they need to ensure the project is finished at a high standard and sold for its full value.

It can also help to prevent the developer from having to drop the property price to secure a quick sale.

Of course, there are also situations where a developer may simply want a seamless transition between projects, in which case a development exit

Repaying the development nance loan early [...] can save the developer a signi cant amount of money in monthly interest charges”

bridging loan can also be used as a means of releasing the capital from the completed project and using the funds to invest in a new project straight away.

This can be a particularly prudent mechanism in the current economic climate, where unforeseen build

MARCUS DUSSARD is sales director at KSEYE

delays or protracted transaction times can get in the way of future planning.

Taking out a development exit bridging loan and repaying the development finance loan early also means that any interest payments on the loan are stopped immediately, which can save the developer a significant amount of money in monthly interest charges.

KSEYE’s development exit bridging loans start at 0.93% per month and range from £150,000 to £25m, with loan-to-values (LTVs) of up to 75%.

Loans are generally calculated on the basis that the majority of work on the existing project has been completed, and borrowing amounts vary depending on the circumstances of each developer.

Brokers with clients looking to take out a development exit bridging loan should ensure they speak to a specialist lender or broker with knowledge and expertise in this area of the market.

Not only will this ensure the needs of each client are adequately addressed, it will also help developers reduce their overall costs, provide them with a much-needed boost in cashflow, and prevent them from having to wait until the sale of a property to access funding for their next project. ●

A development exit loan can provide a seamless transition between projects

Hampshire Trust Bank Q&A

The

Intermediary speaks with Neil Leitch, managing director for development finance at Hampshire Trust Bank, about the current state of development lending

How have you found stepping into the managing director role at HTB?

I’ve been part of the Hampshire Trust Bank (HTB) team since 2016, so I’m very familiar with how the bank works and our position within the market. I joined the development finance team in order to focus on growing the bank regionally. I’ve held a few roles, including lending director for the North of England, so I’ve seen first hand the terrific opportunities there are to support developers at a local level.

HTB’s reputation for supporting developers in the South created demand in other areas of the country, fuelling regional growth over the years. I’m proud to say that we’re now a truly nationwide specialist lender.

HTB is a very positive lender, and we’ve built a reputation during my time here for relying on common sense and a vast amount of knowledge of the sector. There’s a real focus on finding ways to ensure we can say yes to a case, rather than turn it down. It’s about being solutions-focused, really, and that’s something I’m keen to build on.

I want to see us become a bigger player within the purpose built student accommodation (PBSA) market, given the growing need for high level student housing. According to the University and College Admissions Service (UCAS), applications for university spaces hit new record highs in 2020, 2021 and 2022. While they have dropped a little since then, the reality is that we have not produced enough accommodation to meet that need. If we don’t increase student accommodation through PBSAs and houses in multiple occupation (HMOs), we’ll be more than half a million beds short by 2026, according to UK student accommodation statistics.

The team I’ve inherited from Alex Upton is in great shape – we’ve got great levels of experience and expertise across the board, so I’m looking forward to helping steer us to the next level.

What are you hoping to achieve heading up the development

finance division?

First and foremost, it’s about building on what we’ve already established at HTB. I think that if you ask any broker about our standing in this space, they will be full of praise for our pragmatic approach to lending and the level of service we deliver. We want to push on and become the go-to lender across more areas of development finance.

There will be further opportunities through different product types and geographical areas which we can expand into. We want to stay open to exploring these and continue to train our team on emerging opportunities across the country.

Education will be a big focus, too – we want to be true allies for intermediaries who want to do more in this space.

We’ve said it before and we mean it: as a lender we see it as our responsibility to educate brokers on the development finance sector and to work toward making the approval process of a deal more transparent to further their understanding. Moreover, we want to build the best property development finance team in the industry, and we’ll only do that if we continue to invest in our people.

What’s your view of the development finance sector now?

There’s plenty of positivity at the moment, which is really encouraging. We’ve seen a noticeable increase in interest from developers of late, particularly those who may have put their plans on hold over the past year or so – when the economy and the outlook for interest rates have been a little uncertain – but who are feeling far more confident

NEIL LEITCH

today about their prospects. That’s welcome, as without question, we are not building enough homes to meet demand.

Successive Governments have talked about producing 300,000 new homes a year, but we’re miles off. For example, the latest Government stats show there were just 149,000 housing starts last year, down from 178,000 the previous year.

There are certain barriers that we must overcome to improve those levels and address the housing shortfall. Chief among them is delivering the funds that developers actually need to kick on with their projects.

A common complaint we hear from brokers and their clients centres on the regional inconsistency of lenders. Unfortunately, the experience of developers can vary significantly depending on where they are looking to build homes – it can be incredibly difficult for developers to push on with their projects when they’re planned for areas where the lender doesn’t have the local knowledge to understand the nuances of the deal.

I used to hear about this first-hand as lending director. We had built-in local knowledge in our team, meaning we could provide a more informed answer and experience to our clients.

Our lending directors live in the areas they serve, they have the cultural and geographic understanding that developers must be able to rely on.

That’s why we’ve invested in building such an extensive team here, providing that local understanding for developer clients right across the country, rather than in geographic pockets. It means we’re much better positioned for supporting developers in producing the homes that we need, and better able to find ways to ensure that projects go ahead successfully.

What is the attitude of brokers towards development finance?

I think it’s pretty clear that far greater numbers of intermediaries have recognised the opportunities open to them through advising on development finance cases. Diversification is always crucial for advisers, and as appetite among would-be developers has grown, so too has interest from brokers, who perhaps haven’t handled as much development business in the past.

We want to play our part in helping them do just that, having long worked closely with brokers in supporting and educating them around the development finance sector. This passion for education has led to our development finance

masterclasses – the first was in London last year, and we held our second session in Manchester in May this year.

The sessions have been designed for a wide array of experience of development finance, from brokers with limited knowledge who want to do more, to those we’ve worked with many times, and the response has been incredibly positive.

Because we’ve been in this industry for such a long time, we’re well informed on the issues that brokers can encounter, and more importantly how they can find a way past them so that their clients can successfully access the funds they need.

From the feedback we’ve received, we know that even the most experienced of brokers attending the class have learned something new about how development finance lenders tick.

It’s not enough to just talk about helping brokers; action speaks louder than words, and through these masterclasses we’ve taken the next step in assisting brokers in building the skillset and knowledge base they need for working with lenders in property development.

Are lenders doing enough to support brokers and development finance clients?

There’s certainly room for improvement, particularly when it comes to being adaptable. I think the nature of development means that being flexible is vital – it really can’t be overstated how important it is.

Obviously, there’s a need for a plan from the developer at the outset of a case, but it’s inevitable that things will change as you go along.

The fact that there are so many variables involved means that plans will have to shift, and the lender needs to be able to support the developer when that happens.

It’s also worth noting the value in a close relationship with the developer.

It’s not really good enough for the lender to deliver the funds and then keep its distance – the project is far more likely to reach a successful conclusion if the lender takes a more hands-on role and delivers more personalised support throughout.

It’s something that I’m proud to say we prioritise in the way that we work at HTB, and it has played a part in our great success to date.

We pride ourselves on providing the allround service that is so important to guarantee a successful deal for developers, brokers and lenders alike. ●

Thriving through continuous improvement

The mortgage industry faces a unique challenge: balancing complex regulations with efficient customer experience.

Neglecting customer satisfaction and employee wellbeing can have long-term consequences. Here’s where a structured approach to continuous improvement comes in.

By implementing a framework that emphasises communication, performance management, and employee development, you can unlock a trifecta of success: improved customer experience, enhanced financial performance, and empowered employees.

This article explores a range of methods that can be applied within the mortgage operation.

Communication

Daily stand-up meetings: Short, daily meetings at the beginning of the workday and during the day ensure clear communication. Team members share their priorities, identify roadblocks, and seek support. This fosters a collaborative environment and allows timely intervention.

Skills and capabilities matrices: These matrices create transparency by visually displaying the required skills and the current capabilities of each team member for every task. This allows for targeted training and development.

Value stream mapping: Mapping the mortgage origination process allows for clear visualisation of customer requirements, valueadding activities, and bo lenecks. By understanding where value is created and wasted, you can identify areas for improvement.

Controlling performance

Process confirmation: This technique involves regular performance assessments based on established ‘one best way’ standards. Feedback is provided to individuals and teams, leading to continuous improvement.

Performance management: Se ing clear and measurable key performance indicators (KPIs) allows for data-driven decisionmaking. By displaying KPIs openly for both individual and team performance, you can track progress over time, identify areas requiring a ention, and celebrate achievements.

‘Day In The Life Of’ activity analysis: This time-management technique involves analysing the activities undertaken throughout a day. Identifying the type, sequence, and duration of tasks reveals opportunities for improved efficiency. This data helps streamline workflows and eliminate unnecessary time-consuming activities.

Individual improvement

Coaching: Regular one-onone coaching sessions provide a personalised platform for employee development. This collaborative dialogue allows employees to identify challenges, develop solutions, and implement small, achievable improvements. Incremental changes accumulate and contribute to significant gains. Capability management: When coaching and development haven’t yielded the desired results, a formal process can be implemented. This structured approach provides the necessary framework and support to

COLIN MCARDLE is managing partner at Time Consulting

help employees reach the required performance level.

Standards: Clearly defined ‘one best way’ standards for manual tasks provide a solid foundation for consistency and quality. A variety of formats, such as videos, Zoom or screenshots, ensures these standards are easily understood and followed. This minimises errors, reduces risk, and improves overall productivity.

A recipe for success

Improved communication fosters a collaborative environment where challenges are addressed readily. Datadriven performance management enables strategic decision-making and highlights areas for optimisation. Empowering employees through development opportunities cultivates a sense of ownership and engagement, leading to higher retention rates.

A streamlined and efficient mortgage process translates to faster turnaround times, fewer errors, and a smoother experience for the customer. This translates to increased satisfaction, improved brand reputation, and ultimately, a competitive edge in the market.

Continuous improvement isn’t a destination but a continuous journey towards excellence. By embracing this mindset and adopting these tools, firms can navigate the industry’s everchanging landscape while ensuring long-term success.

A culture of continuous improvement fosters innovation, leading to a more agile and adaptable organisation that responds effectively to market fluctuations and regulatory changes. ●

Retirement options for advisers

For advisers approaching their retirement years, knowing when and how to step away from a business they have spent decades cultivating can be a tough and emotional decision.

Many advisers will have built up strong relationships with clients over the years, and will therefore be naturally concerned about the welfare of these customers and the advice they may receive when they are no longer in the industry.

In addition, the strategic and financial planning that goes into ensuring a smooth transition to retirement will need careful consideration, as some advisers may be willing and able to leave the industry immediately, while others may wish to gradually reduce their hours, or work part-time until they are ready to fully retire.

This is even more pertinent in the current economic climate, where a loss of earnings and higher living costs are more likely to eat into disposable income, and may therefore cause concern among those advisers approaching this stage of life.

It may also mean some advisers have to work a li le bit longer than planned to ensure they maintain an income stream that will see them through their retirement years.

For any adviser currently weighing up the possibility of retirement, The Right Retirement Plan (TRRP)

from The Right Mortgage & Protection Network offers a range of opportunities for financial advisers to retain, and in some cases exceed, an income stream in retirement.

The package includes a plan designed for advisers looking to completely retire from the industry, as well as a hybrid service option aimed at those advisers who wish to gradually reduce their working hours over time.

There is also a locum service option available for those advisers wishing to continue to work on a part-time basis, but who would prefer to start gradually migrating their clients into the business over a certain period of time. This allows them to manage the process and their clients’ expectations in a way that is comfortable for them.

Advisers joining the service receive 50% commission for all new business transacted through the plan, and 75% commissions for any renewals.

This means they can continue to earn a passive income from existing clients and any new clients they may refer even a er they retire, which helps to provide them with greater financial freedom and allows them to reduce their hours, take some time off, or decide to fully retire on their own terms.

As there is no fee or any contractual tie-in for joining the service, TRRP can be an a ractive proposition for those advisers still considering their options.

SAM CLARK is director

of e Right Retirement Plan, part of e Right Mortgage & Protection Network

Customers will also benefit from the service, as they will retain access to high-quality financial advice even a er their financial adviser has retired.

So far, 22 advisers have signed up to TRRP in 2024, with a total of 136 advisers currently utilising the plan. The client banks of each of these advisers ranges from seven to 871 clients, and a total of £360,981 in commissions was paid out to retirees in 2023.

In total, 11,470 clients are being serviced through TRRP, and the number of business cases wri en in 2023 ranged from mortgages (951), private medical insurance (673), life insurance (584) and equity release (64). This clearly demonstrates the broad range of options available to advisers within the network, and the specialist areas in which we operate.

Time to plan

For any adviser approaching the stage in life where taking retirement is the next step in their career, planning ahead is crucial, which is why TRRP can help make the transition to retirement smoother.

Signing up to the plan will enable advisers to feel safe in the knowledge their clients will be looked a er and offered continuity of service within the network, while also providing them with a passive income stream. This can help them achieve the financial freedom they may need to take some time off, work reduced hours, or even fully retire, safe in the knowledge that both their clients and their business interests will be fully taken care of in the future. ●

When retirement is the next step in an adviser’s career, planning ahead is crucial

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

expat, non-UK citizen resident. Currently our criteria do not allow us lend to a first-time landlord as an expat, they would require a minimum of 12 months UK BTL history.”

CASE ONE

First-time buyer, first-time landlord

Aclient moved to the UK late last year on a working visa with a bank in London, employed on over £100,000. He is a first-time buyer and first-time landlord without indefinite right to reside, with a deposit he built up when living in South Africa. He now wishes to purchase a buy-to-let (BTL) property in the North.

TOGETHER

“We do not need indefinite rights to reside for those purchasing an investment property. What we will want is to understand the source and build-up of the deposit, and may ask for evidence to support this.

“We can also support with first-time buyer and first-time landlord scenarios, and one of our key remits as a specialist lender is supporting customers through complex cases like this one.

“Due to the customer’s income, we would need an interest coverage ratio (ICR) of 145% against the mortgage payment.”

WEST ONE LOANS

“With property prices in the North varying, and the average property price at £213,087 according to Zoopla, the investment would need to meet the criteria on minimum property value, which has recently been reduced to £90,000.

“West One can facilitate first-time buyers and first-time landlords, with no minimum income requirements, so the salary will help this buyer.

“The challenge relates to the indefinite right to reside. We would need the borrower to be a British

BUCKINGHAMSHIRE BS

“The society can consider this up to 80% loanto-value (LTV). We would need to see that the applicant has been living and working in the UK for a minimum of two years with right to work clear on his visa.

“As a first-time buyer the BTL would be based on full affordability and not interest cover ratio (ICR). First-time landlords are acceptable.

“This is assessed on affordability to ensure that the applicant is not looking at buying the property to live in, however this is in another location in the country. The society would need to ensure that we can evidence the build-up of deposit and that the applicant has saved it themselves, as gifted deposit would not be acceptable on this occasion, it would also need to be in a UK bank account.”

CASE TWO

Remortgage with debt

consolidation

Two clients, an administrator and police officer, need to consolidate debt but also keep their payments down as the recent increase in rates means their future payments will increase by a large amount. Due to the occupation of the police officer, extending the term made little difference, and they decided that interest-only is now the most viable option for their budget. The police income also has a large amount of additional

deductions, and although they are voluntary, they have proven to be a problem for many lenders and thus made affordability a challenge. The joint incomes of the two stands at under £100,000, but they have over £600,000 of equity in the property.

TOGETHER

“Together would likely be able to support these customers with a full first charge remortgage on an interest-only basis, although this would be subject to seeing a plausible exit strategy. Our monthly affordability assessment will then be calculated on an interest-only basis.

“Some acceptable repayment strategies are the sale of the owner-occupied property, should they look to downsize, or the sale of a second UK property where there is sufficient equity.

“Other strategies that would be considered could include tax-free cash from a suitable pension plan, endowment policy and stocks and shares ISAs.

“Our affordability assessment is based on the applicant’s net income, but if the customer fails our automated affordability check they do have the option to be reassessed on their actual stated expenditure – one of Together’s key selling points.”

HARPENDEN BUILDING SOCIETY

“We can absolutely capital raise for debt consolidation, up to £30,000 where the debt was built up through general expenditure, or beyond £30,000 where the debt was built up through home renovation.

“The switch to interest-only would be acceptable here, as we only need a minimum equity of £150,000 and a max LTV of 75%.

“Depending on the nature of the voluntary deductions from the police income, we may or may not be able ignore these for affordability. However, we can consider up to six-times income, so it is worth running this through our affordability.”

WEST ONE LOANS

“We can look at an interest-only loan up to 75%. As they have a household income in excess of £50,000, we can use the loan-to-income (LTI) boost option here with uncapped LTI, which should help overcome the deductions the police office has from pay. However, interest only is not available on LTI boost, which may challenge the affordability. In that case, our standard LTI of five-times income would come into play, with the ability to also look at overtime if part of the pay.”

BUCKINGHAMSHIRE BS

“The society can consider capital raising for debt consolidation, up to 80% on repayment, with

the society clearing the debts on completion. For interest-only the LTV will be lower – up to 60% depending on number of bedrooms in the applicant’s property if they are using sale of main residence as a repayment vehicle. A minimum equity of £135,000 would be required at the start of the application.

“We would need to understand the reason for wanting to do this on interest-only, and we would look to see if we could take the deductions, depending on what they are, for affordability to see if we could support a repayment mortgage as this would be the better option for them to help provide sustainability with a debt consolidation case; however, interest-only can be considered on a case by case basis.

“The society will stress the affordability on interest-only as interest-only – not on a repayment basis – alongside a no minimum income requirement for this area of lending.”

CASE THREE

Self-employed with low deposit

Aself-employed client is looking to buy their first property but has faced challenges from lenders, as to prove affordability they need to show income from two of their self-owned businesses, rather than just one. In addition, the client’s car loan for one of the businesses appeared on a personal credit file, but was in fact paid through the business. What’s more, the client currently only has a 5% deposit.

TOGETHER

“If the applicant was looking to buy a property on a Shared Ownership basis, we could support by lending up to 100% of the applicant’s share, not requiring a personal deposit as part of the mortgage application.

“We can utilise income from both businesses if they have been trading for 12 months or more. We would ask to see a completed accountant’s reference confirming both the actual and forecasted income, supporting the plausibility of the customer’s onward income.

“If a customer can evidence the last two years’ self-assessments, we can then accept these along with the corresponding Tax Year Overviews as an

alternative to the accountant’s reference. As to the car loan, if the applicant can evidence that this was part of their business expenses, then it can be discounted from affordability.”

HARPENDEN BUILDING SOCIETY

“We can accept income from multiple businesses for self-employed individuals, and only need one year’s finalised accounts with a projection for year two. As long as the car loan payments can be evidenced in the business accounts, we can discount this. However, please note our max LTV is 80% on residential lending.”

WEST ONE LOANS

“We would be able to view the income from the two businesses, looking at the client’s personal tax via their SA302 and tax overview. With evidence from an accountant that the car loan is paid for by the business, we would be able to exclude this.

“Unfortunately, our minimum deposit requirement would be 10%.”

BUCKINGHAMSHIRE BS

“In this case the applicant would need to be able to provide two years full accounts or SA302 to evidence the income for both businesses, of which we would take the average. A plausibility check would be completed to ensure that both businesses could be managed and be sustainable.

“The car loan can be excluded, as long as we can clearly evidence that this is paid for via the business. If this option was not possible, maybe considering a joint borrower sole proprietor (JBSP) would help. The applicant would need an additional 5% deposit as LTV would be restricted to 90%, but parents can also gift a deposit alongside being on the mortgage for affordability. A 5-year exit plan would need to be considered, but with the applicant being self-employed this should be plausible.”

CASE FOUR

Single mother of three

Asingle mother of three is looking to remortgage. She currently works a parttime job with the police and receives

a small amount of child maintenance which is not court ordered, but paid regularly into bank. She wants to remortgage, but believes she will struggle with the higher rate and monthly repayments on a capital and interest basis. She therefore wants to switch to interest-only deal in order to reduce the monthly burden.

HARPENDEN BUILDING SOCIETY

“We can accept non-court ordered maintenance as long as this can be evidenced on a minimum of six months’ bank statements. We can proceed on an interest-only basis up to a maximum LTV of 75%, with a minimum of £150,000 equity in the security property.”

UNITED TRUST BANK

“UTB applicants seeking an interest-only mortgage must have a minimum £50,000 annual income and a plausible exit strategy.

“Child maintenance that is not court ordered can be acceptable with sufficient evidence of regular payments being made in full and on time.

“If the part-time income and child maintenance exceeded £50,000, UTB would consider the application if there was a plausible explanation of how the child maintenance income would be replaced if it were to stop.”

BUCKINGHAMSHIRE BS

“The society could consider this case subject to understanding more around the maintenance being received that is not court ordered, as it would need to be paid for the term of the mortgage so would be subject to the child age.

“Interest-only can be considered subject to the interest-only criteria. The society does not have a minimum income for interest-only, but LTV would be reduced subject to the downsizing rules.”

WEST ONE LOANS

“Moving to an interest-only option is something West One can assist with to support borrowers with affordability and potentially offer 75% LTV.

“Part-time and complex incomes in general from applicants are accepted, and something of a forte for West One. We work with clients to ascertain full understanding of incomes to help and leverage borrowing.

“We would need to understand the borrower’s income; however, as the child maintenance is not court ordered we would not be able to take this into account.

“If time is of the essence, we can also look to use our fast-track remortgage service, meaning cases can be completed in a matter of days.” ●

Ithought I was going to write a piece on difficult conversations this month – the sort people avoid like the plague, o en with disastrous consequences.

The more I mulled, the more I realised that conversation itself was the problem. We have forgo en how to do it. Our small talk is superficial, predictable and perhaps boring. We avoid eye contact so we can prevent the, ‘what do you think of this weather?’ ‘what was the traffic like’, sort of ennui. Yet small talk is critical in oiling the wheels of relationships, endorsing the very humanity of the people around us. We just need to be a li le be er at it.

that handles many of my insurance needs, waiting to go upstairs and coach my client.

I noticed those passing security. Some flashed a badge in the general direction, but others stopped to have a brief word, one even managed an almost cool fist-bump. Trivial stuff, but nevertheless, the stuff which builds relationships.

suddenly challenged to discuss, in twos, topics such as:

How have your priorities changed over the years?

How has your background and experience limited or favoured you?

When have you felt alone or isolated and what are your remedies?

Psychological research tells us that those slight moments when we recognise another human and have an interaction, even of the lightest touch, do a great deal for the wellbeing of each person involved.

As an expatriate Scot, I have a tendency to speak to anyone, anywhere – scaring most Londoners. However, as a result I build good relations and can get a feel for organisations.

In one recent example, I was in the reception of a large organisation, one

The trick is in making those conversations a li le more meaningful every time. Asking how someone is o en engenders the ‘fine’ response, telling us nothing. Asking the same question while maintaining eye contact and changing tone of voice –like we mean it – can lead to a sudden insight into what is really going on.

Problems occur when, in all honesty, we really do not want to know – perhaps because we dread people telling us they have problems that we might need to fix.

Theodore Kazdin maintained that society had become increasingly unable to have conversations that held any meaning. We use his ‘Menu of Conversations’ as a dinner activity on many of our leadership programmes.

Bankers who would normally have been discussing sport or traffic are

What have you learned about the different varieties of love in your life?

What does the world need to make it a be er place, and what do you wish to contribute?

The conversations that ensue are deep, meaningful and heartfelt, especially in predominantly male groups. They o en haven’t realised they can talk like this. It feels like men in particular have never been permi ed to explore deep issues with colleagues before. Thoughts are shared on, for example, love and conflict with a father, the wonder of becoming a parent yourself, what gives meaning to existence, and many other themes. Business relationships are enriched as a consequence.

So, you should never be starting with the so-called ‘difficult conversations’, but instead investing

first in building strong relationships, based on a genuine interest and ability to listen to the other person, to consider and remember what they were saying and to take the conversation deeper.

This perhaps helps explain the resounding success of good coaching.

Having someone totally a entive who measures, recognises and confirms your strengths, listens at a deep level, echoing, questioning, probing and discussing options, errors and choices, someone whose opinion you value and from whom you can hear even challenging feedback.

Developing a coaching organisation means training people to use coaching skills as an everyday part of professional, business communication, making conversations really count and consequently increasing business success. You may choose to think of professional communication as ‘so skills’ – but preferably not on my hearing – when, in fact, the results make ‘hard’ business sense.

One bank where we trained bankers as coaches claimed a 6:1 return on their investment, while their investment bankers claimed

their monetary success was much higher! Even if you are not launching a communications programme, it is worth analysing, at a personal level, how much more meaningful day-today conversations with colleagues and clients could be.

Only once good communication is in place and you have earned your colours as an active, interested and empathic listener, will it be time to consider which more difficult conversations you might need to embark on.

You may just find that because the nature of a relationship has been improved so much, it has already taken place as a ma er of course, without having to make a big fuss.

Your challenge for this month is as follows:

Make more – and more meaningful – small-talk with colleagues or people you see daily.

Discover what makes people tick. Notice how different their choices are from your own. If everyone says the same thing, go searching for some diversity.

Listen in-depth without rehearsing your own response. Ask for clarifications, explanations.

AVERIL LEIMON is co-founder of e White Water Group

Don’t just assume you know what they mean.

Be more conscious of the emotional data they are presenting – not just in what they say, but in how they are saying it. Tell people how much you enjoyed the conversation.

Just promise me you will never, ever, use the so-called ‘shit sandwich’. It makes me cringe any time it is mentioned. How stupid do you think that anyone could be to not notice positive feedback only ever comes as a precursor to having the boot stuck in? ●

A vital lifeline for older borrowers

Affordability remains a problem for many people, whether they are buying a property, moving home or simply remortgaging. However, this is a particular issue for many older borrowers, whose age can count against them on standard affordability tests.

This has been a problem for a number of years, but the situation has been exacerbated by the recent rise in the Bank of England base rate.

Many borrowers in their late 50s and 60s find they cannot easily remortgage if it means extending the mortgage term beyond their 65th birthday. As a result, many are stuck on increasingly expensive standard variable rates (SVRs). This was less of a problem when the base rate stood at less than 1%, but in some cases these SVRs now run into double digits. This is hardly an ideal situation in a cost-ofliving crisis.

Fortunately, specialist lenders like Hinckley & Rugby can help. All our products now include a maximum borrowers age of 85, including our Income Flex mortgage. Importantly, this doesn’t just take into account an individual or couple’s main earnings, it takes into account all income coming into the household. This includes 100% of bonus payments and commission, self-employed earnings, or dividend income should they run their own company.

Income Flex can also look at secondary sources of income – for example, interest payments or dividends earned on savings or investments, or rental payments from a holiday home or buy-to-let (BTL) property. These are o en important additional sources of income for many older borrowers.

Hinckley & Rugby will also look at various types of pension income. This doesn’t just include the state pension or a ‘guaranted’ annuity or final salary

pension. The fact our underwriters are used to looking at investment income means they can assess likely income streams from more modern defined contribution (DC) pension arrangements.

Taking all this into account will give many older borrowers the ability to ‘flex’ and stretch their income — enabling them to get off an expensive SVR and unlock a more affordable home loan.

Bridging the gap

We all know that retirement has changed. The days of ge ing a gold carriage clock on your 65th birthday and retiring to the golf course are long gone.

Today, retirement tends to happen over a number of years, with some people opting for part-time work initially, or stepping down into less demanding roles. Many people make a positive decision to work beyond their retirement age — perhaps they don’t feel as old as their parents did at 65. But we also know that for significant numbers of people, this will be a financial necessity.

O en, it is private savings and investments that are used to bridge gaps in income between fulltime work and their full pension entitlement. Many of these borrowers will be able to use these funds to continue to service their home loan, but they need a mortgage lender that can take this into account.

When today’s 60-year-old started their working life they probably planned to have the mortgage paid off well ahead of their retirement date. But as we all know, life doesn’t always go as planned. There are a number of reasons why people can end up with significant mortgage debt as they near their retirement age: divorce, a career change, moving to a larger property later on in life, or taking equity out of the home — perhaps to fund home improvements or help children onto

LAURA SNEDDON is head of mortgage sales and distribution at Hinckley & Rugby for Intermediaries

When today’s 60-year-old started their working life they probably planned to have the mortgage paid o well ahead of their retirement date. But as we all know, life doesn’t always go as planned”

the housing ladder. Brokers will find their 50 and 60-year-old clients can have very different borrowing needs, which is why a one-size-fits-all approach is unlikely to work.

With the age of first-time buyers rising and people typically starting families later in life, this trend will continue, and it will become increasingly common for people to have a mortgage into their 60s and beyond.

In many ways, the mortgage industry has been slow to adapt to these changes. There may be retirement interest-only (RIO) loans and equity release plans for later life borrowers, but there is o en li le to serve customers as they move from middle age and a standard repayment mortgage and into their retirement years. This is a gap that we think Income Flex can bridge. ●

Nothing but a number

Age is a funny thing.

When you are 20 years old, you assume that by 40 you will have everything ‘sorted’, and that by 70, you will be pruning roses. However, while this image is carefully pushed by the media, it is not the experience for the vast majority of customers you support.

While these customers may all want to buy or refinance a property, their other ambitions, needs and expectations are likely to be wildly different. Sarah at 70 might be a self-employed graphic designer who still goes to Glastonbury, while Nigel, who is the same age, might have stopped work 10 years ago due to health reasons.

That is a challenging dynamic when it comes to what advice advisers provide, and how customers are supported – especially in the later life lending market.

Variable vulnerabilities

While older customers are generally more prone to vulnerability, being older does not necessarily make

someone more vulnerable. In turn, those vulnerabilities can o en be successfully managed. For example, hearing loss is identified as one of the characteristics of vulnerability, but while Sarah might need a hearing aid due to years of exposure to loud music, this perhaps has not impacted her cognitive abilities.

The Financial Conduct Authority (FCA) expects advisers and organisations to provide appropriate support, irrespective of what the vulnerability is, but what this looks like can differ from firm to firm.

In the equity release sector, as the majority of our customers are over 55, we are even more focused on this issue, and have chosen to go over and above what you see in the residential mortgage market.

In addition to specialist financial advice, customers must receive faceto-face independent legal advice. This helps to ensure they fully understand the risks and implications of their choices, the product details and are free from duress – a particularly concerning issue.

While most family members will be only too happy to support their loved

KELLY MELVILLE-KELLY is risk, policy and compliance director at the Equity Release Council

ones’ wishes, whatever they might be, there are some cases when an older relative has been put under duress to proceed. This pressure might be overt, with someone scared of actual harm, or covert, with the family member talking endlessly about how they will lose their home without the support of their older relative.

Independent legal advice works to flag these challenges, and recent analysis of more than 300 cases when vulnerability was identified suggest that health (44%), capacity issues (23%) and undue influence (15%) were the most common vulnerabilities highlighted.

Speaking to specialists

Equity release advice is specialist, as is the type of independent legal advice needed to support these older customers. However, we do see situations when customers prefer to use their own legal advisers or someone suggested to them by a friend or relative. Unfortunately, this can slow the process down significantly, as they are not used to dealing with the various processes needed.

The Equity Release Council (ERC) recently published a guide to independent legal advice in this sector, to support legal firms that wish to help clients with these transactions. It is also useful reading for intermediaries who wish to understand more about what they might need to consider as part of a transaction.

We would encourage as many people as possible to read the guide, as while pruning roses will no doubt be some clients’ experience; others may well still be going to Glastonbury and expect an entirely different type of support. ●

Needs and expectations are likely to be wildly di erent across the older demographic

Leveraging GI to achieve consistent client outcomes

We’re now almost one year on from the introduction of Consumer Duty.

Mandating a continued outcomefocused approach from advisers for their clients – and coupled with general market turbulence in the past few years – there’s been a greater focus on discussing general insurance (GI) as a means of demonstrating value in adviser-client interactions.

As we know from our adviser interactions, delivering value is what underpins the successful provision of financial advice. Fundamentally, every home deserves to be properly protected. This is entirely possible through the continued hard work of advisers. However, it’s apparent that despite their intention to do this, advisers don’t always have the luxury of time or resource.

The issue of balancing this limited resource with the desire to get ahead in a challenging market is ubiquitous among all advisory firms that we speak to. However, we believe the path to success o en involves taking a step back to understand how your business is working, identifying the opportunities for improvement and finding the right solutions and technology to empower progress.

Third-party referral

With the added centralised focus of reaching positive customer outcomes, it’s no surprise that advisers are increasingly referring their GI business to a third-party. Not only does this ensure their customers are reaching the right protection outcome, it also adds further value to their business through extra commission, while freeing up valuable time.

So, advisers now have an arsenal of tools at their disposal to help them in continuing to achieve the best outcome for their customer, wherever it might lie. Whether policies are recommended by the adviser, referred to us here at Paymentshield, or generated directly by the customer through a ‘self-serve’ option, there’s a choice to suit any situation.

To help firms find the most effective solution, our team of regional sales managers (RSMs) and telephone business development managers (BDMs) will engage with firms regularly, focusing on understanding their unique business needs. Leveraging the expertise and experiences of our team, we will take a consultative approach to identify which elements of our proposition can best help these firms to achieve their goals.

Market snapshot

The overall aim is to ensure that our solutions align with and enhance how they conduct their business. These conversations are always excellent temperature checks into the sector. Not only does it give a good snapshot of how the market is moving, we’re also able to understand how our proposition is performing and where firms might need additional support to meet their bespoke needs.

As an example, one of our RSMs recently met with a principal of a firm to explore how he could be er engage his employees with the benefits of integrating GI into every client discussion, while not diluting the quality of service. They were seeking greater penetration of GI quotes to mortgages per month and wanted to understand how we could work with them on this. Having discussed his business’ needs, the rich data within

JOHN PRICE is national sales manager at Paymentshield

our Adviser Hub was then analysed to look for opportunities.

This included comprehensive insights into their quote rates, submissions, new business, and conversion percentages, as well as additional data regarding optional extras.

By reviewing the data available with the principal, we were able to provide valuable insights to help inform the firm’s business strategy and improve their penetration.

Once our RSM had done this, she then provided guidance on how her suggestions could be implemented in a business-friendly way that wouldn’t add to the resource burden the firm was already facing.

Supported by our referral proposition, we were able to deliver that firm a customised action plan, set up one-to-one training and sales skill development, as well as objection handling, to support their advisers in their continued mission to provide a top-quality service.

The overall takeaway from these conversations, regardless of business size or market buoyancy, is that success is all about demonstrating value to the client. The best and most successful firms build trust, deliver value and are quick on their feet when it comes to reacting to change.

If advisers continue to approach each and every conversation with a focus on how they can deliver meaningful improvements for their client, then good outcomes will follow for their business. ●

Non-standard is more standard than you think

‘Non-standard’ has traditionally been a catch-all term for risks that fall outside of standard general insurance policies – like thatched roofs, listed buildings, underpinned properties, high value items such as jewellery and watches, or policyholders with previous criminal convictions.

However, according to one specialist managing general agent (MGA), the non-standard insurance sector is poised for “unprecedented, dynamic growth” through to 2030.

From properties utilising modern building techniques and an increase in the need to protect unoccupied properties, to properties at risk of flooding or clients with high value items, it appears that bespoke, niche, or traditionally hard to place requests might actually become a standard part of the intermediary offering.

It’s certainly an opportunity to increase your value as a trusted adviser capable of responding to the diverse needs of clients living and working in an increasingly uncertain world.

Non-standard risks

The range of non-standard risks has always been as diverse as the people that need cover for them. Typically, however, this has included high-value homes, properties in flood risk zones or those that have previously suffered a flood event, long-term unoccupied properties or those undergoing renovation, listed buildings and properties with thatched roofs, and homes with a history of subsidence.

It has also included a range of risks associated with the potential policyholders themselves, such as high profile individuals – including

professional sportspeople or celebrities – or individuals with an adverse history, such as Count Court Judgements (CCJs), criminal convictions, bankruptcy, adverse claims history or previous insurance declinatures.

However, the way we live and work continues to change and the nature of risk evolves, and so too must the intermediary response. Our homes and the relationship we have with them looks very different today than it did 50, or even five years ago. Working from home is no longer unusual, but the norm for a large percentage of the population following the pandemic, and many will have invested in a home office or garden room to accommodate this new lifestyle.

Intermediaries

capable of handling nonstandard risks stand out”

Many of us have invested in our properties with extensions, added solar panels or heat pumps, or have spent money on valuables such as jewellery or watches or works of art and the like.

It is absolutely true that a range of risks that were previously considered non-standard are increasingly becoming the norm, such as nonstandard materials and alternative methods of construction – we’ve all seen the speed with which modular homes go up. That’s not to say that we won’t all get weird and wonderful requests from time to time that fall outside of ‘standard parameters’, but the dynamic growth of the nonstandard sector requires an equally dynamic response.

Its not just the buildings that can lead to non-standard elements. The vanilla products are great at covering the average client, but have limits. If your client is one of those that don’t fit those limits, they are non-standard.

Taking advantage

Intermediaries capable of handling non-standard risks stand out from the crowd. Being set up to handle the vanilla needs of your client base is great of course, but we live in a fastchanging world.

Those most likely to stand out for the long-term will be the brokers and advisers that can also cater for the niche risks and emerging needs of an increasingly complex and diverse client base.

My advice is this: if you’re unsure about what your clients should realistically expect to be covered under a standard policy, and what typically falls outside, or if you’re seeing an increase in requests for any of the above protections, then the best thing you can do is get the support of a general insurance provider that has the experience and market relationships to assist with bespoke quotes for non-standard needs.

Remember, these are the types of risk that the direct writers and comparison sites may struggle with, so the clients in question will need you support more than most.

There is also the option to refer. Referring to your general insurance provider means you can continue to support your highly valued nonstandard clients while still providing you with more commission, a regular income, and the knowledge that you have an expert on your side. ●

GEOFF HALL is chairman at Berkeley Alexander

The need for holistic advice

The introduction of Consumer Duty has brought with it a laserlike intensity to ensure we provide customers with good outcomes for their mortgage and protection needs, at all times. The challenge for networks and advisers is how best to deliver consistently good outcomes.

This also needs to be set against the backdrop of the past 15 years or so, where the UK mortgage market has recovered steadily from the problems of 2008. Products have become more innovative, the market more competitive, and technology has integrated the mortgage and protection adviser sales processes across the industry extremely successfully. We almost take our easy access to great products and solutions for granted; yet in 2024, we would argue, this still isn’t enough.

The Consumer Duty has, quite rightly, focused our minds directly on the consumer, and in particular the need to avoid harm, the potential for harm, and to act in the best interests of the consumer at all times.

Consequently, like others, we have elected to provide customers a holistic advice level of service, and have moved away from the traditional transactional advice model.

Driving change

It is the protection market, however, which is the biggest driver for the change in advice type. This isn’t simply a quick tick-box exercise of merely flipping from one advice type to another, and nor will it be going forward.

Markets are continually moving, products are evolving, and customers’ needs are shi ing. To spot and prevent harm or the potential for it, the tools of our daily trade must improve and develop with the market’s needs.

In addition to the market and regulatory backdrop, networks like

us must also understand the needs of their members and how they are going to meet the regulatory expectations in 2024 and beyond.

Questions we continue to ask ourselves are:

Do we have the right number and choice of protection manufacturers on our panel whose products and business development teams are adding value?

Do the workflows and processes within our fact-finds and customer relationship management tools (CRMs) flow smoothly, allowing the collation of the correct information and the easy engagement with customers?

Is our communication style with customers using plain and simple understandable language?

Are our internal systems picking up those network members who need some additional support and training?

Can the use of adviser focus groups within the network make our processes even be er?

Are we engaging with our customers in a way that truly identifies their needs and protection objectives?

Are all our partner suppliers on the same page as us? Are they engaging with our network members, providing help and support by improving adviser knowledge, making advisers aware of new solutions and boosting confidence?

Accurate solutions

Technology has a huge role to play in helping our members secure quick, accurate and competitive protection solutions, even if that client may have a higher-than-normal BMI, existing or pre-existing medical conditions, or even close family members with existing or pre-existing conditions before a 65th birthday.

Introducing so ware from UnderwriteMe has enabled our own members to secure accurate

comparable illustrations from protection suppliers much quicker. The need to go back and forth with full applications to check if cover is available or not, with or without insurer weighted premiums, and if doctor’s reports are required, has dropped significantly. This can only be positive for consumers and for advisers alike.

Just as important, is taking the time and effort to work with a reputable web-based CRM provider, in our case One Mortgage System, to deliver new, integrated sourcing processes.

It is well worth every minute spent pu ing the ‘grunt’ work in to make sure the benefits are felt by both customer and adviser immediately.

Without these sorts of enhancements to systems and processes, we also believe it would be very difficult to ensure that you can continue to deliver good customer protection outcomes over the full length of a customer’s relationship with you.

A holistic service requires appropriate tools to gather an accurate response to questions such as, ‘has anything changed since we first spoke?’, ‘how pleased are you with the service?’, ‘how well has the product provider delivered their service?’

Being able to respond quickly means the adviser can identify and remediate against issues which might have the potential for harm, but also quickly deliver income earning solutions which meet any manner of changed customer needs and priorities.

While we know there is still a lot of work to be done and improvements to follow, there will be no complacency as we, and others, help our network members provide good outcomes on a continual basis. ●

IAN MERRIMAN is head of network recruitment at Try Mortgage Network

From pure transaction to lifetime advice

The Financial Conduct Authority’s (FCA) Consumer Duty rules will soon apply to all authorised financial services firms across all regulated products and services. To recap, it requires firms to act to deliver good outcomes for retail customers.

Intermediaries are well aware of their responsibilities – the vast majority already transact with the best possible customer outcomes at the front of their minds. The Consumer Duty rules make this mandatory, and more than that, intermediaries will have to provide evidence that a customer’s needs have been considered and discussed, on a personalised basis.

The guidance allows firms some degree of interpretation, but it is clear that advice must be consumer-centric.

A fact-find, product selection and then sale model – whether or not stated as restricted as such – does not fully meet the new rules.

Given where mortgage rates are now, advisers are increasingly having to pull other levers to make repayments affordable for many borrowers.This is particularly true for the average first-time buyer, whose income is a constraining factor.

Advisers have the I’s do ed and T’s crossed on the mortgage side when it comes to taking longer terms or opting for a part-and-part interestonly and repayment mortgage. Now they must consider how this advice plays into wider consumer outcomes – particularly with reference to the foreseeable possibility that financial circumstances could change.

Products and services

This one’s not a gamechanger. Intermediaries already assess customer needs and advise on the most

appropriate products on that basis. Whether that’s fixing for longer to give monthly payment certainty or taking a shorter-term view based on a customer’s likelihood of needing to move imminently.

Price and value

Again, the mortgage advice market is already geared towards delivering these outcomes for customers. The advice process takes these aspects firmly into account, with brokers at pains to ensure that borrowers understand the effect that different options could have for them.

Consumer understanding

Ensuring customers properly understand what each stage of the mortgage application means is a baseline for most firms. Most brokers take on a far broader responsibility for customers’ understanding than just the mortgage, taking time to coach less experienced customers through the entire house purchase, conveyancing and mortgage application journey.

Under the new duty, there is a strong argument that the scope of consumer understanding of the financial decisions they make must become wider. For example, a couple buying for the first time with a view to starting a family may be stretching themselves financially to set themselves up for a more stable future. The advice they receive must be the best possible option, with full disclosure of the implications of taking, say, a longer term to keep monthly repayments down.

To ensure a good outcome in the foreseeable future, Consumer Duty extends the scope of understanding those borrowers’ needs when considering the effect this decision has on their wider financial exposure.

JAY NAYLOR is marketing director at PRIMIS

There is a risk that a partner’s circumstances change, or that one partner loses their life, with devastating consequences. Customers must have been made aware of the risks that taking on a mortgage comes with. Under the new rules, they also must have been made aware of the products and services that can help mitigate those risks.

Whether intermediaries choose to train advisers internally or partner with specialists, it will be hard to justify a decision simply not to cover off protection advice with any mortgage customer under the duty.

Consumer support

The FCA has been vocal that Consumer Duty isn’t a ‘one and done’. It requires authorised firms to monitor customers, particularly in relation to potential vulnerabilities – interpretable in myriad ways. Consider an intermediary who has given mortgage advice in the past to a customer who then becomes more vulnerable. When they come to remortgage, there must be evidence that their adviser considered how to point to the support on offer. There’s really no situation where mortgage advisers can in good conscience bypass the protection conversation.

The mortgage broker holds a privileged position with customers, and we are working hard to ensure our members have access to the products and services that can guard against foreseeable harm. We are slowly moving from a world of pure product advice to one of broader financial advice regulation. Borrowers will expect that, and we must deliver it. ●

The pressure to evolve continues to build

Lenders have a lot to think about. If the business of day-to-day lending wasn’t complex enough – with margins under pressure and resources stretched – regulatory change continues to shape operational thinking and models. The slew of change shows no sign of le ing up any time soon.

High on the compliance agenda for financial services businesses across the market are the Financial Conduct Authority’s (FCA) new Sustainable Disclosure Requirements, which came into force on 31st May, and include an anti-greenwashing rule.

While the primary focus of the rule is to clear up much of the confusion around sustainability claims made in the investment industry, it does also apply to all other authorised and regulated businesses.

The rule’s aim is to make sure sustainability-related claims are fair, clear and not misleading. Naming and marketing requirements are in scope, so products cannot be described as having a positive impact on sustainability when they don’t.

In its final guidance, published in April, the FCA states: “Our expectations under the antigreenwashing rule for the retail market are consistent with the Duty. We expect firms to act in good faith towards their retail customers, and to enable and support them to pursue their financial objectives.

“Similarly, under the consumer understanding outcome rules, in PRIN 2A.5, firms should give retail customers the information they need, presented in a way they are likely to understand, and that equips them to make effective, timely and properly informed decisions.”

How lenders apply the regulator’s guidance is largely up to each institution. Broadly speaking, compliance departments are focused on new retail products and services, including green mortgages, and any scheme designed to assist customers to improve their home’s sustainability.

Back-book compliance is also front of mind, particularly where lenders access money market funding, or engage in securitisations or covered bonds.

The Consumer Duty rules have been in force for new products and services for almost a full 12 months now, and are due to be extended from 31st July to include existing and closed lines as well.

Lenders are acutely aware of what this means for back-book business, particularly where borrowers are on default variable rates.

Where mortgage book owners are not authorised to originate, there are complex questions to address in terms of complying with Consumer Duty rules.

Investing in evidence

Key to ge ing this right is the assessment of fair value and the provision of evidenced reasoning to support claims the customers are receiving it. This will not be easy –assessments must be ongoing, and thus reflective of the changing context borrowers face collectively, and most importantly, individually.

Proactive identification of those borrowers particularly exposed to the risk of not ge ing fair value by remaining in closed lines is fundamental for lenders to demonstrate compliance with the Consumer Duty.

It follows that investment in much be er technology systems that

STEVE CARRUTHERS is business development director at Iress

produce be er quality data and allow for dynamic assessment is a high priority for lenders.

From 1st July 2025, banks and building societies will have to comply with new Basel 3.1 capital adequacy rules. These include a revised set of granular risk weights under the standardised approach for assessing capital buffers, as well as restricting modelling inputs under the internal ratings-based approach.

The aim is to align risk weighting across both approaches to make it easier for firms to adopt the internal ratings-based approach. Navigating risk assessment across asset type, allocation and borrowers in lender back-books will require dynamic monitoring; how this plays into origination strategies is highly complex.

The consensus is that each of these pieces of regulation is designed to improve competition and deliver a be er experience and outcome for customers. The implementation of each – and all within very quick succession – is a big task.

Lenders must still write business, deliver margins and ensure customers get the best product and service, at a time when affordability is stretched and the political landscape is uncertain. Scaling up volumes to win this fight is no longer sufficient; lenders must consider smarter ways to protect margins if they are to meet regulatory expectations and maintain profitability.

Lenders are increasingly focused on investment in flexible technology systems that allow them to adapt efficiently to market changes and their own compliance and commercial objectives as they shi . ●

E ciency savings: The basis of every operating model

However a business operates, it’s worth challenging your own strategy every so o en. Taking a structured approach is crucial to gain helpful insights into where you might invest or improve.

Back in the 1980s, Professor Michael Porter from Harvard Business School came up with three business strategies which are still used today.

1 Cost leadership

High volume, low margin businesses that rely heavily on operational efficiency and standardised processing. The upside tends to be big market share. The downside, it’s hard to adapt to nuanced changes in your environment.

2 Di erentiation

Provide a unique or bespoke product or service and you can charge a premium. This can deliver high margins at a relatively low volume and is typically reliant on constant innovation and investment in service excellence. Upside: brand loyalty and profitability. Downside: fail to stay innovative and you’re vulnerable to being undercut.

3 Focus

Target your offering to a niche group. In mortgage lending, this approach might be higher priced products designed specifically for credit-impaired borrowers, or firsttime buyers who have to purchase with friends. Upside: underserved markets create stable demand and a narrow focus can makes it easier to streamline efficiency, marketing and processing. Downside: a narrow focus leaves you exposed to competitors doing it bigger, be er and cheaper.

Market shifts

Whatever the business model, each requires a business to stay relevant to customers’ needs. The challenge for all lenders in today’s market is that those needs have changed very rapidly in a relatively short period of time.

While change itself is nothing new, it’s the scale and complexity of recent changes that is worrying so many lenders – whatever their model.

Broken down into supply and demand factors, it’s easier to compute. Lenders must supply products that meet borrower needs, offer fair value, deliver good consumer outcomes in the foreseeable future, and do so in a mix that allows them to meet their capital adequacy obligations.

Environmental risk assessment is far more complex, structurally and within a regulatory context. Compliance can feel increasingly like herding cats. On the demand side, borrowers in higher loan-tovalue (LTV) bands typically face significantly squeezed household budgets compared to the last time they remortgaged. Those in lower LTV bands have less incentive to move or downsize in a higher rate, higher Stamp Duty environment.

The proportion of mortgage-free homeowners across England rose 8.5% between the 2011 and 2021 Censuses, accounting for 25 million households and 33% of housing stock. Mortgaged homeowners’ share of the market was 28%, down 4% over the decade. The base rate in 2011 was 0.5%; today it’s 5.25%. The house price to earnings ratio in England in 2011 was 6.8; by 2021, buyers needed more than nine-times their annual income to buy an averagely priced home, Office for National Statistics (ONS) records show.

JERRY MULLE is UK managing director at Ohpen

Changing places

The dynamics of the property market, households’ disposable incomes, the cost of living, working pa erns and living needs have all changed.

While some lenders saw the writing on the wall, even those with the biggest resource at their disposal have found it difficult to adapt to the market with today’s regulatory and personal needs. But one lender’s threat is another’s opportunity.

Our recent research found, perhaps unsurprisingly, that those only just going through the process of adapting their businesses were seeing massive advantages. One told us that simply by investing in more flexible tech and a fit-for-purpose origination platform, it will achieve a 25% efficiency saving. Another said growth without investing in tech would be “very difficult.” Some noted that product innovation was virtually impossible when operating with legacy systems. The prospect of entering new markets without a new platform was simply not an option. Service levels were dropping. Margins are being squeezed.

In the late ‘90s, when I worked at a high street lender, we would play a version of war games. The objective was to play out how competitors – in this case an internet-only business – could put us out of business. Those were the very early days of ‘e-commerce’, and speculation was wild. Nevertheless, understanding where the threats could come from and pu ing strategies in place remains as valid today. If you don’t fix it, are you in fact heading for broke? ●

Making the green easy and

The UK needs to spend £250bn to upgrade its 29 million homes by 2050, according to the Royal Institute of Chartered Surveyors (RICS). It’s a huge challenge; we need to retrofit 80,000 homes per month, but we’re currently only managing 17,000. The mortgage and property industry, in particular, stands at a pivotal juncture, where it can significantly influence and accelerate this transition. The new Government is acutely aware of this.

Clear direction of travel

Clean energy, energy security, and net zero are core priorities for the Government, which has committed an additional £6.6bn in grants and lowinterest loans to upgrade five million homes over five years.

But what about the other 24 million? The Government states that it will “work with the private sector, including banks and building societies, to provide further private finance to accelerate home upgrades and low carbon heating” and has the ambition to “make the UK the green finance capital of the world.”

Additionally, the Government has pledged to mandate UK-regulated financial institutions and FTSE100 companies to implement ‘credible’ decarbonisation plans and to revive minimum energy efficiency standards for the private rented sector (PRS), albeit extending the deadline from 2028 to 2030.

We know where we’re going, but there’s been a host of obstacles that have prevented engagement from businesses and consumers alike in green home upgrades.

Technology is playing a vital role in overcoming these.

Making it simple

First, we need to make it normal to be asked about green home upgrades at natural points to do renovations –such as buying a home, remortgaging, complying with energy standards, or retirement – and provide property owners with the support to make it happen.

Mortgage lenders, intermediaries and estate agents are obviously well positioned at these points not only to raise awareness but also provide that support.

However, these businesses are not retrofit experts – nor should they be – and even the most ‘green’ businesses struggle to make sustainability a priority. It needs to be easy to implement and make sound business sense.

Digital analysis and engagement tools are streamlining the process by providing a portfolio overview of risks and opportunities, a digital report for the property owner on the energy efficiency of a property, quotes

from vetted suppliers, and embedded green finance.

We’re one of a few platforms that, in addition, pass on significant incentives from suppliers, which means it also financially makes sense for businesses to prioritise engaging their customers in green matters, while the property owner also benefits from bulk discounts.

This is a win-win; the journey is made much more seamless, profitable, and cost-effective for both the business and property owner. The likes of Habito, Green Mortgages, Hodge Bank, Molo, and Yopa have recognised this and are leading the way.

Driving innovation

A crucial part of these advancements is being able to overlay different datasets with an address to fill gaps in information. The key to unlocking that is artificial intelligence (AI).

At Propflo, we invested heavily in making sure we had some of the best AI-based address matching on the market and I’m proud of what we, led by my data scientist co-founder Daniel Moyo, have accomplished.

home revolution profitable

We looked at tools used by two top-five lenders and one public sector body – all with different suppliers. In one case, one of these tools predicted a property as an Energy Performance Certificate (EPC) Band E rating, when it was actually A-rated.

The public sector tool couldn’t even find the property.

Accurate data builds confidence in the recommendations made to property owners, which is essential for driving engagement.

For the time being, some properties which are unique or require more support will potentially need an in-home assessment like an EPC or retrofit assessment – which our partner provides – but digital reports are advancing at pace, and will be the right thing for many homeowners.

Innovate UK is currently funding a project where adapted Teslas are scanning all properties at street level to measure their real thermal efficiency.

As part of the same funding programme, we are rolling out smart home and smart meter monitoring

to show the impact of works, and insights such as heat loss, indoor air quality and mould risks. These will make digital home and portfolio reports even more accurate, but also crucial for engaging property owners longer-term.

The road ahead

The journey to net zero is complex, but with a clear and more stable direction of travel and the right tech, the mortgage and property industry can turn this challenge into an opportunity.

By making information more accessible, understandable, and actionable, they can empower customers to make informed decisions that align with sustainability and growth goals.

As trusted advisers, lenders and intermediaries have a unique position to influence and inspire positive change.

Supported by technology, they can lead the way in the transition to a greener, more sustainable future. There are few reasons left to not get involved. ●

LUKE LOVERIDGE is founder and CEO of Propflo

How much could the wrong CRM solution cost?

I’m sure we all have our own measurements of success, failure and anything inbetween, but there are some things that are more quantifiable than others. This thought process comes on the back of a recent question posed by Moneybox around how much bad advice actually costs.

Apparently, people who solely rely on their family and friends for financial advice are, on average, £42,000 worse off – regardless of income.

Of those surveyed, 4,055 (29%) learned how to manage finances through their parents, while 11% relied on friends for advice. Only 8% opted to pay an adviser to assist with financial planning, a move which would have reportedly resulted in higher net worth – approximately £68,000 more – than those that didn’t. Again, that’s regardless of income.

After working so long in financial services, I was intrigued by this question. It also led me to think about how much an underutilised customer relationship management (CRM) solution – or even worse, no CRM at all – could actually cost intermediary firms.

Now, I confess that I don’t have any data or cold hard figures to quantify this, but let’s break down exactly where potential value could be lost.

Streamlined process

One of the most significant advantages of having a robust CRM system lies in its ability to streamline the application process. Without such a system, advisers can find they struggle with a couple of things.

First, increased paperwork. Manual processing and paperwork can consume a considerable amount of

time, reducing the time advisers have to focus on client interactions and strategic planning.

Then, administrative burdens. The absence of automated workflows means that advisers must handle repetitive administrative tasks themselves, leading to inefficiencies and potential errors in having to rekey customers data time and time again.

Centralised data management

A centralised repository for all client and application data is crucial for efficient operations.

Being without it can lead to data disorganisation. Client information and application data might be scattered across various platforms or stored in physical files, making it difficult to retrieve information quickly.

It can also cause decision-making delays. The lack of an intuitive interface to navigate records can lead to delays in decision-making, impacting the ability to provide timely advice to clients.

Finally, it creates customisation challenges. Advisers may find it challenging to customise their workflow and data management processes to suit their unique business needs.

Third-party integration

A CRM system’s ability to integrate with third-party suppliers is essential for maintaining a smooth workflow.

Non-effective integration capabilities can result in workflow disruptions. Advisers may face disruptions when trying to access tools and resources from different providers, leading to inefficiencies and frustration.

It also means manual data entry, and the need to manually enter data

NEAL JANNELS is MD at One Mortgage System

A CRM system’s ability to integrate with third-party suppliers is essential for maintaining a smooth work ow.

Non-e ective integration capabilities can result in work ow disruptions”

across multiple systems can increase the risk of errors and consume valuable time.

Comprehensive reporting

Effective reporting tools are essential for monitoring business performance and making informed decisions. Without comprehensive reporting, this can result in limited insights. Advisers may therefore lack the insights needed to track performance, identify areas for improvement, and make strategic decisions.

The inability to track key metrics can also lead to missed opportunities for optimising business operations and improving service standards.

Time and efficiency are common denominators in many of these points. With time being money, firms and advisers must do their own sums to work out just how much time, energy and value they are missing out on by not leveraging the full power of a CRM solution which best matches their ongoing business needs. ●

The culture of net zero

Never mind the political campaigning around climate change, and what we do or don’t do about it. On the ground, there are two realities facing our industry that will not melt away. These are the climaterelated asset risk held by lenders, and the regulatory risk of not delivering net zero targets.

I’m pleased to say that many lenders are working hard on these issues, to the extent that they recognise their enormity and have begun to undertake serious work to address them. There are those still contemplating this, and wondering where on earth to start.

Deciding on a plan and delivering on its objective aren’t necessarily the same thing — particularly when the deadlines are long-term”

Pull together

In reality it is a two-track approach. Small initiatives can make a large sum difference. But we also know that work in isolation can too often lead nowhere. The problem is not the preserve of one department or one champion, it is cultural across an entire organisation, and indeed the entire market. Our proposition is designed to work in both scenarios.

Last month we completed our acquisition of Parity Projects, folding its expertise in the domestic housing retrofit sector, retrofit advisory services, tools and data into the broader Corelogic proposition.

Having collaborated with Parity Projects for a number of years,

we already know how to address these issues. Better use of data is instrumental to enable stakeholders to reduce their housing stock carbon footprint – so are people. To make a team successful, everyone must be pulling in the same direction, be passionate about where they’re heading, and know what they personally need to do to get there.

Meaningful change

To meet the UK’s legally mandated net zero targets, half a million homes across the country need to be retrofitted every year from next year, according to the Climate Change Committee. In just over five years’ time, we will need to be retrofitting one million homes a year, based on official advice to Parliament.

What does that mean for your business? How exposed are the assets in your back-book? Lenders need to plug into the data that is there.

Meaningful change starts from the top. It’s not enough to get buy-in from the risk department where people understand the consequences of not getting ahead of net zero requirements soon enough. Compliance departments have so much on their plates today that a deadline six years away might be considered important, but not as urgent as getting antigreenwashing processes in place today.

Operations want to see efficiencies delivered by technology, better use of human resource, smoother running interdepartmentally –future asset risk and ratings aren’t top of their priority list. Marketing might love the brand value that investing in sustainability brings but they’re not usually in a position to sign off on budget to get the ball rolling fast enough that it doesn’t lose momentum. Treasury has been notoriously batted back by boards under pressure to deliver shareholder returns, too often at the expense of long-term value protection.

MARK BLACKWELL is COO of CoreLogic UK

Each branch of a lender’s business can work as efficiently as it’s possible to, and still, things get missed. It is imperative, when addressing a business issue like climate risk, that every stakeholder is on board and shares the same priorities. Every department head needs to know why climate change and net zero matters to them and their division.

Passion and drive are vital, but perhaps more important is that everyone in your business knows what they’re supposed to do today. It’s easy to understand that addressing climate change and all the risks it poses to lenders is important. Faced with emails piling up, that presentation deadline, year-end, sales targets, performance reviews – getting on with net zero plans may understandably seem less urgent.

It’s often forgotten that people can only focus on one priority – the very root of the word comes from the same as primary, prime.

There’s no right or wrong for how to go about embedding a net zero strategy – it depends on each business and its individual needs. What is universal is the need to be clear about who is doing what, and holding them accountable.

Deciding on a plan and delivering on its objective aren’t necessarily the same thing – particularly when deadlines are long-term.

People need constant validation to stay motivated. Validation comes with reaching milestones and marking them. Milestones present the opportunity to review the lay of the land and adjust the next milestone if and when needed – that might be changing the how, when or who is working on it. Sounds simple? With our help, it can be. ●

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

Focus on... York

With the housing market in a state of flux following the election, and a wealth of new proposed housing policy, advisers across the country have been struck with a renewed sense of optimism. This is particularly apparent in York, where local experts report a buoyant housing sector, positively impacted by heartening market conditions and lowered mortgage rates.

As one of the country’s most historic cities, York’s blend of cultural heritage and modern amenities has long made it a desirable location for homebuyers.

Despite the many economic headwinds that have put a strain on buyer demand and affordability in the past few years, demand remains robust in the region, particularly for properties in central locations and well-connected suburban areas.

Average prices

According to the latest available data from the Office for National Statistics (ONS), the average house price in York was £310,000 in July 2024, down 3.1% from April 2023.

The average price paid by first-time buyers was £266,000 during this period, 2.9% lower than the average of £274,000 a year prior. For homes bought with a mortgage, the average house price was £314,000. This

was 3.0% lower than the average of £323,000 in 2023.

The average detached property in the region costs around £494,000, while semi-detached homes boast an average of £323,000. Terraced properties cost buyers an average of £271,000, while flats and maisonettes cost approximately £194,000. In the year to July 2024, the average price for terraced properties in York fell by 2.6%, while the average price for detached properties decreased by 3.9%.

In terms of the rental market, the average monthly rent was £789 during this period, up from £734 a year earlier. This is compared to a national average rent price of £1,262.

The most affordable place in the region is in the ‘YO16 4’ postcode, with an average price of £130,000. The most expensive is ‘YO60 6’ with an average of £646,000.

Strong appetite

Last year there were 6,300 property sales in the York region, and sales dropped by 37.6%, or more than 4,100 transactions. While this drop is undoubtedly a product of the high interest rate environment, things seem to be on the rise in terms of buyer appetite.

Ian Leyden, director at Argyll Drummond Financial Services, says the market is currently buoyant. He reports robust sales across the market, from £250,000 to properties exceeding £1m.

JESSICA O’CONNOR is a reporter at e Intermediary

Leyden notes that people have adjusted to the new norm of higher rates, saying: “People have come to the realisation that the days of really low interest have gone and accepted that the new higher rates are here to stay for a while.”

Graham Jones, director at Ebor Mortgages, has also observed this return to market from prospective buyers. He notes that – with interest rates stabilising and more market certainty beginning to spread –there has been a strong demand for residential mortgage, adding: “There are still properties that are going to best and final bids in some areas, and with the low level of housing stock in the city, this is driving good demand.”

A buoyant market

TIAN LEYDEN director at Argyll Drummond Financial Services

he housing market in York is fairly buoyant. We have had a really good three months with written business for new purchases, as before it had been a little bit quieter with rates increasing, but the demand has definitely gone up in the last few months.

We predominately deal with the main high street lenders, however we find clients aren’t bothered about using a lender they haven’t particularly heard of, as long as they are offering the best deal or are prepared to give the client what they want.

We deal with a good spread of clients, from first-time buyers to home movers, remortgage clients, product transfer and buy-to-let clients.

We haven’t noticed much of shift in this demographic, although after the pandemic product transfers were definitely more commonplace than remortgages; recently we have noticed that there are more remortgage deals being better for clients than a product transfer.

We have also noticed an increase in the volume of enquires from bridging finance. In central York there is student housing going up all over the place, and on the outskirts of York, there is a lot of your usual suspect builders with the odd development, but nothing major.

The buy-to-let market in York was affected quite badly when lenders brought in their increased stress-testing a few years ago, as the rents being achieved weren’t high enough as the property prices are so high, although it has become easier recently.

The holiday let market is extremely good at the moment with York being a good year-round holiday destination.

Nicky Kay, adviser at Just Mortgages, says that unlike past trends where events like the Euros or General Elections caused market dips, the predicted Labour win this year has maintained buyer confidence and momentum in the housing market, resulting in an uncharacteristically busy summer.

She notes: “It seems that as everyone had predicted Labour’s win it meant that the usual uncertainty was absent, and people felt confident to go for it

with their housing plans. The market has become very busy; […] there is a really strong appetite now.”

First-time buyers

Demand in York has been driven by one key demographic of late: the firsttime buyer. Advisers report high levels of first-time buyer business, despite the challenges posed by the current high interest rate environment.

In fact, Census data shows that in 2020, there were approximately

591,000 residents in the York postcode area, with an average age of 43.6 years. With the average age of a firsttime buyer now at around 33, York’s younger population lends itself to this first-timer demographic.

Will Shackleton, senior business executive at 1st Mortgage Services, has been receiving plenty of enquiries despite the usually quiet time of year. In his view, first-time buyers entering the market at the moment seem to be more confident and do not want to put off buying any longer.

He has also observed an increase in interest in Shared Ownership schemes from this demographic, stating: “It wasn’t uncommon before, but recently I have noticed a lot more questions being asked around this as an option.”

Kay agrees, noting the recent influx of first-time buyers looking to secure a foothold on York’s property ladder. However, one significant barrier, particularly for first-timers, is affordability constraints. Many of her first-time buyer customers have been concerned about the maximum they can borrow, rather than focusing on budgeting responsibly.

She explains: “What they don’t necessarily consider is whether the monthly repayments are affordable for them. This is a trend that’s been developing over the last few years in York.

“Previously, first-time buyers could afford a four-bedroom detached house. Now, they need to consider starter homes to manage the monthly repayments.”

She adds: “This shift presents a challenge, as it requires educating clients that the maximum amount a lender is willing to lend might not align with what they can realistically afford monthly.”

Plenty of enquiries

MWILL SHACKLETON senior business executive at 1st Mortgage Services

y experience has been pretty positive. York has always been a stable city from a purchasing aspect. There has naturally been some slowdown with next-time buyers who want to move up the ladder, due to costs, but overall I’m positive.

This time of year seems to always be a little quieter, however we have been receiving plenty of enquiries. First-time buyers seem to be more confident, or just don’t want to put off buying any more.

For first-time buyers, they are usually trying to stretch their income as much as they can, particularly in York, and Leeds Building Society have been a good solution for this in recent months.

I have noticed, because some are buying on their own or just trying to get their first property, there’s been a big shift to Shared Ownership enquiries. It wasn’t uncommon before, but recently I have noticed a lot more questions being asked around this as an option.

The buy-to-let market has been tricky. I used to do quite a lot of buy-to-let and a good amount of that was portfolio. Now it’s really difficult. Many would look at each renewal to raise additional funds to maybe increase their portfolio, now a lot are lucky to just cover the loan. York can benefit from holiday let and house in multiple occupation (HMO) incomes; however, the further out you go it does get more difficult to meet the stress-tests on standard tenancy agreements. The larger fees have unnerved potential first-time landlords or people looking to increase their portfolio.

More market certainty

AGRAHAM JONES director Ebor Mortgages

lthough interest rates have increased and mortgage borrowing costs are at recent heights, we are still seeing a good level of purchase demand in the city. As rates have steadily plateaued, and with a little more certainty in the market, we have seen a good appetite for residential mortgages over the past few months.

There are still properties that are going to best and final bids in some areas, and with the low level of housing stock in the city, this is driving good demand. We are seeing a good level of first-time buyers still managing to borrow the amounts required and be within their budget. We do not seem to have a regular issue with property types or valuation in the city, and this shows a good appetite from lenders to lend in this area. We have seen rates come down considerably from the middle of last year. If this continues, it will provide more comfortable and affordable payments while maximising borrowing potential.

York Central will be finalised over the coming seven years or so and will provide a number of new residential dwellings. There are also lots of smaller developments for new-build properties and conversions.

The last year or two has been quiet for new BTL purchases. However, we have seen an uptick. We are seeing tough decisions by landlords trying to keep rents as realistic as possible in line with their finance costs increasing also.

Favoured lenders

The most popular options for those buying in the York region are high street brands like Halifax, NatWest, Santander, Nationwide, Coventry, TSB, HSBC, and Virgin.

However, Leyden says most clients are not concerned about using unfamiliar lenders, as long as it means that they are offered the best deal.

Jones adds: “The main high street lenders we use frequently are the likes of Halifax, NatWest, Santander, HSBC, Barclays and Nationwide.

“We do not seem to have a regular issue with property types or valuation in the city, and this shows a good appetite from lenders to lend in this area.”

Shackleton points out that, for first-time buyers trying to maximise their income, Leeds Building Society has been particularly helpful in recent months.

He says: “I wouldn’t really know which lenders are well established, we always look at what is right for the client and focusing on their circumstances and plans, finding the right lender to compliment that is always our goal. For first-time buyers, they are usually trying to stretch their income as much as they can, particularly in York, and Leeds Building Society have been a good solution for this.”

Upcoming developments

In terms of available housing stock for potential buyers, York has seen a number of new developments over the past few years. With Labour vowing to dramatically increase housebuilding across the country, promising to build more than 1.5 million new homes over the next Parliamentary term, this focus on development in the area seems set to continue.

Notable new developments in York include Bootham Crescent, near the old football ground, as well as a number of new developments on Boroughbridge Road.

Kay says: “As a general rule, properties in York are selling quickly and often at asking price due to high demand. This fast-paced market presents both challenges and opportunities for us, as clients need to act swiftly to secure properties, but it means we’re seeing lots of clients come through the door.”

Increasing momentum

NICKY KAY adviser at Just Mortgages

At the start of the year people were a bit more cautious but the market has picked up momentum recently. Due to the complexity of the market, with each lender having different criteria, products, and affordability measures, brokers are in high demand. We are seeing lots of clients come through the door in purchase and remortgage areas, seeking professional guidance to navigate these complexities, so there’s lots of opportunity.

January saw a lot of activity due to a price war among lenders, leading to a strong start to the year. There was a short period where things slowed down, but they have begun to settle. Rates have started to decrease again, and the market has become very busy.

Affordability is the most significant challenge. Previously, first-time buyers could afford a four-bedroom detached house. Now, they need to consider starter homes to manage the monthly repayments. This shift presents a challenge, as it requires educating clients that the maximum amount a lender is willing to lend might not align with what they can realistically afford monthly.

York has a few notable new developments. Bootham Crescent, near the old football ground, is nearing completion, and there are new developments on Boroughbridge Road as well.

As a general rule, properties in York are selling quickly and often at asking price due to high demand.

Overall, I think the York housing market reflects what we are seeing across much of the country with high demand, affordability challenges, and an increased need for professional advice.

Jones adds that York Central, which is currently being constructed within the city and is set be finalised over the coming seven years, will provide residents a number of new residential dwellings.

“There are also lots of smaller developments happening for newbuild properties and conversions,” he notes.

Leyden also cites this development within York city centre, highlighting the wealth of student housing that has also been built to accommodate the students attending the city’s popular universities.

Rental demand

As a university city, the private rental sector (PRS) is a dominant sector of York’s housing market. In fact, the PRS accounts for 23.4% of the region’s overall housing stock, a healthy figure when compared to an average of 23.6% across England and Wales.

However, Shackleton notes that the buy-to-let (BTL) sector has become increasingly difficult in the area,

particularly for portfolio investors who once relied on renewals to raise additional funds.

He says: “York can benefit from holiday let and houses in multiple occupation (HMO) incomes; however, the further out you go it does get more difficult to meet the stress tests on standard tenancy agreements. The larger fees have unnerved potential first-time landlords or people looking to increase their portfolio.”

Leyden agrees, noting that York’s buy-to-let market was hit hard when lenders increased stress-testing due to high property prices and insufficient rental yields, though this has eased somewhat recently.

In his view, however, the holiday let market remains strong, as York is a popular year-round destination.

Jones has also observed a recent increase in buy-to-let enquiries and purchases, stating: “We are seeing tough decisions by landlords trying to keep rents as realistic as possible in line with their finance costs increasing also.”

York Residents 591k

Average age 43.6

Residents per household 2.32

Promising outlook

Overall, York’s housing market continues to show resilience and a promising outlook, despite the recent slew of economic challenges. The blend of cultural heritage, modern amenities, and robust demand, particularly among first-time buyers, underpins the city’s enduring appeal.

With mortgage rates stabilising and the Government’s commitment to increasing housebuilding in the coming years, the future looks bright for prospective homeowners and investors alike. Local advisers remain optimistic in line with this picture, noting a strong appetite across various property segments and the positive impact of new developments, though it remains to be seen if this positivity is able to extend to the rental market as the outlook settles.

As put by Kay, York’s housing market reflects that of much of the country over the past few months: “High demand, affordability challenges, and an increased need for professional advice.” ●

On the move...

Just Mortgages promotes Tara Panayi to divisional sales director

Just Mortgages has promoted Tara Panayi to the role of divisional sales director, to support new and existing advisers in her region.

She will focus on growing the employed division, handling recruitment, development, and providing day-to-day support as needed. Panayi ranks among the top-performing advisers within Just Mortgages' network of more than 650 advisers nationwide.

Panayi, said: ""I am deeply passionate about providing well-informed advice and helping every client achieve their goals. Through this role, I hope

HTB expands bridging team with four recruits

Hampshire Trust Bank (HTB) has expanded its bridging team. Nathan Wilson joins as senior underwriter, Olivia Colmer-Lynch as senior lending manager, Ella Hosier as lending manager, and Barry Ireland as business development manager (BDM) for the South East and Midlands.

Jamie Jolly, director of bridging, said: “A huge amount of talent, quality and experience joining the bridging team here at HTB. We constantly strive to be be er and have strong lines of communication with our broker partners, we listen to feedback and we act on it. Having access to commercially minded and proactive teams is crucial.”

Jolly added: “We are continuing to build out a dedicated team of bridging specialists [...] Growing demand for bridging finance needs to be matched with lenders that can grow effortlessly too, with the right people, and these four new recruits are how we’ll do just that.”

to use knowledge and experience to not just support our advisers to reach their potential, but to increase our headcount and highlight the opportunities available through Just Mortgages."

Dan Crook appointed managing director at Canada Life

CJohn Phillips, CEO at Just Mortgages and Spicerhaart, added: "Tara exemplifies the exceptional talent we have at Just Mortgages, and is a fantastic example of what people can achieve here."

Assetz Capital has added Mark Roberts to lead the growth of its development finance arm and the expanding North West market.

Andrew Charnley, managing director, said: “The North West remains a core market for Assetz Capital given our location and longstanding commitment to house building.

“With the ongoing demand for housing nationally and in the North West not being met, with over 21,000 homes stuck in planning, it is important that we play our part in the cycle by providing access to liquidity for small and medium (SME) developers at the pace and reliability they deserve.”

LendInvest Mortgages has appointed four field business development managers (BDMs) –Lois Ashcro , Ed Appleby, Rod McPherson, and James Hamblin – to enhance its origination efforts and support its growth strategy.

Ashcro will cover the South West and South Wales, Appleby will oversee the North East and Yorkshire, McPherson will cover Scotland, and Hamblin will oversee business in the South East.

anada Life has appointed Dan Crook as managing director, group protection. Crook has been with Canada Life for 23 years, first joining the business in 2001 as a customer service representative. The appointment follows his tenure as interim managing director since February 2024.

Chief executive Lindsey RixBroom said: “Dan has played a central role in the strategic growth of Canada Life UK’s protection business.

“His wealth of expertise and leadership will be a huge asset as we continue to capitalise on the opportunity in the group protection market and fulfil the evolving needs of our three million customers.”

Crook added: “I am thrilled to be taking on the role of managing director of group protection, and look forward to executing the next phase of our strategy.

“I am fortunate to have a strong team around me and together we will look to adopt new technologies, enabling us to drive innovation and relevant solutions for our customers.”

Paula Mercer, head of sales, said: "We are thrilled to welcome Lois, Ed, Rod, and James to the LendInvest Mortgages team.

"Each of them brings unique skills and experience that will be invaluable as we continue to expand our origination efforts and deliver exceptional service to our clients across the UK.

"Their collective expertise will undoubtedly contribute to our ongoing success and growth in the market."

Assetz Capital appoints Mark Roberts as development nance relationship director

KELLY ILES

MARK ROBERTS HTB customers.”

TARA PANAYI

DAN CROOK

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