The Intermediary – June 2024

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Intermediary. The | Issue 17 | June 2024 | £6 INTERVIEWS ⬛ Insights from Brightstar, Shawbrook, MPowered, Atom and Simply ROUND-TABLE ⬛ Industry figures gather to discuss gender diversity OPINION ⬛ Cross-market commentary from residential mortgages to tech evolution An inside look at the Islamic finance market ETHICAL ALTERNATIVES DIGITAL EDITION

From the editor...

Whether the next base rate announcement, which at the time of writing takes place in days, or the General Election, which will have sped right past by my next editor’s comment, there is much speculation around at the moment. Refreshingly, where my post-pandemic mantras have been ‘expect the unexpected’ and ‘there’s no such thing as a reliable prediction’, these two events may actually be veering toward foregone conclusions.

Despite the unemployment and Consumer Price Index data, and the European Central Bank (ECB) making the first move to dip its toe in lower rates – all of which has sparked tentative optimism among some commentators – it is safe to say this Monetary Policy Commi ee (MPC) meeting may disappoint those more hopeful among us. For those, like myself, who tend to err on the side of pessimistic realism – or outright fatalism depending on the day – it will likely provide a satisfying ‘told you so’ moment. She is the ‘old lady’, a er all, and with age comes caution, for be er or worse.

Established in 1998, the ECB is younger than me. A Gen Z to my Millennial, according to a cursory scan of the categories on Google. No wonder it’s raring to rush in – ah, the folly of youth! Perhaps I’ll be proven wrong, and much like an older cousin trying to keep up with the kids, the Bank of England will take a running jump into the lower rate water. Let’s hope we don’t throw our back out, if so.

The other foregone conclusion, and one that I am even more confident in pu ing my weight behind, is of course the expected Labour victory come 4th July – or at the very least, a resounding and much-deserved Tory defeat.

Those who have paid any a ention might expect me to crow at the prospect of a Labour Government – and certainly, I will be le ing out plenty of squawks at a Conservative downfall –but not so. In fact, being decidedly more Count Binface than Kier Starmer, I expect to have many more rants in me once the dust has se led.

Of course, if the world does what the world has tended to do recently, and reveal a suckerpunch surprise at the last moment, I will take my lumps, but be no less rabid in my rants. Something to look forward to, either way.

On the subject of ousting the status quo (fingers crossed), this month we have content full of positive messages of change – from looking at how Islamic finance is opening up borrowing for a wider range of customers, to an interview with Rob Jupp at Brightstar that touches on everything from good business to mental health, and the future of a diverse sector, and on into the key points from our fantastic recent Women in Finance panel.

Perhaps a change of Government on the horizon has us all thinking about how the world might evolve for the be er. ●

Jessica Bird

@jess_jbird @IntermediaryUK

The Team

Jessica Bird Managing Editor

Jessica O’Connor Reporter

Stephen Watson BDM

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Helen Thorne Accounts

Barbara Prada Designer

Bryan Hay Associate Editor



Ahmed Bawa | Alan Longhorn | Alex Willis

Alison Pallett | Alistair Nimmo | Averil Leimon

Brian West | Caroline Mirakian | Charlee McLaughlin

Chris Hill | Christopher Tanner | Claire Askham

David Binney | David Whittaker | Donna Wells

Emma Green | Emma Hollingworth | Geo Hall

Graeme Nichols | Holly Morrison | Jason Berry

Jerry Mulle | John Wiles | Jonathan Barrett

Kathy Bowes | Katy Eatenton | Kevin Meredith

Laura omas | Lisa Martin | Maeve Ward

Mark Blackwell | Mark Eaton | Martese Carton

Marylen Edwards | Michael Conville

Narinder Khattoare | Natalie McNamara

Neil Rudge | Parik Chandra | Patrick Mullan

Paul omas | Richard Harrison | Richard Kirchel

Ritchie Clapson | Rob Jupp | Rob Oliver

Robin Johnson | Ross McMillan | Scott Jack

Stephanie Charman | Stephanie Dunkley

Stephanie Hydon | Steve Carruthers | Steve Goodall

Stuart Cheetham | Tanya Elmaz | omas Cantor

Tom Denman-Molloy | Vic Jannels | Vikki Je eries

Copyright © 2024 The Intermediary Printed by Pensord Press CBP006075 Intermediary. The Insights from Brightstar, Shawbrook, MPowered, Atom and Simply Industry figures gather to discuss gender diversity commentary from residential mortgages to tech evolution An inside look at the Islamic finance market ETHICAL ALTERNATIVES June 2024 | The Intermediary 3

JUNE 2024

Feature 40

Islamic Finance

Jessica O’Connor explores the growing world of Shariah-compliant lending

Round-table 62

The key discussion points from The Intermediary’s recent Women in Finance panel


Broker Business 68

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

Local Focus 94

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

On the Move 98

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


The Interview 28


Rob Jupp looks at leading the charge in a changing world

Pro les 50, 86


Neil Rudge on sustainable growth for SMEs


Stuart Cheetham reveals new developments in the quest for instant answers

Q&As 16, 58


Richard Harrison outlines what lenders can do for near-prime borrowers


John Wiles weighs up the balance between tech advancements and personal service

Richard Kirchel and Kevin Meredith on the challenges and opportunities facing business development managers

The Intermediary | February 2023
Local Focus 86 92
SECTORS AT-A-GLANCE Residential  6 Buy-to-let  32 Specialist Finance  46 Broker Business  68 Later Life  74 Protection  78 Technology  82 Second Charge 90 22 38 When the Bank Says Knockout!

Weighing up the pros and cons of product choice

Almost a year ago, the first stage of the Financial Conduct Authority’s (FCA) Consumer Duty was implemented for new products and services. Demanding a higher standard of care for customers, the duty sets out the requirement for firms to prioritise customer wellbeing, act in good faith, avoid foreseeable harm, and support customers to pursue their financial objectives.

The next stage, arriving at the end of July, will extend these rules to existing products and services. While there’s no expectation of past compliance, there are implications for closed-book products. For advisers, these rules present both a huge responsibility and an opportunity. Choosing the right product is key to striking the right balance. The current market environment makes weighing the pros and cons of different mortgage options particularly challenging.

Foreseeable harm is a vague concept, and one which includes factors like cost, risk exposure, and customer understanding. Ever a question in our sector is the trade-off between stability and flexibility. With a 5-year fixed rate, borrowers have the security of knowing their interest payments won't change, but less flexibility to move before the five years are up. On the other hand, a 2-year fixed rate offers more flexibility, which may be a safeguard as markets and the Bank of England mull potential base rate cuts in the coming months.

Let’s not forget the upcoming General Election, which leaves a big questionmark over the future direction of policy and the potential impact on the economy over the coming months and years. This uncertainty has arguably swayed

the market towards 2-year fixedrate products, as evidenced by Twenty7tec's March 2024 mortgage search activity report, showing a record high of more than 50% of searches favouring this option.

It’s a trend that shows little sign of slowing down. And yet, it is important to pause and consider what the implications of advising some clients against fixing for longer may be.


protection Decisions, whether well-considered or impulsive, are made in the present moment. Our judgements are influenced by our current circumstances and the prevailing outlook on the future economy.

Following the market turmoil after former Prime Minister Liz Truss and Chancellor Kwasi Kwarteng’s infamous mini-Budget, there was a surge in 5-year fixed-rate mortgage applications. Markets crashed, political alliances collapsed, and the cost of mortgage funding – and thus rates – soared. People wanted certainty. They wanted stability.

Now we are in a different environment; uncertainty still dominates, but it now largely relates to the outcome of the upcoming General Election. Concerns about rising inflation seem to be diminishing, according to the Bank of England, as hints of a possible base rate reduction become more concrete.

When it comes to product choice, the arguments for choosing a 2-year fix over a 5-year fix need to be nuanced. The reality is that mortgage rates are based on swap rates, which have already factored in a potential base rate cut. Delaying your decision in anticipation of a cut from Threadneedle Street is unlikely to affect future mortgage pricing.

The culture of the market and borrowers is often to take short-term risks to protect against in ation"

Of course, cost is a major factor to consider. At the time of writing, 5-year swap rates are lower than 2-year swap rates. Borrowers who choose the shorter-term option are essentially paying more with the hope they will secure a cheaper deal in two years. However, they could already secure a cheaper deal today. They should already know that by fixing for five years today, they will be paying a cheaper rate in year three than they will pay today for their 2-year deal.

The culture of the market and borrowers is often to take short-term risks to protect against inflation, which can be a big gamble in a volatile inflationary period.

The concept of foreseeable harm is particularly relevant here. Are clients better off in a 2-year deal due to the potential need to sell or move within the next five years, even with the associated early repayment charge (ERC) risk?

Ultimately, the most appropriate choice always comes down to borrowers’ individual circumstances, and mortgage brokers have been supporting this through regulated advice for the last 20 years.

No matter what, the rules of the game are changing, and it’s in everyone’s interest to keep a close eye on how this complex situation unfolds over the next two years. ●

Opinion RESIDENTIAL The Intermediary | June 2024 6

Thriving in the age of uncertainty

At its core, ambiguity creates uncertainty, doubt, and risks of the unknown. However, it can also open up opportunities to thrive. This idea is particularly appropriate to the place that lenders, brokers and borrowers find themselves in 2024. Ambiguity as a result of interest rates swaying like pendulums has created opportunities to highlight the vitally important role brokers and lenders play in guiding borrowers through these uncertain times. Indeed, has there ever been a better opportunity to find ways to thrive in adversity, to show the value of expert advice? Demonstrating, of course, what brokers do best.

Competition in the market will always lead to a flurry of good deals –as we saw at the start of this year – but the Bank of England base rate remains at its highest level for 16 years, and the governor Andrew Bailey said he needed to "see more evidence" that inflation had slowed further before cutting interest rates.

Cuts forecast

Bailey has left open the possibility of the first interest rate cut in June; however, economists remain divided. The base rate could fall as far as to 4% by the end of this year, according to the latest forecasts from Capital Economics. Others forecast just one or two cuts to 4.75% with the first coming in late summer.

The uncertainty brings with it consequences for borrowers. Over the past two months, average mortgage rates have crept up by almost half a percentage point while lenders grapple with ambiguous economic data and market fluctuations in the cost of funding. 2-year fixed deals now hover around 5.91%, while 5-year deals rest at 5.49%.

While I think it’s a fool’s game to predict mortgage interest rates in the

Amid the uncertainty, there is opportunity for brokers

current climate – ‘Mystic Martese’ is reserved for lottery numbers only –it’s safe to say that we won’t see fixed rates starting with the numbers two or three for some time yet.

I much prefer to focus on how we can adapt to help borrowers in what is – and will continue to be – an extended era of high interest rates.

I tend to think about what implications our current realities have for new and existing borrowers, and what positives we can take from this to further strengthen ties between lenders and brokers – and of course, between brokers and their clients.

Amid the ambiguity and uncertainty, there is an opportunity for brokers and lenders to stand as beacons of guidance for those that need us.

Take, for example, the 1.6 million households facing remortgaging decisions in 2024, according to UK Finance. The Financial Conduct Authority’s (FCA) data reveals that 356,000 mortgage borrowers could face payment difficulties by mid-2024.

Among them, those rolling off fixed-rate deals could see their monthly payments rise by an average of £340.

Many borrowers are navigating the changing landscape by considering shorter-term fixes to minimise time spent on higher rates – indeed, we’re seeing early signs of more customers reverting to the standard variable rate (SVR).

In these circumstances, the importance of independent financial advice helping borrowers through what is a highly complicated decision becomes obvious. Lenders, too, play a vital role. They’re the safe harbour where borrowers can find shelter. Their commitment extends beyond profit margins; it’s about customer wellbeing. Proactive communication –more than 16.5 million contacts in the last year – ensures borrowers receive timely support, budgeting aids, debt advice, and tailored forbearance.


As a member-owned building society, we are doing everything we can to help those struggling with payments – as well as helping first-time buyers. The support we offer to first-time buyers reminds me of why building societies originally formed.

Brokers often tell me they appreciate building societies for their customer-centric approach and prioritisation of clients’ interests –offering a more personalised service and flexible lending criteria, allowing brokers to find suitable solutions for their clients.

As we excitedly wait for news from the Bank of England in the coming weeks and months, let’s not forget that what really matters is how we can forge deeper partnerships which help those who rely on us to help them through this uncertainty. In doing so, the mortgage industry will thrive. ●

Opinion RESIDENTIAL June 2024 | The Intermediary 7

The importance of brokers through the life-cycle

Given the challenges of the past few years, advice is more important than ever. While falling inflation and a stagnant base rate are welcome signs of growing stability in the mortgage market, higher interest rates, house price inflation and increased living costs continue to stretch the affordability levels of many borrowers.

For those coming to the end of their current mortgage deal, these challenging market conditions could mean having to choose between a product transfer or remortgaging onto a rate significantly higher than they’ve been used to. In some cases, many of these homeowners may have limited choice, which is where the role of the broker comes into its own.

According to figures from UK Finance, the number of borrowers taking out a product transfer has increased significantly over the past few years, with the market growing by 11% to £219bn in 2023.

Advice over execution-only

Given the ongoing affordability challenges facing many borrowers, product transfers will continue to play an important role in the mortgage market. The likelihood of a borrower’s circumstances remaining stagnant enough to allow them to confidently switch on an ‘execution-only’ basis is significantly reduced.

This is why Mansfield Building Society has introduced procuration fees for product transfers of 0.2% across its entire mortgage product range.

The procuration fees have been introduced in response to broker feedback and are designed to demonstrate our commitment to

supporting brokers to provide quality advice through the entire life-cycle of each and every one of their clients.

The fees are paid across Mansfield’s residential and buy-to-let (BTL) range of products, with an enhanced procuration fee available to key club and network partners.

Rewarding brokers for their efforts in helping clients secure a product transfer that’s still right for them not only recognises the value that brokers provide, it’s right for the borrower, too.

Changing needs

Under Mansfield’s current offering, existing borrowers will be able to access exclusive products from four months prior to their current deal expiring. This gives brokers ample time to weigh up their clients’ borrowing options and ensure they deliver the best outcome for their needs.

Our products can be viewed on the main broker sourcing systems, as well as on Mansfield’s recently enhanced website. Brokers can easily compare and contrast the range of fixed and discounted variable rates available to

their clients, as well as check criteria, affordability and product availability.

Market complexities

As an intermediary-focused mortgage lender, Mansfield Building Society understands the important role brokers play during the mortgage process. The knowledge and expertise held by brokers has always been crucial in helping clients navigate market complexities and understand their borrowing options.

When recent economic events have stretched affordability to the limit for many households, brokers are the best-placed individuals to offer quality advice throughout the entire borrower life-cycle.

Many brokers develop strong relationships with their clients over the course of their lifetime, and given their growing role in the product transfer process, it is imperative that this input be recognised. ●

Opinion RESIDENTIAL The Intermediary | June 2024 8
Brokers are the best-placed individuals to o er quality advice during changing times

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Abolish Stamp Duty Don't just freeze it!

The Conservative Party may have promised not to increase Stamp Duty Land Tax (SDLT), but that will have little or no effect on solving the housing crisis. We at the Family Building Society have been calling for the abolition of this pernicious tax for years now, and a recent survey of some 2,300 of our members showed they agreed with us.

Our members called for Stamp Duty for downsizers to be abolished, and incentives provided for landlords to turn empty offices, shops and warehouses into living accommodation. The survey, conducted just before the General Election was called, is the latest in a series of surveys tracking consumer financial sentiment from the society. The survey also found that brownfield sites should be developed before any building on greenbelt land is allowed.

Clearly our members believe, as we do, that Stamp Duty is a disincentive to move and remains a real issue for all would-be house buyers, and many of our members would like to see it scrapped altogether.

These views mirror the findings of a report by the London School of Economics (LSE) and the University of Sheffield that Family Building Society commissioned, which was published earlier this year.

'A Road Map to a Coherent Housing Policy', found that, while we do need to build more new homes of the right kind in the right places, the key is to make best use of the existing housing stock to help the elderly to downsize, to help growing families and first-time buyers onto the housing ladder.

There has been a seemingly unending stream of reports, over decades, which all conclude that the housing system is broken. These usually stress a particular problem, namely not setting – nor meeting – realistic targets for building new housing, and advocate solutions which would actually change very little.

Integrated and coherent

Without an integrated strategy covering housing as a whole, which includes providing housing of a safe and acceptable standard, individual policy solutions are likely to bring very limited success.

Focusing on the existing housing stock and using it more efficiently could bring larger and more immediate benefits, as it accounts for some 99% of housing already in existence. While new-builds of all types are obviously extremely important, and must be increased, they at best account annually for around 1% of the stock. Therefore, it would be a better use of the existing stock if older households, who own

more and bigger homes, had more of an incentive to ‘rightsize’.

Waiving Stamp Duty for over-65s would provide such an incentive and free up homes for growing families and provide downsizers additional funds for care. Furthermore, it would help the labour market and generate economic activity related to moving house, and in return creating revenue for the Government.

The required proof was in the very elegantly crafted temporary relaxation of Stamp Duty in 2020 to 2021, which immediately gave a boost to the whole of the housing market, and the economy in general, as people prepared homes for sale and refurbished new properties. The tax generated via this increased economic activity outweighed what was ‘lost’ through the Stamp Duty holiday.

HM Treasury and Government as a whole must take a holistic view of taxation and housing policy and stop thinking in silos.

The main aim of the LSE and University of Sheffield report was to set out a coherent and consistent approach to housing policy, starting with what is immediately possible and building on it to spell out a longerterm housing strategy.

This means making the existing stock more efficient, creating more social rented housing, proper support for homeownership, a more effective

The Intermediary | June 2024 10 Opinion

and affordable rented sector, as well as setting achievable targets and updating local plans to reach them.

Although housing developers of large sites must put aside part of individual developments for social housing, this does not fully address the first-time buyer problem, and there are limits, often very sensible ones, on what first-time buyers can borrow and the amount of higher loan-to-income mortgages that lenders can do.

Nevertheless, developers sometimes sit on land banks that have planning permission, watching the value increase rather than building, while at the same time complaining about restrictive planning laws. Government, of whatever hue, could

help change developers’ attitudes by promising to reform planning laws, but not until they have used up a large majority of the land they own which already has planning permission.

This should be combined with a set percentage of properties built being specifically for the first-time buyer.

In conclusion, a major lesson we have learned from the academic reports we have commissioned from the LSE and University of Sheffield, and surveys of the Family Building Society members, is that one of the biggest obstacles to persuading people to downsize is the Stamp Duty.

This tax badly needs reforming, or even better scrapping, and not just freezing! ●

June 2024 | The Intermediary 11
ALISTAIR NIMMO is director of marketing at Family Building Society

It’s time to think di erently about peace of mind

As a mortgage adviser, what is it that you sell? Do you simply offer your clients the lowest rate, or do your offer more than that? In an age where consumers have never had access to so much information and so many online tools, the Intermediary Mortgage Lenders Association (IMLA) predicts that intermediaries will account for 89% of all mortgage business wri en this year – as high as it has ever been.

Those mortgage customers have the ability to research and apply for their own mortgage, but they choose to speak to an adviser. Why is that?

According to a survey of mortgage customers carried out in 2021, when asked where their adviser added value, the most popular reason given by respondents was that they provided ‘a sense of security and peace of mind’.

‘Peace of mind’ means different things to different people, of course. For some, when it comes to a mortgage decision, it might mean ge ing the cheapest deal available to them. For others, it may be that they were able to achieve the maximum reasonable level of borrowing they could afford, to secure the home that they really want. For some, peace of mind can simply be knowing that their ability to meet their mortgage payments for the foreseeable future is protected from economic issues beyond their control – like, for example, a poorly conceived mini-Budget.

Human needs

One of the reasons that so many mortgage customers choose to speak to a human adviser in a world of accelerating artificial intelligence (AI) is the ability to understand their human needs and the considerations

that will provide their own personal peace of mind.

Sometimes that peace of mind might come at a cost. Some of your clients, for example, may choose to pay for protection, while others might make the decision that they are comfortable to not do so.

Similarly, some may be happy to pay a li le extra each month for the reassurance that their mortgage payments will not increase for a number of years.

Fixed dominance

You already know this, of course; there’s a reason why fixed rate mortgages have dominated the market for so long. In an uncertain world, people generally want certainty.

As a mortgage lending community, however, we have made it very difficult for you to offer this certainty and peace of mind for anything longer than two to five years. Any product that was fixed for longer than this was tied up with expensive tie-ins and drawbacks.

At April Mortgages, we have launched as a challenger to your previous choices, to offer a range of fixed rate mortgages from five to 15 years, with no early repayment charges (ERCs) for customers who move home, and unlimited overpayments from their own funds. What’s more, we actually reduce the rate your client pays as they drop into a lower loan-to-value (LTV) bracket. So, it’s a fixed rate that only ever reduces in cost.

Lowering the LTV can come from making payments on the balance or an increase in the property price based on a new valuation. This gives you an opportunity to contact them on a regular basis to discuss their options and a possible revaluation.

IMLA predicts that intermediaries will account for 89% of all mortgage business written this year – as high as it has ever been”

Any excuse for regular contact with your clients is good for building long-term relationships and referral business, which is obviously great, and we also give you the peace of mind that you’ll be rewarded for offering this service.

As well as your original proc fee, we will pay an annual service fee from year six of the product term for the remainder of the term to reward you for being available to offer advice.

This gives the broker the peace of mind of having an ongoing income stream and embedded value within their business.

Uncertain future

Of course, nobody knows what will happen in the future. Whatever people think, the future is always uncertain, and we’re here to provide certainty amidst the speculation.

Good advice isn’t based on speculation – it’s built on understanding a client’s human emotions, current requirements and appetite for future risk.

So, if you value peace of mind – for you as well as your clients – it’s worth thinking differently about where you might find it. ●

Opinion RESIDENTIAL The Intermediary | June 2024 12

Addressing the product transfer conundrum

After the flurry of positive activity earlier in the year, it appears we have taken a few steps back and are again facing instability and rapid product repricing volatility. While the purchase market remains muted, the refinance market is busy, and continues to be dominated by product transfers, with brokers telling me there are simply not enough hours in the day.

On a positive note, there are signs that purchase activity is picking up. Data from Rightmove shows a positive trajectory, with buyer demand up 12% year-on-year and sales agreed 13% higher than the same period last year. Our PMS Mortgage Club members are also seeing an increase in applications from first-time buyers.

This trend is supported by mortgage illustration data, which shows a 34% increase in Q1 2024 compared to Q4 2023. Lenders also report that affordability is starting to ease, despite asking prices creeping up and it taking 71 days, on average, to find a buyer –the longest it’s been since 2019. It is evident that product pricing is driving activity. Speaking with our lender partners, it seems that customers are holding fire when rate pricing is over 4%, and waiting for possible decreases, especially with a backdrop of potential bank base rate reduction.

Alongside this, the market is still facing into the practical implications of the Mortgage Charter in relation to product transfers.

Data reported by the Financial Conduct Authority (FCA) shows the impact of this initiative. Around 90,000 mortgage accounts have temporarily reduced their monthly payments, and in the six months to

January 2024, circa 1.4% mortgage contracts switched to interest-only.

However, the change has presented both lenders and advisers with several challenges. For lenders, this includes funding and pricing rates which may never end up completing, or which may complete on a substantially lower rate than originally submitted. For advisers, it’s having to constantly react to lenders repricing over an extended time period, revisiting a product transfer application on every rate change, resulting in an increased workload for less remuneration.

As a result of the impact on both advisers and lenders alike, we have seen two lenders – at the time of writing this article – reduce their product transfer window back to four months from six, meaning advisers can now only transact a product transfer four months from the date of product expiry.

While there is minimal impact to customers with this change, unfortunately it’s a different story for advisers, who are now having to keep track of differing lenders’ processes and product transfer eligibility

Hopefully we will not see a situation where lenders allow six months direct and four for advisers when it comes to product transfers”

criteria at an already pressurised time. If product transfer windows all reduce back closer to the three months we historically had in place, there needs to be parity on timescales with a lender’s direct product transfer proposition. Otherwise, we’re injecting unnecessary complexity into the process. Hopefully we will not see a situation where lenders allow six months direct and four for advisers when it comes to product transfers. That is not a direction we want to move in.

We also must ensure we don’t duplicate efforts while trying to do the right thing for customers. Submitting remortgage applications at six months to secure rate pricing, only to then switch to a product transfer down the line, would result in falling conversion rates and multiple applications submitted.

In a market which is fast-paced, volatile and complex, it’s more important than ever for our industry to work together in the pursuit of a solution which ensures the best outcomes for customers, while not putting extra demands or stress on advisers and lenders. ●

Opinion RESIDENTIAL June 2024 | The Intermediary 13
Product transfer windows can cause complexity

Overall, the market is holding up well

Given that the country has just emerged from a shallow recession, house prices,mortgage approvals and sales agreed are holding up well. The latest figures from property portal Zoopla indicate a tentatively healthy recovery is underway.

Property listings on the site suggest that the housing market is now more balanced than it was before the pandemic, with more homes for sale improving sellers’ prospects for moving.

Buyer demand is also improving, and despite much higher mortgage repayments, we are seeing a renewed confidence in those looking to purchase. Sales agreed bear this out, with March’s figures up 12% on the same month last year, according to Zoopla.

Pipeline positives

For the first four months of 2024, the number of homes going under offer has also been higher than during the same period in 2023. Consequently, the housing market remains on track for 1.1 million sales completions in 2024, up 10% on 2023.

Official data from the Office for National Statistics (ONS) also tally, with seasonally adjusted residential transactions in March showing a third consecutive month-on-month increase, rising 1% from 83,040 in February 2024 to 84,200 in March 2024. Non-seasonally adjusted residential transactions increased by 20% in March 2024 relative to February 2024, though seasonally adjusted residential transactions remain 6% lower than in March 2023.

The ONS statistics lag indicators from Zoopla as they are based on completions, which occur around four to six months after a sale is agreed on average. It’s likely that we will see continued improvement reported over the second half of 2024.

The forward-looking measure from the Royal Institution of Chartered Surveyors (RICS) in April points to fairly consistent market activity, while sentiment indicates a stronger picture for sales market activity coming through over the next 12 months.

RICS members also report a rise in supply, with a net balance of +23% of contributors noting an increase in the flow of new instructions during April. Significantly, this represents the most elevated figure for the new listings gauge since late 2020.

Furthermore, average stock levels have now picked up to a three-year high, at 43 properties per branch. The pipeline for new instructions appears solid, evidenced by a net balance of +20% of the survey’s respondents reporting that market appraisals are up on an annual comparison.

KFH’s experience reflects that, though we are seeing a varied demand picture across the capital.

Market of its own

London is effectively a collection of villages, each with its own micro-market.

Demand from domestic buyers in the outer echelons of the city is strong – and getting stronger. Mortgage affordability is constraining prices, giving buyers more confidence and feeding through to more sales agreed reaching completion.

Some agents are now seeing multiple bids on properties priced realistically and in good locations. Others report shorter timeframes from listing to under offer than this time last year.

Higher mortgage rates are affecting sales volumes, however. Land Registry figures show a steeper decline in mortgaged purchases in the second half of last year, while cash purchases held steady by comparison.

Both cash and mortgaged purchases have seen a recovery in house prices

Demand from domestic buyers in the outer echelons of the city is strong – and getting stronger”

between January and February, which remain very competitive and offer canny buyers good value.

Prime Central London has seen more subdued activity following the spring Budget announcement of plans to abolish the tax-efficient ‘non-dom’ status. Along with the uncertainty of who will be in Government following the upcoming General Election, overseas buyers are displaying more caution for the moment.

London’s new-build market has strengthened over the past six months. Land Registry figures show a significant rise in house price inflation for new properties coming to market compared with prices on existing homes.

New-build inflation stood at 11.6% in December 2023 – the latest data available – while prices on existing homes were down 4.2% that month. It’s worth noting that this is down to the very low supply of new homes in the capital, meaning more buyer competition is pushing prices up.

Much of the new stock in the city is also aimed at higher income buyers.

Overall, though, the market is holding up well, and there remains significant value to be had in certain pockets across the city for all types of buyers. We shall continue to support them. ●

Opinion RESIDENTIAL The Intermediary | June 2024 14

Lenders and the drive to net zero

As the push to reach net zero gathers momentum, it is becoming more widely understood that improving the energy efficiency of our homes will play a big role in making the world a more sustainable place.

Figures from the Department for Energy Security and Net Zero suggest that the residential sector accounts for around 17% of all carbon emissions in the UK. Only about 40% of homes across the UK have an Energy Performance Certificate (EPC) rating of A to C, with the remaining stock having poor energy efficiency. While acknowledging that EPC ratings are not a perfect measure, they are a good indicator of energy efficiency.

A recent report by Rightmove found that 13% of homeowners planning to move in the next 12 months said the energy efficiency of the home will be a major factor in choosing a property.

Although that’s not a big percentage of those seeking to buy, the same report found that only 6% of homeowners surveyed disagreed that it was worth paying more for an energy efficient home.

The report also suggested that a greener home now commands an additional price premium on top of local house price growth, with an average of almost £56,000 more for homes that have improved from an EPC rating of F to C in England.

Encouraging homebuyers to opt for a more energy efficient home, or to plan improvements for a poorly rated home, will likely require some incentives. Government will have to take the lead on this, but lenders undoubtedly will have some influence on how quickly behaviours shift.

At Danske Bank, we recently made improvements to our mortgage affordability calculations, including increased borrowing for EPC Band A to C rated properties.

The improvements include a reduced energy bill assumption when assessing the income and outgoings of customers purchasing a property, enabling us to give an increased maximum lending offer to those buying more energy-efficient homes. This ensures customers are offered mortgages that accurately reflect their income and outgoings.

The changes also offer improved affordability for single applicants. For example, an applicant earning £60,000 with no dependants looking to borrow on an A to C property could now borrow up to £290,000, versus £266,164 previously.

We made our recent move in response to feedback from customers and our mortgage intermediary network, who recognise there are clear differences between the top and bottom rated properties.

Energy cost

Analysis of our own mortgage portfolio shows that properties in the F and G bands can have up to 15-times the emissions of an A property, and for homeowners of these lower-rated properties, this means they are paying on average over 2.5-times the energy costs of an EPC Band A property.

These quite stark differences are also starting to result in a variance in property valuations, with energy efficient homes beginning to attract a premium when it comes to their potential sale value.

Rightmove’s report, which surveyed 150,000 housing transactions in England, suggested a variance in value in the region of 6% between the sales of similar energy efficient properties and those with a poor rating.

There are a number of reasons why this matters to us. First, as lenders we are responsible for the carbon emissions of every pound that we lend – so, it is in our interest to make sure the footprint of our loans is as low as possible. Second, we have a regulatory

obligation as a bank to ensure that customers get good outcomes. In this case, that means reducing the amount customers have to spend on powering their property and reducing pressure on their finances.

You can expect to hear Danske and other banks talking about energy efficiency much more in the next few years, as we try to make energyefficient homes more accessible for customers through our mortgage products and terms, and in turn help them reduce their impact on the environment and benefit from lower energy bills.

We are increasingly looking at EPC ratings as part of our mortgage calculations, but it is no longer only about getting a reduced price if your property is A to C rated. Improved affordability calculations will now reflect lower energy bills – hopefully incentivising decisions to purchase more energy efficient properties.

It is very positive to see more energy efficient homes being built, but we’re also conscious that there is a vast stock of homes that are less energy efficient, where homeowners will require help to tackle the retrofitting needed to reduce their energy costs.

How we incentivise this work is the next big challenge facing the next Government, but it is also incumbent on lenders and brokers to start having those conversations with customers, too. The Financial Conduct Authority (FCA) has noted that the longstanding and trusted relationships intermediaries have with buyers means they have an important role to play.

If we are to fully unlock net zero, each one of us involved in the housing market will have to collectively put our shoulder to the wheel. ●

June 2024 | The Intermediary 15 Opinion RESIDENTIAL

Atom bank Q&A

The Intermediary catches up with Richard Harrison, head of mortgages at Atom bank, on the growth of near-prime and why lenders must do more Atom bank recently updated its criteria. What’s changed, and why?

We made the decision to widen our near-prime criteria, which will allow us to work with a greater number of borrowers who may fall within this category. The fact that they have had a missed payment or two in the past does not mean they’re incapable of servicing a mortgage – we’ve had so many challenges to our budgeting over the past few years, many of us will have felt the squeeze at some point. There are so many perfectly acceptable potential customers being excluded from the market because of those historical payment issues, and by broadening our criteria we can support more of them.

We’ve increased the level of unsatisfied registered defaults a customer can have from £1,000 to £2,500. There is a specific increase on those defaults from communication and utility bills, from £250 to £500. Alongside that, we have reduced the look-back period for defaults from three years to two.

Given the substantial increases we have all seen on utility bills, particularly energy, it’s no great surprise that many people have had issues keeping up with those payments. These new caps reflect that, as well as our desire to do more in this space.

Why are near-prime borrowers being underserved?

High street lenders have always prioritised ‘vanilla’ borrowers, those with impeccable credit records, but that has become more pronounced in recent years. The irony is that this is the precise time when the need for a more understanding approach from lenders has increased, with so many households experiencing some sort of financial issue for the first time.

Part of the problem is down to a reliance on credit scores when assessing an application, which can be a very black and white insight, and

is a particular problem if the applicant has had a temporary payment issue in the past.

Alongside this, a certain perception has developed, namely that near-prime is what specialist lenders do. If there are any payment blips in the applicants record, the default option is to head to a specialist lender. That’s quite a restrictive outlook and can mean that the options provided to a borrower are actually more limited than they need to be.

We are keen to raise awareness among brokers that Atom bank is here to support their near-prime clients, and opening our criteria means that we will be a more attractive option.

How do you balance tech’s benefits in this market, and its drawbacks for

near-prime borrowers?

There’s no doubt that technology has a massive role to play, and everyone at Atom bank is absolutely committed to incorporating it in ways which will lead to an improved experience for brokers and their clients.

But it all comes down to how that technology is used. Where lenders have automated their decision-making processes and leant on credit scoring to the point that there is effectively a tickbox approach, it’s inevitable that more complex cases will slip through the cracks. That applies to any case that falls outside of strict parameters, not just near-prime applicants, and means that even a slight element of complexity can lead to the borrower being rejected.

It’s a question of balance, and identifying where tech can be combined with a personal touch, so that it takes on some of the heavy lifting – say the valuation – but the underwriter is then able to dig into the crucial elements, such as whether the applicant just had a one-off issue or is experiencing more fundamental payment problems.

We also utilise technology so that we can regularly reassess the position of near-prime borrowers, with the intention of offering a

The Intermediary | June 2024 16

prime product at maturity, should their circumstances improve.

There’s also work to be done on the sourcing side. Currently, there’s too much emphasis on brokers having an encyclopaedic knowledge of the policies of different lenders, at a time when rates and criteria are changing rapidly. We need to get the sourcing technology for near-prime cases up to the same level as for prime cases.

How do you ensure responsible lending?

of their fixed term, should their position have improved sufficiently.

That’s not possible with a specialist lender, where the only rate they will be offered is another near-prime one, with the likelihood that they are left paying more than they need to.

It’s not enough to just categorise borrowers as being near-prime, as an industry we need to do more to help repair their credit history and get them back on a sound financial footing. It’s in everyone’s interest, after all.

No one wants a repeat of the challenges faced following the financial crisis. But that doesn’t mean turning our backs on borrowers with a less than perfect credit history, or simply leaving them to a select band of specialist lenders.

It comes down to getting a proper impression of the applicant and their payment problems. In some cases, those will be the first indication of more long-term issues, but equally there will be plenty of applicants for whom it is just a one-off.

If we are to have a properly functioning housing market, we need to be able to support this latter group with their borrowing aspirations, rather than excludiing them.

What does it mean in practice to offer a path out of near-prime?

When the industry talks about near-prime customers, it can seem like these borrowers will permanently be categorised in this way. It’s as if that’s them set for life. But this is a massive missed opportunity – surely we want to help these borrowers into eligibility for prime products, which will offer them better value for the long-term?

It’s something that we have built into the way that we work at Atom bank: proactive monitoring of near-prime customers’ accounts. It means that if there are any warning signs of issues, then they can be provided with the support they need to keep on the right path.

On top of that, we have removed the missed payment and arrears management fees on nearprime products. The reality is that if people have had some form of payment issue in the past, the last thing they need is further fees to worry about if those issues start to re-emerge.

We are also perfectly positioned to offer the client a prime product once they come to the end

Are there speed trade-offs for nearprime customers?

Near-prime customers often miss out on the improvements lenders make to deliver quicker responses. We’ve seen lenders introduce tech in certain areas to cut down their timeframes, but limit that to prime borrowers. But I don’t think that’s fair, or necessary. We’ve made sure that automated valuation models (AVMs), for example, are available to near-prime customers so that they can see the same swift turnaround in the valuation as prime borrowers.

Borrowers of all kinds, prime or near-prime, desperately want to know where they stand as quickly as possible when it comes to arranging mortgage finance. As an industry, we must make sure that we find ways to deliver a fast response to all customers, irrespective of what credit category they may fall into.

What’s next for near-prime?

This is going to be a significant area of the market over the next few years. Even with the economy settling down and inflation falling to more palatable levels, plenty of prospective borrowers will be feeling the effects. Atom bank wants to be their go-to lender, and will continue to get that message out there. Brokers have a crucial role to play, and we work closely with them to identify where the gaps are, where we can play a bigger role. That dialogue is central to how we operate and will inform any further refinements to our proposition. Having near-prime options is only going to become more important. All of us, from lenders to brokers, must find ways to better support those clients and offer them not only an alternative to specialists, but also a route back to prime status. ●

Q&A June 2024 | The Intermediary 17

Con dence returns to the broker sector

It takes a lot to shi brokers’ opinions, especially on future trends. However, the recent Intermediary Mortgage Lenders Association (IMLA) survey reveals that intermediary confidence in the industry increased in Q1 2024.

The proportion of advisers describing themselves as ‘very confident’ or ‘fairly confident’ in the intermediary sector itself rose to 88%, up from 84% in the previous quarter.

We haven’t seen that level of broker confidence since Q2 2022, before the debacle of the Liz Truss mini-Budget in September 2022. The Resolution Foundation calculated that it has cost the nation £30bn as the proposed unfunded tax cuts and the pressure on borrowing caused the markets to recoil to the extent that interest rates started to rise significantly.

Very con dent

So, it has only taken 18 months to reach a point where the majority of intermediaries are feeling confident enough about the future for their businesses, with 42% saying they were ‘very confident’ and 53% ‘fairly confident’. The share of advisers who said they were not confident was insignificant, a result not recorded since Q2 2021.

To back this up, the recent announcement on the fall of inflation to 2.3% is another cause for hope that interest rate cuts will not be far behind, although the Bank of England still remains tight-lipped about the possibility of a rate cut.

A few of the bigger lenders have shaved their rates but, overall, there has not been a stampede to respond positively and take a chance on inflation continuing to fall.

Swap rates have barely moved since the inflation announcement, and the mood seems to be one where the markets have already priced in the inflation rate fall.

With the recently announced date for the General Election, it will be interesting to see how the markets react to the likelihood of the first Labour Government in 14 years. The mood music from Labour suggests that fiscal policy will remain frugal so as not to alarm the City; however, the effect on the housing market and its funding from banks and building societies will only be known a er the winning party takes power.

It is fair to say that in previous years when an election was announced, the period leading up to election day tended to be quiet in the finance markets as they waited for the result. So, expect a slowdown in property sales activity, and for lenders to remain in neutral.

In the a ermath, a decisive victory for one side or another can tend to promote a positive atmosphere and lead to increased economic confidence and stability, with a consequent increase in activity in the housing market.

However, along with the atmosphere of growing confidence,

recent figures from the Financial Conduct Authority (FCA) show that around 1.5 million homeowners will come to the end of fixed rate mortgage deals during 2024.

While the reality for those mortgage holders is that they will be paying considerably more for their new mortgages in the future, the opportunity for advisers to help find the most appropriate and cheapest deals to replace their old arrangements should provide proactive advisers with plenty of opportunity to offer valuable advice.

Relieving the burden

Another factor that will provide further opportunities for advisers comes with the news from UK Finance that credit card balances grew by 9.5% in the 12 months to February. As a news item, ‘it is what it is’. However, opportunities are there for advisers to help people rearrange their finances in such a way that relieves the burden of increasing repayments.

The increase in credit card indebtedness is not, in most cases, due to overspending or extravagant lifestyles. Rather, in many cases it is the pressure on household budgets that has been responsible, with people using credit cards to supplement their day-to-day living costs.

While remortgages are a way to consolidate unsecured debt and reduce monthly repayments, there are other options, including second charge loans. Advisers are in the best position to help people understand the best course for them, capitalising on the growing number of people who are going to need their assistance.

All things being equal, brokers have every right to believe that the lending sector has turned the corner. ●

Opinion RESIDENTIAL The Intermediary | June 2024 18
A positive outlook for brokers on the horizon

Identi cation is crucial to support vulnerable clients

Financial vulnerability isn’t just about how much money a person earns or has access to. With the cost of living continuing to increase and mortgage payments doubling in some cases, even those homeowners who might appear far from financially vulnerable could experience some significant challenges.

Anyone can be vulnerable, at virtually any time. A change in circumstance – divorce, new baby, illness, bereavement – could easily leave someone at risk. Mortgage advisers must be able to identify myriad vulnerabilities in a robust and systematic way. However, with nearly a year having passed since Consumer Duty came into effect, we are still witnessing an undeniable weak link in the chain: actually identifying vulnerable clients in the first place.

Why does it go wrong?

Two of the most pressing reasons for this are that firms are either relying too heavily on their clients to share vulnerabilities themselves, or are expecting advisers and brokers to consistently spot them through face-to-face interactions. Let’s be clear: neither of these approaches are reliable enough.

While advisers and brokers mean well, they aren’t trained mental health professionals, with most lacking the clinical expertise to recognise subtle signs of vulnerability. Some may assume that financial vulnerability is determined simply by how much money a client is bringing in or has in the bank. However, wealth, size of house or access to assets is never an insulator against vulnerability.

An individual with a resilient income can still be at risk of a

health or life event. A presumption like this doesn’t even scratch the surface of the complex nature of vulnerability, meaning that not only is it categorically untrue, but if le unaddressed it will cause scores of vulnerable clients to go unidentified.

As for the idea that clients might share their vulnerabilities themselves, it’s entirely possible that they might not even be aware. Just as a broker may lack the clinical expertise, so too will the average client.

We should also consider the possibility that those who are aware may not want it to be known, especially if they are going through the process of purchasing a house. There’s still a very real stigma surrounding the prospect of being vulnerable, which causes people to shy away from discussing it. They present an image to the world of how they wish to be seen, and admi ing the truth of their situation can be a real struggle.

How can we improve?

There are plenty of firms a empting to rise to this challenge, with new policies and hours of vulnerability training. Training can help advisers and brokers become more aware of their own cognitive biases, and reduce the impact of preconceptions. It can also help them to more thoroughly understand the Financial Conduct Authority’s (FCA) four key drivers of vulnerability: health events, life events, resilience and capability.

Reviewing the firm’s policies can ensure there are procedures in place to make identification more consistent, and as a result more successful. It can also help to create safe, nonjudgemental environments in which clients are more likely to speak openly about their circumstances and disclose when they’re struggling.

While these are important considerations, they’re ultimately worthless without the right identification process. What they really need is the means to systematically identify the signs, and the only way for that to truly be achieved is for every client to undergo a specialist assessment. Combining clinical expertise with hard data, an online assessment is easily deployed and removes the bias and subjectivity that is a factor with a face-to-face assessment.

A digital assessment, accurately identifying financially vulnerable customers, removing subjectivity from the process, and ensuring consistency across a whole client base, is arguably the only way to ensure all vulnerability drivers are constantly in scope.

By doing so, firms can be reassured that their systems and controls will adequately meet the scrutiny of regulatory requirements. Perhaps most importantly, however, it removes the need – and the pressure –for those offering finance to correctly identify vulnerability with only their own insight.

I would urge mortgage professionals to work on ge ing identification right up-front, pu ing tools in place that systematically check every client. If they can get this bit sorted, the rest will flow from there, plus the investment into training and policies will be money well spent.

If you’re struggling, or if you know that you need to bring in additional expertise, don’t delay. The tools are out there to deliver the support you need. ●

Opinion RESIDENTIAL June 2024 | The Intermediary 19

The opportunity of Consumer Duty

How do you solve a problem like complying with the Financial Conduct Authority’s (FCA) Consumer Duty rules? You view it as an opportunity.

The market has known since 2022 the direction of travel when it comes to regulation. The FCA’s strategy paper which outlined its plans until 2025, published two years ago, made it very clear that it expected firms to focus on good consumer outcomes rather than being driven by process.

The Consumer Duty came into force for open products and services on 31st July 2023 and will be extended to cover existing products and services from 31st July this year.

Under the duty rules, firms must act in good faith towards customers, avoid causing foreseeable harm to customers and enable and support customers to pursue their financial objectives.

This requires firms to be proactive in delivering good customer outcomes – rather than waiting for the regulator to intervene – and firms need the right culture and governance to enable this.

The duty also requires firms' management and boards to use data to identify, monitor and confirm that they are satisfied their customers’ outcomes are consistent with the duty. Firms must act when customers suffer poor outcomes.

In February, the FCA noted improvements made by many firms to deliver be er outcomes, but stressed that some are “lagging behind.”

All advisers have built their businesses based on the foundation that they are providing the best possible advice for their clients. The relationship and trust are everything, and for the vast majority, complying with the Consumer Duty is already part of their culture.

The difficulty is that it’s not just about knowing you’re doing the right thing by your client, it’s about

showing it. For directly authorised (DA) firms, ge ing to grips with some parts of the duty is proving challenging. There are a few notable areas that the regulator has highlighted:

Firms’ use of data to proactively and address issues and risks of harm on an ongoing basis.

How firms define and identify vulnerable customers and their exposure across multiple product sets.

Poor demonstration of fair value, particularly in terms of explaining to customers why one product has been recommended over another.

Specifically, the regulator has said: “Some firms have relied solely on an assessment of similar product offerings in a market. This alone does not prove that the customer is ge ing a good deal. We also see statements being made about value, without any qualitative reasoning outlining why a firm considers that its product offers fair value.”

While many firms have put in place robust systems to deliver on their duty, the cost of the technology needed and implementation of a wholesale culture shi across the business is a lot for smaller firms.

This is why we’re encouraging and supporting our DAs to consider

adopting a hybrid approach, the like of which a club, like ourselves, can offer. As part of a wider financial services group, we can offer the regulatory structure of a club but also the service and support of a network. Independence, with the flexibility to lean upon support as your firm needs it.

Mortgage clubs such as TMA can provide access to a range of systems and advice on choosing the right technology for your business to invest in to support the implementation of the Consumer Duty.

Training for staff at all levels of the business is crucial, but working out how best to do that takes time and money. Designing systems that allow for an holistic assessment of fair value and provide efficient methods of documenting the basis for advice requires expertise and resources that doesn’t exist in all firms.

Advisers want to do what they do best – look a er their clients. By becoming a member of a mortgage club that can take care of how you implement the new duty rules cleverly and reliably, you can do just that. ●

Opinion RESIDENTIAL The Intermediary | June 2024 20
e FCA’s Consumer Duty rules could be an opportunity for brokers

Helping rst-timers with a ordability challenges

We’ve seen plenty of knock-on effects from the cost-of-living crisis and interest rate rises over the past couple of years. In terms of homeownership, first-time buyers (FTBs) are among those being hit the hardest.

While ge ing onto the property ladder has become increasingly difficult in recent years, these struggles have been compounded by interest and mortgage rate rises.

The issue was explored in a recent report by the Building Societies Association (BSA), which found it’s more expensive for first-time buyers now than at any time in the last 70 years.

Both the cost of buying and affordability are presenting significant challenges, while many of the proposed solutions designed to help were based on a low mortgage rate environment.

Buying a home now relies on securing a large deposit and being able to demonstrate significant incomes that are higher than the average. It means that people without access to big upfront sums, or those who are single or on low incomes, risk being excluded from owning a home altogether.

More young people have turned to the ‘bank of mum and dad’ in recent years, but even when parents do want to help, they might not always have the funds to gi .

According to data from Statista, the number of first-time buyers in the UK last year was the lowest in 10 years, at 293,000.

Nevertheless, the number of firsttime buyers is recognised as being closely related to the state of the

mortgage market, housing market and then the wider economy – they’re intrinsically linked.

Support to buy

The BSA called for the Government to work with lenders, the wider housing market and the public to “make homes more affordable, more available and more appropriate to the needs of those living in them and the world we live in.”

As lenders, we have to play our part in solving this issue. We must recognise the difficulties that our customers are facing. We have to listen to feedback from intermediaries about which criteria first-time buyers are struggling to meet, and the factors that put them at risk of exclusion from the housing market.

We can then use this information to design products that meet the needs of people trying to get a mortgage today.

At Buckinghamshire Building Society, we understand that traditional routes to buying a home are not viable for everyone. We want to reopen doors that people may feel were closed to them.

That’s why we have launched our new joint borrower sole proprietor (JBSP) mortgage proposition, JBSP Deposit Lite. This combines the benefits of two existing products – JBSP and Deposit Lite – to help buyers take that first step onto the property ladder.

Deposits and a ordability

This provides a solution to both the deposit and the affordability challenge in one product from one lender, making life easier for all concerned: buyer, broker and lender.

A JBSP Deposit Lite mortgage makes it easier for parents to help their children buy a home. It comes with

Buying a home now relies on securing a large deposit and being able to demonstrate signi cant incomes that are higher than the average”

low to no deposit options, enabling borrowers to purchase their first property by leveraging the equity from a parental property.

Then, to assist with affordability, up to two parents can also join the borrower on the mortgage, significantly improving their borrowing potential, but without the need for them to be co-owners of the home.

Parents can use up to 60% of the value of their own property to help their child onto the housing ladder and up to a 40-year term is available.

Subject to individual approval, we may also be able to accept equity in second homes or holiday homes.

We’re always looking to innovate, particularly where first-time buyers are concerned, as we appreciate it’s currently much harder to get onto the property ladder.

This combined product also simplifies the process for intermediaries and hopefully gives their customers a viable option for finally buying a first home. ●

June 2024 | The Intermediary 21 Opinion RESIDENTIAL

Meet The BDM

The Mortgage Works and Nationwide

The Intermediary speaks with Richard Kirchel, business development manager (BDM) at The Mortgage Works and Nationwide

How and why did you become a BDM?

I joined Nationwide in 2007 and started working within the branch network in a variety of customer facing roles. I then joined the intermediary relationships team, taking on a role in e-support working with brokers using e Mortgage Works (TMW) and Nationwide. is role gave me great insight into the intermediary world and the broker usage of our online platforms. I developed a strong understanding of how brokers operate and the support they need, which led to being able to provide them with the best solutions and guidance when required.

It was during this time that the BDM role really appealed to me, because I enjoyed working closely with our intermediary partners and building strong relationships.

I joined the telephone BDM team during its inception in 2016 and then took the next step up to become a eld-based BDM in the summer of 2022. is proved to be a great decision, and I have really enjoyed the role. Promoting two di erent brands – TMW and Nationwide – makes my role both interesting and rewarding.

I have also been fortunate enough to work alongside and learn from so many great people over the past 14 years, which has had a huge in uence on my career.

What makes TMW and Nationwide stand out?

Working within nancial services was something that I always found appealing. It suits my skill set and provides me with a strong platform to have a successful career. I already had a connection with Nationwide before I became an employee, as it was the lender that helped me to buy my rst home.

Being Britain’s biggest building society, alongside having the variety of two wonderful brands to work on, played a big part in my decision. e Mortgage Works has been providing a exible approach, supporting and lending to a range of landlords for over 30 years. ese

The Intermediary | June 2024 22

include rst-time landlords, portfolio landlords, those who specialise in houses in multiple occupation (HMOs) and limited company landlords.

Our landlords bene t from having no limit on the number of properties they have, as well as there being no maximum age for experienced landlords and no minimum income requirement.

e Mortgage Works also recently launched the ability for directors to purchase their main residence into their limited company special purchase vehicle as a buy-to-let.

What are the challenges facing BDMs right now?

e role of a BDM has evolved over time, and I have found that it’s important to adjust the way you work to help stay ahead of the competition. Observing and working closely alongside my colleagues across the South West has really helped my own personal development as I’ve been able to see di erent working styles rsthand. is has enabled me to adjust my own approach and become more e ective and successful. Being prepared and organised is very important within the BDM role so you can manage your time e ectively.

It’s important to continue to grow a detailed understanding of the clients and business type of your broker, which may change over time. is will ensure that you continue to provide key updates and information that will be most valuable to them.

I feel it’s important to identify opportunities to add value and help grow business and understand your brokers’ communication preferences, as they may wish to have face-toface or virtual visits or a combination of the two.

It’s also so important to have the right balance between managing both the reactive and proactive responsibilities of the BDM role, and to make sure you’re on the front foot to support brokers, yet also to be

on hand to resolve any issues that may arise.

What are the opportunities for BDMs?

A key opportunity for BDMs today is digitalisation within the mortgage industry. For example, the introduction of the application programming interface (API). is allows purchase and remortgage decisions in principle (DIPs) to be submitted via third-party platforms, so applications can be submitted quicker and more e ciently. is will give brokers the opportunity to save time by avoiding unnecessary duplication when placing cases, which in turn will improve the customer journey. BDMs have an opportunity to play a pivotal role, supporting brokers to promote the bene ts and o ering education and support along the way.

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

Asking the right questions to brokers is crucial. I want to have a detailed understanding of what they want to achieve. For example, a broker may be placing multiple purchase and remortgage cases at the same time for a large portfolio landlord.

I would need to ensure it meets our property concentration and exposure limit policy and discuss what our minimum property standards are in addition to key elements such as a ordability and loan-to-value (LTV) limits. I also like to provide guidance processing and packaging an application accurately, advising what proofs will likely be required and identifying supporting information that will help with higher risk applications, such as for clients who have higher credit utilisation.

I also ensure my brokers are utilising all the di erent preapplication calculators and support available to them via the

intermediary website, including tools such as the rental and portfolio checker pre-valuation template.

It’s especially important to be clear from the outset when an outcome can or cannot be challenged, or where a certain scenario will not work with us when discussing a new enquiry.

I also explain to my brokers in what scenarios exceptions to lending criteria may be invited in for consideration, and provide brokers with a greater understanding of the underwriting process across di erent application types.

What guidance would you give potential borrowers?

It sounds simple, but it’s important for clients to be prepared so they can provide accurate up-to-date documents swi ly. is helps to avoid delays and creates a seamless application process. is is especially important for complex deposits or being able to evidence any recent changes to employment and especially up-todate property schedules for portfolio landlords. Not providing accurate information from the outset will o en cause unnecessary delays or may result in poor post-application outcomes and DIP declines. ●

First-time landlords

Portfolio landlords

Limited companies

Green further advances

Houses in multiple occupancy

Let to buy


June 2024 | The Intermediary 23 MEET THE BDM
TMW Established
Products Standard BTL

When the only certain what can

Well, if we dared to think things were se ling down, you could argue we should know be er by now.

What we do know is that brokers have responded incredibly well to all manner of upheavals since the Global Financial Crisis of 2008, and we shouldn’t expect anything different now.

There’s no denying, however, that the past 18 months have been a particular rollercoaster, with interest rate turbulence coupled with significant cost-of-living challenges which have drastically affected borrowers’ ability to purchase homes and maintain their monthly mortgage costs.

Brokers centre stage

If we needed any further proof of the vital role mortgage advisers

play in helping borrowers navigate a landscape which is only ge ing more complex, this has given it to us. However, I know from the conversations I have at the coalface every day that this has taken its toll.

Brokers have had to provide appropriate guidance to borrowers in an environment that is changing daily, knowing the significance this has for many aspects of their lives and aspirations.

In many cases – particularly following the introduction of the Mortgage Charter, which offered borrowers more flexibility over switching rates – they have had to find the resources to advise and

re-advise, o en many times, to ensure people benefit from the right recommendation in the end.

Sometimes, this must have felt like an almost insurmountable task. However, I believe that this experience will have only served to cement the value hard-pressed borrowers already placed on advice.

More than ever, borrowers have had to rely on experts to help them navigate the right path through some of the greatest complexity ever seen within the mortgage sphere.

This will only serve to elevate the broker’s status, and demand for their services, going forward.

The Intermediary | June 2024 24

thing is uncertainty, brokers do?

What next?

So far this year, mortgage market activity is defying expectations, particularly among first-time buyers, suggesting that there is scope for optimism. We have seen overall mortgage applications rise by almost a quarter in 2024, despite forecasts from UK Finance that gross lending would be lower in 2024 than it was in 2023. In its November 2023 figures, the trade body suggested gross lending would fall from £226bn to £215bn this year, but actual activity has challenged that forecast so far.

In fact, our own analysis of data from CACI suggests the value of mortgage applications year-to-date is 15% higher than the equivalent period in 2023, while first-time buyer applications have grown by 33% in the same period. This makes them the fastest-growing group, significantly above home movers and remortgagers.

Rates have ticked up a li le a er a series of steady falls, but now mainly

starting with a four or five, are still shy of their 2022 peaks of almost 7%.

While economic data remains mixed – inflation down but growth challenged – the sense is that we have reached a plateau and will start to see rates fall once more in the second half of this year. If this happens, it will help to increase optimism.

So, what could this mean for intermediaries, and what can they do to prepare for what could pan out to be a significant upli in borrower activity?

As things stabilise and confidence builds, lenders will look at opportunities to flex things like their affordability and criteria, and consider any tweaks they can make to reflect the new landscape, to help borrowers. We may also see product and proposition innovation increase as lenders aim to meet the changing needs of borrowers. Brokers can come into their own by keeping a close handle on developments, in order to react and support their customers.

We have been operating in a smaller market for some time now, but there are signs we are starting to come out of the other side. Most economists have reforecast their market size predictions from £235bn to £240bn, and if this comes to fruition, it will provide more opportunities for brokers and their clients

As interest rates hopefully start to come down over the next 12 to 18 months, brokers must be ready to manage those changes. The latest market predictions are that we could see the Bank of England base rate reduce by between 1% and 1.25% by the end of 2025.

Staying focused

Therefore, brokers must be prepared to handle this and the impact it could have on products – as well as the growing market.

CHRIS HILL is senior manager mortgage distribution at Accord Mortgages

Actions they could start to take include looking at their resources and the types of roles they might need, so that they can focus on advice, with the right administrative support in place to process cases efficiently and maximise all opportunities.

Investing in and staying connected to key relationships such as their lenders and business development managers (BDMs), networks and clubs, and the information and insights they will pu ing out, will help them stay close to the latest trends. Our Growth Series portal is a great example of the free information and resources that are out there.

One thing is for certain: this is a great time for the best of our broker community to really shine and make a genuine difference to borrowers’ lives. ●

June 2024 | The Intermediary 25

Consumer Duty has changed our idea of customer care

Meeting Consumer Duty rules will require brokers to take a more holistic view of the mortgage process. Offering consumers added services – such as a private survey – can help ensure they are meeting their responsibilities.

The Financial Conduct Authority’s (FCA) Consumer Duty regulation requires a change in mindset from mortgage brokers, one that extends beyond the moment of transaction and looks across the lifetime of the product and the full circumstances of the consumer.

The fullest picture

Making sure the best possible range of options is available to the consumer means helping them get the fullest possible picture. This includes their own finances and life circumstances, the property they are buying, and any foreseeable problems that might arise. At the same time, providers must be alert to vulnerabilities among consumers that could put them at risk.

The FCA’s definition of vulnerability is simple, but farreaching: "A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care."

A vulnerable customer might be someone who has low financial resilience, low financial literacy or an illness creating stress or disability. But the full range of vulnerabilities is far wider. Many of us will become vulnerable at some stage in our lives due to bereavement, divorce or job loss, for example. The FCA’s Financial Lives Survey of 2022 found that 47% of

consumers are vulnerable due to one or more factors.

The onus is now on providers at every stage in the chain – from lender to broker – to demonstrate they have delivered that ‘appropriate level of care’. From 1st July this year, the Consumer Duty rules extend further still, to include not just new sales, but back-books, adding another requirement on the entire mortgage distribution chain.

When ensuring that the consumer can choose the right product for their circumstances, the mortgage itself is only part of the equation –the property is just as important. Lenders carry out their own valuation estimates to assess their own risk, but only one in five buyers commission a private survey of the property they are acquiring. Remortgagers may see even less value in ge ing a private survey of their own property.

Duty of care

However, there are risks to buying or remortgaging without a private survey. According to the Royal Institute of Chartered Surveyors (RICS), buyers who do not get a survey face on average £5,750 of unexpected repair costs on the property, and 17% face costs of £12,000 or more. For many buyers, such costs will significantly impact the affordability of the property. Helping them recognise this risk should be part of the duty of care to the consumer.

Equally, a private survey may reveal that a property is worth more than a cursory valuation. A remortgager may not, for example, realise how much their lo conversion added to the value of their home. A higher valuation could shi the loan-to-value (LTV) band, allowing the customer to access a lower interest rate.

O ering added services such as coste ective private surveys is likely to become part of the competitive landscape”

For the consumer, a private survey can make all the difference in ensuring they are presented with the full range of choices available and are able to select the product that gives the best value. For brokers, offering their customers added services such as a private survey is a way to ensure that they are doing everything they reasonably can to meet their responsibilities under Consumer Duty.

GOTO has built a suite of services, including private surveys, that brokers can offer to customers, and we expect significant growth in the use of these services as brokers and other firms in the mortgage process look to meet their duty to consumers.

As well as being a benefit to the consumer and a support to brokers in meeting their obligations, offering added services such as cost-effective private surveys is likely to become part of the competitive landscape in mortgage broking.

Consumer Duty is a new responsibility for mortgage brokers, with significant risks for those who fail to match up. But it should also be seen as a positive evolution that will allow brokers to offer even more value and to build deeper relationships of trust with their customers. ●

Opinion RESIDENTIAL The Intermediary | June 2024 26




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The Inter view.

Jessica Bird speaks with Rob Jupp, CEO of Brightstar, about the future of the market and leading the charge in a changing world

When Rob Jupp, CEO of Brightstar Group, looks back at his time so far within this industry, it is a view crossing four decades, during which time the scenery has vastly changed.

“My whole career has been in this industry,” he says. “So I feel qualified in having strong feelings about it. I love what I do, and I have great energy and enthusiasm for the industry.”

Indeed, the UK property finance market holds great weight, not only for its major players, but for the wider economy and population. So, as the country emerges from shallow recession and looks for the next set of challenges on the horizon, e Intermediary caught up with Jupp to get his thoughts on the direction of travel.

Managing perceptions

Brightstar is undeniably a big name in this market, standing as “one of the biggest specialist distributors around.” However, Jupp

notes that where the image people have of the business as “fast-moving” and “growing exponentially” can be considered a compliment in many ways, it is also something of a misconception.

“A lot of these perceptions of the business are wrong,” he explains. “We’re now in our 14th year, and if you look at the trajectory of our growth, it’s been considered, steady and consistent. We’ve never grown too fast or with the wrong infrastructure, even though there might have been some attractive opportunities to take that risk.

“The group has just under 100 stakeholders, so it’s not small, but it’s also not massive.”

Nevertheless, growth is always on the cards, and Jupp points to a policy of “continued diversification away from our core Brightstar business,” that has led to the acquisition of Sirius Property Finance and then Solstar Insurance, as well as adding asset finance capabilities more recently.

Private Label

Part of this growth and development, most recently, has included the relaunch of the Private Label lending proposition. For Jupp, this is a particularly emotive move.

He says: “I was sitting at my desk in 2015 looking at a sterile, boring, uninspiring mortgage market, with numerous potential transactions we couldn’t do because there wasn’t a product or criteria, or acceptance that the person was a good risk.

“Private Label was a massive brand when I was an adviser in my 20s, and Stephen Knight the founder was very much the driver of that.”

It was important, then, for Jupp to gain Knight’s support, which he did in a conversation he describes as “two hours with industry greatness.” At first, however, the business did not achieve the take-off intended.

“I was perhaps a bit naïve,” Jupp explains. “I thought it was all about innovating products that you then distribute – if only it was as easy as that. I was able to ascertain where there were a couple of niches, and thought ‘you launch it and then it’s done’.”

When things did not work out as planned, Jupp decided to “put it in storage and bring it back out when the time was right.”

The Intermediary | June 2024 28

That time, as it turned out, was April 2024. The timing was, in part, also due to the importance for Jupp of bringing in industry stalwart Paul Brett.

“I always had Paul in mind as the right person,” he says. “I needed someone who understands the lender’s perspective, really gets risk, gets how to distribute, to lead the project. He understands the heritage – there’s a lot of history and a lot to live up to, and we’ve got to give this the opportunity it deserves.

“I believe that this business could be the biggest defining moment of my career. It’s got the best opportunity to disturb and challenge the status quo of conventional prime lenders.

“There’s a market out there that doesn’t look as vanilla, but is safe, interesting, allows a lot of franchising for borrowers who are currently unable to get what they want – giving them the right of homeownership.

“I do feel history weighing on my shoulders as the current custodian of this brand. It’s for Paul and I, and the rest of our team, to make sure we do it justice.”

Negotiating niches

This, then, is a business with a mission. Within that, it is impossible to forget that the end goal is about looking out for the borrowers. For Jupp, the need to support the disenfranchised and delve into niche under-served areas has always been part of the plan.

This is helped by the fact that Sirius and Brightstar are, by nature, businesses that brokers often reach out to after they have struggled to come up with an outcome for their clients on the high street, or where clients might be forced into a product that does not really suit them.

“Our team speaks to hundreds of brokers and borrowers each week who are after something,” Jupp says. “We can segment all that data down to niche areas and opportunities.”

Where before Jupp would have given lenders who asked for advice on what areas to move into “the golden egg” on the merit of this information, he says now “it’s time for us to do it by ourselves, especially now we have an exceptional leader in Paul.”

All of this growth and expansion into increasingly granular, niche markets is a further demonstration of the role of specialist, nonvanilla or non-high street lending in the market of the future – whether that is one fraught with challenges as the past few years have been, or simply one that fits the growing diversity and difference that can be seen among the borrower base.

“Without the specialist market, we couldn’t have navigated through 2022-23 as well as we did,” Jupp says. “This market has powered that survival.”

Addressing global challenges

The role of this market in supporting the UK through challenges and crises is not going to stop anytime soon. In fact, there are broader global concerns that also come into play.

Jupp says: “Let’s look at the climate crisis. Is the mortgage market doing enough to address the biggest global threat ever, the survival of the world as we know it? No. We need to continue to lead the sector to leave a decent legacy for future generations.”

Meanwhile, he adds: “UK housing stock is at its worst state in over 100 years.

“People are often living in properties that aren’t fit for purpose.”

While Jupp is enthusiastic about the specialist property market’s role in leading the charge, he warns: “We have to lead, but we also need support from public policy.

“When you’ve had as many Housing Minsters as we have, it shows how unimportant housing is to Government.”

This is not just about keeping the housing market moving. Positive, well-maintained accommodation is a core point for social mobility, wellbeing, and equality. If the UK is to get a much-needed productivity boost, as well as addressing social inequalities, housing must remain front of mind.

This does not seem to be the case for the current Government, and it remains to be seen if the fast-approaching General Election heralds any change.

“We have excellent trade bodies, and we just have to keep trying to push and shape public policy so that the right things are done,” Jupp says.

When it comes to the General Election, while Jupp is not optimistic for sudden sweeping change, he simply says “all the markets want is certainty – a majority Government, whatever colour that is.”

He adds: “Will change happen quickly? I’m not sure it can. Either way, there has to be a will for it. Change is generally a good thing, and as a country, we’re probably ready for it now.”

Regardless of the results come July, shorttermism is going to continue to be a challenge, and instead Jupp says there must be “crossparty agreement in order to create a long-term plan,” and in the meantime, this market must “continue to shape the agenda, rather than follow it.” →

June 2024 | The Intermediary 29 THE INTERVIEW Brightstar

Looking back to when he joined, Jupp says this industry felt at the time like “human beings were seen in most cases as utterly irrelevant.”

He continues: “It’s crazy because at the time the only thing we had was human beings. But they were ‘churned and burned’ really quickly.”

Those people also looked quite different; they were “entirely white, male and middle aged. Smart suits, flash people, and a Thatcherite sense that ‘greed is good’.”

While some might still feel that the echoes of this are around in the market today, Jupp notes that it has come on leaps and bounds.

“It’s a massive sea-change that in most businesses now, their people are at the centre of everything they do,” he explains.

“For all good businesses, it’s the absolute epicentre of what they do, it’s the starting and finishing point, making sure people are equipped with the right tools to do the right jobs.”

This also takes the form of pastoral and mental health support. Although this is not a market that is synonymous with progressive, people-centric thinking from an outside perspective, Jupp states that it is actually “so far ahead of most financial services markets.”

“It would be easy to say that the biggest change since I started is tech, but no, it’s people,” he adds.

In part, this shift came as a result of the Global Financial Crisis (GFC), which was “the moment of change.” In the lead-up, Jupp says, the market was “foul,” leaning into the stereotypes and mentalities built up in the ‘80s and ‘90s, and as a result of the GFC, “had a massive fall from grace” that served to bring it, eventually, to where it is today.

At times, he says, the period after the crisis was “self-loathing,” as people came to understand the ills of the market gone before. The “sense of camaraderie” that emerged was “as alien pre-’07 and ’08 as it could be.”

He adds: “Do I think that the global economic meltdown was a good thing? Of course not. But do I think there were some good aftereffects for people in certain markets? Yes. It was a ‘ground zero’ moment, and those of us who survived knew we had to make a different world. I think we’ve successfully done that.”

This does not mean the market is insulated from problematic behaviours or systems.

For example, Jupp says: “I’ve actually pulled out of all social media, and I don’t go looking for people who have strong opinions just to get clicks and likes. They’re not part of my psyche anymore, and as a result, I can concentrate on all the positive people around me.”

This might sound counterintuitive in an industry that is increasingly promoting the value of social media, but Jupp warns against superficiality and sensationalism.

“We as a business have social media accounts, of course, but if that’s the only string to your bow, your marketing and your business are going to struggle,” he says.

“There’s an element of that ‘Instagram’ effect of creating a false image, which is coming into the mortgage industry, and it’s not very pleasant – and that’s from someone who was an early adopter.

“There’s a ‘tabloid’ attitude that you can sway opinions with headlines or 160 characters, and it’s sadly straightforward to do that. There’s a small number of people in our industry who think that’s an OK thing to do.”

Merit and skill

The people who make up this market do, in many cases, look very different to the pre-GFC stereotype. However, there is vastly more work to be done to build up diversity and inclusion in the property finance space.

Jupp explains: “Diversity and inclusion is not something you do because you feel that you ‘should’ or because it’s fashionable. It’s something you do because it’s right, and because it makes your business better, by being more relevant to the people that you serve.”

Brightstar has made its own efforts to lead the march toward a more representative and equitable market.

Clare Jupp, director of people development, has herself been a “personal vanguard for women in finance long before there was any industry support for that.”

While there is more work to be done, Jupp says the framework within which to make this progress is, in itself, a vast step forward from the market he entered.

“Meritocracy is the idea that someone, irrespective of sex, sexual orientation, race, disability, educational background, can get on if they have the merit,” he says. “When I learned the word in the ‘80s I thought, ‘I don’t recognise that in the world around me’.

“I always promised myself that if I was ever fortunate enough to lead anything, meritocracy would be the most important thing we did. If someone is the right person, they should be able to progress.”

To this end, once someone is recruited, Brightstar uses personality profiling to understand its employees’ strengths, drive performance and construct teams. Even the leadership team is carefully constructed on this

The Intermediary | June 2024 30 THE INTERVIEW Brightstar

basis to ensure a group of people who think differently from one another – for example, those who are more or less risk averse, or who make decisions on gut feelings or after lengthy analysis.

“Alone, they’re flawed, but put all those personality types together, and you’ll make great decisions,” Jupp says.

Pillars of the community

When asked to consider the future of broking, Jupp says: “Mortgage brokers are often pillars of the communities in which they work. They’re trusted individuals.”

This is unlikely to change as consumers look to make big financial decisions in an increasingly complex environment.

What is shifting, though, is the definition of ‘community’. There is still scope for this to mean local geographies, but the digital age provides the ability for this to also mean niche demographics to which a broker feels they can speak and for whom they can provide the best solutions.

“Regardless of the definition, they all have one thing in common,” Jupp says. “They all get the best out of the network they’re in, and they also give back into it as well.”

Nevertheless, there are only so many hours in the day, and brokers are increasingly strained when it comes to serving customers while still looking after themselves.

Jupp says: “The last year and a half has shown that this can be quite a poisonous job. You’ll get a notification that a rate pull is happening on a Sunday evening, and you have customers you have to drop everything for.

“The job will take over your life if you allow it to. There has to be some honest self-reflection, and also an honest relationship with customers to allow yourself to still have your own priorities.”

It is important to remember, particularly looking back to recent crises, that “poor mental health is invisible,” and therefore this market must continue to create “an environment where people feel safe.”

Jupp concedes that there is still a long way to go. Bodies like the Association of Mortgage Intermediaries (AMI) and the Mortgage Industry Mental Health Charter (MIMHC) are part of the solution, but it is also important for every business to signpost and communicate.

One way in which Brightstar leads in this sense, as part of a comprehensive approach to people strategy, is in sharing honest stories from those people, such as himself, who are “at the top table.”

Sea-change for the sector: For good businesses, people are at the epicentre

The future

As the dust starts to settle, Jupp takes a long view of the future of this market, saying: “The big challenge going forward is the same as it has been for two decades: affordability. How do we make housing affordable for people who aren’t high-flyers. I haven’t seen anything so far that really addresses that.

“We need to build real housing in areas real people want to live.”

He sees the biggest change ahead being a shift from the traditional high street to a place more geared for residential and social spaces. This will not be enough to address limited supply, so there may also be a need to “slightly erode our greenbelt,” with the realisation that these are not always – in contradiction to sensationalist headlines – “areas of great natural beauty.”

He adds that development does not have to be an enemy to natural beauty, either: “The great thing about a lot of modern development is that it’s built with the green agenda in mind. It’s about communities that are built for the future, rather than converting something built 150 years ago in the cities.”

Pulling all of this together, he simply concludes: “I don’t see why we make housing such a difficult thing. It’s the most straightforward thing in the world.” ●

June 2024 | The Intermediary 31 THE INTERVIEW Brightstar

The demonisation of landlords must stop

Every year, Ipsos asks the British public which professions they trust most and which ones they trust least.

Unsurprisingly, nurses, doctors and airline pilots typically make the top five, while estate agents, advertising executives and politicians tend to bring up the rear.

What about landlords? Well, last year – like every year – they finished near the bo om, slightly ahead of journalists and business leaders, but behind lawyers, economists and – wait for it – bankers.

Unfortunately, this is not a shock. A feeling of resentment has been growing for more than a decade. These days, you won’t be hard pressed to find commentators trying to cast the nation’s landlords as money-hungry ogres with nothing but disdain for their tenants.

What’s the motivation?

Every time I see a new a ack on landlords in the press, I’m struck by the fact that many of those throwing the stones have vested interests.

For example, recently I came across an article in the national press in which two institutional property investors suggested that Britain would be be er off with fewer landlords.

I will save their blushes by not naming them. But what reason would big corporations have for taking a swipe at private landlords and suggesting that they provide a sub-standard service? Could it be an a empt to talk smaller landlords out of existence so the cold hand of institutional capital can take a greater share of the private rental market?

A er all, life would be a lot easier for the big corporations if private landlords packed up and le the sector.

I’m afraid they will be waiting a long time for that. You see, the vast majority of the UK’s 2.8 million landlords are what you would typically consider ‘small’.

Small but mighty

According to the latest English Private Landlords Survey, 43% of landlords in England own a single property, while 39% own between two and four.

These landlords have served as the backbone of the private rental market for the past 30 years and – while some may disagree with me – the overwhelming majority have served it exceptionally well.

Let’s for one moment imagine all the UK’s smaller landlords disappeared overnight. We would be le with masses of identikit, soulless developments, overwhelmingly located in major cities or towns where there is a big university. You wouldn’t find an institutional property investor or developer building in any one of the hundreds of smaller towns, villages or hamlets that make up the UK. It wouldn’t fit their model.

What about the majority who live outside of the UK’s largest 20 cities? Where would they live?

This article isn’t intended as an a ack on institutions themselves, per se. This is a rebu al against all those people – and there are plenty – who insist on perpetuating the myth that all landlords are bad.

These people hold an outdated, simplistic, intellectually lazy, and institutionalised view of the world. They fail to recognise the vital role smaller landlords play. They also fail to understand why most people prefer to have a real human as a landlord, rather than a faceless corporation.

Smaller landlords have boots on the ground, know their local market and

are available on the end of the phone when things go wrong.

Perhaps most importantly, they provide accommodation for a wide range of needs, something you would never get if the institutions got a hold on the market.

The overwhelming majority are empathic and want their tenants in situ long-term. Many of them accept lesser rental increases – much lower than the market rate – because they have a good relationship with their tenant and want them to stay.

Would an institutional landlord freeze their rents for five years because they didn’t want to lose a tenant? Would they heck. But that is exactly what happened in a case that passed my desk recently.

You see, you never hear about positive stories involving private landlords because the media is obsessed with the ‘rogue’ minority who let the side down. The trouble is, without that balance, the 99% who are good and decent are tarnished by association. When that happens, it leaves the public with a damaging and wholly inaccurate perception of private landlords.

Unfortunately, the critics who try to perpetuate these myths are convincing, so it feels as though landlords are constantly fighting a losing ba le.

For that reason, I have no doubts that the a acks on private landlords will continue.

However, the private landlord is far more resilient than many people give them credit for, and remains a crucial component of the UK housing market.

Perhaps the overwhelming majority of them should be given more credit. ●

Opinion BUY-TO-LET The Intermediary | June 2024 32

International investors and PRS supply and demand

To have a healthy housing market, there must be a balance between supply and demand. Adequate supply can help to meet the demand for both home ownership and rental properties, ensuring stability and preventing excessive price inflation.

The buy-to-let (BTL) sector contributes positively to the housing market by providing rental options for those who want flexibility or cannot afford to buy.

Meanwhile, international buy-to-let investments play a part in helping to maintain an equilibrium, by helping to alleviate the shortage in housing stock and contributing to a dynamic and resilient property market.

Investments in the UK property market by international investors increased in 2023, with HM Revenue & Customs data stating that foreign

buyers accounted for 1.4% of all property transactions in the year ending March 2023 – a 20% increase on the previous year.

This increase in investment by non-UK residents came at a time of imbalance between supply and demand in the private rented sector (PRS), fuelled by market instability and challenges with housing affordability in the UK.

This increasing demand for rental properties has, in part, contributed to further rising rental prices.

Capital boost

The entry of international investors, particularly in the BTL market, could help provide much-needed capital and support for the private rented sector, potentially alleviating some of the pressure caused by the current supply shortages.

To this end, we are making two significant changes that could

make a small but positive impact. First, we are increasing the number of markets from which we will accept international BTL mortgage applications, this will increase from nine to 14. Residents of Egypt, Malaysia, Philippines, Qatar and Taiwan will now have the option to invest in the UK property market through our buy-to-let and residential mortgages.

Second, for the first time we are providing access to our international BTL mortgages to mortgage brokers. This means more than 23,000 mortgage brokers will be able to facilitate UK property investments for residents across 14 markets.

Data from the Office for National Statistics (ONS) shows the UK’s annual private rental prices rose by 6.2% in the 12 months to January 2024.

With demand for rental properties remaining high and showing li le sign of abating, we hope our expansion into the international buy-to-let market will open new mortgage corridors and support the much-needed growth in the private sector, while at the same time being a stable investment for our international customers.

That’s why we are delighted to be welcoming five more markets to the HSBC UK portfolio. We believe it’s a great next step to help not only accelerate our core lending, but to enhance our BTL proposition within the mortgage broker channel, and support our non-UK residential mortgage offerings.

As we continue to scale our international proposition, this is another step in allowing us to broaden our services to customers outside of the UK.

Opinion BUY-TO-LET June 2024 | The Intermediary 33
A ne balance: Equilibrium between supply and demand in the private rented sector is essential

Two deck headline in here along here

Although the weather has been a bit iffy recently, politically things have been heating up – if you don’t include Rishi Sunak’s soggy start to the General Election campaign, and the lukewarm reception that candidates have been receiving as they do their best to find silver linings. Polls, commentators and be ing shops suggest that Keir Starmer is heading to Downing Street. So, what would a Labour Government mean for the property sector?

Landlords shouldn’t get too excited

I don’t expect a sea-change in how property investors are treated. The current Government has belatedly worked out that pushing landlords to sell up through increased taxation or regulation doesn’t actually help anybody. This means there are now more properties for sale, but unfortunately, tenants can’t afford to buy them.

Consequently, there are now fewer rental units on the market, which means that rents have gone up, making it more difficult for tenants to afford to rent anywhere.

Then, we have the now shelved Renters (Reform) Bill, the mere threat of which was enough to scare thousands of landlords out of the sector. I’m afraid I can only see any new iteration of the Bill being more draconian for landlords under a Labour regime.

A big rental myth

One of the biggest misconceptions in the rental sector is that all landlords

Opinion BUY-TO-LET

are wealthy. According to the Government’s 2021 English Private Landlord Survey – updated in March 2024 – 45% of individual landlords own just one buy-to-let (BTL) property, with a further 40% owning between two and four. The report states that the average earnings for all landlords – excluding rental income –is just £24,000 per year, and that their median age is 58.

What happens if we add in their rental profit? The median gross rental income was £17,200, from which they would need to deduct mortgage repayments, agency fees and running costs to arrive at a pre-tax profit. Obviously, each landlord’s costs will be different, but we’re clearly not looking at a king’s ransom.

Many such landlords are accidental – perhaps they kept a flat when they married or inherited a house when their parents died. Super-rich? No, just ordinary people.

How much more regulation and taxation are these types of landlords likely to accept before chucking in the towel?

Better prospects for development?

As ever more landlords have felt the pipes squeaking on their portfolios, many have moved into small-scale property development to offset the pain.

building lots of new houses. We need to build around four million new homes – the equivalent of around 15 Oxfordshires – which means we’re not going to be able to avoid the greenbelt or stick them all somewhere out of the way where no one will notice.

Green, brown and grey Labour reckons it could build some new towns – around 1.5 million homes – using what it calls the ‘grey belt’. This is greenbelt land that already has something built on it, such as car parks or petrol stations.

For many, the type of projects are just one step up from those they’ve done previously, such as creating a house in multiple occupation (HMO) or doing a refurbishment. Simply pu ing flats above a shop or converting a small commercial building can be expected to generate a six-figure profit, so no wonder there’s a healthy appetite. It certainly puts the average landlord’s BTL profits in the shade.

So, will Labour’s approach to property development differ from that of the Tories, who have actively encouraged it by creating many new permi ed development rights (PDR) in England?

In my opinion, there’s unlikely to be too much change. The reason is that the housing crisis is an incontrovertible fact, it’s ge ing worse rather than be er, and it’s impossible to fix unless the Government of the day is prepared to ignore the squeals of objectors across the land and start

The housing crisis... [is] getting worse rather than better, and it’s impossible to x unless the Government of the day is prepared to ignore the squeals of objectors”

They’ve stipulated that 50% of grey belt development must be affordable housing, but it’s not clear how the economics of this will stack up for developers, which clearly are going to want to make a profit.

This focus on the grey belt hasn’t gone down that well with the countryside charity CPRE, which argues that we should instead turn this back into greenbelt.

You might think this is rather ignoring the housing crisis, until you realise that we could build 1.2 million new homes using existing unused brownfield land. These are existing commercial properties and land not in the greenbelt, which could be converted to residential use. CPRE, not unreasonably, believes we should start with unused brownfield land first instead of targeting the grey belt.

These brownfield sites are a rare political win-win. They positively impact the house-building numbers, plus voters are generally happy for these sites to be converted. It also gets more people living in our town centres, which benefits local economies.

On that basis, I can’t see Labour deciding that brownfield conversions are a bad idea. It should also be good news for landlords and investors, because larger housebuilders won’t touch small commercial conversion projects since most lack the skills or appetite to do them. This leaves more opportunities for first-time property developers. ●

Opinion BUY-TO-LET
June 2024 | The Intermediary 35

Helping landlords get the best out of their investments

There’s no denying it’s been a bumpy ride for landlords in recent years, thanks to rising interest rates, tax and regulation changes and the cost-of-living crisis all squeezing profit margins.

Brokers might have experienced clients selling up or looking at other ways they can protect their investments while keeping returns as high as possible.

Landlords who’ve decided they don’t want to sell, or perhaps are not in a position to do so, might be considering options such as forming a limited company, transferring property to a partner or switching to the holiday let sector. Or they could just be seeking advice on what mortgage deals are available to them ahead of existing terms coming to an end.

Incorporation implications

While a record number of buy-tolet (BTL) limited companies were formed in 2023 – 50,000 according to Hamptons – it isn’t the right option for everyone, particularly those with only one to three properties, as incorporation has its own implications around Stamp Duty, Capital Gains Tax (CGT) and the level of mortgage rates and fees. That’s why it’s important that brokers advise their clients about all the options on the table.

A common challenge facing landlords in this higher interest rate environment is that the rent received is no longer enough to meet the affordability criteria on a new BTL mortgage or remortgage.

This is where top-slicing could help. When rental income isn’t enough to borrow the amount needed, we can also use personal income to help achieve the 145% of

the monthly interest due, inclusive of any product fees added.The rental income needs to cover at least 100% of the stressed mortgage payment and personal income can be taken into consideration for the remaining 45%. We’ll look at a landlord’s overall affordability including credit commitments, residential mortgages and existing BTL properties. It could be that a more flexible solution is needed altogether – one that takes a common sense approach to complex situations. This is why we designed our Bespoke proposition. As long as clients meet our five golden rules, a Bespoke underwriter will individually assess each case, to support top-slicing clients who have good affordability but don’t necessarily fit straightforward lending criteria.

This approach is making a real difference in lending decisions. For example, we were able to help a client looking to borrow £850,000 on a joint BTL remortgage over a 20-year term.The estimated rental income was £5,200 per month on a 5-year term fixed at 5.04%. They had an existing residential mortgage of £1.2m, paying £7,000 per month. On paper, affordability was squeezed by a monthly outgoing of £5,500 in private school fees. Thanks to our Bespoke solution, we were able to take into account that the school fees were being paid by grandparents, therefore we were happy to exclude this as part of our assessment.

We’ve moved into a different phase of the housing market – an environment in which buying a low return rental property with the aim of selling in five to 10 years for a large cash return is less likely than it once was.

Notwithstanding the cost implications of higher interest rates,

the requirement to pay Income Tax on all property earnings – new Section 24 legislation – and the reduced rate of tax relief, landlords are also having to navigate stricter fire, gas and electrical safety measures, greater energy efficiency pressures and the yet to be confirmed implications of the Renters (Reform) Bill if it goes ahead.

Growing demand

However, opportunities remain. A stifled housing market and a reduction in the number of rental properties available have resulted in growing demand in the private rental sector.

Rents have risen in an a empt to mitigate higher interest rates, with the average gross rental return at the start of the year being 5.5% according to Zoopla, rising to 7.3% in some areas. Figures also suggest we could be over the peak in terms of landlord sales. Hamptons data suggests the peak was in 2021, with sales declining since. Private landlords accounted for 14% of sellers in Great Britain last year, compared to 15.7% the year before. Last year, landlords made up 11.2% of buyers, resulting in a gap overall, serving to further increase the rental demand.

The National Residential Landlords Association (NRLA) Landlord Confidence Index also shows a trend of optimism, with a rise in confidence and numbers intending to buy, and a fall in those intending to sell.

Perhaps we’re le with landlords who are in it for the longer-term, focusing on small monthly returns rather than short to medium-term capital gains.

Our goal is to be as flexible as we can, so that landlords can continue to make their investments work. ●

Opinion BUY-TO-LET The Intermediary | June 2024 36

A bridge to a yes.

• Experience

• Creative solutions

• The appetite to fund your projects

• The speed to deliver them quickly.

Our Bridging team will be delivering on all of these points this summer as we look to give you and your customers the tools to succeed on their next project.

Mortgages made simple.

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

Meet The BDM

How and why did you become a BDM?

I started out as a eld-based key account manager for the Virgin One Account back in 2002, following positions as a broker on both a selfemployed and an employed basis at Countrywide.

Since working in the nancial services and insurance industry, I had coveted the relationship manager role and was inspired by Richard Branson’s entrepreneurial successes. When I heard that Virgin were seeking pioneers to promote their one account mortgage to

Keystone Property Finance

The Intermediary speaks with Kevin Meredith, business development manager (BDM) at Keystone Property Finance

intermediaries, I jumped at the chance and managed to land a position. Re-brandings and mergers followed over the next six or seven years until I eventually came to represent the NatWest brand as a BDM in Manchester.

What brought you to Keystone?

A er 21 years at the NatWest group and following a restructure of the business, I decided the time was right to seek a new challenge. I was approached by various prospective employers until I was introduced to

Phil Riches and Moises Cruickshank, who were hiring for a North West BDM.

I was quickly engaged by their obvious passion for the business, I liked their down to earth approach and collaborative culture. It seemed the perfect t for me.

What makes Keystone stand out?

Keystone really is the buy-tolet (BTL) expert. e wealth of experience in the team is profound, from chief executive o cer David Whittaker and managing director

The Intermediary | June 2024 38

Elise Coole, right through to the sales team, who have countless years of combined experience in the specialist space.

Keystone is all about helping brokers structure a deal, saving them valuable time, whether it be applicants with a complex company structure, a multi-unit property or looking for an exit strategy from development nance.

Our default position is, ‘let’s see what we can do’, rather than trying to nd a reason not to lend. e only way you can do that is if you have great expertise in the business, which Keystone has in abundance.

Collaboration is also key. All the teams work towards a common goal, which is to ensure that our brokers’ businesses thrive. If they do well, then we do well.

As an intermediary-only lender, brokers are our lifeblood. erefore, we are always in dialogue with them to ensure that our o ering not only makes their lives easier, but that it’s t for purpose for their clients – the landlords – too.

Lots of lenders claim to be innovative, but this is an area where I genuinely feel we can walk the walk as well as talk the talk. We were one of the rst lenders to introduce a green range and remain one of the only specialist lenders to have a product transfer o ering.

What’s more, we recently launched our new Product Transfer Plus range, which allows landlords to increase their borrowing when they opt for a product transfer.

As a broker-friendly lender, we respect the relationship between the adviser and their client, which is why we pay an above average procuration fee on any of our Product Transfer Plus cases.

What are the challenges facing BDMs right now?

It’s no secret that rising interest rates over the past year, a more inhospitable tax environment, and even retiring landlords returning property to the residential arena

have all contributed to a slower market.

Many landlords have been unable to remortgage due to lenders’ higher stress tests, and product transfers are therefore an important part of a lender’s proposition.

Competition is erce, but while some may consider that challenging, we at Keystone like to be kept on our toes and always remain ahead of the game with an innovative approach.

What are the opportunities for BDMs?

While many of the earliest buy-to-let mortgage applicants may be eyeing retirement, there is strong evidence that a new, younger brigade of professional landlords are looking to buy through a company structure in order to gain from the associated tax breaks.

Our own data also shows that younger landlords are making up a higher proportion than they did previously, particularly within our limited company volumes. is is proof that younger landlords, in general, see buy-to-let more as a hands-on business than an arm’s length investment.

A new generation of landlords entering the market, coupled with a potential reduction in borrowing costs later in the year, will create a wealth of opportunities.

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

I like to be hands-on, and I prefer face-to-face visits to really get to know the broker and their business. I encourage complex enquiries and will always thoroughly research a prospective case before recommending a submission.

I will also o er mine and my team’s expertise in helping the broker to structure a case so that it is a suitable t. is can be invaluable for the borrower and customer.

For example, where the applicant may have a complex company structure, or might be unsure on planning requirements for a house in multiple occupation (HMO), my team can also check various aspects of a property enquiry, such as the precise percentage of private ownership in an ex-local authority block, or our appetite to lend on a at above commercial premises.


advice would you give potential borrowers in the current climate?

Use a broker who has experience in the BTL sector. On any recommendation, enquire about your options at the end of your xed rate period. Is there an option to transfer the product or will you be given their standard variable rate only? is can be a very important aspect of any decision on a which mortgage to choose. ●

Green BTL mortgages

(HMOs, Multi-Lets)

Ex-pats (including retired)

Holiday lets

Product transfers (with Further Advance o ering)

June 2024 | The Intermediary 39 MEET THE BDM
Keystone Established in 2018 Products Complex buy-to-let First-time landlords
Standard & specialist
Contact Information 07974 242 344 kevinm@keystoneproperty

ethical alternativeS


The market for Islamic property finance has grown significantly over the past few decades. With the 2021 Census citing Islam as now the second largest religion in the country, the UK’s growing Muslim population has certainly been a key driver for the increasing number of Shariah-complaint products coming to the market.

This has prompted both specialist Islamic and conventional financial institutions to expand their offerings, catering for the unique needs of the Muslim community, while also offering an alternative path for property finance.

As a result, the existing landscape for Islamic finance has undergone a huge transformation, from what many regarded as a niche corner of the sector, to a more accepted, viable option for Muslim and non-Muslim borrowers alike.

Ethical investment

As the property market continues to grapple with persistent economic challenges, such as rising interest rates, fluctuating inflation, and affordability issues, Islamic finance has continued to grow despite all odds – becoming

increasingly accessible for struggling borrowers, offering an alternative model based on ethical investment and risk-sharing.

Characterised by the prohibition of ‘riba’, the term for interest, and speculative activities, also known as ‘gharar’, Islamic finance revolves around asset-backed financing.

This means that instead of borrowing money to buy a home and then making repayments with interest as one would with a standard mortgage, buyers enter a co-ownership partnership with the bank.

Known as a Home Purchase Plan (HPP), the product stands as an ethical mortgage alternative, in which homeowners pay rent back to the bank as a means of buying back their shares of the property, achieving full ownership over time.

This option not only positively reinforces the key ethical pillars of Islam, as it allows homeowners to avoid accruing interest, but also provides borrowers with increased support and flexibility when buying their own home.

Delving further into this increased demand for Shariah-compliant products, many professionals within the Islamic finance space have pointed

The Intermediary | June 2024 40

to the UK’s growing Muslim population as a key driver for growth. The Muslim community in England and Wales grew by over 44% between 2011 and 2021, and there are an increasing number of customers in search of ethical property finance solutions.

According to Sakeeb Zaman, CEO and cofounder of StrideUp, more than 70% of Muslims have stated that they would prefer to take a Shariah-compliant product.

This overwhelming demand continues to drive innovation, and Zaman notes that the Islamic finance market, as a result, has been somewhat shielded from the economic turmoil that has rocked the conventional mortgage markets over the past few years.

He says: “In many ways it’s a very positive story against the backdrop of the past 18 months, which has been a relatively challenging period for the mortgage industry as a whole.

“Islamic finance actually really stands out, because it’s driven by the tailwind of Muslims in the UK demanding shariahcompliant options.”

Another key factor in the sector’s growth, according to Sagheer Malik, chief commercial officer at Offa, is the general preference for property investment among Muslim communities.

compromise, and are seeking HPPs that align with their spiritual values.

According to Sadaf Malik, CEO of Levana Finance, this relatively recent push from young people to adhere to Islamic principles is a direct result of the rise of social media. With access to more information, she notes that young people are more willing engage with Islamic content, stating that: “The younger generation is now being influenced by social media. They are listening to people on social media, TikTok and YouTube, and they’re talking about ‘how do we actually buy without going against Islam’.”

Where previously first and second-generation Muslim immigrants were faced with a property market much less tailored to suit their needs, this new wave of potential homeowners have a lot more options, and can therefore afford to be steadfast in their push for Shariah-compliant financing.

Nizam Patel, director of Halal Options, has also observed this emerging trend.

“I’ve come from that era where it was very difficult to convince people, to now where you have a second, maybe third generation, and the same kind of mindset isn’t there anymore – people are a lot more educated in terms of their own faith,” he explains.

With Shariah law condemning financial activities deemed damaging to society – such as alcohol, gambling and the arms trade – Sagheer Malik reports that Muslims tend to regard bricks and mortar as a safe and permissible – or ‘halal’ –option when looking to invest their wealth.

Generational change

Generational attitudes have also played a key role in the growing appetite for Islamic finance.

Belal Ahmed, CEO of Sunnah Finance, notes that the market has begun to target the emerging Muslim Gen Z and Millennial population looking to step onto the ladder for the first time.

Describing this new generation being more “internet savvy,” Ahmed notes that many of these younger generations are less willing to

“They’ll insist that they want something Shariah-complaint, and a lot of them won’t even care if it costs them a little bit more. I think that’s driving the growth.”

Non-Muslim customers

Another important driver in the recent growth of the Islamic finance market is the increasing number of non-Muslim homebuyers looking to utilise products that fit better with their needs and preferences.

With Shariah-complaint providers offering not only ethically sound but also risk-sharing home finance solutions, non-Muslim borrowers who may have been rejected by the more mainstream banks could instead turn to Islamic finance, in search of more flexible options.

June 2024 | The Intermediary 41

Sagheer Malik says that Offa currently has nearly as many non-Muslim customers as it does Muslim ones, with many approaching the firm due to its turnaround times, which are generally better than those of more conventional mortgage lenders.

Ahmed also notes this trend, stating that Sunnah Finance has done a number of deals with non-Muslim customers since January.

Actively advocating for the opening up of the market, he says that Islamic finance should not simply be treated as a Muslim financing arm, but as a viable option for anyone wishing to achieve their dreams of homeownership.

He adds: “We’re seeing that it is more accessible for everyone.

“It’s not just for an Islamic clientele, or that you have to be a Muslim to get access to finance – it could be anyone.”

International customers

Not only is the more open, co-ownership model presented by Islamic finance attractive to non-Muslim customers, but it has also gained a reputation for catering for international and expat customers, too.

Many foreign buyers, who may have struggled to place a case with more conventional UK banks, are turning to Islamic finance, seeking out lenders that not only cater for their needs with suitable product offerings, but which are also are known to have lower fees for international cases, as opposed to their more mainstream counterparts.

Patel says this push for international customers has come about due to the way in which many Islamic banks are funded, adding: “A lot of these banks have got big shareholdings from the Gulf Cooperation Council (GCC) countries Qatar and Kuwait.

within the foreign investment market. Both Offa and StrideUp report high service levels when it comes to catering for this overseas demographic, with Zaman adding that while there seems to be a concentration of foreign investment interest in the Muslim community, it by no means only applies to those within the Islamic faith.

In fact, according to Sadaf Malik, she has not only seen providers deal with clients in predominantly Muslim countries, but has also noted activity in countries as far as Australia, South Africa, China and Hong Kong.

Product innovations

Increased interest has pushed the market towards further innovations. While a decade ago those seeking Islamic finance had limited choices when it came to product options, this situation is now changing.

Zaman explains that, historically speaking, Muslim homebuyers had “very few options that fit their values and their faith.” However, he sees this gap in the market as something of a positive, citing it as an exciting “growth opportunity” for the sector.

For instance, a number of providers, including StrideUp, are set to expand the current buy-to-let (BTL) landscape in the coming months, spurred on by increased interest over the past few years.

Where previously first and secondgeneration Muslim immigrants were faced with a property market much less tailored to suit their needs, this new wave of potential homeowners have a lot more options, and can therefore afford to be steadfast in their push for Shariahcompliant financing”

“What happened as a byproduct is that, for any policies that are drawn up, they want to make sure that at least their residents can buy property in the UK through these banks, so the policy for international customers ends up being a lot more simplified.”

By targeting this international market, Islamic banks have established themselves as key players

Patel has also seen further innovation from a broker perspective.

Having been in the industry for over 20 years, he says that a great deal of new Sharia options have entered the market of late, for specialist finance in particular.

“Historically, we couldn’t get bridging finance […] but we’ve got a few providers now,” he says.

“They can do a bridging facility by not taking ownership of the property, but yet still not be lending money and charging interest on it.”

This method, known as ‘murabaha’, sees the short-term finance provider buy a commodity external to the property, and sell it back to the customer at a profit, thus providing the homebuyer with finance without lending or charging interest.

This has proven highly popular since it was first introduced to the UK market, with several

The Intermediary | June 2024 42

Take advantage of a lucrative option

Zeenat Shaffi is head of business development at Nomo

There is clear commercial opportunity for the UK’s property nance market to improve its o ering to Islamic customers. There are four million Muslims in the UK, making it the country’s second largest religion after Christianity.

Nevertheless, the range of property options available to them remains limited by comparison – and lenders who can step up their Shariah o ering could bene t from a cash injection.

This burgeoning group of potential new customers not only includes British citizens who are Muslim, but also Gulf Cooperation Council (GCC) residents looking to purchase holiday homes or buy-to-let (BTL) investments in the UK.

Rapid economic growth in the Gulf puts more in a position to do so: the UAE’s economy, for instance, grew by an above average 7.6% in 2022, and according to its Finance Minister Sheikh Mohammed bin Rashid, is aiming to double in size by 2030.

The Middle East o ers lucrative inbound investment opportunities for the markets set up to attract it.

Add Britain’s four million Muslim residents into the mix, and the commercial imperative for the UK’s property nance sector to enhance its Shariah o ering is clear.

Nomo o ers fully Shariah-compliant UK property nance, including for new-build residential and buyto-let properties. Our property nance products are available to residents of the UAE, Saudi Arabia, Kuwait, Bahrain and Qatar, providing access to the UK property market for GCC residents. Our o ering is available to customers who don’t have a UK credit footprint or UK bank account – enabling them to access nance, which other providers don’t o er.

There was a challenging period of volatility last year in both the GCC and the UK – and during periods

new specialist providers moving into the space over the past decade. According to Sagheer Malik, when Offa officially launched it was the first Shariah-complaint bridging finance company in the UK. He notes that, with a number of new providers out there, demand for specialist products beyond the residential HPP is evidently on the rise.

“Now there are a few more players in the market, so it shows there is demand out there,” he begins.

“We cover a range of bridge finance including auction property, light refurb and heavy refurb [and] we will be launching development and land bridging products soon too, along with longer term finance products.”

of economic and political upheaval, lenders tend to withdraw business which carries a higher level of risk. The UAE, for example, was put on a ‘grey’ list in 2023, so several Shariah lenders dropped their business in the country.

The rates environment is now starting to stabilise – with the Bank of England most recently deciding to hold the base rate at 5.25% – encouraging lenders to ease their requirements again.

Most of those who left the UAE have returned, and the coming months will bring heightened activity for Shariah-compliant property nance providers in the UK and beyond.

Since 2003, the UK Government has passed legislation like the 2005 Finance Act to level the playing eld between the Islamic nance sector and its conventional counterpart. This has been crucial in driving the sector’s growth, and the UK o ers a broader variety of bespoke Islamic investment products than any other non-Muslim country.

The GCC markets play an especially important role – the Gulf’s summer season has now begun, bringing exciting opportunities for professional advisers with the Shariah credentials to help buyers meet their requirements.

There are projected to be around 1.2 million visits from the GCC to the UK in 2024. Most will come between May and September, when daily temperatures in the Gulf reach an average of 45°c.

Many will also be looking at properties to purchase, including parents sending their children to one of the UK’s globally renowned Russell Group Universities in the new academic year.

It is the brokers who understand Shariah-compliant property nance structures who will be in poll position to win their custom.

While opportunities for growth within both the buy-to-let and short-term finance space continue to increase, there remain certain gaps within the Islamic property finance market that are yet to be filled.

One of these, according to Sadaf Malik, is in terms of the guidelines around Right to Buy.

Due to the confines to the scheme, which states that the house in question can only be sold to the current occupier of the property, Islamic finance options do not fit within this mould – as the bank cannot be accepted as a co-owner for the property, even for a short time.

Sadaf Malik notes that, because there are no Islamic banks that will do a Right to Buy, she p

June 2024 | The Intermediary 43

Islamic nance is guided by the Shariah principles of transparency, fairness and ethical venture. For example, providers do not invest in harmful sectors such as alcohol, gambling, tobacco, adult entertainment or the arms industry.

One of the key di erences is that Islamic nance providers do not pay or charge interest. This is because Shariah principles state that funds should be put to work for the bene t of the whole community.

Shariah-compliant Home Purchase Plans (HPPs) are commonly referred to as the Islamic alternative to a conventional mortgage. These entail a partnership between the customer and the bank to jointly purchase the property. The customer then pays the bank rent on the share of the property they do not yet own, as well as a monthly acquisition payment. With every payment, the customer acquires an increasing share of the property until they ultimately become the sole homeowner.

In 2022, we launched our green home nance product range, which incentivises customers to opt for a home with an energy e ciency rating of Band A or B by o ering them a reduced rate. Gatehouse Bank will also o set the carbon emissions generated by the average UK property for as long as the customer remains with the bank with a qualifying property.

A valuable role to play

Islamic nance is a burgeoning global sector, predicted to grow to US$4tn in 2030, compared to $200bn in 2003. The UK is a leading Western centre for Islamic nance, which has been aided by demand from its Muslim population of 3.9 million people, according to the latest O ce for National Statistics (ONS) gures. As such, it’s important for brokers to understand Shariah-compliant nance, to o er valuable guidance to customers. Brokers have an important part to play in debunking lingering misconceptions; for example,

and her team at Levana Finance have had to turn away a number of clients interested in the scheme, and instead direct them down the more conventional mortgage route.

Patel also believes there is space within the market for a new product, similar to that of a joint borrower sole proprietor (JBSP) deal.

Family gifting is significant in Islamic culture, and it is common for even extended members of the family to provide cousins, nieces or nephews with a monetary gift to help them take a step onto the property ladder.

Islamic nance isn’t just for Muslim customers, but for customers of all faiths, and none.

This is because Shariah-compliant nance is viewed as more ethical than conventional nance.

The ethical and socially responsible aspects of Islamic nance resonate with a growing number of consumers, particularly younger generations.

A recent consumer survey conducted by Gatehouse Bank found that 72% of 18 to 24-year-olds would consider a Shariah-compliant provider, compared with just 26% of those aged 65 and above. There must be more education and awareness from both advisers and the industry at large, to enhance awareness of Shariahcompliant products.

Current trends

Consumers, particularly younger generations, are increasingly taking their sustainable and ethical beliefs into consideration when making purchasing decisions.

Gatehouse Bank found that 45% of UK homebuyers would consider using an ethical nance provider that follows Islamic principles.

Of those surveyed, 37% of UK homebuyers said they were most attracted to Shariah-compliant products because they do not invest in unethical industries such as alcohol, gambling, arms, tobacco or adult entertainment.

The same research found that 69% of people note the importance of green and sustainable options when purchasing a home, and 48% said they would opt for a provider that o ered incentives to buy a property with a higher Energy Performance Certi cate (EPC) rating.

These demands are often addressed by Shariahcompliant banks, such as through Gatehouse’s green home nance products, which incentivise customers to opt for a home with an energy e ciency rating of Band A or B.

According to Patel, there is a huge opportunity within Islamic finance to capitalise on this tradition, and for banks to be more understanding and flexible when it comes to assessing large, gifted amounts of income when looking at their customer’s individual financial situation.

He explains: “Just like conventional banks, most Islamic banks won’t accept gifts from even extended families.

“Unless they are immediate family like siblings or parents – or some might go as far as parents’

The Intermediary | June 2024 44

siblings – beyond that, most banks don’t accept it, whereas it’s actually very common in our community for cousins to help out.

“I think maybe opening up the market to allow people easier access to the funds for deposit as in terms of accepting gifts […] there’s definitely a need for that.”

Tax issues

Another ongoing gap or oversight that is affecting the Islamic finance community surrounds the tax implications for those refinancing a buy-to-let property.

There have been a number of instances of late in which a customer has refinanced their BTL property with their chosen Islamic bank and has subsequently been wrongfully contacted by HMRC with a large, unpaid tax bill.

Confusing the bank, which partially purchases the refinanced property, as a new buyer, HMRC assumes that the customer has completed a full sale and disposed of the asset, therefore owing a great deal in tax as a result.

Patel says: “At the moment there’s a bit of a stir in the Islamic finance community in terms of what’s going on.

“There’s supposed to be a level playing field when it comes to Stamp Duty Land Tax [SDLT] rules, and if you’ve got a buy-to-let for example, the rent that you pay the bank is treated by HMRC the same as on a conventional mortgage.

“For refinancing, I think maybe internally the message at HMRC has got confused [and] I hope that HMRC will soon issue guidelines and that will sort itself out.”

While hurdles still remain, many view these perceived challenges as an opportunity for innovation. For instance, a persistent issue for both Islamic finance providers and brokers alike is the lack of competition within the market.

Even though new finance providers continue to join the market, the number of operating Islamic banks is relatively small compared with the conventional mortgage sector. This, in turn, often results in higher product rates for customers, as these smaller banks do not have access to the same kind of funding that a high street bank would.

Ahmed argues that to combat these higher rates, more lenders must enter the market, drive competition and bring prices down.

“The more Islamic lenders that come to market, the better,” he says. “We are not the cheapest alternative to the high street, and we can’t beat Nationwide or NatWest.”

He remains optimistic for the future, noting that as many as four new lenders are expected to hit the market within the next year.

Sagheer Malik corroborates this, noting that from a provider’s perspective, acquiring funding for new, un-tested products can be quite difficult.

He adds: “It is a challenge to be among the cheapest in the market. Funding for more established products is relatively easy to get, but if you want to innovate and launch new types of products it becomes quite difficult to get the required level of funding to scale up.

“To the funders it might seem un-tested, and they might be unsure about the chances of us being able to originate and get a return on their money. As we grow, the prices will start dropping to a similar level to conventional banks.”

Building awareness

In addition to further market competition, awareness and education have been identified as vital tools in accelerating the growth of Islamic finance in the UK.

With many potential homebuyers – Muslim and non-Muslim alike – still unsure or even unaware of the Shariah-complaint options available to them, the experts agree that raising the profile of Islamic finance is more important than ever.

According to Zaman, lack of knowledge is undoubtedly one of the biggest barriers to sector growth. To combat this, StrideUp has partnered with the some of the largest mortgage clubs in the country to try and inform their members that these products exist.

“Awareness is clearly the biggest challenge – I’d say as an industry it’s still relatively nascent in terms of scale,” he says.

“In parts of the country, 30% to 40% of the population is Muslim, and so if you’re a mortgage broker in one of these areas and you’re not educated or aware of Shariah options, you’re clearly missing out on a massive opportunity.”

From an advisory perspective, Patel notes that while education has improved among clients over the past few years, more still needs to be done.

He adds: “People are a lot more aware that there are products out there.

“I mean, even 10 years ago, people never heard of the thing, now I think it’s safe to say that most people have heard of it.”

Spurred on by these pushes for awareness, despite the ongoing challenges, Islamic finance has seen vast change over the past few decades.

With competitive providers set to stir things up in the market and increasing numbers of home buyers turning to Shariah-complaint vehicles, there is no doubt that, as stated by Ahmed, this “will become a very much competitive led market as opposed to a niche market – it’s going to be very open, very soon.” ●

June 2024 | The Intermediary 45

Could Labour be good for the specialist market?

Elections traditionally introduce a large dose of uncertainty into the property market, leading to delayed decisions and transactions, as buyers, sellers and lenders await greater clarity on the post-election landscape.

Having said this, the impending vote is perhaps a li le different, in that Labour, despite a dire result in 2019, is widely expected to win, and win big.

With Sir Keir Starmer studiously avoiding the Theresa May trap of basing the campaign around his personality, it seems likely that his party will gain a significant majority, such is the unpopularity of the Conservatives. Indeed, the latest talk is of a ‘super-majority’ which for some reason seems to have replaced ‘landslide victory’ in this year’s election terminology.

In theory, this expectation should reduce pre-election uncertainty and improve sentiment in the specialist finance market, but if the focus moves away from who will win, it falls instead on what Labour will do in power.

History certainly gives cause for optimism here. In 1997, the last time Labour came to power a er a lengthy spell in opposition, they had a very positive impact on the property market. They provided a stable economic environment, supportive policies for homeownership, investment in regeneration projects and tax relief for buy-to-let (BTL) investors that helped to galvanise the private rental sector (PRS).

These measures contributed to a booming property market, but of course there is one key difference between 1997 and 2024. In 1997, Labour inherited an economy which

was in considerably be er shape than the one we have today – public debt was reducing and a fraction of the eyewatering numbers we see today.

Ultimately, a lack of funds to invest could dilute Labour’s plans if they form the new Government on 5th July. Exciting opportunities nonetheless...

While this article is being wri en before Labour’s manifesto is released, it seems that if they form the next Government, they will look to promote investment in housing and public infrastructure projects, particularly in targeted regions.

This could certainly boost both the residential and commercial property sectors, particularly if accompanied by an improved and reformed Help to Buy scheme for first-time buyers, and other proactive measures.

Labour’s plans to build at least 150,000 council and social homes each year for five years should increase demand for specialist finance products, particularly those tailored to large-scale construction projects. Policies promoting green retrofi ing and energy efficiency should also lead to potential new product niches for the specialist finance industry.

If it can be funded, increased public infrastructure spending, targeted tax incentives for property investors and developers, Government-backed loan programmes and a drive to fix the broken planning system could bring many new opportunities for the specialist finance sector in a rapidly evolving market.

Conversely, potential new regulations aimed at protecting tenants could have a negative impact. Rent controls, if introduced, are unlikely to work and could potentially have the opposite effect, reducing

profitability for landlords and forcing them and investor developers to exit the market. However wellintentioned, moves here could significantly exacerbate existing problems in the market.

In addition, there are worries about what Labour might do with permi ed development rights, with suggestions they could reform or even abolish their use. On a macroeconomic level there are concerns about how Capital Gains Tax and other taxes, in combination with other new policies, will impact interest rates. These concerns are already prompting some investors or landlords to look at selling and crystalising gains before Labour even get into power.

In summary, the prospects are mixed, but one thing is for sure: if Labour wants to improve the property market and support the specialist sector, it would be well advised to understand and acknowledge the importance to the general economy.

Don’t treat this key economic driver with the disregard the Conservatives have by changing the Housing Minister every few months!

Any new Government must commit to working with the property sector and truly understand its importance to the economy. Only with continuity, certainty and the development and implementation of a strategic plan will new reforms and initiatives be successful.

If, as predicted, Labour wins, it will face huge challenges. Nevertheless, with the right a itude and a collegiate approach to working with all property market stakeholders, we could be at the start of an exciting period, just as we were in 1997. Now, what was that D:Ream anthem again?! ●

Opinion SPECIALIST FINANCE The Intermediary | June 2024 46
BRIAN WEST is head of sales and marketing at Saxon Trust

An option for ‘wait and see’ borrowers as rates fall

In her hit single ‘Big Yellow Taxi’, Canadian singersongwriter Joni Mitchell wrote: “Don’t it always seem to go, that you don’t know what you’ve got ‘til it’s gone.”

Of course, Mitchell’s seminal ‘70s classic is about the environment and how our notion of progress can end up being “a blight on paradise,” as she once put it. Nevertheless, those words spring to mind when I consider the millions of UK borrowers whose fixed rate mortgage terms come to an end over the next year or two.

The last time these people refinanced, rates were at record lows, had been for more than a decade, and were seemingly going nowhere.

In that low-rate world, people could upgrade to a property with an extra bedroom or one with a big garden out back without too much sacrifice or discomfort.

But just like the world Mitchell sings about, that low-rate world is gone – perhaps for good – and many of us are only now realising how good

we had it. The cost of borrowing has soared over the past two years, and as a result, a lot of borrowers are feeling much poorer than they were.

However, there is light at the end of the tunnel.

The Bank of England hasn’t increased rates since August last year, and in fact talk is now turning to rate cuts, rather than increases.

The big question on everyone’s lips is when. You’ll need a crystal ball for that one, but many commentators still believe we may see two rate cuts in 2024, although these predictions change almost daily.

Outlining the options

In reality, it doesn’t ma er when rates begin to fall; the mere talk of them falling is enough to influence behaviour – and it gives borrowers lots to think about. Do they lock into a 2-year fixed rate? A 5-year fix, perhaps? Or maybe a tracker would be a more sensible option?

These are the types of questions that will form the backbone of

conversations between brokers and their clients at present.

There is another option which could also prove useful for both owneroccupiers and landlords when rates begin to fall: bridging finance.

While bridging is more expensive than a traditional mortgage, it is also much more flexible. Terms are up to a maximum of 12 to 24-months, meaning borrowers are not tied in for the long-term. This is one of bridging’s key a ractions: it allows for maneuverability.

Therefore, it may be a perfectly valid solution for what I like to call ‘wait and see’ borrowers. These are the homeowners or landlords who are convinced rates will fall soon – and quickly – and who don’t want to be locked into paying a higher rate for the next two to five years.

For these people, it may be worth paying the higher cost of interest that comes with a bridging loan for 12 months if it means they are able to lock in at a lower rate in the future.

Admi edly, this is not a mass market option, but for the right person, it could be a valuable solution that could save them thousands – or even tens of thousands – over the life of their loan.

I know some brokers feel uneasy about recommending bridging loans, mainly down to the fact they are unfamiliar with them. That’s understandable, and the likelihood is that bridging won’t be an appropriate option for most borrowers.

But it’s worth keeping in mind for the small section of your client bank for whom a bridging loan may be the perfect short-term solution.

Opinion SPECIALIST FINANCE June 2024 | The Intermediary 47
Many commentators still believe we may see two rate cuts in 2024


Bridging is a versatile product that can be a great addition to any broker’s toolkit. Offering flexibility and speed, it can be the perfect lending solution for those in need of fast finance – be that raising the deposit for a property, purchasing a property outright, capital raising for business expansion, or consolidation of credit.

In a market where mainstream lending is more difficult than it has ever been with the tightening of criteria, specialist lending has never been more in demand. According to the latest Bridging Trends data, contributors transacted £831m of bridging loans in 2023, making it the highest recorded annual gross lending figure since Bridging Trends launched in 2015.

However, there are still many misconceptions about bridging finance and what it can be used for, so it is beneficial to stay educated on the benefits and uses for your customers.

Myth #1: High interest rates mean little to no return on investment

WMyth #2: Bridging nance is a product of last resort

Bridging loans are a strategic offering rather than the last resort. They offer flexible and fast lending solutions to borrowers in the short term where the transaction is time sensitive, while waiting for the longer term solution to come through. Examples would be auction purchases where there is a tight deadline for completion, property renovation where the security is deemed not habitable for traditional lenders, light refurbishment maximising the value prior to sale, business investments and development exit loans, as they provide valuable time for the developers to sell the assets.

Myth #3: Bridging nance is only used for property purchases

WMyth #4: You can only access bridging if you’re a developer or investor

Acommon misconception is that bridging loans are just for property developers or investors; the reality is that they are available to a much wider audience, including first-time buyers, homeowners, business owners and individuals looking for a shortterm finance.

Some brokers are unaware that bridging finance is not just for commercial use. For example, regulated bridging loans can be used to fund purchases of residential properties when selling a house and buying another but needing to keep things moving if a chain breaks, or your if client needs to move faster

hile interest rates for bridging loans are higher than that of a traditional mortgage, they do vary depending on other factors, such as the experience of the borrower, the loan-to-value (LTV), the term required, the creditworthiness of the borrower and the plausibility of the exit.

hile it’s true that bridging finance is synonymous with property, it’s not the only use. Businesses o en use bridging loans for growth or purchases. O en, bridging loans can be used to raise capital for renovations, repairs or large-scale improvements.

Ultimately, bridging finance can enable investors and business owners to leverage their capital and fund investments which in turn create a profit.

Considering the flexibility and speed of bridging loans, they can also be beneficial in certain situations where legal financial requirements must be met while waiting for a long-term solution to be put into place. Typical examples of this could be business expansion, consolidation (Tax Bill), lease extension or land purchase.



than those below you in the chain are able to move.

Myth #5: The process is complex

Similar to any other form of secured lending, there is an application process, documentation required, as well as a valuation, all of which form part of the underwriting process.

The reality is that lenders such as Together have led the way in streamlining the process to enable quick decisions, with the use of automated valuation models (AVMs), dual representation and in-house legal teams to ensure that the urgent need of the borrower is met.

Myth #6: Bridging nance is only available to UK residents

Bridging loans are not restricted to UK applicants or residents. For example, Together will consider foreign nationals or expats. It is all about understanding the customer’s objective, its plausibility, the source of the deposit, the security and the viability of the exit.

Myth #7: Only individuals with a clean credit history can access bridging

MAEVE WARD is intermediary project manager at Together

Though a good credit profile is advantageous, borrowers do not necessarily have to have an impeccable credit history. Fundamentally, a lender is looking to understand the experience of the borrower, their requirements and the plausibility, the asset they are securing the loan against, and the viability of the exit.

More o en than not, credit history is more closely looked at when the exit strategy is to refinance, as to whether this would impact the availability of term lenders. Ultimately the bridge needs to be paid back on time and in full to avoid default and potential financial hardship. ●

Ultimately, bridging nance can enable investors and business owners to leverage their capital and fund investments which in turn create a pro t”

In Pro le.

The Intermediary speaks with Neil Rudge, chief banking o cer, commercial at Shawbrook Bank, about creating sustainable growth for UK SMEs

When Neil Rudge joined Shawbrook Bank in 2017, he brought experience at household names such as NatWest, RBS and Santander, having moved into business lending, specifically, in 1995. Now, Rudge looks after all lending activity across business and property at Shawbrook Bank, including buy-to-let (BTL), commercial investment, bridging and small to medium enterprise (SME) finance. The latter covers working capital, investment, development finance and leasing of digital products to support CapX needs.

e Intermediary spoke with Rudge about how his 35-plus years of experience have helped lead a proposition that focuses on filling the gaps where the market needs it most.

Focus on growth

able to offer a simple, quick route to high profits for banks, and are therefore “really underserved.”

Shawbrook focuses on “providing great lending products to growth companies in the UK, and helping them achieve their plans.”

Rudge explains that, over his time in the industry, the service being provided to large corporates has remained much the same, with big banks providing a “high touch-point relationship with good products for big profits.”

Beyond that, though, larger banks try to provide as low cost a service model as possible, which means “everything needs to fit within what is typically a digital journey.”

For Shawbrook, the approach is instead to provide smaller businesses with the human-led approach offered to larger corporates, using technology in the background to make things “slicker and more efficient for them and for us.”

Rudge says: “We’ve worked really hard at putting in place slick digital application programmes, and auto-decisioning, and we can pay out as quickly as they need it."

where we could really the more.”

After gaining experience across the full gamut of business lending, Rudge says: “I wanted to work in a smaller environment where we could really set the agenda for the business and the way it interacts with the clients, taking the best of all the learning I’ve had over those years, and filling the gap the larger banks tend not to cover any more.”

Global change

One thing that is universal across businesses large or small, is that things often do not go to plan. For smaller firms, this can be much more complex to deal with, Rudge says: “There are lots of twists and turns in the road, and they need someone to talk to when they hit those. We offer clients good support throughout the life of the loan, not just at the beginning of it.”

This has only become more pointed during recent years, when change on a global scale has had turbulent effects on even local businesses.

While high street names will serve those that “fit into a particular box,” there are many potential borrowers – SMEs, for example –that are less

One of the key lessons from the past few years, Rudge says, is that people must think about interest rates differently moving forward, particularly for those younger business owners who were not in the market during the previous higher rate environment.

“There’s generations of owners that have been able to use debt essentially for free,” he explains.



“Now, debt capacity planning – how much to borrow, how much it will cost, the sensitivities, what other things could happen to the business –

The Intermediary | June 2024

is important. It’s about scenario planning, looking at various stresses.”

He adds that it is more evident than ever, particularly with increased globalisation, that “political turmoil around the world can lead to real costs for local businesses.”

Where this might disrupt global supply chains, for example, all businesses need to think about preordering, working capital, and all the many other moving parts that will keep them running.

A different way

In this environment, Rudge explains, the way lenders distribute products must be relationshipled, grounded in knowledge of the client. For Shawbrook, this also means taking a long-term, purpose-led approach, working with its business finance clients to organise their use of debt alongside their plans for the future.

Where businesses used to look for more traditional asset finance, many are now reliant on equipment that does not have the same tangible value as, say, vans and yellow goods.

Instead, these businesses need loans to help build their digital infrastructures, freeing up money for marketing, people, and research and development. However, these loans are more complex, as there is not the option to take back physical equipment if the worst were to happen.

Rudge says: “We put in place a CapX term loan that’s digitally distributed, through brokers, autodecisioned, and available up to £100,000. Because we don’t have to worry about it being a lease structure, we don’t have as much hassle about sorting the goods, etcetera, it can be a light touch, underwritten on the basis of the credit strength of the customer. It has been really well received.”

This varies from a lot of the unsecured loans out there, he adds, which centre on working capital, are more expensive, and focus on the short-term.

Rudge says: “It’s staggering how many SMEs don’t know what financing options are out there, and end up using personal savings, credit cards, remortgaging. Hopefully these types of products stop that having to be the case.”

Longevity and sustainability

SMEs have a vital role to play in the UK's recover, and Rudge sees Shawbrook as key to that, saying: “We’re not looking to start with smaller companies and then move on to work with the big guys. We see value in the SME market, and this is what we’re committed to. This part of the market is not well enough provided for, so we have to come up with innovative ways of thinking.”

This includes bringing in a product geared towards earlier stage businesses that are not yet profitable, but have a good profile and solid

trajectory, or even providing transitional finance into an Employee Ownership Trust (EOT).

Financial services firms cannot do this alone, however, and Rudge calls for more support for SMEs and the lenders that provide for them. The UK needs a regulatory environment that encourages growth and recognises the value that SMEs have within the economy.

Shawbrook also takes a sustainable approach in its attitude to inclusion and environmental, social and corporate governance (ESG) factors.

Rudge says it is important to look internally, and that the firm is “making progress” in terms of boosting diversity and inclusion within its own workforce, in part through its work with the Thrive apprenticeship programme.

He adds: “The more balanced we are as a team, the less likely we are to suffer the consequences of potential biases.”

Looking externally, SMEs offer an opportunity to build in good practices from the ground.

“We think a lot about the environmental and social impacts of our clients,” Rudge says. “It’s quite nuanced in the SME market, and while we do have some rules, we have to look at each individual circumstance quite carefully.

“While only those businesses over a certain size have to do the reporting, we tend to ask them what their strategy is anyway. We get them to develop their own way of thinking about these things. It will have an impact as they get bigger.

“It has to be part of the foundations if you’re going to grow a business. The younger generations of entrepreneurs and founders coming through think about these things more naturally.”

Looking ahead

Shawbrook is looking to continue product innovation, improving the digital experience, and making it easier to interact and share information during the lifetime of a loan.

The outlook for the SME market, Rudge says, is optimistic, with people “positive about the future and opportunities for growth, the need to invest in people, maximise their finance and make it work as efficiently as possible to free up cashflow.”

He concludes: “For companies saying ‘I want to grow’, it’s simply about having the right selection of tools, making sure they know they’re there, what they’re used for and how they work. The intermediaries play a big part in that.

“Our focus is also on continuing to support those companies that need it, back to health, carefully and innovatively. To do this, we’ve invested in a bigger team of portfolio managers, and then it’s a question of having experienced people. We’re very proud of our experienced team of high quality individuals who add real value to our clients.” ●

IN PROFILE 51 June 2024 | The Intermediary

Following a progressive bridging path

Bridging has come a long way over the years, and continues to generate huge amounts of interest among homeowners, investors, developers, landlords and an intermediary community which has become far more switched-on to the potential benefits.

On seeing the latest Bridging Trends data, I thought it might be worth taking a li le trip back in time to outline how and where the sector has changed, if at all, from the initial report in Q1 2015.

The most obvious difference, of course, came in the form of gross lending figures as they hit £196.2m in Q1 2024 compared to the reported £80.47m in Q1 2015, figures which largely speak for themselves.


The average monthly interest rate is now slightly lower, but only just.

Funding costs have fluctuated over the past nine years, from a high point of 0.95% in 2015, falling to 0.69% in Q2 2022. This was a staggered drop which was largely due to historically low financing costs and a highly active lending arena.

However, since the mini-Budget in September 2022, the average rate for bridging finance has increased in line with overall property finance.

As we currently stand, the average rate in Q1 2024 was 0.89% per month, although this was lower than the 0.91% reported in Q4 2023.

2 The average loan-to-value (LTV) has risen by 9.9%.

In Q1 2015, the average LTV for a bridging loan stood at 50.1%, whereas in Q1 2024 this was suggested to be 60%.

We have experienced a significant upli in the number and breadth of bridging providers over the years, which has created an increasingly competitive marketplace. This competition has helped increase LTV offerings, resulted in superior service standards and greater product innovation, and kept pricing relatively low.

With house prices rising, there is now more appetite and opportunity for developers and investors, with the benefit of lower cost finance.

3The average completion time has seen a 70% or 24-day rise. The average completion time has consistently grown over the past nine years, from 34 days in Q1 2015 to 58 days in Q1 2024.

There are number of contributing factors. The first is the plethora of new entrants to the sector, who on the plus side have helped grow the market and keep pricing competitive, but who also have vastly different approaches and criteria, which may have served to lengthen this process at times.

Increased complexity when it comes to funding lines and methodology may have also impacted some processing times, especially if third-party approvals are required on certain transactions. As the complexities have increased, this has brought additional checks, elongated processes, and introduced a need for more in-depth property ownership reports.

The increase in clients using bridging finance who traditionally wouldn’t have needed the product, combined with the use of more traditional solicitors not overly familiar with bridging requirements, have also elongated this process.

A final area to consider is the time taken around the instruction and

completion of valuation reports, due to fewer specialist surveying firms being able to service these needs as a result of increasing professional indemnity (PI) costs.

These factors all contribute in their own unique ways, although it’s worth noting that at Envelop, our average completion time in 2023 was 29.3 days, almost twice as quick as the current average – it can still be done!

4The proportion of unregulated business has grown.

The market saw 31.5% regulated versus 68.5% unregulated business in Q1 2015, compared to 51% regulated versus 49% unregulated business in Q1 2014.

This has been driven by housing market growth and a sustained supply gap; more property chains are breaking down, with those correctly priced properties requiring speedier completion. An aging population has also driven up regulated bridging finance, with older generations releasing equity and downsizing.

A rising number of interest-only mortgages maturities have forced many homeowners to move property and extend terms while the sale is taking place. Growing numbers have also used second charges to undertake home improvements.

More mainstream

Having operated in the bridging world for well over 20 years, we have seen huge change over this period, but never more so than during the past nine years, where we have witnessed an increasingly voracious appetite for this form of finance, now considered a mainstream product among our specialist lending offering. Long may this positive progression continue. ●

Opinion SPECIALIST FINANCE The Intermediary | June 2024 52

Fighting the new normal

Abridging loan, by its very nature, should involve a fast process so a transaction can be completed as quickly as possible. However, the concept of fast bridging finance has become more of a myth than reality.

Nevertheless, many short-term lenders are still prepared to sell the dream in their marketing material, of cases completed within hours or days of application, when in the real world the vast majority are not. Many regulated deals can take between four to six weeks, and although some of the blame can be laid at the door of increased compliance and the demands of regulation, the truth is that many lenders have built systems and procedures they believe will keep them compliant, sacrificing speed because of a more bureaucratic approach to lending.

Introducers aren’t stupid. In today’s market a successful bridging lender cannot afford to promise good service and then not deliver. However, in a market where fast service seems to have been forgo en, are we being

conditioned into believing that four to six weeks is the new normal?

Technology has been adopted by many lenders in a bid to improve service, but for some that has been at the cost of their human resources, which has led to paying the price in the inflexibility of their lending and subsequent downturn in business levels. On the face of it, technology promises much, but the idea of a wholly ‘mechanised’ system that can deal with all types of application with minimal human input just doesn’t work. For technology to take the place of humans effectively, every kind of borrowing circumstance needs to be plumbed into the so ware, and due to the nature of the bridging market and the infinite number of different scenarios, that is just not possible.

Vital importance

Another reason the bridging market has become slower is that some lenders offer highly competitive rates as bait to draw in enquiries and applications which then turn out – amazingly! –not to fit criteria for the advertised rate. When a more expensive rate is offered, brokers can o en be put in a position where it’s difficult to turn down a new offer because of the extra time taken.

In so many cases, speed is vital, and can be more important than rate. A er all, trying for the best rate seems a ractive on paper, but when there are deadlines involved, what do clients really need? It might be ideal to have the best rate, but if the outcome is that the client loses out because the deal cannot be facilitated to beat the deadline, then a lender that can meet the timing criteria is going to win the deal.

Having spoken to many brokers in the past two years who were unhappy with the outcome of working with lenders that do not or cannot provide the kind of service they need, it became clear to us at Kuflink that we

needed to be at the forefront of a new kind of service that put the accent back on speed.

To that end, while we have brought in new technology, our main asset is the team of people in whom we have invested, and who we have encouraged to become the beating heart of our business.

We believe we have developed the ideal scenario for bridging lending, with our team at the heart of everything we do. Everyone we employ is empowered to take responsibility for every case which comes across their desks, and the effect on case throughput has been astounding.

One of the by-products of the relationship we have developed is that Kuflink has been named one of the ‘Best Places to Work 2024’ by The Sunday Times. Kuflink is one of a select number of small UK-based companies to make the paper’s shortlist.

We were recognised for our investment in both employees and the local community, with The Sunday Times praising the company’s commitment to encouraging staff in their individual career development and also oaying tribute to the creation of a charitable organisation that helps young people and others in the area.

With all of our staff personally invested in the success of our business, we believe we have the service formula that introducers have been looking for. Enthusiastic personnel dedicated to client needs and straining every sinew to produce the right outcome. ●

Opinion SPECIALIST FINANCE June 2024 | The Intermediary 53
e human element is essential to a fast deal

According to Government statistics, 2023 saw an estimated 176,460 housing starts. This compares to 176,390 starts in England in 2022.

Despite both major political parties discussing the delivery of 300,000 homes a year, we have consistently fallen well short of that mark. While housing starts exceeded 200,000 a year in the years leading up to the Global Financial Crisis (GFC), they then dropped to a low of 114,240 in 2009. It took until 2018 for pre-GFC levels of construction to be reached again – and momentum was then lost over the pandemic. The expectation for housing starts for both this year and 2025 is around the 150,000 mark, according to the Office for National Statistics (ONS).

Challenges and opportunities for SME developers

Based on the assumption that 10% of housebuilding is delivered by small to medium enterprises (SMEs), 15,000 homes will need the support of specialist funders this year and next. Now, I’m not suggesting that the other 90% of dwellings mainly delivered by national or regional housebuilders don’t need funding – but they tend to have fewer issues accessing capital as their scale allows them to call on syndicated bank facilities or the capital markets.

Some SME developers will be funded entirely by equity, for example by family offices or high net worth (HNW) individuals, but most will need debt finance in one

form or another. Some of these will seek leverage from high street banks, but most will seek support from challenger banks and nonbank lenders.

The reasons for low housebuilding are well-known: issues with labour, costs, a completely unfit-for-purpose planning system, interest rates, access to capital and so on. So, which of these factors will likely impact SME developers the most during the rest of 2024 and into 2025?

The General Election

At a macro level, the political risk associated with the UK is lower than it has been for a while. From a global


perspective, both Sunak and Starmer are seen as relatively moderate, so there is a degree of ambivalence over whether the Government is centre-le or centre-right.

Of course, the reality of how either party may govern a er winning the election is unknown, and we have yet to see how developer-friendly either party will be. With the election set for July, we expect some market participants to sit on their hands until the results are known.

It will be key for the new Government to signal its intent as soon as possible, especially regarding the planning regime and building regulations.

Interest rates

There is no clarity on when interest rates may come down, or by how much. At the time of writing, the forward curve implies a reduction in interest rates of 0.50% to 0.75% by the end of the year, with a trough of 3.5% in Q1 2028. This is much further away than many are hoping for.

While the cost of debt impacts the cost of development, it should never make or break a development appraisal. The more significant issue is mortgage rates, as the residential

sales market remains very sensitive to those.

The macro environment

We have had several years of permacrisis – Brexit, Covid-19, conflicts in Ukraine and the Middle East, energy shortages, the cost-of-living crisis, and so on.

The residential development market has soldiered on as best it can, but there is always a risk of another macro event impacting the market.

Access to capital

There are dozens of funders in the SME development space, all a racted by the underlying supply-demand imbalance which helps underpin residential values. However, each of these funders is capitalised differently, and while we expect some lenders to exit the market over the next 12 to 18 months, others will replace them.

While the development finance market has, to an extent, been commoditised over the past 10 years, we are perhaps now in a market where matching the right lender to the right developer has never been more important.

As lenders, most of the factors that impact the market are outside of our

control, and we need to react to events as best we can alongside our partners in the introducer community.

I mentioned earlier the commoditisation of the development finance market and the volume of lenders in this space. One of the huge benefits of having so many lenders in this ecosystem is that no ma er where a developer is on their journey, there will be a lender for them.

The key for lenders is to ensure that the developers and introducers they work with know where they sit in the market and where they sit on the risk-return spectrum, so lenders can focus on doing the right deals for their capital and risk appetite.

As we go through the rest of this year and into the next, a more bespoke approach, where lenders and borrowers are matched based on a genuine meeting of needs, will be more important than seeking leverage or pricing enhancements, especially in a market where both of these items are now within a fairly narrow range for any given sub-set of the market. ●

PARIK CHANDRA is head of specialist lending at Downing

SME housebuilders: Lifeforce of our property industry

With the country set to go to the polls soon, housing will no doubt be at the forefront of voters’ minds as they enter the polling booth. Consistent failure to build enough new homes over the years has exacerbated the housing crisis and is a significant factor in our country’s sluggish productivity.

The high interest rate environment and persistent inflation of the past two years has created enormous challenges for small to medium (SME) housebuilders, which lack the cash buffers that have helped insulate their larger counterparts from challenges in the market.

SME housebuilders support local economies by using local supply chains and labour. They make use of smaller plots of land that large housebuilders ignore. They are commi ed to delivering the types of well-designed homes that serve the needs of local communities, yet they have been poorly served by a system that has allowed volume housebuilders to dominate.

Dwindling numbers

To shine a spotlight on the issues that have not only hampered growth among SME housebuilders, but have also seen their numbers dwindle by more than 65% over the past four decades, Close Brothers Property Finance, along with the Home Builders Federation (HBF) and Travis Perkins, created ‘State of Play: Challenges and Opportunities facing SME Home Builders’.

In the five years in which we have been producing the report, planning has consistently been cited as the number one obstacle for SMEs.

Last year, 93% of respondents said delays in securing planning permission or discharging conditions was a major barrier, with 90% claiming that a lack of resources within Local Planning Authorities was a significant obstacle to growth.

Reforming our country’s planning system should be top of the list of priorities for the next Government.

The Labour Party has said that if elected to power, it will recruit 300 new planning officers to “get Britain building again.” However, while this is a welcome step in the right direction, it would represent just 10% of the planning officers who le the public sector between 2010 and 2020 and have not been replaced, according to analysis by the Royal Town Planning Institute.

Disproportionate impact

Our country’s chronically underresourced planning system means that just 20% of major planning cases were decided within the official deadlines last year, down from 60% in 2012. These delays disproportionately impact SME housebuilders, whose size means they can usually work on just one development at a time, whereas PLC housebuilders will have multiple sites and can divert resources to another location when they encounter delays.

In other policies designed to boost the supply of new housing, Labour would look to restrict the powers of local authorities to block developments, reinstate mandatory housing targets, and take action to fast-track brownfield sites and lower-quality parts of the greenbelt for development. Labour has also proposed introducing a Mortgage Guarantee Scheme to help prospective first-time buyers to get on the ladder,

Labour would look to restrict the powers of local authorities to block developments, reinstate mandatory housing targets [and] fast-track brown eld and lowerquality parts of the greenbelt for development”

with the aim of helping 80,000 young people over the next five years.

For its part, the Conservative Party is pledging to build 1.6 million new homes over the course of the Parliament, revive Help to Buy, and scrap nutrient neutrality laws.

Previous efforts by the Government to scrap EU nutrient neutrality laws, believed to be holding up the development of 150,000 new homes, were defeated in the House of Lords last year. Resolution of this issue, whether through legislation or funding for nutrient mitigation schemes, would go some way to helping unlock more development.

Unfortunately, there are no quick solutions to the housing crisis, but one thing is abundantly clear: it is only by removing barriers to housebuilding – be that fixing our country’s broken planning system or curtailing the power of ‘not in my back yard’ (NIMBY) local authorities – can we truly deliver the homes that Britain needs, and unlock economic growth in the process. ●

Opinion SPECIALIST FINANCE The Intermediary | June 2024 56
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Simply Asset Finance Q&A


Intermediary speaks with John Wiles, managing director at Simply Asset Finance, about balancing technology with a personal service and the future for SMEs

Can you introduce yourself and the business for our readers?

I’ve been in asset finance and banking for 25 years, starting at what was Halifax Bank of Scotland (HBOS). I was there for many years working on one of their key industry teams, print and packaging.

I moved, nearly 20 years ago now, to Close Brothers. I started in print and packaging, moved on through to construction and recycling finance. I moved through the ranks and built a reasonable sized team of sales reps. In 2017, there was the opportunity to set up Simply Asset Finance.

Nobody goes through university and school thinking ‘I want to be in asset finance’, but the UK is the third biggest market in the world for this. We looked at the banks, challenger banks and the non-banking financial institutions. They were doing a great service, but with a few tweaks and a few changes we knew we could really elevate this.

sector. We work with customers looking to grow beyond a bank’s appetite. They know what they want to buy and how or why they want to buy it, but maybe they can’t articulate it enough to get bank approval, or they’re trying to grow quicker than a bank would support them.

We work with brokers and dealers, and talk to the customer to understand why they’re buying that asset, put it into a format that can help us make the decision. Inevitably, there’s always a good reason for it. We just need to help people get their message across.

We are the fastest growing asset finance company in the UK. We’re very proud of the fact that, for the past three years on the run, we’ve been in the FT 1,000 fastest growing companies in Europe. We’ve done this largely through dedicated people being out on the on the road, using word of mouth and delivering on excellent customer service. We’ve grown our loan book to over £0.5bn and have advanced over £1.5bn in the last seven years. We’ve now got more than 160 employees.

What is the typical client profi le?

They tend to be small to medium enterprises (SMEs) with owner-operators, or family run businesses, that are buying in the ‘hard asset’

Should brokers be giving more consideration to asset fi nance as a sector?

There are more than five million SMEs out there looking for support and funding in one way or another, and 95% of all asset finance is transacted through the broker market.

So, if you have local companies, local businesses – say, ones you are helping with a commercial mortgage – that need help or support, that’s a great starting point to get into our industry.

Brokers may already be talking to the businesses that inevitably will need asset finance anyway, whether it be for vans or cars, or if they’re doing repairs and maintenance, or for plant and machinery equipment.

Once you start having those conversations, then there’s only a few products to consider – hire purchase, lease, sale, operating lease. This is a market that you could argue takes 10 minutes to learn and 10 years to master, because of its nuances. That’s why you get really good brokers with a good set of established customers that know exactly what they can offer to them.

The Intermediary | June 2024 58

What is the role of technology?

Without a legacy back-book, we had the ability to go and pick ‘best in class’ tech from different areas and put it all into one place to give the customer, broker, dealer, everybody the best user experience. That was really exciting.

We use tech not to replace things like face-toface meetings, but to make the user experience much better. Our line is ‘technology with a handshake’. The principle is to put the broker and customer at the heart of everything we do and to find out what could make their journey easier.

They can interact with us in any way that suits them. Some customers still like paper documents, some want to sign on a screen – whatever is best for them, that’s what we’ve been set up for.

Speed is our real unique selling point (USP) – our main focus. There’s two sides to that. First, the customer or broker journey: our philosophy is to use tech to find the right information, rather than wait for the customer to supply it.

We look at the likes of current account turnover (CATO) data, which is readily available and gives us a snapshot of how the customer’s traded, without needing to ask for their bank statements. Or we use Open Banking, and we can do the ‘know your customer’ (KYC), 95% of the time electronically.

The second key part is that we don’t have an auto score. It’s all manual underwriters. What we do, though, is use tech to put everything into a clean, easy format on a screen in front of an underwriter. They can see where all the parts are completely aligned, and what bits they need to do a bit more work to understand.

Our average turnaround time is about 1.6 hours, for loans of between £15,000 and £2m or £3m – that’s a really good speed for our industry, especially when not using an auto scorecard.

In a turbulent market, is certainty as important as speed?

This is where I go back to the fact that 95% of our industry is done through the broker market. We work in partnership with all our brokers, who are going out there to see their customers, and we work to educate them about what it is we’re looking for, our credit appetite, where we can help customers, and when something might be outside of our appetite. We want to get to a position where the broker fully understands what we do and can hear what the customer has to say.

We’re trying to go out into the marketplace and educate people, so that they know they can

just pick up the phone and ask the questions. We’ve got a team of highly skilled individuals that understand our appetite.

What does tech development look like in this market in the future?

You’ve got to get the best out of artificial intelligence (AI), but still have that personal interaction where it’s required. The broker is there to sit down and talk people through the options.

We do have ‘flow type’ deals, where AI and tech really help, and then we have other customers that need more interaction, a more advisory capacity.

The other thing you have to look at, especially when you’re dealing with family run businesses, is that they are potentially suddenly buying an asset that is more expensive than their house. That’s a big stress. So, giving them reassurance is important.

The banking industry is starting to move forward and understand that tech has a role where it can really add value.

There’s always going to be an element of human interaction, because there are so many variables in any one decision. But we can improve as an industry on things like Open Banking, which at the moment still involves a lot of back and forth – that’s where improvements are going to kick in, and we’re going to start focusing on what the outcome is for the customer, rather than what the need is for the funder.

Why is it important to support SMEs now?

As a country, I don’t think we understand the importance enough. The hope, going forward, is that whatever the next Government is there’s a real focus on our SME market and understanding that this is what’s going to drive the country forward. This is our future.

During the Brexit referendum, and the promises were always there to ‘make Britain great again’. Now is the time for whatever party comes in to actually capitalise on that, to listen to the needs of SMEs and provide a way for them to go forward.

Where we fit into this at Simply is in getting out to the SMEs and letting them know that there’s more out there that they can do. There are different ways of funding things that are more tailored, more structured, and flexible.

There’s a lot of hope and optimism, looking forward, because whatever happens, the Government has to deliver on change.  ●

Q&A June 2024 | The Intermediary 59

A light at the end of the tunnel

There’s an old adage in the investment industry that says: it’s not about timing the market, it’s about time in the market.

Those of us in the property world know this only too well. Residential development is a long-term play, and risk is based on serviceability, asset values and cost of funds.

Yet the macroeconomic environment does have a material impact on investment decisions. Returns must stack up, and rising rates over the past 18 months, along with elevated building material costs, have made that balance finer.

There is a temptation to hang fire, to wait for things to improve. But should you?

The Bank of England is becoming less hawkish, with governor Andrew Bailey potentially opening the door to the first rate cut in June, stating the news on inflation is “encouraging” in a statement accompanying the Monetary Policy Commi ee’s decision earlier this month to leave interest rates as they are.

Consumer Price Inflation is now at 3%. It rose by 0.3% in April, compared with a rise of 1.2% in April 2023.

Residential property values have also held relatively steady in most parts of the UK.

Rightmove data showed the average asking price of property coming to the market rose by 1.1% between March and April, with the annual rate of price growth now +1.7%, the highest level for 12 months.

Activity rebound

Buyer demand is holding up. The number of new sellers coming to the market is up by 12% compared to this time a year ago, and the number of sales being agreed is up by 13% as both seller and buyer activity rebound.

Supply is relatively subdued still.

Office for National Statistics (ONS) data showed new-build dwelling starts in England were estimated to be 19,080 in Q4 last year, a 10% decrease when compared to 2023 Q3 and a 51% decrease when compared to 2022 Q4.

Partly, that was driven by regulation demanding costlier energy efficiency standards in new build from Q3 last year. High construction material costs also weighed on development returns.

The tide has turned

Construction materials prices fell by 2.3% in the 12 months to March 2024,

according to the latest figures from the Department for Business and Trade. This was a bigger decrease than the 1.9% drop seen in the year to February 2024.

Earlier this month, Bailey hinted that the Bank of England could move to cut the base rate before the US Federal Reserve brings rates down, with markets now pricing that in. Because of the way we price our development finance, modelling rates based on the SONIA curve rather than a simple assumption that Bank of England base rate will remain static over the course of a loan, we are already able to afford borrowers some of that upside.

It also means we can assist developers whose strategy has always been to contribute a lower cash equity amount to kick off their projects now.

Even with tighter margins recently, we have remained active in stretched leverage development finance, facilitating up to 70% LTGDV, higher than market norms and in some instances for repeat borrowers, even higher.

On the other end of the spectrum, we also recognise those developers who are in a privileged position to contribute larger equity amounts and are seeking lower pricing, particularly for schemes where they need the serviceability to comfortably work.

In these scenarios where we can get the net debt yield to an investment grade level, we are pricing interest margins from as low as 3.15%.

Our clients don’t need to time the market because they see opportunities are out there, and now as ever, our finance options are tailored to continue to support them. ●

Opinion SPECIALIST FINANCE The Intermediary | June 2024 60
Residential development is a long-term play

Building change on strong foundations

The bridging market is going from strength to strength, with the loan books of Association of Short Term Lenders (ASTL) members reaching a record £8.1bn in Q1 2024.

The figures, compiled by auditors from data provided by members of the ASTL, showed a 6.8% increase in the size of bridging loan books in the first quarter of the year compared to the final quarter of 2023.

Completions in Q1 2024 were £1.51bn, a decrease of 10.5% on the December 2023 quarter, but still representing a 6.2% increase on the same period in 2023 and the second highest amount recorded by the ASTL.

The pipeline for new business in the first quarter of the year was strong, with applications totalling £11.3bn –showing a large increase of 17.5% in the first quarter of 2024, compared to the quarter ended December 2023.

These are certainly impressive numbers for the sector, and it’s worth remembering that they do not include lending data from one ASTL member, which only reports its numbers on an annual basis. So, the true total for bridging loan books is likely to be well over £10bn.

Looking back

When you look at our latest lending data, it’s perhaps difficult to imagine that it’s just 16 years since the bridging industry welcomed a new trade association, established to represent the interests of short-term property lenders and their customers, with members commi ing to work together to encourage responsible lending and growth.

The ASTL was spearheaded by the late and much-missed Benson Hersch, who was CEO of the association between 2012 and 2019, during which time annual bridging completions grew from £885m to over £4bn and membership more than doubled.

Under Benson’s tenure, the reputation of the bridging industry vastly improved and representation with the Financial Conduct Authority (FCA), HM Treasury and other regulatory bodies also increased. He took the reins of the membership and transformed it into an association that was more representative of the industry, with a clear purpose to improve standards and encourage sustainable growth of the sector.

I succeeded Benson as CEO of the ASTL at the start of 2020, and at the time I commi ed that we would

When you look at our latest lending data, it’s perhaps di cult to imagine that it’s just 16 years since the bridging industry welcomed a new trade association”

continue to build upon his legacy by doing all we could to help the association, and the sector, to go from strength to strength.

Taking stock

We’ve already made good progress in this regard, and last year saw the launch of the Certified Practitioner in Specialist Property Finance (CPSP), following a joint initiative between the ASTL, Financial Intermediary & Broker Association (FIBA) and the London Institute of Banking & Finance (LIBF).

CPSP is an optional e-learning programme that covers bridging, short-term finance, development finance and specialist buy-to-let (BTL). It provides a definitive and targeted

education programme for the shortterm and specialist lending sector, and participants who complete the modules will be recognised through the award of an LIBF digital badge and accredited for CPD purposes.

The programme’s launch was the culmination of a long and exciting journey, actually started by Benson, and it represented a major stepping stone in continuing to enhance standards, increase professionalism and advance the reputation of the specialist finance sector.

Looking forward

So, where do we go from here? I can say with some confidence that 2024 promises to be a particularly exciting year for our association – but perhaps not in the guise in which you are familiar.

Within a few weeks, the ASTL name will be no more. We are building on the strong foundations established under this name to relaunch our association under a new brand that be er represents our members.

We will reveal more details in the near future, but you can rest assured that this evolution of our trade association reflects the growing maturity of our industry, be er represents our membership of bridging and development lenders, and provides us with a strong foundation from which to continue to champion our sector – among brokers, customers, policymakers and regulators. We have established strong foundations. Now it’s time to build on them. ●

Opinion SPECIALIST FINANCE June 2024 | The Intermediary 61

Walking the walk Round-table.

Jessica O’Connor unpacks the key points from The Intermediary’s recent Women in Finance round-table

According to recent data released by HM Treasury’s Women in Finance Charter, the average amount of female representation in financial services increased to 35% in 2022, up from 33% in 2021. While this is an encouraging trend, having increased dramatically in the past decade alone, monumental change is still needed in order to make financial services a welcoming and equitable place. The Intermediary gathered industry professionals in order to delve deeper into the gender disparities than still permeate the industry.

Caroline Mirakian of United Trust Bank, Natalie McNamara of Loans Warehouse, Marylen Edwards of MT Finance, Tanya Elmaz of Together, Holly Morrison of Paragon, Katy Eatenton of Lifetime Wealth Management and Charlee McLaughlin of WPB shared their thoughts regarding the role of women in the industry, and what can be done in order to ignite positive change.

More to achieve

The progress achieved so far is to be applauded, but this does not mean the industry can rest on its laurels.

The panel unanimously agree that property finance has come on leaps and bounds in the past few decades when it comes to female representation. This is not just about ticking boxes – according to Morrison, having a diverse board has made a very real positive impact at Paragon.

She says: “Having a board that’s a better blend of men and women has bettered our culture. There’s more of a feeling of everybody empowering each other and nurturing each other, rather than going back 20 years ago, when we would have been more likely to see an industry with all the same sort of people pushing the same sort of agenda.”

However, there is still a long way to go in terms of attracting more women to the sector. Mirakian, while quick to acknowledge industry successes

regarding gender equality, remains somewhat sceptical regarding overall progress.

Morrison agrees, noting that while the banking sector employs a huge number of women, it is still yet to see a large, or even equal, proportion in higher ranking roles.

“We do actually have a massive workforce of women, we’re just struggling to see them in those leadership positions, and that is the move that we are trying to make,” she says. “We need women at all levels.”

McNamara, as a relatively new entrant into the industry, has observed a sense of complacency when it comes to achieving this equality.

She explains: “I’ve only been in the industry two years, and I hear a lot of women and a lot of men say ‘look how many women are at this event now, that used to be predominantly men’, as if that’s good enough.

“But there’s still so much more to achieve.”

The Intermediary | June 2024 62

avoiding tokenis M

Meeting targets or quotas is counterproductive. Real change means recognising the value of diversity. Alongside complacency, one threat to progress has been the promotion of gender equality out of obligation, rather than an authentic desire for change. McLaughlin says that pushing for a greater proportion of women in leadership roles is a positive move, but that it must be done in an intentional way.

She adds: “With these big pushes to get women in, a part of me feels like that is very good, regardless of the industry. But a part of me also thinks this business only wants me in because I’ll be 1% of their push to hire 50% more women this year […] it’s just for you to tick a box.”

McNamara echoes this sentiment, adding: “There needs to be more intention to deliver on this for the right reasons. Employers and Government need to support each other in really understanding and listening, and not doing it just because it sounds good.”

To this end, there is perhaps something to be learned from certain pockets of the market – for example, those where there is more autonomy and flexibility, fostering a more equitable environment.

Contrary to the lack of authentic representation on the more corporate, lending side of the industry, Eatenton – coming from the broker’s perspective – has observed little difference in the treatment and success of men and women within the advisory space.

With many self-employed female brokers calling the shots and setting their own working parameters, she has not fallen prey to the stark gender disparities that dominate elsewhere in the banking sector.

She adds: “A broker gets paid what a broker gets paid, whether they’re male or female.

“I think it is more rife within more corporate environments like the lending and banking side rather than the advising side.

“Yes, it’s still a boys club and the events are more male dominated, but I don’t feel that in terms of pay, ability or being listened to there’s a difference.”

iM pacted borrowers

Improving the representation of women in finance is a good thing in its own right, but it also benefits the end customer. Women operating within the industry are not the only ones facing challenges. Given the economic tumult that has pervaded the market in the

June 2024 | The Intermediary →


past few years, lending criteria have become more restrictive, adversely affecting already disadvantaged female borrowers, who are more likely to have lower or less traditional incomes.

Meanwhile, in the world of business finance, data from Bibby Financial Services reveals that more than two-thirds of female small and medium enterprise (SMEs) owners have found it difficult to receive a commercial loan.

According to Edwards, this lack of lending to women is due to archaic lending structures that inherently place women at a disadvantage.

For example, due to the rigidity with which many banks assess income, and with many working mothers on part-time or zero-hour contracts, women are more likely to face barriers to finance.

Edwards says: “Women struggle in terms of residential mortgages, without a doubt, because of the rigidness in how banks assess things, with no flexibility given.

“Having been a commercial bank manager previously, there used to be some SME supports that helped women with their business plans […] However, a lot of those Government-funded incentives have dropped off over the past 15 to 20 years. The support isn’t really there.”

Mirakian notes that male mortgage affordability has historically been 72% of the average house price, 15% higher than that women at 57%. She urges that further attention be paid to this issue, and calls for comprehensive change in lending structures.

“I think this needs to have some relentless focus and awareness,” she adds.

Elmaz has been shocked to hear recent statistics regarding how women “still get refused finance.”

“High street banks are not lending enough to women,” she continues. “Apart from in the past nine months, I’ve not read about this topic, I’ve not seen a lot of coverage – it’s only conversations that I’m having now.”

The disadvantages facing female borrowers are yet another reason why the industry must focus on becoming more representative.

If it is to understand – and get the best outcomes for – a diverse range of borrowers, it must foster diverse perspectives.

b attling assu M ptions

Women will always struggle to progress when those running the businesses fail to keep their biases in check.

Another significant barrier is the persistent and antiquated stereotypes that are still projected on women across the sector. One such assumption is around the question of children and care.

It is still true that women tend to take on the brunt of caring responsibilities, which can have its own impact on career progression, but even when they do not, it is an expectation that plagues their journey through the market.

Panellists highlight that – whether a mother chooses to continue working full-time or take time out to become the primary caregiver – her choice is constantly called into question. This is a line of questioning that male counterparts are almost never subject to.

According to Mirakian, she still finds it “a bit peculiar” that people ask her questions about juggling homelife and childcare.

She says: “My view has always been that I’m going to be the person who doing the work stuff, and then dad stays at home. But people make an assumption, and that then begins to create a sense of guilt, and I start questioning: ‘should I be worried about this?’”

Eatenton has also been subject to this overpersonal line of questioning, stating that often when she is attending industry events, she is asked: “Who is going to look after your children?”

“They don’t say that to a man,” she adds.

s upporting allyship

While pointing out barriers, the market should also celebrate those within the status quo looking to support change. While this double standard is one all women have to contend with, men are not immune to the negative effects of sexism and gender stereotyping. For example, some may experience scrutiny, barriers, or even judgement when looking to spend time with family, or take on a primary caregiving role themselves.

Another example is the difficulty faced by those who dare to step outside the stereptypes and stand up as allies. According to Elmaz, she has seen supportive men within the industry forced to contend with backlash from peers.

She says: “There’s a lot of men that want to be allies, or are genuine allies, but then they’ve got

The Intermediary | June 2024 64

that stigma to contend with as well. Because for every bloke that is a genuine ally, there is probably one who upholds that stigma.”

One of the ways businesses can put their money where their mouth is when supporting equality is to put in structures that support men with things like parental leave. Not only making it more practical, but making a clear statement that it is, above all else, normal and accepted.

“At Together, I have seen many more men take paternity leave now because we’ve extended it,” Elmaz explains.

Employ E r fl E xibility

In a post-Covid world, flexibility and autonomy have become important tools for building a more inclusive market. When discussing ways in which the industry could change to better support men and women alike, panellists often arrive at the same conclusion: the need for increased flexibility and understanding from employers.

“When we’re talking about what positive changes can we make, flexible working is a massive topic,” Elmaz says, calling for greater adoption of flexible hours to support those choosing to juggle work and home life responsibilities, as well as things like more “job shares for the big jobs.”

Covid-19 proved to many businesses that remote, flexible working policies were not only possible, but in many instances preferable, helping people across the industry to shape work around life, rather than the other way round. While there are some job roles and businesses that necessitate an in-office presence, Edwards notes there is always space for flexibility of some form, and that it is worth businesses figuring out what that looks like for them.

However, despite the lessons learned during the pandemic, there are those pushing for a return to traditional working practices. These voices invariably come from members of the old guard, who likely have less experience of the juggling act.

Indeed, Morrison notes that the issue of maternity leave and its implications continues to be a major pain-point for the industry.

Urging further support from employers, she says: “Having that break is a huge step back, and a lot of women struggle to get back in. People feel like they are having to make that sacrifice if they want to have a family.”

The UK’s approach towards work has been irrevocably altered. Most importantly, employers are increasingly tolerant of more flexible, work from home models. Eatenton calls for further acceptance of this new approach to provide support for working mothers, and those with other external responsibilities.

“Covid-19 made people see things differently, because you could do the same job just as well, if not better, being at home,” she says, adding that now this has “given people the view to how things can be,” employers would be remiss to ignore the shifting preferences of potential talent.


Holly Morrison Paragon

Marylen Edwards MT Finance

Tanya Elmaz Together

Katy Eatenton Lifetime Wealth Management

Charlee McLaughlin WPB

Caroline Mirakian UTB

Natalie McNamara Loans Warehouse


According to Edwards, not only has this new acceptance of flexibility helped those in need of time off, but it has also started to benefit female borrowers, by making lenders become more aware and accepting of alternative working structures as a whole, which is then being reflected in criteria.

She says: “There are more lenders being more flexible now over the benefits women can get for being part-time, not working, or working zerohour contracts.

“This is where the specialist market has taken it away from the high streets. The high streets are still very much based on your income.”

a ddressing the pay gap

There is no one quick cure for the gender pay gap, but there are important steps that businesses can take nonetheless.

Perhaps the most important, and most challenging, step that the industry must take is tackling the gender pay gap, which currently stands at approximately 14.3%. Mirakian notes that if it was to close, at the current rate of progress it would take another 20 years.

Posing one alternative solution, Edwards suggests that the industry implement set rates.

“If you had a generic salary for certain roles within the employed sector, I think that would make things a lot fairer for people,” she posits.

This might be difficult to implement across all businesses, and in the meantime, Eatenton says the pay gap is in part dependent on negotiation abilities, which can often differ along gender lines.

“It comes down to negotiation,” she says. “Companies want to maximise profit and minimise

costs, so they are going to pay the least they can get away with.”

To help combat inequalities in negotation, which often have little to do with an employee’s actual job success, Elmaz says firms must be more transparent when it comes to reporting employee salaries – arming their staff with the information to attack the issue head on.

She says: “The transparency of people’s salaries is massive. Without that information and that transparency, it is a very difficult conversation to have. The not knowing is a massive part of what would hamper you in that negotiation.”

b uilding confidence

Firms are stifling their own talent pipelines if they allow barriers to female progression to persist.

While those who take risks and ask for more –either in terms of pay or promotions – can achieve much in this industry regardless of gender, there is often a disconnect between what men and women are willing to push for.

Due to a historical absence of female representation within the boardroom, and with many areas of the property finance industry still very much a ‘boys’ club’, panellists agree that it can be difficult for those working their way up the ranks to envision their place within the hierarchy.

Edwards says that building up confidence as a woman in a male dominated arena is something that takes time, and that to prove their worth, women must work “10 times as hard.”

Detailing her own personal experiences, she explains: “I am a completely different person to

The Intermediary | June 2024 66

who I was in my early twenties. It’s not that you don’t care, it’s about being confident that what you’re saying counts for something.”

Eatenton adds that, while standing out in a room where everyone else fits a certain mould is understandably daunting, this difference can also be a “superpower,” and can be the basis for the very confidence that will help women progress.

Elmaz builds on this, explaining that women have an opportunity to craft unique professional voices, making themselves memorable in a professional environment that often looks quite homogenous. She details her decision to wear colourful power suits to the office, to break with tradition: “They’re all in their grey and I’m every single colour of the rainbow. You have to find what works for you.”

Morrison also takes a personalised approach. Describing herself as softer spoken than some male peers, she admits that while she does not identify with the louder, almost boisterous, attributes commonly prized in male leaders, expressing herself in this softer, more traditionally feminine manner has proven useful in a professional setting, carving herself out an important role as a counterpoint.

She adds that having a mix of personnel including those the “exceptionally confident, as well as those who are not quite as forthcoming,” is beneficial to business. It is important to subvert this idea of ‘softness’ as a negative or weakness.

Mentorship and practical advice

Mentorship is key, but it has to be done properly in order to be truly valuable. With a view to promoting confidence and benefitting the industry as a whole, Edwards highlights the importance of sharing knowledge with the younger generation of women via mentorship. Those lessons learned over decades can then be introduced much younger.

“It’s about sharing how we got to where we are and giving them a steer and a path,” she says. “It’s about giving them the confidence to believe in themselves.”

However, this needs widespread engagement. According to McLaughlin, many of the mentoring and networking events that she has attended have been dominated by young people – with a noticeable lack of those in leadership roles.

She says: “I think the problem with networking events [is that] companies always volunteer their younger people to go. And so, it’s all young people mixing with young people. You wonder, what can we learn from each other when we’ve all got the same experiences?”

To make such events more worthwhile, she calls for more firms to push their senior directors and

CEOs – regardless of gender – forward to share their experience and knowledge. McLaughlin also urges that the mentorship being provided throughout the industry be more grounded in dayto-day practicalities.

She says: “At university, I was taught nothing about how to behave in a corporate setting. Employers, when they get a graduate, could give them the basics, it would help teach them those work life skills.”

Elmaz adds: “If you’re going to do a mentor plan, the mentors, experienced ones like us, need to get together to plan and deliver practical training.

“It’s that that trying it out, those practical examples, that I think really helps people.”

This fits with the push to break down differences in confidence to level the playing field, not just for women, but for anyone starting their working life without advantages such as family members in similar roles to provide insight.

walking the walk

No matter what initiatives businesses decide work for them, it is important to make a real commitment.

To achieve much needed change, participants call for a more proactive approach to promoting diversity within the market.

Urging more people to “walk the walk,” Elmaz explains that businesses must “have an intention, have a plan, and then carry it out.”

From introducing flexible hours, providing authentic support for all employees, and dismantling the institutionalised disadvantages placed upon women, it is now more important than ever that employers spread awareness and implement real change.

This point is succinctly summed up by McNamara: “It’s about not being shy or embarrassed to say that, actually, we want more female representation across the board.” ●

It’s an exciting time to be part of the mortgage sector

Successful business owners and investors know that the key to that success is diversification – that ageold ‘don’t put all your eggs in one basket’ mentality. If the past four years have taught us anything, it’s how true this is.

Even back in the days of the Global Financial Crisis, many brokers will remember how important a diversified business was in seeing them through the collapse in mortgage lending. Adviser businesses focused solely on mortgages are historically very exposed to market shocks, with fluctuations in approval volumes having a directly correlated effect on revenues.

Brace for impact

When the pandemic hit back in 2020, activity all but halted between March and September – the impact on many brokers’ cashflows was very quickly devastating. The Stamp Duty holiday that followed fuelled a recovery in mercifully quick succession. Now the market is facing another subdued year for mortgage approvals.

Higher mortgage rates are restricting purchase activity. Remortgaging is now dominated by product transfers, with the consequent result being a hit to broker incomes due to the lower procuration fee paid on retained business.

Many adviser firms, particularly those run by people who lived and worked through the 2007 to 2009 Global Financial Crisis, have embraced the full-service model as a result. By offering holistic advice across mortgages, protection and general insurance, it provides a degree of insulation from swings in mortgage volumes. The added advantage of including protection advice in your

suite is the recurring revenue it generates, giving firms another type of income stream longer-term.

Positive outcomes

Ensuring a full-service business model is not just a sensible decision, it is also now fundamental to fulfilling regulatory obligations under the Consumer Duty. Selling a mortgage without offering life cover could be considered a breach of that duty to ensure good outcomes for consumers for the reasonably foreseeable future. Brokers must be conscious of this, particularly when it comes to identifying vulnerable customers. The risk of claims management companies jumping on the complaints wagon is serious.

Full-service adviser firms also appeal to consumers’ increasing desire for convenience – dealing with one trusted firm makes sense, both in terms of efficiency and reassurance.

At Primis, our key focus this year is to support our appointed representatives (ARs) in building out this model. There’s no one right way to go about it – some firms will choose to invest in their own people, upskilling and adding to their advice offering internally. Others might decide to offer full-service by partnering with other firms that are already specialist in those areas.

We are also looking carefully at how newer forms of technology, so ware as a service offerings, artificial intelligence (AI) and the cloud can support our members in delivering holistic advice efficiently while also pu ing in a safety valve when it comes to evidencing their Consumer Duty compliance.

What the new Consumer Duty rules have done is switch our focus from the transaction to the entire

By o ering holistic advice across mortgages, protection and general insurance, it provides a degree of insulation from swings in mortgage volumes. The added advantage of including protection advice in your suite is the recurring revenue it generates”

circumstances of the people we deal with. A er all, the advice business is exactly that: it is about people.

The best firms today have always understood that and sought to deliver choices for their clients that go beyond the initial transaction and offer protection and a plan for the future. It’s an exciting time to be part of the mortgage sector.

The opportunity advisers have to build on the trust that exists between them and their clients is huge, and we want to work with our members to get that right for their business. ●

The Intermediary | June 2024 68 Opinion BROKER BUSINESS

A decisive call to action

There is now the clearest need for systemic change and greater support for those working within our industry when it comes to their mental health and wellbeing. This statement gets to the heart of the findings from the Mortgage Industry Mental Health Charter (MIMHC) 2024 survey. This year’s data presents a concerning picture about the working lives of many within this demanding industry.

Long hours and insu cient sleep

The results confirm a troubling trend of excessive working hours and insufficient sleep.

A staggering 62% of respondents report working more than 45 hours each week, with 13% admi ing to working over 60 hours.

This leaves li le room for rest and recovery, contributing to a widespread issue of sleep deprivation.

Alarmingly, 22% of respondents never achieve the minimum recommended seven hours of sleep per night, a critical factor in maintaining both physical and mental health.

Deteriorating career satisfaction

Career satisfaction within the sector has sharply declined over the past year. The survey reveals that 56% of respondents feel either only moderately content or completely disillusioned with their careers, a significant increase from 44% in 2023. This is indicative of deeper issues within the industry, including high stress levels, inadequate work-life balance, and a lack of meaningful career progression opportunities.

Health and wellbeing

Nevertheless, professionals in the mortgage sector continue to prioritise their health and wellbeing.

The survey identifies having a happy relationship with a partner as the top priority, followed by fitness and diet, and financial independence.

These priorities underscore the importance of a holistic approach, where personal relationships, physical health, and financial stability are all crucial components.

Worsening mental health

Perhaps the most concerning finding is the state of mental health among industry professionals.

In total, 21% of respondents rate their mental health as ‘poor’ or ‘of concern,’ highlighting a significant portion of the workforce struggling with mental health issues.

This is a stark reminder that, despite efforts to promote mental wellbeing, there is still a substantial gap in support and resources available to those in need.

No panacea

The shi towards work-from-home and hybrid working pa erns, initially seen as a potential solution to work-related stress, has not led to the anticipated improvements in mental health.

In fact, the survey indicates that mental health and wellbeing have worsened over the last 12 months.

This suggests that, while flexible working arrangements offer some benefits, they are not sufficient on their own to address the underlying issues affecting mental health in the sector.

The way forward

The findings from the 2024 MIMHC survey present a clear call to action for the UK mortgage and finance sector.

While there has been some progress in raising awareness around mental health and wellbeing, much more needs to be done.

Employers, industry bodies, and policymakers must collaborate to

create a more supportive and sustainable work environment.

Five steps to be considered

1 Mental health programs:

Employers should establish robust mental health schemes that provide accessible support services, including counselling, mental health days, and stress management workshops.

2Promote work-life balance:

Encouraging a healthier work-life balance through policies that limit excessive working hours and promote regular rest breaks can help alleviate the pressure on employees.


Enhance career satisfaction: Providing clear career progression paths, opportunities for professional development, and recognising and rewarding employee contributions can help improve job satisfaction.


Foster a supportive culture: Creating an open and supportive workplace culture where employees feel comfortable discussing their mental health without fear of stigma is crucial.

5Regular monitoring and feedback: Continuously monitoring employee wellbeing and seeking feedback can help identify issues early and allow for timely interventions.

While aspects of the 2024 survey highlight the significant challenges facing the UK mortgage sector, it also underscores the opportunity for meaningful change.

By working together, we will create a healthier, more supportive environment that meets the needs of all industry professionals.

The road ahead may be long, but with concerted effort and commitment, positive change will be achieved. ●

June 2024 | The Intermediary 69 Opinion BROKER BUSINESS

Case Clinic


Ex-professional athlete

An ex-professional athlete currently has a limited company for coaching and motivational speaking. While it has traded for five to six years, it has turned over a low figure as he has not been able to commit while performing in international-level sport. He retired less than a year ago and the business has increased its turnover. He does not yet have a year’s figures but is looking for a £380,000 mortgage against a £550,000 property.


“We can potentially work off projected figures as long as this can be backed by suitable commentary by the accountant. The desired LTV is within the realm of what we can consider.”


“The society requires two years’ income evidence for the limited company; however, we do offer joint borrower sole proprietor (JBSP), where a family member can help support with affordability. We would need a strong exit plan, which we would have as income would start to become consistent. A term of 40 years can be considered, with parents going on the mortgage but not on the deeds.”


“UTB requires self-employed applicants to have two years’ finalised accounts, evidenced by an Accountant’s Certificate or sight of the full sets of accounts themselves, but we only use the latest year for affordability purposes.

“If there has been a material increase in the latest year, then we would require an explanation, along the lines of that provided, to support affordability. If the applicant is approaching the end of the increased year of higher-profits trading, and their accountant can confirm the projections supported by management accounts, then these may also be acceptable. However, if this applicant can only show a few months of profitable trading, that would cause an issue as we cannot evidence sustainability of income.”


“West One has previously helped the borrowing needs of high-profile sportspeople, so we understand the potential complexities. Our criteria enable us to lend to limited companies with one year’s records, so the fact that it’s established with five or six years is a benefit.

“We can view salary or remuneration and share of dividends after tax and National Insurance. The income would need to be verified as we would not work off projected income. We can look to include private pension income to bolster income, and utilise our LTI ‘flex’, and use five-times LTI as standard, we may look at an LTI higher than five-times provided the income is verified to be £50,000 or more.”


Complex inherited


Aclient inherited the family home from his parents when they passed away. His disabled brother lives in the home, which has been adapted for his needs. His brother pays a token monthly amount to cover bills. The client

The Intermediary | June 2024 70
Case Clinic BROKER BUSINESS Want to gain insight into one of your own cases in the next issue? Get in touch with details at

lives with his partner in a house that his partner owns mortgage-free, although he is not on the title deeds. His existing term on the inherited house is coming to an end with his current lender, which will not extend it.


“We would deem this to be a second home or home for a dependant relative, which we can assist with, up to a max loan-to-value (LTV) of 80%.

“We would base the affordability off the applicant’s own income and expenditure, and would not accept any rent or bill contribution from the brother. As the applicant is not on the deeds to his partner’s house, we would not consider this to be an asset he is responsible for the costs on, so would not need to be deducted from affordability.”


“The society could consider this to be a regulated buy-to-let as a member of the applicant’s family is living in the property. It would be assessed on full affordability rather than rental interest cover ratio (ICR), the rent that the brother pays to cover the bills each month would not be used toward the affordability so as long as the applicant can cover his own living costs and expenses, alongside the mortgage and any costs for this property.

“The remaining criteria would need to fit the society’s buy-to-let criteria, so the applicant would need a minimum income of £25,000 and should not be a portfolio landlord.”


“Applicants for a UTB residential mortgage must reside in the security property and our buyto-let (BTL) mortgages prohibit the property being occupied by a family member. Therefore, unfortunately we would not be able to not be able to lend in these circumstances.”


Alimony as sole income

Aclient is coming to the end of their interest-only mortgage with a major lender, which will not increase the term. She does not want to sell her home and, currently,

her only income comes from alimony. The income is £50,000 per annum and was set up 20 years ago, to be paid until the ex-husband dies. The client is struggling to find a lender that will accept her case.


“Metro Bank takes a common-sense approach to the types of income we accept. In this scenario, we would require the alimony to be court-ordered, with the payment terms not varying during the life of the mortgage, and as with all applications, subject to full underwriting assessment.

“The benefit of using Metro Bank is that we will ‘gross up’ the income and use 100% of this for affordability purposes, and we also offer flexible interest-only options.”


“Alimony or spousal maintenance can be accepted, as long as this can be evidenced via court order or six months of bank statements. We can offer interest-only loans up to 75% LTV with a minimum equity of £150,000 in the security property.”


“Court-ordered maintenance, including spousal maintenance by legal agreement, we do accept. We would need to know a little more, but is likely a source of income UTB could use, providing it is a formal arrangement. We would also consider what income the applicant would expect to receive following the death of her ex-husband, when this would stop, and if this would impact affordability.”


“We would need to understand a little more detail. Potentially, a retirement interest-only (RIO) option could be given as this would be on interest-only with a 40-year term as standard; however, the alimony would need to be referred to see if this could be considered as an income. We would need to understand what the applicant would do if something was to happen to the ex-husband sooner than expected, as we would need to ensure that she could remain in the property.”


“We require certain information around age, loan amount, property value, and if the alimony is court-ordered. If so, we can utilise our loan-toincome (LTI) Boost product offering, which can lend based on over five-times income. We can also extend the term of the mortgage up to 40 years which may also support the borrower if they are facing challenges around affordability.” ●

June 2024 | The Intermediary 71

Communicating messages to the people that matter

By the time you read this, we’ll be in the thick of election season. Manifestos will have been published, shots fired, and both Labour and the Conservatives will be hoping that their messages are landing with voters.

Chances are, they will have spent weeks, if not months, honing their messaging, because they know it can be the difference between success and failure. It’s the same in the corporate world. Good messaging is clear, unambiguous and memorable.

Think of Nike’s ‘Just Do It’ mo o or Mastercard’s memorable “there are some things in life money can’t buy. For everything else, there’s Mastercard” tagline. Good messaging can elevate a brand, build deep connections with audiences, and even elicit powerful reactions that spur people into action. Whatever your feelings towards Brexit, Vote Leave’s ‘Take Back Control’ mantra was a prime example.

But we’re talking about more than just catchy slogans and memorable catchphrases. Good messaging should permeate everything you do as a firm, and should leave your clients in no doubt as to who you are, what solutions you offer and your company values.

The question is, how do you do that? Here are some tips to help you create messages that drive results.

Know your audience

As is always the case in marketing and PR, your first move should be to define your target audience. A er all, how can you cra effective messaging when you don’t know who you’re talking to? The place to start is your client bank. Is it skewed towards

first-time buyers? Landlords? Later life mortgages? The make-up of your client bank will ultimately determine how you interact with them.

Try to avoid being too broad or your messaging will lose its impact and won’t resonate with the people you want to reach. To ensure your messaging is impactful, ask yourself: Who is my target audience? What interests them? What are their goals, ambitions and fears?

Think, too, about how they prefer to be communicated with. If you’re in doubt about any of this, ask them directly.

Find your story

Every entrepreneur has a reason why they started their business, whether it’s because they spo ed a gap in the market, wanted to pursue a passion or because they felt a desire to help people. Think about your reason.

This may seem a li le lightweight and fluffy, but people tend to connect be er with businesses that feel personal rather than distant, soulless, and corporate.

From a media point of view, companies that have a good story to tell are infinitely more newsworthy than those who don’t.

Think also about what makes you different as a firm. How does the service you offer differ from your competitors? What are your unique selling points (USPs)?

Once you have these in mind, start to tell your story. This is your history, something you should be proud of, so don’t be afraid to shout about it.

De ne your goals

Before you contact your clients, ask yourself: What business goal am I hoping to achieve with this email, article or social media post? Is it to

drive sales leads? Raise awareness of a new product? Increase the profile of your firm? Or just to educate your client bank about something they need to know about?

Whatever the answer is to that, make sure that you add value and that your content is genuinely useful.

The last thing you want is for your clients to feel that you’re being intrusive and pushy, or that you are wasting their time.

Be consistent

Once you know who you are as a business and what you want to be known for, it’s time to implement your messaging strategy. Good messaging strategies are authentic, accurately reflect your company, and above all, are consistent.

There is no point spending the time coming up with a messaging framework if you don’t stick to it.

If you constantly change the way you speak to your clients, you will come across as incoherent. So, once you have your mind set on how you want to be seen, try not to veer from it.

Having said that, be flexible and adaptable. Markets, companies and even your clients change over time, so be prepared to make tweaks if you feel it is necessary.

In fact, we actively encourage our clients to review their messaging at least once a year to ensure it is still reaching the people they want to reach.

You can be sure that both Labour and the Tories will be doing just that a er we find out which party will be in power come 5th July. ●

The Intermediary | June 2024 72 Opinion BROKER BUSINESS

Dealing with emotions

The last thing people want to deal with at work is emotion, their own or other people’s. It is easier to just ignore feelings and plough on being rational. That is always what has been deemed acceptable. Even where ‘emotional intelligence’ is declaimed as an important part of management and leadership, people rarely demonstrate a great deal of skill handling emotion or showing empathy.

I’m not proposing that you sit around asking, ‘how do you feel?’ as if in group therapy. I do, however, want you to pay a ention to a valuable data stream and learn some very basic skills in emotion management.

We all experience strong surges of emotion, sometimes pleasant, o en quite terrifying. They can make us feel out of control and vulnerable. Even worse is the effort it takes to suppress them and make them invisible to others. Other people’s emotions are even worse.

So, we tell people, ‘there’s no need to feel like that’ – one of the stupidest, least respectful responses possible. They already feel like that, now you’ve made them feel stupid, too. Either they shut up or they explode. Neither response helps anyone.



Why are we so inept in the face of such normal human occurrences?

Well for one, people – managers especially – have the erroneous assumption that they have to fix whatever it is that’s wrong. They resort to platitudes. It’ll be OK. Don’t you worry. Cheer up.

Despite all the evidence that these reassurances never work, people keep tro ing them out. Just staying with the person and their emotion and saying something empathic like, ‘this feels really bad,’ ‘you are so sad’ feels unfamiliar and makes you feel like you just aren’t doing enough.

Emotion is a vital data stream in any business, to be ignored at your peril. I have sat in meetings with people squirming in horror at the targets being suggested, while the speaker blithely ignores those emotional reactions. Strong negative feelings, unnoticed, will undermine your strategies – goals won’t be met and you won’t even know why. If explored immediately, fears could have been put to rest or strategies changed to deal with the issues that concerned people.

Emotional literacy

In my coaching, I talk about working from the inside out. If you don’t really understand yourself, you’re not going to do very well with other people. The more insight you have, the be er you can lead and inspire others at work and at home.

I talk about ‘emotional literacy’ rather than emotional intelligence, because, with practice, you can hone your skills:


Learn to read your own emotions and label them correctly. Start with what emotions you have difficulty with. Your past experience probably has relevance here. Some people may shrivel in the face of anger, others can’t cope with sadness.

2 Use the right label. Women have o en described themselves as ‘hurt’ when in fact they are furious, but are afraid of the consequences of their rage. Many people will say they are ‘fine’ when anything but.

3Learn to calibrate your emotion. Are you slightly miffed or murderously angry? Is it proportionate to what just happened? Is it, in fact, anything to do with the current situation, or an accumulation of a series of frustrations which have just exploded in the face of the next person who did something trivial?

4 Communicate – but possibly not right then. Take a breath, take a beat.

5 Use the ‘DESC’ script. Describe, explain the emotion, specify exactly what you want, talk about consequences – starting with the positive. For example: ‘when you did X, I was furious because I looked an idiot. I need you to do Y. That way we will work really well together.’ Note there is no abuse. The power comes from describing the emotion, rather than acting on it.

6Empathise. ‘I guess you didn’t feel too good either’.

By becoming more aware of our emotions, making peace with all of our feelings, and learning to use the data they provide to mindfully shape our actions, every emotion we experience has the potential to support our learning, growth, connection to others and wellbeing.

How? Studies suggest that emotions in and of themselves are neither positive nor negative. When you regard your emotions as ‘data’ rather than directives, you discover the potential in all your experiences; even your most difficult emotions offer signposts to the things that you value most.

For example, sadness can indicate a search for how you can do be er in this world; social anxiety might prompt you to want to connect be er with those around you; boredom in the workplace is a sign you’re ready to grow or be challenged.

When you act in ways that connect you to these values, you experience a greater sense of authentic happiness and connection in your life. The truth is that every emotion serves a purpose to move your body into action – the trick is learning to tune in to what your body is telling you. ●

June 2024 | The Intermediary 73 Opinion BROKER BUSINESS

What the changing face of later life means for advisers

While it’s always eventful in the world of mortgages, it’s the subject of later life lending that is currently taking centre stage. Fuelled by various new data and research, there’s an increasing focus on retirement incomes, with the spotlight firmly on what can be done to help people live as comfortably as possible when they reach pension age.

A number of studies have been reported which reflect what our advisers are seeing on the ground: more people are taking mortgages into retirement, and property wealth is increasingly being used as a means to release money.

Data obtained by pension consultants LCP, based on Bank of England information, showed that 42% of new mortgages issued in Q4 2023 have an end date beyond state pension age, up from 38% the year before and 31% in 2021. If we look at the pre-retirement end of the scale, the average age of the first-time buyer is rising amid deposit and affordability challenges – it’s now 32 according to Statista.

At the same time, existing homeowners renewing their mortgages are having to navigate significantly higher rates.

It’s therefore easy to see how we’re entering a situation where more people are taking mortgages out later in life, and on much longer terms.

At the post-retirement end of the scale, this will naturally result in homeowners who might not be mortgage-free, who perhaps haven’t saved sufficiently for retirement due to cost-of-living pressures. They might have children struggling to raise the deposits to buy their first home.

It’s not just financial pressures that are leading more people to consider their options for later life lending, it’s also changing a itudes towards property wealth and how this can help fund a comfortable retirement.

This is supported by a recent Equity Release Council (ERC) survey, which found that 61% of UK homeowners are interested in releasing money from their property in later life to meet various financial needs.

It is now also more common and more acceptable to have a mortgage in later life, the survey showed.

People are choosing to release equity from their homes for things like paying for care at home, boosting retirement income, funding travel plans and helping their younger family members, including supporting them with their first home deposit.

The role of the adviser

The various data above reflects what we’re seeing on a day-to-day basis, which is an increase in adviser enquiries about equity release.

Homeowners are interested in releasing equity to reduce their financial burdens by paying off an existing mortgage, but it’s not only being used as a last resort.

People are also turning to property wealth to realise a dream or fund a lifestyle choice.

It’s therefore clear that some form of borrowing will become an increasing factor of retirement in the years to come, so it’s vital that there’s a mix of innovative products available to meet these increasingly diverse needs and circumstances.

This might include a greater variety of options such as interest served lifetime mortgages, payment-term lifetime mortgages and drawdown

products, as well as retirement interest-only (RIO) and traditional equity release.

This must be supported by high quality, personal advice that helps customers make knowledgeable decisions today to secure a more comfortable future.

As well as receiving more enquiries about later life lending cases, an increasing number of our advisers are asking us to arrange their equity release training and qualifications.

Even advisers who aren’t qualified must be able to recognise the signs that a more specialist solution may be required. In these situations, at Rosemount they can pass it on to another adviser via our centrallymanaged referral system.

The customer stays within Rosemount, the adviser is still able to help secure the best possible outcome, and they are kept in the loop as to how any subsequent case progresses.

A recent review of later life mortgage firms by the Financial Conduct Authority (FCA) highlighted just how important impartial advice is. It found many examples where advice did not meet expected standards. O en, the advice failed to consider individual circumstances or explore alternative solutions to later life mortgages.

Taking on ultra-long mortgages, remortgaging a er retirement, or releasing money tied up in a home in later life are all big decisions which can’t be taken lightly.

This is where having an impartial adviser who really knows their stuff is absolutely vital. ●

Opinion LATER LIFE LENDING The Intermediary | June 2024 74

Don’t let your development lender frustrate your client’s project

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• No hidden costs. We are completely transparent about our pricing.

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• Lower fees. All our fees are based on net loan amounts and not gross.

• Better products. We don’t offer retained interest so the client doesn’t pay interest on a large interest slice from day one. Interest is rolled up or serviced if the client prefers.

• Loans from £200k to £2m.

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We shouldn’t fear lending into retirement

20 years ago, it was almost unheard of to reach retirement and still be paying off your mortgage.

Nowadays, having an outstanding mortgage in retirement needn’t necessarily be a cause for alarm, as many borrowers comfortably manage their mortgage payments while also enjoying retirement.

The issue of lending into retirement has recently gained a ention following some statistics that came to light a er a Freedom of Information (FoI) request was filed by Sir Steve Webb, former Pensions Minister and now a partner at pensions consultancy LCP.

The findings from the FoI request showed that in the final quarter of 2023 approximately 42% of new mortgages – 91,394 – had end dates beyond the state pension age, based on data from the Bank of England (BoE).

This compares to 38% in the final quarter of 2022 and 31% in the same period in 2021.

Those aged 30 to 39 made up 30,943 new mortgages lasting beyond state pension age, while those aged 40 to 49 accounted for 32,305.

Based on the figures, it is estimated that around one million new mortgages with end dates extending beyond the state pension age have been issued over the past three years.

The figures, on the whole, were reported as borrowers ‘gambling’ with their retirement and facing the prospect of having to ‘raid their pension savings’ to clear their mortgage.

There is, understandably, caution a ached to lending to borrowers in or entering retirement, given that the mindset for a number of years was that you must clear your

mortgage at all costs. However, from our experience, we know that no two mortgage borrowers are the same, something which is especially true for borrowers of retirement age.

The rising Bank of England base rate has significantly impacted some borrowers’ mortgage affordability, and the trend of extending mortgage terms is likely to persist for the foreseeable future as a result.

If we are to help borrowers achieve their homeownership aspirations in both youth and old age, we need to shed the image that lending to all retirees is risky.

Making nancial sense

As a building society focused on specialist lending, one of our areas of expertise lies in helping borrowers with their mortgage needs as they enter or are in retirement.

There are various scenarios in which it might make financial sense for a borrower to continue paying off their mortgage into retirement. For example, some borrowers may have sufficient retirement income from a private pension to cover their mortgage payments.

They may also hold substantial investments and savings which carry a high rate of return, meaning it makes sense to retain these assets rather than dispose of them to repay their mortgage before retirement.

Alternatively, some borrowers may be able to evidence that they are due to receive a lump sum either before or during retirement, which may go towards paying off their mortgage.

While we impose no upper age limit on our lending and extend mortgages to borrowers already in or approaching retirement, we also conduct thorough and comprehensive assessments of each borrower’s

affordability and their retirement income. Our loan-to-value (LTV) is capped at 70% for in-retirement and 80% for into-retirement, with pension payments required to cover the term of the mortgage.

The changing reality

While lending into retirement has its place, it’s not suitable for all borrowers. Emily Shepperd, the Financial Conduct Authority’s (FCA) chief operating officer, was right to caution at the recent Building Society Association’s (BSA) Annual Conference that we must not let lending into retirement become the next big financial risk.

She spoke about how the projected median age of a first-time buyer at maturity has risen to 65 years old – up from 56 in 2005.

Currently, mortgage customers over 67 constitute fewer than 2% of all loans. However, by 2040 this figure is expected to rise to 5%, and by 2050 it is projected to reach almost 10%.

As she emphasised in her speech, building societies are well acquainted with the risks and needs of customers looking to borrow in later life, and ge ing this right will not only benefit individual customers in later life, but also support first-time buyers.

It’s important that a blanket approach isn’t applied to such borrowers, and instead that their income, lifestyle and expenditure are all carefully assessed, as each borrower is different.

As lenders, it’s our responsibility to act in the best interest of older borrowers while ensuring that our products meet their needs responsibly. ●

Opinion LATER LIFE LENDING The Intermediary | June 2024 76

Older borrowers need our mutual bene

The UK Government conducts a Census every 10 years to create a snapshot of the population and establish a record of the demographic trends across the nation, which are used to inform and create social policies. The most recent was performed on 21st March 2021.

What the Census data highlighted is what many of us already suspected: British society is changing. The dripping tap of news about the issues facing public health services, as well as pensions and broader financial services, is a reminder that we are incredibly successful at staying alive. Meanwhile, the aspirations of 60-yearolds today are not what they were even 30 years ago.

This brings interesting challenges to the housing and mortgage sectors. As a building society, we too know how much society has evolved over the past decade, let alone the past 100 years, and we all need to keep pace with it.

From a housing point of view, we must challenge our ideas of what might have been appropriate in the

past. Do we have the right stock for a population that might want to downsize? Without choice, supply can be constrained as the older generation occupies traditional family homes for longer, creating fewer options for borrowers looking for the next step on the housing market.

Demographic shift

Divorce among the older age group is also becoming more prevalent, so we have more demand for single household accommodation.

Age UK reported from Office for National Statistics (ONS) data in its updated report of 2019 that 5.5% of people aged 65 and over in England were single – never married or civil partnered – 60.0% were married or in a civil partnership, 10.5% were divorced and 24.1% were widowed.

It also estimates that 23.4% of male and 29.2% of female babies born in 2018 will survive to the age of 100.

The 85-plus age group is the fastest growing and is set to double to 3.2 million by mid-2041 and treble by 2066 – 5.1 million, or 7% of the UK population.

What all this means is that the way we lend has to evolve to support people. Of course, later life products such as equity release are one option, but they are not right for everyone

To that end, we are seeing lenders, including ourselves, evolve criteria to meet such demands. For example, we have no upper age limit if the mortgage is taken on a repayment basis.

If it is an interest-only loan, we can go to age 80 with no minimum income, provided there is £225,000 worth of equity and no more than 66% if using the sale of the property as the repayment vehicle.

Furthermore, we will accept unused investment plans or pension pots with drawdown facilities to support income calculations, and we also offer a retirement interest-only (RIO) product.

The point here is that lenders are changing their propositions to accommodate older borrowers because their needs and lifestyles are changing, and that’s how it should be.

Building societies are driven by their purpose. That’s why we’re commi ed to our cause: to actively find ways to help people have a home, by supporting people who couldn’t buy without our help and working with groups in our community who offer services for shelter and housing.

But this need is evolving too, to support those in later life who need our help when they encounter life events or make decisions that impact their mortgage arrangements. Society is changing, and so are societies. ●

Opinion LATER LIFE LENDING June 2024 | The Intermediary 77
t Lenders are changing their propositions to accommodate older borrowers

What’s behind the rise of income protection?

Income protection seems to be having a moment. Figures released by the Association of British Insurers (ABI) for 2023 reveal that a record number of people took new individual income protection policies to safeguard their finances. Almost 0.25 million new policies were taken out last year, representing a 16% rise on 2022, and the highest number since the ABI’s records began in 2000.

Strong sales have continued this year. In March, activity on iPipeline portals – which represent 50% of the total intermediated market – reached the highest level in a decade. The week beginning 11th March saw a record number of new income protection applications submi ed.

Advisers continue to feel positive about sales for the rest of the year. In our survey in May, 47% said they ‘strongly agree’ that 2024 is shaping up to be positive in terms of protection sales growth, with most feeling that growth will come via income protection sales.

So, what’s driving this trend? Examining the market, there are several factors, some of which relate to the market in general, and others which are more industry-specific.

The cost-of-living e ect

While inflation has now returned to more normal levels, the uncertainty created by higher interest rates and conflicts around the world remain. Many are still feeling the squeeze, with millions facing a hike in mortgage payments as their existing deals run out, and those not already on the housing ladder struggling to reach the first rung.

The value of new mortgage commitments decreased by 6.6% in the first quarter of 2024 compared

to the final quarter of 2023, and was more than 20% lower than the first quarter of 2023.

These circumstances are causing the advice market to shi . Clients who have witnessed the impact of the pandemic are perhaps more open to conversations about protection. Advisers who have fewer new clients are looking for other opportunities. All this is against the backdrop of Consumer Duty, which has focused advisers on discussing how clients can secure their finances effectively.

Evolution of the industry

Also feeding this renewed confidence are innovations in the market. Advances in technology have made processes quicker, and these will only increase as artificial intelligence (AI), which is still in its infancy, is employed to greater effect.

The product itself has also evolved to make it simpler to understand, and to be er meet customer needs.

Most growth has been recorded in short-term policies, which offer cover for a limited period. While serious illnesses, like cancer or heart disease, can be devastating, they are still relatively rare among those of working age. Those in employment are much more likely to break a bone or suffer from a common complaint like a bad back, which will probably keep them off work for months rather than years.

Short-term income protection policies not only reflect this need, but are also more affordable, making them accessible to a wider market. Are we finally beginning to recognise – and enjoy – the benefits of pragmatism over perfection?

Keeping up momentum

There’s a window of opportunity for

the protection market to sustain this growth, but it depends on action being taken now.

There are three areas that require our a ention as an industry. Focus on these, and we have a chance to make this moment a permanent change.

The first thing is to explore how we can further simplify the underwriting process. Where are the remaining disconnects, and how can we fix them?

Technology has a huge part to play in this, but it also requires cooperation and collaboration across the industry, with all sides working in harmony to focus on creating the most effective and efficient process possible.

Second, it’s about listening to advisers and customers to understand their needs and reflecting these needs in both the process and the product. Data can be incredibly powerful here. What are the growth sectors for protection within the advice market? Where are the emerging risks? What support would help advisers up their protection game?

Finally, it’s about delivering a smooth and efficient service.

In a world where people expect transactions to take a ma er of seconds, it’s vital that we deliver this to both advisers and customers.

None of us are prepared to be limited to a single service channel. None of us are prepared to wait. Multi-channel service in real time is a must, not an option.

There is a real buzz around protection. Let’s work together to ensure we don’t let this opening slip away. ●

Opinion PROTECTION The Intermediary | June 2024 78
STEPHANIE HYDON is director, client distribution at iPipeline

A more personal approach to tackle under-insurance

Under-insurance remains a big issue within the insurance industry in 2024. Prolonged inflationary pressures and supply chain disruption have le thousands of homes and businesses underinsured. It may also be one of the biggest – and potentially most reputationally damaging – challenges the insurance industry faces right now, and intermediaries are on the front line.

New research from Aviva has highlighted that 73% of brokers are concerned about under-insurance across their book of business, and that it is one of the top issues they are facing right now. The report also highlights how the challenge of tackling under-insurance has evolved over the past 12 months.

Many businesses and homeowners have not increased their sums insured at all, or to an adequate level, due to being unaware of the impact of rising costs due to inflation, and not understanding consequences of underinsurance. This could be either to save money, or because they remain unaware or unconcerned about the severity of the under-insurance risk to financial security.

Why so important?

It’s crucial that brokers encourage customers to review their coverage regularly to ensure it is sufficient. A review on sums insured should be undertaken for all aspects of coverage such as buildings, contents, valuables, and indemnity periods – alternative accommodation periods on home insurance or business interruption periods on business insurance.

As a broker, if you arrange coverage based on a standard sums insured basis

with £100,000 contents and £1000,000 for buildings, then under-insurance could still apply. While customers may not be impacted under the buildings policy, we’ve seen claims ge ing close to the maximum amount due to increased costs of reinstatement. Even more frequently, a customer may have purchased additional contents items – such as valuable jewellery or works of art – throughout the policy period, resulting in under-insurance in terms of insufficient contents sum insured.

The most common concern right now, however, is under-insurance across your property owners’, commercial and high net worth (HNW) books. If the true sum insured exceeds the insured amount, then at best a reduced claim value is paid out, but at worst the policyholder could find themselves in a position where the insurer declines the claim completely. This impacts both buildings and contents, as well as business interruption on commercial policies. Say, for example, one of your clients is currently insured for a rebuild value of £1.2m, but the actual cost to rebuild at current market rates is £1.5m, they are underinsured by 20%.

This really isn’t outside of the realms of possibility. According to recent research by surveying practice Charterfields, 77% of the premises it had surveyed were insured for less than the required value, with 40% of those policies covering half or less of the actual worth. Charterfields’ figures also showed that the commercial contents picture was even worse, with 80% having insufficient contents cover, and 45% having a limit equal to half or less of the value of the contents they owned.

While I’m not for suggesting that intermediaries should be appraising

clients’ possessions or rebuild sums insured, ensuring that your clients are covered correctly is fundamental to our role as trusted insurance advisers. It’s also vital to ensuring good customer outcomes are being delivered to ensure compliance with Consumer Duty.

The good news is that there are tools to help – Berkeley Alexander has a desktop rebuild cost service that is very affordable compared to the risk of under-insurance.

Time to get personal

The Aviva survey points to the importance of technology in tackling under-insurance. While that is true when it comes to things like the desktop rebuild cost calculators, a more hands-on, personalised, and consultative approach is needed to identify and tackle potential vulnerabilities.

Market value and insured value can be two very different things – this is where intermediaries have a real opportunity to take the lead.

Educating our customers remains vital – guiding them through the complexities – but I believe the biggest difference can actually be made by truly understanding the customer’s profile, how their lives are being impacted by current market conditions, how their lifestyle has changed, and their vulnerabilities.

Not only does this help our customers understand the consequences of under-insurance, it also means that as a broker, you are always on the front foot when it comes to securing the right level of protection at the right price. ●

Opinion PROTECTION June 2024 | The Intermediary 79

Permission is paramount in the referral game

Referring general insurance (GI) business to a thirdparty is gaining more traction in the intermediary market, and understandably so. Advisers are stretched, so where they are unable to provide advice directly, referring ensures that clients are properly protected, freeing up time while still generating commission.

When done properly, there is considerable appetite among consumers to speak to someone about their financial needs. New consumer behaviour analysis from lending so ware provider Lenvi revealed that in the current economic climate people prefer human engagement over an online route.

Additional research from managed service provider Ensono also shows that 56% of UK consumers prefer to speak to someone over the phone about their insurance. It’s clear, then, that there’s a huge opportunity when it comes to referral, and doing it right is crucial.

Our telephone referral team has been able to deliver quote-to-sale conversion rates of up to 63%. The secret to this success is, in large part, driven by the fact that customers were expecting the call. Referrals can fall down if the customer isn’t properly engaged.

There are a few different referral routes we offer to advisers. Each of the options all have one thing in common: the customer’s explicit permission to be contacted. However it’s done, the customer should be fully warmed up and should understand what happens next.

We give advisers who don’t want to sell GI the option to choose what works best for their client. They

can refer to us to have an advised conversation, or they can place their clients into our online journey which will send an indicative quote – based on the information available – straight to their phone or email, which the client can then interact with at a time to suit them.

We recognise that advisers have worked hard to build trust with clients, and they don’t not want to risk undermining that by enabling unsolicited contact. Who among us can say we’re pleased when we’re contacted out-of-the-blue by any kind of provider?

Positively engaging with – and ultimately converting – a customer would be extremely unlikely if they aren’t expecting a call. In our experience, the process of advisers warming customers up by having a conversation about referring them to us is really beneficial.

Practical tips

So, what does ‘best practice’ look like when it comes to referral? There must be a balance between ease of use and allowing for a degree of personalisation. The referral journey obviously needs to be simple, technologically slick, and timely.

At Paymentshield, we’ve coupled that with working with advisers on how best to set clients up so that they’re expecting the contact, and catering for customers based on individual preference.

Findings from Lenvi’s latest ‘Borrowers on the Brink’ report also reveal a clear willingness on the part of consumers to walk away from financial services companies if customer service isn’t up to scratch. It sends a clear warning to companies to make sure they don’t lose focus on the customer experience.

Customers are holding insurance companies to high standards, with the worrying insight from the Institute of Customer Service that customer satisfaction in GI providers over the past 12 months has fallen at the fastest rate since 2008. So, it’s really important for advisers to consider the experience they’re going to be able to offer their customers when choosing a referral partner.

What’s more, in an a empt to crack down on fraud, the Government recently consulted on introducing a ban on cold calling for all consumer financial services and products – even legitimate ones. While the outcome remains to be seen, and a General Election is imminent, it’s clear that this is an area under legislative scrutiny, with buy-in across the political spectrum.

So, when done properly, referral can help drive a good customer experience. Benchmarking analysis from the Call Centre Management Association (CCMA) shows that Paymentshield call handlers received a Net Promoter Score (NPS) of 56, compared to the average CCMA score of 48. NPS is a metric used to determine customer loyalty towards a company, and over 50 is considered excellent.

Ultimately, we believe that referral will only be successful if the focus is on doing the right thing for the customer. Referral should support and align with advisers’ current processes. So, take that one small extra step, gain permission from the customer, make sure they know who’s going to contact them – and why – and refer from there. ●

Opinion PROTECTION The Intermediary | June 2024 80

Insurance ignorance is not bliss!

In the wake of the news that the Renters’ (Reform) Bill has been ‘parked’ due to the upcoming General Election, now more than ever – while the topic is in the headlines – is the time for landlords to have appropriate property insurance.

Many landlords in the UK overlook the importance of property insurance due to a variety of misconceptions and lack of awareness.

Without specific landlord buildings insurance – and some contents insurance when applicable – landlords leave themselves exposed to great risk on their property portfolio as they are a huge financial investment.

At Safe&Secure, during the advised service on the phone, landlords o en ask questions that illuminate how much they underestimate or misconstrue what cover they should have in place.

The risks

Not having landlord-specific insurance in place means that there is no cover for loss of rental income or liabilities in relation to tenant injuries.

If the rental properties are bought with a mortgage, and if no proper insurance is in place, then the landlord may be in breach of the mortgage terms.

Underestimating the financial risk associated with damage caused by natural disasters, fire, the or vandalism, can lead to substantial financial loss when no cover is in place.

Lack of understanding of landlords’ legal liabilities, such as if a tenant or visitor is injured on their property, then the landlord could be held responsible for the accident.

Intentional or unintentional damage by the tenants themselves can

be expensive, and if landlords do not have insurance then they have to take the hit of the cost personally.

Lost rent during periods of time when the property may be uninhabitable – for example, fire or floods – can be financially very damaging for landlords, but if they have insurance in place then that loss of rental income is mitigated.

So, naivety or ignorance in trying to save on spending approximately £30 a month on landlords’ insurance can cost a lot more than this, if an unexpected situation occurs.

It is also wise to understand that landlords can add on extra coverage, in addition to the standard cover, for things such as legal expenses or contents insurance if the properties are furnished, or rent guarantee insurance to help with missed payments – which in this current economic climate is more prevalent than ever before.

Price of peace

If landlords want to put a price on peace of mind, then the average landlord insurance premium for

a three-bedroom residential property with professional working tenants with an Assured Shorthold Tenancy (AST) in place, would be around £32 a month. This is a small price to pay comparative to the significant costs if any of the above were to happen during the time the landlord owns the property.

Knowing they can sleep easy and know their rental properties are protected allows landlords to manage their properties with greater confidence and less stress.

In summary, UK landlords need to recognise that property insurance is a crucial safeguard against a wide range of financial risks and liabilities.

Educating themselves through an advised service like Safe&Secure Home Insurance Limited can help them make informed decisions and adequately protect their investments at a small expense. ●

Opinion PROTECTION June 2024 | The Intermediary 81
UK landlords need to recognise that property insurance is a crucial safeguard

Embracing tech to streamline the mortgage process

The mortgage application process is challenging. For brokers, and for borrowers. This is why part of our mission as a forward-looking building society is to embrace technology that streamlines the whole process from beginning to end, minimising headaches for all parties and speeding up elements that have traditionally taken longer or been more complicated than needed.

So far this year we’ve already made tangible progress on several fronts.

Improving on all fronts

We recently launched an exciting new product aimed at foreign nationals, who have historically faced more hurdles than other borrowers. Among the various criteria which they must demonstrate to be eligible for a mortgage, time and time again brokers told us that the inability to prove their credit history in the UK was a major barrier.

So, partnering with Nova Credit to boost the process for people looking to se le in the UK felt like a no-brainer. This is innovative fintech allowing intermediaries to access historic credit files in countries around the world, from India and Australia to Kenya.

Elsewhere, our decision to partner with Mortgage Broker Tools (MBT) and integrate its cu ing-edge technology into operations gave brokers one easy-to-use platform to compare the eligibility of lenders in terms of affordability, criteria, products, and service levels for both residential and buy-to-let (BTL) mortgages.

Adopting new technology takes time and shouldn’t be rushed, however. Our partnership with artificial intelligence (AI) mortgage

platform MQube is the first step in our ongoing commitment to speed up the underwriting process and deliver stress-free mortgages to borrowers.

The hope is that, by leveraging state-of-the-art AI and machine learning to assess around 20,000 data points in real-time, we will be able to empower lenders to process mortgage applications quicker than ever before.

Universal adoption

These are all great examples of technology simplifying and improving the application process, and we won’t stop there. But it made me think: why wouldn’t technology be used to improve the entire homebuying process?

Just last month, Open Property Data Association (OPDA) chair Maria Harris argued that the entire buying and selling process should be digitised within the next three years.

There is no doubt that the current market is particularly daunting, and that using technology to improve the application and approval process is vital. But I believe that adoption of technology, and embracing the

exciting possibilities of AI, should be coupled with a human touch.

Brokers remain fundamental to guiding future homeowners through the mortgage process. Now, they can do so in a smoother and more informed way when armed with the right technology. It boils down to saving brokers time by checking credit information from abroad or granting home insurance in a ma er of minutes – allowing them to focus on the emotional side of the conversation.

In 2024, borrowers face more challenges than ever before. So, we are evolving our mortgage proposition to ensure we can really have an impact on growing homeownership and supporting a wider range of borrowers.

To do this, we will need to be innovative and embrace modern technologies, while also supporting brokers to use this technology effectively and successfully. ●

Opinion TECHNOLOGY The Intermediary | June 2024 82
ALISON PALLETT is sales director at Nottingham Building Society Embrace technology that streamlines processes

AI will always need the human touch

When you’ve got a question about a product or service you use, what do you do first to find the answer? Chances are you Google it, and if that doesn’t give you enough information, you might head to the company’s website and frequently asked questions. Increasingly, you are given a range of options. At its most basic, that might be through a chatbot that uses decision trees to get you to the answer you need.

Sometimes that works, but sometimes you find yourself stuck in a loop. What then? Find a phone number? Visit a store? But what if your problem is with a virtual company and there is no shop? This experience is one we all know only too well, and it can send even the calmest and most rational person around the bend.

I’m sure we’ve all had a really good customer experience, too. Whether that’s been online, over the phone or in person, I can almost guarantee it was with a person. A person whose technology is fit for purpose, but crucially, a person who can adapt to you personally should the situation require it.

People and technology

The difference between good service and bad depends on the combination of clever technology supporting people, and people having the capacity to do what people are, more o en than not, good at: dealing with other people.

I use this experience as an example to illustrate why ge ing the use of technology right is so important, and can be so transformative for a business. Customers, be they retail or intermediaries, want speed, service, consistency and value.

Having multiple systems, however interactive, isn’t an answer in itself

– mortgage intermediaries know that all too well. What’s important is having systems that deal with the right problems. That’s where artificial intelligence (AI) and machine learning can be a game-changer.

For lenders, the right problems are manifold – credit risk, compliance, back-book exposure, multiple stakeholders, patchy digitalisation, reliance on manually bringing together information from a range of systems and sources, fraud detection, customer service, and underwriting consistently but in a way that is appropriate for the person being underwri en. The list is endless.

For the past 10 years we have been using AI to analyse mortgage documents, strip out the data, compare it real-time with the case data, and then cross-reference with the other documents. This has significant benefits for the underwriter and broker in streamlining the process by removing the need to check and chase documents, and makes for a much be er experience for the borrower.

Helping our clients get to grips with this is what we do at Ohpen, and it’s why we’ve recently partnered with Cognizant, a global firm that helps companies use generative AI, so ware engineering and cloud computing, and the internet of things to be er their performance and processes.

Cost savings

A report based on research carried out for Cognizant by Oxford Economics illustrates how generative AI can be deployed to deliver cost savings, efficiency, and at the same time support people to do the jobs they were hired to do.

The report said: “We foresee an upside to generative AI workforce disruption, such as its positive impact on ongoing labour shortages that exist in key areas of the economy. For example, in healthcare, ongoing

staffing challenges are driving up service costs while dragging down service quality.

“Our exposure scores indicate that emergency physicians, for example, will see up to one-third of their tasks automated over the next decade – a process that will enable organisations to deliver more healthcare services without the need to ramp up hiring.

“Another potentially positive impact of gen AI on labour challenges is the way it can be flexibly deployed to accentuate an individual’s existing strengths while so ening their weaknesses – in effect enabling a broader spectrum of cognitive capabilities into a wider range of roles.

“Armed with the right tools, for instance, an equity analyst may not need to be a mathematical expert if generative AI handles that part of the job. Instead, they would perhaps lean on a strength such as communication to add value in the workplace. In this way, generative AI has the potential to significantly lower barriers to entry to a large segment of the economy.”

Automation e ciency

Just imagine the potential for our industry. Machine learning combined with appropriately employed human judgment will transform elements of what we currently do, allowing automation to create new efficiencies, deliver consistency, but enable people to focus on elements of origination, underwriting and completing loans that require experience and insight. ●

Opinion TECHNOLOGY June 2024 | The Intermediary 83

Investment in interoperability is crucial

It’s always interesting to a end the annual Building Societies Association (BSA) conference, to catch up with colleagues, of course, but also hear what they consider the big challenges and opportunities in the current market.

This year was focused on technology – how societies are leveraging digital processes and data to revolutionise all parts of their operations.

Emily Shepperd, CEO at the Financial Conduct Authority (FCA), highlighted just how important investing in be er technology should be for the sector: “Technology in general can be a challenge for building societies, particularly those with legacy systems. Integrating these with [application programming interfaces (API)] to access data can be expensive and difficult, feeling at times impossible. Added to this of course are the risks and opportunities of [artificial intelligence (AI)] and moves to cloud technology. There is li le choice about becoming more digital: younger customers, raised on a diet of entertainment and shopping on demand, expect financial services to be available in one or two clicks.

“Building societies must not let their hard-won reputations for integrity –a value that is in tune with younger generations – be overlooked in favour of challenger banks and their whizzier technology. By leveraging innovations such as Open Finance, AI, and digitalisation, building societies can streamline operations, boost resilience, and enhance the customer experience. Perhaps one way for smaller societies to do this is through collaboration with start-ups, tech firms or other building societies.

“In doing so, they will not only survive but thrive in an increasingly competitive landscape.”

I welcome these wise words. The question for building societies facing these challenges is how to go about it, particularly at a time when there is so much change to manage alongside.

Regulatory changes

We are currently in the process of conducting interviews with lenders across the market as part of our annual Mortgage Efficiency Survey, and it is a question high on the agenda for compliance and credit teams.

From the end of July, the Consumer Duty rules come into force for existing products and services, a change that requires a huge endeavour to meet – and to evidence. Meanwhile, next year brings the new Basel 3.1 capital standards for market risk, credit valuation adjustment risk, counterparty credit risk, and operational risk.

The volume and complexity of handling these regulatory changes is a huge task, but it is made far more difficult by how each affects the other. This was much talked about at the conference, where interoperability of both digital delivery and building societies’ wider supply chains was a central focus.

In a session chaired by Nationwide’s head of digital payments Amber Boodt, experts from economic consultancy Frontier Economics and the Centre for Financial Innovation and Technology discussed how future open finance opportunities could support be er interoperability.

In turn, this could enable consistent compliance with regulatory requirements and visibility of data, and thus, evidence of that compliance. There are other implications mutuals must consider, too.

The FCA has asked the cash savings industry to explore the potential to

bring cash savings into Open Banking, with the BSA commissioning Frontier Economics to carry out research.

The report that followed, published in April, explained that current account data sharing and ‘read and write’ access to third-parties through Open Banking would extend through Open Finance – enabling the sharing of data and ‘read and write’ access to more financial services and potentially other industries via Smart Data.

The emergence of such Open Finance enabled TPP solutions in the cash savings market could have a significant impact on how the cash savings market operates, with potential knock-on impacts on the mortgage market.

The findings have the potential to shake up the mutual sector and its place in the wider mortgage market considerably. Pricing strategies would have to change, capital adequacy – particularly for smaller mutuals –could become difficult, and funding models would need to adapt. The changes in the savings market, such as in average rates, improved deposit stability and increased switching from standard rate products, may lead to changes in the mortgage market. The increase in average market savings rates alone may lead to an increase in mortgage rates by up to approximately 21 to 41 bps if Open Finance adoption in the savings market is very high.

Should that go ahead further in the future, investment in flexible technology and systems that can adapt easily as interoperability needs become more complex, is a crucial consideration for lenders today. ●

Opinion TECHNOLOGY The Intermediary | June 2024 84

Focus going forward will be as much on the back books

The next 18 months are going to be extremely full for UK mortgage lenders. Not only is there the prospect of rising arrears management, albeit from a low base, there is the fact that it will be subject to the Financial Conduct Authority’s (FCA) Consumer Duty rules from 31st July.

That will involve lenders needing to have a much tighter grip on proactively identifying vulnerable customers, and clear visibility of appropriate focus on outcomes for them. The permutations could be considerable, from helping some cohorts move to be er products, to restructuring loans for others.

Complicating this, from 1st July 2025, banks and building societies will also have to contend 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 more closely across both approaches, making it easier for firms to adopt the internal ratings-based approach.

While this makes sense, the work involved to assess compliance with the new standards is considerable. How capital is deployed, assets are valued and rated from a risk perspective, along with the credit risk presented by borrowers across all risk segments, will have to be reviewed.

Dynamic capital optimisation becomes extremely complex, arguably impacting origination decisions as they become more interlinked with existing back-book risk, which will, in turn, fluctuate. According to PwC, the Prudential Regulation Authority

(PRA) proposals will redefine the banking sector’s competitive landscape. It said: “Approaches to capital planning and risk-based decisioning will need to be redefined to effectively tackle the dynamic capital optimisation problem.”

The thrust is that lenders will need to be much more hands-on in their understanding of the granular risks si ing on their balance sheets. How o en and how rigorously that needs to be recalibrated is still, for the moment, unclear.

What is clear is that simplistic or standardised assumptions that inform product pricing, business mix and capital allocations for future origination won’t suffice. It’s also possible that much more individualised product design and pricing could become a defining competitive tool for lenders to deploy capital most efficiently.

Lenders must also be be er at reporting capital and credit risk accurately and completely. Regulators are expecting much stronger scrutiny of individual borrower and asset risk, both in lender back-books, but also when it comes to new business.

We’ve known about much of this impending change for long enough that most lenders are well underway in their preparation – for the Consumer Duty rules in particular. However, there are still those yet to work out a strategy to navigate incoming regulation.

In the case of Basel 3.1, firms also have a 4.5-year transition period to comply fully with the new capital rules. However distant 1st January 2030 might seem, though, it will be here all too soon.

Lenders must gain clarity now. Ge ing this transition right will require increased investment in

systems and processes that can provide the outputs lenders need under these new regimes.

Data driven

Data will serve an important role in offering an aggregated view of historic performance, as well as the factors that will determine value and the current appropriateness of borrowers’ situations.

Assessing new digital propositions and whether to abandon legacy systems in favour of those fit for purpose in a very different compliance and risk landscape is not a small undertaking – expensive workarounds will be costly and consistently require change.

Lenders must be able to provide accurate information reflecting their risk positions. The responsibility for due diligence will be ongoing – not merely required at the point of sale. None of this is going to be easy – there is not one straightforward solution. Every lender will have to assess and adapt accordingly.

This said, there is one thing that all lenders can do – today – should they not already have begun. To understand where you want to go, you need to know where you are. That means starting with a wholesale reevaluation of existing back-books.

Understanding the impact of Consumer Duty and Basel 3.1 in secured lending will mean understanding the credit and property risk you hold as it is today, not simply if the loan is performing as expected.

The secured asset, in this instance, is a key part of this dynamic. Lenders will need experts. We are ready. ●

Opinion TECHNOLOGY June 2024 | The Intermediary 85
STEVE GOODALL is managing director at e.surv

In Pro le.

The Intermediary speaks with Stuart Cheetham, co-founder and CEO at MPowered, about new developments in the quest to provide instant answers

In a world where everything – from retail to a car insurance quote – can be done at the press of the button, the mortgage market is still plagued by lengthy processes. For MPowered Mortgages, however, this may be a thing of the past. e Intermediary sat down with CEO Stuart Cheetham to get the scoop on instant decisioning and the huge change this could mean for the mortgage industry.

Instant answers

When consumers cannot handle a “12 second delay on Netflix,” Cheetham says it is strange to accept a four-week wait for a mortgage without a physical valuation. Part of the issue, he says, is a disconnect between the tech side and the lenders, but MPowered brings together both.

While the headline here is about fast answers, Cheetham says “speed can be misunderstood.”

He explains: “What [people] want is certainty, ease and consistency. These are all derivatives of a very fast process. 'Speed' is a sexy word that gets headlines, but it’s the attributes of it that make the difference, like certainty within the process.”

More than just offering a fast process, Cheetham sees this as “an industry milestone, something that has never been done,” and the first time a mortgage can be fully delivered by artificial intelligence (AI).

pre-submission. This all takes place in the form of a chatbot-style conversation, during which, Cheetham explains, “unbeknownst to the broker, they’re being asked dynamic questions unique to their client.”

AI is also used to read documentation and conduct automated valuations (AVMs), gathering around 19,000 data-points, as well as doing antimoney laundering (AML) checks.

Under this system, the journey from the start of the application through to the offer can take as little as 15 minutes and 37 seconds. Of course, not everything can be that fast, particularly in a regulated environment, but MPowered aims to provide decisioning within 24 hours, physical valuations allowing.

Risky business

One of the sticking points for the market has, of course, been around risk and the need for human sense-checks. MPowered’s system is built so that it can be configured to a risk appetite.

At submission, the system does its first hard credit check, which takes on average 22 seconds. At this stage, it refers to a human underwriter if it does not fit within risk parameters.

How does it work?

Looking under the bonnet, Cheetham says this is a “data-driven system, working in real-time.”

When filling out an application, rather than a static form that then sends the information to review, an AI-enabled system analyses the information, underwriting the mortgage live. Every time a field is filled in, the “whole mortgage is rewritten.”

When this system comes up against an inconsistency, or needs greater depth, it generates a question in real-time, allowing difficulties to be overcome before the point of submission. The system also only asks for information that has not already been collected through application programme interfaces (APIs)

Cheetham says: “I could automate 100% of mortgages 100% of the time. But I wouldn’t, because my risk appetite would say that could cause unforeseen outcomes. It’s about automating cases where we do have the confidence that the risk appetite is met.”

He adds that, as time goes on and the system gains access to even better data, that risk appetite will also become more confident.

He adds: “Just because we’re going fast, doesn’t mean we are lax in our operational approach. Customers get the right answer – it might be a no, but it’s correct. We test and test the tech to make sure we’re comfortable.

going fast, doesn’t mean we are lax –we’re they ‘manually’

“For many lenders, the USP is that they ‘manually’

The Intermediary | June 2024 86

underwrite everything. I say no, you ‘individualise’ your underwriting, and choose to do it manually. I individualise my underwriting too, but I choose to use technology.”

There are extra steps for higher risk cases, but “the machine underneath is still doing the work to present back to the underwriter.”

Out to market

This could be a moment of change for the market as a whole, as the platform is available to other lenders through partner business MQube.

“A lot of lenders are talking to us at the moment,” Cheetham says. “All the tech we’re talking about is going to be used by Nottingham Building Society later this year, for example.”

This is more than just getting the best for consumers, Cheetham says: “We’ve taken away the uncertainty and the inconsistency, putting time back into [brokers'] lives, giving them less stress. They can now go and generate more business or focus on the advice, which is what you really should be getting paid for. It’s taking all that unnecessary noise out of the process.”

There will always be scepticism about rapid tech advancements, which Cheetham says is important. For MPowered, the rule is that no matter how much testing and care goes into a system, “it doesn’t work until the brokers tell us it works, that’s the benchmark.”

Cheetham also notes that, in a heavily regulated, consumer-focused market, “you have to have a holistic operation. You can’t just have great tech and be super expensive. We need to deliver great tech with great pricing, products and service. That’s what we’re able to do as a business now.”

There will likely continue to be reticence about intimidating terms such as AI, but Cheetham explains that, while we may not always talk about it, we use AI constantly. This market must stop seeing it as the elephant in the room; change has already arrived. This is only becoming more important as the world remains volatile and property chains continue to be stressed. Certainty means control.

“It has never been more important for brokers than right now,” Cheetham says.

As for how this will look in the future, he concludes: “We are a natural innovator. We will make sure to do more offers faster, and when there is more work involved, we’ll be super transparent about it. There’s some really cool developments in the coming weeks that will be market-leading when it comes to transparency.

“We set up the business to change the market, and from the very first day we said the only way to do that was by creating genuinely better outcomes for the consumers and the broker.”  ●


As a former maternity support worker, Leah Creamer knows that no matter how carefully you prepare, life-changing moments don’t always go smoothly. Creamer is new to mortgage advising, having gained her CeMAP Level 3 qualification last year. Since December, she has worked for the mortgage and protection advice firm Moore Turner Associates.

In her six months as a qualified adviser, the people skills she learned working with new mothers have proven invaluable – especially the ability to listen and understand what matters most to clients as they make important life decisions. Her professional CeMAP training also prepared her for the fastidious work needed to fill out a mortgage application.

Creamer says: “The mortgage process can take up to six weeks on average, particularly for complex cases, given the amount of paperwork needed from a customer to get an application through, from bank statements to identity documents and payslips. It can be challenging managing clients’ applications in some cases, especially for those that are in a hurry to move quickly on a mortgage deal.

“However, waiting weeks or even months is not the case with MPowered Mortgages. The first time I applied for an MPowered mortgage, I was thrilled to become the first adviser to receive an instant, fully underwritten mortgage approval.”

She explains: “The borrower was single and young at just 26, but she had a stable job at the local county council and was looking to get an offer through as quickly as possible and secure the home of her dreams.

“I knew MPowered had earned a reputation for advanced technology, which allows it to underwrite and approve applications faster than any other lender.

“I found the online application form to be logically laid out, and the flow from section to section was smooth and glitch-free. There is an AI-powered chatbot that can instantly answer any questions you have while filling in the application, as well as a WhatsApp channel you can use to speak directly to a BDM.

“Completing the form took minutes, and once I’d uploaded three months of payslips, I checked through all the information I’d submitted and pressed send.

“I stood up to go and make myself a cup of tea, but before I’d even turned away from my computer, a notification flashed up to say ‘congratulations’ that my client’s application had been approved.

“It was a fully underwritten, fully approved mortgage offer. I called my client immediately to tell her the good news and she was delighted – she just wanted to know her remortgage was sorted and didn’t need to worry about going onto the SVR.

“I’m still a bit in shock at how quickly MPowered reviewed and approved my first application to them. I didn’t have time to make a cup of tea, let alone drink one, before getting the good news.”

87 June 2024 | The Intermediary

Advertise with The Intermediary and reach 11,000 current and next-generation property nance business leaders. With commercial opportunities spanning print, digital and events, e Intermediary has a multitude of creative channels that can deliver your marketing message to the people that matter. Contact Stephen Watson on STEPHEN @ THEINTERMEDIARY.CO.UK to discuss how e Intermediary can help your business achieve its goals. Want to share your message with the industry?

Data is key in reducing our carbon footprint

How the UK is set to decarbonise its residential housing stock has been a contentious subject over the past 12 months. A sustained period of high inflation, rising rents and voters disgruntled with the state of play in Whitehall prompted the Prime Minister to stall policies designed to reduce the sector’s carbon output.

Following that decision, the Climate Change Commi ee (CCC) warned Parliament that, while a 2035 phaseout date for fossil boilers is “potentially compatible” with net zero targets, exempting a fi h of households from meeting those standards “creates widespread uncertainty for consumers and supply chains.”

Added to this challenge is the fact that there is insufficient budget to fund household grants to pay for heat pumps. Despite hiking the grant from £5,000 to £7,500, the overall budget remained the same, meaning fewer households will have access to support.

According to the CCC, this means “a marked increase in risks to buildings decarbonisation.”

For lenders, this policy shi is not encouraging. Renters will not now save several hundred pounds on energy bills a year according to Government estimates. That has an impact on their disposable income, increasing the risk of rent arrears.

The condition of homes exposed to climate risk – flooding, heat damage, soil shrinkage, subsidence – is already a concern for lenders looking at property valuations.

As a market leader for retrofit assessment, design and co-ordination, we welcomed the Royal Institution of Chartered Surveyors’ (RICS) publication of its long-awaited

residential retrofit standard, a series of concise mandatory and recommended requirements, effective from 31st October 2024.

One of the biggest challenges when it comes to improving British homes’ energy efficiency is the diversity of housing stock. There is no onesize-fits-all.

What the RICS standard means

e RICS members’ overriding duty in retro t projects is to improve the energy e ciency of dwellings by undertaking their professional duties to the required standard. Retro t improvements in dwellings will likely include:

• Identifying defects – especially if the project is for a special property – that require attention before installation of energy e ciency measures and arranging for their satisfactory repair.

• Improving levels of insulation, airtightness, the supply of ventilation – controlled and uncontrolled – in the dwelling, internal air quality and managing hazards such as volatile organic compounds.

• Managing moisture in the dwelling, including preventing weather resistance.

• Installing e cient heating and cooling systems and reducing the risks of overheating.

• Provision of e cient water heating and lighting systems and other equipment and appliances.

• Installing e cient energy control, metering and monitoring systems and low and zero carbon technologies.

Retrofi ing homes with the best of intentions could actually damage them, with obvious knock-on effects on condition and value.

According to the CCC, half a million homes need to be retrofi ed every year from next year. By 2030, that rises to one million homes a year.

The role of surveyors in delivering on this cannot be underestimated – accurate assessment of the best approach is crucial to protect value, and ultimately lenders’ balance sheets. Capacity is challenging, however, and that’s where the industry needs to get smarter about how data supports this transition. At CoreLogic, we’ve been working on this for years now, and we’ve just taken another significant step on that journey, completing our acquisition of Parity Projects.

Parity is a leading expert in the domestic housing retrofit sector. Having collaborated with Parity for years, we know how positive this will be both for us and our customers.

Be er use of data is instrumental in providing expertise and tools that enable stakeholders to reduce the carbon footprint of building projects. Parity Projects uses data science, proprietary so ware and analysis to help clients deliver energy efficiency competently and effectively. The team works with local authorities, landlords of every size, mortgage providers and private homeowners to develop cost-effective programmes.

This will further enhance the retrofit services that CoreLogic currently offers, with a key focus on providing our clients with the ability to analyse address level data to identify and assess and model properties that should be targeted for retrofit measures. ●

Opinion TECHNOLOGY June 2024 | The Intermediary 89

More business, new faces and nancial exclusion

LAURA THOMAS is regional sales manager at Equi nance

The good news just keeps coming, with second charge volumes increasing by 5% in March and first quarter growth in 2024 now at 8%, according to the latest figures from the Finance & Leasing Association (FLA). The value of new lending increased by 11% to £137m in March, and by 14% across Q1 compared to the same quarter in 2023.

Those figures are only part of the good news in the second charge market. The announcement that a brand new lender has launched, dedicated to second charge lending, is a clear demonstration of faith being placed in the long term viability of our channel.

The new kid on the block is clearly determined to start the way it means to go on, outlining a strategy built around dynamic pricing and a commitment to customer care. The proof of that commitment will only be known in the months to come, and while on the face of it this provides us with more competition, a new player can only be good for customer choice and greater engagement from the broker community.


I hear plenty of objections from brokers who say they won’t consider a second charge solution for clients looking to raise capital, and I can understand some of their concerns. That might sound odd, coming from someone who has worked in the sector for more years than I care to mention, but to my mind a lot of the issues centre around the perception of second charge, rather than a tangible reason for discounting it altogether.

Evidence tells us that brokers do undertake to tell clients that there is

a second charge option, but rarely do they provide evidence in black and white that, in direct comparison, one choice is more competitive than the other.

That is hardly surprising when doing a like-for-like comparison is not easy, primarily because the formats are different.

It is not helped by the difference in the administrative processes, where second charge lending still has a legacy process dating from Consumer Credit Act (CCA) days, which is very different to the first charge process.

At Equifinance, we have always believed that education and demonstration, rather than forcing the issue, is the way forward.

Advisers, no ma er how set in their ways, do in our experience become more receptive to second charge mortgages when examples can prove there are instances where a secured loan is the best option for a customer.

So, by taking the stance that remortgages and second charges both have a place in today’s market, the irresistible force and the immovable object cease to be in opposition.

Financial exclusion

The Covid-19 pandemic hurt us all, and three years on we are seeing it manifested in the latest data, showing that outstanding balances on credit cards grew by 9.5% last year.

As unsecured debt grows, it has a direct effect on people’s ability to obtain the best rates when they remortgage as their fixed rate mortgage deals come to an end, or when they just want to raise capital. We can hardly blame lenders for applying affordability rules to make sure that customers don’t take on loans and mortgages that they will find difficult to sustain.

To my mind a lot of the issues centre around the perception of second charge, rather than a tangible reason for discounting it altogether”

Most advisers would admit that they are not trained debt counsellors, but many times find themselves with a customer who is looking for more funding but who, on examination, might be be er served by not taking another loan and instead talking to creditors about mutually agreed payment plans, for example.

That said, structured debt solutions, including second charge mortgages, should be considered in circumstances where first charge lenders are not prepared to lend and all other options have been discounted.

In debt consolidation there is a strong case for new finance spread over a different timescale, o en at a lower rate, which can reduce monthly outgoings and ease the burden of trying to repay sums which cannot currently be supported.

In addition, restructuring debt, if used sensibly, o en enables a customer to avoid a declining credit profile and the subsequent consequences of this. ●

Opinion SECOND CHARGE The Intermediary | June 2024 90

time to explore second charge mortgages

For homeowners wishing to capital raise by borrowing against their property, remortgaging their home is o en the first thought that springs to mind. Yet in many cases, a second charge mortgage could also prove an effective capital raising tool for addressing their borrowing needs.

Second charge mortgages have come into their own in recent years, as the ongoing uncertainty in the economy and rising living costs have seen a growing number of brokers and borrowers acknowledge the benefits of taking out a second charge where a capital injection is needed.

Recent figures from the Finance & Leasing Association (FLA) show the market is continuing to perform strongly in 2024, with new business volumes up by 5% in March 2024 and increasing 14% in value during the first three months of the year.

Debt consolidation remains the primary reason for borrowers to take out a second charge loan, accounting for 82% of all agreements in the first three months of the year, but the money raised from a second charge can in fact be used for a variety of purposes, including home improvements, purchasing an additional property, paying a tax bill or financing a wedding.

Despite the upward trend in demand for the product, many brokers and borrowers continue to shy away from the sector, either because they are unfamiliar with how it works or simply because they do not know where to start in order to get the ball rolling.

It is here that speaking to a specialist lender such as Norton Home Loans can help. With over 50 years’ worth of expertise in this area of the market,

Norton Home Loans can provide the guidance and resources needed for brokers to gain insight into the sector, as well as offering them the support they need to offer an alternative solution to their clients.

The fact is, a second charge mortgage is always worth considering for any client looking to raise capital. While there will obviously be situations where the product may not be suitable, there will also be instances where a second charge mortgage may well be the best option.

For example, some clients looking to capital raise may be unable to remortgage or secure a further advance with their first charge lender, in which case, the possibility of taking out a second charge loan would need to be explored.

Similarly, there will be some instances where a client may have locked themselves into a long-term 5-year or 10-year fixed rate mortgage before interest rates started to climb, and remortgaging onto a higher rate or paying an early repayment charge (ERC) to exit their first mortgage may not be a financially astute move.

Speed and ease

One of the many benefits of a second charge mortgage is the speed at which the funds can be released, which coupled with the ease of the application process, makes it a potentially more a ractive option than remortgaging in situations where the borrower needs to move quickly.

They can also prove more beneficial in situations where a client may find themselves locked out of other forms of credit, because they only work reduced or part-time hours, or due to age, ill health or family commitments.

For example, Norton Home Loans’ inclusive lending criteria means

applications from borrowers earning anything from £15,000 a year will be considered. This can be from a variety of sources, including benefits, maintenance payments and multiple jobs. Similary, there is flexibility in criteria for self-employed clients, differing contract types and customers in probation periods.

Despite the uptick in demand for second charge mortgages in recent years, many borrowers and brokers continue to shy away from the sector, or remain unaware of the circumstances in which a second charge may prove beneficial to their capital raising needs.

The fact is, a second charge mortgage is always worth considering for any client looking to raise capital”

Exploring the market’s potential presents brokers with the ideal opportunity to educate their clients on the benefits of the sector, as well as offer them an alternative to remortgaging when it comes to raising capital.

It also presents brokers with the opportunity to tap into this lucrative area of the specialist lending market and boost their revenue stream, an a ractive proposition in the current economic climate. ●

June 2024 | The Intermediary 91 Opinion SECOND CHARGE

When The Bank

Says Knockout!

As part of its mission to raise a whopping £50,000 for The Epilepsy Research Institute UK, mortgage and protection broker When The Bank Says No, alongside main sponsors Together and Pepper Money, recently hosted a highly successful ‘It’s a Knockout’ style charity event.

maintained that, and it’s that fight that saw me move twice up waiting lists because I knew my son wouldn’t get through this with medicine alone. I felt that in my bones.

“Through all of this, I found my a ention drawing to those children who didn’t have me fighting their corner, to the funding – or lack of it – within the UK.

On the day, a endees raised £1,500, boosted up to £5,000 on the ‘The Epilepsy Warrior’ gofundme page, which will remain open for donations.

“With be er research, brain surgery could be recommended before five medicines, which in Marcus' case would have saved months of suffering.

Emma Jones, MD and founder of When The Bank Says No, says: “Balancing a morning team huddle over Zoom with [my son] Marcus by my side in his bouncer, I would look down to see him red in the face and having what I assumed was a seizure. He was four months old.

who small

“There’s no denying that I’m a woman who won’t take no for an answer. This last two and a half years, I’ve

“If you can donate today, even a small amount, it adds up. Epilepsy Research Institute is a small charity crying out for support so they can back a PhD student into epilepsy who could be the Marie Curie for this condition.”

You can donate using the QR code below:

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... Glasgow

As the nation grapples with fluctuating interest rates and an evolving political landscape, Glasgow’s property market remains a focal point for investors and homebuyers alike.

Against the backdrop of the UK’s wider mortgage sector, Glasgow, much like the rest of the Scottish market, has been largely insulated from the chaos over the past 18 months. Bucking wider UK trends, the area has seen a promising rise in buyer demand, along with a sustained increase in house prices over the past year.

As a city well placed near Scotland’s rugged west coast, boasting a wealth of transport links, as well as its status as a vibrant university town, the region remains an attractive prospect for potential investors – even as affordability pressures and fluctuating mortgage rates continue to hamper the wider market.

The Intermediary sat down with local experts to delve into the continued success of the Glasgow property sector, discussing the area’s current mortgage trends, ongoing opportunities and potential challenges within the market.

Current values

According to the latest data from Zoopla, the average sold price for a

property in Glasgow over the past 12 months was approximately £233,638. This is a consistent figure when compared with the overall Scottish average of £223,657.

In terms of different property types, detached homes in the area lead the way in price, fetching an average of £373,848. Meanwhile, semi-detached homes within the Glaswegian postcode could set buyers back an average price of £256,596.

Terraced homes cost movers an average of £211,955, while flats and maisonettes fetch approximately £162,119.

According to Walker Fraser Steele, the area has seen a steady increase in house prices as of late, recording a slight 2.8% rise over the past 12 months, specifially.

Sustained activity

In line with this ongoing rise in house prices, local brokers and experts report ongoing activity within the market, particularly as the overall mortgage market has shown signs of a slow recovery in the first half of 2024.

According to Ross McMillan, owner and mortgage adviser at Blue Fish Mortgage Solutions, much like the rest of Scotland the region has been a hotbed for consistent price growth and ongoing opportunity.

He says: “Unlike many other regions in the UK, Glasgow continues to

experience consistent increases in property values month-on-month.”

In his view, this trend is set to continue, with “no indications of a slowdown on the horizon anytime soon.”

Scott Jack, regional development director at Walker Fraser Steele, agrees with this assessment, noting that Glasgow has demonstrated an enduring resilience over the past few months, rather than following the trends of what has been a largely “subdued housing market.”

He attributes this rise in prices to this sustained activity, along with the somewhat limited housing stock available in the region – which has made for competitive marketplace. →

Glasgow The Intermediary | June 2024 94 LOCAL FOCUS
The market in Glasgow has displayed a resounding resilience despite national economic pressures that have threatened to derail the mortgage market over the past two years”

Short on homes, not buyers

he Glasgow property market is very buoyant at the moment, and we’re still seeing lots of closing dates with many properties selling well in excess of the home report value throughout the city. This is partly down to a severe lack of new properties coming on to the market, with there being no shortage of buyers.

Over the past few months, the appetite for residential mortgages has been increasing. We’ve been working with a broad range of customers, from first-time buyers to home movers, all looking for a range of different properties. Anything from starter flats, family homes, through to buyers looking to upsize or downsize in line with their changing needs.

There’s always a risk that higher interest rates will put people off buying, but that certainly hasn’t been the case. If anything, buyers have maybe had to adjust their expectations.

We are completely independent, meaning we look across the whole of the market to guarantee we get the very best deals for our clients, but we do work a lot with Halifax, NatWest and Nationwide, who we find are particularly good for first-time buyers and young professionals.

Our key demographic tends to be first-time buyers, young professionals, business owners, and sports professionals. Most of our clients are looking to buy in the West End of Glasgow.

We have clients as far afield as London, France, South Africa, and even Dubai.

If there are any trends we’re seeing in the current mortgage market, it would be that many clients are still opting for 5-year fixed rate deals, as this gives them the added comfort of knowing exactly what they’re paying every month.

There is a fantastic new development being launched next month on Napiershall Street, in the heart of the West End of Glasgow.

Kelvin Properties is in the finishing stages of redeveloping a former Victorian red sandstone school building, back into use, bringing 49 luxury homes to the market. Glasgow is known for its rich architectural history, and it’s great to see these buildings being brought back to life, and to such a high standard.

The buy-to-let market over the past couple of years has slowed, but this has been inevitable following the many changes in legislation that have been introduced over the past few years.

95 June 2024 | The Intermediary

Supply and demand

he housing market in Glasgow exhibits resilience, characterised by sustained demand and limited inventory. Property prices have seen moderate growth of 2.8% annually in what has been a subdued housing market, reflecting the city’s continued allure among buyers and investors.

Finnieston has emerged as a prominent hotspot among younger buyers, renowned for its nightlife and central location. Shawlands, with its excellent transport links and bustling community, also garners considerable attention. Meanwhile, West End remains highly sought after for its period properties and proximity to the University of Glasgow. While affordability challenges persist, presenting obstacles for prospective buyers seeking entry into desirable locations, ongoing development activity in the suburbs aims to meet housing need.

Supply and demand

Market competitiveness is most definitely a central pillar of Glasgow’s local property sector at the moment, with multiple brokers observing fierce bidding wars between investors on a regular basis.

Graeme Nichols, managing director and mortgage specialist at West End Mortgages, has seen many properties selling in excess of their home report value across the city.

“This is partly down to a severe lack of new properties coming on to the market, with there being no shortage of buyers,” he observes.

McMillan agrees, stating that the persistent imbalance between supply and demand has ultimately led to the growing house prices as of late. While this is a positive for those working in this sector, it has resulted in a difficult market for some cohorts.

He adds: “It’s common for purchase prices to exceed home report [survey] values by 15% to 30%, creating a challenging environment, particularly for first-time buyers.”

Buyer demographics

Despite the affordability challenges facing first-time buyers, both on a wider economic and more local scale, Glasgow’s market still garners a wealth of interest from the first-timer demographic.

According to Nichols, his key client base tends to be those wishing to take their first step onto the ladder, along

with young professionals and business owners. McMillan corroborates this, noting that demand for one-bedroom and two-bedroom flats from first-time buyers remains particularly strong.

He also notes that the middle to upper tiers of the market are largely driven by second or third-time movers looking for family homes – an area that, although briefly stymied by wider market pressures last year, has since regained momentum.

Nichols also notes a clear demand for property from investors based outside of the city, looking to capitalise on its prosperous market.

He says that he has seen clients as far afield as London, France, South Africa, and even Dubai who have all expressed interest in entering the local Glasgow property scene.

Popular lenders

With buyer activity particularly buoyant in the area, those wishing to purchase a property in the Glasgow postcode area have plenty of lenders to choose from.

Nichols says that standard whole of market lenders seem to be particularly popular with buyers.

Indeed, he reports that ‘big six’ lenders such as Halifax, NatWest and Nationwide are commonly used, and “are particularly good for first-time buyers and young professionals.”

Ongoing development

In direct response to lively buyer and lender activity, the Glasgow area

is now home to a number of new developments, as housebuilders struggle to keep up with rising demand.

According to Jack, while affordability challenges persist, ongoing development activity in the suburbs of the city abounds – with Finnieston in particular emerging as a prominent hotspot among younger buyers, due to its central location and bustling nightlife.

In addition, the Shawlands area, with well-connected transport links and thriving community feel, also garners considerable attention.

Meanwhile, West End remains highly sought after, particularly with buyers with considerable budgets, not least for its period properties and proximity to the University of Glasgow.

Known for its “rich architectural history,” Nichols notes that an exciting new development is also being launched next month on Napiershall Street.

This development will see the refurbishment of a former Victorian red sandstone school building, bringing it back into use and delivering 49 luxury homes.

Rental market

However, as buyers scramble to secure existing stock and new developments continue to pop up around the city to satisfy demand, the same level of activity cannot be said of the buy-to-let (BTL) market in the area.

Although buoyed by experienced portfolio landlords and those in the student accommodation sector, the rental market has seen its fair share of struggles of late.

Nichols has seen the buy-to-let market slow down, and chalks this stagnation up to the changes in rental legislation that have been introduced by the Scottish Government over the past few years.

McMillan agrees, noting that, while well-intentioned, these legislative changes have led to rising rents, reduced stock, and significant uncertainty for landlords operating in the sector.

He adds that these measures have effectively stalled new BTL purchases, compounded by the 6% Additional Dwelling Supplement for second homes which came into effect from April of this year.

The Intermediary | June 2024 96 Glasgow LOCAL FOCUS


he Glasgow housing market has shown remarkable resilience in recent years, mirroring the steady and sustained house price growth seen across much of Scotland. Unlike many other regions in the UK, Glasgow continues to experience consistent increases in property values month-on-month, with no indications of a slowdown on the horizon anytime soon.

A key driver of this growth is the persistent imbalance between supply and demand. The number of properties available on the market falls significantly short of the demand, leading to highly competitive bidding situations.

It’s common for purchase prices to exceed home report values by 15% to 30%, creating a challenging environment, particularly for first-time buyers.

With market prices so frequently in excess of mortgage valuations, the level of deposits required often far surpasses the minimum 5% needed for mortgage purposes, and so subsequently this can pose a significant hurdle for many prospective homeowners.

Despite these challenges, demand from first-time buyers for one and two-bedroom flats remains incredibly strong. While the mid to upper tiers of the market, largely driven by family homes and second or third movers, did show signs of some stagnation last year, this segment does appear to have since regained momentum.

The traditionally popular West End continues to attract high interest, but with many potential buyers now being priced out, areas in the South and East of the city are experiencing increased demand as buyers seek to maximise their budgets.

Drawing from my 15 years of experience as an estate agent in and around Glasgow before transitioning to mortgage advice, I do have a unique perspective on the market.

A significant portion of my clients are initially first-time buyers who appreciate and benefit from my in-depth knowledge and guidance throughout the full Scottish housebuying process, beyond just securing the best mortgage deals.

Fortunately, this is also a buyer type that within which demand and desire to purchase – regardless of rates and general outlooks – seems relentlessly unquenchable.

Recent years have seen the Scottish Government implement policies in the rental market that, while well-intentioned, have led to rising rents, reduced stock, and significant uncertainty.

These measures have effectively stalled new buy-to-let purchases, compounded by the 6% Additional Dwelling Supplement for second homes, which has further deterred both new and existing landlords.

However, with recent changes in Government personnel, there is cautious optimism that future interventions may be more balanced, potentially revitalising the buy-to-let market in Glasgow and providing much-needed rental properties for those not yet ready or able to purchase a home.

In summary, Glasgow’s housing market remains robust, with strong demand across various segments despite regulatory challenges. The city is home to many large employers – particularly within the financial sector – and continues to offer a dynamic and attractive proposition for buyers of all kinds.


However, McMillan remains optimistic regarding the future of the private rented sector in Glasgow.

He says: “With recent changes in Government personnel, there is cautious optimism that future interventions may be more balanced, potentially revitalising the buy-to-let market in Glasgow and providing much-needed rental properties for those not yet ready or able to purchase a home.”

Continued allure

There’s no doubt that the market in Glasgow has displayed a resounding resilience despite national economic pressures that have threatened to derail the mortgage market over the past two years.

With demand higher than ever before, and prices on the rise, those lucky enough to already own property in the area are set to secure a healthy return on their investment.

As new developments attract fresh investors to the city, Glasgow’s status as a cultural hub and university city continues to inject life into its housing market.

Nevertheless, considering the hiccups within its rental market, and some difficult legislative changes to boot, local brokers are still set to have their work cut out for them over the next few months.

Overall, this market is predicted to continue apace, and even improve as the wider financial outlook enters into a cautious recovery.

McMillan concludes: “Glasgow’s housing market remains robust, with strong demand across various segments despite regulatory challenges […] and continues to offer a dynamic and attractive proposition for buyers of all kinds.” ●

97 June 2024 | The Intermediary Glasgow LOCAL FOCUS
H OUSE PRICES IN GLASGOW  DETACHED £375,848  SEMI-DETACHED £256,596  TERRACED £211,955  FLAT £163,119

On the move...

HTB expands specialist mortgages broker support

Hampshire Trust Bank (HTB) has expanded its specialist mortgages broker support team with the addition of four lending managers.

Laila Perryman joins from Sirius Group, Edward Shannon from United Trust Bank, Alex Mills from Australian bank Moula, and Gabriella Csende has been promoted from lending assessor.

The broker support team serves as the dedicated contact for brokers and works closely with BDMs and underwriters.

Alex Upton, managing director of specialist mortgages, said: “Lending managers are the thread in our fabric, intricately weaved into our team to pull together vital information to ensure brokers receive the a entive service they, and their clients, deserve. And with these four new recruits offering heaps of personality, experience and energy, I’m convinced we’ve found the golden thread to strengthen

Specialist broker AFIG has added two team members as part of its new structure and expansion plans: Andrew Hosford, formerly of Pure Structured Finance, as structured finance director, and Kayley Stelfox, formerly of Octopus Real Estate, as completion manager. Formerly Adapt Finance, AFIG recently concluded its busiest quarter on record.

Hosford said: “Together we will continue to build something truly special while ensuring our clients receive the best care, relationship and finance solutions for their projects.”

CEO Jordan McBriar added: “To be able to add such in-depth professional knowledge to the business in such a short period of time is immeasurable."

Just Mortgages appoints Zarah Gulfraz as North area director

Just Mortgages has strengthened its selfemployed division, appointing Zarah Gulfraz as area director for the North.

Gulfraz has experience spanning roles with Mojo Mortgages, Britannia Building Society, Aldermore and

She said: “Alongside helping brokers to grow their businesses, a key focus will be recruitment –breaking down the barriers and any illusions around self-employed to show the many talented employed brokers how they can get what they want from their careers and grow a successful business.

“I’ve been blown away by the level of training and support Just Mortgages provides to its brokers. Everything has been top-notch – including the adviser induction which I was able to join."

Leek Building Society appoints Andy Deeks as CEO

Aer a six-year tenure as CEO, Leek Building Society’s Andrew Healy will step down from his position in July. The board has appointed Andy Deeks, who it said will share the same values and community-focused ethos, and will build on the foundations established over recent years.

Deeks said: “It’s a real privilege to be appointed as chief executive officer of Leek Building Society.

“I’ve been hugely impressed with the society so far and I look forward

to working with the team at Leek to further develop this modern, progressive mutual organisation to be an even be er place for savers, borrowers, colleagues and communities.”

Healy said: “It has been an honour to work with such a wonderful team and I’m tremendously proud that together we have not only fortified the society’s financial strength but even more importantly, we have delivered on our purpose to enhance the lives of our members, employees and communities.”

The Intermediary | June 2024 98

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