The Intermediary – March 2024

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

INTERVIEW ▮ A look back at 100 years of mutuality with the Vernon

FEATURE ▮ The market reacts in the wake of another divisive Budget

Intermediary.

The

www.theintermediary.co.uk | Issue 14 | March 2024 | £6

Deafening silence

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Contents

INTERVIEWS & PROFILES

The Interview 22 VERNON BUIL DING S O CIET Y

Steve Fletcher reflects as the society celebrates its 100th year

38 Feature 38

Deafening silence: The market reacts to another divisive Budget

REGULARS

Broker business 64

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

Local focus 82

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

Profile 32 C H L M O R T G AG E S

Lynne French looks at risk and service in a time of uncertainty for landlords

Q&A 78 C O U N T RY W I D E S U RV E Y I N G S E RV I C E S

Matthew Cumber on tech, the business, and the push for more consumer awareness

On the Move 86

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

SECTORS AT-A-GLANCE

Residential 6 Buy-to-let 26 Specialist Finance 44 Later Life 62 Second Charge 70 Protection 74 Technology 80

Meet the BDM 50, 60 Aaron Tinmouth of Reward Finance Group and Lee Williams of Saffron for Intermediaries discuss the challenges and opportunities for BDMs

From the editor...

T

here are many things I could say about the Spring Budget, most in line with my usual editorial lean when it comes to the Tories. I, of course, cannot hope to provide the insight and expertise to be found among our cohort of experts.

So, this month we have worked hard to bring you a feature that calls on these experts to debrief and disentangle the thwarted optimism, the missed opportunities, and the overarching sense that, while the housing market is still likely to be a political football this year, the shape of play is deeply unclear.

Far be it from me to take it upon myself to point out that, in the few relevant measures he did introduce, Hunt gave with one hand and took with another when it comes to landlords, or that various measures have implementation dates a er the General Election, meaning they might come to nought a er all…

No, we all know that this year it’s going to be more about party manifestos than the Red Book, which is perhaps some consolation a er we were all le feeling nonplussed.

Instead, I’ll take a moment to reflect on the Budget – and indeed the Commons – itself.

Without the pesky distraction of any impactful housing policy to speak of, I must admit I found myself cringing at the whole pantomime.

I am not necessarily against the British tradition of a lively revival of the “oh no he didn’t” call and response. However, at times I baulk at the sight of these largely overpaid, overstuffed

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The Team

politicians, many of whom wouldn’t know the cost-of-living crisis if it hit their constituents in the face – which it is – having a good ol’ time jockeying for a ention across the hallowed halls of Government, with li le respect for the people whose lives these policies will actually affect.

This, for once, is not just an anti-Tory rant from me. They’re all the problem, and I don’t exactly feel a swelling of democratic pride at the image of the Deputy Speaker endlessly having to scold both sides of the Commons like naughty schoolchildren.

Perhaps this is me being dour and no fun, but it doesn’t feel like we are facing a difficult economic period with sense and sobriety when important announcements are li le more than a chance for pe y point-scoring and blowing raspberries.

Of course I understand the symbolic role that this back and forth has in our political machine, the egalitarian ideal that even our leaders must expect to be challenged any time they take the stand. All well and good in theory, but recently it has me feeling uncomfortable and embarrassed, watched as we are by the world.

That said, I did appreicate one heckling cry of “when are you going to talk about the recession?”

When, indeed. Hunt’s speech was all economic prowess, Tory success, and obviously Idris Elba.

Yet again, we are le wondering if we are all talking about the same economy… ●

Jessica Bird @jess_jbird

@IntermediaryUK

www.facebook.com/IntermediaryUK

Contributors

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

INTERVIEW ▮ A look back at 100 years of mutuality with the Vernon

FEATURE ▮ The market reacts in the wake of another divisive Budget

Intermediary.

The

www.theintermediary.co.uk | Issue 14 | March 2024 | £6

Deafening silence

Copyright © 2024 The Intermediary

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The Intermediary | March 2024

3

RESIDENTIAL Opinion

Anticipating an upturn

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ortgage rates continued to fall at the start of this year, with many lenders aggressively repricing products to a ract new borrowers. This was largely driven by reports of slowing inflation, growing confidence that the Bank of England would soon begin to cut rates, and the decline in market activity in 2023.

According to Moneyfacts, the average 2-year fixed rate fell to 5.59% in the middle of January, down from 6.85% at the beginning of August last year, while data from the Bank of England revealed a steady increase in mortgage approvals for house purchases, from 47,400 in October to 55,200 in January.

Yet late January and early February saw the downward trend in rates abruptly reverse as high street lenders adjusted the pricing of fixed rate products, with the average 2-year fixed rate mortgage increasing to 5.75% at the end of February.

SWAP rates, which have started to increase again, are likely to have had an impact here. SWAPs may have been pushed up when inflation held firm at 4% in January, contrary to economists’ forecasts, which has fuelled speculation that the Bank of England may delay making cuts to the base rate. Beyond the economic picture, the prospect of escalating geopolitical tension in the Middle East as well as the upcoming elections in

Steady increase in mortgage approvals last year

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The Intermediary | March 2024

the UK and the US this year may have also played a role.

For the most part, however, mortgage pricing by high street lenders remains low in comparison to last year, suggesting that the competitive market dynamics seen at the start of this year could extend into the coming months. This possibility seems more likely when considering the marked slowdown in activity in the la er part of 2023, with many lenders likely hoping to continue a racting new borrowers to make up for the lost business of last year.

Consumer confidence Of course, the future direction of the mortgage market will, as ever, remain closely tied to consumer confidence.

While we saw positive signs towards the end of last year, as well as in January, the latest data suggests that many households remain concerned about the effects of inflated prices and higher interest rates.

Consumer confidence dropped to -21 in February, from a two-year high of -19 in January, according to research company GfK, with January’s reading following three consecutive months of steady increases. January’s inflation reading could have provoked concerns among households that prices may rise again, while others might have also been shaken by reports that the UK entered a recession towards the end of last year. This year’s General Election has also been contributing to the uncertainty facing the mortgage market. Both political parties have been placing a notable emphasis on housing, with lenders paying close a ention to signs of potential changes to policy.

The prospect of a 99% mortgage scheme seized headlines in recent months, a racting both praise and criticism. Meanwhile, the Labour Party has been positioning itself as an advocate for long-term fixed rate

VICKI HARRIS is chief commercial officer at Kensington Mortgages

mortgages, which has likewise been met with mixed reactions from commentators. As market conditions continue to evolve, lenders have been taking steps to adapt their offering to meet customer needs.

At Kensington, we have been reducing rates and introducing new options for residential and buy-to-let (BTL) customers, as well as aligning our credit criteria to reflect borrower requirements. In addition, some lenders have been reviewing their affordability models to reflect the economic environment, while others have been reducing affordability tests for landlords to encourage interest in BTL products.

Despite the market volatility that we saw in February, and while uncertainty undoubtedly remains, we are cautiously optimistic in our outlook for the year. Bringing inflation down to 2% may still require further effort from policymakers, but the considerable drop from October 2022’s 11.1% peak should be encouraging. As economic conditions continue to cool, rate cuts from the Bank of England can be expected later in the year, although these are unlikely to take rates down to the levels seen in recent years. Despite recent repricing, mortgage rates have generally stabilised, which should help to rebuild the confidence of prospective buyers.

Many people who perhaps held off moving last year are likely now approaching a stage where they are preparing to move forward with their purchases. Like other lenders, we are therefore gearing up for a positive shi in market conditions, preparing to manage an increase in volumes ahead of an anticipated upturn in activity later this year. ●

RESIDENTIAL Opinion

Breaking records and strangleholds to help people buy

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ur recently published financial results for 2023 show we’re delivering on our purpose of pu ing homeownership in the reach of more people, generation a er generation – and breaking society records in the process.

In what was one of the hardest years to afford a home since the society was founded in 1875, we helped nearly 18,000 first-time buyers to get on the housing ladder, more than half of our new mortgages. We continued as the market leading Shared Ownership lender, with a 23.5% year-on-year increase in applications for Shared Ownership mortgages, and we lent £4.4bn for residential mortgages, increasing our market share in 2023 from 1.6% to 2.0%.

Streamlining journeys Of course, these achievements are shared with our broker partners. Each and every one is vital to our success – you help us push our purpose forward.

That’s why we’re commi ed to making working with us as easy and efficient as possible. Last year, we invested in customer service and digital-led transformation programmes, which created streamlined lending journeys for brokers and an improvement in our net promoter score.

We concentrated our support on the needs of aspiring homeowners and launched innovative products designed to help break down barriers which prevent home ownership, such as Experian Boost, Home Deposit Saver, and Reach Mortgages.

Purpose through partnerships Innovation doesn’t just come in the guise of products. We believe

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The Intermediary | March 2024

we are the first lender to announce partnerships with local authorities to restrict holiday let lending where they feel it is hindering the ability for people to own a home. From the end of March, we will start a 12-month trial restricting new loans on holiday let homes in certain areas of North Norfolk and North Yorkshire.

Importantly, existing holiday let borrowers are unaffected.

Support for the pilot schemes has been almost entirely positive since we announced it. ‘Almost’ is important to recognise. Some say the pilot schemes will have a limited impact, some suggest borrowers will simply go to a different lender, and others question why we would close down a potential revenue stream.

Yet these views fail to grasp the significance of our purpose to the society. Homeownership today has rarely been as unaffordable, inaccessible, and unavailable. We want to change that, to address the clear problem that, in some areas, holiday lets have grown to have a stranglehold on the pipeline of homes available for local people to live in.

The scale of the impact of holiday lets is acute. According to Generation Rent, there are more than 73,000 holiday homes in Great Britain, with the latest figures showing an annual increase of 7,000. North Yorkshire was one of seven areas where the growth in holiday homes effectively cut new supply by half.

A er consulting with the councils over the restrictions, we’ve sought to balance local housing needs with the economic benefits tourism can provide. Each authority has identified postcode areas where housing pressures are most serious, and where they agree with holiday let lending being restricted.

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

Those locations will be added to our systems to prevent any mortgage applications received in those areas from being approved.

It follows a similar decision in 2022, when we became the first national lender to pull out of funding purchases of second residential homes, allowing us to instead increase lending to people ge ing on the property ladder.

Our decision simply adds to the arsenal of options available to local authorities to balance local housing needs with economic benefits in a way which leaves power in the hands of the local authorities.

Increasing supply We will learn through the trial how effective this measure can be in increasing the supply of residential homes, gaining greater insight on steps that can make a positive difference, and in turn hopefully encouraging other lenders to follow our actions.

Ben Twomey, chief executive of Generation Rent, backed this view: “The massive increase in short-term holiday lets has seen renters turfed out of our homes and priced out of our communities. Generation Rent is pleased that Leeds Building Society is acting on this issue and prioritising the necessity of homes over the luxury of holidays.”

Our achievements show the society at its best, but the most important measure is how many people trust us to help them to achieve their ambitions. Our dedication to this – our purpose – continues unchanged.

Ater all, everyone deserves a place to call home. ●

RESIDENTIAL Opinion

Customer interest is there, advisers must be ready to act

F

ebruary 2024 took the spots for the second and third-highest days for mortgage searches ever.

It also took top place for the busiest week ever for self-employed mortgage searches on the Twenty7tec platform.

The data tells us that January and February have been the busiest ever opening months to the year since our inception 10 years ago; we’re up 19.1% for all searches.

When looking at searches done by self-employed people, January 2024 was the busiest month ever, and the start of the year has been up 19.41% on last year.

In February 2024, there was a 10.95% li in self-employed mortgages overall, but a 65.37% li in the volume of people who declared as a limited company compared to the same time last year.

With these figures in mind, it’s safe to say that there are some very positive signs for the market.

What does 2024 look like?

It’s likely the market will cool slightly, and while February was certainly very busy across the board, it wasn’t as busy as January. However, with this in mind it’s likely to be significantly more active than the levels we witnessed in 2023.

It’s likely that advisers are currently being kept busy by the peak in interest from customers, and that many conversations are happening as customers review their opportunity to purchase and find the right time.

The mortgage searches themselves are an indicator of interest from customers, and those with their eyes on a home will need to be guided by their adviser on when to make their next move. This is something

that, while we’re still in a high rate environment – which has increased slightly from January to February – will keep some customers hesitant, as people may still feel they are overstretching.

While the search numbers are positive, we’re not quite in a comfortable position where all customers can push on. However, we are definitely in a position where customers are trying to line themselves up to move quickly if the market improves. The house stock is there, and the advisers are ready, but for some customers to advance their position, they are looking for the market to improve, which, of course, it can rapidly. Early 2024 proves this very point.

This ‘eyes on the prize’ mentality for rates inspired our real-time Rate Watch service on our Communicate Platform, which notifies brokers when lenders announce rate cuts. This means advisers have peace of mind that they have immediate access to information they need for customers, improving the service advisers offer.

Self-employed borrowers Naturally, when there’s a more challenging market around rates, the self-employed market can go quieter. My gut tells me that this is around education; the self-employed customer base believes it’s harder for them to get a mortgage than an employed customer. Of course, it’s a delicate balance. Those who are self-employed are not only weighing up the mortgage market, but they are balancing the books alongside their business prospects; where there’s a more challenging economic situation with high inflation, it most likely impacts the interest in big decisions like moving or buying a home.

NATHAN REILLY is director at Twenty7tec

We’ve seen many positive news stories around the market lately, which has likely sparked more interest from selfemployed customers” So, when headlines are more negative about the mortgage market, they become less engaged and switch off unless they have to act.

We’ve seen many positive news stories around the market lately, which has likely sparked more interest from self-employed customers who want to explore the rates available to them; the 10.95% li in self-employed searches we’ve seen this year certainly shows this.

There’s lots of research showing that self-employed customers feel it’s harder for them to get a mortgage; Pepper Money recently found that 80% of self-employed people say that this makes it more difficult for them to get a mortgage.

But this is a common misconception; of course, specific criteria need to be met, but ultimately there are plenty of options to find the right lender for a self-employed customer, as long as the adviser understands the market.

To engage with the self-employed customer base, advisers need to find a be er way to get this message out and reassure them that they can move; it’s just knowing how and who to speak to. ● March 2024 | The Intermediary

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RESIDENTIAL Opinion

The mortgage shake-up

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lexible long-term fixed rate mortgages are the missing jigsaw piece of the mortgage market, providing much-needed stability and flexibility for borrowers. Like with anything different, it can take time to feel comfortable with a new offering, and for both brokers and borrowers to understand the benefits it can bring.

However, with the turmoil we’ve seen in recent months, a new option that can give certainty over mortgage payments for up to 40 years could be exactly what’s needed to help put borrowers back in control.

Why must the market change?

For too long, lenders with a short-term focus have dictated the terms of the mortgage market because it matches their short-term funding. This has resulted in a market where the risk falls onto borrowers – whether the risk of interest rates rising in the future, of not being able to remortgage in the future, or that product options will be removed when deals come to an end – short-term fixed rates can present problems for borrowers.

Unfortunately, we’re seeing a lot of that pain today. Of course, the risk isn’t isolated to borrowers.

Short-term business means brokers experience this too.

The regulation impact The landscape of mortgages is evolving, and with it, the approach to mortgage advice has undergone a transformative shi . With Consumer Duty, there is an increased focus on protecting consumers from foreseeable harm, with an emphasis on regulated lenders and advisers justifying their actions and demonstrating fair, positive outcomes.

Perenna embraces this evolution, recognising Consumer Duty as both a guide and an ally in shaping our

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The Intermediary | March 2024

product concepts. We think that for advisers, networks and compliance functions, the message is clear.

Discuss all options and allow informed choices. Undoubtedly, borrowers will request the ‘cheapest’ mortgage, but the stakes of predicting the future incorrectly are high!

And what does ‘cheapest’ really mean?! This type of request demands a deep understanding of the borrower’s true needs, balancing initial costs against stability, long-term expenses, flexibility, and overall satisfaction.

In a market where short-term fixed rates have been the norm for so long, how can we expect borrowers to understand all the options available to them? To understand the true impact of their decision?

That’s why the regulations expect a mortgage adviser, as the expert, to present a range of options – including long-term fixed rates – to enable a genuine discussion about risk appetites. At Perenna, we’re proud to be providing options to help those conversations.

Long-term fixes How come long-term fixed rates aren’t more popular in the UK? Millions of people across the US and Europe already benefit from these products, so there’s no reason they can’t work in the UK. They key barrier is flexibility – or the perception of flexibility.

Typically, longer-term fixed rates offered in the UK have not given borrowers the flexibility they want.

However, a Perenna mortgage is different as it combines long-term stability with flexibility.

Borrowers have payment certainty for the whole mortgage term, knowing they need never pay a penny more. No teaser rates, no rising payments, no shocks.

Plus, as there’s no need to remortgage every few years, they can leave the worry – and fees – behind.

They can even take their mortgage

COLIN BELL is co-founder and chief operating officer at Perenna

with them when they move home or change to another lender or product without charge a er five years. Of course, we’ve considered brokers too – in addition to paying a proc fee at the point of completion, we also offer trail commission for the life of the loan.

Who is our mortgage designed for?

A Perenna mortgage can suit anyone looking for financial certainty, but is particularly a ractive to those underserved segments of first-time buyers looking to borrow a li le bit more, and later life borrowers wanting to release equity.

We’ll lend up to 95% loan-tovalue (LTV), with fixed rate terms of between 15 to 40-years, helping borrowers lower their monthly payment amount, with interest-only options available up to 75% LTV. As there’s no standard variable rate (SVR), there is no stress for interest rate risk, which we know restricts affordability.

Customers can borrow up to sixtimes their income, subject to criteria – a significant boost for many firsttime buyers who consistently struggle with affordability.

As retirement approaches, homeowners o en find that options are limited. Unlike many lenders, there’s no maximum age limit at any time with Perenna, giving borrowers more options in later life. Plus, we’ve recently launched a retirement interest-only (RIO) range for over-50s up to 60% LTV. Why not visit our website and try our calculator to test out our maximum loan amounts? See for yourself which of your clients could benefit from a Perenna mortgage. ●

S BROKER S G N I H T FIX

O T E R E H WE’RE Payment certainty No teaser rates, no rising payments, no shocks Increased borrowing power No SVR based stress tests Age is but a number No maximum age limit, providing more options for customers Interest-only and RIO options IO available up to 75% LTV and RIO up to 60% LTV

6 x Income Up to 95% LTV where income is £50k+ Subject to eligibility and income type Short ERC Review or change mortgage without charge after 5 years No LTI cap On straight balance swap remortgage Partnerships that last Proc fee at completion & trail commission when you review your customers’ needs

intermediary.perenna.com This marketing is intended for professional intermediaries only. It is not a financial promotion and should not be used as such.

Perenna Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 956138.

Perenna Bank PLC is a company registered in England and Wales with company number 13084174. Our registered office is at 20 Eastbourne Terrace, London W2 6LG. © 2024 Perenna Bank PLC. All rights reserved.

FOR PROFESSIONAL INTERMEDIARY USE ONLY

RESIDENTIAL Opinion

Embracing the new

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he arrival of innovative mortgage products, offering borrowers greater flexibility and choice in managing their finances, undoubtedly has huge potential when it comes to opening the doors to homeownership – especially in the UK’s current financial state.

With these new services, we stand to witness a huge transformation of the industry, reshaping the essence of lending and access to credit.

Gone are the days when borrowing was confined to the rigid corridors of brick-and-mortar banks, and where approval processes were o en confusing, time-consuming, and based on the analysis of obsolete data.

Today, the digital revolution has ushered in an era of unprecedented accessibility and convenience, empowering consumers with a wealth of options at their fingertips.

Moreover, the concept of creditworthiness itself is undergoing a huge change, as lenders increasingly embrace alternative data sources to assess risk and make informed lending decisions. This shi towards data-driven lending fosters financial inclusion, helping those who may have previously been refused credit gain access to capital.

Ever-evolving market Increasingly, consumers have grown to appreciate the ability to tailor the terms of their loans to align with their evolving needs and situations. As the market continues to become ever more competitive, there is now a clear and growing demand for financial products that adapt to the unique circumstances of each borrower.

With more financial institutions tailoring products and services to best fit their customers, this trend signifies a shi in consumer expectations, urging traditional lenders to rethink their strategies. The good news is that a wave of new market entrants

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The Intermediary | March 2024

Increasingly, consumers have grown to appreciate the ability to tailor the terms of their loans to align with their evolving needs and situations. As the market continues to become ever more competitive, there is now a clear and growing demand for financial products that adapt to the unique circumstances of each borrower”

is actively exploring opportunities to introduce adaptability into credit products throughout the entire lifecycle of a loan.

This marks a positive step towards fostering financial inclusion and be er serving the diverse needs of customers.

The new era of mortgages Recent news around the introduction of Dutch-style mortgages in the UK is just one of the new market entrants currently offering a refreshing alternative to the traditional lending landscape. The opportunity to see the full loan value decrease over time, pu ing pennies back into the pockets of consumers, is certainly a positive step forward in reducing overall debt for individuals in a much more sustainable way.

By decoupling principal repayments from the mortgage itself, these mortgage products empower borrowers to allocate their financial resources more strategically, potentially saving towards newer properties or making improvements to those they already own, thereby enhancing their own long-term financial stability.

Likewise, Own New – a scheme enabling access to low deposit mortgages – has just introduced its new offering, which provides interest rates of below 1% for those looking to purchase a new-build home.

While new-build developments continue to pop up across the country, there have already been warnings that 2024 may see a significant slowdown in their development, due to limited demand and supply chain struggles making the mortgage offer even more of a potential rarity. The lower rates and greater flexibility certainly appear enticing, but the longer-term and wider implications could, and should, raise potential questions.

For example, on the one hand ultra-low interest rates may stimulate demand and strengthen homebuying,

RESIDENTIAL Opinion

dynamics of finance but on the other hand, they could also inflate property prices and exacerbate existing affordability challenges for consumers. Finding the balance between flexibility and accessibility will be critical as more new entrants bring their products to the market.

Assessing affordability As leading players in the lending industry, we have a responsibility to not only ensure that the market is innovating and open when it comes to accessibility, but also to ensure any new products are still measuring creditworthiness fairly and with the same stringent checks used by their traditional counterparts.

For too long, lenders have solely relied on bureau data to assess a consumer’s affordability, but moving forward, lenders must look at all the data available to make properly informed decisions. By making use of more accurate insights into an individual's financial behaviour, there are more opportunities to create tailored financial products for consumers, with varying terms that suit their lifestyle and, critically, their affordability.

However, as with many new financial offerings, it is crucial for both lenders and borrowers to tread cautiously, cognizant of the potential pitfalls before embracing this new model. While the allure of flexibility and possible cost savings are appealing, they are o en accompanied by complexities and risks that require informed decision-making and prudent financial management.

Borrowers must meticulously assess their risk tolerance, investment strategies, and long-term financial goals to determine whether these mortgages align with their individual circumstances and preferences.

In navigating the evolution of the lending market, the demand of new entrants is clear: harmonise product innovation with robust risk assessment.

ANDREW FISHER is chief growth officer at Aro

While the allure of flexibility and possible cost savings are appealing, they are often accompanied by complexities and risks that require informed decision-making and prudent financial management. Borrowers must meticulously assess their risk tolerance, investment strategies, and long-term financial goals”

Today's consumers demand tailored solutions, yet regulatory scrutiny remains stringent. Striking a balance between meeting customer needs and upholding due diligence hinges on leveraging data insights responsibly.

As the lending landscape continues to transform, adherence to these principles ensures sustainable growth while safeguarding against systemic inequalities. Ultimately, success requires not only innovation, but also a conscientious commitment to datadriven decision-making, ensuring the financial wellbeing of both lenders and borrowers alike. ● March 2024 | The Intermediary

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RESIDENTIAL Opinion

A focus on support for London’s mid-market

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ondon presents a very specific set of issues for the Government, not least because of the strength of the London Assembly across planning, housing and land policy decisions.

Yet, as the economic powerhouse in the UK, the capital needs close a ention from a central Government perspective, too.

Its housing market is notoriously international, particularly in prime Central London. The concentration of global services jobs in the City of London, along with finance and banking in Canary Wharf and hedge funds and private equity and investment banks in Mayfair makes it more so.

Power balance shift The latest figures from the Office for National Statistics (ONS) showed average UK house prices were down by 1.4% in the 12 months to December 2023, based on a provisional estimate.

London's average house prices remain the most expensive of any region in the UK, with an average price of £508,000 in December 2023, according to the ONS. A separate report from Savills suggests that the prime housing markets in London experienced an easing in the level of price falls during the final quarter of 2023.

This can be partly put down to buyer funding sources. Where cash buyers are more common, prime Central London recorded the smallest falls in values during 2023, down 0.8%, following a marginal fall of 0.2% during Q4.

There are growing signs that demand from international cash buyers is creeping back up, and

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The Intermediary | March 2024

that will put pressure on values – particularly in central prime areas.

There is a trickle-down effect, too, though. While homebuyers with a mortgage are experiencing much tighter affordability constraints, that puts cash buyers in a particularly strong position.

That is allowing those flush with funding to negotiate on price – as mortgage rates ease this year, that power balance should shi marginally.

Obscured by confidence An expected rate cut from the Bank of England sometime in the Autumn is already buoying confidence. Yet there is a risk that activity in the housing market among the very wealthy obscures the mid-market’s challenges.

The people buying these homes are the backbone of economic growth in London, and although wages are rising strongly, their ability to continue to afford to live with proximity to their employment also ma ers to the industry, hospitality and transport sectors in the city.

As is the case across nearly all parts of the UK, there is a shortage of homes in London.

Affordable housing in the capital is even harder to come by – and based on construction rates, that’s likely on a downward path.

Late last year, the CBRE published a report showing that planning activity in London fell to its lowest level since 2010.

There’s evidence to suggest that developers are focusing on fewer, higher value developments.

Mortgage affordability presents a higher risk in today’s interest rate environment, dampening developer appetite to ramp up supply for those buying in this market.

ROBIN JOHNSON is MD of KFH Professional Services

Open data firm PlumPlot put the average price of a newly built property in the London region at £1.1m in 2023" Open data firm PlumPlot put the average price of a newly built property in the London region at £1.1m in 2023, up by £378,000 – some 51% – over the past 12 months.

That may be a commercially sensible approach for developers, but it has consequences for buyers not in that bracket.

Consider this beside figures for London’s build-to-rent sector, which CBRE’s report suggests accounted for one in three of all newly built homes in the capital sold in the first six months of last year.

The CBRE report also outlined that overseas buyers continue to make up a greater proportion of new-build sales following the removal of the Help to Buy scheme.

Investing in rental property, particularly at a time when the volume of rental stock in London is under crippling pressure to meet demand, is an a ractive option for overseas cash buyers.

The boost to the British economy that this inward investment brings should not be underestimated, but not at the expense of ensuring those living and working hard in London can realise their own homeownership aspirations. ●

RESIDENTIAL Opinion

The case for shopping around

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here is no denying that good advice is as important now as ever.

A quick look at the economy reveals why there is uncertainty about what will happen next, and how quickly. Regardless of any changes in the Budget, we all have a lot to think about and consider.

At the Monetary Policy Commi ee (MPC) meeting in February, the base rate was held at 5.25%. Added to this, the Consumer Price Index, including owner-occupiers' housing costs (CPIH), rose by 4.2% in the 12 months to January 2024, the same rate as in December 2023. On a monthly basis, CPIH fell by 0.4% in January 2024, the same rate as in January 2023, according to the Office for National Statistics (ONS).

In the retail figures from December, ONS estimates suggested that sales volumes fell by 3.2% following a rise of 1.4% in the previous month. The decrease was the largest monthly fall since January 2021, when pandemic restrictions affected sales. Finally, wage inflation data showed annual growth in regular earnings excluding bonuses of 6.6% in September to November 2023, according to the National Institute of Economic and Social Research.

Broadly, these numbers – taken together – suggest an economy with many households’ finances still under significant pressure. But Mr Bailey did also have some good news on inflation, which is now forecast to fall close to the Bank of England 2% target in the spring. He also pointed to a change in the language used in the MPC minutes from February’s meeting.

The commi ee consensus was not whether policy should be tightened further, but for how long it should remain at its existing status quo. In other words: no rate cut now, but if the data emerging over the coming months supports it, then a possible

base rate cut could come later in the year.

Whether we see any material change mainly depends on wage inflation, which remains stubbornly high. Within our industry, we need to consider what implications this backdrop may have for mortgage borrowers, intermediaries, and lenders, and what advice is appropriate under the Financial Conduct Authority’s (FCA) Consumer Duty rules to ensure borrowers achieve the best outcome possible.

Shifting outcomes What is clear is that the volatile market environment has encouraged record numbers of borrowers looking to refinance to remain with their current lender and switch to another product without a full reassessment of affordability.

This may be a trend that accelerates this year. UK Finance estimates that 1.6 million mortgage customers will reach the end of their deal in 2024 and need to refinance or default to their lender’s standard variable rate (SVR).

How should intermediaries, along with lenders, demonstrate a good consumer outcome given this shi in market dynamics?

Affordability has always been one of the key elements when underwriting a borrower; ensuring a good outcome for the customer without this information is a big ask for both brokers giving advice and lenders approving a new customer with whom they have no previous track record.

In the short-term, a broker might choose a product transfer due to external factors, but also changes in individual circumstances. It’s almost certainly a preferable outcome than defaulting to SVR, which is almost always likely to result in even higher repayments considering the current average SVR stands at 8.18%.

Yet this is just one way to look at Consumer Duty in this market.

MICHAEL CONVILLE is chief customer officer at Newcastle Building Society

Another key question is about choice when it comes to refinancing.

If a customer has just one alternative to defaulting on their existing lender’s SVR, is that a good outcome? Lenders must be vigilant on this score, especially where a product transfer is the borrower’s only option and no advice is offered or taken.

All borrowers benefit from good advice. It’s why we believe the advice of a trusted mortgage professional is important. Indeed, the wider the distribution options available to brokers and their clients the be er.

There are opportunities in this market, too. It’s tempting to look at economic data coming out of the ONS and feel things could be rather be er. But it’s worth reminding ourselves that UK data is just that — a snapshot of the average borrower across the whole of England, Wales, Scotland, and Northern Ireland. Even in London, there are more than 100 micro housing markets.

Anyone who lives outside of the capital and home counties is only too aware that the situation is enormously different across the country. Not every borrower is struggling with affordability. Not every local housing market pushes loan-to-income ratios to their absolute limit.

We must all be mindful of the vast range of individual circumstances of every client. That is what will allow us to ensure good outcomes, and it is advisers who are best placed to safeguard that responsibility. ● March 2024 | The Intermediary

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RESIDENTIAL Opinion

Putting the customer first has never been more important

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e know these are uncertain times, and the mortgage market in particular has borne the brunt of recent economic volatility. With the outlook for inflation and interest rates still unclear, economic growth sluggish, and the prospect of a General Election promising further seismic change, the process of applying for and securing a home loan feels ever more difficult.

At the same time, we’re seeing a growing segment of the population who feel unrepresented and underserved by the mainstream mortgage market. This may be because of non-traditional income, a thin credit history, or because they are recovering from unexpected life events. This is only adding to a feeling, for many, that homeownership is out of reach.

All this means that the old maxim, that the customer should come first, has never been truer. Financial institutions must innovate to provide

The election later this year is going to be a major moment in the future direction of the mortgage market” customer-centric solutions which are relevant to their circumstances.

One size does not fit all, especially in the realm of mortgages. The evolving needs of borrowers require a more nuanced approach to lending. We recognise this, and as we look to the future, we want to support an even

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The Intermediary | March 2024

ALISON PALLETT is sales director at Nottingham Building Society

broader range of people to own their own home with products that cater to their circumstances.

By offering a diverse range of tailored options, we want to ensure that customers have access to financial solutions that align with their specific needs and financial goals.

For example, last year we were delighted to be able to adapt our mortgage criteria for contractors, reducing the minimum length of time a contractor must have worked on fixed-term contracts in the same profession to just 12 months, and introducing no minimum time required on their current contracts.

The world of work is evolving.

From construction to health and social care, more and more people work on contracts, and it is imperative that the industry reacts in tandem – especially as contracting allows greater flexibility within the workforce.

Clarity and certainty Alongside this, we want to make sure that the mortgage process itself is as simple and stress-free as possible.

In the past few months, we’ve taken steps to make this happen. For example, offering brokers the option to select a product at the decision in principle (DIP) stage.

With the continuing volatility in the mortgage market, we want to provide brokers with additional clarity and certainty on the products available to their customers, without the need for rushed and panicked applications when products are withdrawn.

These are just some examples of mortgage criteria changes we have made, designed to streamline the mortgage process for both brokers and customers. The evolving needs of borrowers are at the heart of these changes. A er all, with an increasing

number of individuals falling into self-employed classifications, it is critical that lenders like us respond accordingly. Our new criteria will allow more self-employed workers to access mortgage financing more easily.

What’s more, we’re always keen to understand the pressures and frustrations brokers face, and whenever we can, we will respond to broker feedback and make changes that provide genuine benefits to them and their customers.

At the heart of this approach is our dedicated team of business development managers (BDMs).

These professionals play a pivotal role in navigating the intricacies of the mortgage market for both borrowers and brokers.

By working closely with brokers, the BDM team ensures that the right mortgage products are identified for each borrower's unique circumstances. This collaborative approach enhances the efficiency of the lending process and contributes to the overall satisfaction of customers.

The one thing we do know is that uncertainty is not going away any time soon. The election later this year is going to be a major moment in the future direction of the mortgage market. In times like this, the importance of pu ing the customer first cannot be overstated.

Our goal is to ensure that we continue to serve customers and brokers as best we can, while at the same time developing our offering to serve future generations of people as their needs and circumstances continue to diversify. ●

RESIDENTIAL Opinion

Niche markets may be key to delivering margins

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conomic, technological, regulatory and political change continue to challenge lenders’ operational models and margins. Higher interest rates have undoubtedly challenged mortgage borrowers over the past two years, even if the financial pain has been financially absorbed by the majority of household budgets.

Savers, meanwhile, have benefi ed from returns that have rivalled those on offer in the stock market for the first time in more than a decade.

This has led to a boost in UK bank profits as net interest margins have widened to protect against an uncertain base rate outlook. Now, ratings agency Fitch Ratings says that is coming to an end.

Layers of reassurance The latest inflation figures from the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) held steady at 4% in the 12 months to January 2024, the same rate as in December 2023. On a monthly basis, CPI fell by 0.6% in January 2024, the same rate as in January 2023 and down from a recent peak of 11.1% in October 2022.

In November last year the Monetary Policy Commi ee (MPC) indicated that the base rate may have to rise again from its current 5.25%, perhaps to as much as 5.75%. However, lower than expected inflation in December prompted the Bank of England to drop its guidance hinting at a rate rise, instead suggesting that its stance is now when to cut rates rather than whether to raise them.

What held monetary policymakers back from announcing a cut, Andrew Bailey said, was persistently high wage inflation.

Since that meeting, the ONS has also published earnings figures for October to December 2023, which showed that annual growth in regular earnings (excluding bonuses) was 6.2% in October to December 2023.

While still stubbornly above the central bank’s overall inflation target of 2%, wage inflation is slowing. The three months to the end of October recorded regular earnings growth at 7.2%, falling to 6.6% to the end of November.

This most recent set of data will likely provide another layer of reassurance to markets that rates are stable for the time being, and look set to come down at some point this year.

Dented growth Another set of data from the ONS confirmed that the UK did slip into recession in the fourth quarter of last year, with GDP down 0.3% between October and December. That followed a contraction in the economy of 0.1% in the third quarter. Signs that household budgets are squeezed enough that economic growth is being dented will feed into the next MPC meeting.

Even ahead of this slew of data to indicate that monetary policy is more likely to loosen this year, Fitch warned that lender margins “will come under growing pressure from rising deposit costs and increasing loan impairment charges.”

In a statement the ratings agency put out in November, it noted that the average annualised operating profit or risk-weighted assets ratio for the six largest UK banks was 3.2% in the first three quarters of 2023.

According to Fitch, the narrower ratio was driven by both lower net interest margins and a small rise in loan impairments.

JERRY MULLE is UK managing director at Ohpen

The past couple of years have shown us just how crucial agile systems are for lenders” It’s likely that this shi will continue over the course of this year, and it will be very much front of mind for all lenders – no ma er their market strengths.

The past couple of years have shown us just how crucial agile systems are for lenders to navigate unpredictable and sometimes volatile market movements.

Managing application volumes is paramount to maintain intermediary relationships and future pipeline.

Managing the profitability of product approvals is just as important.

It is the speed with which lenders can adjust their service to achieve a commercially healthy balance between these two factors that now sets the winners apart in the established market.

For lenders adopting a value play rather than a volume play, niche markets are key to delivering margins.

Success in those areas also requires agility – it is the ability to respond to niche market needs quickly that establishes first mover status.

Whatever happens this year, having agile systems will mean you can either play in the established market with changes or move into more lucrative parts. ● March 2024 | The Intermediary

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RESIDENTIAL Opinion

Real lives and lifetime ISAs

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n the Government’s Spring Budget, the cost-of-living crisis, a ershocks from the pandemic and energy price rises were all pointed to as reasons why many people’s budgets are tighter than ever. And rightly so, as these are just a few factors that have been making everyday life more expensive and saving more difficult over the last couple of years.

There will be few people across the country who haven’t felt the impact of rising costs. For those hoping to buy their first home, ge ing on the property ladder may feel more challenging than ever, particularly as high rent costs and bills make it more difficult to put aside money each month.

More than numbers This has been highlighted in recent research by OneFamily; concerns around income, the property market and the cost of living are soaring among renters between the ages of 18 and 40. The findings show that 68% of young renters are worried about their income, up from 60% last autumn.

The research involved two surveys, the first in October 2023, which asked people aged 18 to 40 about a number of topics, including their average salary, cost of rent or mortgage, and overall quality of life. The second, in February 2024, asked the same questions and shows how financial a itudes and concerns have changed in that time.

When asked about the property market, 71% are worried about the cost of housing, compared to 51% last year. Those who are renting privately are the most anxious about the cost of housing and the property market (80%), compared to those renting from a local authority or housing association (53%). Given that a recent report by the Office for National Statistics (ONS) suggested annual private rental prices increased by 6.2%

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The Intermediary | March 2024

in the 12 months to January 2024 – unchanged for the second consecutive month – it’s understandable that worries are on the up among young renters. But this is much more than just numbers and statistics, it’s about the real-life experiences of people managing their money and saving for their future. We know our customers are feeling the brunt of the cost-ofliving crisis, and our purpose as an organisation is to support people of all backgrounds through our products and services as best we can.

The lifetime ISA (LISA) can be a useful tool to help people saving for their first home boost their investments, as the Government tops up the savings by 25%. This means that for every £100 saved, an extra £25 will be added on top. The maximum saving limit into a LISA per year is £4,000, which equates to an annual bonus of up to £1,000. This free LISA bonus really can make a difference and help people make that first step onto the property ladder.

Making changes Ahead of this year’s Spring Budget, OneFamily urged the Government to make some changes to the LISA penalty and property cap.

We have been asking for the penalty LISA holders pay when withdrawing savings from their account for any purpose other than buying a first home or retirement to be reduced from 25% to 20%. This would mean savers would not lose out on their own investments when using the money for another purpose, particularly as people may have been forced to turn to their savings unexpectedly due to the cost-of-living crisis.

Additionally, the £450,000 cap – the maximum value of a property that can be bought using a LISA – was set when the product was launched in April 2017. The cap has not kept up with the rise of property prices in recent years and is now outdated. We have been

JACKIE DAVIES is head of customer services and direct sales at OneFamily

urging the Government to increase the cap, so people are not hit unfairly by the penalty if the property they wish to buy costs more than £450,000, and to commit to reviewing this regularly in line with house prices.

Unfortunately, these changes were not announced on the day, but we will continue pushing for these amendments to be made to provide that extra help that is needed to reduce the understandable worries among first-time buyers.

In the meantime, for any client hoping to buy their first home I would recommend considering a LISA, as that free bonus of up to £1,000 a year really can provide a helpful savings boost. The LISA is a fantastic product that has helped tens of thousands of people get on the property ladder. But more needs to be done to help people buy their first home, particularly given the cost-of-living crisis and high house prices. ●

Case study Michelle Steele, a 44-year-old mum renting in London is saving into a OneFamily LISA to buy a house, but has had to cut down on her monthly investments due to rising costs. Michelle opened her LISA to start saving for a house, wanting to put down some roots and have a nice home to continue raising her son in. She says the cost-of-living crisis has made it much harder to put money aside each month. Previously she was saving £100 into her LISA, but had to reduce it to £25 each month because of rising costs. She knows she’s not alone in this, and has said when she speaks to her friends, they say the same.

RESIDENTIAL Opinion

Networks need to bring advisers together

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e’re looking forward to our annual Recognising Excellence Conference, taking place at Wembley stadium in London in March. This year’s will be our biggest ever, packed full of workshops designed to enable advisers to share best practices, as well as expert masterclasses and the opportunity to network with the industry’s best and brightest.

It’s hard to know how this year will pan out for the mortgage market. UK Finance’s official forecast suggests the outlook for 2024 is one of continuing challenges, though more positive is their view that the main pressures on affordability look to be peaking now.

Gross lending in the residential sector is expected to so en as the number of fixed rates due to expire drops off; buy-to-let (BTL) lending is also forecast to contract over the coming 12 months.

Yet there are plenty of reasons to be positive. Moneyfacts’ January report revealed an increasingly competitive market. The average 2-year fixed mortgage rate significantly fell month-on-month by 0.37%, its biggest monthly fall since December 2022. It is the sixth consecutive month to see mortgage rates come down, reflecting a more stable economic outlook.

At its February meeting, the Monetary Policy Commi ee (MPC) tentatively paved the way for loosening policy later in the year, stating that it's now a case of how long to keep the base rate on hold rather than considering another rise. Along with a sharp drop-off in inflation, markets are much more comfortable with rate risk, affording lenders the opportunity for keener pricing.

Rates coming down is good news for clients, many of whom have been waiting for more affordable products before refinancing. But there’s no guarantee such competitive pricing will hang around. Even with markets expecting the Bank of England to cut rates, swap rates have been volatile and quick to react to sensitive market data. It remains a mixed picture on that front. The Office for National Statistics (ONS) confirmed that GDP fell by 0.3% in Q4 last year, taking the UK into a technical recession.

There is a General Election on the cards later in the year, and following defeat in two recent by-elections, we may yet have a change in Government.

Should we see that, it’s unclear how markets will react. Fiscal policy under Labour is likely to be altogether different from today’s status quo, and monetary policy will necessarily have to react.

Hard work in testing times In this environment, advisers are having to work hard to maintain volumes and access to the most competitive rates, and a strong pipeline is more important than ever. Being part of a strong network with critical mass is a safe haven, particularly when lenders are striving hard for market share without compromising on service. All this uncertainty will doubtless test us all, particularly when business is conducted under the scrutiny of the new Consumer Duty rules.

At the time of writing, there is significant speculation about fiscal impetus in the Budget. Whether this comes in the form of high loanto-value (LTV) lending or another Stamp Duty holiday, volumes may significantly grow from the expected levels. We have been here before, of

VIKKI JEFFERIES is proposition director at PRIMIS Mortgage Network

A strong network with critical mass is a safe haven

course, but there is much more at stake. Good outcomes are now baked into the process and they go beyond ge ing the right deal.

As a network, we must continue to offer the very bets support for our growing appointed representative (AR) brokers. We do that through our educative and technology platforms that are designed to deliver and prove best practice.

We are working hard to make sure all our brokers have the foundations to thrive this year.

Our acquisition of Tenet Lime brings an additional 378 advisers working within 157 firms into the Primis fold, and Tenet advisers arranged around £3.9bn of mortgages in 2022, and also bring significant strength to our protection offering.

As I said, the clue is in the word 'network'. We will continue to bring our brokers together to share and learn and support one another.

That way, we can shape the future as well as react to it. ● March 2024 | The Intermediary

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RESIDENTIAL Opinion

Support in a shifting regulatory environment

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n February, the Financial Conduct Authority (FCA) wrote to a number of financial adviser firms requesting information about their delivery of ongoing services, for which their clients continue to be charged a er advice has been given.

In its survey, the FCA asked if firms have assessed their ongoing services in response to the introduction of the Consumer Duty, and whether they have made any changes as a result.

It also asked for data on the number of clients due a review of the ongoing suitability of the advice as part of the service, how many received that review, and how many paid for ongoing advice but whose fee was refunded as the suitability review did not happen.

While ongoing services are more typical in the investment market, there are elements that should be read across into the provision of mortgage, protection and general insurance (GI) advice. The Consumer Duty requires firms to act to deliver good outcomes for retail customers.

Complex course of action At the best of times, it’s impossible to foresee a change in a client’s circumstances which could result in what should have been a good outcome becoming a poor one. With mortgage rates so much higher today than two and five years ago, ascertaining the best course of action for many clients is even more complex.

Affordability dynamics have completely transformed, the economic outlook is still uncertain, and household finances are under considerable pressure across the board. Where advice is being given to purchasing clients, it is relatively simple to evidence the suitability of a

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The Intermediary | March 2024

product recommendation. For existing borrowers needing to refinance, it can be considerably more difficult to document why advice was given that could result in a client paying more than they might have. Product transfers, extending mortgage terms, switching to interest-only or part and part all have cost implications.

We’re also in a market where an increasing number of clients could be considered vulnerable who wouldn't have been the last time they remortgaged. Defining what

Affordability dynamics have completely transformed, the economic outlook is still uncertain, and household finances are under considerable pressure” constitutes a good outcome is also subjective – how should advisers weigh up keeping people in their homes with taking a product option that will ultimately mean they pay a lot more interest over their term?

Ongoing mortgage advice in this context is critical – extending a term from 20 to 30-years might be the best course of action to keep repayments affordable and avoid a client falling into arrears.

Ensuring that client understands why reverting to a shorter term if – and when – affordability constraints change is fundamental to that initial advice resulting in a good customer outcome. Clients must also be made

LISA MARTIN is development director at TMA

aware of the risks should they not take out some form of protection.

Is mortgage advice provided without life cover, critical illness and income protection advice really ensuring good outcomes for clients? Even where advisers do not offer it themselves, there is a compelling argument for establishing protection referrals to cover this off.

How we give mortgage advice is evolving as the Consumer Duty regulation beds in on new products and services. Later this year it will extend to existing and legacy products and services, changing the landscape again.

Crucial area of compliance Navigating compliance is a full-time job; ge ing documentation right to evidence why advice was given is critical. The support brokers will need in order to deliver this is why clubs and networks exist. Mortgage Clubs fulfil a vital role for their directly authorised (DA) members across this crucial area of compliance – whether in supporting learning or in the form of the technology needed to evidence the best practice.

Policymakers and regulators have high expectations of brokers – higher than ever before – and it is our job to make sure we support them to do this. Just as borrowers should expect good advice, so should brokers expect excellent support.

We’re the experts in compliance, regulatory and product education, technology that makes life easier, and maintaining strong lender relationships, so advisers can focus on being experts in giving good advice. ●

RESIDENTIAL Opinion

Helping complex clients doesn’t have to be complicated

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any of us have seen our clients’ financial circumstances become more complicated in recent years. For some, it will be down to making the move to selfemployment. Data from the Office for National Statistics (ONS) suggests in the final quarter of last year, around 4.37 million people were self-employed, either on a full-time or part-time basis. While that number is down from pre-pandemic levels, it still represents a significant portion of the nation’s workforce.

Even those who are employed may see greater complexity in their income, such as the payment of variable earnings in addition to basic salary including bonuses.

While self-employment and variable earnings are likely to be beneficial for the individuals in question, the complexities can make it tricky when they are applying for a mortgage.

This isn’t just limited to those on lower incomes. Even those with higher incomes can find it difficult to obtain the mortgage they need, even though they’re capable of repaying it, just because their circumstances are a li le out of the norm.

Taking the complexity out Brokers will know first-hand how the complexities in a client’s financial arrangements can mean raising the funds they need is challenging.

At Bank of Ireland for Intermediaries our ‘Bespoke’ proposition has been designed with this is mind. Bespoke is our personalised and flexible service for good quality complex cases.

It can support those who have

good affordability, but don’t fit straightforward lending criteria.

As long as the case meets our five golden rules, one of our underwriters will individually assess the case, taking a common sense approach.

This way of working has made a tangible difference in a range of cases recently. For example, we were able to help a self-employed borrower whose previous year’s profits were lower than usual. This could have prevented them raising the funds required.

However, the latest year’s profits had

The days of borrowers fitting in neat categories are behind us, if they ever even existed” normalised, in line with previous years’ figures. The applicant was able to give an acceptable reason for the one-off fall in profits. Given this, we were able to offer the loan amount they required based on the latest year’s figures without having to take an average of the two years.

Similar flexibility has also enabled us to work with a wide variety of contractors. For example, onee applicant had recently le an employed role and had been contracting in a new role for less than 12 months. It was in the same industry as their previous role, but on a day rate rather than usual employed terms.

This short length of time contracting doesn’t fit within our usual criteria, meaning they wouldn’t be able to secure the loan they wanted. As we were able to see their experience in similar roles in the same industry, we were able assess affordability

ALAN LONGHORN is head of sales, distribution and marketing at Bank of Ireland for Intermediaries

based on the new day rate contract, therefore we could offer the loan amount required.

Communication is key O en, one of the issues when it comes to complexity is a lack of communication. Brokers need to be clearly told from the outset how their case will be assessed if it falls a li le outside of the norm.

As a result of this, we’ve worked on educating brokers on our five ‘golden rules’ that cases must meet in order to qualify for our Bespoke service. We have also established a daily underwriting surgery, where our business development managers can take their broker’s complex case questions and get immediate answers from our underwriting team.

By ensuring that the same underwriter deals with a case from the initial enquiry to offer, we make sure brokers and their clients benefit from consistency so they can have trust and confidence in the decision.

Common sense The days of borrowers fi ing in neat categories are behind us, if they ever existed. Recent years have highlighted the variety of circumstances among clients, and emphasised the need for a more personalised approach to supporting them.

Our Bespoke proposition has been designed to deliver for these borrowers by embracing common sense, taking the time to understand their individual case, and how they can be provided with access to the funds they need. ● March 2024 | The Intermediary

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The Interview.

Vernon Building Society

Remaining relevant

Jessica Bird speaks with Steve Fletcher, chief executive officer at Vernon Building Society, about the value of intermediaries as the society celebrates its 100th year

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teve Fletcher joined Vernon Building Society as CEO in January 2018, having retired after more than 12 years at Clydesdale and Yorkshire Bank (CYB), and a career that included institutions such as Barclays and Woolwich Building Society. At CYB, Fletcher was primarily responsible for its branch network across England and Scotland, as well as contact centres, and running the third-party mortgage business. This, he says, means that he came to Vernon already “quite grounded and rounded,” not to mention the fact that he has remained in the financial services industry – both retail and mortgage – in some form or another since leaving school at 18.

Six years later, Vernon Building Society has reached its 100-year anniversary, a milestone which inspired The Intermediary to gather Fletcher’s thoughts on how the society plans to stay relevant through the next century.

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The Intermediary | March 2024

This, of course, was exactly the question Fletcher has had to answer in his role as CEO. The first goal was to almost double in size, which the society has achieved in the years since 2018. Meanwhile, a substantial part of the journey has been to fully appreciate the value of the broker network, where prior to 2018, the society operated largely via direct business.

“Before I got there, the recognition had just started that we needed to do more intermediary business,” Fletcher explains. “The biggest change over the years is recognising the importance to the society of intermediary business, and the opportunities that intermediary business has brought to us.”

Prior to building out this side of the business, Fletcher explained that the society had perhaps been unsure as to the motivation for clients not coming to the firm directly, and wary of adding more steps – and proc fees – into the equation.

However, this has dramatically changed.

He says: “We’ve grown into a place where we’ve made brokers our friends, and we really value and want to look after them. They’ve got customers that they’re looking after, so the best way to engender relationships with brokers is to take care of their customers – and we’re really good at that.”

In order to reach more prospective clients – local or otherwise – brokers are an integral resource, particularly in a world where people are less likely to simply walk into whichever lender has a local branch as their first port of call when sourcing a mortgage.

Growth in a simple proposition

The Vernon’s model centres around mortgages as its sole source of revenue, Fletcher explains: “We don’t do current accounts or unsecured lending. We stick to our knitting, we’re good at savings, and we’re really good at mortgages.”

He adds: “It’s about understanding what to be really good at, and what we’re not going to chase. Some building societies have gone a different way – down the current account route – but we have been very clear that we don’t want to compete on other products. Our whole purpose is to help people buy houses.”

The Vernon is a small lender, but one which is capable of finding and handling, as Fletcher puts

I N T E RV I E W

it, a “mountain of new business,” particularly with the support of its brokers.

Growth, Fletcher explains, means nurturing a selection of strong, close relationships with key brokers who know to approach the society with “all their quirky business,” while also engaging more with clubs and networks.

“We set out to find brokers who value what we can offer them, and to turn them into our key brokers,” he adds. “The difference means pushing the envelope a bit further for key brokers, because we know and understand these people and their customers. For someone picking us up for the first time, we still approach it with personal, individual underwriting, but we wait to get a bit more comfortable before we push the envelope.”

Beyond this, Fletcher says that the approach to pulling in more broker business is simply to provide the best service possible, to facilitate a quick turnaround, and to handle things effectively that are “out of the ordinary.”

Join the club: A push for subscriptions

Best buy or best sense

The Vernon is not looking to grow by hitting the top of the sourcing system based solely on price. As Fletcher says, “that’s just not our game.” That being said, it has found itself trending for its 3-year fix recently, as few others are offering these, and the deal is competitive, even against some 2-year rates.

In terms of a typical deal profile, the Vernon is interested in medium-term assets. Fletcher explains that the society is less focused on 2-year deals, on the whole, as this is a “very crowded market, heavily reliant on margins,” which does not fit with the sustainability of the society’s funding model. The Vernon leans more toward 5-year fixes, with its 3-year product as a happy middle ground for those clients it suits.

Indeed, referring to this product, Fletcher says: “We didn’t launch it with the view to making it a ‘best buy’ in terms of price, but because it was a sensible product.”

Beyond this, Fletcher explains that the Vernon’s lending ethos is to keep customers on board, creating positive retention patterns and – intermediated or otherwise – treating every borrower as its own customer. To this end, Fletcher says the society is careful not to allow customers to slip onto its standard variable rate (SVR), with systems in place to flag and contact these borrowers well in advance.

“We want our customers on the best deal,” he says. “We like to help brokers ensure that, as well. If we can get brokers and customers to come to us and stay with us, that’s what we like. We appreciate that a broker’s job is to go out and make sure their customer gets the best deal on the market. We hope that what we offer is something brokers talk to their customers about, and realise it’s not worth moving for the difference they can get in price, because we’ve been good to them and the client is happy.”

The spice of life

Men about town: Early board members assemble

Since Fletcher took the helm, there has not been a year without crisis – whether Covid-19, foreign conflict, or rising interest rates. Suffice it to say, this has made it clearer than ever that simplicity is a rare thing. This is where Vernon Building Society comes in, Fletcher explains.

The society does not expect to get huge numbers of cases that could go easily to the big high street banks – although, he adds, they did receive a good share of these during 2020 when the market was fragmented and other lenders closed for business.

There is, however, plenty of market share to be had from more complex deals. “People’s lives are complicated, and they don’t go in straight lines any more,” Fletcher says.

This is where the firm’s historical standing can come into play, he adds: “We go back to the old-fashioned approach: what is the quality of the applicant, and the quality of the security?

This is a traditional way of lending.

“Of course, we have to prove affordability, which is key to being a responsible lender, but we can take the time to do that.” → March 2024 | The Intermediary

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This is coming increasingly into play in the modern market. For example, Fletcher points to joint borrower sole proprietor (JBSP) deals being a big market, leveraging equity in parents’ properties to help the next generation of first-time buyers. He adds that the society’s Headstart mortgage is a “best kept secret” for similar reasons.

It is not just first-time buyers who benefit from the Vernon’s tailored approach. Fletcher notes that later life borrowing has changed over the years, with there no longer necessarily being a clear, straight path to retirement. For example, coming off interest-only products when reaching a certain age is not always the best option. Fletcher notes that the Vernon sees many borrowers looking for retirement interest-only (RIO) products who, looking beyond just their age, are great lending prospects, but have struggled to get past the high street algorithms.

Fletcher says: “The principles of mutuality are all about helping each other when it really matters, and that’s continued all the way through the life of the society.”

The fact remains, though, that the market has changed deeply. One of these key changes has been the loss of many mutuals over the years, including big household names – particularly during the 1990s as they demutualised and became part of larger banks.

Fletcher says those that are left continue to “carry the flag” and are all “fiercely proud” with regards to the status of mutuality.

Of course, the Vernon also understands that it was forged in an entirely different era. Fletcher says that successfully marrying history with agility and changing with the times is about understanding what you are setting out to achieve.

“It’s all right having that sense of core purpose, but customers have choice, and unless you’re good at what you do, nobody’s going to keep coming to you,” Fletcher explains.

Fletcher explains that it is important to put the society’s money where its mouth is in terms of service. It is not enough to simply tout a message about caring for customers if the phone is not being picked up when it matters.

“The tone from the top is very important,” he continues. “But you can’t do it by yourself.

We’re aligned in terms of what we’re trying to deliver, implementing the right standards in order to deliver genuinely good customer experience. People come to you only if they know they can rely on you, what you stand for, and that you deliver it.”

Life after 100 years

On 27th March 2024, Vernon Building Society celebrated its 100th anniversary. The society, the market, and indeed the world have changed vastly in that time, but Fletcher says some things have remained steady.

He says: “The purpose of the society in 1924 was exactly the same: to help local people buy their homes, and to give them a safe place for their savings. The only thing that’s a little bit different is that it’s not just local people any more – it’s people across England and Wales.”

This purpose has underpinned the Vernon throughout many historic milestones. In 1945, the society designed a scheme to help returning soldiers buy homes, in 2008 it supported those affected by the Global Financial Crisis, and when Covid-19 hit the ethos remained the same.

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The mutual model Automatic for the people: Operating an early ATM device

To maintain this standing and remain relevant even 100 years on, Fletcher says the Vernon focuses on continuous improvement. Getting great results one year does not mean that the work stops; in fact, expectations keep increasing. The mutual model lends itself to this, where other lenders’ priorities might be diluted by their obligations to shareholders.

“At the minute, it’s better to either be very big or small, because you can either play the ‘discount and margin’ game, or you can play the service game,” Fletcher says. “The ones in the middle find it quite hard.”

Mutuality was, in fact, what pulled Fletcher back in from his own retirement – namely, the opportunity to work with a firm in which there is no doubt that decisions are being made for for the benefit of the borrower on the street.

He explains: “At the end of everything, the question is: is this in the interest of our

I N T E RV I E W

savers, our borrowers, and the long-term sustainability of the society? Often banks have to compromise on that to deliver what shareholders want in the immediate future. I feel very comfortable in mutuality.”

In terms of sustainability, the Vernon must keep generating enough profit to maintain the business and grow, but the mutual model means that these profits directly circle back into funding the society’s branch network, and creating better rates for savings customers.

This investment in the business also means that customers are able to “speak to a human not working from a script.”

Although Fletcher agrees that there is a time and place for automation, face-to-face is not going away any time soon within the mortgage industry, particularly if and when things don’t go quite right or fit easily into a box – which is increasingly common in the current market.

Therefore, while those who might want to deal with their mortgage entirely online might be able to find a better rate elsewhere, Fletcher believes that the Vernon’s borrowers “won’t get a better service.”

A year, and a century

When it comes to navigating the current set of challenges facing the mortgage market, and the ones that will inevitably follow that, Fletcher points back to the Vernon’s ethos of doing what it does, and doing it well.

“We’re not trying to be too flashy – we want to keep sticking to the knitting,” he explains.

“The market is tough, and it’s going to remain tough. What we have out there – helping with quirky and individual cases, complex enquiries – that’s where our niche is.”

Considering the market’s trajectory, Fletcher warns that for those who have been in the industry less time, interest rates might seem very high. However, being “long in the tooth” means being able to look back at historical

The next big thing: Vernon Building Society joins the World Wide Web

trends, just as the Vernon is able to do, and understand that this is unlikely to be a flash in the pan.

Fletcher urges brokers to help their clients understand that rates are unlikely to go back to the levels seen prior to the recent lifts. Where many clients are opting for 2-year deals in order to get onto lower rates in the near future, it might be worth taking a more circumspect view. Fletcher suggests it is unlikely that the Monetary Policy Committee will push the base rate below 3% before the end of 2025, and ultimately, those taking a 5-year fix now are not likely to lose out, and may in fact benefit.

Ultimately, while it is worth taking stock of what makes up the ‘new normal’, Fletcher says the decision to take out a mortgage should be based on individual circumstances, rather than trying to judge – or predict – the market.

“Can anybody now really predict with confidence what’s going to happen in the next few years?” he asks. “Nobody would have predicted Gaza, or Covid-19.”

While this lack of certainty might be a cause for concern, Fletcher also reiterates that – following the Global Financial Crisis in particular – the regulators “have certainly woken up.” This market has systems in place now, such as affordability assessments, which make it much stronger than before.

It might be impossible to predict the next seismic shift within the economy, but the mortgage market is better set than ever to survive, and to ride the resulting waves.

This can be seen in the current environment.

Although people coming off low rates secured five years ago are getting a shock, Fletcher notes that few are as badly affected as they might have been, had the industry not had robust affordability systems in place.

“Our system is so much stronger now than it used to be,” he says.

This stability and sustainability is particularly prevalent, he concludes, in the mutual industry.

In fact, although no one can tell what the mortgage industry will look like in 100 more years, Fletcher is confident that the Vernon will be there to see it.

“I have quite the baton to hold as CEO, and I want to make sure when I pass it on, it’s to someone who can keep it going,” he says.

“Considering what the Vernon has withstood over the last 100 years, why wouldn’t it survive the next? It will have to stay true and relevant, and that means it can’t just stay as it is, but will have to move with the times, but it is so nimble that it can, where others might creak and crack – it’s proof that small can be beautiful.” ● March 2024 | The Intermediary

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Higher interest rates are levelling the playing field

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hether in politics, industry or just general day-to-day life, there is probably no such thing as a truly level playing field. One party always has an advantage over another.

That is certainly true of the UK mortgage market, where smaller lenders have o en operated at a disadvantage to their bigger rivals.

While NatWest, HSBC and Lloyds have all reported bumper profits of late, there is also evidence that their lending margins are coming under pressure.

The net interest ratios – the difference between what they pay savers and charge borrowers – of all three banks have grown over the past 12 months. Noticeably, however, they have slipped back between the third and fourth quarters.

The 'Old Guard'

Both savers and mortgage borrowers are getting a better deal, and the big banks are having to work harder to win business. In other words, the playing field has become a little bit more level”

The big banks have always benefited from cheaper funding, which has allowed them to offer more a ractive rates to borrowers.

Historically, there has also been a feeling that the regulatory regime – more specifically, the capital requirements regime – has favoured those banks which operate at scale. It is for these reasons that the challenger banks which have sprung up over the past decade or so have been unable to break the stranglehold of the 'Old Guard'.

This isn’t me breaking out my violin – not at all. I’m merely stating facts. In fact, we should take pride in the fact we have such a thriving and bustling scene of challenger banks and nonbank lenders, given the headwinds they have faced.

Nevertheless, something peculiar is happening. Encouragingly, it seems higher interest rates are beginning to tilt the balance back a li le bit in our favour.

Big banks under pressure If, like me, you take a keen interest in how our biggest banks are performing, you’ll have noticed that higher rates have become something of a doubleedged sword.

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The Intermediary | March 2024

In its full year results, Lloyds warned specifically that it was suffering from “mortgage pricing and deposit mix headwinds.”

In other words, the big banks are having to pay more for their funding, because savers are switching out of low-paying easy-access accounts and into more generous term products. It also means they are having to charge their mortgage clients less to remain competitive. At the same time, the securitisation market, a key source of funding for non-bank lenders, is also looking in decent shape.

DAVID WHITTAKER is CEO of Keystone Property Finance

We have seen two specialist lenders come to market with issues so far this year, with another one possibly on the way. What’s more, they have achieved decent pricing, which will help them be more competitive in the market.

The secondary market is also looking strong, suggesting that there is an appetite among investors for already securitised debt from specialist players.

Striking a balance It is this combination of higher funding costs for banks and favourable funding conditions for non-deposit taking lenders that leads me to conclude that the market is becoming more balanced.

Don’t mistake this for schadenfreude. I want to see our banks as strong as possible, as they are essential to any healthy economy.

However, the fact they are feeling margin pressure is a sign of a wellfunctioning market. It means that both savers and mortgage borrowers are ge ing a be er deal, and the big banks are having to work harder to win business. In other words, the playing field has become a li le bit more level. When that happens, it drives innovation and competition, as neither group has an automatic advantage over the other.

This may change when the Bank of England begins to cut interest rates, of course. But at present, it feels as though the pendulum has begun to swing a li le bit the other way, which is fantastic for borrowers. ●

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Expats are an important part of the landlord mix

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t first glance, expat UK homeowners might not elicit much sympathy. But the cliché images of people enjoying the best of both worlds – sunny climates and UK property ownership – tend to cloud the real, more complex, financial picture.

In our view, expat landlords are an important part of the private rental sector (PRS) eco-system. As such, they have faced the same issues in the UK as other landlords – and some additional ones, too.

All landlords have faced rising costs.

According to a report from CBRE in the middle of last year, 400,000 rental properties have been sold in the past seven years, as they abandon the market in the face of higher mortgage rates.

It has been a challenging time with the implementation – and then retreat – of Energy Performance Certificate (EPC) standards for rental properties, regulatory and tax changes, as well as the rising cost of finance.

But that picture is slowly changing.

Inflation is not beaten, but it is lower now, and mortgage rates have fallen with it.

While cuts in the Bank of England base rate look unlikely until the second half of this year at the earliest, there are reports from across the housing value chain that house purchase activity has picked up significantly, and that remortgage business remains strong, as significant volumes of homeowners roll off fixedrate terms.

With this improving outlook, expat mortgage holders are presented with more product choice, and a critical decision: whether to opt for a fixed or other type of variable rate mortgage.

KATHY BOWES is intermediary manager at The Cambridge Building Society

A broker's knowledge of the expat sector is paramount in ensuring bespoke solutions

Expat mortgages that can remove uncertainty are crucial. They provide welcome relief, because not only are interest rates key to the cost of money, but for expat landlords, fixed rates can protect landlords from adverse currency movements. Expats o en earn income in one currency while needing to make mortgage repayments in another. Fluctuations in exchange rates can significantly impact monthly payments.

Currency exchange risks We need only look back to the Brexit referendum in June 2016 to see how the British pound weakened against the euro. From a high of 1.43 at the end of November 2015, the pound-to-euro exchange rate has remained below 1.2 since July 2016. By 9th February 2024, there were 1.17 euros to the pound.

At face value this is good news for overseas investors, who benefit from a weaker pound, but less so for those UK expats – particularly if they are still largely denominated in GBP. To minimise currency exchange risks, brokers not only need to know which products offer the greatest opportunity, but must guide clients on the timing of the transaction.

While no one is saying expat landlords hold the answer to the

shortage of rental property, they are part of the market, and one that needs support and products. Our own proposition is available to expats from any country – with the exception of those under financial sanctions – and all currencies can be considered. Our maximum loan size is £750,000, and where a 5-year fixed rate is taken, we use payrate together with an interest cover ratio (ICR) of 140% to ensure the monthly payment is met by the gross rental received.

If a 2-year fixed or discounted rate is more suitable, we use a stress rate of 2% above the payrate and again the gross rental income must be at least 140% of the required mortgage payment.

In this more specialised market, what we understand is that a broker's knowledge of the sector is paramount in ensuring that all external considerations are considered when presenting a financial solution.

More o en than not, this will involve talking to a lender that manually underwrites complex and nuanced business to ensure that a personalised solution is found.

Expat landlords can make a valuable contribution to our private rental sector. They, and the brokers that serve them, deserve our support. ● March 2024 | The Intermediary

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Buy-to-let is now recovering, so let’s stop bashing it

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or many years, becoming a landlord was viewed by many – rightly or wrongly – as a guaranteed path to riches. In fairness, it did seem that way for a while, and many of those who snapped up investment properties in the 1990s and 2000s have profited handsomely.

But in recent years, it has become more difficult to turn a profit if you own a property in your own name. This is largely due to higher taxes and a more onerous rulebook, designed by a series of landlord-sceptic administrations.

Throw into the mix soaring interest rates, and you can understand why the mood surrounding buy-to-let (BTL) has soured over the past 18 months.

Some sections of the media have even suggested buy-to-let is on its deathbed – or, at the very least, on life support.

Given that sentiment is a major driver of the UK mortgage market, it’s no surprise that lending has tanked as optimism has plunged.

Purchase lending has been particularly affected, slumping 53% year-on-year in 2023, according to UK Finance. The trade body predicts a further 13% contraction this year.

But while lending is down significantly, I can sense a tangible improvement in optimism levels within our industry over the past few months.

We conducted a survey of brokers recently to test current sentiment and were encouraged by the responses.

Some 73% of respondents said they expect to write more business in 2024 compared to last year, while buy-to-let was listed as a potential growth area.

Part of the reason for that upli in sentiment is that conditions are also improving for landlords. For a start,

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borrowing costs have come down substantially in recent months.

At the time of writing, buy-tolet mortgage rates had fallen to their lowest level since September 2022, according to data firm Moneyfactscompare.co.uk.Whereas the average 2-year fixed rate at 60% loan-to-value (LTV) was around 6.64% in August last year, it now sits around 5.22%, according to the data.

That’s a significant gap, and can mean the difference between a landlord being able to transact or not.

Anecdotally, we have certainly noticed more willingness to transact among our client base in recent months.

Reduction in cost One trend we have noticed recently is that average loan sizes have really increased, which suggests some landlords are looking at deals again that perhaps they couldn’t get over the line last year.

We are also starting to see more portfolio lends, blocks, larger value properties and more purchase lending.

For me, that suggests that lower mortgage rates are starting to unclog the market a li le. The good news for landlords, and the wider market, is that it’s highly likely we will see a further reduction in borrowing costs before the end of the year.

Inflation is expected to reach the Bank of England’s 2% target within months, piling pressure on the central bank to cut rates in a bid to boost the economy.

Until that happens, though, activity will remain muted. But when rates do begin to fall, I believe we will see the release of pent-up demand and a significant uptick in activity.

Rates aside, there are also plenty of other data points that suggest that the buy-to-let market is a lot more

LUCY WATERS is managing director at Aria Finance

resilient than people o en give it credit for.

For example, there are currently more than 1.98 million BTL mortgages outstanding, which is only around 79,300 less than its peak in November 2022. Some may point to the fact that this is a downward trend, but nearly three-quarters of landlord sales in 2022 – the last year we have data for – were by those retiring, according to Hamptons.

Parts of the media have suggested that we are witnessing a landlord exodus because they feel buy-tolet simply isn’t worth it anymore.

Instead, what we’re seeing is simply that those who bought properties in the '90s and 2000s are retiring.

We have also seen a huge number of landlords shi their portfolios into a limited company structure to shield themselves from tax. According to Hamptons, a record 50,000 did this last year, taking the total to more than 345,000. These companies now hold more than 615,000 properties across England and Wales.

To me, this doesn’t sound like a market in retreat. It sounds like a market, like any other, that has gone through a difficult spell, but one that is adapting and will come through it stronger.

I have always said that landlords are a resilient bunch. Most treat their portfolios as a business, and with any business, these periods come and go.

But it feels as though the market is over the worst, and green shoots are beginning to emerge. If I’m right, then hopefully the doom and gloom surrounding buy-to-let will subside, and we can start to move forward in a positive fashion. ●

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Landlords push on as politicians backpedal

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andlords should be applauded for continuing to improve the energy efficiency of rented homes despite a lack of direction from Government. But with more work to do, it is important for whichever party holds the political power to provide landlords with the guidance and support to help us reach net zero.

Rishi Sunak drew criticism when he announced that proposed changes to energy efficiency standards for privately rented homes would be abandoned. This was seen by some as a significant setback on our road to reaching net zero by 2050.

But Paragon research highlights that it’s not all bad news. Many landlords have been far from idle when it comes to making their portfolios fit for a greener future. All the properties owned by 32% of landlords are already rated Energy Performance Certificate (EPC) Band C or above, and 37% are pressing ahead with upgrades to bring their homes up to that standard, despite the absence of a legislative stick bearing down on them.

This contributes to the improvements already seen in private rented sector (PRS) sustainability over the past decade, with the proportion of A to C-rated homes in the tenure rising by 165% to now exceed owneroccupied homes.

It is important to note, however, that this is based on research carried out for our portfolio landlord report, focused on those with four or more buy-to-let (BTL) properties, or more 'professional' landlords.

I’m not a fan of that term, because there are many landlords who manage smaller portfolios with utmost professionalism, but holding more properties could mean they

have greater financial incentive, in the form of capital gains, and financial ability in terms of having more to leverage, to undertake improvement works.

In addition, our landlord research highlights how growing a portfolio takes time, and landlords who hold more properties are more likely to be le ing over the long-term. This means a need to adopt a forward-facing strategy. Even among these portfolio landlords, we still see a proportion (16%) who said that they delayed upgrading their properties until the Government’s position has been set out with legislation.

Power shift With a General Election on the horizon, this is not likely to happen any time soon, and although Labour's lead in the polls has narrowed of late, a power shi seems likely.

The red side of the house has also announced the scaling back of environmentally focused policies. The annual amount Labour plans to spend insulating homes would fall from up to £6bn to approximately £1.3bn on average, as a result of the previously pledged £28bn of green investment being cut by around half.

But, with net zero shadow secretary Ed Miliband already outlining his support for a minimum EPC C for rentals, it is likely that the policy will be revived in some capacity.

So, what should policymakers do differently to help the sector transition to more sustainable housing?

First, the timeline set out in the original proposals was unrealistic and landlords need more time to comply with any new standards. Our Rented Sector Energy Challenge report found that more than 3,500 properties would need to be upgraded each day to meet

RICHARD ROWNTREE is managing director for mortgages at Paragon Bank

the original 2025 deadline for all new tenancies and 2028 for existing.

That brings me to another challenge: finding enough of the right people to do the necessary works. The UK faces a skills shortage in a number of areas, and those with the specialist knowledge and expertise needed to operate in what is a rapidly changing, technology-driven field are likely to be in high demand.

Cu ing corners could lead to poor quality, even unsafe work. Spray foam insulation offers a cautionary tale.

Early installations o en lacked proper ventilation, leading to condensation and roof damage. Removal can be difficult and expensive, sometimes requiring a roof replacement.

This highlights the need for an assurance framework, similar to the British Standards Institution’s Kitemark, so landlords can feel confident they are spending time and money on enhancements that will safely and effectively deliver the desired efficiencies. Lenders could also benefit from a mechanism to ensure they are lending on good quality home improvements.

While some homes only require minor upgrades, a large portion of the PRS stock will need extensive work.

The challenge lies in addressing these issues without too much disruption or costly voids.

We fully support the move towards net zero, but recognise the complexities. We applaud the efforts of landlords in reducing the negative impact that our homes have on the environment, and call on whichever party is in power to deliver policies that facilitate further improvement. ● March 2024 | The Intermediary

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Energy efficiency affects every market and property

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t is almost six months since Prime Minister Rishi Sunak dropped plans to force private residential landlords to upgrade rented properties to a minimum Energy Performance Certificate (EPC) of Band C by 2028.

Critics suggested that the move was designed to woo landlords ahead of this year’s General Election, the date of which is still to be confirmed.

Indeed, many landlords were relieved at the news – the cost of energy efficiency improvements add up into the tens of thousands depending on the type of property.

Energy crisis A 2017 study carried out by the Department for Business, Energy & Industrial Strategy (BEIS) estimated the average cost to install internal wall insulation would have been £7,900.

Double or triple glazing was put at £6,400, cavity wall insulation at £750, lo insulation at £450, replacing a gas boiler at £2,000 and underfloor insulation at £5,800.

That was before the pandemic upended global supply chains, Russia’s invasion of Ukraine sparked an energy crisis in Europe, and Brexit le companies with higher import costs.

Paying for those upgrades would likely cost considerably more today.

Despite the savings on offer to landlords, there were many who weren’t pleased at the decision to abandon energy efficiency policy.

Across the housing industry there was considerable backlash.

Both the National Housing Federation and Energy and Climate Intelligence Unit (ECIU) warned that this move would leave households facing even higher energy bills in years to come.

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NHF research claimed that retrofi ing homes would save social housing residents on average 40% on heating bills. Similar savings no doubt apply to all housing tenures.

There are several things to consider here. First is the cost of those upgrades – the deadline to make them in the private rented sector (PRS) may have been scrapped (for now) but the cost is still si ing in that property. At some point, tens of thousands of pounds will need to be spent to make that home fit for purpose.

The second is the impact that low energy efficiency has on borrower affordability. Energy bills have rocketed over the past three years.

Low efficiency Speaking in the House of Commons in November last year, Secretary of State for Energy Security and Net Zero Claire Coutinho said: “In England, the share of households required to spend more than 10% of their income on energy a er housing costs was 21% in 2021 and 30% in 2022, following the invasion of Ukraine that year.

That is significant for the majority of households.”

The third consideration is what happens to the condition of a property le without energy efficiency upgrades? Data collected by the Met Office show UK mean temperatures have been shi ing over the decades as a result of human-induced climate change.

Based on provisional data, 2023 is on track to be Earth’s warmest year on record. Carbon dioxide concentrations in our atmosphere are at their highest for at least two million years. The five warmest years in the UK series from 1884 include 2022, 2023, and 2020, and the 10 warmest years have all occurred since 2003.

MARK BLACKWELL is COO at CoreLogic

We er weather and higher temperatures can lead to a host of potential problems for all kinds of properties – not just in the rented sector.

Damp leads to mould and damage to the fabric of a building. Extreme heat can cause buildings to expand and then retract, pu ing undue stress on its construction. Higher rainfall affects the soil’s properties, which can lead to subsidence or structural movement. Flood plains expand, coastal erosion accelerates, wildfire risk rises. Each of these climate risks presents a material impact on a property’s value.

Rebalancing risk Energy performance affects every market and every property. The footprint of energy usage on lenders’ back books is almost certainly the largest Scope 3 emission they must manage. Ignoring the problem simply delays the inevitability of having to address it at some point. What policymakers and lenders need to do is understand the scale of the problem and plan out what can be done in sensible, bite-size chunks. Assembling the right data and technology to support this will be a starting point.

The process of rebalancing risk of this sort cannot be applied sector by sector – buy-to-let, residential, development, new-build, equity release are all equally exposed, albeit in different ways. We have invested, and continue to, in developing solutions for these markets which bring understanding to these complex risk issues. We are here to help. ●

One property or a portfolio

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FAMILY BUILDING SOCIETY, EBBISHAM HOUSE, 30 CHURCH ST, EPSOM, SURREY KT17 4NL Family Building Society is a trading name of National Counties Building Society which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. National Counties is on the Financial Services Register. Firm Reference Number 206080.

In Profile.

Jessica Bird speaks with Lynne French, lending director at CHL Mortgages, about navigating risk and service in a time of uncertainty for landlords

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HL Mortgages was formed three decades ago, and became one of the early adopters of professional buy-to-let (BTL) lending prior to the Credit Crunch. Following the financial crisis, the firm took a step back to focus on servicing its existing assets, re-entering the market around three years ago. Since then, of course, the tough decisions have not stopped.

With 2022 and 2023 posing challenges that served to prove the mettle of the firm, The Intermediary sat down with lending director Lynne French – herself boasting broad experience over 15 years in specialist BTL, credit repair, residential, second charge and short-term finance.

A specialist part to play

One of the key reasons French gravitated toward the specialist BTL finance market was its role within the wider UK ecosystem.

She explains: “We can make a really big impact on the nation – enabling landlords to provide housing, supporting the financial infrastructure, and generating investment. Sometimes we forget to remind ourselves that we do a lot of good for the economic stability of the nation.”

To meet demand, there must be a focus on conversion and repurposing.

“We have a lot of buildings that get reimagined multiple times in their lifetimes,” French explains.

“So, having the appetite to be able to look at a [house in multiple occupation (HMO)] with a slightly unusual layout, or a small-scale conversion of a multi-unit block [MUB], is fundamental.”

As such, large housing schemes are not the “be all and end all,” and the market must cater for varied and diverse BTL investors.

“There is evolution in property, and to make the best use of the space in our country, we have to enable that evolution,” says French.

Red light, green light

Since making the decision to return to lending, the market has been turbulent, not least for BTL investors and the lenders that serve them. This led to 2023 being a quieter year for CHL Mortgages, but French is clear that this is all part of taking a steady approach to risk.

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“There’s been so much change and unrest in our space,” she says.

“Our aspiration is to be the specialist lender of choice – that people can talk to, where introducers can have a valuable conversation.”

The firm typically caters for those deals that might not fit with a “hyper-automated lender,” but which are still a viable risk.

French says: “We’ve got a strong team – from sales to underwriters, to the product and proposition team in the background – in terms of understanding where the right line is for risk.”

She points to “risk layering.” For straightforward lenders, everything must be ‘green’, whereas a specialist can take a more nuanced eye to its deals and tolerate some ‘amber’ in the mix, as long as it is not “pushing all our risk boundaries at one time.”

Everyone in the business must be on the same page as to where the line is, but French also emphasises the importance of communication with introducers, adding: “We have a system that has automation in it, but often the real outcome is to give the introducer a call, and they’ll be able to bring the deal to life for us.”

French says: “If there’s one thing that makes us stand out, from the feedback I get, it’s the personal service we create for the introducer, and our trust in them to know their deals.”

The year so far

Looking back over Q1, affordability has been the biggest concern. Nevertheless, French highlights a trend in January, when SWAPs calmed and lenders were able to lower their rates, that eased the affordability pressure. This made for an optimistic start, though since then SWAPs have been more volatile, with rates rising once again. For CHL Mortgages, handling this turbulence meant building optionality into its product suite, in order to help borrowers unlock better affordability.

“Every borrower has a slightly different stress point,” French explains. “It’s about giving access to the right combination of rate and fee to unlock as many of those affordability issues as we can. That has been our defining mission for Q1 – to do what we can to support that affordability piece.”

Of course, one of the key features in March was the Spring Budget. French points to the scrapping

I N P RO F I L E

of the Furnished Holiday Letting tax regime, which she says is, if nothing else, an “interesting indicator of the Government’s direction of thinking, and how it’s going to address some of the concerns around the impact of holiday lets on local communities.”

Overall, though, the impact of the Budget on the housing market is likely to be “reasonably negligible.” French notes that the reduction in the higher Capital Gains Tax (CGT) rate was good news for landlords, but the changes to Stamp Duty on multiple dwellings was not as positive.

What French would have liked, in simple terms, is more certainty – either around the Government’s direction of travel, or its timelines for change. If nothing else, this could have been an opportunity to simply leave BTL alone and allow this market to do what it does best.

Navigating the unknown

Looking ahead, French says the biggest BTL concern is simply figuring out what challenges might materialise at any given moment. This is not helped by Government policy, which introduces and then “kicks around” initiatives – such as the Renters (Reform) Bill or changes to Energy Performance Certificate (EPC) requirements.

“This market is one that gets talked about a lot,” French says. “It gets called out for change, but actually, not all of that change comes to fruition.”

With a General Election on the horizon, the rental market will likely be used as a hot-button topic, but this leaves people wondering what measures will actually come into effect.

“As a sector, we end up on tenterhooks an awful lot,” says French. “The only way to navigate that well is for us to recognise the expertise that comes in the borrowers in this space.

“As a nation, we have an established culture of professional landlords, who – despite the odd headline or bad apple – run their portfolios well and know how to manage their own risk.

They are able to do that with the support of specialist lenders like CHL Mortgages.”

She continues: “The use of the BTL market as a political playing piece is going to cause some of the biggest challenges over the coming year.”

Despite these challenges, French says there is plenty of activity to indicate that any rumoured mass exodus of landlords is unfounded.

She says: “I think there will be people who have got to the point where they don’t want to put up with the uncertainty and change any more, but it’s a market with a degree of churn, and almost as many people come in as exit it.”

LYNNE FRENCH

However, what is likely to happen is a shift towards a more professional market.

“While there is still an appetite, those ‘dinnerparty’ landlords aren’t jumping straight in,” French explains. “They’re being more considered – there’s more limited company borrowers, more complex structures, indicative of people giving real, considered thought as to why they are investing in this property, their succession planning, and efficiency of income.”

CHL and the future

In order to serve these clients, French says that while technology and innovation are integral, so is a human approach.

She explains: “[Tech is] taking the slack where it can, so that the human approach can be applied most effectively, where it’s most needed.”

While CHL uses automation for quick decisions – and understands the value of this for brokers – the firm also ensures a human sense check.

“There’s a flexibility in our systems,” French says.

“That’s where our innovation comes in. We work with our tech partners to ensure we are managing and assessing data to strike that balance between speed and clarity of decisioning, and bringing our personal expertise to the forefront.”

Through all of this is the ethos that CHL Mortgages is “a lender that is not prepared to settle.” This means continuous improvement and incremental changes. According to French, where others might hoard updates and make them all at once in a grand gesture, CHL makes improvements more regularly so as to constantly evolve.

This comes into product design as well – avoiding sharp shocks by remaining agile. For example, in Q1 CHL designed its products with a degree of protection against SWAP rate changes, in order to avoid “dreaded short notice rate pulls.”

Even when there is uncertainty to be dealt with, French says, “as a sector, we have reasons to be cheerful,” pointing to increases in housing transactions, for example.

French concludes: “As a sector, we’ve been around long enough that we know how to weather these storms. We have a much brighter 2025 ahead of us, so 2024 is all about continuing to do what we do as well as we can, support borrowers, and be ready for those green shoots to keep growing into the future, getting good business done on the back of that.” ● March 2024 | The Intermediary

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B U Y - TO - L E T Opinion

Budget: Not positive for landlords

A

couple of months ago, I spoke to a close acquaintance about the upcoming Budget. They were u erly convinced the Chancellor would “have to” do something on Stamp Duty, incentives for first-time buyers, and a potential Help to Buy replacement, in order to try and bring back some voting demographics to the Conservative Party fold.

Not only that, they also mentioned that “Jeremy Hunt is a landlord” and there was the suggestion that someone who acutely aware of how landlords have been impacted by Stamp Duty, extra charges and the pulling of mortgage interest tax relief, might therefore look sympathetically on buy-to-let and property investment, perhaps even cu ing the 3% charge, certainly including landlords in any Stamp Duty changes, but perhaps not going so far as to U-turn on tax relief.

Now, to give this person their dues, there was a lot of noise being made on housing and the property market measures in the early weeks of January. Michael Gove, for example, was trawling the TV studios talking about all manner of measures, including Stamp Duty changes, and there were even some rumors the Government would go all out and abolish it entirely.

However, as February progressed and certainly as we saw the UK slipping into recession, it became increasingly apparent that big ticket measures designed to stimulate the housing market were not just being put on the back burner, but dumped into the bin in a burnt mess. Hence, we come right up to date, and we have to confront the recent Budget.

In a sense, looking at the measures announced, we can definitely hark back to the “Jeremy Hunt is a landlord” comment, but we might surmise that Hunt is coming to the end of

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his own landlord journey, isn’t too interested in either improving other landlords' lot, or increasing the supply of properties in the private rental sector (PRS), and it seems he now also subscribes to the view that you have to engage in policies which effectively pit landlords against first-time buyers and owner-occupiers.

How else can you explain the decision to cut the higher rate of Capital Gains Tax (CGT) from 28% to 24% on the sale of residential property?

The Government even spell this out in the ‘Red Book’ – this policy is designed to incentivise landlords and additional homeowners to sell up, and it is hoped by doing so, they increase transaction numbers and tax take, and these properties are bought by first-timers.

Landlord exit So, instead of seeing the owneroccupied space and the PRS as two sides of the same coin, which need to be treated equally in order to get a fully-functioning housing market, what we have is a continuation of all those policies designed to improve housing supply to purchasers, by effectively moving landlords into an economic position where they feel they have to sell up.

Now, recent history will tell us that this works to a certain extent, and we’ve certainly seen landlords with perhaps one or two properties leaving the PRS, but can we truly say these properties have made their way to first-time buyers?

A er all, the most coveted property for a first-timer is a new-build – landlords are not selling new-builds to first-timers, of that there is no doubt.

Professional and portfolio landlords who might wish to purchase multiple properties have been disincentivised further with the abolishment of multiple dwellings relief on Stamp Duty, while those who might have

STEVE COX is chief commercial officer at Fleet Mortgages

been trying to up their yield by moving their properties from longer tenancies to holiday lets have also seen the furnished holiday le ings tax regime abolished. This is designed to move holiday lets back to longterm tenants, but whether it actually achieves this aim remains to be seen.

The maths of each property is still going to determine whether landlords continue renting out these properties as holiday lets – perhaps the Government also believes there is a greater likelihood these will be sold onto first-time buyers?

So, understandably, this can hardly be said to be a positive Budget for landlords or the PRS, or indeed the wider housing market at all.

Instead of tackling the root cause of the UK’s housing market problems – namely a lack of supply for both owner-occupation and the PRS – the Government have effectively continued a policy which hopes that landlords exit the market, and when they sell up, these properties are bought by first-time buyers or others.

It will not take a genius to work out where such a policy has le us right now, and therefore to ‘double down’ on it seems somewhat baffling, and not least a li le galling for those working in this sector, trying to find ways to improve the lots of both tenants – 4.6 million households rent privately in the UK – and those who would also like to buy their own home.

Both tend to be one and the same, and the sooner we have politicians who treat them as such, the more likely we are to have housing policy that works for both. ●

B U Y - TO - L E T Opinion

The challenge of good quality rental homes

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overnment policies, affordability issues and property shortages have all recently contributed to questions over the future of buy-to-let (BTL) – for both landlords and tenants.

Higher interest rates have heaped financial pressure on many landlords, risking damaging the private rental sector (PRS) that has evolved over the past two decades – if le unchecked, this could harm not just landlords, but also the tenants they serve.

Many have raised questions about the potential long-term consequences of the Government’s policies, and suggested reforms relating to this sector – including those designed to protect tenants from unscrupulous landlords. For me, this has sparked an interesting but very important debate: how can we ensure the PRS is sustainable and remains viable for reputable investors and their tenants?

Ensuring the right mix There are unintended consequences to well-intended but poorly-thoughtthrough tenant protection reforms.

It is all about striking a balance and understanding the consequences in both the short and longer-term.

While protecting the rights of tenants is important, landlords too need to feel in control of their assets and have the freedom to make changes required to maintain the viability of their offering, which, a er all, is in critically short supply.

There has been a succession of changes over recent years which have, arguably, made being a landlord less palatable. These include adjustments to taxation and the introduction of rent controls in Scotland. In other areas, there is uncertainty in the

industry – such as with regards to Energy Performance Certificates (EPC) requirements, following previously proposed reforms being placed on hold, coupled with the upcoming election.

I believe the blanket demonisation of landlords misses the point, which is the vital contribution reputable landlords make – both in terms of making up the shortfall of quality homes for those who cannot or do not wish to buy, and offering a springboard into homeownership for future first-time buyers. The ‘Home Truths’ report published by Yorkshire Building Society last year a ests to the impact on sentiment – 61% said that being a landlord is less a ractive now.

One of the most serious potential outcomes is what I could best describe as a 'race to the bo om'. We could see be er quality landlords exit the market, which would then become increasingly cost-led – creating incentives for corners to be cut, leading to poorer quality accommodation and a rise in measures designed to extract greater yield, such as predatory ground rent practices.

This brings into sharp focus the need for more strategic thinking around protections for tenants, covering vital factors like fire safety, accommodation standards and deposit protection. This should take the form of a long-term, joined-up strategy. Energy efficiency also has an important role to play – as inefficient buildings increase energy bills.

Why it matters Asset quality is so important. It allows lenders to manage risk as well as their reputations, if they can lend to socially responsible landlords who keep properties in good condition, abide by regulations and treat tenants fairly.

TOM SIMPSON is managing director of YBS Commercial Mortgages

That’s why we’ve commi ed to the Decent Homes Standard – a formalisation of what we already do to ensure the rental properties we lend on are of a high quality. This ensures properties we lend on meet clear criteria, according to a framework through which we determine what good quality properties look like.

This includes: meeting the statutory minimum standard for housing, such as not being affected by damp or mould; being in a reasonable state of repair, such as having windows and doors which are watertight and secure; and having reasonable facilities, such as a modern kitchen.

These standards are crucial, and 63% of landlords surveyed for Home Truths agree that legislation to protect tenants is a good thing for landlords.

Collaboration is key This industry has a responsibility to ensure tenants a decent standard of living. However, we must also acknowledge the rights of landlords – and these different priorities must be managed in a balanced and controlled manner.

One way Government could support this is to incentivise landlords to provide properties of a decent standard – motivating reputable landlords, benefi ing tenants and helping ensure the long-term viability of the sector.

There are already policies designed to support tenants, such as pending legislation to prevent no-fault evictions. However, what we really need is a wider package of reforms which achieve that sweet spot of supporting quality landlords and improving conditions for tenants. ● March 2024 | The Intermediary

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DEAFENING SILENCE PRACTICAL REALITIES AND MARKET REACTIONS IN THE AFTERMATH OF ANOTHER DIVISIVE STATEMENT Jessica O’Connor

To say anticipation was high

ahead of this year’s Spring Budget might be an understatement. Following what was widely considered to be a lacklustre Autumn Statement, optimistic speculation was widespread.

First on many wishlists was, of course, the desire for major Stamp Duty Land Tax (SDLT) reform. With the average bill reaching over £9,000 per household in 2023, many expected the Chancellor to introduce further cuts in a bid to reduce the growing financial strain on mortgage holders.

And what of the plight of the struggling firsttime buyer? Could something akin to Help to Buy be resurrected?

Or perhaps consider the much-ignored private rental sector (PRS) and its legion of jaded landlords? The divisive 99% mortgages proposal?

Unfortunately – or fortunately, depending on your persuasion – none of these schemes materialised.

With bated breath, the mortgage industry looked on as Jeremy Hunt stepped up to the despatch box, and took the opportunity to…announce a reduction in Capital Gains Tax (CGT). Not exactly an industry altering bombshell.

Needless to say, commentators have called the Budget an “underwhelming,”

“tone-deaf” “missed opportunity” – and that’s the polite responses.

Putting market reaction aside, though, what was actually proposed for the property sector?

First, Hunt turned his focus to various forms of property taxation, abolishing the Furnished Holiday Lettings regime in a bid to increase options for local, long-term tenants in the PRS. While this may sound like a positive step, supporting a rental market which finds itself severely lacking in housing stock, perhaps a closer look at the fine print is required. The proposed change is not set to take place until April 2025, several months after the General Election. The chances of the current Government still being in power in April of next year seems highly unlikely by all accounts, and it is unclear how many of its proposed policies will survive the election storm.

The Chancellor also abolished Multiple Dwellings Relief. While this was originally intended to support investment in the PRS, Hunt said that an external evaluation provided “no evidence” it would have done so.

Stamp Duty amendments did make an appearance, although not in the form many expected. Instead

of introducing a much-needed overhaul to an outdated system, Hunt’s new legislation only affects those providing social housing.

Registered providers of social housing in England and Northern Ireland are now not liable for SDLT when purchasing property with a public subsidy.

Rules for claiming first-time buyers’ relief from Stamp Duty in England and Northern Ireland have been amended, so that individuals buying a leasehold residential property through a nominee or bare trustee will be able to claim – including victims of domestic abuse.

While this may provide incentive for areas across the country to provide more social housing options, and open doors for more vulnerable homeowners, it also demonstrates an oversight of what could have been a real shake up.

Nevertheless, Hunt held firm on describing the Conservative Party as one of “housebuilders,” and promised to deliver more than one million homes over the course of the current Parliament.

Allocating £242m of investment Canary Wharf, with the aim of building more than 8,000 new houses, he also committed to “building houses for more young people.” That said, it is hard to imagine many young first-timers affording to buy in the heart of London – or anything at all for that matter.

Hunt was also quick to highlight previous commitments made by the Conservatives to pour £188m worth of funding into Levelling Up projects in Sheffield, Blackpool and Liverpool.

In one of the more prominent steps taken by the Budget, of course, the Chancellor also reduced the higher rate of property CGT from 28% to 24%, following positive analysis from both the Treasury and the Office for Budget Responsibility (OBR).

In his opening statements, Hunt revealed the heartening news that the OBR has officially forecast inflation hitting 2% in Q2 of this year, before it is set to rise slightly once again in the latter half of 2024. This begs the question, with inflation seemingly on the path downwards, the property market slowly returning to what it once was pre-Truss mini-Budget, and base rate cuts expected from the Bank of England in the coming months, why the cautious approach?

Beyond the mortgage and property market, the Chancellor set out a few other noteworthy plans, such as £200m to extend the Recovery Loan Scheme as it transitions to the Growth Guarantee Scheme in support of small and medium enterprises (SMEs), the introduction of the British ISA, and the extension of the Household Support Fund. However, commentators agree that this Budget was nothing to write home about, that the few measures taken were simply

not enough to help tackle the day-to-day financial pressure that has households across the country in an icy grip. With the number of individual insolvencies showing an annual rise of 23%, and mortgage arrears increasing by 7% in Q4 of 2023, I am inclined to agree.

As the cost-of-living crisis firmly marches on, we can all agree that this not a good look for a Government already being outperformed at the polls. In fact, from perpetual dithering over the Renters (Reform) Bill, inadequate levels of housebuilding, and the constant cycling of different Housing Ministers – this Government seemingly refuses to make the mortgage and property market a priority.

As for public reaction to this approach? That answer will be heard loud and clear at polling stations later this year.

Jonathan Stinton is head of intermediary relationships at Coventry Building Society

B

udget? What Budget? The Chancellor’s speech barely touched on the property market; there could – and probably should – have been a lot more announced. Reducing the higher rate of CGT may drive more property transactions, and the amendments to the Furnished Holiday Lettings regime will hopefully free up longer-term homes for people, but it’s a stretch to describe it as support for homebuyers. First-time buyers weren’t tossed so much as a crumb, and the silence around housebuilding was deafening. It’s disappointing to see that both have well and truly slipped down the priority list when they are so important to the health of market.

First-time buyers are the foundation on which the rest of the housing market stands, and the availability of new homes is what keeps demand from spiralling and house prices rocketing. It’s bizarre that neither were directly mentioned.

The much talked about 99% mortgage scheme turned out to be nothing more than the rumour mill in overdrive. It would have given buyers help with their deposit, but wouldn’t have helped them from an affordability perspective. The scheme also came with the danger of escalating property prices too quickly, which could have been damning when the lack of new homes hasn’t been addressed. It’s perhaps a good thing it didn’t materialise, but it’s a real shame nothing else materialised either. All the speculation of meaningful Stamp Duty changes turned out to be hearsay, too, which was surprising given it’s a tax so ripe for the picking it practically fell into

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the Chancellor’s lap. There was so much which could have been done, like waivers for downsizers or incentivising energy efficient home improvements, or fluid thresholds which move in line with inflation, yet we got nothing. It’s a blow for future homebuyers, who now have just over 12 months to benefit from the temporarily reduced tax thresholds.

Come April next year, the tax bill on an average priced home is going to shoot up by £2,500, which could mean many new buyers have to dip into their deposit and borrow more to cover the bill. Over the term of a 25-year mortgage, based on a rate of 4.88%, this could cause buyers to pay an extra £4,332. The Chancellor could have got creative and presented innovative solutions which address some of the challenges homebuyers are facing, but instead, homebuyers were mainly overlooked. The Government can’t singlehandedly erase all the challenges homebuyers are facing, but it can certainly play its part. To see it do so little was not only disappointing, but a waste of an opportunity.

Rohit Kohli is director at The Mortgage Stop

S

ince last week’s Budget announcement, we’ve noticed a change. New inquiries have slowed a little, but more notably, the tone of conversations with prospective borrowers has changed. Many feel overlooked by recent fiscal strategies, voicing frustrations over the absence of targeted support for homebuyers. This has not only dampened their spirits, but also posed new challenges for us in advising clients under these evolving market conditions.

The Budget passed over vital chances to support potential homeowners, especially those aiming to take their first step onto the property ladder. The absence of new incentives for affordable home construction or measures to assist first-time buyers stands out starkly.

This oversight perpetuates the longstanding issues of unaffordable housing and inaccessible mortgages, rooted in the absence of a cohesive, long-term housing strategy. While the slight cut in National Insurance (NI) is a welcome gesture, it barely scratches the surface of the deeper confidence crisis gripping the housing market. Facing a technical recession, troubling job market data, and rising mortgage arrears, the economy teeters on a precipice. Recent Budget measures, while attempting to address some financial challenges, fall short of providing the robust support the housing and mortgage sectors desperately need. This lack of substantive

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action amid critical economic indicators was a missed opportunity for meaningful Government intervention. To prevent the economy from tipping over, a strategic and targeted response is essential. Only through thoughtful, decisive policies can we hope to stabilise the housing market, support potential homeowners, and ensure the broader economic health of the nation. The Government must consider a more proactive approach to bolster confidence, stimulate growth, and make homeownership accessible to a broader segment of society.

Inaction is not an option.

Adam Oldfield is chief revenue officer at Phoebus Software

O

n the surface it looked like such a vanilla Spring Budget that it should have been served with a flake. There was one key area that would have given the housing market a much-needed boost that was particularly notable by the poor level of attention it was afforded – yet again. I am, of course, referring to Stamp Duty.

The high price of Stamp Duty is one of the largest barriers to purchasing a property, and the housing market is practically hoarse with calls for reform. Yet it barely got as much as lip service in the Spring Budget. Mortgage lenders are doing as much as they can to support borrowers without creating risk. Yet according to February’s HMRC National Statistics, January 2024 saw 12% lower residential transactions than in January 2023. If you look at the seasonally adjusted figures, we’ve seen a fairly steady decline since May 2022. Stamp Duty relief for first-timers, next-timers and downsizers could have been a slam dunk for the Government. It’s quite baffling.

Now we have people who would like to upsize or downsize, but the cost of Stamp Duty is stopping them. This is stifling the housing market at a time when it should be set free to stretch and grow. Instead, the Chancellor presented us with a 4% reduction in CGT, in the hope, apparently, that it would trigger an increase in the volume of transactions. This is yet another ‘strategy versus tactic’ disconnect.

Let’s not be gloomy, though. With the OBR anticipating that inflation will kick through the 2% goal in the coming months, we can at least hope for financial stability, lower SWAP rates, and the Bank of England cutting its base rate.

What mortgage lenders do with that over the next few months is probably very little. It will be interesting to see how it all pans out through to the Autumn and elections.

Ryan Davies is strategy director at Bluestone Mortgages

T

his was a missed opportunity for the Government to tackle the housing crisis.

While there were some positives, such as the extension of the Household Support Fund, there was a glaring absence of any long-term strategies to address the shortage of affordable homes nationwide. This absence is particularly disappointing, albeit not entirely surprising, given that it’s an election year. The Government is focused on securing votes in the short-term rather than prioritising sustainable, longterm solutions. Due to the lack of Government support, the responsibility is increasingly falling on lenders to find new and innovative ways to support people onto the property ladder.

As we approach the upcoming election, we hope to see the emergence of comprehensive, forward-thinking policies and innovative solutions which support individuals looking to take their first steps onto the housing ladder.

Hiten Ganatra is MD at Visionary Finance and Mortimer Street Capital

O

nce again it feels like a missed opportunity, which unfortunately seems to be the story of this decade of Conservative rule. YouGov polling recently showed that only 11% of 24 to 49-year-olds would support the Conservatives at the next election, compared with 43% over the over-65s. This is a worrying statistic for the Conservatives, and a clear indication that they have failed successive generations of first-time buyers.

For landlords, despite a positive move to reduce the effective rate of CGT, the benefit has been offset by the reduction in the exemption of the CGT zero banding threshold. In addition, many landlords moved to furnished holiday lettings after the Government reduced the interest relief on long-term BTLs in 2015.

Hopefully this will create a level playing field and release the pressure of supply in the longterm rental market, as many landlords may consider reintegrating these properties back.

Finally, the 300,000 house target has been in effect since 2004 and has been missed every year since it was set. Therefore, this target falls short of the number of new homes we actually need – it should be 385,000 per annum.

With shortages in labour, the cost of materials increasing, developers simply not building, and

local authority planning rules being onerous, the problem isn’t going to go away.

Alan Fitzpatrick is head of property finance at Nomo

B

ritain’s property market continues to be a favourite destination for Gulf Cooperation Council (GCC) nationals.

The Chancellor’s cut to the higher rate of CGT is positive news for GCC customers looking for opportunities in the UK property market.

However, declining valuations were already providing discounted opportunities for Gulf nationals to purchase a house in the UK. The CGT announcement will likely be eclipsed by more established market conditions, as well as stabilising interest rates reducing the cost of mortgages.

More controversially, the Chancellor announced plans to replace the non-dom tax regime. From April 2025, individuals moving to the UK will be exempt from UK tax on all nonUK profits for their first four years of residency.

Time will tell how this will shape UK housing’s attractiveness to prospective buyers, including those from the Gulf. Similar regimes are widely considered to be a success in countries such as Italy, so Hunt’s headline-grabbing move might drive up demand for British real estate.

When it comes to attracting buyers from the GCC, the reduction in CGT is a positive step.

Other elements of the Spring Budget, however, may be less welcome. The Furnished Holiday Letting scheme being axed spells bad news for those who own a holiday home in the UK. Again, though, underlying economic conditions will do more to shape Britain’s appeal to GCC purchasers than Hunt’s announcements.

Rising inflation and a seemingly constant increase in the base rate between December 2021 and August 2023 saw rates rise significantly for many. However, if inflation does drop as predicted, the base rate should also reduce, enabling lenders to bring their rates down again.

More than any of the measures announced in Hunt’s Budget, that would be welcome news.

Richard Harrison is head of mortgages at Atom bank

I

t is a real shame that the Chancellor opted against some improvement to the way that Stamp Duty is structured, as doing so could have given the housing market a welcome boost at a time when we are still feeling the

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effects of the past few years. The increases in house prices mean that buyers are facing ever growing tax bills. This discourages many, whether they are looking to upsize or downsize, which only serves to tie up the market.

The step to 10% Stamp Duty on transactions of above £925,000 in particular is so steep that it stalls the market at this level. This, in turn, discourages older homeowners from downsizing, which then impacts the housing market further down the chain. The nature of our housing system means that when one area seizes up, the effects are felt across the board.

While supply is clearly an issue, first-time buyers already face difficulties saving a sufficient deposit. Some will also have to factor in additional money in Stamp Duty, and inevitably these further costs are pricing out buyers.

I would like to see the Government look at more fundamental and enduring changes. When Governments have looked at Stamp Duty in the past, all too often the measures have been temporary at best. Time-limited measures lead to a rush to meet an arbitrary deadline, and mean that ultimately these market issues will remain.

visitors to areas where the local economy is predominantly built around tourism, who then spend money at local businesses. This, in turn, encourages greater investment, often with more businesses opening in response.

The abolition of the tax regime is tinkering with the housing problem rather than addressing the root cause – that too few new homes are being built across the country.

It would be a shame to potentially reduce this level of investment in holiday areas and reverse the benefit, particularly in seaside towns that have experienced neglect for so long.

The more progressive approach to addressing the housing crisis in popular holiday locations would be to focus on delivering more housing there. This could even be coupled with a percentage cap on the number of properties able to be let on a short-term basis.

Increasing the housing stock in these regions by an average of 5%, would not only more than counter those properties being let to holidaymakers, but it would also encourage even greater investment in the area, creating more jobs and wealth for local residents.

Anna Lewis is commercial director at Castle Trust Bank

Damian Thompson is director at The Mortgage Works

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T

t wasn’t a surprise that the Chancellor announced the abolition of the Furnished Holiday Lettings tax regime – a move the Government says “will level the playing field between short-term and long-term lets and support people to live in their local area.”

The prevalence of short-term lets in popular seaside areas and holiday regions is a relatively recent phenomenon. Airbnb first hit the UK in 2009, sparking a boom in demand among holidaymakers and inspiring new investors.

The huge popularity of furnished holiday lets hasn’t been welcomed across the board, with residents blaming owners of these properties for local housing shortages.

However, whereas the growth of short-term lets is relatively recent, we have had a housing crisis for many years. The total number of properties used for short-term lets is also relatively small, even in the most popular holiday areas.

These short-term lets are indeed properties taken out of the long-term rental market, but they are also often properties that investors have purchased and renovated specifically, which may otherwise have been left deteriorating and empty.

The abolition of the regime overlooks the many ways an area can benefit from a vibrant short-term let market. For example, it encourages

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he PRS plays a vital role in supporting the UK economy, driving investment, and meeting the diverse housing needs of both tenants and landlords. However, it is becoming increasingly unviable for landlords to sustain their business, and a holistic approach to support the entire sector and all parties within it is urgently needed.

‘Missed opportunities’ were the words that reverberated following the Spring Budget.

The Chancellor could have used it to support landlords, enabling the sector to play its vital economic role in providing housing for those who can’t or don’t want to buy a home. Instead, he committed to changes to the Furnished Holiday Letting tac regime and CGT, which will have little or no impact on the supply of longterm rented homes.

It is difficult to see how a Budget which disappoints both the NRLA and Generation Rent can be considered a success.

TMW shared four critical actions with Micheal Gove earlier in the year, to build a stronger PRS: • Provide greater certainty for landlords with a moratorium on all but essential new regulation following the Renters (Reform) Bill.

• Incentivise landlords to carry out energy efficiency work by allowing energy performance

improvements to be deductible against rental income for tax purposes.

• Ensure appropriate funding is available to deliver the additional 90,000 homes per year into the social housing sector.

• Reintroduce landlord mortgage interest relief and review the additional 3% landlords have to pay on top of their normal Stamp Duty.

At the point of ‘pens down’ on 5th March it was clear the Government was persisting with a piecemeal approach to solving Britain’s housing crisis. A different approach is urgently needed and must start with a cohesive plan for long-term renting, rather than making separate changes for different types of renting.

The Government should partner with the PRS to bring about positive change. By setting a clear strategy, including building more homes, the Government could implement policies that help landlords offer decent, long-term housing and support other elements like holiday rentals.

The pressing need for a holistic approach to support the sector is undeniable, and is paramount for addressing the housing crisis.

Reviewing how we tax landlords is essential to ensure the continued provision of rental properties by the private landlord community. At the same time, the Government must increase its efforts in expanding social housing. This approach fosters a broader partnership between private landlords and the Government to address the growing demand for affordable housing and support sustainable communities across the UK. TMW has clearly outlined the crucial actions imperative for fostering a thriving PRS. On their own, each of these would make a reasonable impact. Combined, they would not only support landlords, but will attract new ones to a sector in which demand is continuing to grow rapidly.

The PRS is essential if we are going to help the UK prosper, and greater action must follow soon so that we can repair and build a sustainable, inclusive and prosperous rental market.

Kate Davies is executive director at the Intermediary Mortgage Lenders Association (IMLA)

I

ndustry response to this month’s Budget can best be described as muted. There was relief in most quarters that the much-trailed concept of a 99% LTV mortgage did not come to pass, but disappointment – if not surprise – that Hunt neglected to offer more simple support for firsttime buyers, which he could have done by making the current Stamp Duty concessions permanent,

for example. Another disappointment was the failure to offer any meaningful encouragement to BTL landlords. The 4% cut in CGT on the sale of residential property for higher and additional rate tax payers is likely to cut little mustard, particularly given that the CGT allowance is set to fall from £6,000 to £3,000 next month.

The BTL sector has demonstrated remarkable fortitude in recent years, and a widely rumoured ‘exodus’ of landlords has simply not happened, at least not yet. But IMLA’s research in March 2024 revealed some interesting truths which should give the Government pause for thought.

The IMLA Landlord Survey reveals a market predominantly supplied by small businesspeople who will struggle to break even in the next two years, with the cost of borrowing soaring by an anticipated 80% as they refinance off historically low fixed rates.

Most landlords do not have significant resources to draw on outside their rental business. On average, non-rental income is roughly in line with tenant income, except in London where tenants earn substantially more.

It’s time to change the narrative about greedy, exploitative landlords. It’s time the Government acknowledges the crucial role BTL investors play in the PRS, which provides homes for almost 20% of the UK’s households – more than the social rented sector.

Of course there is a minority rogue element, but focus should be concentrated on drumming the few bad eggs out the market, while supporting the many good providers who care about their tenants, while attempting to run a viable business. BTL is the only small business sector in the UK which is taxed on turnover rather than profit. That needs to change. If more landlords exit this market, the result will only be a reduction in supply and further upwards pressure on what are already record rents.

There are tough times ahead for all parties in the PRS, and it is in everyone’s interest to understand the pressures involved. Genuinely easing the tax burden on landlords would encourage them to remain committed to the sector, and shaving a bit of CGT off the bill for those already selling up will not achieve that end.

In the near future, IMLA would like to see a review of the changes to mortgage interest relief and the additional 3% Stamp Duty charge, to support landlords in continuing to provide the homes we so desperately need. In the long run, of course, the only way to overcome the housing shortages which plague our country is for Government to support an ambitious, sustainable programme of housebuilding. Sadly, neither seem to be a priority. ● March The Intermediary 2024 | The Intermediary | July 2023

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

Helping clients grab a deal through auction

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uction finance is an area often overlooked by brokers. During the pandemic there was a boom in property purchases through auction, but this may still be an area which gets less attention than it deserves.

In the current climate of economic uncertainty, it’s always worth exploring new ways in which you can diversify your product offering, and your client’s portfolio.

There is a lot of potential here, with January 2024 being quoted as “the busiest ever in auction history” by Essential Information Group, with the number of properties coming to market increasing by 45.1%, and the number selling growing by 49.8%.

Should you look to assist those clients looking to start buying property through auction, we have some top tips you can give them to help along their journey.

Find a solicitor familiar with auctions It’s vital that your customer’s solicitor knows they need a quick completion period, whether that’s seven, 14 or 28 days. They need the experience and capability to work to those timescales.

Their solicitor should also be Solicitors Regulation Authority (SRA) regulated, and aware that they will need to act as dual representation in most purchases.

Read and understand the legal pack It’s really important that they understand the legal pack. If there’s anything in it that they may be not 100% confident about, they can always get their own solicitor to have a look and review. Ensure that clients read and review the special

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conditions of sale, as this contains a variety of important information – in particular, any aspects that may see them incur additional costs.

If the legal pack is not available, they should certainly consider not buying the property as this could be a red flag.

Get finance approved before auction Knowing how much your customers can borrow, the types of properties they should focus on, and whether

they are affordable beforehand will stop them making costly mistakes.

No more paying way over the odds and then worrying that they won’t be able to find the funds required to complete the purchase. Getting a decision in principle (DIP) and doing research into the products and properties ahead of time will give them the confidence to bid.

Beware of the six-month rule Auctions are a great way for investors looking to make a profit. Buying and redeveloping – popularly known as ‘flipping’ – is common, as auctions have a shorter completion period and a higher certainty of sale compared to other methods of selling property, which can see a deal falling through.

However, as the vendor may have only owned the property for six months or less at the point of sale, it can make getting a mortgage on an investment or buy-to-let (BTL) property harder for the winning bidder, especially when applying for finance with high street providers.

Make sure your customers do their research before the auction, and, if they find themselves in a situation where the property breaks the sixmonth rule, they could consider not buying the property at all, buying with cash, or utilising the services of a specialist finance provider.

Check the completion period At a conditional auction, your customers typically get 28 days to complete the purchase. If you take out weekends, that is actually only 20 to 21 working days. You can sometimes get completion periods of 14 days, and very rarely, as little as seven.

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

Getting funds fast can be tricky at the best of times, but buying the types of buildings typically available at auction, like non-standard properties, can add more complexity to passing lending criteria. Such complexities could prolong the process, making it almost impossible to complete within these timeframes through a high street lender.

With a non-conditional auction, they’d get 28 days to exchange and an additional 28 days to complete, giving them a total completion window of 56 days.

If they can’t meet the initial completion date, they would almost certainly lose their deposit in addition to further fees, and should the property have to be resold at auction, they could be liable to pay the difference.

about both the tenant and the tenancy agreement. Assured Shorthold Tenancies (ASTs) can cause issues for finance with some of the big lenders.

If they buy a property with a regulated tenant, it may be a long time until that property is vacated, as they will have the right to remain – usually at rents well below the market rate.

Investigate tenancies

Look for unsold lots

Is the property they’re planning to purchase currently being rented out?

Advise them to take the time to find out some background information

Most lots will have a reserve, which is the minimum price the vendor will accept for the property. If a reserve price is not met, the auctioneer will

Get to know your auction house Some auction houses may have more lots on offer for the property type than your customers are interested in – at better prices – and others may simply make them feel more at ease with their methods or atmosphere.

Attending a few auctions before purchasing can be a great way to get a feel of how they operate and find one that is best for them.

AMY SCHOFIELD is auction sales manager at Together

withdraw the lot from the auction.

However, at the end of the auction the vendor may agree to sell the property at a lower price.

Your customers can ask the auctioneer if they can register their interest for such properties, and they may grab a last-minute win at a bargain price. ● March 2024 | The Intermediary

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

When speed matters most for intermediaries

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or anyone who has ever bought or sold a property, there’s no ge ing away from the fact that it can be a stressful journey – even when working with the best agents, the best solicitors and the best brokers. This has become increasingly apparent over the past 12 to 18 months, amid the turbulent economic conditions and unstable mortgage rates which have served to fuel buyer and seller uncertainty.

For example, looking back at Q1 2023, market analysis by Quick Move Now reported that 55.8% of property sales in England and Wales collapsed before completion. While this figure was inflated due to the severity of mortgage rate movement at that time, even during the more stable lending conditions of Q3 2023, more than a quarter (27.3%) of property sales in England and Wales still collapsed.

Of the sales that failed in this la er period, 29% were a ributed to buyers ge ing cold feet and changing their minds about the property. A further 25% were due to the buyer pulling out over legal issues or as

Chain-breaks remain a challenge for buyers and sellers, and with the market moving so slowly, it has become increasingly difficult to complete on all links in the lengthier property chains" 46

The Intermediary | March 2024

the result of a survey report. The remaining failed sales were a ributed to chain-break, difficulty securing a mortgage, slow sale progress and miscellaneous causes.

When speed is critical Chain-breaks remain a challenge for buyers and sellers, and with the market moving so slowly, it has become increasingly difficult to complete on all links in the lengthier property chains.

This is where the speed element a ached to short-term finance can help anyone involved in a chain-break scenario to complete their purchase and provide more time for their seller to find a buyer to complete the downward transaction.

Short-term finance is also integral for properties bought at auctions to ensure that the 28-day deadlines can be met. For the rising number of online property sales, this can be extended to a completion timeframe of 56 days. However, this can still prove to be a tight timeframe given market complexity and the fact that many mainstream lenders are still unable, or unwilling, to accommodate such strict deadlines.

Leveraging bridging With first-time buyer and typical buy-to-let (BTL) property stock selling relatively quickly due to the shortage of homes on the market, using bridging finance – and automated valuation models (AVMs) and title indemnity within this process – can also be a way to dramatically shorten the completion timeframe.

This means that the purchaser can almost act like a cash buyer and put themselves in a more favourable buying position to secure the right property at the right price.

DONNA WELLS is managing director at Envelop

We also have heard reports of an increasing the amount of gazumping, especially in and around London. As a rule of thumb, the longer a property chain takes to complete, the higher the chance of gazumping. Where there is an increased chance this may happen, especially on a property which may have been acquired for under market value, short-term finance could be the answer to get the transaction over the line.

Tips for guiding clients For those intermediaries with less experience of the short-term finance sector, collaborating with a specialist packaging partner will help facilitate differing forms of alternative finance.

Specialist packagers fully understand which types of application suit which type of lender, their individual criteria demands, the depth of information required, and how to deliver it. This combination is imperative from both a speed and certainly standpoint, and there is no substitute for experience in this area.

Another important factor in the successful application of bridging finance is using solicitors who are familiar and comfortable dealing with this type of loan. As is having one eye on the plausibility of the exit right from the beginning of the application process.

Speed isn’t always everything when it comes to securing propertyrelated finance, but when aligned with understanding, experience and expertise, it can certainly help in a number of property-related scenarios. ●

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

Investors support nation’s housing

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nticipation and disappointment around Budget announcements is a well-trodden path for this industry. Even the welcomed Stamp Duty incentive to stimulate the housing market during Covid-19 came with complications.

It’s perhaps unsurprising, then, that the latest offering provided nothing to get excited about. So, should we be grateful that there was at least no sting in the tail in the form of further tax hikes for property investors, or view it as a missed opportunity? There is, of course, an argument as to whether it really ma ers. Those who a ended the

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VIC JANNELS is CEO of the ASTL

2023 ASTL Annual Conference will remember political columnist Daniel Finkelstein was adamant a change of Government is on its way. Perhaps the contents of the upcoming party manifestos are of more consequence than the red box.In considering this, there are two undeniable truths. First, the UK has a structural housing crisis, with an undersupply of housing and a population growing faster than the delivery of new homes. Second, the private rented sector (PRS) is a crucial cog, currently providing accommodation for nearly a fi h of all households. It will play an ever more important role unless there is a dramatic upli in the delivery of social housing.

According to the Local Government Association, there were more than one million unoccupied properties across England in 2022, representing an increase of nearly 60,000 homes since 2018. Many of these will be reaching a state of deterioration that will make them una ractive or unsuitable for habitation, but with some renovation, could provide much-needed housing.

It is not politically popular to support property investors. However, they hold the key to unlocking new housing. The delivery of more available properties into the PRS creates greater choice, potentially higher standards and downward pressure on rental prices.

Incentivising property investors has a high chance of delivering a very positive social benefit – a progressive step towards tackling the housing shortage. However, it would need to be well-considered and presented.

Bridging and development finance can play an important role in helping investors to overcome this challenge. ● March 2024 | The Intermediary

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

Biodiversity – can developers enjoy some net gains?

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f all the obstacles developers currently face, perhaps the one that vexes them the most is also where they have least control, namely the planning regime. Erratic, under-resourced and burdened by red tape, some planning departments are taking eight weeks to simply validate applications, let alone determine them. Hardly the best backdrop for the introduction of new biodiversity net gain (BNG) legislation that will significantly increase the workload of local authority teams.

Government guidance to councils suggests that they must train existing teams and recruit additional staff with ecological expertise to apply the new regulations. Add in extra planning conditions and the fact that the legislation is so loosely wri en, and it allows councils to adopt a variable approach to implementation. It’s not hard to see why many developers, and their trade bodies, fear significantly worse planning delays.

What exactly is this new legislation?

From February 2024, all ‘major’ proposed developments in England have had to provide a biodiversity net gain of 10%, and the same rule will apply for ‘minor’ developments from April 2024. A major development is classified as one with 10 or more new homes and a minor is one with nine or fewer. For now, the Scots and Welsh have escaped legislation, with their devolved Governments lagging somewhat behind Westminster.

The requirements are enforced by the 2021 Environment Act, and mean that before any development begins, applicants must measure the existing and proposed biodiversity of their

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The Intermediary | March 2024

sites. They will then need to dra a clear plan to demonstrate how they will deliver a 10% improvement to the biodiversity of the site and have it approved by their local planning authority before works can begin. To save time, the plan can be included in the original planning application.

There are three key ways that developers can achieve the required improvement. They can create enhanced biodiversity on-site, deliver biodiversity gains off-site on other land they own, or as a last resort, buy off-site biodiversity units on the market or acquire expensive statutory biodiversity credits from the Government. If necessary, they can employ a combination of all three options, but must follow the steps in order, and the BNGs delivered must be maintained for 30 years a er the completion of the development.

Tough times for developers While we should be proud that the UK is an international leader in addressing the twin challenges of climate change and biodiversity, this will be scant consolation if planning delays are further exacerbated by new BNG rules, and the resultant cost of specialist consultants and reports, let alone the expense of implementing these plans – which will add to an already onerous burden of regulation on new construction, such as energy performance, sustainability, and nutrient neutrality.

Compounding the many challenges since 2020, these are tough times for developers – but in truth, not as tough as it is for British wildlife, with nearly one in six of our 10,000-plus species now at risk of disappearing from Britain altogether.

It’s easy to see this as a challenge where the development industry is at

BRIAN WEST is head of sales and marketing at Saxon Trust

odds with the climate and biodiversity crisis. The truth, however, is that it’s only by developers, lenders, and planning departments all working together that we can first halt and then reverse the biodiversity decline, with a new and exciting partnership between nature conservation and infrastructure.

Building stylish, insulated, airtight eco-homes filled with a diverse range of carbon reducing technology on sites close to public transport links, and which proactively preserve biodiversity and nature, makes perfect sense. Providing healthy amounts of green, communal space and creating habitats in which wildlife can flourish will build communities that enjoy living in harmony with nature.

Potential buyers and renters, particularly among younger demographics, cite sustainability as a key factor in the new homes they are looking to move into.

Adherence by developers to eco principles, and developments that incorporate a 10%, or even 20% biodiversity net gain – as mandated by a small number of councils – will clearly align with the values of these potential buyers and renters.

In conclusion, while Government pressure from above has driven BNG, it’s clear that demand from below will sustain it. Yes, developers will face frustrations and increased costs in the short-term, but these new homes will sell at a premium; first, they will drive long-term savings in running costs, and second, as individuals and societies, we all want to enjoy where we live. ●

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

Spring Budget: For businesses, brokers, commercial lenders

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head of a General Election, many headline-grabbers from this Spring Budget focused on consumers’ pockets, but for businesses, the Budget also brought in a few changes.

The big news for businesses was the announcement that full expensing will now apply to leased assets, making a huge difference to many small to medium enterprises (SMEs) that might be looking to get a tax break on new financed assets.

Business investment, productivity and growth are only possible when businesses feel empowered to chase their ambitions.

A business that is cautious becomes risk averse and before too long has the potential to stagnate” In his Autumn Statement last year, the Chancellor announced a move to make full expensing permanent, a measure that was considered to be the biggest business tax cut in modern British history, and one that would stimulate £20bn of investment a year for 10 years.

However, what this fell short of was any support for the businesses that simply don’t have the working capital to invest in growth. Making investments more affordable is the key

takeaway here, and this new measure will now allow the broker community to provide more flexible solutions on leased assets for their businesses. This will be a big catalyst for businesses, allowing more SMEs to invest in growth, while benefiting from the Annual Investment Allowance.

The reality for many businesses is that their cash reserves are low.

Cashflow is still a very real day-to-day issue, and when it comes to investing in new equipment – tax incentives or not – many businesses may have been pu ing their plans on hold.

Now, they can lease new equipment and offset the costs against their tax bill, reducing their tax by up to 25% for every £1 invested.

A turning tide for inflation If the Office for Budget Responsibility’s (OBR) predictions are correct, we could expect to see inflation fall lower than the 2% target in just a few months. This will be very welcome news for the business market, and the intermediary industry as a whole. As this figure continues to head in the right direction, business confidence will no doubt grow – this is really important, and something we need to keep fuelling.

The Chancellor called this a “Budget for long-term growth,” and optimism and confidence are vital here.

Business investment, productivity and growth are only possible when businesses feel empowered to chase their ambitions. A business that is cautious becomes risk averse, and before too long it has the potential to stagnate or worse, make the difficult decision to fold.

But confidence is growing, and entrepreneurs are seizing opportunities. At the end of last year, there was a rise in new businesses,

ED RIMMER is chief executive at Time Finance

with the number of UK incorporations between October and December 2023 increasing by 30,363 (16.5%) compared to the same period in 2022. We, as an industry, need to collectively nurture this business confidence for the sake of our economic strength.

Shifting growth up a gear For the Chancellor, the Budget presented an opportunity to help businesses put their growth plans front and centre in the coming year.

With this, he introduced a transition from the Recovery Loan Scheme to a Growth Guarantee Scheme, which will help an estimated 11,000 businesses. This move – in name if nothing else – represents a shi of focus from survival to growth. But for a lot of businesses, this shi is just as much in mindset as it is in action.

There is no question around how challenging the past few years have been, but with business overheads staying high, at least until inflation and interest rates fall, the issue of cashflow remains.

What businesses will be asking themselves now is: how can we balance cashflow with investment for growth?

Time Finance is helping some 11,000 business owners find this balance right now, and that’s a role we take great pride in. Businesses continue to prove their resilience, and in doing so have created a bold, brave and agile business community. While the Government is taking steps to help them succeed and prosper, our role as a funder to SMEs remains vital. ● March 2024 | The Intermediary

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Meet The BDM

Reward Finance Group

The Intermediary speaks with Aaron Tinmouth, business development manager (BDM) – North East, at Reward Finance Group How and why did you become a BDM? I spent over five years in a clientfacing role in the banking sector, managing and maintaining a commercial portfolio of active applications, so I relished the opportunity to step up to the role of BDM at Reward.

It brings a host of new challenges and opportunities to further my career, and the opportunity to build greater relationships with property investors, small to medium enterprises (SMEs) and Reward’s extensive network of commercial finance brokers and introducers.

I’m also able to guide clients, to help them navigate through the 50

The Intermediary | March 2024

borrowing process and really get under the skin of their business to understand their funding needs. In the current economic climate, it’s very rewarding to advise forwardthinking companies looking to expand, create jobs or overcome financial hurdles.

What brought you to Reward?

Having predominantly worked in banking before joining Reward, I was very keen to move into the alternative finance space and join a lender that is on a rapid growth trajectory. Reward has recently expanded into the North East region, so it is exciting to be part of

the journey at such an early stage, especially since I’m also originally from South Shields.

Another key factor was that the company launched a wellness team last year. It’s reassuring to be part of a great working culture and a business that prioritises the welfare and wellbeing of all staff.

What makes Reward stand out?

In addition to the wealth of knowledge, experience and expertise across the team, it’s Reward’s fast and flexible approach to lending that sets it apart from the crowd.

Many SMEs and property investors

MEET THE BDM

Only by working in partnership with the broker can we drive joined-up thinking and deliver the best outcome for property investors and SMEs seeking finance. It can be daunting to borrow for the first time, so we recognise that lenders and brokers working in unison makes it a more seamless and productive experience” we speak to are struggling to access finance from high street banks or need to borrow at pace to innovate or complete a property transaction in a short timeframe.

That is where we can step in and deliver an agile funding solution that is completely tailored to the client’s needs, that can be deployed at speed, and which is not held back by needless red tape.

We find this type of approach is really well received by both clients and brokers.

What are the challenges facing BDMs right now?

The challenges facing BDMs are often the same as those faced by our clients. Many businesses that we lend to will often have a set of challenges or market pressures that they need to overcome.

A strong BDM should be able to anticipate and understand those potential obstacles and ultimately work with the client to find the right solution. Although we’re sectoragnostic as a lender, understanding

what is happening in some of the key industries we operate in, such as property, allows us to build up a bank of knowledge which helps us to guide our clients and assist them in problem-solving.

What are the opportunities?

Across Reward there are many opportunities for BDMs to join the business and progress their career internally.

Thanks to the growth we’ve experienced both regionally and nationally, we’re rapidly expanding our team and getting to work on an exciting range of sectors and types of deals. It’s a fast-paced environment, but there is plenty of room for progression and being given greater responsibility.

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

Reward’s success has always been built on forging close relationships, especially with our network of brokers and other introducers.

Only by working in partnership with the broker can we drive joinedup thinking and deliver the best outcome for property investors and SMEs seeking finance.

It can be daunting to borrow for the first time, so we recognise that lenders and brokers working in unison makes it a more seamless and productive experience.

What advice would you give potential borrowers in the current climate?

I believe planning and preparation are key for those businesses looking to borrow. I would advise them to be prepared to talk through their growth plans, financial forecasts and other key information to demonstrate that they can

successfully create and grow a profitable business.

Transparency is also essential, as the relationship between any lender and borrower needs to be built on trust. Many property investors or SMEs we work with need short-term, flexible working capital to bring new ideas to market or complete a transaction. Therefore, it’s important they are honest with us about the loan amount they need to borrow and the timeframe they feel is right for their business needs.

Predicting the future can be challenging for businesses, but those we speak to will be drawing down different amounts from the funding facility over a set period, so they need to try to estimate expected cashflow requirements and anticipate any financial hurdles that may impact them over the next 12 months.

One thing that shouldn’t be overlooked is that many opportunities can arise for businesses even in the most difficult economic conditions. We see so many examples of companies that have borrowed from us to capitalise on a market opportunity that might not have presented itself in a more buoyant climate. ●

Reward Finance Group Established in 2012

Key Products • Property finance up to £5m, rates from 1% per month over 2 to 12-month terms • Short-term business finance for SMEs up to £5m, rates from 1% per month over 2 to 12-month terms • Asset finance from £100,000 to £5m, rates from 12% per annum over 12 to 84-month terms • Asset-based solutions for SMEs from £100k to £5m, rates of 0.06% daily over 12-months and up terms Contact aaron.tinmouth@rewardcf.com 07720 162 916 March 2024 | The Intermediary

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

Permit me if you will...

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t is clear that the UK has a housing crisis, but what that shortage of residential housing actually looks like is less clear.

Knowing what we are dealing with will show the value of extending the permi ed development scheme.

In the 2021 Census, a few very important points came to light. First, that there is not a universal shortage of homes to live in. The real shortage is housing which accommodates single-person households. Divorce, an aging population and lifestyle choices mean we now have more single person households than ever before. Nevertheless, many people in

The proposed changes would significantly expand the scope of permitted development, both in terms of floor space allowances, and the areas in which it applies” this position find themselves having to stretch themselves financially to the limit to purchase a small house that is too big for their needs, when a flat might have sufficed.

Flats themselves, tarnished by over-pricing in the mid-2000s and cladding issues post-Grenfell, are now returning to popularity, largely owing to the lack of suitable affordable housing. The reform of leasehold will help, too. Confidence since the cladding crisis is improving.

Developers, too, have undergone a huge surge in the costs of material and labour that have seen many large

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The Intermediary | March 2024

and small builders very publicly put on ice schemes to provide new-build properties. That may change a er the Budget, or it may not. Either way, it will not be quick to get back to the types of new build numbers – 300,000 per annum – once enshrined in policy and now merely a distant ambition.

Meanwhile, our high streets and business centres reel from the doublewhammy of online shopping and postpandemic working practices.

However, this means there is opportunity. Permi ed development rights (PDR) allow property owners to change the use or extend a property without the need to apply for planning permission from the local council.

Since 2015, PDR-assisted office conversions to housing have added 81,282 net new houses to England.

Significant change A consultation document outlining potential amendments to The Town and Country Planning (General Permi ed Development) (England) Order 2015 was released by the Government on 24th July 2023, with replies expected by 25th September 2023. Responses continue to be analysed, but are expected to suggest significant change.

The real area of focus for funders like us will be the changes in class MA, which address the change of use from commercial, business and service to residential. There is a lot of support for increasing the maximum floor area allowance from 15,000sqm to 30,00sqm. But this may – and should, I believe – go further, perhaps as far as removing the upper limit entirely.

While there are other mooted changes to the reach of permi ed development, such as extending its use into Conservation Areas and Areas of Outstanding Natural Beauty, and use of agricultural buildings, etcetera, it is our town centres and business parks which will help us address the housing pressure most quickly.

MARIO IOANNIDES is associate partner at Pluto Finance

The proposed changes would significantly expand the scope of the permi ed development, both in terms of floor space allowances, and the areas in which it applies.

These kind of alterations to existing parameters would exponentially increase the number of dwellings that can be delivered under the PDR regime, and would also simplify the floor space allowances.

While Canary Wharf reels from the relocation of former tenants such as HSBC to the City, permi ed development could be employed to regenerate the surrounding area or indeed the tower itself.

Larger permi ed development schemes will have a bigger positive impact on the real housing crisis.

Last year, we funded a large office to residential conversion in such a location. The scheme sold well and closed ahead of schedule.

Indeed, it was estimated that the Central London office vacancy rate increased to 9.4% by the end of Q2 2023, up from the previous quarter's 8.9% and well above the long-term average of 5.5%. The reasons include new supply as well as a decline in demand for older space, but underline the opportunity.

No one is suggesting permi ed development is a silver bullet for the housing crisis. It is one of myriad steps that are required to deliver more of the right type of accommodation.

Quality will need to be carefully monitored, but the opportunity for larger scale permi ed development feels like a very obvious way of addressing not only some of the supply problems for single dwelling households, but also reinvigorating important parts of our cities and urban infrastructure. ●

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

Midlands displays growth boost

I

t’s no secret 2023 was a difficult year for the property market, and yet the performance of the Midlands demonstrates that the region continues to be in demand among buyers and tenants. The most recent data from the Office for National Statistics (ONS) shows that, across the year as a whole, the West Midlands was one of only two regions to see house price growth, with values up by an average of 0.3%.

Only the North West performed more strongly, and while the East Midlands saw prices drop by 1%, that was significantly be er than the likes of the East (-3.8%), South East (-4.6%) and London (-4.8%).

That hasn’t happened by accident.

Property in the Midlands is generally available at a more affordable level than is the norm in southern regions, and as a result, prospective buyers have been less impacted by the increases to interest rates on mortgages over the past year or so.

Demand has therefore remained at more robust levels, helping to push up prices further in the West Midlands, despite the various challenges faced by the market as a whole.

The fact that this is an Article Four area, meaning HMO conversions require planning permission, is simply an added consideration, rather than an active impediment to such projects currently.

Throughout the Midlands, therefore, new homes are consistently being delivered, opening up new opportunities for investors and residential buyers.

It’s also worth noting the situation with commercial property in Birmingham, which seems to be in a particularly strong position at the moment. The latest analysis from Savills noted that the final quarter of 2023 saw total take-up of 240,000 square feet of office space, a jump of 14% on the same period in 2022. It also represents the highest quarterly takeup of the year.

This was across 37 deals in total, almost double the 19 deals for office space closed in the preceding quarter, an excellent indication of the momentum behind the commercial sector in the city currently.

AMJAD IBN ABDUL is regional manager – Birmingham office at Tuscan Capital

Savills’ research found that prime rent in Birmingham now stands at £41 per square foot, having jumped 19% since the end of 2019, and is forecast to jump to £48 by the end of 2028, as a result of growing demand and what the firm described as “an extremely thin development pipeline.”

We are seeing greater numbers of businesses choosing to establish some sort of presence in the city too, with the large legal firm Hill Dickinson – based in Liverpool – opening a dedicated presence in Birmingham for the first time.

There is a clear message here: the Midlands region is becoming more desirable for both residential and commercial tenants alike.

With supply still constrained, that represents an exceptional opportunity for savvy investors. ●

Improving supply A further boost to the region has been the improvements to the level of property supply, particularly in Birmingham. For example, Birmingham City Council recently approved plans for a 33-storey Build to Rent development in the heart of the city, while the JQ Rise development in the Jewellery Quarter has now topped out, with all units sold ahead of completion.

These are just the latest examples of a host of new homes being produced across the region, while the level of house in multiple occupation (HMO) conversions also show that there continue to be great opportunities presented by the existing property stock.

Commercial property in Birmingham is in a particularly strong position at the moment

March 2024 | The Intermediary

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

LOOK BEYOND THE HIGH

I

t’s no huge surprise that small businesses have become a li le more cautious in their approach to borrowing of late.

The most recent data from UK Finance showed that £3.5bn was lent to small and medium-sized enterprises (SMEs) in the third quarter of 2023, the fi h straight quarterly drop in this figure.

The combination of higher interest rates and an uncertain economic environment has understandably meant that some businesses have put their borrowing plans on hold, happy to wait for signs of a li le more stability.

However, even at a reduced level, that is still a lot of money being borrowed by smaller firms. Evidently there are still plenty of businesses which have spo ed opportunities and want to push on, despite the various hurdles they face.

It’s not just the cost of borrowing or the state of the economy that is a worry, but where they might be able to secure those funds, given the changing a itude of many banks towards smaller businesses.

Excluded from the market While high street banks have not entirely shut their doors to commercial customers, they have certainly become more limited in their appetite for such cases.

All too o en, they focus their lending activity solely on business customers looking for large sums or at small loan-to-values (LTV).

That’s all well and good for large corporate borrowers, but it is far from welcome for smaller businesses.

There is, then, a significant market of smaller firms which need to raise funding. It may be that they want to take on new premises, invest in new equipment, or expand into a new market.

Their prospects for growth are excellent; these are well run firms, they are simply being excluded from the market because of their status as SMEs. It’s not just unfair on the businesses themselves, but there is a big impact on the economy, too. Small businesses play a huge role in the health of the

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UK’s economy, so if they are given the support needed to grow, the economy as a whole performs more strongly.

The reliance on automated decisions can prove a further hurdle for businesses. We know there have been many cases where SMEs have suffered from a ‘computer says no’ decision, simply because a high street lender is unwilling or unable to consider the business based on its individual merits.

More support for SMEs While brokers may feel that high street banks have all but given up on the SME market, other lenders have taken on a more progressive a itude.

At Atom bank, for example, we have worked closely with a significant number of small businesses looking to raise up to £1m and at larger LTVs. Ultimately, this comes down to understanding what businesses in this position really value, and the sort of financial support that will make a real difference to their futures.

We know that businesses need an alternative to the high street banks, where things won’t be so ‘black and white’ when assessing their requirements.

A perfect example is a case we handled last year, where Bill Rawles Classic Cars – a car restoration business – was unable to access funding from high street lenders because of the insistence on classing it as a car dealership. Atom was able to look beyond basic lending templates, and get a be er idea of the business itself and its potential, providing the loan it needed to prosper in the future.

Providing fast funding One element that can be o en overlooked when it comes to SME borrowing is the importance of speed.

It’s rare that business owners are looking to raise funds for some far-off project; instead, they know how they want to spend that money today, and want to get on with their plans.

As a result, delivering that funding swi ly is an enormous plus point.

Our recognition of that fact – the value that SME borrowers put on the quick delivery of finance – has driven a host of process changes at Atom

bank. We have focused on identifying changes that can make a material difference to how quickly we can get that finance in place for SME clients.

Deploying tech correctly While it’s true that commercial cases are more complex than regular residential ones, the truth is that technology can still take on some of the heavy li ing involved.

That’s why we have developed a Quick Quote tool, allowing the broker to provide the client with an initial ballpark quote, with a broker portal in place for uploading supporting documents for the application.

The portal is designed to help direct this process, ensuring that all relevant documents are supplied from the beginning, and that we can get to a resolution more swi ly.

That technology is then coupled with a streamlined process, ensuring that the application is seen by the right people as quickly as possible.

It’s delivering tangible results, too; fully packaged applications receive an agreement in principle (AIP) within two days on average, with offers provided within 20 working days.

Cases where everything is provided quickly and documents are swi ly signed and returned reach the finish line that much faster.

Beyond the high street Small and medium-sized enterprises are the lifeblood of the British economy. However, the fact is that they are being handicapped by the approach of high street banks.

We need these firms to thrive, but that is only able to happen if they are provided with tailored financial solutions by lenders that understand them.

That’s why it’s so important for intermediaries to look beyond the high street when searching for funding for business clients.

Partnering with challenger banks that are truly commi ed to this sector will put SME clients on surer footing for a successful future. ●

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

STREET FOR SME CLIENTS

DAVID CASTLING is head of intermediary distribution at Atom Bank

One element that can be often overlooked when it comes to SME borrowing is the importance of speed.

It’s rare that business owners are looking to raise funds for some far-off project; instead, they know how they want to spend that money today”

March 2024 | The Intermediary

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

Breaking down the bridging process

T

he growth of the bridging market in recent years means there are now more bridging lenders than ever before. While greater choice of products when seeking speedy access to finance is great news for borrowers, knowing where to start can be somewhat overwhelming for those brokers trying to navigate the market for the first time.

Although the exact number of lenders in the bridging market remains unknown, it is generally believed that there are anywhere between 200 and 400 different types of regulated and non-regulated players in this area of the mortgage market, demonstrating the high demand and need for this type of product.

Bridging loans are a popular method of short-term financing for property developers and residential homeowners alike, as they offer swi and flexible access to finance, and provide borrowers with the ability to move quickly on purchases with a short completion, time such as buying at auction, purchasing a property that

is below market value, or to prevent a chain-break.

With such a vast array of products available in the market, brokers play a vital role in guiding their clients through the advisory process and advising them on the most suitable option for their needs.

So, how can they ensure they are choosing the right product for their client, when there are so many from which to choose?

With the key points identified, narrowing the search down to consider the finer borrowing details will provide greater clarity on the most suitable product for the client's needs”

The right route

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Spoilt for choice In many ways, the numerous product options available in the bridging market is not dissimilar to the different options available when it comes to buying a new car.

A good place to start would be to first determine what type of car is needed – whether it’s a family car, a sports car or a fuel-efficient run-around – and the preferred make and model.

In terms of bridging, this may mean working out whether the client needs a regulated or non-regulated bridging product, and whether the capital raised will be used for a residential extension, a large-scale property development, or to pay off debt.

As the offerings of each lender differ across the market, working out why the loan is needed will automatically determine what route the broker can take. For example, if the loan application is for a residential client looking to carry out a small home renovation, then any lender not offering regulated bridging products would automatically be discounted.

Once the type of borrowing is identified, the next step would be to break down the various different types of features on offer – automatic transmission over manual, diesel over

SONNY GOSAI is senior sales and development manager at Norton Group

petrol, seven doors instead of five – to determine whether or not they are the best solution for the client. In the case of bridging solutions, this will mean determining the loan-to-value (LTV) required, the length of the term, and how quickly the funds are needed.

With the key points then identified, narrowing the search down to consider the finer borrowing details will provide greater clarity on the most suitable product for the client's needs. Is a heated steering wheel a necessity or a luxury? Is an automatic handbrake a key requirement?

Is an automated valuation model (AVM) sufficient, or is a full valuation required? Is dual legal representation needed?

For most bridging clients, the finer details of the chosen product will be determined according to the suitability of the product, the speed at which the money is needed, and whether they are able to meet the affordability requirements of the chosen lender if a refinance is the exit plan.

Admi edly, the level of choice in the market can sometimes be daunting for any broker unfamiliar with the workings of the bridging sector, which is why referring clients to specialist distributors like Norton Broker Services can help.

With over 40 years of experience and strong professional relationships with both established and new market lenders, Norton has the knowledge and expertise required to help brokers navigate this area of the market and successfully meet the needs of all their bridging clients. ●

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

Living in a specialist finance world

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hat is specialist finance?

Personally, I deem specialist finance as any finance solution that falls outside of the regular advice process to most borrowers, so this includes all bridging finance, commercial, development, mezzanine and equity finance. In addition, and in my experience, customers tend to be property investors, small to medium enterprises (SMEs), and high net worth (HNW) clientele – usually a combination of all three.

The demand for specialist finance has been driven by the ever-increasing tax burden being placed upon landlords, which has forced many to incorporate and so has fed a growth in specialist lenders catering for this market.

This, in turn, has created further degrees of specialist buy-to-let (BTL) lending via new lenders, including increased bridging finance options.

The growth of incorporation is backed up by recent findings, as according to research by Hamptons published in January 2024, the London estate agency last year saw a record 50,004 limited buy-to-let companies set up across the UK, surpassing 2022’s previous record (48,540) by 3%.

This means that at the start of 2024, there were 345,426 active limited companies designed to hold BTL property in the UK, up 11.6% since the beginning of 2023. The majority (68%)

of current companies had been set up between 2017 and 2023, when tax changes were phased in.

Overall, these companies own a total of 615,077 properties across England and Wales. This marks an 82% increase from the end of 2016, when landlords who were higher rate taxpayers started to see the share of mortgage interest they could offset from their tax bill for homes in personal names reduce. However, companies set up a er 2016 still only own 38% of all buy-to-lets held in a limited company.

Of the 615,077 limited company buy-to-let properties, 458,838 (75%) have a mortgage charge against them. This means that limited company landlords are more likely to have a mortgage than investors who own buy-to-let property in their personal name. The number of outstanding limited company mortgages has risen 10% over the past 12 months, despite the total number of buy-to-let mortgages falling 3% over the same period.

Bridging investments Bridging finance in particular is seeing an unprecedented surge in demand, mostly from property investors, and this is backed up from the recent MT Finance Bridging Trends data, which recorded a 16% increase in 2023 compared to 2022.

Anecdotally, at the end of last year I a ended an event where the broker audience was asked whether they had arranged bridging finance in the past 12 months. Incredibly, two-thirds of

HITEN GANATRA is MD of Visionary Finance and Mortimer Street Capital

Bridging finance in particular is seeing an unprecedented surge in demand, mostly from property investors, and this is backed up from the recent MT Finance Bridging Trends data which recorded a 16% increase in 2023 compared to 2022” the audience raised their hands, so it’s clear that bridging has become part of many brokers’ toolkits that they offer to customers.

However, a li le bit of knowledge can be a dangerous thing. Specialist finance is so called for a reason, as the options and complexities involved in securing finance aren’t suited to brokers who just do an occasional case.

It was this that led me to set up a new business this year, Mortimer Street Capital, to specialise in delivering bridging finance, commercial, development, mezzanine and equity finance to such clientele.

Living in a specialist finance world isn’t for everyone, but even if it’s not for you, there are those for whom that’s all they do. They are there to support you and your clients.

You wouldn’t hesitate to appoint a specialist solicitor or accountant for certain clients, so why not do the same for specialist finance, too. ● March 2024 | The Intermediary

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

Islamic finance – a guide for intermediaries

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LOTTIE DOUGILL is head of intermediary sales at Gatehouse Bank

ecent years have seen rapid growth in the global Islamic finance sector, with market predictions showing the sector is poised to grow from US$200bn in 2003 to US$4tn by 2030, according to the UK Islamic Finance Market Report 2022-2027. While the UK is a leading Western centre for Islamic finance, according to a report by TheCityUK, there remain misconceptions around who these products are for, how they work, and the differences from their various counterparts.

For brokers to develop their understanding of Islamic finance and help this market further its potential, it is important to close this knowledge gap between conventional and Shariah-compliant finance.

also known as capital repayment in conventional terms, the customer’s share of the property increases while the bank’s decreases, until the customer ultimately becomes a homeowner.

the UN's Principles for Responsible Banking, whereby we have commi ed to strategically aligning our business to the UN's Sustainable Development Goals and the Paris Climate Agreement.

Understanding the market

For all faiths and none

Primed for growth

Although awareness of Islamic finance is growing, it’s important to understand the key differences between Shariah-compliant and conventional finance.

The main distinction is that Shariah-compliant home finance products don’t pay or charge interest.

This is due to the Islamic principles stating that money should be put to work to produce a return for the benefit of the whole community, rather than generating profit in and of itself.

Home Purchase Plans (HPPs) are commonly known as the Shariah-compliant alternative to a conventional mortgage. These entail a partnership between the customer and the bank, who jointly purchase the property with the customer paying rent to the bank for the portion of the property they do not yet own.

With rent and acquisition payments,

According to the Office for National Statistics’ (ONS) Census study, the UK's Muslim population increased by a quarter between 2011 to 2017, reaching 3.9 million people, demonstrating the nation’s burgeoning market for Islamic finance.

However, Shariah-compliant products are not exclusively for those of the Muslim faith, and are becoming increasingly popular with customers wanting to align their financial objectives with their ethical principles.

This is widely because Shariahcompliant finance is viewed as more ethical than conventional finance, as Islamic principles prohibit investments into harmful sectors, including alcohol, tobacco, adult entertainment, gambling and the arms industry. At Gatehouse Bank, we have further formalised our commitment to do good for society by becoming a founding signatory to

The ethical and socially responsible aspects of Islamic finance resonate with a growing group of consumers, as reported by Deloi e’s Sustainable Consumer Report 2023, which found that a third (30%) of consumers have stopped opting for some brands or products due their sustainabilityrelated concerns.

As such, it’s important for brokers to understand Shariah-compliant finance and further offer valuable guidance to customers who are seeking these ethical alternatives.

Islamic finance boasts a promising future, underpinned by the ethical commitments of industry players and the appeal of its products.

It is a sector commi ed to fairness for consumers of all backgrounds, and brokers would be wise to explore this further to help their clients understand and access these ethical solutions. ●

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Shariah-compliant finance is viewed as more ethical than conventional finance

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

Addressing common misconceptions

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haria finance products are underpinned by the key principles of Islam.

For Nomo, the digital banking arm of Bank of London and The Middle East, this means providing property finance through what’s called a Murabaha arrangement rather than a traditional mortgage, never pu ing client money in interestbearing investments, or in tobacco, alcohol and gambling industries, and operating in a way that is fair and transparent for both our customers and brokers.

While it may be easy for us to explain what Sharia financing means, we’re very conscious of the fact that there are misconceptions held by both customers and brokers alike that may be preventing them from exploring Sharia compliant options.

1

It takes too long to go through an application Historically, applications for Shariacompliant property financing, particularly from Gulf Cooperation Council (GCC) residents for purchases in the UK have taken a long time.

Nomo’s process is digitally enhanced and follows a similar process in assessing the application as other retail banks. Clients can apply via app and brokers can apply via a portal.

2

You can’t tell if a product is truly Sharia-compliant Sharia-compliant banks such as Nomo are usually guided by a Sharia Supervisory Board.

This goes beyond a traditional compliance process a high street bank would have in place, and ensures banks are guided by Islamic scholars.

If a bank has this, then a certificate will be displayed on its website.

ZEENAT SHAFFI is senior business development manager at Nomo

3

The bank owns the property Nomo finance is structured under a Murabaha contract, where the customer’s name is on the title deeds and they pay the bank on a monthly basis. However, there are a number of different property finance options available which are Sharia-compliant.

With some of the options, the bank owns the property and the customer pays the bank each month until they have paid the full cost and can take ownership.

4

Only practicing Muslims can apply for Sharia-compliant property finance Nomo is open to all clients that meet our criteria, regardless of their religion. Any resident of the GCC countries we are available in can apply for a Nomo product to help with their UK property purchase.

5

Brokers require additional permissions Nomo structures finances using the commodity Murabaha principle. This principle is considered a regulated mortgage contract (RMC) by the Financial Conduct Authority (FCA).

Other types of Sharia-compliant property financing may require you to have home purchase plan (HPP) permissions.

As long as brokers are regulated by the FCA and have RMC permissions, they can advise on regulated cases and submit via our portal.

6

Sharia-compliant financing requires specialist training You do not necessarily need specialist training to offer Sharia-compliant products. However, we understand that for some brokers, this may be something which compliance teams require.

We’re very conscious of the fact that there are misconceptions held by both customers and brokers alike that may be preventing them from exploring Shariacompliant options" We are happy to offer training and guidance to brokers to be able to give more comfort to compliance teams.

Our business development managers (BDMs) are available to be able to support brokers through the process.

7

The process of submission is different The process is similar to submi ing with other lenders. Brokers are required to be registered with Nomo, and we can give access to our portal to be able to submit applications.

We anticipate that appetite for Sharia-compliant property finance will grow in the coming years, and so we hope this provides answers to some of the common misconceptions surrounding it.

We regularly provide lunch and learns at Nomo for brokers interested in offering our products, so please do get in touch if this is something you would like to learn more about. ● March 2024 | The Intermediary

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Meet The BDM Saffron for Intermediaries

The Intermediary speaks with Lee Williams, business development manager (BDM) at Saffron for Intermediaries How and why did you become a BDM? I’ve worked in the mortgage market for 19 years now, starting as a cashier in a local bank branch before training as a broker. After managing a team of mortgage advisers for some time, I switched to the business development side, where I’ve been for about three and a half years, and am absolutely loving it.

I see my responsibilities as coming under three big umbrellas: educating, listening, and inspiring. BDMs are not just here to relay policy, or to act as an extension of the website, we really are here to add value and help find the best solution for borrowers as quickly as possible. I have been with Saffron for just under a year and a half, but before this I was a BDM at a mortgage and insurance 60

The Intermediary | March 2024

network. While there, I learned how to build a business, looking at marketing, recruitment, training and development, and more. I fostered a genuine passion for supporting business opportunities, something that I now get to put into practice every day with my broker partners.

What led you to Saffron?

First, Saffron is very broker-centric, which really aligns with the people-first approach I wanted to take as a BDM. As a complex lender with adaptive underwriting, I also saw the huge value that a flexible lender like Saffron can bring to brokers and their clients, and wanted to play a part.

As a BDM with Saffron, the partnership with brokers goes two ways, as we listen to feedback which leads to enhancements to our

proposition and policy. Even now on my busiest weeks, I still make sure I speak to underwriters every day to ensure we continue to develop in the right direction.

What makes Saffron stand out?

To me, Saffron’s strength is its commitment to educating, listening and evolving to help with complex lending requirements.

While we partner with our brokers to work with them and help them develop opportunities with our complex lending proposition, this partnership truly works both ways.

We listen to feedback from our brokers and look at current market requirements in order to adapt, providing up-to-date complex lending solutions as a result,

MEET THE BDM

particularly with regard to selfbuild and custom-build, which have become an area of strength for us.

What are the challenges facing BDMs right now?

Having been a broker for many years, I know the biggest challenge they always face is being short on time. They’re constantly dealing with hundreds of emails and a to-do list longer than their arm, so the challenge for us as BDMs is trying to cut through the noise and make sure they’re aware of the product enhancements we’re making, and how our proposition can help with great solutions for complex lending requirements. It’s all about awareness and making sure everyone’s well-informed in one of the fastest markets going.

What are the opportunities?

This year, we have seen ever more brokers turn to us for support with more complex solutions due to changing client needs. The year has been tough for many, leading to more complex customer circumstances such as complex business setups, moving to contracting from permanent employment, or huge enhancements to their existing properties rather than moving, for example, but that doesn’t mean they should not be able to achieve their ownership aspirations.

Despite the complexities involved in these cases, that alone does not mean individuals should have to put their ambitions on hold. BDMs have a huge opportunity to help brokers understand the range of solutions out there that might just be a good fit for their clients. 2023 has been huge for complex lending, and I think 2024 will be even bigger.

There are so many great solutions out there that people just aren’t considering, which needs to change.

For example, according to research from NaCSBA, self-commissioned

BDMs have a huge opportunity to help brokers to understand the range of solutions out there”

the conversations we’re having, and can be just as valuable as the more objective facts like income, in our overall assessment.

As a lender, Saffron loves to understand the story, plans, and needs of our clients when underwriting an application.

homes amount to 7% of the UK’s housing supply, but it’s rarely thought of as a popular option.

What advice would you give potential borrowers in the current climate?

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

Education is key in my line of work.

It’s about helping brokers to do their job well, and understanding those more niche areas that they might not have worked in before – say custombuild mortgages – and then helping them to feel confident or understand how they can work with packagers to facilitate these lending solutions.

Flexibility also ties into that, so one day I might be in the home office on Teams in the morning, in a broker meeting in their office in the afternoon, and at a networking event in the evening – everyone likes to work in different ways, so it’s about appreciating that and building around it.

Then, crucially, we work and assess cases holistically, so that is something I take into my work with our broker partners – even if one aspect isn’t an immediate fit with our criteria, I get a holistic understanding of the enquiry by discussing it with the broker. We’ll then think about what other factors might explain or even compensate for that, adapting our underwriting to help with the borrowing needs.

Speaking to underwriters is also another huge part of my day-today, and a reason why I love being a part of what Saffron is building.

As part of that, I spend time adding notes to cases when submitted – or helping brokers to do so – to support and streamline the work of the underwriters. These notes reflect

I’ve said it before, but it’s really about education for me. Customers must get good quality advice from a broker who will sit down and discuss their situation in-depth.

We’re seeing a lot of nervousness in the market at the moment, and people are sitting on their hands wondering if the coming months might be better or cheaper.

To those people I would say: focus on the monthly repayments, and if you are comfortable with the monthly outgoings then go for it.

No one can predict the future, and we shouldn’t try to, so just focus on if the timing is right for you and your needs. ●

Saffron Building Society Established 1849

Products ◆ Self-build ◆ Custom-build ◆ Self-employed ◆ Contractor ◆ First-time buyer products, including Joint Borrower Sole Proprietor ◆ Later life lending ◆ Interest-only ◆ Buy-to-let mortgages, including first-time buyer, first-time landlord, expat, limited company, and portfolio landlord Contact Lee.williams@saffronbs.co.uk 07890 896 712

March 2024 | The Intermediary

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

Maintaining trust and setting up for growth

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Repairing reputation: Innovation in this market needs to be supported and encouraged

oo o en the elephant in the room when you are speaking about equity release is reputation.

This is defined as: the beliefs or opinions that are generally held about someone or something. It can see businesses succeed or fail, requires no actual facts to back it up, and can be incredibly hard to improve.

That said, the Equity Release Council (ERC) has – since its formation – stepped up to the challenge and pushed its members to improve the reputation of the industry by focusing on good outcomes for the customers they support. Core to this are the council’s Standards, which outline safeguards that customers can expect when they take out one of these products.

They range from the no-negative equity guarantee to guaranteed tenure for life on all plans, and the requirement that all customers receive face-to-face independent legal advice to ensure they fully understand their choices.

While they are vitally important, this does not preclude innovation, as the sector is constantly evolving and looking for ways in which to meet a broader set of customer needs.

With this in mind, the council recently unveiled a refreshed version

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of its current Standards, with a wider review planned for later in 2024. There were a range of changes, including the fact that income and expenditure must now be covered as part of the advice process. This important information is already included in many adviser discussions – especially given the current higher interest rate environment and the proliferation of products which allow repayments.

However, the council felt that by mandating this approach, it would ensure that all customers received the same opportunities for further discussion and analysis of what was best suited to their circumstances within the advice process. Guidance has also been provided on how to assess this information and manage inconsistencies to provide a truly personalised approach.

New separate Standards for the recently launched Mandatory Payment Lifetime Mortgage products were also introduced. Innovation in this market needs to be supported and encouraged so these new standards will allow customers to make choices safe in the knowledge that they will also enjoy enhanced protections.

Whether you are an equity release adviser, mortgage broker or wealth manager, keeping on top of administrative tasks can be

KELLY MELVILLE-KELLY is director of risk, policy and compliance at the Equity Release Council

challenging. However, if advice isn’t correctly documented, it is extremely difficult to evidence that important discussions have taken place. So, as part of the refresh, we also provided guidance on how to demonstrate that all alternative options have been considered, quantified and reasons for discounting documented.

So what’s next?

The council intends to work with members, stakeholders and other parties active in this market to undertake a full review of the existing Standards over the course of 2024.

When you are the custodian of such an integral part of the market, it does not pay to rest on your laurels, and the idea is to ensure that the Standards are relevant, robust and provide customers with peace of mind.

Part of this will be to consider how they are communicated, and whether they are as accessible as they should be, not only to members but the older homeowners who rely on them. Too o en in financial services we can rely on jargon which can be challenging to explain during the advice process, and opaque if considered without prior knowledge.

A core part of maintaining trust in this market and se ing it up for safe growth are the council’s Standards, so the review will take time and be a considered process.

Our ultimate aim is to ensure that we safeguard the reputation of the industry by providing customers with good outcomes – and gradually remove the elephant from the room. ●

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

Recapturing consumer confidence

Y

ou know you’re living through an unprecedented period when the word ‘unprecedented’ has started to lose all meaning. The steady stream of significant world and economic events over the past half a decade has felt never-ending. The combination of pandemics, global conflicts, Brexit, and economic shocks – and the associated cost-of-living crisis – have undoubtedly caused the wider public to suffer an erosion of confidence when making major decisions.

The question is, what can the later life lending sector focus on to try to restore consumer confidence and highlight the work being done to drive good outcomes in line with the Financial Conduct Authority’s (FCA) Consumer Duty?

Sophisticated products While we’ve undoubtedly seen significant market movements ratewise over the past 12 months or so, off the back of the Kwarteng miniBudget and the seismic economic shi s that followed, it ought to be highlighted that products have evolved to service an ever more varied range of customers, with the features to match.

Modern equity release plans boast a litany of options for consumers, such as downsizing protection, the ability to port a mortgage to another property, and a diverse range of lending criteria, such as the ability for married people to apply under a single name – for example, our Sovereign range – and acceptance around age-restricted properties or those with flat roofs.

Additionally, penalty-free optional repayments are an excellent tool for applicants to reduce interest roll-up over the mortgage term – and are

PAUL CARTER is CEO at Pure Retirement

available on all Pure Retirement lifetime mortgages – offering customers the flexibility to manage their plan to suit their circumstances.

Enhancing service through technology However good products are, consumers also need to feel that the structures are in place to help deliver them the best possible experience, and technology undoubtedly has a role to play in that journey.

We have to remember that the current generation of later life borrowers is far and away the most tech-savvy to date, with all but a minority almost certainly having used computers in their professional careers and smartphones in their personal lives – and vice versa.

As a result, they’ve come to expect innovative solutions in their dayto-day lives – either directly as a user experience or underpinning overall processes – especially given the prevalence of online options in the high street banking and insurance markets.

To offer an example of how innovation has streamlined processes and helped to deliver the best outcomes, our updated online application form for advisers has benefi ed from the addition of an amended question set.

This not only aims to capture more information upfront, but by extension, works towards minimising the usual email ‘ping pong’ when further information might be required, in turn reducing referrals and the time to offer.

While many will think of their user journey surrounding lifetime mortgages as going up to completion, a commitment to technologyenhanced service post-completion

and throughout the mortgage term can also be pivotal in delivering good outcomes. That mentality underpinned the development of our online account management platform, MyPure.

The platform enables our customers to view their accounts and download documents such as annual statements.

Customers with drawdown plans can apply for a cash release online, vastly streamlining the process compared to postal methods.

Additional queries are also reduced, as applicants are guided throughout the journey to ensure all necessary information is captured.

Furthermore, ad hoc payments can be made via MyPure as an added convenience for plan holders, with the platform also enabling the set-up of recurring regular payments if customers so wish.

This year undoubtedly provides the wider financial sector, and later life lending specifically, the opportunity to recapture some of the consumer confidence that broader events have certainly impacted.

However, to do that, lenders have a vital role to play in the journey by offering products that act as effective retirement planning tools for an array of circumstances, and technical solutions that enhance the journey and service levels for advisers and consumers alike.

It’s something we’re proud to have underpinning our activity, and we look forward to keeping these key pillars front and centre throughout the rest of the year to deliver the best outcomes. ● March 2024 | The Intermediary

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

I

f the multi-millionaire CEO of a global food corporation told you the best way to save money was to eat cereal for dinner, what would you think? First, I’d check if it was April Fool’s.

Then, I’d wonder why an exorbitantly well-paid captain of industry had placed a camera in the kitchen of my university digs.

A er overcoming my paranoia, my response would almost certainly be: “Well, you would say that mate, wouldn’t you?”

At this point, you may be thinking I’ve lost the plot, or that I’ve given up trying to use this column to impart anything even remotely useful to readers of this fine publication.

However, not only did this indeed happen, but there is a point, I promise.

In an interview last month, Kellogg’s CEO Gary Pilnick suggested “under pressure” consumers tuck into a bowl of cereal as a way of budgeting.

That must be a mistake, I thought.

A slip of the tongue, perhaps. That was until I read that Kellogg’s had been running an advertising campaign in the US urging cash-strapped households to “give chicken the night off.”

Surely, the boss of Kellogg’s must know it’s irresponsible to promote eating ‘low fat’ cereals laden with sugar for two or more of your daily meals? As my wife, a nutritionist, pointed out, there is nothing new in big business trying to profit from the general confusion surrounding what constitutes a healthy diet.

I was le feeling somewhat irritated. To me, this was yet another example of a big corporate pu ing its interests above its customers.

That got me thinking. Could you make the same argument about the PR industry? Well, not all of it, but some operators within it at least.

Bad publicity Most people have, at best, a vague and fuzzy idea about how PR – or the wider media – works. That’s why it’s sometimes referred to as ‘dark arts’ – it’s seen as something of a mystery for many.

However, there is a general feeling that column inches – and lots of them – can only be a good thing. A er all, there’s no such thing as bad publicity, right? I’ve never been a fan of that saying, as it assumes that all coverage

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

PAUL THOMAS is head of news and content at MRM

is relevant and will help you achieve what you want to achieve from a comms and marketing perspective.

Who wouldn’t be interested and suitably impressed if a PR agency promised to get you on the front page of the Financial Times?

I have two issues with this. First, nobody can guarantee coverage for you, and anyone who tells you otherwise is misleading you. Second, what use is a prominent quote on the front of The Pink ‘Un if the very people you want to target are reading Hello! magazine?

This is what my colleague likes to call coverage for coverage’s sake. It might work as a vanity exercise, but it may not provide you with the best bang for your buck.

PR may not even be the best lever to pull to meet your aims and objectives.

Instead, you may be be er off trying content marketing, direct mailshots, traditional advertising, social media or, o en, a mix of all of them.

My point is this: start with working out your story, who needs to hear that story, and then decide how and where to tell it. It should never be the other way around.

I am a firm believer in the power of PR to boost a company’s profile and to help shape the narrative. But it’s not the answer to everything, and it’s unrealistic to think it should be.

Therefore, you should be wary of any PR professional who unthinkingly recommends PR as the only solution, before they have got to the bo om of the problem you are trying to solve.

That may be because they only offer PR. In which case I would recommend you engage with a firm that offers the full spectrum of PR and communications services, as you’re more likely to find something that works for you.

But whatever plan your agency suggests, challenge it. Ask them why achieving the profile slot in The Sunday Times business section, for example, will help you to tell your story to the people that ma er.

Maybe it will. Maybe it won’t. But at the very least they should be able to tell you why. If they can’t, there’s a good chance you’ll end up blowing your marketing and communications budget on a project that doesn’t move the dial.

Find yourself in that position and you may have to se le for Coco Pops at the next Christmas party. ●

Start with working out your story, who needs to hear that story, and then decide how and where to tell it. It should never be the other way around”

March 2024 | The Intermediary

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

No such thing as a bad review

P

erhaps my headline is stretching the truth a li le, but let me share some research that we published in October 2022 that highlights why you just cannot ignore reviews.

The vast majority (84%) of consumers trust reviews from other consumers, 69% of consumers are likely to change their mind after reading reviews, and more people use reviews (23%) to decide which financial products to use than asking an adviser (17%).

Another survey by digital marketing agency Fan & Fuel found that 92% of consumers hesitate to make a purchase if there are no customer reviews.

However, encouraging customers to leave reviews is one thing – but successfully acting on the feedback is another. While some reviews showcase what you’re doing well, others present a great opportunity to make improvements and ultimately improve conversions.

At Smart Money People, we only do financial services reviews, and have collected more than 1.5 million customer reviews and counting.

Here are our five top tips for how your company can turn feedback into action.

1

Have oversight of your reviews

It may sound obvious, but you can’t turn customer feedback into action unless you keep on top of your reviews!

Depending on the volume of feedback your company receives, this may prove to be both challenging and time consuming.

So, make sure your review site has the ability to send you a notification

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when customers leave a review at your page. This makes it easier for you to respond promptly if needed.

time to read the feedback 2 Make

JESS RUSHTON is head of business development at Smart Money People

Once you have oversight, you should then take time to go through the reviews and consider any next steps.

Not all customer reviews require immediate action, but there will be times where customers highlight areas in which you can improve.

For example, our review platform allows you to easily analyse themes in your feedback. If improvements are

needed, depending on the size of the job, it could be something that you’re unable to manage on your own.

So, make sure you get the right people involved so that you can turn the feedback into action.

3 Get everyone engaged

If you’re getting other stakeholders from the company involved, everyone needs to be working together and on the same page. Make sure they all appreciate the benefits of listening to customer reviews. Just as importantly, ensure everyone is clear about their role in acting on the feedback and delivering change.

4 Follow up with the reviewer

By acting on the feedback, you’ll

show the customer that their opinion has been truly respected and valued, and that leaving the review was worthwhile.

Now that you’ve taken the time to turn their feedback into action, it’s a great chance to follow up and tell them what you’ve done. Better still, reply publicly so other customers can see. Use a review platform that allows you to easily respond to feedback in this way.

5 Keep analysing new feedback

Review new feedback to see if your changes worked, and keep checking for similar suggestions from other customers in the future.

The world is constantly evolving, so reviews are a great way to constantly learn more about your customers.

Find a way that you can analyse trends; some review sites, like ours, will allow you to do that.

I hope the above shows that only by embracing the power of reviews and actively managing and analysing feedback, your business will reap the benefits – ignoring feedback is not an option. ●

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

Prioritising good mental health in 2024

W

e operate in a sector where stress and pressure have become inevitable companions, resulting in increased risk of mental health problems, like anxiety and depression, if le unchecked. Consequently, it has become essential for us all to consider the issues surrounding mental health, while prioritising our own and our colleagues’ mental wellbeing.

But how can this be achieved as inclusively and positively as possible?

The Mortgage Industry Mental Health Charter (MIMHC) aims to create a culture of openness and compassion within by spreading a message of support and understanding.

We’re immensely proud of the schedule of events and initiatives we’ve drawn up for 2024.

Wellbeing survey Through March and April, we’ll be urging individuals in the sector to participate in our annual Wellbeing Survey. This is a vital tool for assessing the current mental health landscape within our industry – and then benchmarking what happens next.

The insights gathered inform both initiatives and support strategies which ultimately contribute to a healthier workplace environment.

MIMHC will compile these results into a comprehensive whitepaper which will be published during Mental Health Week, which runs between 13th and 19th May. Significantly, the overarching theme of this year’s Mental Health Week is ‘movement’, and it aims to highlight the importance of physical activity in maintaining mental wellbeing.

JASON BERRY is co-founder of MIMHC and group sales director at Crystal Specialist Finance

Walk and Talk We will be promoting physical activity through ‘Walk and Talk’ initiatives throughout Mental Health Week.

We would like as many of you as possible to sign up to take part in a meaningful conversation while simultaneously ge ing outside in the fresh air and recording your step count. An information pack containing guidance and resources for organising your own ‘Walk and Talk’ session will be made available for download from the MIMHC website.

A separate – and standout – event in our 2024 schedule is a planned 144-mile walk from Tamworth to Canary Wharf, London, led by myself.

This journey symbolises MIMHC’s dedication to promoting physical activity and raising awareness about mental health issues.

It’s a tangible representation of our commitment to the cause and is intended to inspire industry professionals to prioritise mental and physical wellbeing.

A er leaving Crystal Specialist Finance’s headquarters in Tamworth on Monday 13th May, I’ll be walking 28 miles, on average, every day for the rest of the week until arriving at London, and hope as many other mortgage professionals will join me along the route.

MIMHC is also introducing ‘Mindful Mondays’, intended to provide a dedicated time for industry professionals to meet either in their office or a nearby café for a coffee and a chat. This monthly event will foster community and connections, while breaking down stigmas around mental health conversations.

MIMHC will also be supporting sporting events organised by regional mental health advocates like the

Leicestershire Action for Mental Health Project (LAMP).

MIMHC ambassadors will also actively engage fellow professionals at mortgage club and network events throughout the year.These opportunities will be used to advocate for mental health awareness while also encouraging brokers to become signatories to the MIMHC Charter.

Regional meetings for signatories will be another cornerstone of MIMHC’s 2024 initiatives. Held either face-to-face or virtually, these will provide a platform for signatories to discuss what’s working best for them.

It’s an opportunity to share those insights, challenges and successes that will further strengthen the community of support that MIMHC has already fostered within the mortgage industry.

To conclude…

MIMHC’s 2024 program culminates in a charity dinner on Mental Health Day on 10th October. This is an opportunity to reflect on what we’ve achieved, while also fundraising.

Co-founder Andrew Montlake says: “Through this diverse range of initiatives and events, we will create lasting change within the mortgage sector by fostering a culture of support and understanding surrounding mental health issues.”

MIMHC’s 2024 schedule is a testament to our dedication. By promoting awareness, starting appropriate conversations and fostering a supportive environment, MIMHC is leading the way towards a healthier and happier workplace. ● March 2024 | The Intermediary

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

Case Clinic Want to gain insight into one of your own cases in the next issue?

Get in touch with details at editorial@theintermediary.co.uk

BUCKINGHAMSHIRE BS

CASE ONE Concurrent interestonly remortgage of rental and residential

A

couple have two properties next to each other; one is their residence, one is let out.

The properties are also located on a large horse stud of over 20 acres, which their business owns. They intend to swap the residence and the rental around, and remortgage both. They also want an interest-only deal, if possible.

One applicant is in a partnership with his father, and they had a significant capital allowance claim which reduced taxable income from over £100,000 to £20,000. They need this capital allowance claim written back into the net profit and used as earned income, not only to make the case fit on affordability, but also to fit most lenders’ requirements for minimum income on interestonly deals.

HARPENDEN BS

“This is one we could consider, but in order to do so we would need to understand how the titles are split and what impact the business premises has on the two dwellings.

“Interest-only is not an issue here as long as the residential property has a minimum of £150,000 equity and we don’t exceed 75%. For the rental property, the max loan-to-value (LTV) will be 70%.

“We would need to understand further details around the capital allowance claim to ascertain if this was a one-off event, and if it can therefore be ignored or added back in for affordability.”

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“The society would be unable to consider this due to the 20 acres of the large horse stud for their business.

“If this was for their own personal and not business use then the society could consider at a reduced LTV of 50%.

“Interest-only could be considered once we understand what the repayment vehicle would be used.

“At the Buckinghamshire we don’t have a minimum income for interest-only, but we would need to look at their income to ensure that the case would be affordable.

“Further understanding would need to be provided to establish why they are looking to swap the residential and buy-to-let (BTL) around, and to make sure this is not just being done for the case to work.”

WEST ONE LOANS

“There are a few complexities with this case. First, the property has a significant commercial element relating to the large horse stud, which would affect the borrower’s ability to apply for a traditional residential mortgage. Second, they own a rental property next to their residential home.

“Lenders may have a concern around this because, in the event of a repossession of the residential, there is the risk of nuisance value.

“This could be mitigated if the lender had mortgages over both properties and took an all monies charge to reduce the risk to the lender in the event of repossession proceedings.

“Accessing an interest-only option is possible through certain lenders that do not have a high income threshold for interest-only applications.

“This will be highly dependent on the LTV and meeting minimum equity thresholds along with a plausible repayment strategy. There

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

may also be a requirement to have sufficient affordability to meet the equivalent repayment on a capital and interest basis, based on the lower income threshold.

“Finally, the applicants have taken steps to reduce their tax liability, but also want to benefit from the increased income from an affordability perspective. I would suspect that for most lenders they will only be prepared to work off their taxable income as part of the affordability assessment, unless a lender is prepared to take a view on projected income.”

CASE TWO Remortgage with one applicant no longer resident

A

n applicant that owns a property jointly with her friend is coming off a low fixed rate, meaning that current affordability is now a stretch.

Since buying the property, one of the applicants got married and moved with her husband into armed forces accommodation, leaving the second applicant living at the property alone.

The applicants hope to find a lender that is happy for one of the applicants not to reside in the property, but to remain on the mortgage for affordability to utilise her income.

One of the applicants has also just been informed that she is due to receive a pay increase in the next few months, and was able to provide a letter from her employer to that effect, which will help to ensure the loan is more affordable.

HARPENDEN BS

“This is one we would be happy to review further.

We’re comfortable having additional applicants on the mortgage who do not reside in the security property, as long as their own residence costs are accounted for in the affordability assessment.

“We can accept pay rises as long as this can be evidenced on application by a letter from their employer, and one months’ payslip evidencing receipt.”

BUCKINGHAMSHIRE BS

“The society can consider this case. Affordability would be assessed on both applicants’ income; however, expenditure for the applicant who has

moved out would need to be factored in to cover both the mortgage payment on the property in question and any household expenses for the property that the applicant is now living in with her husband.

“It would be possible to do, as both applicants would be on the mortgage and the deeds despite one of them not living in the property.

“For an increase in salary that has not been received yet we can work off the higher salary, as long as the applicant can provide a letter from their employer.

We would, however, be unable to complete until the salary increase is in force, and this can be evidenced with a payslip to reflect the increase.

This would be a condition of the offer.”

WEST ONE LOANS

“This is an interesting scenario, which is where lenders allow friends to purchase a property together. Inevitably in this situation, circumstances do change, which is why this is still considered as niche lending.

“At the moment, the borrower who has moved out of the property is still liable for the mortgage, and now that she has got married and moved into alternative housing, she may be reluctant to continue with this arrangement.

“I cannot envisage that lenders would be comfortable with this arrangement. They will want the remaining borrowers to remortgage based on this now being a joint mortgage between them, removing their friend from the mortgage via a transfer of equity.

“This would mean that they would need to be able to meet the affordability assessment on their own. The pay rise may be factored in by certain lenders, which could help with this.

“The other alternative is if there was a close family member who would be prepared to enter into a mortgage with them on a joint borrower sole proprietor basis.

“They may be able to boost their income this way to pass the required affordability assessment.”

BLUESTONE MORTGAGES

“Bluestone Mortgages would be happy to assist with this case.

“In order to move the application forward, we would need to factor in any expenses that the applicant who has moved out of the property would be accruing in their new property, such as bills, utilities etcetera.

“However, in this case of the applicant moving to army accommodation, it’s usually unlikely for additional expenses to occur as these expenses tend to be included in the rental package.” ● March 2024 | The Intermediary

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

Second charge can be used as a preventative tool

T

he Pepper Money Specialist Report has, with the help of Knowledge Bank insights, shed some light on the second charge mortgage market. At times seen as the poor cousin of the first charge, second charges have gained some momentum over the past year.

The economic landscape has been stained by a series of challenges in recent years. From the fallout of the Global Financial Crisis to uncertainties around Brexit, Covid-19 and then the invasion of Ukraine, individuals have been grappling with various strains. These events span a 15 to 17-year period. There are those who have had to deal with each of them, and others who came to it later.

Whichever group you fall into, you’re lucky if you have escaped unscathed. Among the most affected are those with adverse credit, reliant on unsecured loans or the liberal use of credit cards, and those compelled to take on secondary employment to make ends meet.

Second chance Adverse credit refers to a situation where individuals have a history of late payments, defaults, or bankruptcies, making it challenging to access traditional forms of credit. This demographic o en find themselves in a precarious position, facing higher interest rates and limited borrowing options. Many resort to unsecured loans, which do not require collateral, but o en come with higher interest rates, exacerbating their financial burden.

As a broker or lender, it is easy to become desensitised. It's just part of the job to deal with such words as ‘adverse credit’. But for many of the

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general public, it's more than that.

Perhaps it points to a time in their lives when options simply weren’t there, a life changing event, or perhaps one of those national or international events which takes the rug from under you.

The need for secondary employment has become increasingly common among individuals facing financial challenges across the UK. Whether due to stagnant wages, rising living costs, or unexpected expenses, many find themselves seeking additional income to make ends meet.

However, secondary employment o en comes with its own set of challenges, including increased stress, limited free time, and potential conflicts with primary employment obligations. So, many will look to perhaps start a business to create a supplementary income. At Knowledge Bank, we have seen a marked increase in searches which include a second job.

Searches have doubled compared to pre-2019 figures.

Searching for solutions Second charge mortgages have emerged as a viable solution for individuals seeking to consolidate debt, fund home improvements, or address other financial needs.

Unlike remortgaging, which involves replacing an existing mortgage, second charges allow borrowers to access additional funds while keeping their primary mortgage intact. Some may still be enjoying a low rate, so switching could prove costly.

This can be particularly beneficial for those with adverse credit or limited equity in their homes.

Searches on Knowledge Bank for second charge show that many are waiting until it’s too late to address the challenges. The top five searches in 2023 were: capital raising for debt

SHANE CHAWATAMA is sales director at Knowledge Bank

consolidation; debt management plan – ongoing or current; defaults – registered last three years; defaults – over £500; and credit repair for adverse credit.

This highlights the opportunity being missed. With the proper advice and knowledge of the options, we would see a reduction in clients with adverse credit looking to carry out a second charge. Second charges can be used as a preventative tool, as opposed to a tool to ‘repair’.

Navigating the complexities requires expert guidance, and this is where brokers play a crucial role, having the expertise and industry knowledge to educate clients about the available options, assess their financial circumstances, and guide them towards the most suitable solution. By providing personalised advice and sourcing across the board, brokers empower individuals to make informed decisions that align with their long-term financial goals.

The financial challenges facing individuals across the UK underscore the importance of accessible and tailored financial solutions. Second charges offer a lifeline for many, providing a means to regain financial stability. However, navigating this complex landscape requires the expertise of mortgage brokers who can educate clients about their options and empower them to make informed decisions.

As the economic landscape continues to evolve, ensuring access to reliable financial guidance will be paramount. ●

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

The numbers will show that seconds are booming

A

merican investment author Ron DeLegge II is credited with once saying: “99% of statistics only tell 49% of the story 100% of the time.”

That wi y warning against rushing to conclusions when analysing numbers came to mind when I saw the second charge lending figures for 2023.

Looking at the year as a whole, new business volumes were down 10% compared with 2022, according to the Finance & Leasing Association (FLA).

From this top-line figure, you could easily conclude that this was a market in the doldrums, and that demand had fallen off a cliff. But that single figure masks the fact that activity has actually picked up over the past few months. Dig a li le deeper, and you’ll find that the number of new agreements was up 3% in December, which is traditionally a quiet month for the sector.

In fact, the outlook for seconds is looking extremely positive, with the market set for a significant upli in demand during 2024.

There are many factors which suggest that December’s uptick in lending won’t be the last we see over the coming 12 months.

What are those factors?

For me, the biggest factor has been the incredible rise in product transfers (PTs), which accounted for nine in 10 refinance cases last year, according to UK Finance. That’s perhaps unsurprising, given the fact that higher interest rates have hit household finances and are causing affordability issues.

There is also a feeling among brokers that some high street lenders are reversing on criteria and

tightening scorecards. Therefore, for many borrowers, a PT – which has fewer affordability hoops to jump through – perhaps makes more sense than a remortgage. In fact, it may be their only option in some cases.

We’re also seeing be er understanding about the benefits of second charge loans among brokers and borrowers. They are starting to realise that second charge loans are o en the most appropriate option for high street borrowers locked into deals but who want to raise capital.

That’s because, with a second charge, you can do so without disturbing your first charge, which is particularly important for borrowers locked into competitive rates.

O en, there is a misconception surrounding seconds that they are only suitable for borrowers with a less than perfect credit history. In reality, however, the vast majority of borrowers who take out a second charge with us are high street borrowers with good to excellent credit scores.

That said, borrowers with more complex borrowing requirements may also benefit from having second charges as an option, with lenders in this space offering a more individual approach to underwriting, working closely with intermediary partners to find lending solutions.

That’s all well and good, but if you’re a broker who hasn’t advised on second charge loans before, where do you start? If you are directly authorised (DA), you will have the option to provide the advice or to outsource this to a specialist second charge advice firm. The exception to this is if you describe your services as whole-of-market, in which case you will be required to advise the client directly. Even if you are directly

PAUL HUXTER is head of clubs and networks at West One Loans

The number of new agreements was up 3% in December, which is traditionally a quiet month for the sector” advising the client on their first charge loan, you can still outsource the processing of the second mortgage to a packaging partner.

When choosing a specialist second charge broker firm to work with, make sure they have a whole-ofmarket offering so they explore all available offers for your client.

If you are an appointed representative (AR), it is likely that your network will have a process for you to follow. For example, it might be mandatory that you refer the case to an approved packaging partner.

If you want to identify borrowers who may benefit from the option of a second charge, it’s worth contacting any client on your books that has taken out a PT in the past two years.

There is a strong chance they will have additional borrowing requirements, but may have assumed that they had no options available to them because they opted for a PT. PTs will remain extremely popular this year, and therefore we expect demand for second charge loans will remain very strong.

This is the perfect time to introduce a new revenue stream into your business and to demonstrate your value to your clients. ● March 2024 | The Intermediary

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

Choices increase in the second charge market

T

he welcome announcement of increasing volumes of second charge business a er a six-month hiatus is indeed good news. With the property market still defying expectations and only a fairly neutral 1.8% fall in prices in December, property remains relatively immune to those who have consistently downplayed predictions of imminent price falls.

Also, the last quarter of 2023 showed stronger broker activity in enquiry numbers and applications across the lending sector. Again, this was particularly counter-intuitive against

Because of the nature of individual client circumstances, sourcing engines represent, at best, a way of filtering out the least appropriate alternatives" the predictions of a slowing market for mortgages and loans, which had been especially popular in the summer.

At Equifinance we are seeing a strong start to the year, with a preponderance of consolidation requests, followed in popularity by home improvements.

However, we are also seeing a rise in property investment loan purposes, with loans used to finance an entire purchase if there is sufficient equity available, or an adequate deposit. Clients must be

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able to provide evidence of adequate affordability to repay any other finance on the investment property, and a miscellaneous amount for utilities, Council Tax and any other associated costs. Also, projected rental income is not used by lenders, as the property is typically bought empty, so affordability must be based on a ‘worst case scenario’.

Relying on tech too much?

Having been in the industry long enough to remember paper application forms sent by snail mail, the excitement of adopting fax machine technology, and collating supporting documentation to be witnessed and copied before being consigned to the tender mercies of the Post Office, I revel in the technology revolution and what it has done for the lending industry.

However, as an enthusiastic advocate for technology, I still have to make sure that our enthusiasm does not blind us to its limitations.

Take sourcing systems, for example.

The proliferation of sourcing technology not just in first charge but also seconds, commercial and even bridging, brings about a different set of challenges for today’s broker.

With many lenders commi ed to underwriting by algorithm, it is perhaps unfair to expect that sourcing engines can reach the level of sophistication required to be sure that a deal will be acceptable.

They are more, rather than less, likely to fail to provide the right answers when – no ma er how well the criteria are programmed –none of them have access to the exact algorithm used to generate a yes, no or maybe.

In the second charge market, the situation is the same. Because

LAURA THOMAS is regional sales manager at Equifinance

of the nature of individual client circumstances, sourcing engines represent, at best, a way of filtering out the least appropriate alternatives.

However, rather than relying on technology in second charge lending in contrast with large first charge players, lenders like Equifinance still rely on well-trained human underwriters. We believe that the computer-heavy approach leads to a box-ticking exercise which fails to take into account that customers are not homogenous, and their circumstances are rarely the same.

For first time or occasional users of second charge lending, I believe there is still no substitute for the experience, knowledge and strong relationships that are the hallmark of the human talent available to intermediaries among the specialist packager community, for providing the closest matches and seeing the case through to a successful conclusion.

Technology is unquestionably a valuable tool as a helpmate, but it is not a substitute for a human underwriter.

Unless the lender in question has set up an underwriting factory where volumes require a production line approach guided by a template of their ideal customer, give me a human interface to provide the necessary oversight and understanding that is vital for final decisions.

Until we can properly fuse the best of technology with a human being, we will continue to favour flesh and blood underwriters over credit scored, algorithm-led technology. ●

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

The Formula 1 of the mortgage industry?

T

he second charge market, like many other sectors of the financial services industry, thrives on innovation and efficiency, with the aim of continuously improving customer outcomes. It has been exciting to see moves to drive this agenda further forward – some could even argue that we are moving at a faster pace then the first charge market.

We do need to remember that seconds is a considerably smaller market, and therefore arguably easier to evolve.

Perhaps seconds are the Formula 1 of the mortgage industry? The testbed for innovation that is eventually introduced across the mass market to benefit everyone.

Over the past year, we have seen continued enhancements with application programming interface (API) applications, increased usage of E-signatures, conditional offers that support an application being agreed for a consumer with consent to follow, and other elements such as electronic verification of ID and secure messaging and document transfer.

There’s an ongoing conversation in the sector about how we keep moving the digital dial to help more consumers, make the process even quicker and easier, and grow the second charge market. We all know there are thousands – if not hundreds of thousands – of homeowners out there who could really benefit from a second charge loan.

The changes should not – and won’t – stop there. We should continue to shake things up and introduce new ideas and functionality.

At UTB, we recently introduced product transfers in this space; a

first in seconds, as it were. This has been very well received, and a real success story in terms of supporting consumers at pace.

New entrants to the market, as well as the larger broker firms, are trying to push the tech boundaries even further by seeing how the benefits of Open Banking can be optimised. It will be interesting to see how fast this moves to adoption.

Speed and efficiency Efficiency is crucial in the second charge market, for several reasons.

First, it allows for faster processing of applications and transactions. This means that consumers can access the funds they need without unnecessary delays, whether it's for home improvements, debt consolidation, or the other needs we typically see a second charge being utilised for.

We live in a fast-paced world, speed is of the essence, and efficient processes which ensure that customers can get their loans quickly are not just preferred but expected.

Greater efficiency also reduces costs for all of us. Lenders, brokers, and most importantly, borrowers.

Streamlining processes and minimising manual interventions can lead to significant cost savings.

Lenders can pass on these savings in the form of competitive interest rates and fees, helping to make second charges more a ractive and accessible to a wider range of customers.

Furthermore, efficiency improves the overall customer experience.

When borrowers have a smooth and hassle-free journey, they are more likely to be satisfied with the service provided. This, in turn, can lead to repeat business and positive word-ofmouth recommendations, which are essential for growth and success.

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

Innovation in the second charge market is essential to address the changing needs and expectations of customers. By frequently introducing new functionality, such as product transfers, and leading the charge for fintech, UTB has shown that there is room for improvement and growth in this market.

This encourages other players to think outside the box and come up with innovative solutions of their own to meet customer demands.

Second charges are expected to grow in popularity this year as rising cost of living pressures, along with stricter criteria from first charge lenders, are pushing brokers and consumers to consider more varied forms of finance.

In the current environment, with so many customers opting for a product transfer over a remortgage, second charge loans provide an excellent way to release capital from their homes, and allow brokers to offer their customers an alternative solution.

In conclusion, efficiency plays a vital role in the second charge market.

It enables faster transactions, reduces costs, and enhances the customer experience. The introduction of new services and functionality brings yet more innovation to a market which has o en taken pole position in the tech and innovation race.

I don’t know whether everything we’re developing to improve the seconds market will eventually filter through to mainstream firsts.

What I do know is that we should never stop looking for ways to deliver quicker, easier and be er customer outcomes. ● March 2024 | The Intermediary

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P RO T E C T I O N Opinion

Work your way out of mortgage market misery

T

he Bank of England has kept interest rates frozen at 5.25% for the fourth time in a row.

This might be good news for those worried about inflationary pressures, but it’s not great news for the mortgage market. Mortgage rates remain higher than they’ve been in recent history, with many homeowners struggling to make repayments or facing a high payment shock as they come to remortgage their property this year.

In a Financial Stability Report published at the end of 2023, the Bank of England estimated that 900,000 borrowers could see their monthly mortgage repayments jump by more than £500 in 2024, and that 20% of these could see a monthly repayment increase of more than £1,000.

The result could be a reduction in property sales and mortgage lending, as interest rates combine with the recently confirmed recession and prolonged cost-of-living squeeze.

In fact, banking think-tank UK Finance predicted in December that in 2024 gross lending would fall, with lending for house purchase and remortgaging predicted to fall by 8%, and that buy-to-let (BTL) purchase lending would fall by an even steeper 13% this year. In addition, it forecast that mortgage lenders will see a significant uptick in arrears, and a 16% increase in possessions.

Impact on intermediaries An unhealthy mortgage market is bad news for brokers, and they’ve voiced their concerns about buyer hesitancy, medium to long-term uncertainty, and the impact of a quiet housing market. But we’re here to tell you that it doesn’t have to be all

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doom and gloom. There is a valuable, and o en under-utilised, lifeline for brokers and advisers.

That lifeline is grabbing the opportunity of general insurance (GI) sales to see you through hard times.

Let’s look at the evidence…

Four big benefits

1

GI sales are great for client retention. You don’t need to limit yourself to household policies just because your bread and bu er is mortgages. GI offers the chance to diversify and tap into other areas, whether it be the insurance on an investment property or small business. It also helps ring-fence your client from competitors, and allows you to demonstrate your knowledge and service, giving reasons to have more regular and meaningful conversations with your clients – all of which help keep them ‘sticky’.

Selling GI doesn’t have to be a heavy administrative burden. I know all the recent discussion about Consumer Duty and Fair Value Measures might have you believing otherwise, but if you really don’t want to do the GI yourself, whether you don’t have the time or the knowledge and expertise, referrals to a GI provider enhance your opportunities to support more customers, while eliminating the administrative and regulatory issues and providing you with regular and reliable income.

The market is seeing significant premium increases due to claims inflation, so there is no be er time to talk to your clients. Don’t let them fall into the hands of the comparison sites or banks, because as sure as eggs are eggs, those people will look to crosssell, and that will include the products which are core to your business.

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GEOFF HALL is chairman at Berkeley Alexander

Mortgage rates remain higher than they’ve been in recent history, with many homeowners struggling to make repayments”

4

GI sales generate income for you while delivering a differentiated point of service and additional value for clients. GI gives you new opportunities to reach out and engage clients with a consultative and holistic approach that helps retain relationships for the long-term.

With the cost-of-living crisis now in its third year, your clients will be trying to save money across the board, as well as protect themselves as much as possible from the fallout.

Mortgage and income protection products such as Accident, Sickness & Unemployment (ASU), mid- and highnet-worth home insurance, as well as insurance for property investment portfolios, are just a few of many GI opportunities.

The latest figures from Consumer Intelligence’s Cost of Living Consumer Behaviour Tracker highlight that 7.1% of people in the UK have cut back on general insurance, with a further 6.4% saying they would consider doing so in the future. That’s around 4.8 million potentially vulnerable people – a huge market opportunity for savvy intermediaries who can help them fill the gaps in their protection needs with cover at the right price.

GI your way out of mortgage market misery. ●

P RO T E C T I O N Opinion

The need to protect income has never been greater

I

t feels like every day there is a new headline about the declining state of the nation’s health. The latest figures suggest that 13.6 million people are now at increased risk of Type 2 diabetes, three million people with cancer and 5.5 million people with high blood pressure, with the average BMI also rising. Alongside the re-emergence of some childhood diseases such as measles and scarlet fever, it’s fair to say that, as a nation, looking a er our health has never been so important.

A recent study published by Zurich and the Centre for Economics and Business Research (CEBR) reported that in the past six years the number of people with long-term health problems has increased by 27%, equating to a staggering 112.5 million sick days over the past 12 months.

Positive improvement Facing into these stark facts, the need for consumers to protect their income has never been greater. It’s therefore been pleasing to see some positive improvement in the number of income protection policies sold, with Gen Re’s Protection Pulse report reporting a 23% year-on-year increase last year.

The work that the Income Protection Task Force (IPTF) has done to raise awareness has been vital, and the fact that we can see the fruits of this labour is to be welcomed With adviser education a focus for many protection providers over the past few years, income protection (IP) is now a regular part of the conversation for most advisers and their customers, particularly due to the importance that Consumer Duty places on avoiding causing foreseeable harm.

However, the question remains: has the awareness-raising drive gone far enough?

For underserved consumers in particular – who maybe aren’t currently seeking advice – it’s vitally important that we raise awareness, especially considering the current economic environment.

Legal & General’s 2022 Deadline to Breadline Report states that most people overestimate their financial resilience, and the average UK consumer is just 19 days away from the breadline. This is before we factor in the cost-of-living crisis and the impact of rising inflation and increasing food and energy costs, which have impacted people’s finances even further.

The Government’s introduction of the furlough scheme as a response to the pandemic highlighted the importance of having safeguards in place to pay household bills.

With statutory sick pay at just £109.40 a week, it’s difficult to see how that could cover a family’s weekly shopping bill, let alone other household outgoings, such as mortgage or rental payments.

Battling misconceptions It is likely that there is a consumer perception that income protection is an unaffordable product. However, recent product innovation has resulted in the launch of new options and product features suited to most people’s monthly budgets, delivering greater flexibility for customers.

'Budget' versions, for example, typically pay out for a shorter time – usually 12 months to two years – which puts income protection cover within reach of more people.

One area where I believe there is a consumer need that is currently

STEPHANIE CHARMAN is group partnerships and propositions director at Sesame Bankhall Group

Income protection is now a regular part of the conversation for most advisers and their customers” underserved is the rental market – the first-time buyers of the future.

The average 18 to 34-year-old has £990 in savings, with 45% saving less than £100 a month.

For those who are keen to save for a deposit for their first home, their need to utilise these savings due to rising living costs could put their dream of purchasing a home on hold for an indefinite period.

So, what can be done to ensure that younger generations recognise both the need for and benefit of this type of cover?

The emergence of more products that are specifically marketed at renters is something that we have seen recently, and is a step in the right direction.

With rental arrears currently increasing faster than residential mortgage arrears – increasing 11% quarter-on-quarter at the end of 2023 – any further protection to support both tenants, and in turn landlords, has got to be a win-win solution.

There is clearly still much work to do, but with intermediary distribution and protection providers closely aligned on the customer need, I believe it is a sector that will continue to go from strength to strength. ● March 2024 | The Intermediary

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P RO T E C T I O N Opinion

Are you talking about the growing underinsurance risk?

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ost people have felt the impact of inflation in the past few years keenly, and while it remained be er than expected at the last count – 4% in January – this is still well above the Government’s inflation target of 2%.

However, as an infrequent purchase, one area where people may not have really considered inflation is in the context of their home insurance.

This means that there is a real risk that homeowners could be underinsured. Inflation has significantly driven up the cost of building materials and labour costs, so if a property is completely destroyed beyond repair, it will almost certainly end up costing more to rebuild than it would have previously.

According to the House Rebuilding Cost Index, which is compiled by the Building Cost Information Service to monitor changes in the price of rebuilding costs, the two years from January 2022 to January 2024 saw the index rise by 21%.

There are two ways that home insurance cover is rated: either insurers take a sum insured approach, which requires a specific rebuild value for the property, or a blanket sum insured is applied based on the number of bedrooms in the property.

The la er reduces the risk of the policyholder not having enough cover in the event of a total loss. In both scenarios, if the level of cover isn’t high enough then there could still be a risk of underinsurance. It’s why Paymentshield has recently increased our level of blanket cover to allow for the rise in rebuild costs.

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LOUISE PENGELLY is proposition director at Paymentshield

It’s worth noting that – according to Paymentshield's analysis – one in four home insurance policies rate based on the sum insured approach. So, it stands to reason that many of these policyholders would benefit from a review of their sums insured to check they’re still suitable. Plus, even those with older bedroom-rated policies could still benefit from a review of their policy to check their limits are still adequate, should their property need to be rebuilt.

Regular review We know from our own research that many existing homeowners have not reviewed their home insurance when remortgaging, or spoken to an adviser to check their cover is still appropriate. In a survey we conducted with more than 2,000 UK adults last year, we asked about their most recent remortgaging experience: 21% said they didn’t review their home insurance at that time, and a further 13% couldn’t remember whether they had or not.

So, it’s important to encourage clients to regularly review their home insurance. We’ve always championed the importance of advisers taking the opportunity to speak to every client about their home insurance needs, and arguably it’s more important now than ever. We’d also recommend that where a conversation isn’t possible, advisers refer it to a business that can offer advice on their behalf to help the client with the purchase of a policy that’s tailored to their needs.

Handling inflation For advisers, or those professionals having the home insurance conversation with clients, being prepared to discuss the impact of inflation can be a key part of objection handling when it comes to price.

Unfortunately, inflation means that the cost of claims – and therefore premiums – has gone up, and it’s forecast that insurers will continue to raise prices over the next two years.

New research from the Association of British Insurers (ABI) shows that, in the year ending Q4 2023, the average premium paid for a combined buildings and contents policy rose by 19% compared to 2022.

It’s fair to expect, then, that homeowners will have questions about increases in what they’re paying for their insurance these days. We know this is causing some anxiety for advisers, with some finding the costs of premiums so off-pu ing that it prevents them from even broaching the home insurance conversation.

However, without educating homeowners on what’s driving this increase, and the importance of comparing like-for-like and

P RO T E C T I O N Opinion

ge ing the right advice, the risk is that they’ll try and find a cheaper policy by themselves – enter the underinsurance risk again. To maximise the chance of ending up with a policy that properly meets their needs, homeowners would need to effectively assess the features and benefits, the cover limits and the terms of the policy – otherwise it might not pay out.

Advisers can add huge value by discussing insurance with their clients and helping them to make informed decisions. If advisers still don’t feel confident handling questions

or objections, referral services can handle that for them. Our own referral team is made up of dedicated in-house experts who can address any client queries and ensure they end up with a product tailored to their needs – advisers can rest assured their clients are in safe hands.

This isn’t about stoking up fear, but we shouldn’t ignore the realities of the current climate. Advisers are in the best position to confront that and steer homeowners to adequate protection.

Most will be grateful for having their a ention drawn to a risk area that may not have occurred to them. ●

There is a real risk that homeowners could be underinsured.

Inflation has significantly driven up the cost of building materials and labour costs, so if a property is completely destroyed beyond repair, it will almost certainly end up costing more to rebuild than it would have previously"

March 2024 | The Intermediary

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Q&A

Countrywide Surveying Services

The Intermediary speaks with Matthew Cumber, managing director at Countrywide Surveying Services, about tech, the business, and the push for more consumer awareness First of all, can you tell us a little bit about yourself and your role?

I didn’t start out as a surveyor, I started my career at Halifax Building Society working in intermediary sales roles, becoming part of Lloyds Bank, and eventually ended up in a senior role at Colleys – then owned by Lloyds Banking Group.

I joined Countrywide Surveying Services (CSS) in 2016 and became managing director in 2020.

I have the honour of being responsible for more than 650 people, making us one of the largest residential valuation and surveying business in the UK. It’s a fascinating business, and I love my role as we continually steer through this ever-changing industry, providing services which help people buy their dream homes.

service enhancements and solutions which not only generate growth within the business, but also help drive the whole surveying sector forward and improve the homebuying journey.

You’ve written recently about the need for greater consumer awareness as to the value of a survey, why is this so important?

There are huge benefits to talking about the magnitude and value of a survey as early in the buying process as possible, and the intermediary market can play a hugely significant role within this process. So, it’s key to not only continue raising awareness in consumer circles, but also within the intermediary market, CSS retained its lead valuer to ensure that borrowers are fully agreement with Santander educated on what remains an often misunderstood part of the purchase UK, how important are process. One of the most important these relationships? factors being the difference between a mortgage valuation and a survey.

CSS has now worked with Santander UK Due to a lack of awareness around its for coming up to 10 years in a variety of importance, a survey can also be viewed guises, and over this time we have enjoyed as an additional cost rather than an integral an extremely close relationship which one. The thing homebuyers need to bear MATTHEW CUMBER is constantly evolving to better meet its in mind is that opting for the right survey needs as a business, and the ever-shifting could actually save them time, money and requirements of its customers. heartache. The cost can often be a fraction of We greatly value the longevity and continued the potential expense from work which needs growth within such an integral partnership, and to be completed on the property which was not we can always learn from leading players in their identified before contracts are signed. respective fields, which maintain a constant In short, buyers who haven’t sourced the right focus on improving and expanding the customer level of information or received the right advice experience. Technology, people, and client are leaving themselves in a precarious position, requirements are constantly shifting, meaning and are open to potentially damaging financial we have to remain agile in how we work, evolve consequences if unexpected and expensive and innovate. These types of partnerships ensure issues arise post-completion. After all, the more that our offering stays ahead of the curve, and information purchasers receive upfront, the less we are constantly collaborating with key players likely it is that unforeseen complications will arise across the industry to develop new products, further down the line.

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Q&A

With one of the largest employed surveyor workforces in the UK, what are the challenges in finding new talent for the business?

People will always be a key component in any successful business, meaning that continued investment from a training and development perspective is vital in adapting to ever-shifting market dynamics. For those firms looking to recruit, this also means maintaining a clear focus on recruiting the best in class across a potentially broader spectrum.

We are constantly evaluating how we can make surveying an attractive career option for more people, whatever their gender or race. It’s taken time to establish a clear recruitment and educational pathway to enable us to attract people of the right calibre into the sector. This highlights the importance of finding the right balance between qualifications, experience, attitude, ambition and transferable skills.

In reality, it’s impossible to get this right 100% of the time, but it remains our corporate responsibility to invest in the right people as early in the process as possible, and support them throughout this process as best we can.

This is why the CSS trainee programme remains so important in terms of attracting people from different professional and cultural backgrounds, before putting them through an extensive training process and sending them out into the field.

Our training academy has already recruited 400-plus new surveyors since its inception, which represents approximately 12% of the entire lender panel workforce currently working in the market.

Of course, not all business have the resources, capabilities or appetite to build such a pathway.

However, for those firms that are looking to grow in the near or medium-term, it’s prudent to have some kind of plan in place when it comes to identifying, hiring, and developing diverse, untapped talent. Investing in people remains the best and most obvious route to future success.

What does the future hold for the residential surveying industry, and how are you shaping the business to meet future needs?

Looking forward, this year is all about the getting our business back to doing the basics brilliantly. By this I mean focusing on quality and getting things right first time in every aspect of our roles. All

There are huge benefits to talking about the magnitude and value of a survey as early in the buying process as possible, and the intermediary market can play a hugely significant role within this process” with the end goal of helping to make Countrywide Surveying Services great again.

Our overall strategy doesn’t change. We want to extend our lender relationships – as evidenced by the Santander win – as well as continuing to grow our surveying offering. We have ambitious plans in place around how we can achieve this in a simpler, more effective way, and I’m very much looking forward to putting these plans into practices.

We are always looking at ways to help our clients and customers achieve their objectives, we understand that in an ever-changing technology consuming world we will need to continue to adapt how we do our job, improving service delivery, but at same time giving confidence to our clients and customers around property risk decisioning that only a professional surveying business can do. We have recently partnered with CoreLogic to provide our core products that we use daily, which will drive efficiency and productivity savings, but this is only the start. We have ambitions to bring world class products and services to our clients and customers, and this is delivered through people, not the technology.

How important is technology in general to the surveying industry?

Technology is important, but as in every business, as I mentioned before, it is how our people deliver the service and engage with our customers that is the most important part of what we do.

Technology – whether it’s what’s in use today or whether it’s the growth of artificial intelligence (AI) – is only ever an enabler and an enhancer to our products. I see AI as an opportunity, it will help our business, from doing the simplest of tasks to the more complex, and should be embraced.

While the machines can learn from the humans, we need to fully explore and understand how this will help our business on the next stage of its journey. ● March 2024 | The Intermediary

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T E C H NO L O GY Opinion

The human touch in a digital age

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e live in an age of rapid and everevolving digital advancements, where tech continues to play an increasingly significant role in almost every aspect of our lives.

The mortgage industry is no exception to this rule, with criteria search engines, online applications, virtual document submissions and digital platforms now a prevailing feature in the modern-day mortgage application process.

These advancements have certainly helped to create greater efficiencies within the industry, streamlining the mortgage application process and making it more convenient and accessible for lenders, brokers and customers alike.

However, the importance of a human touch remains paramount, particularly during the underwriting process.

Understanding context If the past few years have taught us anything, it is that nothing is certain and that events outside of our control can o en change the circumstances in which we find ourselves.

The past 12 months, in particular, have proven extremely challenging for borrowers, many of whom have found themselves facing difficulty adapting to the rising cost of living and trying to meet the affordability requirements of many mortgage lenders.

For the majority of these individuals, navigating the complexity of securing a good rate in a higher interest rate environment was unfamiliar territory, which is where the value of a personal approach during the underwriting process comes into its own.

Mansfield Building Society has long been an advocate of individual underwriting, as we understand that

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the needs and circumstances of each applicant can differ significantly.

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

The value of BDMs A personal approach is especially useful for more complex cases, such as in situations where clients have diverse or irregular income streams or some historic adverse credit. It has also proven particularly beneficial in recent months for those borrowers who may have found themselves falling foul of the tick-box approach of many mainstream mortgage lenders.

In fact, this human-centric approach was hailed as a standout element of Mansfield’s customer service in recent broker findings from Smart Money People. The business scored a satisfaction rating of over 80% among brokers, while satisfaction with business development managers (BDMs) scored a high of 83.9%.

These figures speak volumes about the importance of a common-sense approach to lending, and informed, personal communication when it comes to answering broker questions about the needs of clients.

In fact, according to the data, direct access to underwriters and personalised support were highlighted as key strengths for Mansfield.

Personal touch Addressing the needs of more complex borrowers in need of a more handson approach was one of the reasons behind the addition of our Credit Repair products to our Versatility and Versatility Plus range at the start of 2024.

The range of products have been specifically designed to cater for a wide range of customer scenarios, including those with irregular or unusual income streams, as well as those on zero hours contracts or with a limited income history.

In all of these situations, the personal approach to underwriting is essential to ensure the borrower

secures the best outcome for their needs. The generic nature of many online application forms are likely to mean these customers fall foul of standard mainstream lending criteria.

For example, some borrowers with historic credit blips such as County Court Judgements (CCJs), individual voluntary arrangements (IVAs) or bankruptcy may be disregarded and declined a mortgage during the online application process for having a poor credit rating.

However, having an individual assessment of a case means the circumstances can be discussed in further detail, which can be er account for the real life context and more subtle shades of complexity, rather than the impersonal decisionmaking of credit scoring systems.

Flexible and inclusive Technology will always play a crucial role in helping the mortgage industry evolve – it can improve business processes significantly for brokers and lenders alike.

In the current economic climate, though, a human approach to underwriting remains essential and clearly demonstrates that the need for communication with brokers and their clients has never been greater.

This is more important than ever when it comes to addressing the needs of those clients with more complex circumstances. The human touch is still well-placed to assess the context and quirks of cases and can be er offer flexible and inclusive solutions for brokers and their clients. ●

T E C H NO L O GY Opinion

Minimum effort, maximum profit

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s any business leader knows, one of the keys to running a commercially successful operation is efficiency.

Minimum effort and process for maximum output and profit.

This is why firms constantly revise their operational efficiency on an internal basis. Complicating ma ers, however, is the influence and sometimes imperative imposed on firms by external regulation and central policy decision-making.

In December, the Prudential Regulation Authority (PRA) published provisionally final rules on the implementation of Basel III – referred to as Basel 3.1. The changes have the potential to materially change the competitive landscape for residential mortgage lenders – both building societies and banks.

Professional services firm PwC issued a summary this time last year following the consultation paper publication in November 2022. In it, the firm said the requisite changes would “add to the operational challenge” facing lenders.

You can say that again. The new standards require lenders to undertake a wholesale rethink of capital planning strategy and risk-based decisioning process.

More nuanced risk weightings for certain assets, dependent on the scale and type of lending institution, mean lenders are facing the challenge of how to effectively navigate an increasingly dynamic environment in which to allocate capital optimally.

Reporting requirements are more complex and have more than one end, necessitating a comprehensive review of the processes involved. Then there are the Consumer Duty rules lenders are already contending with.

These require firms to consider the needs, characteristics and objectives of their customers – including those with

characteristics of vulnerability – and how they behave at every stage of the customer journey.

As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.

STEVE CARRUTHERS is business development director at Iress

Adjusting to change Most firms are still ge ing to grips with the first stage of the Consumer Duty implementation, which came into force on 31st July 2023 for new and existing products, or services that are open to sale or renewal.

Another deadline is looming: for closed products or services, the rules come into force on 31st July 2024. In and of itself, adjusting to this significant change in consumer protection regulation is a huge undertaking from a process perspective.

Evaluating the responsible delivery of that customer-facing outcome requirement against the prudential requisites that influence a lender’s ability to balance product choice and innovation with credit risk and exposure is no mean feat.

The Government’s desire to win a General Election, likely slated for later this year, is palpable.

Access to homeownership, easing affordability and appealing to the Conservative voters of the future is understandably a ractive.

It will be interesting to see how much bandwidth lenders have to deliver yet another new policy within the timeframe that the Government will inevitably require, should it opt to bring in another vote-winning housing policy promise.

Striking a balance It isn’t just the context of significant regulatory change this year that will affect this. The market is also coping with the effects of higher mortgage rates. For several years, lenders have been preparing for higher arrears

rates, dealing with vulnerable borrowers as well as identifying who is and isn’t vulnerable, and ascertaining the most suitable course of action.

We are already seeing those numbers rise as more and more people face steep monthly repayment rises come the end of their deal period.

Striking the right balance between support, good longer-term customer outcomes and adhering to the Government’s Mortgage Charter is another challenge lenders are having to contend with.

Will the Government factor in these practical complexities when it’s prepping for an election?

On our toes This is even more reason for lenders to be prepared for anything.

Central Government policy decisions have the potential to throw the competitive balance off overnight – lest we forget the week that followed Liz Truss and Kwasi Kwarteng’s mini-Budget.

If that event taught us anything it is that flexibility, agility and the ability to be responsive quickly are absolutely key to success in a market that can move as fast as today’s.

At the time of writing, no one knows the outcome of the UK’s imminent General Election, which could turn the entire market upside down again.

What our systems and processes need is the ability to change quickly.

We can prepare for both expected and unexpected change to be a constant feature. ● March 2024 | The Intermediary

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

Focus on ...

JESSICA O’CONNOR is a reporter at The Intermediary

Southampton

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ituated along England’s southern coastline, Southampton stands as a beacon of economic vitality and cultural diversity. Its strategic location as a major port city has long served as a gateway to global trade and maritime commerce.

Even beyond its maritime legacy lies a property market teeming with potential. Despite a troublesome period for the housing market, Southampton’s market remains buoyant, abounding with interest from buyers and sellers alike.

This month, The Intermediary sat down with local property professionals to dissect Southampton’s property landscape, discussing its current dynamics, the intricacies of its mortgage market, and the economic undercurrents shaping its future.

Current values According to the latest data, the average property price in the Southampton postcode area is approximately £391,000, while the median price stands at around £320,000. This is compared with an average and median of £350,000 and £269,000 in England and Wales.

Properties in Southampton showed an average price decrease of 6% – equating to around £23,600 – over the past 12 months.

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This comes as property experts predict the increased softening of the UK property market following months of market turmoil.

The most affordable postcode area in Southampton was found to be in ‘SO15 1’, which boasted an average price of £156,000. The most expensive place to buy was ‘SO24 0’, where properties can set buyers back over £1m.

The average detached property in the Southampton area costs approximately £643,000, while semi-detached homes sell for around £369,000. Meanwhile, terraced houses cost an estimated £328,000, with a typical flat in the area averaging around £200,000.

Market overview Last year, there were approximately 6,100 property sales in the region, denoting a substantial annual drop of 37.9%, or 4,000 transactions.

This drop was undoubtedly the result of the high mortgage rates which plagued the sector last year, deterring potential buyers from entering the market.

However, despite this recent blip in buyer activity, Rohit Kohli, director at The Mortgage Stop, says that Southampton’s market has shown a “remarkable resilience” over the past 12 months. Reporting a renewed interest from local buyers, he says that the market has maintained a steady

trajectory in the face of the wider market troubles of the past year.

Jamie Alexander, mortgage director at Alexander Southwell Mortgage Services, agrees with this positive assessment, suggesting that those “with strong financial standing” continue to show interest in securing their dream homes. According to Alexander, this interest was evidenced by his business levels throughout February, which proved to be a record month for his brokerage.

Popular demographics With a purchase market that is seemingly on the mend, brokers have also noted a number of client demographic trends popping up in

Growth and correction JAMIE ALEXANDER mortgage director at Alexander Southwell Mortgage Services

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n the past year we’ve seen a slight correction in average property prices. is is natural a er a period of rapid growth and shouldn’t be a cause for alarm. Importantly, there’s still healthy buyer demand, particularly for competitively priced properties.

Southampton is undergoing exciting transformations with ongoing infrastructure projects. While the immediate impact on property values might be difficult to predict, these developments can positively influence the city’s long-term prospects.

While rental demand remains strong, lower yields and increased competition present challenges. However, selective investors with a long-term perspective and expert guidance can still find opportunities.

Buyers are making calculated offers, ensuring they get the best possible deal on their desired property. e remortgaging landscape has seen a surge in proactive behaviour. is approach allows them to secure favourable rates before potential market fluctuations.

Changing conditions GARETH DAVIES is director at South Coast Mortgage Services

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e’ve seen an uptick in enquiries from people looking to move or get their house ready to go on the market. It’s noticeably different to conditions six to 12 months ago.

We’ve seen an increase in first-time buyer activity recently, and over the past three years we’ve had a big increase in the postretirement sector. It seems people are getting fed up with waiting for rates to improve, as most seemed to do in 2023. ere’s a number of large new-build developments on the outskirts of the city. Land that was once farmland is now being used for housing. It doesn’t always go down well with the locals, but we need more housing, let’s just hope it’s affordable for the masses.

2023 was tough for the residential market. However, as long as rates don’t go crazy again, I’m quietly confident for the rest of 2024.

BTL is showing signs of recovery, but many small landlords have decided that enough is enough. e comments I get from many is that the benefit just isn’t worth the ‘aggro’ anymore.

According to the latest data, the average property price in the Southampton postcode area is approximately £391,000, while the median price stands at around £320,000.

This is compared with an average and median of £350,000 and £269,000 in England and Wales” the area as of late. While Alexander maintains that his key demographic is largely first-time buyers looking to achieve their dreams of homeownership, he has seen a slight increase in general home movers who are looking to upsize in the past few months.

He also reports a surge in proactive activity from existing mortgage holders, with clients approaching him for advice “o en up to six months before their current deal expires.”

Mark Robinson, founder and managing director at Albion Forest Mortgages, adds that there has been an increased dependence on schemes such as joint borrower sole proprietor (JBSP) and gi ed deposits, as firsttime buyers in the area, much like those across the country, continue to struggle with ever increasing house prices. → March 2024 | The Intermediary

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L O C A L FO C U S Southampton

Going steady MARK ROBINSON is founder and managing director at Albion Forest Mortgages

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he housing market appears to be steadily moving again, with properties being snapped up, sometimes before a viewing can be secured. Most of our clients are key workers, who are picking up, with more specialist products released.

We have also seen more dependence on schemes such as JBSP and gifted deposits, as first-time buyers struggle with ever increasing house prices while wages remain largely unchanged. The ‘Bank of Mum and Dad’ is being leaned on even more frequently.

There are always new-build sites popping up in the area, but the biggest news in coming years will be the huge development on the Fawley power station site that intends to add thousands of new homes to the area.

Many are either deciding that they have waited long enough, or that things will not dramatically change while they are throwing money away on rented accommodation.

Buy-to-let landlords had a spate of selling properties over Covid-19, with many selling up. However, we have seen many landlords now expanding their portfolios or even getting their first buy-to-let to bolster the rental supply again.

Demand stays strong CHRIS SCHUTRUPS is founder of The Mortgage Hut

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e’ve seen continued demand for good quality housing stock. New homes have been slowed by red tape around planning permissions and nitrates. Well-priced, quality homes are moving quickly, and we see more demand for homes than we do people trying to sell.

We deal with over 90 banks and building societies so most of our mortgages are with high street lenders; however, we have some fantastic local building societies. One to really note would be Newbury Building Society, which is very supportive of local customers and really support us with Shared Ownership for first-time buyers trying to get their foot on the property ladder.

We deal with more than 100 customers a day, so our client base is diverse; however, we see a large number of customers who are either looking to buy their first home, want to move home, or with an uncertain rate environment, get advice on their existing mortgage.

One Horton Heath is a large development in Fair Oak and Eastleigh which is being built out. Abri, which specialises in Shared Ownership, and Bargate Homes which builds premium quality homes, both have some really exciting developments coming in the next 12 months.

Large portfolio landlords are buying blocks and developments, whereas the occasional and accidental landlords are fewer in the market at the moment, due to the rate environment and unfriendly tax regime currently in place from the Government.

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Gareth Davies, director at South Coast Mortgage Services corroborates this first-time buyer appetite. Stating that he has seen a notable increase in this activity recently, along with a growing demand for lifetime and retirement interest-only (RIO) mortgages.

Lender trends Brokers report a strong demand for the typical high street lenders in the area. According to Robinson, the most common lenders operating in the area tend to be the larger institutions such as Halifax, TSB, Nationwide, NatWest and more.

However, on a more regional level, Chris Schutrups, founder of The Mortgage Hut, is quick to note the popularity of Newbury Building Society. He reports that the society is very supportive of local customers, especially when it comes to Shared Ownership for first-time buyers trying to get their foot on the ladder.

Kohli also notes a recent shift in borrower preference, with clients opting for more specialised options such as Gen H, and even the longerterm, Dutch style products from emerging lenders such as Perenna and April Mortgages.

Upcoming developments In response to these green shoots emerging from the local mortgage market in Southampton, the area is now home to several new housing and infrastructure developments, as developers look to capitalise on positive market sentiment.

Indeed, demand for new-build homes in the region is high, with the price of an established property coming in at £391,000, compared to a much more substantial average of £489,000 for new-builds.

To feed buyer appetite, Davies notes that a number of large new-build developments have been established on the outskirts of the city.

With old farmland now being used for housing, he says this trend allows families and young professionals to relocate outside out the bustling city, while remaining within a reasonable commuting distance.

According to Robinson, the biggest of these new developments in the coming years will be located at the recently announced Fawley power station site – a regeneration project

L O C A L FO C U S Southampton

Stability in times of turmoil ROHIT KOHLI is director at The Mortgage Stop

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he Southampton housing market has shown remarkable resilience, maintaining a steady trajectory despite tough economic conditions. This stability, coupled with a gradual increase in property prices in the past few months, paints a cautiously optimistic picture for the city’s property landscape.

A key factor bolstering Southampton’s market is its dynamic BTL sector, driven by the substantial student population.

Despite a slowdown in transactions in late 2022, investor confidence is on the rise, signalling a positive shift. The city’s evolution is evident in the transformation of areas like the Woolston waterfront, where modern developments meet improved amenities, attracting a diverse population, including graduates seeking long-term residence.

However, the proliferation of flats and apartments, while addressing housing demand, underscores the challenges for first-time buyers, particularly the need for significant deposits.

We have mix of clients ranging from first-time buyers to those transitioning to quieter suburbs. Over the past few years we have seen a demographic shift, with more clients relying on family support for property purchases, especially with innovative lenders such as Gen H. We have also seen an uptick in borrowers interested in longer term fixed rates, with the potential of higher borrowing as a result.

Southampton continues to evolve with significant developments.

These projects, along with new-builds in areas like Eastleigh and Romsey, are expanding housing options, catering to a diverse demographic. For our clients, these offer exciting opportunities to explore living spaces that align with their preferences and capabilities.

Southampton’s housing market is navigating through a period of cautious optimism, with developments and demographic shifts shaping its future.

that intends to add thousands of new homes to the area.

Schutrups agrees, further highlighting the large development at One Horton Heath in Fair Oak and Eastleigh, which is currently in construction.

In terms of the city itself, Southampton continues to evolve, with significant developments underway in St Mary’s as well as along the Woolston waterfront.

Rental market This evolution, particularly within the city, is not only driven by growing buyer appetite and developer investment, but also by a bustling buyto-let (BTL) sector.

As a city that is home to several prominent universities, such as The University of Southampton and Solent University, Kohli says that area’s buy-

to-let sector is fuelled by its substantial student population.

In fact, the private rental sector (PRS) takes up 22.8% of Southampton’s overall housing stock, a figure not dissimilar from the national average of 23.6%.

However, while students may continue to keep the rental market afloat, Alexander notes that increasingly low yields and growing competition is presenting challenges to what has, historically, been a fairly prosperous market.

Indeed, Davies highlights growing concerns from landlords surrounding stress-tests and taxation changes, which led to a much-subdued market for the majority of 2023.

He says he has seen many small landlords decide that “enough is enough” and start to reduce their portfolios over the past few months,

Southampton Residents

716k Average age

40.9

Residents per household

2.41

www.plumplot.co.uk

with some choosing to dispose of them altogether.

Meanwhile, Robinson takes a more optimistic view, noting a slow recovery, as many landlords have begun to tentatively rejoin the market.

Beacon of resilience It is clear that the property market in Southampton reflects the delicate balance to be struck between opportunity and challenge.

While factors such as the city’s emerging buyer demand and wealth of development opportunity continues to attract investors, affordability concerns and buy-to-let taxation changes remain significant hurdles to overcome.

As the area navigates the complexities of a rapidly evolving economic landscape, brokers agree that collaboration between policymakers, industry stakeholders, and the local community will be crucial in fostering sustainable growth going forward.

With the Office for Budget Responsibility (OBR) forecasting a fall in inflation to 2% by Q2 of this year, and many commentators hopeful that a base rate cut may be on the horizon in coming months, Southampton’s mortgage market has the potential to emerge as a beacon of resilience throughout the remainder of 2024. ● March 2024 | The Intermediary

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On the move...

MPowered boosts sales team with new hire

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Powered Mortgages has appointed Lichelle Samra as key account manager for the Midlands. Samra joined from NatWest where she was joined business development manager.

Ma Surridge, sales director, said: “[Lichelle’s] appointment is testament to our commitment both to expand our reach in the Midlands and also improve the service we offer brokers in the region. Lichelle is an experienced business development professional and her knowledge and extensive

LICHELLE SAMRA

Mark Snape joins GoTo Group as managing director

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experience working with foreign nationals across global markets will be invaluable as we look to support foreign nationals fulfil their aspirations to be homeowners in the UK.” Surridge added: “At MPowered, we remain commi ed to delivering the best service to our broker network through a quick and hassle free mortgage process using the power of AI. Our Whatsapp service and online chatbot which supports brokers using our mortgage origination platform are just a few examples of how we continue to adapt to ensure we are delivering the best possible service to brokers.”

Zenzic Capital recruits Simon Brown to lead development finance growth

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HTB expands portfolio management team

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ampshire Trust Bank (HTB) has made two new hires, growing its portfolio management team with the recruitment of Victoria Baily and Graham Smith.

Baily joined as head of portfolio management from Secure Trust Bank. She said: “HTB understands the importance of relationship management and expects the highest standards, which is what a racted me to this role.

"I’m excited for the challenge of leading the portfolio team at a bank with such a great reputation.”

Smith joined as portfolio manager, focused on the ongoing management and review of existing borrowers.

He also joined from Secure Trust Bank, and held a variety of relationship management roles at Lloyds Bank.

Smith said: “An opportunity to join a growing, ambitious bank was something I wasn’t going to pass on."

oTo Group has appointed enzic Capital has appointed Mark Snape as managing Simon Brown as head of real director. Snape has estate development finance conveyancing, survey and lending. Brown spent over 20 financial services expertise, from a years in deal origination, with senior career that spans over 30 years. positions at firms like Investec and Royal He most recently held CEO roles at Bank of Scotland. Brown said: “Over the CAL and CLG while he was working last 10 years, Zenzic for Movera. has established a Snape said: “Joining the GoTo strong reputation for Group presents an exciting thinking creatively opportunity to expand our proposition to deliver innovative further and deeper into the UK financing solutions…I property market. look forward to “Our ‘customer first’ approach is helping...grow their already turning heads and as our development finance SIMON BROWN VICTORIA BAILY services and distribution grow, I offering.” fully expect to see greater success for the business.”

Nigel Hoath, founder and Mortgage Brain welcomes Niki Cooke as national account CEO, added: “Mark is an excellent ortgage Brain has officer, and previous to that she addition to the team, bringing appointed Niki was director of intermediary with him a vast background of Cooke to its sales relationships at Twenty7tec. expertise to work closely with myself team as national She said: “I look forward to and Alex Willis account manager. Cooke leveraging my experience to spearhead will be responsible for and expertise to further our exciting and maintaining corporate strengthen Mortgage growing business. account relationships Brain’s position as a trusted “With Mark with key industry partner for mortgage on board, we are partners, overseeing the professionals nationwide.” ready to build on development of tailored Neil Wya , sales and the new solutions, and supporting marketing director, added: NIKI COOKE industry the launch of new tech “[Niki's] extensive experience standards products this year. and dedication to client success we are Cooke joined from Protection make her the ideal candidate to help KELLY ILES se ing.” MARK SNAPE Guru, where she was chief revenue grow our national accounts strategy."

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