The Intermediary – May 2024

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How the later life market is adapting to increasingly complex times Intermediary. The | Issue 16 | May 2024 | £6 INTERVIEWS  ⬛ In-depth conversations with Air, more2life and the ERC BROKER BUSINESS ⬛ New opportunities, navigating networks and keeping well LATER LIFE FOCUS ISSUE
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The Comprehensive Conversations movement aims to establish a new standard of consumer-focused service excellence in the later life lending market. Striving for an affordability-centric and product agnostic approach. By signing up to the manifesto, you will be agreeing to follow industry guidelines, present all options to customers, and enhance advice, products, and services when possible. You’ll also gain access to Air’s safer tracks – educational resources and technology –supporting you with your advice process. Sign the manifesto: Call: 0800 294 5097 evolve the later life lending industry

From the editor...

As I write this, we are deep into this year’s Mental Health Awareness Week. Through the week, we’ve been covering the valiant efforts of Jason Berry of Crystal Specialist Finance, Jonathan White of Fi een Recruitment and all the participants in Mortgage Industry Mental Health Charter’s Walk & Talk event, who are walking a whopping 125 miles (allowing for the odd detour and adventure) to raise money and awareness to address the mental health crisis, which is particularly acute in demographics that make up much of this industry.

I have personally enjoyed receiving daily check-in calls from an increasingly sore-footed but perennially positive Jason to hear all about the day, discuss the importance of fresh air and conversation, and help decide what the team should order in for dinner.

I bring this up not just to congratulate them for a job well done, or add my own voice to the awareness raising, but also as a segue into wider conversation about the market. Brokers take on a lot of responsibility and work to ensure the best outcomes for their clients. Not a day seems to go by when there are not changes to the market, o en at short notice, leaving brokers with an increasingly heavy workload.

The wider economic challenges facing the country and the ongoing cost-of-living crisis also impacts everyone in one way or another. On top of that, brokers do not only face ongoing challenges to their own wellbeing, but o en also

hold the weight of their clients’ as well.

This all, of course, comes at a time when regulatory scrutiny has everyone focusing on fair outcomes and vulnerability, on top of everything else.

This brings me to our focus for this month: the ever-evolving later life lending market.

In this issue, we cover everything from practical advice on spo ing and handling vulnerable clients, to the exciting evolution of products to fill the gaps created by an increasingly diverse client base.

I have enjoyed discussing everything from the political context to product sourcing.

In this issue with you can find interviews with the likes of the Equity Release Council and more2life, which look closer at the state of the market.

Meanwhile, our case clinic homes in on tricky later life deals, and our feature seeks to understand how this market is evolving with the times. If there’s anything I’ve learned from my conversations this month, it’s that in order to truly move into the future, we have to view the full spectrum of mortgage lending - from firsttimers to retirement - as a whole, rather than in siloes .

This market is more than the sum of its parts, and the UK economy will do well if we remember that fact.●

Jessica Bird

@jess_jbird @IntermediaryUK

The Team

Jessica Bird Managing Editor

Jessica O’Connor Reporter

Stephen Watson BDM

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Helen Thorne Accounts

Barbara Prada Designer

Bryan Hay Associate Editor Subscriptions


Alison Pallett | Andrew Gilbert | Arjan Verbeek

Averil Leimon | Ben Allkins | Benjamin Wells

Bill Lumley | Brian West | Caroline Mirakian

Charles Morley | Christopher Tanner

David Whittaker | Geo Hall | Grant Hendry

James Pagan | Jamie Lennox | Jason Berry

Jeremy Duncombe | Jerry Mulle | Joanne Legg

Jonathan Barrett | Kathy Bowes | Laura omas

Les Pick | Lisa Martin | Louise Pengelly

Lucy Waters Mark Blackwell | Mark Snape | Martin

Swann | Mat Rees | Matthew Cumber | Michael

Conville | Mike Taylor | Nathan Reilly | Neal Jannels

Patrick Bamford | Paul Auger | Paul omas

Ranald Mitchell | Richard Harrison | Richard

Rowntree | Richard Sharp | Robin Johnson

Roland Steere | Simon Jackson | Spencer Gale

Stephanie Charman | Stephanie Dunkley

Stephen Perkins Steve Carruthers | Steve Cox

Steve Goodall | Steve Smith | Tom Denman-Molloy

Uliana Kuzmis | Vikki Je eries | Wayne Dewsbury

Copyright © 2024 The Intermediary Printed by Pensord Press CBP006075 FINDING ANSWERS How the later life market is adapting to increasingly complex times Intermediary. The May 2024 In-depth LATER LIFE FOCUS ISSUE May 2024 | The Intermediary 3


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Property valuations are our business. We ensure valuations are more accurate and your lending decisions are clearer.

This is why we created Knowledge Hub, a library of short one-to-two-minute videos, bringing together our know-how and experience. We answer many of the commonly asked questions about valuations, property and the market.

Visit the Knowledge Hub at, or to propose a topic for us to cover.

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Feature 6

Shifting Sands

Bill Lumley looks at how the later life lending market is keeping its footings in a changing world

Opinion 16

Insights into the later life market from the likes of UK Moneyman, Advise Wise and L&G


Broker business 84

A look at the practical realities of being a broker, from navigating networks

Local focus 102

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

On the Move 106

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


The Interview 24


Jessica Bird speaks with Paul Glynn, CEO of Air, about how later life is growing to meet modern challenges and opportunities

In Pro le 54


Natalie McNamara, head of network distribution and growth at Loans Warehouse, about celebrating second charges

In Pro le 82


Vikki Je eries, proposition director at PRIMIS Mortgage Network, discusses the challenges facing the sector

Q&A 14


The Intermediary speaks with Jim Boyd, CEO of the Equity Release Council, about the expanding world of later life lending

Q&A 34


Ben  Waugh, sales director at more2life, discusses innovation in the later life market and how his rm has adapted to the changes that have impacted the market

Meet the BDM 46


The Intermediary speaks with Gareth Randall, lead business development manager (BDM) focusing on large loans at Metro Bank

The Intermediary | February 2023
SECTORS AT-A-GLANCE Later Life  16 Residential  38 Buy-to-let  62 Specialist Finance  74 Second Charge  78 Broker Business  84 Local focus



Bill Lumley for The Intermediary

Changing demographics and other sociological factors have put later life lending on an uncertain trajectory in recent years. In fact, the sector providing mortgages for the over-55s showed a dramatic fall of over 40% across the board in the final quarter of 2023, compared with the same period in the previous year, according to market data from UK Finance.

Nevertheless, this is a key market within the UK, particularly as the population ages and people increasingly need support with finances in their later lives – either to ensure a stable retirement, release funds for their own enjoyment, or even help younger generations facing an ever more challenging environment.

As the UK landscape shifts, later life lenders and brokers must do the same.

Changes and choices

Equity release has been particularly affected by recent turbulence. A significant number of lenders in this space have reduced the range of products available to borrowers due to loan-

to-value (LTV) challenges, for example. However, these issues have also prompted lenders to adapt their approach.

Ronnell Reffell, mortgages policy manager at UK Finance, says: “Our members are always quick to respond to changes in the market and customers’ needs. We’re already seeing more hybrid equity release products entering the market that allow customers to make full or partial interest payments, before reverting to a full roll-up lifetime mortgage.”

The expectation at UK Finance is that brokers will adapt and begin to consider interest-served options from the outset, enabling borrowers to consider all later life options available to them.

Meanwhile, the reasons behind how, when or why someone retires are becoming increasingly complex and non-linear, no longer solely dictated by the mandatory retirement age or paying off their mortgage.

Jim Boyd, CEO of the Equity Release Council (ERC), says: “People have more freedom to make choices that provide them with the type

In focus LATER LIFE LENDING The Intermediary | May 2024 6

of retirement that they want, and products in the later life lending market have evolved to support this.”

Two years ago, the trade body launched its fifth product standard, guaranteeing borrowers the ability to make ad hoc repayments within lenders’ criteria.

“This type of evolution has been driven by customers who wish to actively manage their borrowing over the life of their loan – especially in the current higher interest rate environment,” says Boyd.

He predicts that – as the concept of retirement continues to change and mean different things to different people – there will be yet more customer-centric evolution in this market. For example, for a long time equity release was

essentially the only option for someone looking to borrow into older age, but Boyd says: “Over the last few years, we’ve seen the advent of later life mortgages, retirement interest-only mortgages [RIO] and more flexibility around the terms of standard residential mortgages going past age 65.”

RIOs were launched in 2018 to bridge the gap between traditional mortgages and lifetime mortgages – or equity release products. According to Steve Humphries, proposition director at Mortgage Advice Bureau, they have served the market well.

However, he warns: “RIOs are designed so thhat the customer has to make interest payments on the mortgages until death or earlier entry to long-term care, which is just not achievable for some people.”


The Intermediary | July 2023

The launch of the mandatory payment lifetime mortgages is one recent product innovation in the later life sector, but providers are constantly working to consider how else they can better serve customers.

Boyd says: “Modern equity release products provide more flexibility and safeguards than at any point before, and can help more people to enjoy financial freedom and better quality of life.”

He adds that modern equity release products allow customers to access the wealth tied up in their homes, with the option to release funds in stages, when needed, with interest charged only when money is withdrawn, the flexibility to reduce or avoid paying compound interest by making voluntary partial repayments when they can afford to, as well as servicing the interest with some products.

They also provide the freedom to repay their loan in full, with no early repayment charge (ERC) after a fixed period of time, for the majority of products. These products also include the ability to ringfence a guaranteed minimum

inheritance amount to leave behind to loved ones, and downsizing protection allows people to repay their loan without penalty if they move to a property which is not suitable for equity release.

Lender responsibilities

The heavy impact of recent economic challenges on the later life lending market has highlighted that the market must evolve and adapt.

Sadna Zaman, home finance proposition development manager at Canada Life, says: “The cost of living, an ageing population and more people than ever working past retirement age all mean that the needs of our customers are changing. It is important for us as lenders to recognise that we have a responsibility to evolve and ensure we are aligned to meeting these needs.”

With growing demand for financial products specifically designed for older borrowers, lenders have had to re-evaluate their offers and strategies.

Zaman explains: “There is a need to balance the desire to innovate and provide new product

“I've cracked it! I've nally gured out what age we'll be when we can retire”

solutions, while recognising that these are products for the long term.

“They need to be ‘future proof’ and allow enough flexibility to adapt with a customer’s life events. This is further emphasised by the requirements under Consumer Duty regulations and the overarching requirement to deliver good outcomes.”

She adds: “A focus on holistic financial planning is a significant change for the market, and goes beyond simply funding or advising on a loan.”

Zaman warns that the Financial Conduct Authority’s (FCA) review into later life mortgages stresses the need for personalised advice, assessing affordability and considering all options available.

“This means it requires a more comprehensive approach that considers factors such as personal income, healthcare costs, and estate planning,” she says. “This has in turn increased the role of lenders to offer greater flexibility and personalisation and effectively compete against the full range of later life lending products.”

Ben Waugh, managing director at More2Life, says the current later life lending environment is becoming more complex, with different customer needs emerging.

He says: “Under Consumer Duty, the industry needs to adapt to those changing scenarios and

Steve Humphries is proposition director at Mortgage Advice Bureau

Payment term lifetime mortgage (PTLM)

PTLMs are a newer later life mortgage product, claimed to ‘bridge the gap’ between standard mortgage products and interest-only products.

It works by giving the borrower a cash sum, on which the interest, and in some cases the capital, is payable. There is a set term in which these monthly repayments must be made – either a term chosen by the customer, or until they turn 75, whichever comes rst.

The amount owed is paid o following the sale of the property upon death, or a move into long-term care. Any money left over after paying o the amount owed, post-sale, goes to any bene ciaries. The main bene t of the PTLM is to give the customer access to a higher LTV at outset.

Standard residential mortgages

In Brief p

Later life lending challenges

◆ Debt burden is preventing 18% of mortgaged over-55s from saving more for retirement, 10% from reducing their work hours, and 16% from retiring completely.

◆ One in ve (20%) do not expect to retire mortgage-free, while 19% more are unsure.

◆ Almost one in three (31%) UK consumers believe accessing their property wealth could improve their nances in retirement, up from 25% in 2021.

◆ More than one in four (26%) believe a later life mortgage could be a useful way to boost their income in retirement, up from 21% in 2021.

If the customer's nancial pro le ts, why not o er them a standard mortgage? Age restrictions aren’t as readily enforced with traditional lending anymore, and if the borrower can meet the monthly repayments and interest, not only do they retain ownership of their home, but they’re also lowering the capital amount for when it comes time to sell the house. While unorthodox, it could work for some.

Term interest-only mortgage (TIO)

A TIO is a type of mortgage in which the borrower only pays the interest on the product for a speci c term. During this period, the borrower does not pay down the capital amount, only the interest. Like standard interest-only mortgages, this typically results in lower monthly payments.

These products can only be o ered if the customer has a repayment vehicle available to pay o the capital amount of the loan when the interest-only term ends, and can show they can a ord the monthly interest payments. For those who know they have money coming in to cover the capital amount, this could be the ideal solution.

Retirement interest-only mortgage (RIO)

RIOs are essentially the same as TIOs; however, the capital loan amount is paid upon death or entry into full-time care. This amount is paid once the property in question is sold. As it is a form of mainstream mortgaging, standard mortgage a ordability checks apply. Lenders take into but are not limited to: state and employment pension payments, personal pension payments, and annuity payments. These loans typically have an LTV of up to 75%.

THe ProS and ConS of VarioUS StaPle ProdUCtS

Rate of fall in later life lending in Q4 2023

NOTE: Residential later life loans in Q4 represented 7.38% of all residential loans. Buy-to-let (BTL) later life loans in Q4 represented 21.98% of all BTL loans.

Source: UK Finance

customer circumstances. We need to do a better job of tailoring and providing different solutions to those different customer needs.

“For customers in later life, there used to be two real options. One was traditional equity release, or full roll-up, and the other was a traditional mortgage. There was very little in that middle space. Now, we're starting to see new products that address this.

“For example, we are piloting our own product, which provides in most cases some form of hybrid version of a later life. There is a far more phased transition of people that are still going to work until they're much older.”

These shifts are resulting in new hybrid products that offer part roll-up equity release, but part discounted rates for periods of time; for example, by making payments and borrowing more, but then paying off some of the loan by the time of formal retirement.

“That's got to be the way to go to provide a better solution; a better product solution that better suits the customer needs,” says Waugh.

More2life is currently piloting a payment term product from WaterLife.

Waugh says: “There are more and more products in the marketplace that meet that underserved middle area that's neither a traditional mortgage nor full-fat equity release. That's to be applauded in all lenders that are getting involved in that part of the market.”

Customers now need to borrow more money, for longer, later in life.

According to Humphries, this is down to various factors, from rising property prices and interest rates to customers coming out of relationships and going into new ones.

Furthermore, customers simply are not as concerned about taking debt into retirement as generations were previously. Humphries says: “Pensions are underfunded, and customers cannot

afford to live a healthy lifestyle on pension incomes alone.

“More advisers need to be aware of later life borrowing options and how these products have evolved over the past five or six years.”

Many standard residential mortgages are available to older borrowers, with some lenders now removing the maximum age cap on the mortgage term.

Humphies says: “This means that a mortgage doesn’t have to finish by age 75 or 80. Alongside these, we have term interest-only (TIO) and retirement interest-only (RIO) products. There are also lifetime mortgages – known as equity release products – which are right for some customers in certain circumstances.”

AI game-changer

The mortgage sector may have resisted artificial intelligence (AI) so far, but it is set to revolutionise later life lending practices, according to Dave Basson, business developer and adviser to UK insurers at NTT DATA UK&I, which provides technology platforms and applications for financial services.

AI can be used as a means to pitch conversations with mortgage applicants at the right level, for example, while also keeping an increasingly astute eye on the all-important issue of vulnerability.

Basson says: “Some 70,000 people under the age of 65 have working age dementia, and many of those people don't think they've got dementia, they think they've just got bad memories.

“Using AI, you can identify, using their vocal patterns, whether they have dementia. You can determine the type of person you're speaking with and how they should be supported – slow down, recap regularly, check they’re OK and during the call get playback on what you've discussed, for example.”

Number Value Rate of fall YoY New loans advanced for older borrowers 29,060 £4.1bn 42.4% New lifetime mortgages 6,710 £520m 40.1% Retirement interest only mortgages 255 £26m 57.4%
Number Value Rate of fall YoY New loans advanced for older borrowers 29,060 £4.1bn 42.4% New lifetime mortgages 6,710 £520m 40.1% Retirement interest-only mortgages 255 £26m 57.4%
In focus LATER LIFE LENDING The Intermediary | May 2024 10

AI is therefore making consumer understanding around the commitments and risks of these products far clearer, which helps meet a key part of financial services regulation.

“Improved technology can really improve any industry – whether or not that industry wants to be improved,” Basson says. He cites analysts’ suggestions that 2026 will be the year to expect cross-industry, mainstream adoption of AI.

“AI is an overused word,” he adds. “All it does is make humans more intelligent. It does not replace humans and it won’t do so for a long time. What it is going to do is make people hyper-productive.

“This means that people can be more intuitive about the needs of their customers. It means brokers will be better able to support the people that they want as their customers.

“What it also means is that it can optimise the customer experience and make it less painful for people to buy a mortgage. It can make the process more efficient for the broker as well.

“The challenge that this industry has is there are more solutions than there are problems. In terms of technology, you should always start with what the problem is first.”

Boyd says advisers need to focus on is the individual needs of their customers and their unique circumstances, as this will help them to find the best option.

“To provide advice in the equity release market, you need to first obtain your CeMAP then CEReR qualifications,” he explains. “However, this is arguably only the start, as most advisers continue to build on this knowledge over their careers by taking courses, attending events and signing up for webinars. It is about continuous learning to ensure that they keep on top of what is happening in the market.”

A significant number of advisers also belong to the ERC, which not only shows their commitment to professionalism in this market, but also provides access to additional insights around the rapidly changing landscape.

Meanwhile, lenders in the later life sector are actively changing criteria and affordability tests to ensure they meet customers’ needs wherever possible.

While there is inevitably a limit to which lenders can stretch, the signs are looking positive for more product and criteria development in the coming years. ●

“Grandad, for the last time, stop leaving your skateboard in the hallway”
How brokers can find gold in niche markets

In recent years, many have experienced �rsthand the unpredictability of relying on low interest rates as they approached the end of their �xed-term mortgage period.

According to a recent study from the Equity Release Council (ERC) and Canada Life1, 90% of homeowners believe it’s important to be mortgage free by retirement. The current reality for one in five is that this will not be the case, 60% of mainstream mortgages now written beyond a customers expected retirement age.2

Traditional mortgage brokers now face a dilemma of evolution. With increasing numbers of customers needing to carry housing acquisition debt into retirement, seeing more than half a million over-55s still paying mortgages, mortgage brokers have an opportunity to both better serve the needs of their customers, and expand the value of their business.

As with the advent of Consumer Duty last year and the rise of innovative new later life lending products from the start of 2024, such as payment-term and interestreward, brokers now face both a responsibility and opportunity in pointing consumers to these products.

This is particularly true where previously the approach would simply be to rebroke an existing mortgage to the

best 2, 3 or 5 year fixed term product available, with little focus on the longer term needs of the customer. However, there comes a point for all brokers where their customer base ages out of reach of mainstream products and that relationship is lost.

Breaking from convention

Being able to offer or refer customers towards later life products may be out of the comfort zone for brokers who feel underqualified to make these recommendations or may be reticent to begin providing what is essentially a relationship ending product.

However, there must be some consideration towards timeliness. If a customer is already recognising the prospect of needing to carry mortgage debt into retirement, it is already a potentially a lost relationship if an adviser can not demonstrate their ability to discuss longer term solutions rather than simply short term fixes – better then to be the trusted facilitator of change, than the one left behind.

We live and breathe later life lending

By being able to provide the most appropriate product to your customers, either through expanding to be able to advise on equity release, or partnering with a referral company, brokers will give themselves more of a chance to capitalise on a mature client relationship.

Taking the time to investigate referrals or advisory practice then is the quickest way to gain access to procurement or finders fees, while simultaneously allowing you to stand by a long-term client for what is, for many, a significant milestone in their lives and retirement.

Introducing the new school of customers

It’s important not to understate the changing tide of customer needs that we’re witnessing. Much like the slow drawback of waves before a tsunami hits, we are now seeing the beginning pullback from traditional consumer approaches to equity release.

Previously, equity release was used by some to unlock liquidity out of assets for leisure and gifting of others. This generation and the positive housing market they faced at the start of their journey, is quickly becoming eclipsed by a new school of market demographic.

Those coming into their 50s, with mortgages have seen less favourable conditions than the previous generation, with less benefit from the 40-year housing boom and the need to borrow higher multiples of their earnings, often at later ages mean that many are still paying off their mortgages, while simultaneously looking to retire, reducing their income to what their pensions and credit cards can provide.

A perfect storm for savvy brokers?

Of course, it’s rare that change can happen overnight, but for firms of all sizes, as well as independent financial advisers, the sunlight this new dawn is bringing is worth reaching for.

The two-step challenge for brokers is patently clear, the first will be breaking from long-held traditions and routines to capitalise on new ways of supporting clients and bolstering revenue.

The second will be finding the most economically viable way to seize this opportunity, finding the most value. That could be an overhaul of personal process and training to ensure you can provide advice independently and receive procuration fees or the sourcing of partnerships that will facilitate the process.

For those looking for speed and adaptability, the time is now to seek out a partnership that can navigate initial start-up pains, either in the short or the longterm. Where training your own people will cost time and money, equity release as a sector has existed for a long time, with experts who’ve done the heavy lifting for you.

Across our decades of development and experience,

Air has worked tirelessly to provide later life lending specialists with a comprehensive sourcing platform, online tools, as well as educational models to support the industry.

As highlighted in their study, already more than a fifth of UK homeowners with a mortgage say that their current mortgage debt is preventing them from affording a comfortable lifestyle, which has increased by almost 10% in just 2 years, with a further 13% saying that their debt levels keep them awake at night.

This highlights the capacity for the new school of customers to quickly become the dominant force across the market in less than a decade, if current trends continue. This seems likely as mortgage debt is becoming a significant negative factor for many, with 13% kept awake at night worrying, 11% unable to move house and 7% putting family plans on hold.

These significant pressures on an elderly demographic, unable to further negotiate mortgage rates or seek refinancing will naturally begin to turn to other means to safely manage their existing debts, where credit cards can spiral out of control quickly, equity release, with its ERC protections, no negative equity guarantees and assured rights to tenancy remains more attractive.

Call us on: 0800 294 5097

Air has worked tirelessly to provide later life lending specialists with a comprehensive sourcing platform, online tools, as well as educational models to support the industry.

As the market begins to shift, we’ve created a foundation of support that can help brokers and firms begin to make the shift towards including later life lending products in their suggestions to clients in as quick and effective a way as possible.

The bottom line

A new dawn is breaking across the later life lending market, facilitated by regulatory and economic changes. Traditional mortgage brokers are now faced with a choice to support their mature customer base and be rewarded for their longstanding service.

Whether they choose to adapt to an opening in the market and partner with existing experts or not, it remains clear that those who fail to work on finding support or a referral partnership will equate losing clients and revenue sooner.



Find out how we can support you: /comprehensive-conversations

Equity Release Counci Q&A

The Intermediary speaks with Jim Boyd, CEO of the Equity Release Council, about the expanding world of later life lending

What are some of the big trends in equity release at the moment?

e market is quite constrained. Just two years ago, we had a record year. en, due to a combination of high interest rates and uncertainty, it contracted.

e market is navigating strong headwinds. For a variety of reasons, people have deferred making quite important long-term decisions, so there’s quite signi cant suppressed demand.

It’s still such a relevant market. All the drivers are there, because we have an ageing population, people with inadequate retirement savings, living longer lives, who need to look at a wide variety of di erent assets to help them live those lives.

Are there still misconceptions circling about products like equity release?

It’s a continuous process. We need to address the barriers that come up when people think about equity release. Why don’t advisers feel they can have full and better rounded conversations considering all funding options for consumers?

ere are also certain conceptions about the idea that one spends one’s entire life paying o debts on a property, so it’s counterintuitive to then suggest that they leverage that property for credit to support them through late life. . Nevertheless, there are clear generational di erences, and the shi has been far quicker than I imagined it would be. e young are much more comfortable with credit; they see a mortgage, not as a burden, but as access to an incredibly valuable asset.

What role does the later life market have within the wider economy?

We’re talking about arguably around £5.2tn of housing wealth, equivalent to the amount of money held up in pensions. A signi cant part of UK

private property is owned by the over 50s – Savills suggested 78%. e Government is facing many huge public policy issues, one being the proportion of public spending on people in later life.

It’s unfair and unfeasible to rely on the young to fund an increasing share of public spending through direct taxation and National Insurance, considering that they are arguably the most indebted generation ever, and don’t have the bene ts that older cohorts do, like gold-plated nal salary pensions.

A basic level of care should be guaranteed through taxation, but there have to be ways to support those people with assets to address unmet needs and have additional levels of care. Property is a critical way of doing this – providing independence and choice over how people live their lives. is also ties in with a fascinating piece of work we’re doing looking at green retro t mortgages – an example of how, if you support people in later life to look a er themselves, this can be of huge bene t for the young, to the world they are going to inherit.

We’ve got among the oldest housing stock in Europe. Our housing is responsible for 20% of all carbon emissions. We also have lots of elderly people who want access to things like cheaper forms of heating for a better quality of life. We’ve done a lot of work to support the search for how to put these two things together, particularly in Scotland, which is about ve years in front of the rest of Britain in terms of achieving net zero.

We’ve been looking at the evolution and guidance around green retro t equity release, addressing exactly that cohort with older housing stock. If they make the right interventions, it’s great for them and makes the property more valuable.

Do we need a more holistic approach to property to encompass all these factors?

We certainly need to unlock those barriers in terms of broader perception and how the market is hardwired, and to work with politicians,

The Intermediary | May 2024 14

regulators, and the industry. e Government doesn’t have a vision for property wealth in later life, so we’re seeking to put together a round-table with the industry – all the major trade associations, corporates, the Treasury, and also the Department for Work and Pensions (DWP) – to start that conversation and create a blueprint.

e risk is that if we don’t have a blueprint, this extraordinary resource might not be used optimally. ere’s such a lot of value and good consumer outcomes which are being overlooked.

It’s a fascinating time when we’ve got another Government potentially coming in, which could take advantage of this source of extraordinary growth.

setting authoritative standards and protections which go above formal regulations, which we require our members to adhere to.

We’re unremitting in our focus on good consumer outcomes, and committed to the belief that this is the precondition for a sustainable, vibrant market. I’m very proud of that.

We are keen to reach out to advisers and mortgage brokers and build closer connections, because they will have customers who are older and considering their options in later life.

Retirement isn’t static, people in later life are actually major employers, they invest in new sectors, and the money that comes out of it cascades directly into the real economy.

Instead of property value being wrapped up into static bricks and mortar, it should be released to support the growth of the real economy and cascadeg down, helping to employ people. at’s another point about inheritance, in the broadest sense – and not only for those few who have the bene ts of inherited wealth.

ere isn’t agreement about an overarching vision. For example, you have ‘money and pensions’, not ‘money and retirement’, ‘work and pensions’, not ‘work and retirement’ and it takes signi cant time to change the overarching focus of Government and objectives for its departments.

ere is a risk they look at pensions wealth and access to that resource, in a silo to other assets. . is is a dynamic resource, and we have to start reimagining our future considering all the constituent elements.

e young are o en disengaged with pensions and later life, and o en policy is designed taking into account short term imperatives, which typically bene ts thosein older age groups, which in turn disadvantages the young – whether it’s house building, the size of new homes, pensions. It brings everything back to the need for a holistic view of the market and the economy.

What are the ERC’s objectives for 2024 and beyond?

We represent all the major participants within our market, whether it’s providers, advisers, solicitors, funders. It’s all underpinned by good consumer outcomes, standards and innovation.

We seek to lead a consumer-focused market by

You’ve also got situations where equity release can be used to buy property, which is quite interesting; for example, somebody slightly older might want to move close to their family, and what they can sell their current property for is not going to get them what they want to buy. ey can use equity release to buy that property.

So, there’s a variety of other options that we can o er to mortgage advisers to support those clients; people are perhaps not aware of those more nuanced uses.

We continue to focus evolving our standards to meet consumer need. e reason why this is so important is that for 30 years we’ve been developing and building extraordinary consumer safeguards designed to support consumers to trust that equity release is reliable and safe.

ese are also a precondition for the innovation and growth of the market. For example, we’ve set the standards which underpin home reversions, lifetime mortgages.

en, in response to our members, who wanted us to support innovation underpinned by strong standards, we are now supporting mandatory payment lifetime mortgages, which is an important product evolution which looks to address changing consumer needs.

We’ve consulted our members; they wanted us not to do anything which impacts our core classic standards for lifetime mortgages.

So, this year we’ve introduced a separate series of standards to support innovation in this new part of the market.

We’ve also supported the market, recently developing guidance with Fairer Finance and helping our members engage with the Consumer Duty in how they communicate with customers –down to font size.

We’re doing a huge piece of work looking to refresh our standards, taking into account the Consumer Duty. Our body of standards is evolutionary, and we’re putting signi cant thought into that. ●

May 2024 | The Intermediary 15

Taking your client through their advice lifecycle

Ageneral, widely held belief about UK consumers focuses on their age and their engagement with financial advice: we tend to believe that older consumers are much more likely to be the recipients of advice, want to access it, can afford it, and therefore benefit the most from it.

As a general historical rule of thumb, that might have been right, but recent statistics from the newlyretired actually present a somewhat different picture, providing advisory firms and their clients of all ages with the potential for a salutary lesson around ongoing client activity and ongoing engagement.

Research from Canada Life found that four in five (79%) of over-55s who had already retired, had done so without any financial advice or guidance. That seems a somewhat remarkable statistic, and this ‘do it yourself’ approach boggles the mind a little; if we think about it a little more deeply, one must wonder what the outcomes of that decision might

have been for those retirees? Are they on the right track? Were they able to truly find the right outcome without any advice?

It worries me to think about the types of products and solutions these individuals opted for without any advisory support.

Perhaps the following statistic shows the problems with such an approach: one in three (29%) said their retirement reality fell short of their expectations.

It’s important that we, as an advice community, learn the lessons of this and insure against advice engagement either not starting at all, or simply tailing off the closer to retirement people get, when – somewhat ironically – you might well argue the need for advice actually grows ever greater.


go-to option

Consumer Duty should certainly help in that regard, not least in terms of the opportunity it presents to mortgage advisers in the here and now, in delivering advice to borrowers, but how we take them through their

entire lifespan, providing them with advice on a range of other wants and needs. If mortgage advice has always been the go-to option for borrowers, they are much more likely to continue accessing all types of advice later in life.

As mentioned above – and certainly from a lending, mortgage, or house finance point of view – that advice requirement is not tailing off; indeed, as we know, ever more borrowers are taking mortgages or lending into and beyond retirement.

Therefore, the ability to keep servicing that need and providing positive outcomes is essential.

Also, lest we forget that this need is also manifested within a very different economic, mortgage, and housing environment today than borrowers were fortunate to have lived through during the last decade – namely, ultra-low interest rates which kept the mortgage cost relatively low and, certainly prior to 18 months ago, helped many borrowers meet the rising cost of living.

Now, of course, we have a ‘new normal’ in terms of rates, plus those

In focus LATER LIFE LENDING The Intermediary | May 2024 16

other costs have not fallen, although inflation has dipped from its doubledigit period.

While there is talk of rate cuts, they will certainly not take us anywhere near the levels of the 2008-2022 period. There are serious considerations, particularly for older borrowers, in terms of their continued ability to meet higher affordability criteria, what monthly mortgage payments they will need to find, and how this shapes their overall financial position.

In essence, what we have is not just a blurring of the mainstream and later life lending market here, but a fullblown integration that will require advisers to ensure they are actively willing and able to provide advice and recommendations across the entire swathe of products that are now available to the over-50s borrower.

Now, when put like that, it might – I fully understand – seem somewhat daunting, particularly for those advisory firms that have run a fullydemarcated business model, not feeling the want or need to look at later life lending options, and more

happy to ‘stay in their lane’ in the mainstream, residential space.

However, as we have become increasingly aware, that option is running its course. It will certainly pay for all advisory firms to think very carefully about what they need to do, the sectors they need to be active in, the options they need to provide, in order to meet the needs, not just of the borrower now, but also as they move through their life and their circumstances and requirements shift.

It's why we have launched our ‘Comprehensive Conversations’ campaign, because it’s a reflection on what advisers need to be offering –comprehensive options that cover the client’s entire life cycle, and with each recommendation, put them in the best place for the next stage of their life.

With so many new and varied product options available – specifically for the over-50 borrower – it won’t be enough to simply remortgage or product transfer them through their next two, three, or five-year period, especially when other later life lending options might be more suitable. What you are effectively doing here is

is managing director at Air

putting them on the right, early path to retirement, cementing the need for and the importance of advice in the here and now, and for the future, and ensuring that they continue to see the value of advice into and throughout their later years.

In truth, it will start – and could well end – with you. Your ability to offer a diverse and wide range of advice, products and solutions, sets the scene and foundation for how they move through their later lives.

That’s hugely important for both the client and you as the firm, and should mean you are their go-to advisers when it comes to providing all these clients with life-long advice. It is certainly needed. ●

In focus LATER LIFE LENDING May 2024 | The Intermediary 17

What does the future hold for equity release?

The annual lending volumes in lifetime mortgages (LTM) halved from 2022 to 2023 as interest rates spiked, loan-to-values (LTVs) were trimmed, and various parties left and re-entered the market. So, after a quarter of more stability, where are we now?

The Equity Release Council’s (ERC) Q1 figures showed a modest quarter of total lending (£504m), and a fall in new customers by 11% vs Q4 2023 – although there was growth when considering returning customers also. There is, therefore, a growing deficit between customers’ financial needs and those finding a solution. However, there’s also the will within the industry to innovate to bridge this gap. That leaves the question: what’s in store for the later life lending market for Q2 and beyond?

No respite in rates

The interest rates and product features in later life lending products are primarily driven by long-term, riskfree interest rates, such as the yield on the 15-year gilt. Over the turn of the year, these fell substantially and there was a growing sense that rates could start to stabilise at a lower level.

However, throughout the course of 2024 there have been more data points showing inflation was more entrenched than previously thought, with exacerbating pressure from an escalation in the Middle East conflict. This has seen risk-free rates jump by more than 0.60%.

This increase has prompted lenders to act with higher rates. The scale of these moves has been limited, however. The average equity release rates are up just 0.11% year-on-year, as lending balance sheets – driven

by competition in a smaller market – have been more willing to absorb the impact.

Rates are still available from 5.55% MER, which remains competitive versus other lending options, in addition to the unique flexibility around interest payments, guaranteed security of tenure and a no negative equity guarantee (NNEG).

But LTVs have widened

The nature of not having to service the interest on a LTM, and higher interest rates, usually acts to limit the maximum LTVs that can be offered.

In 2024, though, we have seen market LTVs rise. For example, on 1st January, the maximum LTV a healthy life 70-year-old could access through more2life’s Tailored was 37.5%. Today, Tailored offers the same customer a release of 40%. This has acted to mean there are returning solutions for more customers than recently seen, but also that the inherent value of the NNEG for the customer has increased considerably.

Tailored products

Above all, there is an industry desire to provide more solutions for more customers, despite the higher interest rate environment. While a large fall in rates would be very welcome, this doesn’t look likely, and so instead we’re seeing more sophisticated and bespoke products come to market.

There are products now in the market that considerably reduce interest rates when interest is partially served – while retaining the NNEG and security of tenure. LTVs can be significantly increased for some customers through answering a medical questionnaire, and for others by undertaking regular payments for a defined period.

There is an industry desire to provide more solutions for more customers”

This means that the best advisers will adapt from a one-size-fits-all product suite and be able to find the best customer outcomes with a thorough understanding of their clients’ circumstances and needs.

Q2 and beyond

Although new customer volumes reduced in Q1, advisers can enter Q2 with confidence. New products built to serve customer groups that have been locked out of the market since 2022’s mini-Budget will only serve to increase product suitability, while the reintroduction of more high LTV conventional and enhanced lifetime mortgages will arm advisers with a broader range of solutions to help meet customer needs. I expect the pace of innovation to be maintained throughout the year.

We’re yet to see the full impact of interest rate rises across the mainstream mortgage market. So, as fixed rate terms end and inflation continues to erode customer savings, there will be a growing number of borrowers to serve.

With a greater product offering available, the foundations for market growth are here, and as a sector we’re now better placed than we have been for two years to deliver good customer outcomes. ●

LATER LIFE LENDING The Intermediary | May 2024 18 In focus

A very real alternative

As a mortgage broker, one of the most disappointing aspects of the industry in recent years has been the lack of lender product innovation. For the majority of high street customers, the product choice has, almost through inertia, become a question of “which fixed rate do you want – 2-year, 3-year or 5-year?”

Don’t misunderstand me, of course there are other products available, and I’m not suggesting there is anything inherently wrong with fixed rates, but often the attractiveness of the alternative products is quite limited. Indeed, as the typical customer becomes increasingly less typical, lenders have not moved their product offering to match the changes in the demographic, so it is refreshing to see a new lender coming to the market

Perenna is, for the time being at least, a lender only available through approach, particularly with a view

irrespective age, is a classic example of how the worlds of later life lending and high street lending are beginning to merge.

With many people continuing to work to an older age and retirement ages being pushed further back, we have seen ‘mainstream’ lenders extend the maximum age-at-end-of-term that they will allow, though this is still typically limited to 75.

Perenna’s decision to allow a term that effectively ignores age gives a very real alternative to those customers whose options often fall between the two stools of the limited term, or restricted interest-only options offered by high street lenders, or the limited loan-to-value (LTV) options offered by retirement interest-only (RIO) or lifetime mortgage products.

Real examples

As with any mortgage product, there

silver bullet that smashes through all lending criteria barriers to provide a

However, we’ve seen real examples where customers in their 60s – who

is age 50-plus mortgage adviser at UK Moneyman Limited

The product choice has, almost through inertia, become a question of “which xed rate do you want”

didn’t have enough equity to be eligible for a high street interest-only product and whose LTV was too high for a lifetime mortgage – could take a 35-year repayment mortgage, at a rate lower than the RIO products available, meaning that the actual monthly repayment on a capital and interest basis was lower than the equivalent RIO interest only payment. For this customer, it was the perfect outcome.

What this new development emphasises, more than anything, is the value of consulting advisers – like UK Moneyman – who are authorised to advise across the whole spectrum of the different potential mortgage types available. Many advisers don’t hold the appropriate qualification or authorisation to advise in all these sectors.

For a younger customer, this may not be as much of an issue, as they will have a wide range of choice from high street lenders. However, for customers going into their fifties or above, consulting, say, an equity release (ER) specialist, might mean that, while they could walk away with the most competitive ER product available, they may not be aware that, say, the Perenna option, could have been more suitable, but the ER adviser was not authorised to discuss it. ●

LATER LIFE LENDING May 2024 | The Intermediary 19 In focus
Dearth of products: e sector has been crying out for some variety

Working with vulnerable clients A best practice guide

In March, the Financial Conduct Authority (FCA) announced it would be conducting a new review into firms’ understanding and response to the needs of vulnerable customers. With the findings due to be shared by the end of the year, the regulator is assessing the fair treatment of clients in vulnerable circumstances, and judging whether the outcomes they receive are as good as those attained by other consumers.

At Comentis, we believe that mortgage firms should have processes in place for identifying and supporting vulnerable clients. That said, we understand that it’s something which is much easier said than done.

Clients rarely consider themselves vulnerable, and those who do often want to remain under the radar, using surprisingly effective coping mechanisms to hide or mask their vulnerabilities.

Then, there’s the act of identification itself. It’s often a reactive process –highly subjective and inconsistently deployed, with endless opportunity for bias to affect our judgement.

Even for trained clinical experts, identifying someone at risk of a more cognitive vulnerability can be far from easy.

To counter these challenges, we recommend firms implement a simple three-stage process.

The Intermediary | May 2024 20

1 Be consistent

Mortgage advisers and brokers must be able to consistently identify all vulnerable clients. Arguably this is the most important part of the process. It doesn’t matter how robust a firm’s vulnerability interventions and processes are, if the identification process isn’t done correctly upfront, then any interventions after that will be fruitless.

2 Plan to support

There must be plans in place to support any vulnerable clients that are identified. In many cases this is likely to be small changes to the mortgage process, but ones that can make all the difference to clients.

3 Document and report

Every stage of the process must be thoroughly documented and reported on. This is for the mortgage adviser’s benefit, but also for the regulator.

While this three-stage process is a good overarching strategy to work to, there are a number of best practice tips that will put mortgage professionals in a considerably stronger position to identify and support vulnerable clients.

Here are our ve top tips:

1Assess every client

In order for this process to work, it has to be consistent. That means every client has to be assessed in the exact same way. For instance, it isn’t enough to assume that if a client is wealthy or buying an expensive house, they can’t be at risk. Vulnerability is complex, and anyone can be susceptible. With that in mind, the first thing to get right is ensuring that advisers and brokers are assessing every client for the same signs of vulnerability.

2 Look for the triggers

The FCA has identified four key drivers – or triggers – that may result in a client experiencing vulnerable circumstances. These are: health events, life events, capability, and resilience.

There’s a tendency to see these as fixed, but the reality is that no two people will have exactly the same combination. In any case, determining whether one – or

indeed more – of these triggers are present should be an adviser’s first port of call when looking for signs of vulnerability.

3 Identify the causative nexus:

Once a potential trigger has been identified, understanding the concept of the causative nexus is fundamental to determining how best to support that client. Ultimately, this hinges on the idea that it isn’t a circumstance or trigger that makes someone vulnerable. Instead, it’s their unique emotional, physical, or psychological response.

If we consider bereavement, someone who loses a life partner or close family member is likely to suffer a significant emotional impact, affecting their mood and consequently their ability to engage and concentrate. By comparison, if someone loses a distant family member, who they perhaps weren’t particularly close to, the emotional impact may be less severe.

Put simply, the causative nexus is the reason one person is affected by a certain situation, while another is not. A good rule of thumb is that the greater the causative nexus, the greater the extent of the vulnerability. If a mortgage professional understands the impact of circumstance on the individual, they can use this information to identify how best they should offer support.


Tailor your approach for each client

Not all vulnerabilities can be responded to in the same way. As part of our Comentis Vulnerability Support Framework, we have developed a Vulnerability Quadrant to help determine the support a vulnerable client might need.

This tool encourages advisers to consider whether the client needs immediate or long-term support, and whether it should be internal or external. The adviser or broker will need to consider the specific struggles the client is grappling with, and then try to determine what personalised support would benefit them most.

5 Record all vulnerabilities

Any vulnerabilities that are identified, as well as any actions or interventions

The FCA has identi ed four key drivers –or triggers –that may result in a client experiencing vulnerable circumstances”

that are taken to provide support, should be comprehensively recorded.

This will be vital, given the FCA’s new review, and must be done consistently across the entire client base, in a way that can be recovered and acted upon at a later date. That said, building vulnerability data doesn’t just mean keeping track of vulnerable clients. In order to compile the most comprehensive records, mortgage professionals should keep thorough records of clients who they have identified as not being vulnerable, too.

Identifying and supporting vulnerable clients is difficult. But with this best-practice guide, mortgage advisers and brokers should be well-equipped to bring the process of identifying, supporting, and reporting into their firm’s processes.

For further help, there are plenty of tools and resources available to help determine how to support clients that have been identified as vulnerable.

In focus LATER LIFE LENDING May 2024 | The Intermediary 21

Flexi Payment Term Lifetime Mortgage A long-term solution to the interest-only trap

more2life’s Flexi Payment Term Lifetime Mortgage is a lifetime mortgage that requires a part-interest-serving payment for a fixed payment term. This allows customers aged 55–62 access to higher LTVs and/or lower borrowing costs than conventional lifetime mortgages.

Who is a Flexi Payment Term Lifetime Mortgage for?

It’s designed to provide a better customer outcome for:

Younger borrowers aged 55–62 with a property value of £125,000+

Those who would like, or are only able to, service a smaller portion of the interest than would be required by a RIO or residential mortgage

Those who would like the flexibility to stop making regular monthly payments sooner

Those who would like to secure guarantee of tenure sooner

Flexi Payment Term Lifetime Mortgage  Highest LTV Lifetime Mortgage Customer age 555657585960616263 64 65 66 67 40% 35% 30% 25% 20% LTV age

How can a Flexi Payment Term Lifetime Mortgage help your clients?

The average five-year fixed residential mortgage rate has more than doubled since 2019.1 Customers coming to the end of their initial fixed rate term face a difficult choice: fix again, or take a gamble on a variable rate with the hope of the Bank of England significantly reducing the base rate in the short to medium term.

However, with the suggestion that most mainstream mortgage lenders have already priced in, and passed on, the drop in base rates expected over the next two to five years, it’s a gamble that may not pay off. This could leave customers, particularly those who are starting to think about retirement planning, in a challenging position. Julie Walton is a prime example.

Case study example

Julie Walton is a 55-year-old sales manager from County Durham. Julie is coming to the end of the initial fixed term on her interest-only mortgage and, with plans to retire at 70, wants to find a solution that allows her to be free from monthly mortgage payments in the not-too-distant future. Ms Walton has an outstanding mortgage balance of £119,750 on her £500,000 home. Her circumstances dictate that she has the borrowing power to meet the affordability of a full or part-interest-served product. But given her financial objectives, what’s the best customer outcome?

Flexi Payment Term Lifetime Mortgage: A better customer outcome

Unlike the alternative interest-only options, a Flexi Payment Term Lifetime Mortgage provides Ms Walton with a longterm solution that meets her needs. When the contractual payment term ends, Julie has the option to stop making payments while securing guarantee of tenure. This means Ms Walton’s interest-only timebomb is not put on hold for another five years in the hope of better market conditions. Instead, she’s provided with an affordable outcome that meets her financial objectives and helps protect her estate.

Term Interest Only Retirement Interest Only Flexi Payment Term Lifetime Mortgage Flexi Payment Term Lifetime Mortgage Standard Lifetime Mortgage MER N/A N/A 5.97% MER 5.97% MER 8.82% MER APR 4.28% (5 year fixed) 5.74% (5 year fixed) 6.14% AER (fixed for life) 6.14% AER (fixed for life) 9.19% AER (fixed for life) Monthly mortgage payment £431 £572 £431 £284 None required Contractual term 15 years 29 years 6 years 5 months 10 years 6 months None Age at the end of the contractual payment term 70 87 61 66 for the oldest borrower None Reversionary rate 8.24% 8.44% Fixed for life Fixed for life Fixed for life Cost to the estate at 15 years £245,575 £255,860 £245,121 £264,141 £447,451
1. Statista, January 2024. Availability of our Flexi Payment Term Lifetime Mortgage depends on a customer’s ability to meet credit and affordability requirements. The customer’s home may be repossessed if they fail to keep up with mandatory payments during the payment term. 03454 500 151 CALL or email For more information about our Flexi Payment Term Lifetime Mortgage

The Inter view.

Jessica Bird speaks with Paul Glynn, CEO of Air, about how later life is growing to meet modern challenges and opportunities

When looking at the numbers, you might be forgiven for seeing later life lending as a somewhat subdued market. Indeed, in Q1 2024, Equity Release Council (ERC) figures showed an 11% dip in new customer numbers compared with the previous quarter, and an even greater 31% drop on Q1 2023. This, coupled with a 6% quarterly increase in drawdown activity, resulted in a total lending figure of £504m, down from £535m in the final quarter of 2023.

As ever, though, the numbers only tell part of the story. The Intermediary sat down with Paul Glynn, CEO of Air, to discuss the real state of the later life lending industry and get the inside track on the direction of travel for the

rest of 2024, for a market that is vital for the financial health of a growing proportion of the UK population.

Muscle memory

Despite subdued completion figures, the image from Air is of a strong opening to the year. Glynn notes that the ERC statistics, while correct in essence, likely reflect a quiet period towards the back end of 2023, particularly as they hinge on completions.

“What we’re seeing in Air at the top of the funnel of activity is that advisers are doing more sourcing sessions than they were in Q4,” he says. “We’ve seen a good pick-up of activity in both sourcing and [key facts indicators (KFI)] numbers.”

This is also an industry that, rather than stalling in the face of strong headwinds, has been able to innovate and adapt. For example, Glynn points to Legal & General and Standard Life Home Finance launching new products, as well as recent pilots from more2life.

At the end of last year, Legal & General launched a payment term lifetime mortgage (PTLM) to improve options for borrowers over 50, going on to tailor its approach to pricing for both the PTLM and lifetime mortgages early in 2024. Standard Life, meanwhile, has added to its offering by providing discounted rates for borrowers who commit to regular repayments with its ‘Interest Reward’ initiative.

In February, more2life introduced its own ‘Flexi PTLM’ product to aid those willing to serve part of the interest, going on in the following months to enhance loan-to-values (LTVs) on various products.

The signs, Glynn says, point to a market that is gearing up for growth, and this is filtering through into broker behaviours seen at Air.

“We’re seeing advisers build that muscle memory and embrace new product types,” he explains. “They’re seeing the benefits of gaining those discounts by asking important questions around how much people can afford to pay.

“They’re starting to utilise the tools that we built in Q4, which also help them under the Consumer Duty banner.”

To aid with this evolution, Air implemented additional questions within its sourcing system in January and February this year, focusing on

The Intermediary | May 2024 24

how much and for how long a customer can afford to service the interest of their loan.

“We track take-up of those new fields,” Glynn says. “Just from the first months of having those questions, now one in five sourcing sessions use that information.

“That means those sessions have the opportunity to display those new products; brokers are adapting to them, comparing equity release with voluntary payments to optional payments for an interest reward style product, and to the benefits of a higher LTV.”

Advice and product evolution

The evolution of the later life market has in part been spurred on by the new era of Consumer Duty, but this is also about the wide array of other factors influencing, not just the cohort of later life borrowers, but the wider property market and economy as a whole.

Glynn says: “If you were to map a spectrum from mainstream residential mortgage products with mandatory payments, right through to traditional equity release where there’s no need to make payments and it’s all rolled up in interest, both sides of that spectrum are under pressure at the moment.

“You’ve got cost-of-living pressures, increases in interest rates, as well as brokers facing a constant moving feast of product and rate changes. Then, for equity release post-Liz Truss, you’ve seen restricted LTVs and product withdrawals, not all of which has come back to normal yet.

“More customers, as a result of those pressures, have fallen into the gap between the two ends of the spectrum. That’s where all of these new product designs come in.

“More importantly, that’s where having the opportunity to engage in conversation with an adviser who can challenge a customer in the right way through the advice process around what they can afford to pay, and keep the right product options open, means that they understand the costs, how interest works, and the benefits of making even small payments.”

Comprehensive conversations

This perfect storm of market headwinds sand product innovation means that early 2024 was the ideal time for the launch of Air’s Comprehensive Conversations Manifesto. The goal of this movement is to establish a benchmark of customer-focused service among both specialist later life and mainstream advisers.

Firms that sign the manifesto – which already include more2life, Standard Life Home Finance, Viva Retirement Solutions, Eadon & Co and Comentis – pledge to follow key tenets focusing on presenting all options to

customers, enhancing advice, products and services, and implementing referral systems where needed in order to gain the best customer outcomes.

The firm also launched its Later Life Lexicon to demystify this field with clear definitions of key market terminology.

“We launched this with the understanding that in the pipeline was a lot more innovative product design,” Glynn explains. “This will help advisers drive better outcomes for customers, and we’ve created the tools to make those more accessible.”

He adds: “We’re trying to make an environment where advice is the product, the challenge around making payments is the right thing to do, and customers can come out of that with a broader set of options and the right advice as a result.

What we’re seeing in Air at the top of the funnel of activity is that advisers are doing more sourcing sessions than they were in Q4,” he says. “We’ve seen a good pick-up of activity in both sourcing and [key facts indicators (KFI)] numbers”

“Advisers work really hard to go the extra mile for customers, and we can give them the tools to do that.

“It’s about personalising advice. That might be in having an affordability-led conversation, or personalising it around a health conversation, because more lenders are designing products with that type of personalisation, reliant on a pricing engine rather than LTV tables. Advisers are getting to grips with the completion of those extra fields for tailored prices.”

The campaign, Glynn continues, is about driving deeper conversations with customers, which are affordability-led, and do not necessarily focus just on the specific products.

To this end, Air’s academy aims to help advisers gain a full, digestible understanding of an increasingly complex market. In offering these resources, Glynn sees Air as establishing itself in an intermediary role.


is key

While the Comprehensive Conversations message is clear, this does not mean that advisers must be all things to all people. →

May 2024 | The Intermediary 25

Indeed, Glynn points to a recent comment by Robert Sinclair at the Association of Mortgage Intermediaries (AMI), who reaffirmed the right to have a niche, or narrow band, but that in order to provide a fair service – particularly under current regulations – advisers should ensure clear signposting and referral processes.

Glynn also refers to Charlotte Nixon at Quilter, who has spoken about the need to think of mortgage brokers now as advisers –the work is naturally more detailed, and Air’s campaign looks to reinforce that.

To this end, Air is keen to provide even greater levels of education around both the complexities and the possibilities that abound within the later life lending market.

“There’s definitely scope to do more,” he says. “That said, organisations like AMI, networks and clubs to do exactly what Air is doing now and talk to people about creating a broad, Consumer Duty-led, affordabilityled conversation in which those things are signposted.

“A lot of the networks are also adopting our navigator tool, and have signed the manifesto and got behind the principles.

“Everybody understands that the market is moving really quickly, and this is a good way to build longstanding relationships and forge different specialisms as valid support structures for a customer conversation.”

The user journey

A key pillar of creating a comprehensive, customer focused advice experience, is of course the personal, human touch. However, Glynn also reinforces the need for tech innovation to go hand in hand with this. Air has invested heavily in application programming interfaces (APIs) over the past year, in order to enable real-time pricing from a variety of lenders.

In 2024, the focus has been building on its navigator tool, embedding that within Air’s processing system, as well as investing more heavily in analytics within the platform itself, in order to “understand where advisers are getting stuck, not using the quickest options, and whether it’s intuitive enough.”

“There are opportunities for us to develop our user journey a lot further in this market,” he says. “We understand in Air that the advice journey is complicated enough, and advisers are not IT technicians. The tech needs to be delivered intuitively, and we’re investing heavily in making that journey better.

“If we do that, and make it easier for advisers to get to the right information in the right way,

then they can spend more time with customers, where they really add value.”

Technology also has a role to play in meeting some of the growing expectations facing this market around elements such as vulnerability. This is a space where behaviour analysis could come increasingly into play as time goes on, helping track where there might be red flags, understanding the transient nature of vulnerability, and helping brokers address it.

To this end, Air has partnered with Comentis as part of the adviser journey within both its sourcing platform and its academy, and as one of the first signatories of the Comprehensive Conversations campaign.

There’s definitely a more complex customer emerging, who need new product designs, who need to think about servicing a different type of debt through retirement and different phases”

“We recognise that we’re not the experts in that part of the field, so teaming up with Comentis is really important,” Glynn says.

“The work they have done as an organisation to understand customer behaviour is brilliant. That, for us, is a massively important integration into the work we’re doing with advisers.”

Changing lives

Looking at the customers themselves, Glynn points out that people’s lives – and their retirements – no longer look the same as they might have even a decade ago. For equity release customers who took out mortgages pre2000, for example, they were likely mortgage borrowers from their 20s to their 40s, with the remainder of their working lives left to accumulate before the period of decumulation in retirement.

This, however, is no longer the typical case, Glynn says: “Mortgages taken out post-2000 are becoming more complicated. The income multiple needed for property purchase has massively gone up, so people are taking mortgages out later and for longer.

“There’s more mortgages running into retirement, and the traditional equity release market is massively important, but what we’ll see emerge is people in their 50s with unpaid mortgage debt.”

He adds: “There’s definitely a more complex

The Intermediary | May 2024 26

customer emerging, who need new product designs, who need to think about servicing a different type of debt through retirement and different phases.

“This all comes back to the matter of comprehensive conversations. Advisers on both sides of the spectrum need to think about a new type of customer over 50.”

Consumer protection

Using Air’s yearly conference as a marker of time, Glynn casts his mind back to the different themes over the past few years. For example, last year’s was focused on the build up to the July 2023 Consumer Duty deadline, and the tools to support brokers under that new regulation.

The onset of the new duty, alongside the Financial Conduct Authority’s (FCA) review of later life advice, created a strong reminder of what was needed for this market to move forward with as much strength as possible.

A year on from the advent of Consumer Duty, Glynn says: “We started this journey ahead of that July 2023 deadline. That’s how our navigator work started, which then landed in September.

“The message is to be inclusive at the start point, not ruling products out, doing the right things to make sure that customers keep their options open for as long as possible.”

Consumer Duty was not only a reminder to protect consumers, but also spurred on a great deal of development and innovation as it has been wholeheartedly embraced by the market.

“There’s still more to see on that front in terms of lender and market activity,” Glynn adds. “It has been a positive catalyst, but we shouldn’t be complacent. We can always still do more.”

As for the conference, which takes place this year on 13th June, Glynn says Air is supporting this progress by broadening its exhibitor list, providing practical support through masterclasses, and focusing on the end-to-end customer journey as a key theme.

To help attendees make the most out of the experience – and push the comprehensive message – Air is encouraging people to get out and meet as many lenders as possible, using its ‘speed dating’ initiative to be structured in getting the most value out of the day.

“This is all adding to the work we’ve done so far this year, doing our part to encourage those conversations between member and lender,” Glynn explains. “We’ve got a lot of practical support for lenders, designed to help them work with those new customer personas.

“The investment of time will be worthwhile due to the relationships they build and conversations they have.

“I get a huge kick out of the conference, because seeing the numbers and hearing the noise – it means we’re delivering value. We want to build on that this year – it comes back to Air being an intermediary. We put members in touch with lenders that have solutions and allow a flow of tech through the middle.”

The year ahead

Glynn notes that six months ago, he was looking ahead at the “new dawn in terms of products,” whereas six months before that, it was all about the lack of products and the onset of higher rates. This encapsulates the oscillations of a market that itself reflects the pressures being faced within the population.

Looking ahead, Glynn explains that rates have not come down, and that a higher base has now become normalised – and LTVs are shifting back, but are still not in an ideal place.

Now, the focus for the market, and for Air, is about asking more questions and “using all the products and tools in your kit bag.”

Glynn sees 2024 as a good opportunity to bounce back, adding: “If we do those things, the steady state the market is in, which has a two in front of its number of billions, has a good opportunity to go back to having a three.

“Look at the innovative lenders – people are doing brilliant things. This is a really exciting space to be in, off the back of a difficult 12 to 18 months.

“We should be looking forward now to supporting more customers, and it all starts with being confident to engage with more customers.”

For Air itself, a busy 12 months has passed, and the rest of the year will hold much of the same.

Glynn concludes: “There will be further tech developments, such as in the way we support new products, a further development of our education proposition, and more progression of our trusted partnerships.

“I’ve been in the equity release market for 20 years, and this is the most exciting period. There are real catalysts for building better journeys, innovating products, and thinking about the advice process.

“We should always look for opportunities to do more to support customers. At Air, we continually challenge ourselves to take friction out of the journey and deepen our relationships.” ●

May 2024 | The Intermediary 27 LATER LIFE LENDING In focus

Case Clinic

Want to gain insight into one of your own cases in the next issue? Get in touch with details at


Raising funds for a car purchase with pension income

ATwo retired customers owned their property outright and were looking to raise funds in order to clear some debt and purchase a new car. They are retired, so the only income they have in place is pension and investment income.

The pension income alone wasn’t sufficient to borrow, meaning they needed to find a lender that would accept income from investments.

The investment income was from a combination of investment bonds and unit trusts, which was not deemed appropriate from the vast majority of the market.


In this instance, Hodge would consider income from a variety of sources including pensions, cash-based investments, unit trusts and other investments too. As a lender which specialises in complex income streams, the involvement of an unencumbered property is a clear indicator the couple has a track record of servicing a mortgage.

Hodge allows for a range of loan purposes, including debt consolidation and asset purchases, where high street lenders often won’t.

Hodge also assess applications on a caseby-case basis which is particularly useful for applicants that require a more personalised solution.


Lifetime mortgages don’t require any mandatory payments; therefore they are not affordability

tested, nor does it have any impact on our ability to lend. In this scenario, we would be happy to assist these clients in realising their aspirational needs and to repay their debt, although it’s worth noting that further requirements may be necessary depending on the circumstances.

It is worth noting that the amount and type of debt incurred could impact the product available to the clients if this is adverse in nature, i.e. County Court Judgement (CCJs) or defaults.


Securing funds to purchase a car can be a challenge in the standard mortgage market, even if you have sufficient funds, which it appears these customers don’t.

Concerns about securing debt potentially over a longer period than the asset may last itself need to be considered; however, if this is proven to be the most suitable option, a lifetime mortgage could be a solution. With modest borrowing needs, these customers would attract some of the best rates in the market. While this couple don’t need to make any payments towards their loan, by taking advantage of a lifetime mortgage’s overpayment facility - which features in any Equity Release Council approved plan - they could choose to service the interest, or even repay the debt entirely. Let’s take a 60-year-old couple with a £300,000 property, wishing to borrow £30,000 for their car for life. Not convinced they could pass a driving test again now, let alone at 70; they feel a car for the next 10 years feels about right.

On this basis, they could apply for more2life’s Capital Choice Ultra Lite with an MER of 5.65%, and if they were able to make the maximum 10% annual overpayment, they could reduce the impact of the debt on their overall estate by more than £25,000.


There would be several obstacles to overcome here securing a conventional or Retirement

The Intermediary | May 2024 28
In focus

Interest Only (RIO) mortgage. An adviser should include or exclude conventional mortgages and RIOs on this basis and at Air we have a ‘Later Life Lending Navigator’ tool which can help advisers establish this quickly.

The adviser would however have a wide range of lifetime mortgages to consider as a solution, where borrowing is based on a maximum loan-tovalue (LTV) based on customer age.

Lifetime mortgages have expanded significantly in the last year to offer more flexibility around how and for how long a customer can service some or all of the interest on their loan, providing commercial benefit of this to customers even in cases where forms of income being used would not be regarded as allowable for conventional mortgages.

Current choices include; servicing 100% interest, even if that is only for a fixed term of years; servicing interest partially or fully on a monthly basis for as long as they wish; or paying varying sums on an ad-hoc or monthly, but on a fully voluntary basis.


Equity release to repay Interest Only mortgage

Amarried couple, both 61, live in a London property worth £3.5m, with a £750,000 outstanding interest only (IO) mortgage. They have a self-employed income of around £150,000 to £200,000 a year, which is prone to fluctuation.

They contacted a broker, who was unable to secure them conventional mortgage, as their age was a concern for a number of high street lenders.


Hodge specialise in complex and professional mortgages assessed by experienced underwriters. By adopting a common-sense approach to lending, Hodge would assess the overall risk by including positive factors such as LTV, affordability headroom, longevity of self-employment and track record of servicing a mortgage.

Evidence of retained profits should be straightforward enough to obtain, and there may well be other background income which we could also consider.

Provided the self-employment was deemed stable enough to service the mortgage, a positive outcome would be highly likely.


Equity release products are specifically designed for over-55s, and as income does not form part of our assessment or impact the amount of loan the clients can take (borrowing is restricted to product LTVs) – as a result, they would be eligible for this plan as a potential solution.

Lifetime mortgages, unlike conventional mortgages, have no defined term and although there are no mandatory payments required, all new lifetime mortgage products have the option to make regular optional payments as part of the Equity Release Council’s product standards without incurring any fees (subject to productspecific annual allowances), so they could even service the interest and reduce the balance if this is something the customer wanted to do.

This could give the clients the freedom and flexibility to make payments when they choose to, which is important to them given their fluctuating income.


Self-employment carries several risks when it comes to committing to contractual mortgage payments.

Even if the income on paper is sufficient, the fluctuating nature can make it difficult to maintain regular monthly payments.

With this amount of equity, though, this customer could successfully apply for a conventional roll-up lifetime mortgage, which would enable them to redeem their existing mortgage and secure their home for life (until death or entry into long-term care).

While these products feature no mandatory payments - instead the interest rolls up - with the modern features more2life provides, the couple could make payments if they wished to service a portion or all the interest, or even reduce their overall debt.

Taking our Flexi Choice plan as an example, this married couple could borrow the £750,000 they need at a rate of 6.14%.

If they didn’t want to make any payments, the cost of borrowing to their estate would be £1.8m at the end of the anticipated term - albeit they’d be protected by the no negative equity guarantee. However, if they maximised the overpayment facility of 10% of the initial advance on an annual basis with a monthly payment of £6,250, this could be reduced to £1.1m - a £700,000 saving to the estate. ●

May 2024 | The Intermediary 29

Tech to optimise the later life advice process

As a tech company, we firmly believe technology can optimise the advice process, ultimately providing clients with a superior customer experience. On a daily basis we see the benefits tech development brings to the later life lending industry – from enhanced data analysis and process improvement on the lender’s side to time savings, increased accuracy and efficiency for advisers, along with strengthened security for data.

Recent developments in the mortgage sector, particularly within the later life lending market, significantly add value to advisers and simplify their daily activities.

For instance, the diffusion of granular pricing among providers is an innovative step that helps advisers reach be er customer outcomes through bespoke pricing, based on the client’s circumstances beyond their age and the loan-to-value (LTV).

Technology also improves product sourcing, making it easier for advisers to effectively source the right product for their client’s needs. Powerful product filters exclude unsuitable plans, while integrated medical underwriting and property information ensure search results are tailored to the client’s circumstances and prevent those frustrating lender declines.

Additionally, advanced tech tools allow advisers to compare multiple plans side by side and present results clearly and concisely to clients.

Another key element is automation, which plays a big role in simplifying and improving the advice process. When applied to various stages in the lending process it enables smoother processing times, reducing the burden

on both borrowers and lenders, minimises the potential for errors, ensures compliance with regulatory requirements and enhances the overall customer experience.

Moreover, API integrations connect systems of different companies, allowing them to communicate easily between one and another. For example, API integrations with lenders systems enable the advisers to download instant quote PDFs within seconds without leaving the sourcing platform, instead of having to log into the lender’s portal and rekey all details; but also online applications can be submi ed in just one click, directly from a sourcing platform.

Streamlines systems

Similarly, integrations with solicitor firms enable advisers to instruct a specialist solicitor with a click, transmi ing the case details from the client case on the sourcing platform directly to the legal firm within seconds.

Another great element we’ve seen and developed for our platform is the integration of workflow documents into the sourcing system itself – such as integrated fact-find and suitability le er templates. Integrated documents are pre-filled with client and case data, eliminating the need for re-typing. Furthermore, artificial intelligence (AI) is gaining popularity across various industries. Many digital tools are now AI-prompted, facilitating the user with suggested wording and contributing to improved final outputs.

If we consider the wider mortgage industry, the equity release market still has substantial potential for technology to drive significant efficiencies for both lenders and advisers. The residential mortgage

market is awash with tech efficiencies, whether automated or digital, while the later life sector has yet to fully benefit from these advancements. There is still much that can be done to improve and simplify the sourcing and the application process, ultimately growing the market, making it more a ractive to a wider number of customers and financial advisers. However, progress is being made in the right direction.

In the future, it would be great to see all lenders embracing API integrations, adopting granular pricing and additional product development such as medical enhancements. This would allow clients to opt for plans more tailored to their circumstances, further improving customer outcomes.

There is also immense potential to develop tools that assist advisers with complex calculations. On the backend, much can be done to involve clients more and provide greater visibility throughout the entire process, such as developing customer self-service portals to manage their plans and improving accessibility.

Technological process never stops and there are no limits to what can be developed and achieved. The future of digital transformation in the financial sector likely includes the spread of robo-advice, which in part has already started! While the human element remains crucial in the advice process, many steps are increasingly simliplified by technology and AI, and this trend is set to continue.

We are poised to see more substantial technological advancements in the coming years. ●

LATER LIFE LENDING The Intermediary | May 2024 30 In focus

Innovation is key to supporting changing needs

There are more than 21 million people aged 50 or over in England, and that number is growing year-on-year, according to the Centre for Ageing Be er. As more of us are living longer, people are spending more time in retirement and needing larger amounts of money to fund their living costs, lifestyles that are o en more active for longer, as well as requiring funds to make necessary improvements so their home is fit-forpurpose.

Property wealth has become an increasingly valuable asset for many in later life, but not all realise what a vital tool equity release could be in financial planning for their retirement.

With greater numbers of homeowners likely to make use of their home’s equity in the future, lenders must continue to adapt to make sure their products reflect a broader range of circumstances, and the increasingly diverse customer needs in later life.

Product innovation

At Legal & General Home Finance, we are very aware that each customer’s journey through retirement is unique, and we are commi ed to driving innovation in the later life lending space to address these varying needs. This includes incremental improvements to our existing products, as well as innovation in the lifetime mortgage market to meet the needs of previously under-served customers.

We were one of the first major lenders to introduce drawdowns across our range, so customers could borrow what they need, when they need it. This extra flexibility means

that customers can release their equity in stages, rather than taking it all as a lump sum, and as customers only start to pay interest on the money they release as they take it, it can be a more cost - effective way of accessing property wealth.

We’ve also introduced innovative product developments to suit the many different circumstances in which people access their property wealth.

In late 2023, Legal & General Home Finance launched the Payment Term Lifetime Mortgage (PTLM), a new category of lifetime mortgage to improve options for homeowning over-50s whose needs are not always well served by the current market. This not only gives younger borrowers more options to live the life they want, but it’s also an answer for interest-only mortgage holders seeking a reliable repayment plan to stay in their homes.

PTLM signals our commitment to leading the lifetime mortgage market and offering more choice for homeowners who are si ing on equity in their homes but can’t access this because of their age and borrowing needs.

Working closely

We are commi ed to listening to adviser feedback and innovating to deliver be er customer outcomes. This is reflected in our most recent adviser survey, which showed that a third of respondents considered Legal & General to be the best lifetime mortgage provider in the market in our Home Finance Adviser Relationship Study from November 2023.

It’s important that customers only pay for what they need. That’s why we’ve recently introduced a new tailored approach to lifetime

Not all realise what a vital tool equity release could be in nancial planning for their retirement”

mortgage pricing, specific to customer circumstances. We’ve also launched Application Programming Interface (API) integrations with adviser platforms, including Advise Wise, Iress and Air Sourcing platforms. The API links help improve the adviser journey by allowing our so ware to share information in real time, which in turn helps advisers to carry out due diligence research quickly and efficiently. Following adviser feedback, we also announced that all lifetime mortgage offers will be valid for 90 days – an increase from the 50 days offered previously.

Looking forward, continued innovation will remain important in meeting evolving customer needs, including integrating property value alongside pension wealth to allow truly holistic retirement planning. We are already seeing later-life lending evolve from a niche option to a mainstream solution, increasingly at the heart of people’s broader retirement planning.

The industry must keep that in mind to ensure those who can benefit from property wealth can access it, by offering greater choice, flexibility and protections to customers. ●

LATER LIFE LENDING The Intermediary | May 2024 32 In focus
ANDREW GILBERT is product director at Legal & General Home Finance
Bridging loans. Helping your clients from A . to Buy. For professional intermediary use only First charge, cross-charge and second charge bridges with multiple exits available. No lender legal or exit fees. From hope to home. Call us on: 03300 573 952

more2life Q&A

The Intermediary speaks with Ben Waugh, sales director at more2life, about innovation in the later life market

Can you introduce yourself for our readers?

Six years ago, I joined Key Group as operations and change director, and I’ve progressed from there to managing director, looking after everything that is more2life – all the front office operations, origination, servicing, products, underwriting, and everything in between.

I wanted to work in a smaller company where I’d have a bit more influence, with less bureaucracy and red tape, and to put to work all the skills and experiences from working in a big company.

This was a smaller company, but one that was growing extremely fast. The year before I joined, more2life lent about £350m; take that to 2022, and we lent just under £2bn.

again, culturally quite a challenge, but a good one, because it was about freeing people from the boring things to use their expertise and skills.

This leads us onto the next challenge – the Truss-Kwarteng mini-Budget and the huge volatility it caused.

That was a seminal moment for the industry where we saw wide-scale product withdrawal. A lot of lenders completely withdrew. A lot of our funders stayed in the market throughout.

How has the business handled the upheaval of the past few years?

There’s been a number of challenges since I’ve been looking after more2life. The first, of course, was Covid-19 – namely the lack of face-to-face valuations. In later life lending, there were no automated or desktop valuations, because we’re going to hold that asset for a long time.

We had to quickly work out how to get comfortable with desktops.

That meant working closely with e.surv and with our funders. We completely changed the business model so that we could continue to serve customers.

We also needed to make sure we could keep the lights on for our own staff. Then, coming out of Covid-19 there was pent-up demand.

We saw a massive increase in lending in 2022, and the business doubled during that period. Again, we did a lot of work around automation to scale the business, and we had a big push to free up people to do more value-add work – the stuff that really need people to think about. That was,

That’s a strength of more2life having six funding partners behind it.

Nevertheless, it was pretty challenging, with product withdrawals, loan-to-values (LTVs) coming down and interest rates going up significantly. While it’s hard for us, there’s a really big impact on the customers that sit at the end of all of this as well.

The team rallied and really thought about everything through that customer-broker lens, and how we needed to change our business to help them manage theirs.

The result of all this was that in 2023, the market collapsed from £6bn to £2.8bn, as well as a significant reduction in later life lending, including at more2life. We didn’t lend anywhere near as much as we did in 2022, but we did still lend a pretty good amount because of the strength of our product offering.

Where does the market stand now?

I am absolutely optimistic about 2024 being better than 2023. While the ERC figures look like it was a pretty stagnant Q1, that’s not how it felt being in the market. We have got more customers back in the market, and there is definitely more confidence in January, February, and March than a year before.

The ERC figures are based on completions in Q1. So, when we see the completions in Q2, we’ll see that the market has grown.

The other thing that gives me huge optimism is product innovation. Interest rates are much cheaper now than in 2023 – our cheapest rate today is 5.5%, where after the mini-Budget it might have been 1.52% higher than that. That’s a big

The Intermediary | May 2024 34

difference when you’re borrowing money for 15 to 25 years. Product innovation is going to be a key thing, and we’re just starting on that journey.

How does this innovation track changes to borrower needs and demographics?

At the moment, it’s largely about customers at younger ages who want to borrow more than you can on a pure lifetime mortgage.

Our existing payment term product is quite limited in scope at the moment because it’s new and we’re all learning how we do this, but where we see this going as we go through the next few months is that we will make that product available to younger ages, down to at least age 50.

Over the rest of this year, we’ll start to widen the cut off period where you have to have paid off, and the LTVs that we’re able to offer at all ages.

It’s about meeting the needs of more customers. It’s really important, because with the rise in interest rates in the mainstream, people are rolling off those cheap fixed rate deals onto the current mortgage products with much higher rates.

Does this need more awareness among brokers and advisers?

As a lender, we absolutely need to do a lot of work with distribution, so brokers and advisers know how to use these new products, how they work, and what to explain to the customer to make sure they fully understand the risks.

It’s a very crowded product landscape, so I applaud clubs like Air Sourcing, which has got a navigator tool which enables an adviser to put in a few specifics around the customer’s situation, what they can afford, retirement dates, and so on, and it shows them a range of product types that are most likely to meet their needs.

But we and other lenders can’t do it on our own, we need the Association of Mortgage Intermediaries (AMI) and the like, as well as sourcing systems, to create a level playing field.

There’s a vested interest in doing this because we all want to find the right solution for the right customer.

Has this been spurred on by Consumer Duty?

We have done a lot of work on Consumer Duty,

and it’s been a really useful exercise, getting us to review all parts of our business, to really think about ‘sludge’ practices – what do we do that’s not really that easy for a customer or a broker to navigate.

This might be some of our small volume ancillary processes – they might be small to us, but if you’re a customer it’s really important.

We’ve done an awful lot of work over the past 12 to 18 months to really look at it from that customer and adviser lens and make it easier to do business with us – easier for the customer to get the right outcome.

For us, tech developments are primarily brokerfacing, but it needs to be more customer-facing, too. We’re doing a lot of work so customers can self-serve simple things for themselves – copies of their annual statement, late payments – that will come on stream later this year.

As for the wider market, it’s very clear that everyone is taking Consumer Duty very seriously, especially around value for money and fees.

There’s the interplay with the Financial Conduct Authority’s (FCA) review of later life advice last year, as well. Advisers are really getting their heads around issues of income and affordability. For example, there might not be any requirement to make payments on a later life loan, but if your customer can afford it you absolutely need to be having that conversation.

These are very important industry trends, and the industry is absolutely taking it on board. Is it perfect? No. Is there more to do? Yes. But it is definitely moving in that direction.

What is on the cards for this market going forward?

The main focus is absolutely product innovation. There are other innovative products going out into the market.

Standard Life Home Finance, for example, has its Horizon Interest Reward product, where if you make payments your interest rate is reduced. That’s a great customer outcome.

Watch this space, because we’ll be unveiling our own version over the next couple of months to complement and widen our portfolio all with that aim of making sure we’ve got the best possible product solutions for every single customer over the age of 50.

That’s where we want to get to, and these are important steps on that journey where we evolve from just being an equity release lender when I joined, to a later life lender with a broad range of product offerings. ●

May 2024 | The Intermediary 35 In focus LATER LIFE LENDING

Understanding a ordability for borrowers aged 50+

Restrictions on affordability for borrowers over 50 vary greatly across the industry. From the more conservative mainstream lenders to the o en more generous options from specialist lenders.

For later life veterans and brokers new to the sector, it can be a daily challenge to work out the best options for your clients. This is mainly due to the ever-increasing number of products on the market to address our ageing population, and the fluctuating interest rates driven by unpredictable swap rates and global conflict.

What is later life lending?

Contrary to common misconceptions, later life lending does not simply refer to equity release, otherwise known as lifetime mortgages. No ma er how old your client, a lender may still consider them suitable for a standard capital and interest mortgage or a standard interest-only mortgage, as well as the more traditional retirement interestonly (RIO) and equity release options. Instead of the client’s age, lenders that have the consumer’s best interest at heart will base their decision on two key factors: the types of income the client is generating or receiving and the type of property the client wants to borrow against.

Income types

Lenders consider many types of income. Bear in mind that people are retiring later, and many are even returning to work. A good proportion of borrowers aged 50-plus are still salaried. Some may be self-employed, or receive income from rentals or lodgers. All of these factors could be considered.

Later life lenders may also accept income such as pensions, future pensions and spousal pension transfers, as well as cash savings and investments.

Property types

Some lenders dismiss properties at risk of flood, near pylons or rail lines. Others do not. They may also consider property close to or above commercial property, or built with non-standard construction such as a timber or steel-frame. They might also consider properties with flat roofs, listed buildings, ex-local authority properties and properties with several acres of land.

Let tech do the work

The easiest way to work out what is best for your client is to enter their data into a matching engine such as the one we have developed for brokers. It uses an affordability calculator developed for later life lending criteria, and matches your client’s circumstances with suitable options specifically for them out of hundreds of potential products.

Complex made easy

Of course, technology won’t do all the work. For the more complex situations it is important to have a personable, empathic and knowledgeable underwriter for that human touch.

Here are two examples where a holistic approach to property and income can be life changing.

Wilfred, 62 years old, and his wife kept ge ing turned down by lenders because of the pub next door. He needed £300,000 on their £500,000 property. A specialist lender like LiveMore can consider property near licensed premises. Wilfred secured a 5-year fixed-rate RIO mortgage.


No matter how old your client, a lender may still consider them suitable for a standard capital and interest mortgage or a standard interest-only mortgage”

Steve, 55, struggled to find a provider who would lend him £1m to buy a new home based on the retained profits of his successful accountancy firm. While some lenders will not consider retained profits as part of their affordability assessment, others will. Steve got a 10-year fix at 65% loan-to-value (LTV).

To help make the complicated simple, we have developed a Matching Engine for brokers. Based on criteria which the broker keys into the affordability calculator, the matching engine provides a full view of all mortgage options suitable for the client – right across the spectrum, not just equity release. If they fail to meet affordability requirements on the mortgage they originally requested, the matching engine will counteroffer with a list of alternatives from across the range.

At LiveMore, we believe that everyone has the right to live in their own home, whether they’re 53 or 93 years old. ●

The Intermediary | May 2024 36 LATER LIFE LENDING In focus

Things are improving but challenges remain

It’s been a good start to the year: volumes are up and borrowers looking to purchase seem to be beginning to adjust to the current affordability circumstances.

Analysis carried out by Zoopla in February suggests that based on a 15% rise in the number of agreed sales year-on-year that month, and an 11% rise in buyer demand, transactions are set to hit 1.1 million this year. Though lenders have been pulling sub-5% deals, rates remain broadly competitive and inflation expectations indicate a less hawkish stance from the Bank of England’s MPC.

In a recent interview with the Financial Times, the bank’s governor Andrew Bailey said a cut to the base rate was “in play” and would be discussed at future meetings. Early estimates from the Office for National Statistics (ONS) suggest GDP grew by 0.1% in February 2024, following growth of 0.3% in January 2024, revised up from 0.2% growth.

March’s residential market survey from RICS showed a rise in new listings which should support transactions in the coming quarter. While we are all only too aware that things can take an unexpected turn, it’s a welcome opportunity to be positive about the outlook.

We recently canvassed our brokers and found they too are feeling upbeat about the coming year, with 82% believing consumer confidence will rebound as inflation falls back and energy bills come down this month. The past few years have been tough for many British households, but it looks like the pinch of higher food prices, energy costs, rents and mortgage payments is beginning to lessen.

Our brokers are right at the coalface when it comes to how their clients

are feeling about their finances and with the prospect of a general election before the year is out, there is a sense that things are set to improve. That said, we also need to remain mindful that there is still considerable pressure on some households’ finances.

Sympathetic solutions

The FCA published an update to its financial lives survey earlier on 10th April and found that many are struggling to meet financial commitments. They found that around 7.4 million people admi ed to finding it difficult to pay bills and credit repayments in January 2024, though this was down from 10.9 million a year earlier. Five million people said they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous six months from January 2024, down from 6.6 million a year earlier. In the 12 months to January 2024, almost three million adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty. Nearly half (47%) of those who sought help said they were in a be er position as a result. However, two in five adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.

Our research also highlighted that there are still challenges. Two in five of our brokers, based across the UK, said they do not expect the pressures on household finances to improve over the coming year, with three in five expressing some concern.

It’s important that intermediaries keep this front of mind, particularly given that the consumer duty rules on new products are now bedded in and will extend to include existing

products and services from the end of July.

Each and every situation is unique and helping clients to understand the impact of different routes they might take is ever more critical. The FCA has reminded firms they must support their customers and work with them to manage payment difficulties. The regulator has shown it’s prepared to act quickly too. Where firms haven’t met its expectations, it has secured nearly £60m in compensation for 270,000 customers.

While the onus is on lenders to manage borrowers who find themselves struggling, it is advisers who are o en in the position to support those customers – something our brokers will continue to do.


OUT: Industry outlook

Primis brokers report a really varied picture depending on where they’re based. In some parts of the country, clients are much more exposed to affordability constraints.

When we spoke to advisers, those based in the north of England were less confident of there being sufficient business to maintain the number of active advisers.

Two in three of those surveyed said they thought there would be fewer still in the industry this time next year.

Firms in the southern regions of England were marginally more positive, with 61 per cent of the view adviser numbers would contract over the next 18 months.

A reasonably sizeable minority of advisers were more positive, with 37 per cent saying they expect the industry to grow next year. ●

Opinion RESIDENTIAL The Intermediary | May 2024 38

Getting clients back on track with credit repair

One of the many misconceptions held by consumers is that having a history of poor or adverse credit will prevent them from taking out a new mortgage. In some cases, this belief may be due to something they once read or heard, while for others, it may be due to personal experience of being declined a mortgage with a mainstream lender.

A recent study published by Ma hew Sparkes at the University of Cambridge has reinforced this perception, with a number of mortgage borrowers cited as saying they feel stuck and unable to move or remortgage due to the impact of their credit scores on their borrowing capacity.

Tackling this misconception is crucial, particularly given the fact that the number of people with a history of adverse credit rose significantly in 2023, when rising living costs, higher interest rates and uncertainty in the UK economy placed greater pressure on household budgets.

New name, familiar approach

If a borrower does not fit the automated credit scoring model of the big banks, what options remain for them?

Some lenders are increasingly using a specialist label to identify themselves as being able to accommodate this type of borrower.

In truth, the real specialism behind the tag is common-sense lending from underwriters alongside considered and accommodating criteria.

Yet I think it’s fair to argue that this approach is nothing particularly new, it’s only that the times have drastically changed while the rigidity

of automated scoring models have not, leaving many borrowers with credit blips facing being labelled as a specialist case.

Temporary circumstance

Helping these borrowers must be a priority, which is where solutions such as our credit repair proposition can help. Our credit repair mortgages have been designed to help borrowers who would typically fail the credit checks of mainstream lenders because they have experienced credit problems.

This includes those who may have a history of missed payments, defaults, County Court Judgements (CCJs) or even bankruptcy. They are also available to borrowers who may be currently seeking relief through active debt management plans (DMPs).

While the range of criteria needs may initially seem specialist and unfavourable to some, they can also be seen as a temporary period of vulnerability, perhaps resulting from spiralling inflation or job insecurity from the pandemic.

At Mansfield, we recognise this and aim to support underserved borrowers

get back on track. For example, we’ll also consider applications for capital raising, transfer of equity and debt consolidation.

By not only providing accommodating criteria but also offering flexible ways to manage their finances, we believe we can empower these borrowers to move forward.

Sympathetic solutions

Given the events of recent years, brokers will increasingly be seeing borrowers with credit blips desperately looking for help either to remortgage or move home. We know brokers want to do everything they can and when the ‘computer says no’ at the big banks, it’s important that they know how to treat those borrowers to get them a fair deal.

While some lenders may wear a specialist label to identify themselves, there are building societies, like Mansfield, that are already adept at providing solutions for what can typically be a temporary issue.

Understanding the criteria from regional societies can make a real difference to your clients. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 39
If a borrower does not t the automated credit scoring model of the big banks, what options remain for them?

Navigating rate uncertainty in an election year

Following the predictions and commentary around whether interest rates will fall or not has been something of a ‘will they, won’t they’ saga so far this year.

At the beginning of 2024 there was hope rates would fall as inflation appeared to be easing. However, the Bank of England held rates at a 16year high with an unexpected spike in inflation, and a short-term dip in mortgage rates was immediately followed by them going back up again.

Only recently, we saw another flurry of media coverage and speculation, with analysis showing that an estimated 868,000 homeowners will be paying an extra £240 a month on average between now and a likely end of year election. That equates to around 4,200 households a day coming off fixed-rate deals and onto higher monthly payments.

The right direction

This was immediately followed by the Bank of England’s decision in early May to keep interest rates at 5.25%. But, with two of the nine-strong Monetary Policy Commi ee (MPC) voting for a rate cut, Andrew Bailey was reportedly “optimistic that things are moving in the right direction” – but was not commi ing to a rate cut in June.

All this uncertainty is helpful for nobody. And, as we know, a reduction in the overall base rate doesn’t always translate immediately into lower mortgage rates. Speaking directly with our customers and with our broker network, it is clear that the uncertainty around whether or not rates will change is weighing heavily on minds.

A er all, separate data suggests that about 1.5 million borrowers on low fixed-rate mortgages could be in for a shock this year when they remortgage. While for first-time buyers, mortgage product fees are increasing to £1,141 on average, according to Moneyfacts.

Swaying the electorate

In an election year, we should expect more commentary and analysis around the issues that are likely to be swaying the minds of the electorate. The state of the economy – in particular the state of the housing market – is undoubtedly one of those issues, but the heightened speculation is not making brokers’ lives any easier.

My view is that we should assume we won’t see interest rates back down to the levels we saw throughout the 2010s and early 2020s for quite some time. Even with inflation heading steadily down, a major political change like that most pollsters predict later this year tends to come hand in hand with economic uncertainty, as lenders, brokers and borrowers alike adjust to the ‘new normal'.

Our focus right now is sticking to our strategy regardless. That means making sure we can support our brokers and our members as best

In an election year, we should expect more commentary and analysis around the issues that are likely to be swaying the minds of the electorate”

we can. Listening to their concerns, to the evolving issues borrowers are encountering, and doing our level best to find innovative ways to solve them. In particular, we are in active discussions with brokers about those segments of the market who report being underserved by mainstream lenders.

That may include those with complex incomes, or who through no fault of their own are unable to provide a full credit history. This includes customers who arrive in the UK from overseas on either a Working Visa or a Health and Care Visa. They are o en unable to provide evidence of credit history when they have just moved to the UK. So, we have partnered with an innovative fintech who can source credit data from 14 countries – helping to overcome a major obstacle to homeownership. We are also extremely mindful of the plight of first-time buyers, for whom the current market must look particularly daunting, and maintaining an open dialogue with brokers to do what we can to make the application and approval process as streamlined and painless as possible.

Doing our best

Uncertainty around mortgage rates and the prospect of a change of government is not going anywhere. But we cannot let that distract us from doing our best for brokers and for consumers and we are commi ed to doing all we can throughout this period to support as many homeownership dreams as possible. ●

Opinion RESIDENTIAL The Intermediary | May 2024 40
ALISON PALLETT is sales director at Nottingham Building Society

An important step towards net zero

Six months ago, Rishi Sunak announced a significant roll-back on the Government’s net zero policy, pushing carbon reduction targets back out by years in some cases. Backtracking was widely acknowledged as a move designed to appeal to core Conservative voters ahead of an imminent General Election.

Analysis from the London School of Economics (LSE) and Grantham Research Institute on climate change and the environment said, rather than encouraging investment into green infrastructure and projects, it was “exactly the kind of policy uncertainty that puts business investment at risk and undermines the UK’s ability to capture opportunities of green industry.”

The Institute for Government said at the time: “Economically, yet another change in climate policy also risks making the UK even less a ractive to global investors.”

There were two big announcements relevant to the property market.

First, the date for banning the installation of new domestic gas boilers was moved to 2035 and new exemptions were introduced and the maximum grant available through the Boiler Upgrade Scheme was raised to £7,500. Second, the plan to raise minimum energy efficiency requirements to Energy Performance Certificate (EPC) Band C by 2025 for new tenancies and 2028 for all tenancies was cancelled entirely “on the basis of excessive costs for landlords,” said the Royal Institution of Chartered Surveyors (RICS).

Maintaining momentum

Perhaps naively, the Government assumed that li ing the 2025 deadline to retrofit privately rented homes would save those landlords tens of thousands of pounds. 2025 is now less than a year off, and as anyone

familiar with property renovation, construction or refurbishment is acutely aware of, building work takes months and months to complete. The fact is that the majority of private landlords have either already invested in upgrading their rented properties or they have set aside the capital to fund the required retrofi ing.

Speak to those in the industry, and momentum has not lost pace. In March, RICS published its first residential retrofit standard in response to growing demand for retrofit services in the UK.

It is designed to support consumers carrying out retrofit upgrades to a residential property, ensuring they receive advice from skilled, regulated professionals, and protects the public interest by upholding high standards in a growing market.

The professional standard sets out a series of concise mandatory and recommended requirements effective from 31st October 2024. It also provides long-awaited and muchneeded benchmarks that guide RICS members in delivering residential retrofit services tailored to their clients' evolving needs.

Given we are expecting a General Election later this year, it may be that climate change and net zero policy is in for yet another shi . What that could mean for the property sector is unclear – the le has also been inconsistent on its net zero delivery plans, U-turning on its own pledge to pump an extra £28bn a year into carbon reduction in February, cu ing that spending promise down to £5bn.

The Climate Change Commi ee estimates that residential retrofits need to increase to a rate of 500,000 per year by 2025 and to one million per year by 2030 to meet the Government’s overall net zero target. This is enshrined in law, meaning that whichever party is in power the need to deliver is a legal requirement. It’s heartening therefore that there is

now clear evidence the industry is preparing to deliver, despite the political – and potentially temporary – rollback.

What this says is that there will be issues and bumps along the retrofi ing road to net zero – but did any of us really expect anything different? High energy prices, the proposals for the Future Homes and Buildings Standard and pressure to decarbonise mean that investment in retrofit is surely as a sensible bet. What is important is not perfect policy or that politically motivated promises are kept but that the industry remains commi ed to the net zero agenda.

Companies, mortgage lenders, homeowners, landlords, renters, insurers – all these stakeholders have a vested interest in improving the energy efficiency of Britain’s residential housing stock. Who is responsible for what is the next key step in this journey – and what supplementary funding schemes are on offer. However, the RICS guidance is an important step forward in driving these next stages.

Our own energy solutions support the assessment, installation and reporting of energy efficiency measures under various Government schemes, and we support lenders who need to meet regulatory and Governmental requirements for the assessment of their Scope 3 emissions.

We recognise not everyone is and can move at the same pace but the resources and data to deliver meaningful action is now available – not least because there is a moral, ethical and environmental imperative for everyone to act. Even amid short-term political posturing, there is a strong commercial incentive to do so. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 41

time for another option…

Hardly a day goes by when there is not another story or event that brings with it a huge amount of change. In the last 10 years alone, we have had to deal with a pandemic, the Brexit vote, the American election of 2016, and much more besides.

Whether welcome or not, the changes in our society and technology as well as markets and government mean change is inevitable. With that comes uncertainty.

I’ve recently made a big change personally, too. A er 20 years I le Nationwide to try something new and exciting at April Mortgages.

In the UK, the received wisdom for how to manage uncertainty when it comes to buying a house has been to take a long-term mortgage on a short-term fixed rate. Early repayment charges (ERCs) apply through the short-term deal but at its end you have choices. Though in more recent years, 5-year fixed rates have become a lot more popular than the previously dominant 2-year fixed, this fix and switch model has been the UK mortgage market’s bedrock since Halifax first dreamt it up in the late 1980s.

Things have changed a lot since then. The Bank of England base rate rose to almost 15% in 1989. It fell to 0.5% in March 2009 and remained at or below that level until August 2018 – almost a decade. A er a spell at 0.1% amid the pandemic crisis, it has risen steadily to 5.25% today.

House prices and earnings ratios have also changed. According to Land Registry data, the average house price in November 1988 – when Halifax brought out the UK’s first fixed rate mortgage – was £55,448. As of December 2023, the average house price in the UK is £284,691. In 1988 the average adult earned £218.40 a week, according to Office for National

Statistics (ONS) data. In 2023, average weekly earnings were £807.30.

So, in 1988 the house price to earnings ratio was 4.88, and it’s 6.78 today. That means the average UK adult would need to borrow almost seven times their annual income to cover the cost of buying a home.

Over the same period, demographics have shi ed along with working pa erns and migration. People move around the country more for work. So, flexibility as well as certainty over the level and time of repayments has become paramount.

Yet despite all this upheaval in the way we live our lives, the mortgage market has remained wedded to short-term fixed rate loans. Lifestyles have changed dramatically, but our mortgages barely at all. The lack of certainty over the pay rate has meant that, too o en, the interest rate risk has effectively been carried by the borrower.

A new model

A key barrier to offering longterm fixed rates in the past was a result of mortgages being funded by short term retail deposits. The product was prohibitively expensive, offered borrowers no benefit for reducing their loan-to-value (LTV) and punished them when their life needs changed.

At April, we don’t think this model is right for everyone. We want borrowers to have choices throughout their homeowning lifetimes, not just at rigidly fixed intervals. We also believe that loyalty should be rewarded.

It is our belief that this is the first truly innovative change to the market seen in decades. Certainty and flexibility lie at its core.

Our product allows your clients to move house without incurring early repayment charges. As they pay down their balance, and their LTV reduces, the interest can reduce, too. Monthly

The received wisdom for how to manage uncertainty when it comes to buying a house has been to take a long-term mortgage on a short-term xed rate. ERCs apply through the short-term deal but at its end you have choices”

payments are fixed, so budgeting certainty remains a key advantage for borrowers planning their finances. April is responding to market forces and offering borrowers an option that is designed for the way they live life today. As the industry adapts to delivering products and services under the Financial Conduct Authority’s Consumer Duty rules, ensuring borrower needs are fairly met must become the driving force behind the provision of home finance.

We’re proud to offer an alternative that gives borrowers more certainty in an uncertain world but comes with the flexibility borrowers should expect of a product that underpins the most important purchase they make. The good news is that brokers are on board – a er all, they want to make sure they’re giving clients the best advice possible. And that’s what we’re all about. ●

Opinion RESIDENTIAL The Intermediary | May 2024 42

Why a ordability is now more essential than ever

Afully functioning property market needs three main things to ensure that both the top and the bo om of the market are working well. We need them both in good order for things to be steady; the rest in the middle primarily sorts itself out.

In the absence of a clear and delivered house building strategy from the Government, it is important that homeowners can access existing stock that meets their needs, and vacate properties that don’t.

This cyclical nature of what should be a fully functioning housing market relies on the right balance between downsizing and upsizing, but as it stands, it’s clear that the harmony just isn’t there. Whilst this is challenging for all areas of the market, it feels particularly notable at the bo om of the ladder.

We’ve seen innovation try to keep the bo om part of the market alive, like Yorkshire Building Society’s £5,000 deposit for first time buyers, and Skipton Building Society’s Track Record Mortgage’. Similar innovation needs to happen in the downsizer space, too. Otherwise, the this could cause disturbance to the whole chain.

The bottom half

Over the past year, we’ve seen the erosion of first-time buyers in the below £250,000 market, where Stamp Duty doesn’t bite; in fact, there were 7.5% fewer first-time buyers in that category compared to April. Paired with a lack of Government direction on new-builds and social housing, first-time buyers are being squeezed out of the space, leaving the purchase market for properties of this value increasingly reliant on landlords. The

challenge is that, of course, landlords have also felt the squeeze.

However, data from our recent Twenty7tec monthly mortgage report shows a rise in the volume of buy-tolet (BTL) mortgage searches, which are up 7.93% in April 2024 compared to March 2024 and 19.27% compared to April 2023. It also shows that the searches for buy-to-et remortgage searches were up 2.50% in April 2024 compared to March 2024 and rise even higher when it comes to the year before, up 26.48% compared to April 2023.The data from last month’s BTL space indicates that a er taking a period of understandable reflection, landlords who have been si ing on decisions have evaluated their portfolio and feel that the space remains right for them.

Complemented by a slight rise in searches for purchase mortgages on BTL properties, it highlights that with the right portfolio and focus for the right investor, Buy to Let is still a good place to be and will continue to be so.

Despite BTL facing a backlash by some who claim it reduces the first-time buyer opportunities, the market needs landlords because if you don’t have a solid social housing policy, available stock or an overnight solution to deposit and affordability challenges, then the only way that people will get homes is through renting. For people to rent, we need landlords to offer those possibilities.

Navigating the market

In today’s market, the headlines focus on interest rates, taxation, and the challenges that buyers face, but with product innovation, there really can be great opportunities out there, and an educated adviser can help buyers get the right products for them.

The challenge can be how advisers

promote these solutions to customers. Too many customers still believe mortgages are restrictive and hard to get, particularly where there’s been recent innovation, like the examples highlighted earlier in the article, which is where advisers need to be at the forefront of addressing this education gap and have a strategy and the technology to do this effectively.

The previous point touches nicely on another area that has become increasingly complex over the past 12 to 18 months: affordability. In a turbulent market, it’s absolutely essential, as customers need to have access to accurate results from lenders and advisers once again are the vital source of truth.

This is why our latest update focused on bringing an affordability solution to advisers via SOURCE, giving advisers a more efficient way to research lender affordability and retrieve more accurate results for their customers.

How does the future look?

With the General Election looming, housing is a hot topic. If the Labour Party gets in, it promises to build half a million new homes, pledging they will be delivered within the first five years ensuring new dibs for first-time buyers.

It’s a bold promise, and it comes with many very real questions for instance, will this mean for house builders and developers? It’s no easy fix; it will be interesting to see how things unfold, but it’s essential the bo om half of the market is reinvigorated so that the whole property market can function. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 43

The UK housing market is healing

London property is part of a national picture, but our nation’s collective obsession with house prices has spawned a plethora of reports to feed the appetite for knowledge and thirst for understanding what is coming next.

It’s easy to conflate the information published by each of these organisations – roughly, house price inflation is recovering and the first three months of the year are generally agreed to have been more positive than the second half of last year. But it is worth taking a look at each index individually however, for each tells a slightly different story from a different point of view.

This is the most accurate and official index as it’s based on the value of properties changing ownership as registered with the Land Registry. These are actual completed sales, inclusive of both mortgaged and cash buyers, making it the most comprehensive of the indices available. The catch is that the data comes with a time lag of around three months. It’s reliable but tells the story of where the market was, rather than where it’s going.

The RICS UK residential market survey is a bit different from the rest in that it doesn’t track property values but rather looks at sentiment among its members. This is helpful as it gives an indication of future movement in values, crucially transaction volumes and buyer confidence more generally. The March report is indicative of a steady improvement in overall sales market conditions, it says.

Buyer demand continues to edge higher, while near-term expectations point to activity gaining further traction over the coming months. House prices have stabilised at the headline level, with forward-looking metrics suggesting that an upward trend may emerge later in the year.

The flow of new listings coming onto the sales market increased for a fourth successive report.

Sales expectations improved slightly at both the three and twelve-month time horizons, with new buyer enquiries continue to rise at a gentle pace and new listings activity also picking up.

House prices

The Halifax index uses mortgage lending data from across the Lloyds Banking Group to assess the average house price. It’s a good indicator of borrowing appetite and the affordability of properties purchased with a mortgage. Obviously this excludes the value of cash only purchases, something included, for example in e.surv’s index. The March index shows that UK house prices grew in March on a quarterly basis, by +2.0%, with annual growth slowing to +0.3%, from 1.6% in February.

Nationwide’s house price index has been running since 1952, making it the go-to for historical price comparisons. Like Halifax’s measure, Nationwide’s index is based on its mortgage lending data. It differs because the mutual’s customer base is quite different from its larger bank competitor. Nationwide’s borrower profile is typically lower loan-to-value than Halifax, with its broadly more conservative criteria resulting in a different mix of property types. March analysis states: “UK house prices fell by 0.2% in March, a er taking account of seasonal effects. Nevertheless, the annual rate of house price growth edged higher to 1.6% in March, from 1.2% in February.

Based on Nationwide’s numbers, London remained the best performing southern region with annual price growth recovering to 1.6%.

Property listings site Zoopla’s March report recorded that the annual rate of UK house price inflation remains negative at -0.3%. This is up on the

recent low of -1.4% in October 2023. However, all parts of the country are recording higher house price inflation than six months ago. Sales volumes are recovering and pricing levels are firming up across the UK housing market.

They expect these trends to continue into the second half of 2024 as house prices continue to adjust to higher mortgage rates and reduced buying power.

Rightmove tracks property values based on asking prices, making it a forward-looking index that gives a sense of buyers’ price expectations. By its measure, the average price of property coming to the market for sale rose by 1.5% (+£5,279) in March to £368,118 with the market continuing its recovery a er a muted 2023. The positive start to the year continues, with Rightmove recording an increase in buyer demand.

London has seen the biggest increase in buyer demand, both overall and for top-of-the-ladder properties, compared to this time last year.

As with all reports, it’s important to understand the micro nuances that exist behind the headlines and how those headlines were reached. All these reports tell differing stories but one constant thread is that the months ahead look be er than the ones behind. Wage growth appears be steadying concerns about affordability and inflation, while not tamed, is not proving to be unmanageable for many. There are many ore products available and house purchase searches last month, according to Twenty7tec, are now equalling remortgage ones.

The UK market is finding its feet once again and London is very much a part of that. ●

Opinion RESIDENTIAL The Intermediary | May 2024 44

A new era of trackers and discount rate products

The news and current geopolitics of the Middle East, as well as imminent elections in two of the world’s leading democracies, may make one feel any further fall in interest rates is further off than we all think.

But analysts, at least, point to cuts in the second half of the year. UK markets are predicting the first interest rate cut from the Bank of England will come in September rather than August, with only one or possibly two cuts this year. The changes in expectations came a er stronger-than-expected US inflation reading earlier in April.

Notwithstanding the US data, it was widely reported, and remains expected, that the Bank of England is on track to cut rates. Andrew Bailey said in March "we are on the way" to interest rate cuts a er they were le unchanged at 5.25%, their highest for 16 years. The Bank still needed to see inflation fall further, but last month’s drop to 3.4% was "very encouraging and good news.”

Life is what happens while you’re busy making other plans, as John Lennon said; but plan we must, and if things go accordingly we may yet see another change in the product mix available to brokers.

In its report, Twenty7tec cites the growth in the number of products available to the market in March this year but also the huge growth in search for 2-year fixes as brokers and their clients hedge their bets on interest rates. It’s a far cry from the popularity of 5-year fixed only a few months ago. Meanwhile, lenders have been issuing trackers and discounted rates in the expectation a market of rate cut is coming.

It’s a long time since many of us – if ever – will have seen such a market. There was a time not so long ago when the humble tracker mortgage was in plentiful supply. Back in 2009, roughly seven in 10 new mortgages were sold on a variable rate basis, according to Bank of England data. However, their popularity has plummeted since, with fewer than one in 10 borrowers plumping for one since 2019 as a result of fixed rates having been so low in recent years. Quite simply it has been difficult to make the case for any other type of product.

Maintaining momentum

Nevertheless, there is plenty of colloquial evidence that consumers are beginning to question the wisdom of fixed rates when backing a tracker or discounted product may proffer be er returns. Ge ing this right ma ers, because even on an average loan size of £200,000, a drop of 25 bps can mean savings over the life of the loan of thousands of pounds.

Not to mention the easing of pressure for those already struggling with payments as standard variable rates (SVRs) come down, too. The cost-of-living crisis may have abated in some respects, but it is still acutely

felt in others. A rate cut might and probably should promote another whirlwind of remortgaging as affordability issues ease. The diet of regulatory updates on Consumer Duty and vulnerability will continue but lenders will breathe a sigh of relief if the cost of finance can play a part in easing the stress felt by many households.

It may not be imminent, but if all things remain equal, we should see a rate cut in the second half of the year and this expectation will spur a significant increase in tracker and discounted products. In some cases, there is no product arrangement fee so savings are instant with many products also coming free of early repayment charges (ERCs), meaning borrowers can fix at any time if they want to.

Ultimately, some borrowers will be taking a calculated risk already on the fact a rate cut is coming, while others – especially those with a pending product maturity – will be waiting to see how rates change when the first interest rate cut is upon us, before plunging for another fixed rate. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 45
A rate cut in the second half of the year and will spur a signi cant increase in tracker and discounted products

Meet The BDM

How and why did you become a BDM?

A er a number of years as a Mortgage Adviser, becoming a BDM felt like a natural career progression and I’m so glad I did. I’m very detailoriented but also very relationshipdriven, which is essential for the role. For instance, I love understanding the nuances of each individual case to provide the best outcome for the customer and I take the time to work directly with the intermediary to help support them with their customer base.

Metro Bank

The Intermediary speaks with Gareth Randall, lead business development manager (BDM) focusing on large loans at Metro Bank

My day-to-day focus is large loans, speci cally those in excess of £1m. is market can be both fascinating and unusual and there is a lot of space for a lender like Metro Bank to really make a di erence to all parties in the process. O en by providing simple solutions to what appear like complex problems at rst glance.

What brought you to Metro Bank?

A er over 10 years at my previous employer I was ready for a new challenge, and I’ve now been

with Metro Bank for almost eight years. Metro Bank was the ‘new kid on the block’ then, and it has retained that dynamic energy throughout. It had – and continues to have – a very di erent feel about it and a real drive to make a di erence and to challenge the status quo. I haven’t regretted a single moment of the move.

What makes Metro Bank stand out from the crowd?

Our mortgage proposition is built

The Intermediary | May 2024 46

around the needs of the customer and is driven by comprehensive broker feedback. Our mission throughout is to create and deliver solutions which make the complex appear simple.

Our proposition is based on the ability to layer and combine criteria, to deliver the right customer outcome, whether it be for a high net worth individual, a Buy to Let landlord or someone with a less than perfect credit le.

To complement our product set we ensure every registered broker has a dedicated BDM contact supported by an expert Helpdesk team, providing quick access for queries and case discussions.

add real value to the intermediary market, through focused support, strong relationships and general market education.


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

As the large loan BDM, I see a lot of complex customer scenarios and help manage the enquiry through with the introducing intermediary. is ensures the application is carefully and quickly processed and the right outcome is achieved for the customer.

What are the challenges facing BDMs

right now?

BDMs must show themselves to be adaptable and complement how intermediaries want to work today. is means ensuring that contact and interaction with rms is delivered as required, helping to drive greater market e ciency and the right level of focused support. Additionally, the costof-living crisis has changed the circumstances of many customers and delivered an increased layer of market complexity. is means that today’s BDM has to have a broader knowledge set to understand the nuances and detail of potential applications, alongside a detailed knowledge of criteria and policy to be able to support intermediaries.

What are the opportunities for BDMs?

I’ve always believed that being a BDM is one of the best jobs there is, you have the opportunity to be your own boss, manage your own diary and very few days are the same. I think all BDMs across the UK have a fantastic opportunity to

It also provides the intermediary with direct access to an expert that understands this market sector and helps support a seamless and stressfree application process.

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

Make sure you engage a mortgage adviser as early as possible in the process and to share as much detail on your speci c circumstances. is will ensure you receive the best possible guidance and advice throughout the mortgage journey. e current nancial climate has delivered an air of uncertainty to the sector, therefore seeking expert help when dealing with probably the single biggest personal nancial transaction of your life is vital.

I would also encourage everyone to educate themselves about their own personal nances – credit les, planning a personal budget etcetera. I think this should be a mandatory part of the UK education system, as it would enable a much wider breadth of the UK population to become far more nancially aware, at the same time as providing many with a necessary new life skill.

My day-to-day focus is large loans, speci cally those in excess of £1m. This market can be both fascinating and unusual and there is a lot of space for a lender like Metro Bank to really make a di erence to all parties in the process. Often by providing simple solutions to what appear like complex problems at rst glance”

Metro Bank

Established in 2010


First-time buyers

Experienced landlords

Complex income

Self-employed and contractors

High earners,

Less than perfect credit pro les

Contact 07814 583 069

May 2024 | The Intermediary 47 MEET THE BDM

Electing for a di erent approach

As I write this, it’s we’ve just had a whole ra of electoral votes across England and Wales and I’m trying to make sense of the results as they are slowly coming in.

It is early days, with the counting unlikely to finish much before the weekend is out, and while there appear to be some notable exceptions, it doesn’t feel like these are going to be a strong set of results for the Conservative Party. Quite the opposite.

If housing availability hasn’t been one of the key ba leground issues in many regions right across the country, then I would be mightily surprised, and certainly for those who are yet to get on the housing ladder, this might well feature even more prominently, especially when they come to cast their vote in the General Election, whenever that might be.

On that issue, I read a piece in The Times today headlined, ‘Councils slash housebuilding plans’ which included an accusation that some councils have cut the number of homes they had commi ed to building. This, the story suggests, has been done off the back of Michael Gove’s new planning reforms which allow them not to build on greenfield land, even if they can’t otherwise meet their housing targets.

The story suggests that councils such as South Staffordshire and Hertsmere have cut their annual housing target by 40% and 25% respectively, and they have done this prior to the anticipation of a new Government changing the rules and insisting on them meeting the targets it has set.

Labour has pledged to build 1.5 million new homes over the course of the next Parliament and has said it will change the planning system in order to do this.

Without wishing to delve too deeply into the party politics of this, the recent landscape has changed fairly dramatically in terms of the

current Government’s approach to housebuilding.

It was anticipated that Michael Gove, in particular, was a strong advocate for more house building in regions, but apparent pushback from Conservative backbenchers meant a watering down of the new reforms, with critics arguing it has allowed Councils in those constituencies not to have to build the numbers of houses that many would argue are required.

Keeping up supply

Of all the ongoing issues impacting on would-be new purchasers, supply of homes has to be up there. Even if the biggest purchasing demographic over the past year or so has been first-time buyers, it has been clear for some time, that the number of new, affordable homes being built has not in any way kept pace with demand.

To be fair, this is not just an issue of the past five years, but one that has been going on for the best part of three decades-plus, and perhaps the most frustrating aspect of this is that we appear to be going backwards rather than forwards.

For many years we have been told that we require at least 250,000 new homes to be built every single year, without actually having hit this target for some time. As every year goes by, the need goes up, the number of homes doesn’t meet this need, and we fall further behind.

While I’m not anticipating housing to be an ultra-top-tier issue which might decide the next General Election, I would certainly anticipate it to be raised a number of times on the campaign, and I suspect – even with these Conservative planning reforms –the major parties will be fighting each other to say how many more homes they will build if they win.

Talk, of course, is rather cheap when it comes to such an important issue, especially in the context of repeatedly missed housing targets.

is head of international business development at Qualis Credit Risk, part of AmTrust International

If these allegations are true it would seem that some councils are trying to get their defence in early, hopefully anticipating that Labour might not have the political will to force them to build more, should they get into power.

No time for parties

This perhaps gives us all further evidence as to why housing issues might actually benefit from any sort of cross-party approach. The way we have approached this issue over the last 35 years doesn’t suggest that a party-political focus has delivered, and given the long-term importance of housing the population, might we not all feel that a long-term plan to be followed over multiple Parliaments would be far preferable to one that may be ditched this year, and ditched again in four to five years’ time?

It is probably wishful thinking on my part, but I’m sure there are plenty of would-be first-time buyers who are currently renting or trying to save a deposit, or living at home with their parents or just unable to even consider buying at any time in the near future, who would probably like a bit more from their Government or local council, and certainly some stronger commitments in terms of ensuring the number of homes required are actually going to be built.

That is, of course, a huge challenge, but it’s one that at some point is going to need to be grasped, whoever is in power.

It will require a big, bold offering of that there is no doubt. I suspect that it will be the party who people believe can actually deliver on this, who will be charged with delivering it come the next General Election. ●

Opinion RESIDENTIAL The Intermediary | May 2024 48

Brokers have a lot to think about

We are now firmly into the second quarter of this year and the market is in relatively good health, particularly on the purchase side. However, affordability remains a key issue – let’s take a look at where things stand.

Earlier this month the Financial Conduct Authority (FCA) published an update on its financial lives survey and found that, while many are struggling to meet financial commitments, the picture has improved over the last year. The regulator found 7.4 million people were struggling to pay bills and credit repayments in January 2024, down from almost 11 million in January 2023.

While the number is heading in the right direction, this is still higher than the near six million recorded in February 2020 before the cost of living squeeze began. 5.5 million people said they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous six months from January 2024, down from 6.6 million people a year earlier.

In the 12 months to January 2024, almost three million adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty, the regulator found.

Half of those who sought help said they were in a be er position as a result. However, 40% of adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.

Brokers were le disappointed by the Chancellor’s Spring Budget, which held no support for the housing market. It may be that the Conservatives are keeping their powder dry on that ahead of an imminent General Election.

In the meantime, lenders are

pricing marginally more cautiously than at the start of the year.

Moneyfacts’ most recent UK Mortgage Trends Treasury Report recorded a rise in both 2-year and 5-year fixed rates, though more modestly compared to a month prior. Product choice overall rose, but so did options for higher loan-to-value (LTV) deals.

At the start of April, the average 2-year fix came in at 5.80% and the average 5-year rate at 5.39%. The average standard variable rate remained at 8.18%, just shy of 8.19% during November and December 2023.

This significant price differential highlights just how important a role advisers have. Even where affordability is tight, refinancing is vital to ensure borrowers don’t spiral into arrears – it’s in lenders’ interests too to keep as many customers on the lowest rates possible.

In the mix

Given this, the product transfer component remains an important part of the mix for those reaching the end of low rate fixed deals, but there is also a pickup in borrowers seeking new deals.

Availability and product choice is improving off the back of this. Moneyfacts data showed there were 6,307 product options in early April, the highest number since February 2008 when there were 6,760 deals on offer.

The availability of deals at the 90% LTV tier also increased for a second consecutive month and at 774, is now at its highest point in over four years. The number of deals at 95% LTV rose for a fourth consecutive month, and the average shelf-life of a mortgage product stabilised to 22 days, up from 15 days at the start of March 2024.

The key consideration for brokers this year is affordability. The FCA’s financial lives survey found that 28% of UK adults report either not coping

financially or finding it difficult to cope. One in nine had no disposable income at all.

Though mortgage holders appeared slightly less likely than the national average to be struggling in January 2024, a quarter still reported that they were not coping financially or were finding it difficult.

The FCA also recorded an increase in the proportion of mortgage holders struggling financially who have asked their provider to reduce their monthly payments or to provide a payment holiday. The numbers are tiny, with just 0.4% asking their lender for help in the six months to January 2023 and 1.6% in the 12 months to January 2024. Yet the trend is serious.

In April 2022 the average 2-year fixed mortgage rate was 2.86%, and in April 2019 the average five-year fixed mortgage rate was 2.88%, Moneyfacts data shows. Those facing remortgage rates over 5% today need support and detailed advice – understanding the best route to manage much higher repayments is a complex balance.

These pressures are likely to worsen this year as the effects of fiscal drag, higher utility and mobile and broadband bills start to bite from April. Council Tax – a critical bill to keep up with – is also going up significantly in most local authorities, adding to the strain.

As a result, brokers have a lot to think about when considering the most appropriate course of action for clients. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 49

Before the days of the Global Financial Crisis of 2007, prior to record low interest rates, and even six months or so before Financial Services Authority (FSA) mortgage regulation – the Financial Conduct Authority’s (FCA) predecessor –economist Kate Barker’s housing report was published.

For those that remember, it might come as a shock to hear that 2024 marks 20 years since she released her landmark review of the housing market. At the time, the housing crisis we find ourselves in now was in its early days, but it was still evident that something needed to be done.

In 2002, only 37% of new households in England could afford to buy a house, compared to 46% in the late 1980s. In 2001, the UK had seen the lowest number of houses built –175,000 – since the Second World War.

To help tackle this, in April 2003 Barker was appointed by Tony Blair’s Government to conduct an independent review of the UK’s housing supply, with her findings

released in March 2004. At the time, the report was optimistically received, and there was every hope it would be a watershed moment in the Government’s bid to increase housing supply.

In some ways, there was nothing ground-breaking about her report in terms of its recommendations, yet as then Chancellor Gordon Brown noted, it offered “the most detailed analysis of the housing market in 50 years.”

Perhaps a li le less jaded by years of non-action, there was hope that it would guide planning policy and boost housing production in the years to come.

Barker’s report set out a series of policy recommendations to address the lack of supply – many of which are still relevant today, with reform of the planning system at the heart of her recommendations.

For instance, she recommended an additional 70,000 private sector homes in England each year would need to be built in order to reduce annual house price increases to 1.8%, instead of the 2.4% they had been over the previous 30 years.

This was based on 140,000 gross starts and 125,000 gross completions of private sector homes in 2002-3.

In order to go one step further and achieve the then EU average of 1.1% annual house price increase, she recommended an additional 120,000 private sector homes per year. In both scenarios she said an additional 23,000 social homes per year would also be needed.

A missed opportunity

The Home Builders Federation (HBF) – never one to hide its views and frustrations about the damage a lack of planning reform and disjointed Government thinking is doing to the housing supply – has marked 20 years since the Barker Review with its own report, ‘Beyond Barker’, offering analysis of how the market would look if the recommendations had been implemented.

The report shows just 11 of Barker’s 36 recommendations are currently in place, with a further 10 having only been partially implemented and five recommendations having been implemented and then reversed.

The Intermediary | May 2024 50 Opinion RESIDENTIAL

The HBF says recent changes to the planning system, announced by Michael Gove to appease ‘not in my backyard’ backbenchers, have on their own led to the rolling back of three measures Barker identified to improve the housing market for first-time buyers (FTBs).

By its estimate, the nation is two million homes short of the report’s most ambitious scenario – a shortfall equal to the entire housing stock of Ireland. It argues that Barker's most ambitious scenario – for 297,000 homes a year to be built – has not been achieved in a single year since 2002.

In the meantime, over the past 20 years we have seen the average age of FTBs rise from 31 to 34, with home ownership levels falling from 71% to 65%. Housing affordability has also worsened in every local authority in England, and the ratio of median house prices to earnings has increased from 5.1 to 8.3.

Little has changed

Speaking to The Guardian to mark 20 years of the report, Barker said that one of her biggest disappointments

was the lack of social rent homes built over the years. She was also disappointed by Ministers’ failure to drive through changes that would allow for planning decisions to be made at the regional level, rather than by local authorities. She also criticised the trend for politicians to focus on reforms such as new mortgage initiatives designed to boost demand, when the supply of new homes was o en the key issue.

She said: “Demand-side reforms are sort of an easy route for politicians to make it sound like they are doing something about the housing market, while actually not doing something that’s very effective.”

As a General Election looms, we continue to hear promises from politicians to meet the 300,000 target, with very li le in the way of new thinking to support this.

Given that, who's to say we won’t be marking 30 years of the Barker Report in 2034, in an even worse predicament than we are today?

When asked about her target of 297,000 new homes a year, Barker replied that it was “as far off today

as it was in 2004,” and sadly, she is right. To say whoever forms the next Government needs to grasp the ne le on this issue, and quickly, would be an understatement. Let’s hope that we finally have an administration prepared to do what is necessary, and then some. ●

May 2024 | The Intermediary 51


It’s fair to say there have been many headwinds facing all sectors of the mortgage market over the past yearand-a-half, the principal ones being economic, political and geopolitical turmoil which – coupled with soaring costs of everything from houses to everyday essentials – have impacted on the rates lenders have to charge. Amidst all this, there has been a reduction of activity across the board, as those who don’t have to move, sell or buy have perhaps opted to sit tight and see whether things would settle down before taking the leap. Signs have been positive so far this year, as activity in the first few months of the year has been greater than expected.

However, whereas for owner occupiers all of the external factors have serious consequences when it comes to their life plans; for landlords it can become a question of bread and butter – of staying in business or not.

Hanging in there

They have faced all the challenges other borrowers have, and more in the form of new taxation rules which mean not only are they paying more for their mortgages, they are also unable to offset those costs against the tax they pay. They are also facing increased regulation to protect tenants, and the stalemate caused by high house prices and rates together, making it almost impossible for some to expand their portfolios. Capital earnings potential is also under pressure, thanks to the high cost of properties and the abolition of Capital Gains Tax-free thresholds on sale of properties.

So, no surprise then that some have questioned whether there was much road left to run for buy-to let. We’ve consistently vouched for the potential and importance of landlords, and indeed included a recommendation in our Home Truths report last October

that, action should be taken to ensure them a level playing field.

Happily, though, we’re not a lone voice and a newly-released survey from the NRLA, which saw Pegasus Research interview a national sample of 774 landlords, suggests that not only are the majority hanging in there, but the sector as a whole may be turning a corner.

So, what are the headlines?

It’s certainly true that there has been some adjustment in the buy-to-let sector as expected, but there are also signs of green shoots appearing. Those who are still ‘in’ are continuing to make money to ensure the sustainability of their operations, with a 0.9% increase in yields being reported between Q1 2023 and Q1 this year, including a rise of 0.5% between Q4 2023 and end of March 2024 - the largest quarterly increase since Q2 2020 – albeit those increased returns are likely the result of rent rises, so less good news for the tenants they serve.

In fact, this is the first time since the end of 2021 that the average yield has been over 6% and, although still not huge, this does demonstrate resilience. Despite rents increasing in response to market conditions, tenant demand remains high, with a negligible (1%) proportion of landlords reporting weak tenant demand, and only 12% describing it as average in their experience.

Over the last 10 years, when rates were low, it was easier to be a landlord, which is likely why so-called ‘accidental’ amateur landlords were able to remain in the game for a while.

However, there are signs that some of those people, under pressure from the aforementioned challenges, have decided to exit the ring. Finding ways of maintaining viability when the tides turn against you can be tough, and should only be for those serious about their role in providing quality private rental housing.

This is resulting in a professionalisation of the sector, where it is increasingly populated by those who are happy to strive for solutions to balance their books – like taking on their own property management (the NRLA report suggests that 48% of nonHMO landlords self-manage) and maintenance, and managing their rental prices pragmatically. This means the sector is increasingly populated by people who have more than one property and know what they need to do to make an effective business venture out of buy-to-let. Better for the landlords themselves, the sustainability of the sector, and the tenants they serve, who can rest assured that their properties will reflect the highest possible standards; for example, one in 10 will definitely make energy efficiencies to their portfolio in the next year.

The good news, though, is that this doesn’t appear to rule out the smaller landlords, so long as they are serious about, and committed to, what they are doing.

The NRLA figures show that only 17% of the landlord respondents overall are making large profits; 67% are making a small profit; 4% are making a small loss and 2% are making a large loss. Among the smaller players, who own between one and three properties, only 14% said they were making a large profit; 67% a small profit; 13% are breaking even and 4% making a small loss.

The figures also underline the valuable contribution landlords make to society. Families are key beneficiaries of private rental sector provision, while one in 10 landlords let to students and four in 10 offer accommodation to tenants in receipt of benefit support.

In it for the long haul

The findings also demonstrate a growing level of commitment to the

Opinion RESIDENTIAL The Intermediary | May 2024 52


sector, which also suggests the buyto-let market is starting to stabilise. Thirty-one per cent said they are considering exiting the altogether or divesting properties – down from 37% in Q2 2023 and 33% in Q1 2023. Sell-off activity is higher among portfolio landlords, suggesting that they are reorganising their portfolios in response to current market conditions, which is to be expected as good business practice, and we would expect to level out as economic conditions improve.

While some downward fluctuation in interest rates is hoped for, possibly even as early as next month, the market has probably settled close to what, historically, represented more normal rate levels of around the 5% mark. This means landlords entering the market now, are doing so with more realistic expectations when it comes to planning their portfolios; and making them much more likely to succeed in doing so.

The latest UK Finance arrears figures, released on 9 May, show that arrears in general are up by a relatively modest 3%, but the buy-to-let position has remained stable, again suggesting that while landlords may have struggled for a time, they are now moving forward more positively. And despite it being harder to demonstrate affordability; financing and refinancing activity is still going on. Over four in 10 landlords said they will re-mortgage or make a product transfer this year.

Brokers dominate buy-tolet mortgage arrangements –demonstrating the power of advice in volatile conditions, particularly when it comes to complex property portfolios. When asked how they arranged their most recent mortgage or product transfer, only 26% of landlords did so directly with their lender, predominantly on an execution-only basis. Landlords with more than four buy-to-let mortgages

are more likely to have engaged a broker for their most recent loan.

Unlocking this potential

It’s encouraging to see that the appetite remains among landlords, which puts even greater onus on lenders to help them find ways, through new and innovative solutions to affordability and pragmatic underwriting. At Accord, our answers to some of these issues so far have included solutions like top slicing, which allows us to take borrowers’ surplus personal income into account, in addition to the rental income, in order to increase the amount we can lend.

However, spurred on by these latest findings, landlords can rest assured we’ll be working hard to come up with more options in the year ahead and beyond, while pushing and hoping for wider industry action to remove some of the barriers to the success of this sector which are beyond our control. ●

JEREMY DUNCOMBE is director for intermediaries at Accord

In Pro le.

Jessica Bird speaks with Richard Howells, managing director at PRIMIS, about how brokers can navigate a rapidly changing market

When asked for his view on where the market –and the UK economy as a whole – stands at this time, Richard Howells, managing director at PRIMIS, wisely demurs, pointing out that if there is anything to be learned from the past few years, it is the foolhardiness of making hard and fast predictions.

“It’s one of those periods in time where, if you ask ve economists for a view, you’ll get six answers,” he explains. “Laws of economics are out the window in the mortgage and wealth markets.”

In this strange, ongoing environment of “expected volatility,” e Intermediary sat down with Howells to discuss, not where this sector is going, but how brokers can build their resilience, the role of networks in supporting them, and the ongoing evolution of a holistic market.

Changing relationships

One thing that is certain through all this, is that brokers – “traditionally a resilient bunch” – have been tested time and again.

“We are at a real pivot point in terms of brokers thinking about their businesses,” Howells says. “ e rst reason for this is to make themselves more resilient, and the second is Consumer Duty.”

For PRIMIS, this underpins the need to move toward a “composite model,” creating a “holistic adviser rm” encompassing mortgages, protection, general insurance (GI), wills, and all other elements of the nance lifecycle, which will ultimately bene t both brokers and consumers.

“ is is not a new concept,” he adds. “And busy mortgage brokers will likely say ‘I haven’t got time, I’m too busy’.”

However, this perspective does not take into full account the changing shape of the customer base. Howells notes that brokers will likely see a shi from focusing on the number of customers, to making more of the ones they have.

more on ‘customer yield’,” Howells explains. “One of the future elements of the market will be a reduction of the number of customers coming downstream to get to the advice community.

“ ere will be more big digital players capturing customers at very early stages, engaging with them before they’re even thinking about mortgages – for example, when they’re trying to get match t for mortgages – and they’ll create a relationship and drive them down a digital mortgage journey.”

is journey might be right for a customer – but equally, if not, they might miss out on the neutral, holistic advice that would help them understand their options.

Howells continues: “While most brokers will say they have more customers than they can shake a stick at, I do think there’s a future where they have to think about what they would do if there were fewer customers coming down the track.”

In addition to bene ting the broker and customer in terms of service delivery, a composite

model can also help with some of the Consumer Duty expectations.

Howells voices a concern that in this brave duty to “come for brokers,” convincing Mortgage Intermediaries (AMI) potential liability; even if

new world, claims rms might use the customers that they have not received the right service to avoid foreseeable harm. He points out that, in recent Association of research, 93% of brokers said they had a conversation with customers about protection, but only 30% of customers remembered it. is is not simply a perception gap, but a potential liability; even if

“What we’ve been working on is a change of mindset to focus

The Intermediary | May 2024 54
People who have good social skills, are good at talking to people, are authentic and whom people can trust – they are like gold dust. ey’ll make great advisers, because it’s not just about being technically competent, it’s about getting the customer to engage with you and trust your advice”

complaints are easily refuted, this is a time, resource and emotional drain that could be avoided.

With a composite model, brokers are in a position of trust, ticking all the holistic boxes to help ensure these perceived gaps are lled.

For some rms, this is something they want and are capable of doing in-house; for others, understandably, it is too much to add to an already packed work ow. In both scenarios, networks like PRIMIS have a role – either providing support and education, or a source of referrals.

To make the most of these referrals, Howells points out that some rms must move past a lingering reticence, borne out of a misconception that they might lose grip on their hard-won customer base.

“When it’s rms within one network, they’re all part of the family, so that fear is going away,” he says. “Firms can o er a full-service proposition, without actually having to do it all themselves.”

While networks are not “the only game in town,” and it is up to each rm to decide what works, Howells says the network proposition will continue to develop to provide this much-needed support as time goes on.

Advancing tech

is is a market in which it is increasingly di cult to ignore the importance of technology. Beyond simply assessing which is the right customer relationship management (CRM) system, brokers are now expected to take a nuanced approach, which can be di cult without support. is is

increasingly important when attempting to create a composite model.

“It’s not just about managing the customer, it’s about digital engagement and keeping the broker business front of mind for the customer,” Howells explains.

“How do I get straight-through processing? How do I integrate with the lenders and make the process more e cient for customers?

“ ere isn’t one single piece of tech that does that, so networks will develop to be able to provide the right combination of tools. Small broker rms o en won’t be able to do that for themselves.

“ e raison d’être for networks has always been compliance. at will remain, but they will also have to move along with the broadening of services to cater for an emerging broker model.”

Howells also states the importance of faceto-face engagement from brokers, but says that – particularly as there is simply a lack of enough advisers in the UK – tech is the answer to being more productive and focusing on the “real kernels of value for the consumer.”

Driving forward

While one answer to the limited number of advisers is to make sure those already in the market can work as productively as possible, this does not solve the wider problem, which is that there are simply not enough people coming into this industry.

“ ere’s a perception problem,” Howells says. “ e role of ‘ nancial adviser’ still has a stigma attached to it, but for many people it’s a great option. People who have good social skills, are good at talking to people, are authentic and whom people can trust – they are like gold dust. ey’ll make great advisers, because it’s not just about being technically competent, it’s about getting the customer to engage with you and trust your advice.

“ e market has got to work harder at that perception, really spelling out the bene ts of being a nancial adviser. Helping someone achieve their dreams of homeownership is a really great feeling.” is is partly an issue with messages about nancial services being relayed in the media. Meanwhile, while there is a positive push toward providing better nancial literacy in schools, this growing con dence – combined with a negative perception of nancial services – might have the concerning e ect of leading future generations away from much-needed advice.

“It’s good to have all these new potential routes to market, but we need to consider whether these routes actually reach the right customer outcomes,” Howells says.

May 2024 | The Intermediary IN PROFILE

erefore, he adds, nancial education should also focus on the important role of the adviser; this, in turn, could have a positive e ect on recruitment.

For the industry, beyond simply adding more volume, bringing in new, young advisers would complement the stock of experienced individuals already at work.

“New people bring new ideas, new ways of engaging with customers,” Howells says.

Building better

Howells is not just talk when it comes to the idea of bringing in fresh insights. As a network, he believes PRIMIS must itself be representative of the population, the broker base, and the bank of current and potential customers.

“I see lots of people talking about [diversity and inclusion (D&I)], but I don’t see enough action,” Howells says. “We have been working really hard to do something about this, increasing the number of our sta who reported as minority ethnic by 13% last year, and increasing the number of female sta in senior positions.” is, he asserts, is “not about targets, but understanding that diverse teams beat homogenous teams every day of the week.”

As a business, PRIMIS works from the understanding that D&I is not just the right thing to do, but also that there is also a clear commercial bene t.

“If we want to be the most successful business we can be, we have to drive diversity,” Howells says.

is only works, he adds, if rms work hard at the ‘inclusion’ element. Finding the right roles for each person, playing to their strengths, creating accountability without fear, and breaking down unnecessary hierarchies, all combines with the value of having diverse teams to promote an environment primed for creative, collaborative thought.

“It’s only by allowing people to be themselves that we release those ideas that will take our business forward, and release the latent potential of those individuals” Howells explains. is factors into his own leadership style, from physically placing himself within the team rather than behind an o ce wall – creating an environment of “high visibility management and leadership” – to fostering a sense that no one gets everything right, and mistakes are an opportunity to learn.

Part of this culture is about understanding that “feedback is gold dust” – this, in part, takes the form of a reverse mentoring scheme that Howells himself has vastly bene tted from.

“We’re all on the same team, and it’s important

e concept of advice will endure, and I can’t see anything coming down the track that can replace the important human contextualisation of advice”

for me to spend time with people,” he says. “I want to make it absolutely natural for the most junior member of sta to come up and speak to me without being nervous. e business is better as a result.

“One of the ways we’ve found to increase learning and communication is through mentorship. Each exec mentors at least two people, and each exec also has a reverse mentor. It’s among the best learning you’ll ever have.

“It’s about understanding the reality of somebody’s world when you might not have your own references to rely on. For example, if someone’s transitioning, what does it actually feel like for them to come into work?”

It is not enough to simply gain these insights, however; Howells warns that there must be changes and results stemming from these conversations – even in something as simple as changing an email signature, or a dress code –and that “it’s important that allyship is seen in a physical sense.”

Concluding thoughts

Whether it is the shape and experiences of its workforce, or its support for brokers in building their own resilience, PRIMIS is focused on the future of this market – even more so when that future is so di cult to predict.

Howells concludes: “ e concept of advice will endure, and I can’t see anything coming down the track that can replace the important human contextualisation of advice.

“What I can see is that really successful businesses in the future will do a number of things. ey will embrace technology to take away ine ciencies, they will move to a composite model to serve the customer all in one place. Finally, each broker business and the wider market will play its part in terms of inspiring the next generation of borrowers and advisers.” ●

56 The Intermediary | May 2024

2024: Already a lot to think about

Aer four years of health and economic challenges, 2024 seems tentatively to be turning a corner. The Bank of England has been much more upbeat on inflation prospects, now suggesting that no further interest rate rises will be needed to keep a lid on the rising cost of living. Markets are pricing in base rate cuts in the second half of the year, and there has been a noticeable pick-up in activity in the housing market in the first three months of the year.

Bank of England figures show that in Q4 2023, the share of gross mortgage advances for house purchases for owner-occupation rose 1% from the previous quarter to 58.7%, 3.3% higher than a year earlier.

Supporting the market

It has been an excellent start to the year – for us in particular. Much of this positive turn is the consequence of wider market trends and improving economic data. However, it’s worth calling out the role that both brokers and lenders have played in supporting the mortgage market and borrowers over the past few years.

It has not been an easy ride for borrowers, who have been under increasing financial pressure on multiple fronts at once. More than two million borrowers have faced significant rate rises on remortgage, and it’s to both intermediaries’ and lenders’ credit that – where payment increases have pushed affordability to the limit – those customers have been supported throughout the process. This sensitivity will need to continue through this year and beyond.

Even though, according to UK Finance, remortgaging from very low rates to rates in line with today’s has peaked, more than 1.5 million deals are set to end this year. While affordability looks likely

to ease in the medium-term, such a significant change in monetary policy since December 2021 will have material consequences for existing borrowers for years to come. There are challenges, not least managing forbearance for those whose household finances simply cannot cope in this new economic normal.

Growing stress

The latest mortgage lenders and administrators’ statistics from the Bank of England show that arrears are rising fast, albeit from a very low base. The value of outstanding mortgage balances with arrears in Q4 last year increased by 9.2% from the previous quarter, to £20.3bn, and was 50.3% higher than a year earlier.

The proportion of the total loan balances with arrears relative to all outstanding mortgage balances rose from 1.12% to 1.23%, the highest since Q4 2016.

There is undeniably growing stress in the UK mortgage market, something all lenders are mindful of. In its latest Financial Lives cost of living survey, the regulator found that 7.4 million people were struggling to pay bills and credit repayments in January 2024. Though that is down from 10.9 million in January 2023, it is still higher than the 5.8 million recorded in February 2020, before the cost-of-living squeeze began.

5.5 million people told the Financial Conduct Authority (FCA) they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous six months to January 2024, down from 6.6 million people a year earlier.

The implication for arrears is clear, and lenders are taking steps to prepare. Managing back book risk is a priority, one that is breaking uncharted territory following the implementation of the FCA’s consumer duty rules.

In a statement released in April, the

More than two million borrowers have faced signi cant rate rises on remortgage, and it’s to both intermediaries’ and lenders’ credit that ... those customers have been supported throughout the process"

FCA confirmed stronger protections for borrowers and published in-depth guidance for firms supporting existing mortgage borrowers impacted by rising living costs. The expectation on lenders to support borrowers in difficulty, first introduced during the pandemic, will be made permanent from 4th November, and there will be additional targeted changes designed to improve outcomes for consumers.

This year also holds some political uncertainty – who will be in power following an increasingly imminent general election? The Budget in March may have been disappointing for those in the mortgage and housing markets, but when it comes to electioneering, voters care about access to homes. We may yet see another fiscal intervention in advance of any vote to further boost homeowners’ sentiment. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 57

Understanding the value of the services you offer

The focus on consumer detriment in an economy that still has plenty of capacity to provide unpleasant shocks means avoiding consumer harm has never been so vital.

The FCA advice is very prescriptive in relation to Consumer Duty, requiring advisers to act in good faith, avoid causing foreseeable harm and enabling clients to pursue their objectives. This requires firms to be “proactive in delivering good customer outcomes,” the regulator states.

That presents mortgage brokers with a simultaneous demand: that to be above reproach, advisers can no longer be satisfied with offering clients a service, but they also need to know the products they recommend inside and out while being conscious of the prevailing market conditions.

While this might seem intimidating, it actually offers a clear opportunity to demonstrate the genuine value and intention of the services brokers can and in some instances do offer that go beyond that of their core business. Selecting products that cater to the individual's circumstances, regardless of whether this may be the most profitable, should obviously be mandatory.

Buying properties, unlike white goods or even financial services products, relies heavily on the notion of ‘caveat emptor’ – namely that the buyer alone is responsible for checking the quality of the property they are buying. The question is that, in the midst of what is invariably for homebuyers an emotive transaction, is a buyer really capable of exercising that notion? Caveat emptor is hard to exercise when the buyer knows so little about the purchase they are

making and is often doing it under tremendous pressure. It is especially hard for first-time buyers making an immense financial commitment; essentially, if the decision is wrong, keys cannot simply be handed back.

In spite of this, it appears that the home-buying process has become more distant rather than personal.

Room for error

All of these elements can combine to remove more of the human interactions and creates room for unhelpful mistakes. Even the traditional ‘once over’ of a property has, in many cases, become an optional add-on, rather than a vital link in the chain.

In some situations, this leaves the buyer as the only person to physically view the house they are purchasing. Without a set of experienced eyes, this leaves room for error and faults that may detrimentally impact the price and size of the required loan, risking customer harm.

There are clear actions mortgage brokers can take to remain helpful to their customers, regardless of common market practices. Placing the interests of the customer at the forefront of any decisions or advice is what Consumer Duty aims to achieve.

The rules urge the maintenance of customer relationships and more transparent methods of communication. Offers such as private surveys and conveyancing should all be thoroughly bridged to represent a cohesive buying and lending process. A broker is their customers’ guardian not only at the point of securing the mortgage finance but throughout the life of the transaction and loan.

A thorough process that delivers 360-degree client care can remove the unnecessary haste to save money and

may alleviate concern throughout the whole value chain. But over and above offering a private survey, brokers should be aware of the process and what their clients are paying for. Panel management, for example, often means the client is paying for another layer of management that can hardly be said to deliver the best value.

This is why our model removes the intermediation and cost, and includes a price match guarantee. The survey price match means that brokers can avoid causing unforeseeable harm and contribute to improving the homemoving experience. The service works as a bridge, joining the dots between mortgage broking and other services, such as conveyancing. It speeds up the transaction too by unveiling upfront any unpleasant surprises. Most importantly it offers a level of crucial level of protection from future harm.

In an uncertain and tough economic climate, customers are in a vulnerable position to make such a large financial commitment, and brokers have a greater responsibility than before.

A private survey makes sense now more than ever. The housing stock is aging, and our expectations of our houses are having to change as we seek to become more energy efficient. Knowing the state of something before you buy it seems obvious but for too long surveys have been seen as a block to a transaction, when in fact they are now a legitimate buyer protection against future detriment.

Protecting clients means understanding the central importance of broking across the entire process and comprehending how mortgage intermediaries can better manage and evidence that role. ●

Opinion RESIDENTIAL The Intermediary | May 2024 58
MARK SNAPE is managing director at GoTo Group

Plugging the key awareness gaps

It takes any market a while to find its feet following a period of sustained turbulence, and this is even the case for one as robust and resilient as UK property.

Following 12 months of interest and mortgage rate rises, a variety of geopolitical factors and worldwide economic influences, generally speaking, the past six month have laid a far more solid economic foundation. This is a foundation on which the housing and mortgage markets have been able to cautiously rebuild confidence and reengage propertyrelated aspirations as consumers slowly adjust to a new interest rate norm.

Not that this adjustment has been easy, especially from an affordability perspective. It has also taken some time for many first-time buyers and potential homemovers to realise that we are not going to return to those heady interest rate lows that we took for granted or experience a house price crash any time soon. For those creditworthy borrowers who remain wellpositioned to take their first step onto or next step up the property ladder, there has become less and less of an incentive to wait on the sidelines any

longer. This was evident in the latest figures from NAEA Propertymark which showed heightened demand within the residential sales sector, with the number of buyers registered and the number of viewings per property both increasing.

HMRC statistics for March also demonstrated a rise in the number of UK residential transactions. This totalled 86,980 for the month, 9% lower than March 2023 but 20% higher than February 2024.

In addition, the latest Money and Credit statistics from the Bank of England showed that net mortgage approvals for house purchases rose from 60,500 in February to 61,300 in March, the sixth consecutive rise and the highest number of net approvals since September 2022.

In terms of house prices, Halifax suggested that they held steady in April, rising on a monthly basis by just +0.1% – less than £200 in cash terms – with annual growth rising to +1.1%, from +0.4% in March. However, further data from Nationwide outlined that UK house prices fell by 0.4% in April, resulting in a slowing in the annual rate of house price growth to 0.6% in April, from 1.6% the previous month.

What do these figures mean?

From our perspective, we are seeing a slow but steady rise in demand from a variety of perspective buyers who made some modifications to their previous expectations and sellers who have become a little more openminded and appreciative of borrowing demands.

The majority of purchasers have always been aware of how much help they need during such a complex, emotive and often arduous homebuying journey but these past 12 to 18 months have further accentuated the importance attached to information, advice, reputation, professionalism and specialism. This stems from lenders through to conveyancers and advisers through to surveyors, plus anything and everything in between.

Although, it’s prudent to point out that – as highlighted in our inaugural Home Survey Trends Index for Q1 2024, which found that fewer than one in 10 homebuyers instructed a home survey with their recent property purchase – there still remains some huge awareness gaps which need to be plugged.

So, while the UK housing and mortgage markets appear to be operating on a firm footing, it remains vital that all service providers work cohesively to arm homebuyers with all the necessary advice and knowledge to ensure they have the ability to make the most informed decision possible and keep confidence levels trending in the right direction. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 59
Information, advice, reputation, professionalism and specialism are essential

Mainstream lenders must provide nearprime alternative

Millions of people are starting to feel more confident about their finances. That’s the conclusion of the latest financial lives survey from the Financial Conduct Authority (FCA), which found that almost threequarters (72%) of adults said they were coping well or fairly well with meeting bills. That’s up substantially from the 64% in January 2023 who reported the same.

While the survey suggested that around 7.4 million people are struggling to meet their repayments, that is nonetheless a substantial improvement on the 10.9 million in the same position at the start of last year.

Brokers will no doubt have plenty of clients who have gone through a similar improvement in their financial fortunes, who may have struggled somewhat a couple of years ago but who are in a firmer position today. They may have experienced the odd payment blip during the most testing times but are now better placed to take on a mortgage.

Yet while they may be a perfectly good borrowing prospect, the fact that they have had some sort of issue in the past can prove a significant barrier, something which I believe mainstream lenders need to act upon.

Unfortunately, many mainstream lenders take a dim view of the nearprime market. Their reliance on credit scores when assessing applicants means that those who have the odd hiccup in their payment history are excluded.

This approach means that brokers often focus their efforts exclusively on the specialist market, and while it’s true that specialists have carved out

something of a niche catering for such borrowers, it’s also true that there are non-specialist lenders delivering for near-prime clients, too.

Ultimately, whether a lender is likely to consider a near-prime candidate tends to boil down to whether it leans on the black and white of a credit score, or if it instead wants to get a more informed impression of the client’s financial position and payment abilities.

One of the issues that can be easily overlooked is the fact that near-prime is only how the borrower is categorised in the present. If the black mark in their history really was just a one off, then over time they should be moving back into the prime category.

Specialist lenders are not going to be able to support such clients with this transition, since they do not tend to operate in the prime spaces dominated by mainstream lenders.

But if mainstream lenders are more open to working in this space, then we can play a more hands on role in steering such borrowers onto more appropriate deals as and when their circumstances dictate.

At Atom bank, for example, we are proactive in monitoring the situation of our near prime borrowers, so when the time comes to refinance they have the option of a prime product, should they now fit the eligibility criteria.

Realistic lending

Another hurdle brokers can face when working with near prime clients is securing finance at higher loan-tovalues (LTVs).

The reality of the rising costs seen in recent years is that saving a more sizeable deposit is a big ask, particularly when you consider the rate of house price growth as well. The fact that these clients may have only

modest wriggle room in their monthly budgets could have contributed to that temporary payment issue in the first place.

As such, it’s crucial to find near prime finance that is available for those with more modest deposits, and this is an area where mainstream lenders can make a real difference.

It’s something we are doing at Atom bank for example, ensuring that our near prime range is available up to 85% LTV.

Mainstream’s role to play

Near-prime borrowers are not a tiny subset of the mortgage market. The challenges of recent years mean that ever-growing numbers of clients fall within this bracket, having experienced a payment issue for the first time.

It wasn’t the start of more prolonged problems, just a temporary bump in the road, yet that threatens their borrowing prospects for a far longer period than is necessary precisely because of the approach of mainstream lenders towards near prime.

While it’s welcome that specialist lenders are providing options for these clients, there should be far greater levels of choice, with mainstream lenders well placed to deliver. It’s an issue we believe in passionately at Atom bank, recognising that the near prime clients of today are the prime customers of tomorrow. But they will only reach that stage if they receive the support they require now. ●

Opinion RESIDENTIAL The Intermediary | May 2024 60

The end of the traditional 25-year mortgage term?

As the old proverb goes, there’s nothing certain in life but death and taxes.

Until recently, the traditional 25-year mortgage term was all but a certainty. When I was cutting my teeth in the industry, it was extremely rare to see anyone taking out a term that was longer than 25 years. It just wasn’t really a thing. However, times have changed, and the once-popular 25-year mortgage term is becoming a dying breed among today’s first-time buyers (FTBs).

Data from UK Finance shows that, by the end of 2023 nearly six in 10 FTBs took out loans with terms of 30-years or more. What’s perhaps more shocking is that nearly one in five FTBs in December last year applied for a loan with a term of 35-years or more.

That’s a very different place to where we were. Rewind to the end of 2008, and just two in 10 borrowers took out mortgages with terms of 30-years or more. Terms of 35-years or more were virtually non-existent, accounting for just one in 20 FTB transactions.

Many factors

So, why are today’s FTBs so readily willing to saddle themselves with debts that they will more than likely take with them right up to – or even into – retirement? There are several factors at play here.

Soaring inflation and borrowing costs have clobbered FTBs more than any other type of borrower. First, they tend to earn less than older, more experienced workers and, second, they have far less equity, meaning they pay higher rates of interest.

Extending a mortgage term by just

10 years can make a huge difference to a first-time buyer’s quality of life. Therefore, it’s perhaps unsurprising that FTBs have looked to reduce their outgoings as the cost of living has soared.

For example, the monthly repayments on a £250,000 loan over 25 years at 5% come in at £1,461.68. Extend the term to 35 years and a FTB can shave nearly £200 off their monthly repayments.

However, while extending the term brings down the monthly repayments considerably, it can add thousands to the total cost of the loan. In the example above, the borrower will end up paying more than £91,000 extra in interest by extending the term by 10 years.

We’ve seen in our second charge division that borrowers’ primary focus right now is to bring their monthly costs down, whereas it used to be the total cost of borrowing.

But while the desire to keep costs low in a higher inflation, higher interest rate environment is the driving force between the recent uptick in FTB mortgage terms, other factors have also played a part.

The Mortgage Market Review (MMR), which came into force in 2014, rightly introduced new rules to ensure that lenders only accepted borrowers who could afford their loans.

While I believe the MMR was absolutely the right regime to introduce, there is no denying that it has made it more difficult for some FTBs to get onto the housing ladder. However, arguably the biggest contributory factor behind the rapid extension of mortgage terms has been the rapid ascent of house prices over the past few decades.

Data from Nationwide shows that

The last time housing was what the ONS considers ‘a ordable’ –ve-times income or less ... was 23 years ago”

in just nine of the past 71 years have house prices ended a calendar year lower than they were at the start.

Separate data from the Office for National Statistics (ONS) shows the average home cost 8.3-times the typical salary last year. In Wales, things were slightly better, with the average house costing 6.1-times income.

But the fact is the last time housing was what the ONS considers ‘affordable’ – five-times income or less – in both England and Wales was 23 years ago.

When interest rates start to fall and inflation is back at the Bank of England’s 2% target, the pressure on FTB finances will start to ease. When that happens, it’s likely we will see reduced demand for longer mortgage terms.

However, the trend won’t reverse completely until we find a way to build enough homes to satisfy demand. The best way to do that is to completely transform the planning system.

Both the Government and Labour have been making noises about planning reform over the past few months but it’s time they turned action into words. The positive economic and social benefits are too large to ignore. ●

Opinion RESIDENTIAL May 2024 | The Intermediary 61

Holiday lets haven

There is no mistaking that landlords have –in the main – found the market challenging over the past few years. The higher interest rate environment, coupled with restricted affordability and changes to how buy-to-let (BTL) income is taxed, have not only hit landlords’ profits but also forced them to potentially scale down their portfolio expansion plans, or worse still, sell property to help with cash flow.

Buy-to-let landlords have, therefore, been seeking avenues that promise not just stability, but also increased returns; that’s why there has been a noticeable shi towards higher yielding assets over recent years, such as houses in multiple occupation (HMOs) as well as semi-commercial and commercial properties. Another avenue that has gained significant traction among landlords is holiday let properties.

any accommodation type. Usage of holiday rental properties is currently highest among 16 to 44-year-olds. However, the rising population of older adults represents a big opportunity to the holiday rental property market.


rising demand translates into higher occupancy rates and rental incomes for landlords.

Similarly, holiday let properties offer landlords greater flexibility and control over their investment. Unlike long-term rentals, landlords have the freedom to use the property for personal holiday or short breaks when it's not occupied by guests. This flexibility appeals to many investors who value the opportunity to enjoy their investment while still generating income from it.

Unlike traditional BTL properties, holiday lets o en command higher rental rates, especially during peak seasons. This increased earning potential can significantly boost the landlord's income, making holiday lets an a ractive investment option, especially when compared to the ‘vanilla’ buy-to-let market, where properties are struggling to financially wash their faces at the current time.

Mintel Group Ltd recently documented that 52% of UK adults expressed interest in staying in a holiday rental property in the future. Holiday rental properties continue to show the highest growth potential of

The past few years have seen a resurgence in the popularity of staycations. This followed the onset of the Covid-19 pandemic in early 2020, but rising demand has also been driven in part by factors such as economic uncertainty and a desire for convenience. As a result, holiday let properties in desirable locations across the UK have experienced increased demand from holidaymakers seeking short-term accommodation. This

For portfolio landlords, with economic uncertainty and market volatility a constant concern, a well thought out diversification strategy has become crucial. Holiday let properties provide an excellent opportunity for landlords to diversify their property portfolios. By spreading their investments across different asset classes, including holiday lets, landlords can mitigate risk and enhance their overall investment strategy.

For some landlords, investing in holiday let properties goes beyond financial gains; it's also an investment in lifestyle. Owning a holiday let allows landlords to own a piece of

The Intermediary
Opinion BUY-TO-LET

for higher yields

desirable real estate in picturesque locations, offering the potential for personal enjoyment along with financial returns. This blend of lifestyle and investment appeal makes holiday let properties an enticing proposition for many investors.

Another factor driving the popularity of holiday let properties has been the favourable tax treatment they o en receive compared to traditional buy-to-let investments. For example, furnished holiday let property owners have been able to claim 100% of the mortgage interest as an expense.

However, from April 2025, holiday let owners will lose their mortgage interest tax relief, aligning them with the Section 24 rules that previously only covered residential landlords. Those landlords in higher tax brackets will be most affected, increasing their tax liabilities. It wouldn’t be a surprise to see holiday let ownership structures change a er April 2025, with a rise in purchases through limited company vehicles to minimise the effect of the tax changes.

Finding the right partner

It’s vital that mortgage advisers work with their landlord clients to help

them make the most out of their diversification strategy and that includes finding them the right lender for their requirements.

It’s also important to understand how there is further diversification in terms of property type within the holiday let market. For example, Quantum Mortgages is one of the few lenders which caters for the rising demand for multi-unit freehold blocks (MUFBs) with a holiday let BTL product. We lend on both single units and MUFBs up to 75% loan-to-value (LTV) and both individual and limited company applications are accepted, so we can help those landlords looking to mitigate the changes to tax relief next year via an incorporated structure.

At Quantum, we also recognise that holiday let isn’t just for highly experienced landlords with large existing portfolios. Instead, we just require the borrower to hold at least one existing buy-to-let property and have a minimum of 12 months’ market experience.

Our other requirements are simply that the properties are in a known tourist area and will be listed on at least a recognised holiday let listing website. In addition, an average

seasonal rental value (35 weeks) can be used in areas with materially below average unemployment rates of less than 3.6%.

Despite the economic downturn and lending market fluctuations, the demand for holiday let properties has shown resilience. The allure of short breaks and holidays remains strong, driving sustained demand for holiday accommodation. This market resilience adds to the a ractiveness of holiday let investments, providing landlords with a relatively stable income stream even during uncertain times. Furthermore, the shi towards higher yielding assets among landlords has propelled holiday let properties into the spotlight as a popular investment choice.

With their potential for a ractive yields, flexibility and lifestyle benefits, holiday let properties offer an a ractive proposition for investors looking to diversify their portfolios and maximize returns. As mortgage advisers, understanding the motivations behind this trend can help you be er serve your clients and identify suitable investment opportunities in the thriving holiday let market. ●

May 2024 | The Intermediary 7
Opinion BUY-TO-LET

A crowning year for specialist lending

In the world of mortgages, you will find countless definitions of ‘specialist lending’ and what it means today, despite the clearly essential role it is already playing in the infrastructure of the UK’s mortgage market.

My view – and I welcome others – is that specialist lending at its core uses criteria and manual underwriting to support a wider breadth of customer, o en in historically underserved sectors of the market, but can cover a wide and varied spectrum of lending from high net worth (HNW) Individuals, through to buy-to-let (BTL) landlords, as well as those looking to get on the housing ladder –via first-time buyer solutions such as Joint Borrower Sole Proprietor, all the way through to customers who, as a result of the past few years, may have blips on their credit files.

Borrower needs

An in-depth understanding of the needs of the borrower, whether employed or self-employed, is paramount, as are the nuances of their income. Lenders should also be on-hand to support mortgage intermediaries, providing detailed product information and excellent service allowing brokers to operate successfully in this sector, all of these are critical elements in the DNA structure of any specialist lender.

The days of specialist lending being serviced by the hand of the few has long gone, with it becoming very much part of the wider fabric of the lending community.

Accord’s low deposit product, for example, demonstrates how important this sector has become to all lenders, largely driven by both the pandemic and the cost-of-living crisis,

which has altered the UK mortgage market and driven lenders to be more innovative in product design, delivery and ultimately implementation.

The specialist market will continue to play a major part in supporting those customers who do not fit ‘standard’ criteria, and it is incumbent on us all to educate them on the options available.

Active market

So far this year, swap rates have dictated the direction of mortgage rates that have both fallen and more recently started to rise. However, the overall picture has been a more active market than many of us had anticipated and one where lenders are still very keen to lend and innovate, which has provided the intermediary market with a wealth of options and solutions, with the specialist sector leading the charge.

Specialist lending is a market segment we should all embrace.

Specialist lending is a market segment we should all embrace. Many lenders operate solely in this important sector, with others choosing to play on the periphery, but all providing choice and support to borrowers with unique circumstances”

Many lenders operate solely in this important sector, with others choosing to play on the periphery, but all providing choice and support to borrowers with unique circumstances.

For instance, more traditional high street lenders may use computerbased underwriting processes which won’t necessarily allow the manual interpretation of things like accounts or investment portfolios to understand the needs and borrowing capability of this important and growing customer segment.

Specialist buy-to-let

Looking at the BTL sector specifically, we can see greater positivity than we have done in recent years, leading to more evolution and innovation.

Limited company products are becoming a key element of any specialist lenders portfolio and one that will continue to play a major part both now and, in the future, as the sector evolves to be more innovative and resilient.

2024 looks to be a year that will witness real product innovation and a mindset shi towards developing products for a wider breadth of customer and adopting a greater intermediary focus.

In a world marked by economic uncertainties, specialist lending can comfortably meet the changing dynamic of the UK population, not only now, but also well into the future. Safe to say, specialist lending has most definitely moved out of the chorus line and taken its rightful place at the centre of the stage. ●

Opinion BUY-TO-LET The Intermediary | May 2024 64

Niche markets require optimised operational models

All lenders know that there are broadly two ways to approach the market: either you’re a low margin volume play, or you target niche sectors and charge a premium for a more nuanced view of credit risk. Niche markets in the mortgage industry allow lenders of all sizes to address the borrowing needs of specific groups of borrowers or unique property types. These niches can be based on various factors, including the borrower’s financial situation, property characteristics, and geographic location.

However, if a lender is not operating from a standing start, the system changes and fixes required to enter markets quickly are not the preserve of everyone – and even those lenders who are in niche markets already need to be ready to move at a moment’s notice.

The story of the buy-to-let (BTL) sector proves my point. It has had an eventful few years, filled with fiscal, monetary and regulatory change. Higher interest rates and the shi away from leveraged assets held in individuals’ own names have changed the shape of the market. Licensing laws for houses in multiple occupation (HMOs) now vary from council to council, creating a more nuanced set of risks for lenders to assess. Profit margins for landlords reliant on buyto-let finance have narrowed.

For lenders with access to the most competitive money market funding rates, the volume game is more achievable; for those with challenging funding costs, understanding niche markets is key. All markets have niches – adverse credit, multiple owners, self-employed borrowers are obvious ones in the residential market.

In buy-to-let, the niches have evolved as the market has changed, and for lenders, the ability to capitalise means operations need to be able to spot opportunity and implement appropriate service and product offerings quickly.

The rapid rise in the use of limited companies to hold BTL assets is a good example. In 2007, Companies House recorded just over 5,000 BTL incorporations. Analysis of official figures by Hamptons shows a record 50,000 new incorporations in 2023. While the intervening years saw consecutive growth in these numbers, the number of landlords opting to operate as a limited company really took off in 2019, in tandem with the removal of tax relief on buy-to-let mortgage interest.

Subsets of subsets

10 years ago, buy-to-let lending might have been loosely divided into straightforward individual landlords, portfolio landlords and limited companies. Now, there are significant subsets of subsets for these categories and the balance is constantly changing.

According to Hamptons, at the start of 2024 there were 345,426 active limited companies designed to hold buy-to-let property in the UK, up 11.6% since the beginning of 2023. Overall, these companies own a total of 615,077 properties across England and Wales, an 82% increase from the end of 2016 when higher rate tax reliefs began to be withdrawn.

This tells us that the profile of limited company landlords has changed significantly.

Typically it was just landlords with large portfolios who used limited companies to run their businesses. But according to Hamptons, most of

the growth in BTL incorporations over the past year has come from smaller landlords, with a 22% increase in the number of homes held in companies with a single property. This compares to a 3.8% increase in the number held by companies owning 20-plus homes. Lenders have had to review not just their risk appetite, product offering and pricing but also their market focus as volumes have shi ed.

Buy-to-let is but one example of how the ability to move quickly to the changing rules, regulations and market dynamics can affect the margins and volumes available to lenders if they are unable to roll with the punches operationally. But there are many other elements of interest rates, fiscal changes and more in the past five years that also illustrate the point. If lenders are to have any hope of delivering rapid effective responses in terms of propositions, markets and pricing then operational agility is a must. Systems and processes that take an age to change can kill a business – even if the answer is properly understood.

Both lenders and brokers know that first movers take market share fast –and tend to retain it. To do that quickly and accurately to protect the business model, lenders need technology and systems that are fit for purpose.

Specialising in niche markets and specialised lending can open up exciting opportunities for mortgage lenders and their broker partners. These opportunities not only allow lenders and brokers to cater to unique client needs but they also offer a path to professional growth and financial success. ●

Opinion BUY-TO-LET May 2024 | The Intermediary 65

Opportunity in holiday let despite the Budget

It’s funny how quickly things can change. In the 1990s, everyone wanted to be a landlord. These days, anyone who isn’t a landlord seems to want to get rid of them.

Property investors have been targeted – unjustly, in my eyes – for the best part of a decade now.

The pressure started with the Government hiking Stamp Duty rates for second homeowners in 2016. Over the following four years, tax relief on mortgage interest was gradually phased out for landlords buying in their own name.

Since then, various new Government rule changes and regulatory initiatives have a empted to make it far less appealing to own investment properties.

The reason? It’s far easier to prize existing housing stock out of landlords’ hands than it is to build enough homes for those who want to buy them.

Why waste time and effort doing something properly when you can just take the easy route? Unfortunately, this has become the default position of our elected representatives over the past few decades.

Not down or out

But despite the Government’s best efforts, landlords have proven resilient. Cannier investors have switched to buying through limited companies so they can continue to deduct their mortgage expenses from their rental income.

Sensibly, others have diversified into higher yielding properties such as holiday lets. Therefore, it was a real shame that the Government decided to clamp down on these investors in the Budget.

Jeremy Hunt’s decision to scrap

the Furnished Holiday Let (FHL) tax regime from next April is unwelcome, but it should not be a surprise to holiday let owners. A er all, why should they benefit from a tax break on mortgage interest that is no longer available to residential landlords?

Regardless of whether it’s fair or not, I believe it’s a short-sighted move. If you’re looking for someone to blame for sky-high house prices, landlords and holiday let owners are easy targets, but I’m yet to see any proof that they are to blame for the property market’s woes.

Flexible value

The assumption is that ge ing rid of landlords would free up millions of homes for would-be buyers to purchase. The issue with that argument is that it assumes all UK adults have ambitions to own their home. A lot will, clearly, but others value the flexibility that renting offers. Without landlords, they simply wouldn’t have that option.

Similarly, when it comes to holiday lets, I understand the logic behind making homes more affordable for locals, and I empathise with those struggling to buy near where they grew up.

However, let’s not forget how vital tourism income is to the economies of popular holiday spots. If there are no holiday lets, it may free up homes for locals, but will they be able to buy them if the jobs disappear?

I’m also struggling to understand why the Chancellor decided to apply the changes across the board from April 2025. It would have made more sense to apply it from April 2024 on new purchases and to gradually roll it out to existing owners, so they are not excessively punished. From there, local authorities should have

I empathise with those struggling to buy near where they grew up. However, let’s not forget how vital tourism income is to the economies of popular holiday spots”

been empowered to apply Selective Licencing to limit the numbers of future holiday lets.

But that’s by the by. The real question is whether the Government’s clampdown on holiday let tax perks will kill off the sector.

I don’t think it will. Staycations boomed during the pandemic and have remained highly popular since. A recent survey by Travelodge found that a third of Brits were planning a domestic holiday this year.

Not only is the demand there, but holiday let yields are as much as 30% higher than the yield on a typical residential buy-to-let property.

Of course, taking away such a generous tax break is a body blow to holiday let investors, but the opportunity remains a ractive.

Plus, while investors may absorb some of the additional costs they face, I imagine a big chunk will be passed on to tourists. That’s o en how things work.

Once the hysteria dies down, I’m sure we’ll return to business as normal. In the meantime, I wonder how Devon and Cornwall are this time of year. ●

Opinion BUY-TO-LET The Intermediary | May 2024 66

MPs must see that landlords breathe life into economy

The economy will undoubtably be one of the first topics tackled on General Election manifestos, and it is likely that housing will be important for voters, too. We commissioned a report that reveals the contribution of small and medium landlords, highlighting how these two issues are inextricably linked.

With recent local elections offering us something of a precursor to the next general election, which Prime Minister Rishi Sunak has said he expects to be "in the second half" of 2024, politicians are drawing their ba le lines.


Polling by Ipsos last year revealed that healthcare and the economy were the most important issues for voters. Despite a range of indicators pointing to an improving economic outlook, the underlying economy is still lacklustre and households continue to struggle as the base rate remains at its highest point in over a decade.

Alongside the other perpetual political footballs of education and immigration, Ipsos’ polling found that housing was also an important issue for the electorate. Talk of a cut to Stamp Duty in a bid to boost the economy and woo voters suggests that policymakers understand the relationship between a thriving housing market and a nation’s prosperity.

It is important, however, to view housing holistically, and that – alongside promises to boost homeownership – politicians recognise the vital role of the private rented sector (PRS). We recently commissioned a report

in collaboration with the National Residential Landlords Association (NRLA) from leading professional services firm PwC that highlights the economic contribution of small and medium landlords in England and Wales.

The report defines small and medium landlords as those with fewer than 15 properties. These landlords are estimated to account for around 80% of the PRS’ 4.8 million households, owning 3.8 million properties in England and Wales. Providing homes for such a diverse and large group of people is clearly an important social function but there is also a sizable economic contribution – £45bn.


For context, the report authors point out that this is roughly twice the amount contributed by the advertising and marketing industry or the same as the gross value added (GVA) of Kent.

Throughout England and Wales, the contribution of small and medium landlords amounts to approximately 2% of the GVA of each region. This increases to 2.58% in London where there is a higher proportion of renters and average rental revenue relative to the rest of England and Wales.

Regional data on the size of the PRS and revenue per property, in addition to national level data on the size of landlord portfolios, was used by the researchers to estimate the economic contribution of small and medium landlords.

Using Office for National Statistics (ONS) data that shows the relationship between different industries in the wider UK economy helped to show that the £45bn GVA contribution was made up of £27.8bn of direct impacts, £11.8bn supply chain impacts and £5.2bn spending impacts.

Direct impacts refers to the value created as a direct result of private rented housing provision but also the jobs, with 129,000 people directly employed in the sector.

Interestingly, for every person directly employed in the PRS, two more jobs are supported. Indirect benefits are gained through supply chain demand generated by landlords as they spend on le ing agents, tradespeople and financial advisers, for example, supporting 1750,000 jobs.

These workers then spend this income, supporting further economic activity and a further 85,000 jobs.

This amounts to 390,000 full and part time jobs, further illustrating the important social contribution of the sector too.

Solving the puzzle

The report provides us a platform to engage with politicians and move forward the conversation on housing policy. We will join the NRLA at an event held in Parliament in June, sharing the report’s findings with policymakers and other interested parties.

Using data and expert insight to reinforce the role of the PRS in the economy, we will urge MPs to develop policies that view all tenures as equal parts of the same puzzle.

Doing this and resisting the temptation for short-termism and political point scoring will help to create an a ractive environment for sustainable investment, which in turn will help to provide a greater choice of affordable homes for tenants. ●

Opinion BUY-TO-LET May 2024 | The Intermediary 67
ROWNTREE is managing director for mortgages at Paragon Bank

Diversi cation is now imperative for landlord clients

We’re operating in an everchanging financial landscape, and it's become essential for UK mortgage brokers to encourage their landlord clients to take action and diversify their property portfolios.

With market dynamics shi ing and new challenges emerging, diversifying asset classes can provide stability and growth opportunities for investors.

But it’s also essential that this diversification takes place in conjunction with full consideration of both energy efficiency improvements and the rising demand in the private rental sector that’s occurring amidst increasing homelessness and affordability challenges.

Diversi cation is key

One of the most effective strategies for mitigating risk and maximising returns is diversifying asset classes. Landlord clients who solely focus on residential properties may be missing out on lucrative opportunities in commercial, semi-commercial, multi-unit blocks (MUBs), houses in multiple occupation (HMOs) and holiday lets.

By spreading investments across different asset classes, landlords can reduce their exposure to market volatility and enhance their overall portfolio performance.

Mortgage brokers play a crucial role in educating their clients about the benefits of diversification and helping them identify suitable investment opportunities.

Whether it's investing in commercial properties for stable rental income or exploring the potential of holiday lets for higher

yields, brokers can provide valuable insights and guidance to help clients make informed decisions.

Energy efficiency

In addition to diversifying asset classes, it's essential for landlords to consider energy efficiency improvements in their properties.

While the Government has yet to enforce legislation regarding Energy Performance Certificates (EPCs), proactive landlords can gain a competitive edge by investing in energy efficient upgrades.

Mortgage brokers can advise their clients on the potential cost savings and environmental benefits of implementing energy efficiency measures such as insulation, double-glazing and energy efficient heating systems.

Not only can these upgrades enhance the desirability of the property for tenants, but they can also future-proof investments against potential regulatory changes.

Landlord clients who solely focus on residential properties may be missing out on lucrative opportunities in commercial, semicommercial, multiunit blocks, houses in multiple occupationand holiday lets”

Rising demand

The demand for rental properties in the UK continues to rise, driven by factors such as increasing homelessness and affordability challenges in the owner-occupied market. According to the Organisation for Economic Co-operation and Development (OECD), the UK has seen a significant increase in homelessness, with 43 people per 10,000 affected in 2023. In this context, landlords have an essential role to play in providing safe and affordable housing options for tenants. Mortgage brokers can highlight the opportunities in the private rental sector to their clients, emphasising the potential for steady rental income and long-term capital appreciation. By encouraging landlord clients to diversify their portfolios and consider energy efficiency improvements, mortgage brokers can help them navigate the evolving property market landscape and seize opportunities for growth.

Moreover, by addressing the rising demand in the private rental sector, landlords can contribute to alleviating homelessness and meeting the housing needs of UK residents.

To conclude…

Proactive action is now essential for landlord clients to thrive in today's dynamic property market.

By diversifying asset classes, considering energy efficiency improvements, and meeting the rising demand in the private rental sector, landlords can position themselves for long-term success.

Mortgage brokers play a crucial role in this process by guiding their clients through these strategic decisions. ●

Opinion BUY-TO-LET The Intermediary | May 2024 68

More than the sum of its parts

No one would deny that the buy-to-let (BTL) sector requires a healthy array of products to choose from, particularly in an environment where rates are much higher than the medium to long-term, and where landlord borrowers are seeking to ensure they can not only access the finance they need, but also meet the affordability criteria, and ensure they keep any increase in mortgage costs down to a minimum.

That has been easier said than done for a large number of landlord borrowers, particularly those coming off cheaper deals which were much more in abundance prior to the miniBudget disaster.

Alien spike

I think we would all acknowledge that rates were on an upward trajectory even before Liz Truss and Kwasi Kwarteng got their hands on the Government tiller. A er their intervention, we saw a hugely significant spike that has le borrowers of all types having to deal with a mortgage rate environment that will seem alien compared with what we were fortunate to have.

Just as that particular debacle was unfurling, and the market was trying to deal with its repercussions, lenders stepped back in terms of product choice; who could be sure of just where rates were heading and over what timescale?

As a result, certainly in our sector we saw a large number of products fly the nest, in some cases never to return. While we have seen progress on that front we are still some way off the level we had available. Recent figures from Moneyfactscompare do, however, show signs of positivity, and a move back towards the levels we had become accustomed to.

As mentioned, though, we do have clear progress that shows a ‘fight back’

from the lower number of products which were undoubtedly a result of the mini-Budget in Autumn 2022, and which were also impacted heavily back in the Spring of last year when inflation rocketed, rates had to rise continuously and no one seemed to have much idea about when or if inflation would get close to target, or what level rates would need to go to in order to take the inflationary sting out of the situation.

While we might be seeing sticky inflation again right now, at least it is at much lower levels which allows us to look at a rate reduction horizon which hopefully doesn’t go too much further than this Autumn. Although we should point out that a month or so ago, a large degree of money seemed to be on a June cut to Bank Base Rate (BBR). That might appear to be too early now, but we wait to see.

However, in all of this, what is just as important – indeed, you might argue more important – than product numbers, of course, is the type of products that are available to landlord borrowers, and that involves us as buyto-let lenders making sure we have a diverse and wide range of options that cover the vast array of client wants and needs.

Again, not an easy ask in an environment which still feels uncertain, particularly from a rate point of view, which does of course need to be reconciled with our own risk appetite, and that of our competitors. All combine to create the market and the products we can offer, but I’m confident that – for the most part – lenders are able to work with intermediary partners on their landlord borrower needs and provide product and criteria choice which can get them to where they want to be.

We certainly saw that last year, with the introduction of a significant number of lower rate, higher fee products, which are still available and necessary in today’s marketplace, but

also – at the other end of the scale –zero fee products for those landlord borrowers who don’t wish to add to their overall loan amount by adding the fees to the loan, which of course adds to the interest payable.

Demand drivers

At Fleet, we’ve just launched new variations of both types of products to market, because we recognise the different demand drivers that are at play here for landlord borrowers. Some require the lower rate in order to meet the affordability criteria and are happy to pay the higher fee in order to achieve the loan amounts they need, while others don’t want larger percentage-based fees, plus we also offer fixed-fee products which might be said to be something of a halfway house.

At the same time, we want product options for the different types of borrowers and property types they are purchasing or refinancing, and again within those segments, we want to be able to offer the type of fee options mentioned above, because again there will be different needs and requirements at play.

Truly, this is about keeping landlord borrower clients either invested with their existing portfolio, or providing product choice and options to allow them to add properties to the portfolio. Coupled – product numbers and options – we can meet these needs, and importantly, both, as the statistics show, are growing.

As the year progresses, let’s hope we continue to see not just growth in product numbers and options, but also a downward pressure on rates, which will provide advisers and their landlord clients with further reasons to be cheerful about the future. ●

Opinion BUY-TO-LET May 2024 | The Intermediary 69

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Specialist advice is key for landlord clients

It’s fair to say that the fall in rates which we were led to believe might materialise in the Spring or early Summer of this year now looks unlikely to come to fruition, with much of the mood music around the money markets speculating that we may not see any cuts until the Autumn.

Understandably, with the rate environment much changed over the past couple of years, the importance of securing mortgage finance which doesn’t effectively price the landlord borrower out of the private rental sector (PRS), remains a key consideration.

Indeed, mitigating those higher mortgage costs has been, and remains, a key concern for all landlord borrowers, and with such concerns, I would hope, comes a greater need and use of mortgage advisers in order to help them keep any mortgage cost rises down to a minimum.

A recent survey of landlords, conducted on our behalf by Pegasus Insight, reveals what landlords have been doing, and what they are prepared to do, in order to mitigate against those rising mortgage costs.

Asked a question in which multiple answers were allowed, 30% of landlord respondents said they had renegotiated their mortgage with an existing lender, 29% had increased rents, 25% had cancelled plans to purchase additional property, 22% had remortgaged to another lender, 15% said they had paid part of their mortgage out of non-rental income like savings, while 15% said they had actually sold a property in order to reduce their mortgage outgoings.

Given the circumstances, you might well say that all seem like sensible ideas, particularly if the rates available and payable by landlord borrowers

had more than doubled over the time period.

In fact, given the timing of when borrowers were coming up to the end of their deals, they could have – at points over the past 12 to 18 months –found themselves paying more than double for a new mortgage, compared to their last.

Thankfully, we have come off the rate highs that we saw during that period, but by any measure, there will be few landlord borrowers who have remortgaged or product transferred recently, and as a result, are paying less than previously. That, I’m afraid, is a fact of interest rate life.

This shows, to my mind, the absolute importance of advice within this scenario. That becomes even more clear – or at least, should – for landlord borrowers given the average levels of mortgage debt they are carrying in the buy-to-let (BTL) space.

According to the Pegasus Insight research, landlord borrowers on average owe £634,000 in mortgages across their portfolio, ranging from £251,000 for non-portfolio landlords – with one to three mortgages – and £1.1m for portfolio landlords, with four or more.

It’s a significant chunk of change in anyone’s books, and given that the vast majority of landlords will only be paying the interest on these loans, the rise in rates we have seen has, and is, going to have a considerable impact.

Owing such debt levels should focus the mind, and with those costs rising, it’s understandable that landlords are looking at other ways and means to keep costs down and increase income levels.

Our research also revealed that 17% of landlords carry out more of the property management themselves now, while 8% have completely

switched away from using a le ing agent to self-management. We’ve also seen landlords seeking to maximise rental income levels and moving – or converting – properties into higheryielding sectors such as houses in multiple occupation (HMOs) and multi-unit blocks (MUBs), but also holiday and short-term lets.

Courting competition

Clearly, there is a marketing avenue to be pursued by advisers in this space. Product numbers in the BTL sector are rising, and greater competition should at some point lead to more competitive rates, but advisers are going to need to sign-post a large number of landlord borrowers to advice, judging by the survey.

26% said they had arranged their last mortgage direct with a lender, and while this might well have been the most suitable option, one can only wonder if there were savings to be made, or a more suitable product to be accessed, by these borrowers if they had used the services of an adviser.

A more competitive rate on borrowings of millions of pounds could save the borrower a significant amount of money, and provide them with options they had maybe not even considered, let alone criteria and product options that were simply not available by going direct.

Pushing that advice message to landlord borrowers should remain a key focus for all of us. Some landlords think they are ge ing advice from lenders direct when that is clearly not the case, and clearly, we want them to be able to compare their current lender’s product transfer offering against a search from the entire market. ●

Opinion BUY-TO-LET May 2024 | The Intermediary 71

How to complete more deals in 2024 and beyond

The property finance space has been exceptionally challenging over the past 12 months, with developers facing barriers and obstacles from every angle – high material costs, rising inflation and interest rates, falling gross development valuations (GDV), plus many other issues.

These factors have succeeded in creating the ‘perfect storm’ that has been responsible for derailing countless development projects. This has resulted in numerous stories of developers buying land towards the end of 2022, only to be told a year later it was worth less than what they original paid for it.

When you add unpredictable mortgage market fluctuations to the mix, developments over the past year in particular have been lacking the financial foundations to stack up. The ripple effect has been widespread, with brokers losing a significant amount of business last year alone.

Positive outlook

Fast-forward to the here and now, the time of year that has always traditionally been the busiest for property development projects, and we’re pleased to say the outlook is looking more buoyant. March and April were record months for CrowdProperty – we processed applications worth over £750m GDV in March, and over £1bn in April. This positive outlook is also evident in recent interactions our broker desk has been having with clients. Stable interest rates and land prices, falling inflation and rising valuations are all contributing to this upli ing picture.

Brokers are increasingly realising that there are widespread benefits

to venturing down the specialist finance route.

While some challenges still exist, there are opportunities for brokers to take on new deals they may have previously steered clear of. There is also the prospect to increase their revenue, which can be unlocked with the help of the following tips:

1 Consider the specialised route

Contrary to popular belief, funding for more specialised developments, such as barn and church conversions, is being provided by lenders, including CrowdProperty.

During the past few months, we have welcomed brokers such as Pure Property Finance, Cornerstone Finance, Propp and Positive Lending and a host of others to our panel. This is in addition to already working with industry stalwarts, including Arc & Co., Aureum, Kingswood Associates and The Property Finance Collective. At the same time, we’re dealing with lots of commercial to residential, airspace and Modern Methods of Construction (MMC) developments, which are far from the ‘norm’, but which we can and will fund, and get incredibly excited about!

2 Cast your net wider

Most brokers speak to the same funders, who may have helped them time-and-again over the years. However, as we all know, the market has changed – bridges within the bridging market got burned last year, and as a result, many of those tried-and-tested funding channels no longer exist. Now is the time to take a step back, re-evaluate the market from a here-and-now perspective, and identify those companies, like CrowdProperty, that are willing to

help and are funding developments, despite last year’s storm and the farreaching ripple effect it created.

3 Do your research

While property finance may initially appear difficult to navigate, this couldn’t be further from the truth. Established, experienced, reputable property finance companies are here to build relationships with brokers and ultimately help them and their clients.

The area they specialise in may seem complex, when in actual fact their expertise can help make things less complex in the long-run because of their tried-and-tested experience.

For instance, we provide a decision in principle (DIP) within the hour, share our next steps, go directly to ‘know your customer’ (KYC) and provide a credit-backed offer, which has already been reviewed by an underwriter. This means our brokers’ clients have confidence in our commitment and ability to fund deals at pre-valuation stage.

Additional and new revenue

There’s no denying the fact that the property development finance road has been a particularly bumpy one over the past year.

However, lower interest rates, rising house prices and more stable valuations, as well as the specialist development route, are all avenues brokers can leverage to bolster their revenue, and in some circumstances, generate a brand new income stream. ●

Opinion SPECIALIST FINANCE The Intermediary | May 2024 72
Helping you get more deals done Our dedicated broker team works with you to support SME property developers with loans from £100,000 to £10m+ for: Call or email us today to learn more -> Ground up and refurbishments Modern methods of constrution Airspace Barn and church conversions and more Our expertise allows us to offer • Competitive rates • Reliable funding • Better value for your clients 020 5252 251

The principles of good service

There are many definitions of what constitutes ‘service’, and the best one I have seen is as follows: an intangible, valueadded activity that a company provides to its customers – the core of what a company does to create added value for its customers.

In the lending industry, good service covers everything, from the broadest description of the experience of dealing with a lender that delivers the results required by brokers and their clients in the right timeframe, to a narrower version that celebrates the outstanding work by an individual lender, team member or members.

What constitutes good service – as opposed to indifferent or bad service – comes directly from the principles and work practices established by the lender.

Technology and its implementation have a large role to play in a smooth workflow, but the slickest process is only good in theory without the contribution of positive human input. People like to communicate with their fellow human beings rather than face the impersonal mechanisms constructed by many firms, such as automated answering systems, which – while designed to push respondents to use the website or non-specific email addresses – cause frustration and anger, creating antipathy toward the lenders in question.

This is the absolute opposite of good service. While no lender sets out to provide poor service, unfortunately it is sometimes a by-product of establishing a successful brand and then failing to upgrade a service infrastructure that hasn’t grown to take the pressure of that success.

What is becoming clear from conversations with introducers is the increasing number of bigger lenders in the short-term lending market that seem to have developed this ‘affliction’. From the feedback we are ge ing, brokers have – by and large – gone back to a lender because of a good experience when they first used it, only to find that going back to the same lender has resulted in a very different experience.

Instead of the ‘can do’ a itude they experienced before, they are met with a less than personal service, li le feedback and a ‘take it or leave it’ vibe.

Under pressure

The larger the lender, the more impersonal the service tends to be. The greater the volume of business a lender a racts can lead to a diminution of service as resources, both human and technological, come under pressure. Should you as intermediaries feel sorry for them? In my opinion, the answer is no. It is your clients who suffer when lenders let you down, to say nothing of your reputation –whether they cynically use ‘teaser’ rates to a ract your business, keep

you hanging on and then inform you that your case does not fit, or ask for more information in dribs and drabs, and then inflate the rate because of ‘unforeseen’ evidence.

Of course, it is up to introducers to make sure that their cases, from the decision in principle (DIP) to full application stage are robust and that the supporting evidence – should it be needed – is included. Lenders can’t be blamed for poor service if an application deviates from the DIP or the application itself is not fully completed. Having made that point, we know that the majority of cases are presented correctly, and lenders can’t hide behind that excuse for providing poor service.

At Kuflink, we believe that service to our customers, both intermediary partners and their clients, is of utmost importance. Our service commitment is founded on three main points: products, human interaction, and technology.

We start with developing products which make sense for borrowers. Simple in design, with as few moving parts as possible, to ensure that they are easily understood – thus making it easier to give DIPs almost immediately.

We continue to adopt technology, but only if it leads to be er outcomes for our customers. Adopting technology is not a question of choosing the system with seemingly all the bells and whistles, but more importantly, making sure that it helps improve the workflow and complements the work of what we like to think of as our secret weapon, namely the human touch – our team members, without whom Kuflink’s proposition would fail. ●

PAUL AUGER is head of origination at Ku ink
The Intermediary | May 2024 74
Lenders must uphold their service infrastructure

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Time to be a convert?

Since its invention in 1974 the Rubik’s Cube has seen sales top 500 million worldwide. It’s also spawned a myriad of quotes, including the following, which will strike a chord with property developers and lenders alike: “Building new properties is a bit like solving a Rubik’s Cube: just when you think you’ve got it figured out, everything changes.”

Whoever it was that first coined this quote, it certainly sounds like they could have had first-hand experience working in the UK construction sector since the start of this decade!

Following Brexit, a pandemic, supply chain disruption, 14 consecutive base rate rises, a disastrous mini-Budget, a cost-of-living crisis and demanding new legislation, it’s hardly surprising that rampant inflation and falling property prices finally caught up with the sector in 2023. Add in perennial and increasingly exasperating planning delays, and it’s no surprise that the number of starts fell sharply as developers focused on building out existing sites rather than opening new ones.

The challenges of a ‘speculate to accumulate’ cashflow model have rarely been felt so keenly, but thankfully as we move towards summer, the headwinds finally seem to be easing a li le. Inflation is falling, the next move in rates may well be down and supply chain issues have eased.

Developers and funders certainly have reasons to be more positive and there is now a strong case for specific forms of development, most notably conversion projects, to thrive.

Far from played out

The build-to-rent sector, underpinned by record demand for rental homes, is traditionally popular with young professionals and one favouring city centre locations. It’s estimated that to

keep pace with demand we will need a million new rental properties by 2031.

While some commentators argue that the best conversion opportunities have already been pursued in the years since permi ed development rights (PDR) were introduced, this ignores some interesting market fundamentals.

With the impact of remote and hybrid working pa erns, the city office market has become quite challenging, especially with the cost of renovating many older offices to the required Energy Performance Certificate (EPC) standards being prohibitively expensive. An estimated 60% of offices currently don’t achieve the Band C rating required by 2027, and consequently, it’s not hard to envisage another surge in commercial to residential conversions for both the rental and private market.

While ground-up developments will continue to hold an allure, there are many compelling arguments for converting existing commercial buildings into residential, not least the fact that conversion typically involves less risk than ground up projects, given that the property already exists. Older commercial buildings have o en been built with robust construction techniques and materials. Consequently, they can potentially provide a very solid foundation for residential conversion.

With a solid basic structure already in place, conversions are generally quicker to complete when compared to the lengthy process of acquiring land, obtaining planning permissions, and navigating the regulatory hurdles specific to ground up projects.

With developer margins being squeezed from all sides, cost efficiency is another factor. Conversions typically entail lower upfront costs compared to ground-up developments, because they eliminate the costs of land acquisition and preparation mentioned above.

If reduced risk, speed, and cost efficiency are not persuasive enough arguments for conversions, then the fact that adaptive reuse also ticks many sustainability boxes is another big argument in favour of this specific area of development. New life can be breathed into a ractive, historic buildings in areas that already have established infrastructure, amenities, and transportation links.

By retaining their intrinsic character and charm it’s possible to produce homes within vibrant and resilient, mixed-use communities close to employment centres, schools, and entertainment venues – homes where people really want to live. In addition, these developments usually encounter only minimal if any opposition.

Finally, in the face of escalating housing costs and affordability challenges, commercial to residential conversions in our big cities and towns can also potentially include affordable and social housing elements and by doing so promote inclusive urban development.

Of course, conversions are not a complete nirvana. While the advantages are clear these schemes can also present very real challenges, such as the remediation of hazardous materials or potential structural issues thanks to deterioration over time.

The requirements on listed buildings can also be onerous and quickly throw budgets and timescales off course, but overall, the case for funding good commercial to residential conversion schemes is compelling on multiple fronts. Now is a great time to be a convert to the opportunities offered by conversion schemes. ●

Opinion SPECIALIST FINANCE The Intermediary | May 2024 76
BRIAN WEST is head of sales and marketing at Saxon Trust

Brokers and the right of light risk

There is no shortage of factors that developers must consider before they can get started with their projects, from the planning process to funding.

But one issue which is o en both overlooked and misunderstood is the right of light. This can pose a huge issue, scuppering a development and incurring substantial costs in the process, which is why it’s so important for brokers to ensure their clients have included it in their deliberations.

Daylight and right of light

There is a common misunderstanding when it comes to right of light, with many in the industry thinking it is the same as a daylight and sunlight assessment.

This assumption can become a potentially costly error. Daylight and sunlight assessments are a core part of the planning process. It is a technical document that analyses the potential impact of a development on the daylight, sunlight and overshadowing of surrounding properties and assesses how much daylight and sunlight a proposed development will get.

Understandably, these assessments are generally carried out right at the beginning of the planning process.

It is not the same as a right of light survey, however, which is a legal right courtesy of the Rights of Light Act 1959. In broad terms, right of light provides legal protection ensuring that you can enjoy natural light in your building through a defined aperture, like a window or skylight.

Different assessments are carried out for each – there’s no guarantee that a property which has performed sufficiently on daylight assessment would not fall foul of an infringement claim against right of light.

While daylight and sunlight assessments focus on habitable rooms, right of light covers any room or

space – it could be breached because of the light impact on a stairwell, for example.

A growing concern

Right of light is a particular consideration when you build upwards, adding floors to existing buildings.

The ‘airspace’ development has become more commonplace in areas like London of late, given the limited space available. But when you build in this way, it’s inevitable that there will be some impact on the light access of neighbouring buildings.

The calculations in the right of light assessment will determine the level of compensation that should be paid to those impacted by the new development. However, it is crucial to mention, those impacted don’t have to accept that compensation.

Instead, they can take the developer to court, and obtain an injunction that forces them not only to stop the construction work but to tear everything built thus far down.

The costs involved can run to enormous sums, levels that developers simply will not be able to deal with.

There have been cases in recent years where right of light has become a significant issue for a proposed development, to the point that the value of the land has been severely dented and work has had to be halted.

Put simply, right of light is not something that developers can afford to get wrong.

A crucial role to play

Understanding right of light is crucial for any broker working with developers, since they can act as effectively the first line of defence against a potentially expensive mistake.

Brokers always play the role of educators, and that isn’t limited to simply how different types of property finance work – they can also play a

crucial role in outlining what right of light is, and why it needs to be considered with any development.

For example, intermediaries can ensure that the developers themselves understand there is a difference between right of light and daylight assessments.

Brokers can go even further. It may make sense to partner with surveyors who are on top of the importance of right of light and familiar with the surveys required. While larger developers may have their own favoured surveyors for this issue, smaller and inexperienced developers would benefit from guidance from brokers in identifying surveyors who could help.

If the developer is already on top of the issue, they will at least be reassured that their adviser is on the ball, while for those who have not considered it, their broker could be saving them significant sums on a project that might be affected by right of light. ●



of an overlooked

As the cost-of-living crisis deepens and housing markets continue to face huge challenges, consumers across the country are feeling the pinch. The demand for financial products that help to better manage finances has grown, but there is one product that is often overlooked: secured loans, commonly known as second charge mortgages.

Although some segments of the second charge market boasted record application numbers in February 2024, the overall performance of the market fell short of expectations last year. Despite forecasts, Buster Tolfree, UTB’s director of mortgages, observed a persistent stagnation, with the market plateauing at around £1.4bn.

Fluctuating interest rates and high moving costs have left many consumers with no choice but to stay in their current homes instead of making a move.

Against this backdrop of economic instability, second charge mortgages could prove to be more valuable to consumers than ever. But there is much work to be done to educate consumers on the product’s value and dispel the negative perceptions that have long been associated with a second charge mortgage.

The negative perception

Negative perceptions around second charge mortgages often stem from their incorrect association with payday loans. The association overlooks the nuanced differences between the two financial products, and fails to acknowledge the legitimate purposes for which second charge mortgages

can be used. What’s more, this perception issue isn’t just felt among consumers.

Second charge mortgages were brought under Financial Conduct Authority (FCA) regulation with the implementation of Mortgage Credit Directive in March 2016, replacing previous regulation under the Consumer Credit Act (CCA). This transition saw a shift from less stringent oversight to a more comprehensive regulatory framework.

Some industry heavyweights already providing finance to consumers have historically been against offering secured loans because of lax CCA regulatory practices –including irresponsible lending, a lack of transparency and hidden fees.

and second charge mortgages further compounds this.

This is why we’ve seen many lenders transition from calling it a ‘second charge mortgage’ to a ‘secured loan’. By simply removing the ‘mortgage’ element, it can ease confusion and open up the industry.

However, we need to see consistency across the market on the naming convention to ensure clarity for consumers throughout the onboarding process.

Repositioning value

As many grapple with their finances, as well as the rise of easy access money management tools, we’re starting to see new doors open for the secured loan space. Everyone is looking at ways they can make savings on their

While the one-on-one nature of secured loans provides a clear opportunity to build its profile directly with customers, the industry needs a champion”

Now, however, with the FCA's oversight, lenders and brokers are better educated on the risks and associated costs, facilitating more informed decision-making focused on the interests of consumers.

Embarking on change

Within the industry, one of the most significant challenges is the naming of the second charge product. Even today, variations persist in how we articulate and present it to consumers.

This lack of a unified approach perpetuates confusion in the market. The proximity between mortgages

monthly outgoings, and there’s a clear opportunity for the industry to reposition secured loans with this need in mind.

For some consumers, particularly in the current climate, a reliance on unsecured loans, 'Buy Now Pay Later' services and other short-term lending products have left them with several outgoings at varying interest rates. These are often extremely difficult to manage.

For some, these interest rates are extortionately high. By positioning secured loans as a money management tool, the industry could start to make



consumer solution

headway in helping reverse the trend of multiple monthly repayments into one single outgoing.

In the case of second charge mortgages, they can be positioned as a debt consolidation tool, where consumers can access a loan against the value of their home which could see a decline in the number of repayments they’re making each month, and most critically, the interest rates they’re paying.

Repositioning its value will also require the industry to prioritise product innovation.

For example, some individuals seeking secured loans aim to finance home improvements. Using a loan in this way could lead to a decrease in overall loan values as equity is generated. In practice, this would see individuals who take out a second charge mortgage for home improvements having their house revalued once the renovations are completed.

The money generated from the revaluation could then be deducted the loan balance. Not only would this strategy make secured loans more attractive to consumers, but it would help them with their long-term financial goals.

Reaching more consumers

As a product that must be issued solely by lenders and brokers, brokers can truly understand the needs of their customers, discover their pain points, and offer solutions.

While the one-on-one nature of secured loans provides a clear opportunity to build its profile directly with customers, the industry needs a champion. Just as we see Martin Lewis advising people on the best

interest rate savings accounts and energy tariffs, we need someone that can begin to promote the benefits of second charge mortgages. Likewise, we need to see more secured loan representation on panels in the wider lending market to give a voice to this often-overlooked financial solution.

Going hand in hand with this would be a household name entering the industry to add legitimacy and trust.

People need to realise that the product is viable and not a last resort, or something to be afraid of. Brand awareness has a significant opportunity to change the market.

Aligned to this is the way we’re interacting with our customers. People struggle to talk about their finances and debts, so looking to alternative channels, such as live chats, that make these conversations less daunting are key.

Good brokers will be able to use this submitted information to evaluate a customers’ financial needs, and whether a secured loan could be suitable, in the easiest way possible.

Final words

The industry still has a lot of work to do when it comes to highlighting the various opportunities aligned with homeowners taking out a secured loan. Genuine transformation and advancement in financial inclusion hinge on redirecting attention to the consumer – understanding their preferences and responses.

Given the dynamic nature of the UK housing market and economic landscape, there’s ample opportunity for disruptive innovation.

However, before that can happen, these distinctive loans require a reimagined perception. ●


Don’t ignore seconds out of habit

The Office for National Statistics (ONS) has indicated that the current average mortgage in the UK was around £189,503 at the end of 2023. Obviously, to get that figure there will be anything from £1m-plus down to below £50,000. However, it shows that homeowners are generally carrying large mortgage balances which have been made more expensive by the increase in interest rates over the past two years.

Although there are signs of rates beginning to stabilise, most first charge lenders are currently making marginal adjustments because of an anticipated delay in the Monetary Policy Committee (MPC) reducing rates. There is no doubt that when mortgage holders look to raise capital from the equity in their properties, the alternative methods of remortgage or taking out a second charge might be advantageous to them.

Up to now, many mortgage brokers have likely headed for a remortgage as the most appropriate way to provide the funding required by customers. This stemmed from the belief that, while interest rates remained at historic lows, transferring to a new lender that would take on the original

mortgage balance plus the required extra funds needed by the client would, in the majority of cases, be the simplest solution.

As we all know, there are exceptions where a different solution might, or perhaps should, be considered. For example:

1 The purpose of the loan may be less palatable for the prime first charge arena.

2 There may have been some deterioration in a client’s credit profile since they took out their mortgage.

3 The existing mortgage might be subject to early repayment charges (ERCs), creating an unacceptable switch cost out of the first mortgage and into the next.

4 Clients might want to borrow the extra amount over a different term than the first.

5 Speed – are they in a rush for whatever reason?

6 Their employment status is complex.

All these circumstances could be satisfied by a secured offering. The second charge industry has developed products over the years to suit most circumstances, and at rates that can nearly bear comparison to firsts at

the prime end of the spectrum. The regulator’s overwhelming focus is that it wants to know that the customer is advised appropriately, and the adviser is duty-bound to do so having considered the customer’s needs. However, it’s for you as the adviser to decide what’s best for your customer. As lenders, we just need to convince you that there are alternatives out there, and deliver them to you.

After decades of low interest rates, where a remortgage could look particularly attractive for capital raising when making a lender swap on a like-for-like basis, currently that is no longer the case.

Interest rates are at a 13-year high, but with uncertainty still uppermost in the thoughts of policymakers.

Many capital raising clients will need far more persuasion when being advised to swap a perfectly good and cheap first charge mortgage for one that costs considerably more, even if it does give them the extra funds they asked for.

In comparison, a second charge leaves the original mortgage in place, and while in some cases the interest rate is higher than an equivalent first charge mortgage, the client knows that the loan is fully under their control to pay off, again without disturbing the valuable first charge mortgage.

The work goes on to persuade more mortgage brokers to look more carefully at second charge solutions, and we lenders will continue to make a case for their use where client needs make them appropriate. ●

Opinion SECOND CHARGE The Intermediary | May 2024 80
LAURA THOMAS regional sales manager at Equi nance e work goes on to persuade more mortgage brokers to look carefully at a second charge solution

The untapped opportunity of second charge

Irecently chaired a panel debate with second charge industry leaders, looking at the market today and how it might develop in the future. The second charge market has certainly served thousands of customers extremely well over the years, helping them meet a variety of aspirations, from home improvements to purchasing a car, consolidating debts or meeting unexpected tax bills.

Given that the market has supported many customers, and continues to do so, conditions suggest that it should grow. We know from CACI that rolloffs on mortgages are at £294.96bn this year, 45% of customers have been forecast to take out product transfers, and arrears levels remain relatively proportionate to a first charge mortgage – if not smaller. With brokers crying out for quick solutions and more flexibility in affordability, this product deserves more attention.

It is also a sector that has shown considerable forward thinking, developing and innovation. For example, many lenders are employing application programming interfaces (APIs) and online ID verification, delivering gains in speed, security, simplicity and efficiency. Much of the technology now being introduced in the first charge space has been embedded in second charge processing.

Long-term benefits

However, we need to address several challenges if we are to see the second charge market reach its full potential. At present, according to the Finance & Leasing Association (FLA), the market sits at around £130m per month. Unless we see a change in approach, it’s hard to see how this will change.

At UTB we have always believed that the best way to grow our second charge business is to grow the market. You can put increasing effort into baking your slice of the cake, but if everyone involved works to make the cake bigger, everyone benefits.

Now could be the time to get a passionate group of second charge leaders, brokers and lenders, together to give the industry a real co-ordinated voice.We need a strategic vision for the industry and an appetite to address any elephants in the room around how it works, how it is perceived, and where it should sit in the advice process.

We must really look at this product in detail, agree on where it stands, where the similarities or differences lie between first and second charge products, and how we can break through to educate enough brokers that this is a tremendous product.

We must also question and be honest with ourselves – does everyone in the mortgage market really understand how a second charge is processed and the regulatory responsibilities around this product?

The regulatory perspective

Some lines have remained blurred, despite attempts from the regulator to provide transparency. There have certainly been different interpretations on how fees should be treated, and lots of debate about whether these fees represent fair value or not, and why.

Should second charge mortgages be viewed in the same way as first charge if these loans are not being sourced in the same way? If they are being viewed the same, from a regulatory perspective, then why weren’t second charges included in the Mortgage Charter?

The key thing is to continue increasing knowledge among introducers as to why this product should be routinely considered. It could be a great fit for certain circumstances. With current rules on affordability combined with higher interest rates it could be a really good option for customers who need funds but are unable to meet the criteria for a move to a new first charge.

As well as helping a customer find a solution to a problem, it’s another avenue to a potential sale. How many perfectly good second charge customers are let go when they could have been helped? Yes, there are a few process differences to get to grips with, but once you’ve done one it’s not hard.

Perhaps more mortgage distributors should have stands at events promoting second charges. I’m sure there are lots of advisers who would welcome offering a diverse product portfolio, particularly as we’re seeing customer profiles evolving.

That’s not to suggest that there are more customers falling short of prime criteria, but we are seeing more unusual circumstances. In fact, an interesting point in our panel discussion was how the majority of customers taking second charge mortgages at the moment have prime profiles and a clean credit history.

There is untapped opportunity in the second charge market. Perhaps with a little more education and understanding, and an industry united in promoting this exceptionally versatile product, we may eventually see the second charge market reach its full potential. ●

May 2024 | The Intermediary 81 Opinion SECOND CHARGE

In Profile.

The Intermediary speaks with Natalie McNamara, head of network distribution and growth at Loans Warehouse, about celebrating second charges

Natalie McNamara, head of network distribution and growth at Loans Warehouse, has a fresh perspective on this market, having joined – initially at finova – in May 2022. Prior to this, she worked in early years teaching. This might seem like a stark contrast, but McNamara says her previous career had her grounded in high regulation environments and focused on looking after people – which might sound quite familiar.

Now at Loans Warehouse, McNamara is putting her expertise – and her newfound relationships with lenders – into gear, with a focus on brand awareness, meeting brokers, and representing the firm at events. This is not just about Loans Warehouse’s profile, but encouraging more people to embrace the second charge market. So, The Intermediary sat down with McNamara to take a look at the role of seconds in catering for customers’ diverse needs, and the work being done to get it recognised.

The market

Considering the market forces at play – rising first charge rates and intense pressures on household budgets among them – the consensus is that 2023 should have been a much stronger year for seconds. However, all was not smooth sailing, as the ill-fated mini-Budget put paid to hopes of a big splash for seconds in 2023.

“It took the market from a really good position to absolutely plummeting,” she says. “No one was going anywhere or worrying about overall market stability, but they didn’t know what rate to lend at and took a backstep. In a market where there wasn’t a lot of competition, lenders took their time to get comfortable again.”

Towards the end of 2023, though, there appeared to be a return to form, with Loans Warehouse experiencing a strong period in Q4, even reporting its best month in December, which has never been the case before.

“We’ve gone into 2024 seeing what we were hoping for in 2023,” McNamara says. “People feel more confident. It should be a very good year for second charges.”

This is also to be seen in the widespread talk of new lenders entering the market, such as

Admiral and Interbridge who have now both had FCA permissions granted, and injecting more innovation, or as McNamara puts it, “shaking the tree.” Indeed, existing lenders in this space have already started making changes to ensure they continue to compete and hold their own.

Changing perceptions

The climate in the mainstream market, where those with time left on their lower rates want to keep their mortgage for as long as possible, should create an ideal environment for seconds to flourish. However, more support is needed to grow awareness of the options, like any product the market needs constant promotion among brokers, and their clients, to fully consider this option.

For McNamara, it is time that the broader market got more awareness of seconds to help more customers. At the moment, although all networks have a second charge broker on their panel, in too many cases this is a tick-box exercise rather than an active investment in the space.

“They’re on the panel, but they’re not priority,” McNamara explains. “It’s also up to the brokers to promote themselves and spread the word.”

For those touting the importance of this product, while the opportunities to promote it are there, they tend to be time and cost prohibitive. Brokers might not have the budget, while those lenders that do have the means are more likely to promote other core products than their second charge offerings at, say, events and expos – even those that are among the biggest lenders in this space.

One solution is for networks to push out the message that seconds are worth considering and promoting, laying guidelines for members to ensure that if a customer is looking for additional borrowing, while considering a remortgage they must also take seconds into account.

Although McNamara’s focus is to help get out to firms with this messaging, there is only so much one person, or one business, can do. Therefore, she wants the attitude from networks to change, as well as for lenders to get more involved.

Fit for purpose

The difficulties in promoting second charges are at odds with the product itself, which McNamara points out can provide an appealing deal and a

The Intermediary | May 2024 83

much-needed solution for borrowers’ evolving needs. Rates, for example, are competitive in comparison with first charge mortgages at the moment, within 3% and closer than they have ever been. Beyond this, the market is also in a good place in terms of the process of accessing funds – lenders can complete quickly, there is not the same need for legal involvement, automated valuation models (AVMs) are widespread. In addition, the range of available products has expanded, and is set to do so even more once new lenders enter the market in the coming year.

McNamara says: “It’s not that the product or process needs to change –though it will keep improving – it’s about distribution and awareness.”

This is not only about getting to the best outcomes for customers, but is also a matter of business sense. If a customer who fits the bill for second charge does not get the help they need and ends up going elsewhere – either to a broker that does work in seconds, or to an aggregator site – this represents a potential loss of business. Brokers therefore must be given more awareness of the product to be able to – in the very least – refer their customers to a trusted source, likely retaining them better long-term.

There are parallels with bridging finance –another tool in Loans Warehouse’s shed – which has in the past suffered from a lack of awareness.

Similarly to bridging, consumers are unlikely to reach out to their broker asking about a second charge. Instead, McNamara explains, the conversations will be needs-based, with the onus on the broker to understand where the various options come into play.

This conversation becomes even more important when considering the importance for brokers of diversifying to protect their own businesses during the kind of turbulence experienced recently. Where before, brokers might have felt like cases kept “landing in their laps,” the market has shifted to require more work to keep business flowing.

Full steam ahead

With all this in mind, McNamara feels she came on board at Loans Warehouse at an integral and exciting stage, both in terms of the business and improving the industry.

“Loans Warehouse has ambitious growth plans, and I knew I was coming on board at a really early stage of that, in a role that no one else had done before,” she says.

“I had a blank canvas and knew what they wanted to achieve. It was a unique opportunity.”

“It’s about looking after people and supporting

them to consider all the options,” McNamara explains. “Consumer Duty was coming in when I joined the industry. We need to ensure the best outcomes, which is about partnerships – lenders, packagers and brokers working together and complementing each other.”

She adds: “This is also about promoting seconds as a key part of the industry, rather than an add-on. It should be considered equally, and networks should be making it a priority.”

Since joining in January, McNamara has been busy but well-supported in enacting the firm’s plans, in a business that she describes as “buzzing and enthusiastic.”

She says the message to get across to brokers – some of whom may not have the bandwidth to add yet more to their conversations with borrowers – is that rather than just saying ‘no’, they should always consider referring.

One of the challenges to face as this journey continues is that panels have often not been reviewed for a long time, which does not help where brokers want more “freedom of choice” to help find the best outcome for their clients.

On the other side, McNamara points out that Loans Warehouse continually reassesses its choice of lenders. Due to what she describes as the firm’s “confidence in the space,” it is able to hold its own in expecting service levels to be upheld, for example.

McNamara looks forward to showcasing the role and purpose of second charges and bridging loans in ensuring the best outcomes for clients, and the ease with which brokers can refer deals through and maintain those relationships.

“This is a good brand, we just need to promote it,” she adds, planning to do as much as possible face-to-face.

The message around both the product and the referral process, meanwhile, is around trust and mythbusting.

“There’s maybe a myth that we’ll ‘steal’ clients,” McNamara says. “But we won’t. We fit their purpose for a short period of time, but they’re your client. We look after them and have a bespoke relationship depending on what the broker wants, and then hand them back at the end.”

Finally, she concludes: “We’re there to work in partnership with the brokers, complement them. If you’ve got a case that you think should fit but doesn’t, speak to us. One size doesn’t fit all, and no two clients are the same. Achieving the best options is about working together, being innovative, and not trying to squeeze people into a box.” ●

May 2024 | The Intermediary IN PROFILE

Communicating a data breach or cyber attack

When I was growing up on the coast in South Wales, I always fancied myself as a bit of a surfer. I was never going to be the next Kelly Slater, but I was keen, enjoyed it and, if I’m honest, I thought it made me look cool.

Whether they admit it publicly or not, most surfers like people to know they are surfers, meaning you have to wear the right clobber. In my teens and early 20s, there was a strong chance I’d be wearing a pair of Vans shoes –a staple of the skater and surfer community. Even as I approach 40, I still like to slip on a pair of Vans. I’ve always had a so spot them. Or, at least, I used to.

You see, I recently had an email from Vans informing me it had suffered a ‘data incident’. The firm also revealed that some of my info may have fallen into the hands of undesirables, to put it nicely.

Data breaches and cybera acks happen all the time. In fact, 44 records are stolen every second of every day, according to Cybersecurity Ventures. It’s also not just retailers: financial services firms are prime targets for hackers, given the data they hold about their customers. Major financial services players such as Equifax, the now defunct payday lender Wonga, Tesco Bank and countless smaller firms have become victims of data breaches over the past 15 years.

The fact that Vans lost my data is not what got my back up the most, although clearly, I’m pre y annoyed about it, to say the least. No, my main gripe is the way Vans communicated the breach to me. To date, I have received one email – three months a er it took place.

All businesses worry that a major data breach or cybera ack could be the end of them. But what will really make or break your reputation is how you communicate it.

So, here are some overarching guidelines you should follow to ensure you emerge the other side with your reputation intact.

1 Plan ahead

No firm is too small to become a target, so plan how you will communicate with your clients should you suffer a breach.

This will be driven by your PR and marketing team, but you’ll want input from all parts of the business. Form a crisis team that includes the board, IT, compliance, and anyone else who you think will have a role to play.

Decide what information you need to share, and when, in the event of a cybera ack or data breach.

Give everyone in this team clear roles and responsibilities. For example, who will collect the necessary data needed to inform your communications? Who will liaise with the IT team for status updates. Who will inform the regulator?

2 Act fast and decisively

When a breach occurs, speed is of the essence. The worst possible thing that can happen is that your clients and other key stakeholders hear of the breach from someone else first.The first 24 to 48 hours are critical. Go into full information gathering mode and start to form your communications. While it’s sometimes difficult to assess accurately the full extent of the damage in the days a er an a ack, try to obtain as much information as possible. Within a few days, you should decide what information you can and can’t share with your clients.

3 Own up and be honest

This is no time to try covering up or making excuses. Your communications with clients and other key stakeholders should be open, honest and informative. Avoid jargon and strip out any unnecessary information.

Your initial comms should include – to the best of your knowledge – what information has been taken and how your clients may be affected. They should also include information on what they need to do next, if anything, and how they can get in touch with you should they need to.

You should also set out what you’re doing to fix the problem and how you’ll avoid it happening again in the future.

There is a school of thought that companies should never apologise for their mistakes. This is nonsense. If you’re at fault, own up to it. It’ll serve you be er over the long-term.

4 Monitor, respond and evaluate

This isn’t a 'one and done' deal. A er your initial communications, monitor developments and provide regular updates to your clients and other key stakeholders where relevant.

If you have enquiries from clients, make sure you get back to them in a timely manner, and make sure you correct any factual inaccuracies that may appear in the press.

Most importantly, make sure that you document the entire process, so that, god forbid you suffer another breach in the future, you have a readymade road map to follow. ●

The Intermediary | May 2024 84 Opinion BROKER BUSINESS

Making menopause an open discussion

Menopause symptoms can vary from person to person, but they can have a major impact on a woman’s ability to carry out normal day-to-day activities. In fact, the Equality and Human Rights Commission (EHRC) recently suggested it may be considered a disability in some circumstances.

The statistics speak for themselves regarding the impact menopause can have on working women. Research from the Chartered Institute of Personnel & Development (CIPD) found that two-thirds (67%) of women between the ages of 40 and 60 with menopause symptoms said these have negatively impacted them at work. Further research by the Fawce Society found that one in 10 women they surveyed who were employed during the menopause le their role due to symptoms, which can include anxiety, mood swings, brain fog, hot flushes, and irregular periods.

It is a subject I am passionate about, having gone through early menopause in my mid-thirties. At the time, I was completely unprepared for the tsunami of symptoms that hit me, and unaware of the impact it was having on both my personal and work life. With a supportive employer, friends and family, alongside HRT, I now have my symptoms under control and have found coping mechanisms that suit me. However, the report has brought into sharp focus that the need to raise awareness continues.

The CIPD research also found that 79% of respondents were less able to concentrate, 68% experienced more stress, and nearly half (49%) felt less patient with clients and colleagues.

Given the recent volatility, female advisers going through menopause will have experienced a huge amount of additional stress in what is already a pressurised environment.

Businesses have come a long way, with many introducing formal menopause policies or pu ing frameworks in place to support employees and create a supportive and inclusive working environment.

Sesame Bankhall Group’s menopause policy was put in place not only to provide workplace adjustments and support female colleagues, but also training for our wellbeing champions, alongside an educational awareness campaign for all staff members running teams in the business.

Even for smaller advice businesses, this is something very much worth considering. A formal policy shows that you acknowledge and support female staff members, making menopause a topic of conversation with all employees, male and female.

This is particularly important as the CIPD research found that 53% of women going through menopause were unable to go into work because of their symptoms, but only 18% felt able to tell their manager the real reason for their absence.

Open discussion

From personal experience, male colleagues appreciate open discussion of menopause, as it makes them feel be er able to support both employees, colleagues, and family members.

There are a range of small adaptations that can be made, with minimal cost and disruption, that can have a big positive impact, such as pu ing fans on desks, moving the office layout so female staff members can sit near a window, a quiet space for those if they wish to have some space and time to themselves, having notes taken in meetings as a norm, and a discreet emergency supply of sanitary products. A small but considerate change goes a long way.

Offering flexible working to fit around doctors’ appointments or the ability to work from home if they are

suffering from heavy and painful periods or other symptoms can make such a difference.

Understanding customers

From an adviser perspective there is another angle to consider: what is the average age of the women in your client bank? Could they potentially be going through or struggling with any of the symptoms highlighted in this article? Should any of those symptoms be considered as you progress through the advice process with your female customers?

While I am not suggesting that all menopausal women should be treated as vulnerable customers, any of us can become vulnerable at different life stages. The regulator will be sharing its findings by the end of the year on how firms are acting to understand and respond to the needs of customers that could be in vulnerable circumstances.

Fully considering your business’s approach to supporting women throughout menopause will be reflective of how you focus on equality, diversity and inclusion in the workplace. Discussing the policies you’ve implemented in the workplace could also resonate with new and existing female clients and encourage them to be more open. It may even drive new potential clients to consider using your services.

Ultimately, having a more supportive and inclusive working culture can have long-lasting positive impacts for us all, and go a long way to helping those who need support feel more able to reach out and not suffer in silence. ●

May 2024 | The Intermediary 85 Opinion BROKER BUSINESS

Isaw ‘The Motive and the Cue’ recently – the play about John Gielgud and Richard Burton rehearsing Hamlet. A play in which actors, acting as actors, were rehearsing a play…but I don’t intend to discuss narcissism here! No spoilers, but Zadok the Priest made my night.

What struck me afresh was Shakespeare’s insight into cognitive psychology. Hamlet says: “There’s nothing good or bad but thinking makes it so.”

Locked inside our own heads, thinking errors can lead to complicated consequences. These thoughts fly through our brains so fast it can be hard to catch them, so we overlook the damage they do.

Here are some of the classic thinking errors to look out for, check and challenge – or perhaps get a good coach to do it!

1 All or nothing thinking

The tendency to see things as being a total success or total failure, when in fact most situations are somewhere in between.

2 Over-generalising

Believing that one bad experience means everything will be the same forever.

3 Exaggerating and catastrophising

Blowing things out of all proportion, assuming that the worst possible disaster is bound to happen in a situation you find difficult.

4 Ignoring the positive

Selectively homing in on any negatives first. O en, this blocks our capacity to see what went well, making it hard to find ways to improve in the future.

5 Negatively predicting the future

The downward spiral towards negativity is thinking that nothing will ever happen to change things, and that the outcome is entirely bleak.

I hope you are not experiencing all of these, but do bear in mind that, however robustly positive you are, there will be colleagues, clients and direct reports who may be labouring under some of these misconceptions,

It’s all in

but not making it explicit. This will impact on outcomes and performance.

Notice any of these thinking errors cropping up in meetings and help people reframe in terms of what could be achieved if we weren’t tripped up by negative predictions.

When I coach, I use the phrase, ‘what went through your mind, right there?’ regularly, when clients are facing challenges.

Here are a few responses, all spoken by extremely successful people in senior positions:

“If I don’t get the top job, then I will be a total failure” – the number two in a household name insurance company.

“I’m only as good as my last achievement” – a client felt that if he gave up his debilitating terror of failure he would become a sloth, rather than a more relaxed but driven success.

“It will be a disaster if they ask me to speak at the conference” – once the belief was debunked and skills built, she proceeded to wow the 500-strong audience, delivering part of her speech in French!

It is normal to have doubts, but it isn’t necessarily rational; it can also be exhausting, and it slows down your progress.

That voice in your head has taken up residence over your lifetime. O en, you are not even aware of what it is saying, just the sense of malaise it imparts. Viewed in as positive a light as possible, regard the voice as a concerned, well-meaning observer, a empting to keep you out of trouble and safe from harm.

Every time you were told, ‘walk don’t run – you might fall’ or ‘stick with what you know – you might fail’, it was stored. However, there are times when you need to run and discover that you don’t fall and that you find

speed exhilarating. You might need to take that risk to move forward and succeed rather than stay safe.

Sometimes it is possible to hear whose voice it is – a parent, a teacher, an early boss, a concerned friend. O en, we take their ‘advice’ on in our lives when in fact we wouldn’t ask their advice on anything else!

I recently heard two stories about what careers teachers had said to pupils:

“You should join the police as you’d have a lot in common with your clients” – he became Group Treasurer of a major bank.

The Intermediary | May 2024 86 Opinion BROKER BUSINESS

the mind

It is normal to have doubts, but it isn’t necessarily rational; it can also be exhausting, and slows down your progress. That voice in your head has taken up residence over your lifetime. Often, you are not even aware of what it is saying, just the sense of malaise it imparts”

“You want to be a writer? Why don’t you apprentice with a printer? That’s more realistic” – this was Mark Hodkinson, author of ‘No one round here reads Tolstoy’ and owner of Pomona books.

Thankfully, both of these people refused to let that voice into their heads. In fact, they used it to engender sheer bloody-mindedness and stick to their own plans!

So, the steps to freeing yourself from the restraints of an unhelpful inner dialogue are:

1Pay attention

Ask repeatedly – what just went through my mind?

2 Check the evidence

Consider the factors for and against your inner reasoning.

3 Choose di erently

Try to consciously pick out a more constructive and positive thought.

4Repeat, repeat, repeat

Say this thought over and over like your life depends on it – it does!

Research tells us that optimism and success are correlated in all but one profession.

The one profession where pessimism and success are correlated? Have a guess – and no, it isn’t funeral directors. Contact me if you want to know. ●

May 2024 | The Intermediary 87

Avoiding an adviser shortage

The drip-drip of less than good news in the housing and mortgage markets continues, marked by growing affordability issues, along with a steady increase in down valuations and the news that UK property transactions fell by more than a fi h – to 1.2 million homes – in the year to March, while mortgage lending last year was down 23% to £130bn, according to UK Finance.

Amid the gloom, what does the future hold for mortgage advisers? Could we be looking at a reduction in the number because of the difficulties described above?

According to a recent poll conducted among brokers, the majority believed that adviser numbers would fall due to the number who might leave the industry next year and not be replaced by new advisers.

On the face of it, it seems logical to believe that the current difficult conditions might put new blood off from joining the industry, at the same time as older advisers might bring forward their retirements in the face of the downturn. However, is that really a likely outcome?

There is no doubt that joining our industry as a complete beginner is much more difficult than it was when all you needed was a freshly minted business card and a positive a itude –admi edly a long time ago! However, barriers to entry in the shape of regulatory requirements and formal examinations have professionalised the industry and made it more desirable as a profession, which in turn has a racted a different and more accomplished demographic.

That said, as an industry, we should be doing more to a ract new recruits. Some of HLP's appointed representative (AR) firms have their own development programmes designed to a ract trainees, support them in obtaining qualifications, and

help them flourish through ongoing development, proving very successful.

At HLPartnership, we encourage our members to expand their businesses where practical, and recruitment is a key element in that planning. We offer support in creating that plan and practical help to our AR principals in formulating a strategy to meet their objectives, including recruitment of the right individuals.

Having recently expanded our team of external development managers to provide onsite assistance to our members, HLP is in a strong position to help them grow their businesses and employ more adviser staff.

Universal importance

The need to increase the number of advisers across the industry should be a priority for everyone involved in lending.

It goes without saying that human advisers play an increasingly important role in helping buyers and existing owners find the right finance for their particular needs. The fear that ‘robo-advice’ would do away with human advisers has been shown to be another damp squib, and most lenders recognise that the intermediary market remains the only genuine route to market.

The short lived robo-advice phenomenon was supposed to revolutionise the way that members of the public could access the mortgage market without the need to engage with a human adviser. However, it didn’t catch on, except among more financially aware customers.

Instead, it drove home the importance of human input and actual advice based on proper assessment of customer needs.

Robo-advice did, however, highlight the need among intermediaries to invest in technology that enhanced their service offering to their clients. There has been a widespread adoption of new technology to help them

The short lived roboadvice phenomenon was supposed to revolutionise the way that members of the public could access the mortgage market”

manage their workflows and existing client data be er through integrated customer relationship management (CRM) and mortgage systems.

While we at HLP are encouraging recruitment expansion among our members, a racting new talent into the industry, rather than recruiting experienced advisers with existing track records is an area which requires greater discussion among all interested parties.

The potential retirees, many of whom came into the industry when the need for exams and professional standards did not exist, did not have to invest financially to the extent that new recruits must if they set up on their own. The simplest route for newcomers who want to avoid the immediate costs of being compliant, the costs of office space and the technology to be effective straight away, is to join a firm and learn the ropes before starting out on their own. With the amount of support available to AR firms in terms of access to lender panels, compliance and technology support, it would make sense for advisers looking to strike out on their own to strongly consider joining a network as an AR firm. Of course, going directly authorised (DA) is the alternative route, but that option is not ge ing any cheaper. ●

The Intermediary | May 2024 88 Opinion BROKER BUSINESS

Are you getting what you need from your network?

Whether you are a broker looking to become an appointed representative (AR) or an AR within an existing mortgage network, making sure you make the most of your membership opportunities is extremely crucial.

Weighing up the pros and cons of becoming part of a larger organisation, and determining what you may need from a network, is a very personal and important decision. Every network is different, bringing with it a wealth of opportunity, support, values and culture.

What works for one adviser may not be the best fit for another; therefore, the decision to join or leave a network will depend on each individual’s goals and what they want to achieve, so it is important that each adviser has a clear idea of the direction their business is heading.

For example, some advisers may prefer to become part of a larger organisation that has been around for a longer period of time. While others may not like the concept of being part of a larger corporate identity and prefer the more personal element of a smaller network.

Other factors, such as the costs associated with being part of the network, as well as compliance, support and education and training will also play a key role in any decision about being part of a network organisation.

Understanding the associated costs involved in joining a network is also important so that advisers know what they are ge ing for their money, as well as what they may need to pay extra for further down the line.

For example, for an adviser looking to generate more business, it may be worth joining a network charging a higher fee if it offers greater business development and training opportunities to grow your brand.

Things like commission structure, procuration fees and earning potential will also be key considerations, as well as any potential revenue opportunities available through a broad-ranging and diverse lender panel that can help to maximise sales.

Training and support

For advisers new to the market, and even longstanding players with decades of experience, networks offering ongoing training and support in achieving qualifications or meeting continuing professional development

(CPD) requirements is vital in helping you achieve your goals.

Once achieved, being able to access business development and marketing support that can help you grow your business is also crucial in providing you with the skills to identify and maximise all sales opportunities.

At Beneficial, we understand how hidden costs and the lack of transparency around fees can sometimes cause budgeting problems for advisers.

Training and events also play a significant role, and we strive to help our advisers achieve their goals to build their businesses by offering an extensive panel of more than 90 domestic and commercial mortgage lenders and providers offering protection, general insurance and equity release.

All our members have unrestricted access to regular events and ongoing training such as workshops, webinars, group and one-to-one training sessions. In addition, our state-of-the-art technology and 100% file checking process means brokers and their clients are always protected and compliant in an everchanging industry.

For advisers considering joining a network, or even those ARs who are entertaining a fresh start, it is important to identify what you want from a network and weigh up your current situation before making a move. Being prepared and doing your research will not only stand you in good stead in the future, it will also provide you with the skills required when making decisions regarding your business.

May 2024 | The Intermediary 89 Opinion BROKER BUSINESS
CEO at Bene cial
● e decision to join or leave a network will depend on each individual’s goals and what they want to achieve

Are brokers leaving money on the table?

In a busy brokerage, it can be all too easy to favour what falls into the traditional remit of mortgages and protection. However, with an increasing number of cases requiring more specialist support, advisers risk of missing valuable opportunities.

Rather than neglecting these cases or referring out into the void to an external third-party, brokers can refer within Just Mortgages to a qualified broker to handle these cases.

Alongside mortgages and protection, these brokers can offer crucial services such as equity release, business protection and commercial advice — areas not commonly covered by brokers as they require specialised licenses.

Not only can brokers provide greater value to their clients by referring these cases, but they can also capitalise on this to provide themselves with an additional revenue stream.

Referral opportunities

In the mortgage process, brokers conduct fact-finds to assess clients' needs and identify any potential shortcomings. Through this process, a broker might uncover needs beyond the typical mortgage offering, such as the need for a pension review, or that the client is a business owner and suitable for a conversation around business protection.

It may also identify if the client has more specialist requirements that fall under commercial advice. This is far reaching and covers everything from Sharia-compliant mortgages and those for expats and foreign nationals, right through to complex buy-to-let (BTL), fully and semi-commercial premises, bridging, development finance and much more. For brokers who frequently encounter these cases, it's seamless. However, for those less familiar, it can certainly be daunting.

To support our brokers, we launched our Just Refer platform in September

to connect clients with a qualified broker to discuss specialised services. It can also be used to refer clients to Just Wealth for advice on pensions, savings, investments, and protection.

It was recently upgraded to further streamline the referral process, providing brokers with a clear line of sight throughout so they can be er track outcomes and ensure a smoother experience for all involved. It has proven popular so far, having recently surpassed 750 referrals.

By using the portal, brokers can deliver a broader service, while generating additional income by earning referral fees and remaining part of the revenue share.

Neglecting referrals

When brokers turn down cases or overlook referral opportunities, the risk is greater than just missing out on potential revenue. There's a potential loss of trust and loyalty from clients. Clients seek brokers not only for their expertise in mortgages, but also their ability to provide comprehensive financial solutions. If a broker fails to address broader needs and a competitor does, it can lead to dissatisfaction and loss of business.

In today's competitive market, client retention is crucial. Brokers who consistently meet clients' needs and exceed expectations are more likely to retain long-term relationships and secure recommendations.

From a financial standpoint, brokers may miss out on valuable referral fees and incentives. These fees not only contribute to the broker's income but also serve as recognition for their role in enhancing the overall client experience.

Educating brokers

There is a clear need for education in this area. Some brokers might not be aware of what types of referrals to make, especially in specialised areas like commercial advice.

Crucially, brokers must also consider the broader needs of an individual's situation, including their family, rather than just the individual themselves.

Even if the majority of clients are not over-55, there may still be opportunities within the wider family that later life lending or equity release could support.

For brokers who find themselves consistently handling these referral cases, it’s important to consider training opportunities to expand their licenses to manage these cases directly. At our recent Lender Fayre in Birmingham, there was notable interest among self-employed brokers to acquire additional licenses.

With the demand for services like business protection and commercial advice still on the rise, these areas present lucrative opportunities for brokers willing to broaden their scope.

Commercial advice, in particular, is a specialist area with significant potential for growth. This not only enhances the broker’s value to clients but also maximises their opportunities in the market.

Exploring opportunities

It's important that brokers do not overlook the potential of referrals. By broadening their horizons or indeed expanding their own services, brokers can enhance their offerings, increase revenue streams, and provide comprehensive solutions to their clients.

With the right education and tools, brokers can ensure that they are not leaving money on the proverbial table, and are instead maximising their value in the ever-changing mortgage landscape. ●

The Intermediary | May 2024 90 Opinion BROKER BUSINESS
BEN ALLKINS is head of mortgages and protection at Just Mortgages

The rise and rise of the boutique network

How do you define 'boutique'? A simple Google enquiry revealed the following: “Boutique comes from a French word of the same spelling, which means any small shop. The word has its roots in the Greek word ‘apotheke’, meaning a ‘warehouse’. The same word gives rise to the English word apothecary. The word boutique o en has an air of exclusivity.”

I ask because it is easy to say you are a boutique. Try Mortgage Network is a boutique, but others in the same line of work as us are, too, and with justification. The answer to what our businesses are lies somewhere in between a shop and a warehouse. Mind you, boutique does sound far sexier – but then again, its French!

I’m sure that I’m not the only one, but I enjoy shopping in a well-stocked boutique, where items for sale are different from the mainstream, and sometimes not available elsewhere. This o en provides a sense of exclusivity, and where the service is spot on as well, a loyalty to that brand also develops – it’s about having things that others don’t have or can’t find, all bought with a gratifying touch of personal service. You rapidly become the consumer smug!

Differentiation in the mortgage market – whether you’re a manufacturer or distributor – has never been easy in what is a very congested space.

Network distributors are no different in the challenges they face. Our own particular challenge facing up to the larger, longer established, and well-run competitors, is simply how to be different and yet add value at a competitive price.

The first thing we always extend to new advisers seeking to work with us, and I’m sure we aren’t alone, is to emphasise the importance we a ach to the straight line advisers have into decision-makers. Building a business relationship which is transparent, with honesty and trust at its heart, is the bedrock of building adviser value. Arguably, without it, you have li le chance of enduring success.

One-stop shop

Other important things then come into play, such as the range of products and services you actually have on offer and control directly. Our aim is to provide as much as we can under one roof, so our advisers don’t have to go beyond the confines of the firm.

Secured loan master broking, specialist lending packaging including short and long-term bridging, development, and commercial lending, broadens the range products to select and access. It means the adviser, again, maintains the relationship they have with us directly, in finding products and services their client needs.

Another important issue is the pricing of your service and how advisers and their clients extract value. The purpose here is not to showcase the price of being part of our network each month, but to show that there are other critical ways where pricing and value, through greater transparency, create stronger brand loyalty for both adviser and client. A good example of this is in the protection market.

One option for the boutique owner is to decide the shape and form of commission structures they operate with their protection manufacturer suppliers. Our own decision has been not to charge weighted premiums,

knowing that in doing so, the customer receives a pure price – no network loading increasing their monthly premium. We have this in play across all protection providers, and clients and advisers value this hugely. Once more, the adviser receives a product and service not readily available from other network providers, and it is a means of making a distinction between competing businesses, along the same theme of generating brand loyalty through transparency and value.

It is equally important to transact business with your advisers and their clients using a system which makes the journey simple and straightforward. Not only does the boutique business have a broad range of products and services, it is important they are delivered in an efficient and stable way.

We have an excellent partner in OMS, whose integrated sales platform provides everything. We are very grateful that we can underpin what we have with some of the best tech around.

When choosing a network partner, an adviser has a wide array, which I’d argue is a good thing. I would argue further that it’s not all about price, because while that’s very important, being part of what feels the right fit for you is just as critical, if not more so.

A boutique is, therefore, one very credible option, but might not be right for everyone. Yet what is undeniable are the clear benefits and value these businesses bring to our amazing and constantly evolving industry.

A boutique option is here to stay. Happy shopping! ●

May 2024 | The Intermediary 91 Opinion BROKER BUSINESS

Bridging the gap for women experiencing menopause

Menopause is a natural biological stage that marks the end of menstrual cycles, characterised by a significant decline in oestrogen levels. This hormonal shift triggers various symptoms and has profound long-term health implications that are pivotal in shaping insurance coverage and advice. It will ultimately impact just over 50% of the population so it is a key issue advisers need to understand.

Critical illness (CI) and income protection (IP) insurance are particularly relevant when discussing insurance for menopausal women. CI policies play an essential role due to the serious health conditions associated with the oestrogen decrease during menopause. Research, including a significant Australian study, highlights the heightened health risks faced by women who experience early menopause. The study found that 71% of women with premature menopause developed multiple chronic conditions by age 60, compared to 55% of those who underwent menopause at the typical age of 50 to 51. Additionally, women with premature menopause were nearly twice as likely to suffer from cardiovascular events such as strokes or coronary heart disease before the age of 60.

These insights are crucial for financial advisers when recommending CI policies, which could provide substantial financial support following the diagnosis of conditions linked to reduced oestrogen, such as heart disease, osteoporosis, diabetes, and dementia. It is crucial for advisers to also consider family histories of premature

menopause, which could significantly influence the risk profiles and insurance needs of clients.

However, while CI policies cover severe health conditions, they do not typically address the more immediate and often disruptive symptoms of menopause, such as sleep disturbances, mood swings, and cognitive impairments commonly referred to as 'brain fog’. These symptoms, although not lifethreatening, can severely impact a woman's ability to work and perform daily activities, potentially leading to significant economic and psychological strain.

Symptom impact

Here, IP insurance can be invaluable. IP offers a payout to policyholders who are unable to work due to illness or injury. The challenge with IP and menopause is determining whether menopausal symptoms, which vary widely in intensity and impact, can be classified as a disability under the terms of the policy. The Equality Act defines disability as a "physical or mental impairment that has a substantial and long-term adverse effect on a person's ability to carry out normal day-to-day activities." Whether menopause fits this criterion remains a contentious issue.

Despite these challenges, IP might provide coverage for severe cases where menopausal symptoms lead to significant disabilities. Advisers need to be aware of the limitations and opportunities within existing insurance products and may consider advising clients on additional coverage options, such as health and wellness support programs or extra medical insurance that specifically addresses menopausal health issues.

Given the evolving nature of how

insurers view menopause, Protection Guru regularly updates its analysis of this subject to help advisers stay informed about industry trends and changes, and to understand how insurers are adapting contracts in light of new research and changing perceptions of menopause. This will better position advisers to offer relevant and empathic advice.

Advisers should also consider the broader impact of menopause on women's financial planning, including retirement planning, as health issues related to menopause could lead to earlier retirement or unplanned medical expenses. This also applies to any longer-term financial commitment such as a mortgage payment. Providing a comprehensive approach that considers all potential financial impacts of menopause will ensure that women are better prepared and supported during this significant phase of their lives.

Ultimately, as awareness grows and societal attitudes shift, the hope is that more tailored and flexible insurance products will become available, allowing women to navigate the challenges of menopause with greater security and confidence. For now, financial advisers play a critical role in bridging the gap between current insurance offerings and the real needs of women during menopause. This knowledge-driven approach will empower women to make informed decisions about their health and financial wellbeing during this transformative stage. ●

Opinion PROTECTION The Intermediary | May 2024 92
JOANNE LEGG is protection expert at Protection Guru

The impact of postcodes on premiums

At a time when home insurance premiums are increasing by an average 41%, now is the time to encourage homeowners, landlords and tenants to shop around for the best cover at the best price.

Postcode variations may seem insignificant, but understanding the impact of postal codes can be the linchpin to providing tailored and compliant guidance to the consumer in the world of general insurance (GI). In an era where consumer expectations and regulatory scrutiny are at an all-time high, harnessing granular data and local trends is not just beneficial, but imperative.

Savings on annual premiums can be in the £100s each year. Postcode variations encapsulate a plethora of factors from socio-economic demographics to localised impacts and environmental considerations, and having an insight into this can help customers to save significant amounts of money.

In the first quarter of 2024,

Safe&Secure Home Insurance collated more than 10,000 quotations using 32 insurance policies, and identified the top 100 postcodes that are the keenest on price.

Topping the list were Slough (SL6) and Stevenage (SG8), while Derbyshire (DE) postcodes appeared six times, Leicestershire (LE) postcodes appeared five times in the top 100, and Croydon (CR7), Coventry (CV5), Norwich (NR12), Sheffield (S71), Peterborough (PE21) & Notts (NG) appeared four times.

Many sides to the story

To provide comprehensive advice to the consumer, there is no option now other than to adopt a multi-faceted approach that integrates granular data and local insights – such as crime rates and environmental hazards – which are just a couple of examples of how home insurance is impacted on price and renewal increase.

By incorporating such data into risk assessments, insurers can offer fairer premiums and better coverage for policyholders.

Knowing this backdrop can be empowering for mortgage, pension and investment advisers when talking to clients, and this knowledge is never so important as it is now, within the landscape of Consumer Duty obligations, where businesses are compelled to prioritise the best interests of their customers.

You could further argue that only by understanding and harnessing the power of the postcode data can organisations and individuals truly fulfil their commitment to customercentricity and ethical conduct.

This is a hard task for us all, but having this leverage on why some areas are more competitive that others is crucial in today’s world of high costs, and the scrutiny on saving where possible for our customers.

Having specific knowledge – like knowing the postcodes ‘minefield’ – can offer real savings for the consumer, and help us as a community of advisers ensure that people with homes in these areas really should be encouraged to shop around, particularly those in the most competitive areas.

On the mark

Of course, the parameters behind these prices change constantly, as claims affect market prices as do geographical locations. As an expert in this field, Safe&Secure updates its information on a quarterly basis.

Keeping up to date is a tangible asset when advising buyers and property owners to make a choice, to stay on budget, and get the best general insurance cover possible. ●

Opinion PROTECTION May 2024 | The Intermediary 93
Mortgage brokers are in the best position to make real-life recommendations

Extension boom

Last year, more than one million homes in England were granted planning permission for structural changes, according to Department for Levelling Up, Housing and Communities statistics. That represents 4% of the nation’s total housing stock, and is a rise of 14% from a decade ago.

The appetite for home extensions and outbuildings – such as garden offices – has risen since the pandemic. Despite the recent dip in UK house prices, the market is still incredibly tough for would-be new home buyers – with lenders continuing to raise rates coupled with issues such as gazumping on the rise. For many, extending a property is the best solution to get that sought-after extra space.It's useful, then, for advisers to be in a position to confidently inform their clients on what the implications of extending or adding outbuildings might be for their home insurance.

There are four things to consider:

1 Does the customer need to notify their home insurance provider if they are undertaking significant work at their property?

This all depends on the policy.

At Paymentshield, we don’t require new or existing customers to notify us about whether their property is undergoing renovation or extension works. We cover properties during the work, providing our eligibility criteria continues are met – for example, the property will continue to be occupied.

Many other standard home insurance policies will require the insurer to be notified. The insurer will then determine if cover can continue or whether additional specialist cover is required, and any impact on price.

Advisers should recommend that clients check their terms and conditions and the information they have provided thoroughly to determine if any planned work needs to be disclosed – or else risk a claim being declined.

The Intermediary | May 2024 94

Are your clients properly protected?

2 Is the property going to be unoccupied while work takes place?

If the homeowner moves out during renovation work and the house is left empty, this could impact a claim.

Paymentshield home insurance policies have an unoccupancy period of 60 days. If a customer is looking to take out insurance for a property that will be unoccupied for over 60 days from the policy’s start date, then the customer wouldn’t be eligible to buy a Paymentshield policy. In this instance, advisers can help their clients by recommending a specialist policy.

If an existing policyholder leaves the property unoccupied for more than 60 days, then certain exclusions will apply until the owners move back in. For example, loss or damage caused by escape of water or oil is excluded, as is theft, and accidental damage to buildings and contents.

Different insurance policies are likely to have a different definition of ‘unoccupancy’, with differing limitations and exclusions. It’s important that advisers establish whether there is intention to do any major renovation works on the home.

Customers need to know in advance that their cover could be reduced, so they can source a specialist policy if needed, instead of getting caught out if they need to make a claim during a period of unoccupancy.

At the time of purchasing the initial policy, the different unoccupancy periods and any associated limitations can be an important factor in comparing policies, if the homeowner is planning to undertake work immediately. Advisers can help them to carefully consider this.

3 Have they added or removed a bathroom?

If an extension includes a new bathroom, wet-room or toilet, it’s vital that the insurance provider is informed as it may change the property’s risk profile. Every year, home insurers typically pay out more for damage caused by leaking or burst

pipes than any other claim type. More bathrooms – and more pipework – increase the chance of damage occurring and needing to make a claim. So, it’s vital the insurer is aware, and that the customer is paying the right price for their situation –meaning no problems should the client need to claim.


Will it cost more to rebuild?

Has an extension significantly increased the square footage of the property? If yes, it may cost more to rebuild if the property is damaged beyond repair.

If the client’s home insurance has a blanket sum insured, they should check the total limit will provide enough cover after an extension or renovation work on a property.

The alternative is a sum insured policy where the customer will have selected the specific cost of rebuilding their property. In this situation, the client will need to check their policy documentation to ensure the buildings sum insured remains accurate, and possibly update it to avoid the risk of underinsurance.

It’s also worth checking that contents cover is still appropriate. That extra space is likely to have led to the acquisition of more furniture and other items that could mean contents cover needs increasing.

Making sure that homes and belongings are adequately protected during and after extension or renovation works is not necessarily straightforward, and advisers are really well placed to help clients navigate that.

After investing in enhancing what, for most people, is their primary asset, homeowners will want to make sure it’s properly protected. ●

May 2024 | The Intermediary 95

Don’t let your development lender frustrate your client’s project

At Magnet Capital we are a genuine solutions provider and experts in development finance.

Why choose Magnet Capital?

• No hidden costs. We are completely transparent about our pricing.

• Quick, decisive approach. No ‘double underwriting’ or slow credit committee process. Brokers and clients have direct access to genuine decision makers.

• Flexible funding. Our funds are provided by our equity partner in the business and therefore we aren’t limited by numerous investors or have the risk of funding lines being pulled.

• Lower fees. All our fees are based on net loan amounts and not gross.

• Better products. We don’t offer retained interest so the client doesn’t pay interest on a large interest slice from day one. Interest is rolled up or serviced if the client prefers.

• Loans from £200k to £2m.

• Low surveying fees - no QS monitoring for loans with build costs below £500k.

• ‘Commended’ Best Service from a Development Finance Provider 2022 at Business Moneyfacts Awards.

• Additional introducer fee can be added to the loan.

 020 8075 3255   The development finance experts

Protecting the transition towards net-zero homes

The Government has rolled out ambitious climate targets – net zero by 2050 – paving the way for higher adoption of renewable energy technologies.

UK homeowners have responded in record numbers due to the removal of VAT for renewables until March 2027, signing up for grants for air and ground or water source heat pumps, boiler upgrades and other energy saving measures.

Intermediaries have a key role to play in protecting the transition”

Last year, we saw record numbers of UK homes adopting green energy solutions – with more than 20,000 households installing solar panels every month, and heat pumps reaching a peak number of 3,000 household installations per month for the first time ever.

It’s a trend that’s set to continue throughout 2024, with new data from MCS revealing the nation’s installation count now stands at 1,378,870 – that’s 5.7% of households in England with a certified renewable installation.

Why the urgency to go green?

With the country still in the grips of a cost-of-living crisis, the cost of energy remaining stubbornly high against historic levels, and the urgency to embrace sustainable living high on the global agenda, it’s no wonder that more homeowners are turning to renewable energy solutions to

generate their own heat and power. Installations including heat pumps, solar panels, solar thermal energy, car chargers and electricity storage solutions are growing in popularity across the UK.

Insurance implications

Over the past decade, the cost of solar power has halved, making it increasingly appealing to homeowners. In fact, solar power is now the cheapest energy source in history.

However, solar panels also come with a range of risks, such as increased fire load, structural integrity, storm damage, and maintenance issues.

Similarly, heat pumps offer an energy efficient alternative to gas boilers, which helps reduce carbon emissions, but they come with fire and structural hazards, as well as potentially very high repair costs.

Renewable energy solutions, which are considered part of the fabric of a property once installed, can also affect property values and rebuild costs.

Industry response

It is a fast-moving market, so where your client has invested in green technology, don’t leave it to chance. Check the policy wording to ensure such technology is included within the policy cover and that sums insured are adequate.

Inevitably, as ever more renewable installations appear in our homes, underwriters will accrue more data and therefore build an accurate picture of the risks and claims landscape. This should help with improved wordings, fewer exclusions, and lower premiums in the future.

Until then, intermediaries have a key role to play in protecting the transition to renewables.

Protect your clients

Whatever renewable energy solution your clients might be considering, the key point to remember is that they are making a major change to their home, and it is therefore always best to seek specialist advice from your general insurance (GI) provider.

Policies can vary widely, but as a general guide, policies should cover the green technology for:

o Damage against natural disasters –lightning, hail, high winds, etcetera – and fire;

o Loss and replacement as a result of theft – let’s not forget that solar panels and heat pumps are valuable assets, and therefore potential targets for criminals;

o Liability for injuries and property damage, protecting the policyholder against injuries or damage to other people or their properties.

However, because of the increased fire risk, expect insurers to include an expectation that this technology is purchased from a reputable supplier, installed professionally, and also professionally maintained to the manufacturer’s specification.

Finally, but perhaps the biggest consideration of all, is the impact on the buildings cover as a result of higher property rebuild costs.

Research from Admiral Money recently found solar panels can boost a property’s value by as much as 25%, and heat pumps by 10%.

Make sure clients have access to a broad panel of insurers, and that your GI provider has the expertise to understand all the nuances involved to ensure you deliver solutions that meet the needs of your clients and offer fair value. ●

May 2024 | The Intermediary 97 Opinion PROTECTION

Green mortgages are invaluable, tech makes the di erence

Tackling climate change is a monumental challenge, and decarbonising homes is critical. According to the UK Green Building Council, nearly every existing property in the UK will need some sort of retrofit, equivalent to 29 million homes. The Climate Change Commi ee estimates that an investment of £250bn will be needed to fully decarbonise homes by 2050.

It’s requires a concerted effort from various sectors, including the Government, industry, and finance. With existing housing stock already accounting for over 50 million tonnes of CO2 in 2022, roughly 17% of all carbon emissions in the UK, retrofi ing existing homes is crucial.

As a lender, we know that homeowners not only care about and want long-term certainty around their financial future, but also want this regarding the future and stability of their home.

Catalyse decarbonisation

In the past couple of years, there has been growing recognition of the need to incentivise homeowners to invest in energy-efficient upgrades. Many mortgage lenders have since launched green mortgage products, which provide benefits for borrowers who buy energy efficient homes or make efficiency improvements.

By aligning financial incentives with environmental goals, green mortgages – and green finance more broadly – can benefit individual homeowners and also contribute to broader efforts to reduce carbon emissions.

One initiative in this space is the government’s Green Home Finance Accelerator (GHFA) programme,

which aims to catalyse and provide funding for the development of innovative financial products that help homeowners overcome the barriers to retrofi ing.

The GHFA is funded by the Net Zero Innovation Portfolio (NZIP) under the Department for Energy Security & Net Zero (DESNZ). Perenna is currently participating in this Accelerator, and is gearing up to launch a retrofit mortgage pilot this summer.

Perenna’s new proposition will focus on incentivising homeowners to improve the energy efficiency of their homes, rather than rewarding homes for already being energy efficient. New Perenna customers will receive all the benefits of our flexible long-term fixed rate mortgage, but will be rewarded with lower mortgage payments if they install low-carbon technologies such as heat pumps and solar panels.

Forging new ties

The success of green mortgages relies on access to accurate data and information about energy usage, carbon emissions, and retrofi ing costs. Perenna is working with innovative climate tech firms to help improve access to information and improve confidence in the whole process from start to finish.

It starts with the new digital tool which we launched recently. The Retrofit Calculator – provided by Kuppa – provides homeowners with initial insights into the costs of retrofi ing their homes and possible home energy savings. The interactive tool provides much be er recommendations than an Energy Performance Certificate (EPC), which is o en relied upon by homeowners who don’t know where to start.

Perenna is also collaborating with Heatio under the GHFA, to help

homeowners on the next stage of their retrofit journey.

Customers who sign up to use Heatio’s Flexx service get enhanced insights into their home’s energy usage and the impact that low-carbon technologies could have via an intelligent dashboard. Flexx utilises actual in-home data and machine learning to give bespoke energy efficient recommendations, and can be used to optimise the performance of renewable technologies a er their installation.

Partnerships like these demonstrate how innovative technology can be used to empower homeowners to make sustainable choices. The integration of technology and data into the mortgage process has the potential to revolutionise the industry.

Through developing new innovative products that align financial incentives with environmental goals, this is se ing a new standard for the mortgage industry. The integration of tech and data is not just enhancing the product offering available to borrowers, but also enabling a shi towards a more sustainable and resilient housing market.

The path ahead

Despite the progress made in the development of green mortgage products, achieving widespread decarbonisation of housing stock still remains a long way off. Barriers such as upfront costs and low awareness of low-carbon technologies still pose significant obstacles to scaling up energy-efficient retrofi ing efforts. But with the right tools, and a coordinated effort from policymakers, institutions and technology providers, it can be done. ●

Opinion TECHNOLOGY The Intermediary | May 2024 98

The rst step in a lending data revolution

It’s been almost two decades since British mathematician Clive Humby famously said: “Data is the new oil. It’s valuable but if unrefined, it cannot really be used.”

Business consultancy firm First Site Guide estimates there were 79 ze abytes of data generated worldwide in 2021. By 2025, it says more than 150 ze abytes of big data will need analysis. To store it all, there are now more than 6,000 data centres worldwide, according to research service Data Center Map.

The million – or billion – dollar question is how to harness the value from that data. It’s still something businesses, especially with legacy systems, are grappling with.

Last year, Salesforce carried out a global survey of nearly 10,000 business leaders and found that, while they knew using data is important to their business, the vast majority weren’t really doing so. Business leaders were also struggling to put the use of data into practice quickly, limiting their ability to make strategic business decisions and navigate economic uncertainties. Eight in 10 business leaders said data is critical in decisionmaking, and 73% acknowledged that it had the power to reduce uncertainty and help them make more accurate decisions in real-time.

Closer to home, mortgage lenders are acutely aware of the enormous value careful data management and modelling can bring to their businesses. Notwithstanding the data lakes available, the existing infrastructure and markets have understandably driven a series of bespoke solutions that fix real problems, rather than broad solutions that a empt to address everything. It is very clear that, in so many areas

of property risk, data is the only way of assessing and complying with issues like energy performance across existing portfolios.

Lending risk splits broadly into asset risk and borrower risk. Focusing on my own area of expertise, asset risk splits into a huge number of subsets. From building condition, climate change exposure, planning and infrastructure factors, broader lending appetite and ease of resale, safety factors, exposure to construction defects – the list goes on.

Focus on what matters

Each business will have different needs and be in different stages when it comes to collecting, accessing and using data. Where to start comes down to what ma ers to your customers. It depends on specific lender and market concerns. This has informed our strategy to deploy our vast access to up-to-the-minute property knowledge through our surveyor base with digital expertise and access.

Listening to customer demand is the smart way to assess what those are, be that demand for finance on non-traditional dwellings, leaseholds, homes with cladding, new-build properties or those in high climate risk areas.

We know from the interest and use of our suite of products that there is a huge appetite for data-driven solutions – in part because we can guarantee the accuracy of our data. A 2021 study by analyst research firm Gartner claimed that every year, poor data quality costs organisations over £10m.

Apart from the immediate impact that has on revenue, over the longterm, poor quality data increases the complexity of data ecosystems and leads to poor decision-making.

That’s why lenders need a broader view, one that not only covers the breadth of the wider market, but also provides the depth of granular detail needed to be accurate.

In the end, we are a business that must provide solutions that all customers want when they are ready for them. Manual boots on the ground are not just an invaluable physical presence for some lenders, but they are the building blocks upon which we can add so much more value at both a macro and niche market level.

The success of our equity release business means we have insights into a relatively new and rapidly growing market that few others can offer.

In the mainstream, we have access to unrivalled market intelligence, undertake a mortgage valuation for the UK lending community every 25 seconds. We have developed bespoke technology and processes to support a distributed model, combining our nationwide coverage with local market knowledge, underpinned by industry-leading technology and robust risk controls.

The challenges facing lenders are evolving too, and the security upon which they lend is playing an ever more important part in that decision. From energy performance to geographical location and exposure to climate risks, understanding the value of the security today and estimating its future performance will play a critical role in lenders’ understanding of their own capital positions and their lending risk.

At a time when the affordability squeeze continues, understanding and managing asset risk tightly is even more important. ●

Opinion TECHNOLOGY May 2024 | The Intermediary 99
STEVE GOODALL is managing director at e.surv

Viva la digital revolution

You could take almost any period of time over the past 100 years and chart the incredible contribution made by technology in some form or another. However, the past 10 years have undoubtedly been the most transformative, as the nation’s appetite for tech has risen at pace, and this appetite will continue to drive change in terms of the way we live, work, consume and connect.

Over this time, we have seen notable developments in areas such as virtual reality, augmented reality, artificial intelligence (AI), foldable devices, 5G, sustainability and a plethora of other areas in what has been a constant stage of metamorphosis and adaptation.

It’s fair to say that certain industries have emerged stronger from this tech explosion while others have lacked the vision, capacity, infrastructure and capability to fully embrace this movement.

Historically speaking, the housing and mortgage markets are not exactly known as leaders in the tech field. This was largely due to the size, scale and complexities involved in o en protracted and intricate transactions which contained such a wealth of

variables and an ever-extending number of obstacles to navigate. Of course, the homebuying journey is one which should not be taken lightly due to the huge sums of money involved and the importance of corners not being cut from a legal, risk, compliance and security standpoint.

Indeed, these factors have served to provide a natural barrier to outside tech influencers and more standardised tools which were growing in prominence within other sectors during this period, especially from a lending perspective.

But should lenders be be er at implementing technology to introduce more innovative products and offerings in a time when the demands and needs of borrowers across the UK are constantly evolving?

The obvious answer is yes, but in previous times it has not always been that simple. There is obviously a long history and values a ached to banks and building societies, especially when it comes to the impact of societies that they have on their members and in the local community, and maintaining a competitive edge with innovative products has proved difficult due to antiquated systems and legacy issues.

New lender entrants have helped

push the digital envelope and served to challenge more established players to up their tech game, and specialist tech providers have entered this space with cost-effective offerings to be er support new and established lenders in delivering a more tailored, customer-centric experience.

For example, we have recently launched OMS Originations, an allencompassing mortgage origination platform which helps put the lender in charge. This comes via streamlining the entire end-to-end origination journey for both the intermediary and direct submission route to deliver unparalleled processing capability, keeping all parties informed throughout the process. A customisable dashboard allows lenders to create efficient workflows, so that they can meet a range of borrowing needs without lengthy development times or cost.

Our mission is to support lenders in their transformation programme to become a modern lender by providing advanced technology to help achieve lending goals, boost efficiency, mitigate risk, and cater to a new generation of borrowing needs.

Looking forward, it’s crucial that lenders, intermediaries, distributors and tech providers don’t rest on any laurels as a string of transformative advancements will reshape consumer needs in ways we can only yet begin to fathom.

The next chapter of the digital revolution is always being shaped and it’s vital that we, as an industry, don’t get le behind. ●

TECHNOLOGY The Intermediary | May 2024 100 Opinion
Mortgage brokers are in the best position to make real-life recommendations

Consumer Duty will inform the tech of tomorrow

Another year has flown by, and we now have another mortgage efficiency survey to look forward to.

Now in its 13th year, our annual industry review kicks off in June, when we will be speaking to lenders of all shapes and sizes across the market to find out what challenges and opportunities they see for the coming year.

The survey has come a long way. From its beginnings as a piece of quantitative research conducted online, it has now become one of the most anticipated research events of the year because of our contributors’ input. The survey focuses primarily on how satisfied lenders are with their mortgage processing technology, but we have found each year that this evaluation takes account of a much broader range of factors.

How processing systems interact with other IT systems, the regulatory environment and economic conditions means our discussions with lenders touch most aspects of what it is to be in the mortgage market today.

Last year’s survey put the spotlight on affordability, correctly anticipating the acute competitive pressure on product pricing that characterised the market in 2023.

The complexity of criteria was another area of focus, specifically in relation to the speed and turnaround of product withdrawals and launches.

Also central for lenders was how systems support arrears management and allow them to track and evidence compliance with the Consumer Duty rules and all other regulation.

It’s likely that these themes will continue to be at the forefront of lenders’ minds this year, particularly given that forbearance is increasing,

and the Consumer Duty rules will begin to apply for existing and closed products and services from the end of July.

The Financial Conduct Authority (FCA) states that the duty “sets a higher expectation for the standard of care that firms give customers.”

The guidance states: “Firms are required to comply with the duty's cross-cu ing rules by acting in good faith towards customers, avoiding causing foreseeable harm to customers and enabling and supporting customers to pursue their financial objectives.”

Given the financial strain many households are under, carrying out this duty is complex. Producing sufficient evidence to show why certain courses of action were taken or advised is fundamental for lenders – so is having access to the right customer data to allow lenders to be proactive in providing support to customers early.

The FCA has been really clear on this ma er, publishing results from its review of firms’ implementation of the Consumer Duty for new product lines in February.

It found examples of both good and bad practice, but highlighted specifically that some firms “need be er data and monitoring strategies.”

The regulator also highlighted firms’ treatment of vulnerable customers, with some failing “to address identified weaknesses in processes to track vulnerable customers across multiple product sets and gaps in data and servicing capabilities.”

While this doesn’t necessarily refer to practice in the mortgage market – the review was undertaken across financial services firms –it’s a highly relevant observation for our industry. The definition

of vulnerability is increasingly amorphous as a result of inflation and rising interest rates. Capital-rich borrowers can find themselves with dangerous affordability constraints just as quickly as those with much less wealth.

On the flipside, the FCA also saw firms carefully and precisely define the target market for products and services that could cause harm if sold to the wrong consumers.

No simple solution

The Consumer Duty rules are proving to be a wholesale gamechanger. The expectation that this places on IT and technology systems weighs heavily. Key to ge ing it right is acknowledging there is no more onesize-fits-all.

We will be asking lenders how able they consider their own systems to be to fulfil their regulatory obligations. And importantly, how able those systems are to adapt to individuals’ needs, and how to embed the lessons learned into future process management.

It will be interesting to learn how lenders have responded to the challenges presented over the past year, particularly in relation to how they understand mortgage application process efficiency in today’s market.

Cost management, fast and reliable service, and accurate process and information have always been part of the efficiency equation.

We expect to see more qualitative factors influencing lenders’ assessments from here on in. ●

TECHNOLOGY May 2024 | The Intermediary 101 Opinion

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

Focus on... Norwich

Following the Bank of England’s decision to once again hold the bank base rate at an all-time high, local markets across the UK continue to wait with bated breath for some semblance of relief.

Despite promising signs and a brief rate war from major lenders at the beginning of the year, it is fair to say that the much-touted easing of pressures upon the mortgage market haven’t quite come to fruition thus far in 2024. And with the Chancellor’s rather disappointing Spring Budget ushering in very little change to make mention of, and many lenders still increasing rates, borrowers across the country are forced to contend with ongoing affordability constraints and fluctuating market sentiment.

This unfortunate trend is no different for Norwich, where brokers and buyers alike have been forced to weather turbulent market waves over the past 18 months.

This month, The Intermediary sat down with local experts to ascertain how Norwich has been handling this ongoing market unrest, whether this has affected buyer trends, and whether better days are indeed on the horizon.

Current values

According to the latest data, the average property price in Norwich postcode area is approximately £289,000, while the median price sits at £260,000.

This is compared with an average and median of £350,000 and £270,000 in England and Wales overall.

The average price in the area declined by £-13,700, or -4%, over the past 12 months, undoubtedly as a direct result of wider market fluctuations.

The most affordable place to purchase a property in Norwich is in the ‘NR30 2’ postcode, with the average price of £126,000. The most expensive place to buy is in the ‘NR25 7’ area, where properties could set buyers back over £792,000.

The average detached property in the region costs around £415,000, while semi-detached homes boast an average of £275,000.

Terraced homes will cost buyers approximately £227,000, with the average price of an apartment or flat coming in at around £165,000.

Subdued appetite

Overall, there were approximately 7,400 property sales in the Norwich postcode area in the past year, with sales dropping by over 41.7%, or -5,800 transactions.

According to Ranald Mitchell, director at Charwin Private Clients, this level of sales, although somewhat lacklustre, have at the very least remained consistent over the past few months.

He says: “The level of sales, whilst consistent, is not buoyant.

“It seems like there is lots of interest in listed property, but the rate at

which offers are being made remains sluggish.”

Jamie Lennox, director and mortgage adviser at Dimora Mortgages, corroborates this somewhat subdued view of the market, citing buyers’ ongoing conservatism when it comes to stretching their budgets.

He says that while he has seen an uptick in activity over the past few months, buyer spending power has massively reduced, as people remain more concerned with “meeting a budget” rather than “borrowing the maximum possible.”

A promising spark

On the other hand, Stephen Perkins,

Norwich The Intermediary | May 2024 102 LOCAL FOCUS

Brisk for business

ctivity in the local market has improved since 2023 with more supply coming on to the market.

The level of sales, whilst consistent, is not buoyant. It seems like there is lots of interest in listed property, but the rate at which offers are being made remains sluggish.

Property investors are also relatively quiet, with more established landlords continuing to seek new opportunity, however activity from smaller or aspiration landlords has almost ground to a halt.

Norfolk is a holiday spot for many and investment in holiday rentals is slowing, as is overall demand. For us, business has been very brisk, however, I’m not sure others would agree. There is a sense of acceptance now that rates are going to be higher for longer, and those remortgaging are looking for ways to withstand the impending payment shock.

Debt consolidation is popular as are term extensions. For first-time buyers and movers, the best time to act is when you can afford to.

There is never the perfect time. I expect transactional activity to remain steady for the remainder of the year.

The housing market is going through a transformative period and will eventually settle. Everything is ticking over, just at reduced levels to that we’ve been used to. The boom times will return, of that there is no doubt.

We deal with most lenders and have no preference to any. There are no stand-out local lenders since the acquisition of Norwich & Peterborough Building Society were acquired by Yorkshire Building Society some years back.

We help everyone no matter what stage of life and mortgage cycle they are at. There is a notable increase in older enquiries though, who have had legacy interest only mortgages and failed to act at any point to repay the capital. These people have some tough decisions to make. First time buyer activity is steady, as is people remortgaging.

Some of the larger builders have been throwing up new housing like it’s going out of fashion. South of the city, Cringleford continues to further develop around the Hospital and the housing seems to be getting sold. South of the city is a very popular location.

Then we have north of the city, with the Northern Distribution Road providing better access from northern routes into and across the city.

In areas like Rackheath, small towns are effectively being built with mixes of two to five-bedroom homes, affordable housing and accompanying infrastructure.

managing director of Yellow Brick Mortgages, maintains a level of optimism when it comes to residential appetites in the Norwich area.

He says that despite the market being somewhat “dimmed” in February and March, April and May have seemingly brought spring back to the market.

He notes that over the past month, enquiry numbers from buyers have significantly increases, while a number of property agents have reported a strong number of new property instructions.

He says: “The fire is all set; it is just awaiting the spark to get it roaring.”

Younger demographics

In terms of demographics in the region, the first-time buyer market seems to be particularly profitable. Indeed, according to the latest population data, recorded in 2020, there were approximately 763,000 residents in the Norwich postcode area, with an average age of 43.8 years. With affordability issues pushing the average age of the first-time buyer ever higher, Norwich undoubtedly boasts a market full of those on the younger, first-time buyer end of the scale.

Lennox says he has seen “a strong market” for first-time buyers, with many prepared to “bite the bullet” even in light of higher rates and take that first precarious step onto the ladder.

He also notes that home movers remain relatively active but have had to make compromises due to higher mortgage costs.

Perkins also notes this surge in home mover activity, particularly from buyers who have chosen to move to the area, away from larger cities such as London in search of a quieter, and more affordable, suburban life

103 May 2024 | The Intermediary

A strong local market

024 has seen a revitalised housing market within Norwich, fuelled mainly by the lower rates we saw at the start of 2024 and the realisation that rates are unlikely to return to the low levels we saw over the last decade.

Residential lending has gone from strength to strength in 2024 which has defied the normal winter months where moving transaction are typically reduced.

Providing there are no more hiccups with inflation and mortgage rates, we would expect this to continue through to the rest of 2024.

Although activity has increased, spending power of the houses people are wishing to buy has certainly reduced, with buyers more focused on meeting a budget rather than borrowing the maximum possible.

With us servicing a lot of first-time buyers and next time movers, you will often find you are using the usual suspects in Halifax, Nationwide, NatWest, HSBC.

Thankfully there isn’t anything to quirky around the area, so none have issues lending in Norwich and the surrounding areas.

We see a strong market around first-time buyers who are prepared to bite the bullet with higher rates following a correction in house prices locally, making the first home more achievable versus previous years.

Movers are still active but are having to adjust their expectations on the next home based on the monthly costs of the new mortgage.

Anglia Square’s architecture has failed to last the test of time over the years and was ear marked for major redevelopment, however, has seen one of the major backers pull out of the proposed deal.

Hopefully we can see these plans come back to fruition in the future.

The majority of redevelopment around Norfolk will fall under the Greater Norwich Local Plans which already has development sites earmarked around the county to support the growth of Norwich - with over 45,000 homes expected to be built between now and 2038.

This comes as no surprise, given Norwich is regularly voted in the top 10 places to live, with its low crime rates, access to the coast and the rural setting.

This, combined with a more competitive price point, allows families to relocate from London, Essex and Cambridge and get far more for their money.

We’ve seen a mixed bag when it comes to buy-to-let, the casual landlord who may have one or two buy-to-lets are considering selling off due to lower.

However, we are seeing established landlord use this time to grow their portfolio with more competitively priced properties, although many are now considering other ways of letting. such as houses in multiple occupation (HMOs) which Norwich has a strong market for around the university.

following the pandemic. Mitchell, while also noting strong first-time buyer and remortgage activity, has also seen a surge in business from older borrowers.

He says: “There is a notable increase in older enquiries though, who have had legacy interest only mortgages and failed to act at any point to repay the capital.

Lennox says that due to the main demographic in the area generally being standard first-time buyer and home mover cases, most brokers tend to pluck for “the usual suspects”, such as Halifax, Nationwide, NatWest, HSBC.

Mitchell agrees with this assessment, noting that, in his opinion, there are currently no standout local lenders since Yorkshire Building Society’s acquisition of Norwich & Peterborough Building Society some years ago.

New build preference

With the typical ‘big six’ lenders seemingly in favour in the area, buyer appetite for new build properties also seems to be ‘in vogue’.

Last year, the average price of an established property in the Norwich area stood at £298,000.

Meanwhile, the average price of a newly built property came in at £328,000, suggesting a clear buyer preference for newer properties.

With 101 new builds sold in the area last year alone, Mitchell says that larger developers have been “throwing up new housing like it’s going out of fashion.”

He cites the area south of the city to be particularly popular, with many houses being built and sold in Cringleford near the pre-existing hospital.

Additionally, he notes the rise in areas like Rackheath, where small towns are being built with mixes of two to five-bedroom homes, along with the accompanying infrastructure.

Perkins was also quick to note the development of land around the new Northern Distribution Road (NDR).

What’s more, with plans to dual the existing A47, he says that these improved links to Norwich will undoubtedly encourage further investment and appetite for property in the area.


“These people have some tough decisions to make.”

When it comes to lender activity in the area, unsurprisingly, the larger, high-street banks tend to be dominant.

Norwich’s private rental market, although not immune to the abundance of economic and legislative challenges as of late, has been operating at a relatively consistent level.

Private rental stock accounts for 21% of housing in the area, a solid figure when compared to the national

The Intermediary | May 2024 104 Norwich LOCAL FOCUS

average of 23.6%. According to Mitchell, hardened and experienced residential property investors have remained active in the market, as they already had enough cash to ensure their growth.

However, he notes that smaller or first-time landlords have seen the profits from their rental properties eroded due to higher interest rates,

with some now making a loss. Perkins agrees, noting that due to recent legislation and tax changes, things have been tough for local landlords over the past few years.

Nevertheless, one way in which landlords have adapted to this shifting landscape is by finding new and more innovative ways to expand their portfolios.

Enquiries on the rise

The property market started the year brightly but then dimmed during February and March, but April brought a spring back to the market.

Enquiry numbers from buyers have increased and most agents have had a strong number of new property instructions.

So, the fire is all set, it is just awaiting the spark to get it roaring.

Much like the rest of the UK, the majority of the Norwich residential mortgage market is placed with the top six banks, with Halifax, HSBC and NatWest taking the lions share.

As a university town though, there is a buoyant letting and student let market, and with the coast and the broads nearby, holiday lets are also popular.

Existing borrowers have been keen to secure new rates either with a new lender or with their current provider earlier than ever.

With rates still continuing to rise, it is certainly better to secure a rate and have the option to switch should a lower one become available, than to leave it late and be left with a potentially higher rate.

Purchase mortgage enquiries have been high, but many are hesitant to offer on properties with predicted rate reductions and pre-election incentive policies and that could mean a better time to buy may be just around the corner. The housing market, though, has shown us repeatedly that those who delay, usually pay more as any saving from interest rate reductions is lost against the ever-growing house prices.

We work closely with many estate agents in the area, so our main demographic is local first-time buyers and home-movers.

However, Norwich and Norfolk as a whole has, since Covid especially, seen many buyers who have sold up in London to move to the more rural countryside, supported by work from home policies.

There are many new build developments across Norwich and surrounding villages. The development of land around the new Northern Distribution Road (NDR) being probably the largest. With plans to dual the A47 making future access to Norwich quicker and easier, Norwich property will become even more popular.

Landlords have had a tough time the last few years, both from legislation and tax changes to requirements on energy efficiency and with increased mortgage rates, and reduced lender affordability, many landlords will require larger deposits and will be looking to make more modest returns outside of student lets and Houses in Multiple Occupation (HMO) properties.

With recently announced changes to holiday let taxation, there has been somewhat a cooling of that sector of the market.

Due to the house price to rent ratio in Norwich, the rental sector is faring better than other parts of the country and with the number of available properties growing, it looks to soon be a buyers’ market.

Lennox notes that he has seen many landlords turn towards houses in multiple occupation (HMOs), mainly due to their popularity in Norwich, xof the furnished holiday lettings tax regime as announced by Jeremy Hunt in the recent Spring Budget, has resulted in an evident “cooling” of the sector.

Mitchell also cities this change, with the Covid staycation craze beginning to die down as borrowers begin to once again show a clear preference for more affordable, package holidays abroad.

Continually improving

Despite ongoing uncertainties within the wider mortgage sector, Norwich’s property market has remained active.

While unimmune to the high mortgage rates and affordability constraints that still hamper the wider UK market, appetite for residential lending is still strong.

With many new builds currently in development, and large numbers of buyers relocating to the area due to its proximity to larger city hubs, the Norwich market still has plenty of potential.

Despite its waning holiday let market and the struggling landlords in the area, brokers still remain confident that enquiry levels have, and will continue to, improve.

As put by Mitchell: “There is never the perfect time. I expect transactional activity to remain steady for the remainder of the year.

“The housing market is going through a transformative period and will eventually settle.” ●

105 May 2024 | The Intermediary Norwich LOCAL FOCUS
Norwich Residents
Average age
Residents per
Norwich postcode area. Source:
household 2.29

On the move...

Tandem names Suavek Zajac as chief technology o cer

Tandem Bank has appointed Suavek Zajac as its new chief technology officer. Z

quarter-century of experience to

Zajac brings almost a quarter-century of experience to Tandem, having developed his expertise across a spectrum of technology roles at companies such as Grand Parade, William Hill, Blackberry, and Railsr. In his new role, Zajac will lead the development of the bank’s digital platforms,

aiming to enhance the scalability and efficiency of systems that support Tandem’s mission to make green living accessible.

VAS Panel makes four new internal promotions

AS Panel has made a series of promotions.

RAlex Mollart, chief executive officer at Tandem, said: “Welcoming Suavek as our new CTO marks a pivotal moment in Tandem’s digital journey."

VJenny Kitching, who joined in April 2021, has taken the role of head of facilities.

Charlie Connelly, who joined in September 2018, has become head of service having been assistant head of service.

the bank’s digital

ichard Doe, former managing director at Paragon Banking Group plc and ex-chief executive officer of Harpenden Building Society, has been appointed as a non-executive director on the board of United Trust Bank (UTB).

With a banking career spanning over forty years, Doe has a track record of steering companies through significant growth and transformation.

Harley Kagan, chief executive officer of UTB, said: “Richard has a wealth of experience of running, transforming, and growing successful specialist lenders and his record of delivering high growth across commercial lending, residential mortgages, and deposits speaks for itself.

“Richard’s strong customer and marketing focus combined with astute commercial management is an excellent fit with UTB’s values.

“His deep understanding of the UK financial services market and market drivers will be extremely helpful as UTB continues to grow and increase its presence and awareness in the sector.

Zajac added: “As Tandem’s new CTO, I’m looking forward to diving headfirst into the buzzing and rapidly growing green finance sector. As the UK transitions towards a net zero economy, companies like Tandem have a huge role to play in ge ing consumers over the line on green issues on time."

Movera appoints Mark Tosetti as CEO of CAL

Movera has appointed Mark Tose i as chief executive officer (CEO) of its panel manager business, Conveyancing Alliance (CAL).

Tose i brings a wealth of experience from across the sector having previously worked within DLA, Capita, Optima Legal and since 2022 group partnership director of Movera.

Tose i will remain within the Movera executive team, reporting to Nick Hale Movera Group CEO.

Additionally, Maria Azam, who started with VAS Panel in October 2021, takes the role of assistant head of compliance and Robyn Sculley, who began in June 2022, becomes assistant head of facilities.

All four will report to Natalie Benson, current operations director.

Benson said: “Jenny, Charlie, Robyn and Maria have been exceptional, and it is right they have been rewarded for all their hard work and diligence."

Lendco expands bridging team with three new hires

and his time as a specialist lending manager at Market Harborough Building Society.

Keegan joins from Lendinvest, where she developed her expertise as a bridging underwriter.

While Beeton comes from Enra Specialist Finance, where she was part of the bridging servicing team.

helpful in the sector. directors."

Lendco, a specialist lender, has enhanced its bridging team with three new appointments.

“I am delighted Richard has accepted our invitation to join our board of directors."


Tom Dolby has been appointed as broker sales executive, Courtney Keegan as underwriter, and Natalie Beeton as loans servicing manager.

Dolby brings experience from his recent role as an underwriter at MFS

Alex King, executive director at Lendco, said: “I’m very happy that our growth plans are coming to fruition, and these planned additions will further strengthen our position in the market.

“I have no doubt they will be a success, and I speak for everyone here at Lendco in extending them a very warm welcome to the team.”

Richard Doe joins United Trust Bank as non-executive director RICHARD DOE MARK TOSETTI SUAVEK ZAJAC

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