The Intermediary – October 2024 by theintermediary

From the editor...

When asked recently what I thought most market experts were hoping for as we move toward the end of 2024 and look to the prospects for the next year, I found li le need for complex thought to ﬁnd the answer. “Best case scenario,” I told my companion, “I think everyone just wants to have a really boring year.”

Of course, as a journalist my own role hinges on quite the opposite, ‘no news’ is not ‘good news’ for those of us with SEO targets to meet. However, every time I have asked someone recently what they want to happen in the coming months, only to be met with a wry smile and a statement along the lines of “ideally, nothing much,” I feel their pain. We’ve all become acutely aware of the aptness of the old curse: may you live in interesting times.

We almost got sight of the sweet abyss of boredom when Labour – like ‘em or leave ‘em – made it into power with a strong enough majority to do away with the change, turnover, turbulence and, at best, divided decision-making seen under the past few years of Conservative rule. Even the staunchest Tory card-carriers secretly sighed in some relief as they realised that, at the very least, they could now know where they stand.

This was short-lived, of course, as with stability in Parliament achieved, the conversation about that £22bn black hole –or was it £40bn? – reared its ugly head, and

Starmer set the country ablaze with panic and speculation with his comments about a “painful” Budget. There’s no doubt hard measures are needed to right this veering, dilapidated ship, but that doesn’t mean we wouldn’t all rather bury our heads in the sand. We’re nearing that time now, and I for one am trying to work out how to put together a convincing Capital Gains Tax costume for Halloween.

You might be forgiven for assuming there’s something of a bleak outlook ahead for Q4 with all this spooky foreshadowing, but never fear, The Intermediary is here to make things be er with its inaugural, and much anticipated, awards event. Less than a month away as I write this, the National Mortgage Awards – Second Charge is shaping up to be quite the party, if we do say so ourselves.

It might not solve some of the more challenging aspects of the market and economy, but in recognising the incredible work being done by players across a sector that is growing in importance – not least as people’s lives and ﬁnances become more complex – we can at least remind ourselves that it’s not all doom, gloom and deﬁcits.

While I wish I could help all those in the market looking for an uneventful, quietly successful end to the year, the one thing I can promise is, with the evening we’ve got lined up, it certainly won’t be boring. ●

Jessica Bird

@jess_jbird

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

The Team

Jessica Bird Managing Editor

Jessica O’Connor Senior Reporter

Marvin Onumonu Reporter

Zarah Choudhary Reporter editorial@theintermediary.co.uk

Stephen Watson BDM stephen@theintermediary.co.uk

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Helen Thorne Accounts nance@theintermediary.co.uk

Barbara Prada Designer

Bryan Hay Associate Editor Subscriptions subscriptions@theintermediary.co.uk

Contributors

Adam Ryan | Adam Stretton | Adrian Moloney

Alan Longhorn | Alex Upton | Alexis Rog

Alpa Bhakta | Andrew Arwas | Andrew Gething

Averil Leimon | Bob Hunt | Charlotte Oakley

Christopher Tanner | Craig Hall | Dave Harris

David Goodman | Elise Coole | Geo Hall

Grant Hendry | Helen Comben | Iain Carter

Jason Berry | Jerry Mulle | Jonathan Rubins

Kathy Bowes | Laura omas | Leon Diamond

Lisa Martin | Luke Schlemmer | Mark Blackwell

Mark Stringer | Martese Carton | Matt Harrison

Michael Conville | Oli Sherlock | Paul omas

Peter O’Connor | Praven Subbramoney

Rachael Hunnisett | Richard Harrison | Richard Pike

Robin Johnson | Sebastian Murphy | Sophie Pollard

Stephanie Dunkley | Steve Carruthers

Cover illustration by Eduardo Luzzatti Cartoons by Giles Pilbrow Printed by Pensord Press

Feature 42

NAVIGATING THE SME FUNDING MAZE

Jessica O’Connor considers the complex world of small business nance

Meet the Broker 52

FINSPACE

Luke Schlemmer on the challenges and opportunities for brokers

REGULARS

Broker business 54

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

Local focus 78

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

On the Move 82

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

INTERVIEWS & PROFILES

The Interview 24

CHETWOOD BANK

Andrew Arwas explains how an eventful 2024 will make for an exciting future

In Pro le 10

BUTTERFIELD MORTGAGES LIMITED

Alpa Bhakta discusses HNW nuances and the prime Central London market

Q&As 48, 70

NORTON

Mark Stringer celebrates as the business marks its 50-year anniversary

SIKOIA

Alexis Rog looks at the mortgage market’s delicate relationship with technology

Meet the BDM

OSB GROUP

Helen Comben on the challenges and opportunities for business development managers

Why we must widen community input on planning

Building more homes, including aﬀordable ones, is a crucial part of solving the national housing crisis, which naturally has major ramiﬁcations on the mortgage sector.

The new Labour Government has made a commitment to build 1.5 million homes in the next four years, which is welcome news for everyone struggling to ﬁnd a home of their own.

However, the current planning process could become a huge sticking point in making this a reality. This is something – as a lender that wants to put homeownership within reach of more people, generation a er generation – that we want to address.

The planning process is currently weighted towards the minority of people who oppose development, those whose voices are drowning out the people who support building more homes. This is why we’ve worked with Public First, the research consultancy, to explore ways of unlocking opportunities for home building.

Our aim is to share these ﬁndings to support the Government in making its pledges a reality.

Finding inspiration

In countries like New Zealand, the planning process has been altered to make decisions on housebuilding faster and easier, by se ing out what kind of homes they want, and where, at the outset.

The Christchurch earthquake led to the need to build quickly, so a new approach was introduced which led to a tripling of the number of homes delivered and a marked impact on prices. Other places in New Zealand learned from Christchurch and went out and consulted their communities on building more.

The support for these ideas led to housing becoming more aﬀordable.

This is something we want to take inspiration from, and we want to advocate for vital changes needed. Our research is part of a series of suggestions from MPs and industry experts outlining muchneeded reform to the housebuilding planning process.

Hearing from a broader crosssection of voices earlier in the planning process – rather than only those opposed to individual schemes once they are drawn up – will create a fairer system that reduces barriers to homeownership.

The report we have produced alongside Public First shows that those voicing concerns with local planning are typically older, richer, and much more likely to be well-housed. They do not speak for the whole of the community.

Total representation

We need to change the planning system so that local councils and developers are obliged to listen to a representative cross-section of local people.

The research undertaken by Public First was conducted in a constituency in Berkshire where housing is costly. Having conducted representative research online and face-to-face, not one person interviewed had ever responded to a planning issue. Our planning system privileges the voices of people who are time-rich, welleducated and conﬁdent.

Of those questioned, three in four wanted more houses in their area, but four out of ﬁve want councils and developers to be obliged to consult the community fairly and equally. Councils must consider the views of the whole community, which can only

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

happen if they make it simpler for people to get involved.

Not everyone will agree, but by consulting widely, politicians can be conﬁdent that those tough choices are seen as necessary and are supported by the majority of local people. The system must be made more representative and inclusive.

For many, the dream of ownership currently feels unrealistic, as there simply aren’t enough homes to meet demand, and mortgage lenders and brokers know all too well the challenges people face.

Pushing local authorities and developers to widen community consultation could be key to unlocking unmet housing need and doing so in a way that builds cohesion rather than division by listening to a full range of local voices. ●

ose voicing concerns do not speak for everyone

Specialist answers to complex challenges

The economic backdrop for the mortgage market has certainly brightened over the course of the year in comparison to much of 2023. Inﬂation has fallen to just above the Bank of England’s target, hovering at 2.2% in August, while the base rate was lowered to 5%, the ﬁrst cut since March 2020.

Many lenders have been slashing mortgage rates in recent months as competition accelerates, driving an increase in market activity, with the Bank of England reporting net mortgage approvals of 64,900 in August, the highest level since August 2022.

Nevertheless, UK households are still evidently confronted with a challenging environment. GfK’s latest Consumer Conﬁdence Barometer dropped markedly in September, despite showing signs of recovery earlier this year. GfK asserted that this has been driven in part by warnings from the Labour Government of a “painful” Budget to be announced at the end of October, with tax rises and spending cuts likely to place an additional strain on household ﬁnances.

It is in this context that the market has been seeing an increase in the number of customers with more complex credit circumstances. This includes people who may have experienced a small recent credit blip despite an otherwise strong credit history. The Financial Conduct Authority’s (FCA) latest Financial Lives Survey, for instance, found that 11% of UK adults – approximately 5.5 million people – had missed domestic bills and credit commitments in the last six months to January 2024.

The study also reported a jump in the proportion of mortgage holders requesting that their provider lower their monthly payments or provide a payment holiday, reﬂected in recent

Bank of England data revealing a 32% increase in total mortgage arrears in the second quarter of 2024 compared to last year.

These trends are also reﬂected in the increasing concerns among mortgage brokers regarding customers’ credit ratings. Kensington’s website analytics show that the top lending criteria that brokers are looking for are defaults, income, and arrears. We have also received anecdotal feedback from our mortgage club and network desks that adverse credit is the top subject that brokers are currently querying.

O ering exibility

As more aspiring homeowners struggle to meet the lending requirements of mainstream lenders, the role of specialist mortgage providers is increasingly important. Flexible lending criteria allow specialist lenders to consider the complete financial situation of each applicant, including the reasons for any previous financial difficulties.

By assessing a wider range of factors, specialist lenders can offer solutions that address specific customer circumstances and make mortgages accessible to more prospective borrowers so that a oneoff recent credit blip need not always preclude borrowers with an otherwise strong credit history.

Kensington’s Resi 6 and Resi 12 products, for example, are designed for borrowers who have experienced a credit blip over six or 12 months ago, respectively. Both offer Kensington’s Step Down option, which applies two fixed rates over a 5-year fixed term. The first is applied during the first two years of the loan, followed by a lower rate for the remaining three years. This provides reassurance for customers, offering the certainty of a 5-year fixed term with the knowledge that their payments will be lowered a er two years as they rebuild their credit profile.

VICKI HARRIS is chief commercial o cer at Kensington Mortgages

Mortgage brokers can also provide crucial services for customers in this position. This includes evaluating the specific needs of each customer and forming a comprehensive understanding of their financial situation as well as their goals and priorities for their mortgage, to help them find the right lender and products. Working closely with specialist lenders and their business development manager (BDM) teams can help brokers identify suitable offerings for the specific needs and circumstances of their customers, which can be particularly important amid increasing market complexity.

Providing support for overwhelmed customers is also vital, ensuring that their options are clearly explained and providing details on documentation requirements, expectations, and turnaround times. Brokers should aim to help their customers to understand the signiﬁcance of any credit blips on their record and how to get mortgage ready.

It is important for brokers to bear in mind that necessary knowledge may be lacking in these situations. Recent research from Which?, for example, found that just 45% of people have checked their credit score in the past ﬁve years while only 25% have checked their credit report.

Specialist lenders have an opportunity to enable more people to achieve their homeownership ambitions and help them to not be limited by previous ﬁnancial diﬃculties.

Customers depend on their broker’s expertise and knowledge of the market, and brokers should be prepared for a growing number of customers that may be in need of specialised support and direction. ●

Peace of mind: Making mortgages simple

What do comprehensive insurance policies, extended warranties and service plans all have in common? They are designed to provide a degree of certainty in a very uncertain world. Consumer behaviour for decades has shown the value that people put on peace of mind. That is, in most areas except mortgages, despite it being the largest debt most homeowners ever take on. Why have we normalised a short-term view in this market?

Why this way?

If you were explaining this logic to someone with no prior knowledge of the market, it would be a hard sell. The answer to how and why we’ve ended up here is rather complex, but a few key reasons spring to mind:

◆ Short-term money in equals short-term money out. This funding model is the basis of many mortgage lenders’ funding lines. Taking short-term money in and lending it for extended ﬁxed periods is mathematically complex and holds rather a lot of risk, which ultimately is priced into rates or factored into propositions.

◆ The UK market is heavily intermediated, much more so than the majority of Europe. With regulated advice comes liability. With traditional longer-term ﬁxed products, lack of ﬂexibility made these products incredibly binary –so unless you were certain that your client’s circumstances wouldn’t change, it was hard to advise with a longer-term holistic view.

◆ A historically very ﬂat market. Prior to the past 24 months, the rate market had been ﬂat for a

long time. Perceived levels of risk are signiﬁcantly lower when economists are pointing to decades ahead of super-low interest rates. If Liz Truss taught us anything, it’s that nothing is more certain than uncertainty.

I’m not stating that any of the above is right, wrong or neutral, these are simply the facts at play in a £220bn-plus a year market. I’ve certainly been quoted saying this on stage many times over the years: if you were to start with a blank piece of paper and told to design a housing market and the ﬁnance system which complements it, you would be unlikely to land here.

The system has served our country well for a long time and gone under multiple changes – with many signiﬁcant changes still to come!

Doing things di erently

How would you design the UK mortgage market? Give it a thought before you read on. It’s a hard question to answer, because the market is incredibly inter-dependent and very few people have visibility of the entire end-to-end process, and because a er working in the sector for a while, we all become a bit used to what we know. That’s just human nature.

That is also why I’ve really enjoyed working internationally. I’ve spent time with lenders from Canada, the USA, Australia, and much of Europe. Listening to the experiences of others, their pinch points and where things run incredibly well, provides a fresh perspective. Perhaps things we might previously have viewed as problems simply aren’t, or what could have been our blind spot is suddenly in plain sight. There’s nothing be er than leaving a meeting feeling completely

RACHAEL HUNNISETT

is director of mortgage distribution at April Mortgages

awakened to something you hadn’t considered before!

A blank page

April’s proposition was conceived in the early 2010s by two Dutch entrepreneurs who had a blank piece of paper of their own. They used it to map their own vision of how the market would be much simpler if long-term ﬁnance ‘in’ was matched with long-term ﬁnance ‘out’. Our parent DMFCO was born, now the Netherlands’ largest independent asset manager. I share this as a success story that can be born when we step outside what we know, challenge our own thinking and are open to learn.

April’s proposition leapt off the page to me. I could see the benefit of both long-term peace of mind and unrivalled flexibility. I could see how this could help so many homeowners, and their brokers. Longterm planning helps people buy their home and also to keep it. Unlimited overpayments help customers to build equity, coupled with rates which reduce as the loan-to-value (LTV) reduces, either through capital being repaid or the house going up in value.

Longer-term lending also changes the stress rate lenders must apply for aﬀordability. For example, April oﬀers up to six-times income, with no minimum income, up to 95% LTV.

April’s proposition is incredibly straightforward. ‘Mortgage More Simple’ is our vision, and it’s a joy to execute. I’ve o en thought about what would occupy my own hypothetical blank paper. I know April’s proposition comes very close. ●

In Profile.

Butterfield Mortgages Limited

The Intermediary speaks with Alpa Bhakta, CEO of Butterfield Mortgages Limited, about high-net-worth nuances and trends in the prime Central London market

At a time when strained affordability and deposits dominate the mortgage news, the prime market, and the high-net-worth (HNW) clients that form a core borrower base, might seem like a relatively simple proposition. Affluent, second stepping or portfolio expanding clients might sound like the dream, and someone outside this market might be forgiven for assuming that this is a relatively simple equation for lenders, too.

However, prime properties – and high-net-worth borrowers – can present just as many complexities and complications as any part of the market, perhaps more. With this in mind, The Intermediary sat down with Alpa Bhakta, CEO of Butterfield Mortgages Limited, to discuss the lender’s proposition, and the trends and realities of the complex market it caters for.

Risk and reward

Butterfield Mortgages specialises in providing residential mortgages – as well as buy-to-let (BTL) and bridging finance – for prime properties in London and the South of England, particularly those within the HNW and Central London brackets. Far from a simple proposition, Bhakta says that Butterfield “has flexibility at its core,” providing a “bespoke approach to lending” in order to support its clients.

She adds: “Whether they are seeking a home, a pied-à-terre or an investment property, we ensure that our residential, buy-to-let mortgages and bridging loans align with individuals’ unique circumstances and long-term goals.”

A far cry from the high street, Bhakta explains that these cases necessitate a specialist approach.

She says: “Specialist lenders are well-versed in handling the complexities of high-net-worth cases, which often involve unique financial structures and unconventional income streams.

“This experience in understanding the challenges brokers might face allows us to offer tailored guidance from the outset.

“Specialist lenders can also provide flexible underwriting, which takes into account the nuances of HNW clients’ financial situation. In turn, these lenders offer bespoke mortgage

products, customised to suit the specific needs of a HNW individual – whether it’s for an investment property or a luxury home.”

The fact that HNW borrowers might take their income in a non-standard way – such as through various different streams, bonuses and commission, foreign currency, investments, or rental income, for example – brings its own challenges when it comes to things like calculating risk.

“We don’t use a tick-box approach to lending, it’s as simple as that,” says Bhakta.

“Our lending criteria are flexible, enabling us to assess risk more accurately, assisting clients that conventional lenders might reject.”

Counterintuitively, HNW individuals might also not have ready access to cash reserves, meaning that lenders must take a nuanced approach to assessing affordability.

Bhakta explains: “Some HNWs own significant assets but often lack access to the upfront capital needed to buy a multi-million-pound property. Others, meanwhile, want or need to maintain their liquidity rather than investing it all into a real estate purchase.

“As such, assessing risk requires a detailed and holistic picture of who the borrower is.

“Specialist providers such as Butterfield will have the expertise necessary to consider the full financial profile of an individual.

“This allows us to consider complex income streams or assets like investments, businesses, or international holdings.”

Complex conditions

Despite their high earnings, HNW individuals can often find themselves turned away by conventional lenders. They, too, have found themselves at the mercy of the troubled mortgage market that has emerged in the years since the pandemic hit UK shores.

Bhakta says: “This is an issue that appears to have become more and more prevalent over the past few years, due to rising rates and tighter lending criteria.”

HNW individuals have also not been immune to the shocks of the cost-of-living crisis, with the Saltus Wealth Index showing that nearly a third

reduced their pension contributions last year in order to manage their day-to-day finances.

In addition to having complex incomes, HNW individuals can struggle to effectively evidence their income, unlike those on simpler PAYE arrangements, for example.

“Indeed, often the wealthier individuals are, the more complex their finances can become, and this could include not having any monthly pay cheque to prove to lenders that they have a set income,” says Bhakta.

She adds: “Bricks and mortar remain one of the most popular investment asset classes among wealthy individuals.

“But beyond treating a property as an investment, there are many other reasons they might purchase a luxury house or apartment; it could be used as a holiday home, for example, or somewhere for a dependant to live while studying at university.

as well. All of these are likely to hit the HNW market. Bhakta says: “As such, the key challenge for brokers and lenders at the moment is to help investors, landlords, and homeowners navigate a shifting regulatory landscape with confidence.”

Indeed, Butterfield’s own research into landlord trends found that the most common quality they looked for in a lender was “expertise around tax and regulation.”

At the moment, many in this market are taking a “wait-and-see approach, which has seen demand and prices cool slightly,” according to Bhakta.

LonRes data for August showed sales in the prime London market fell by 7.5% year-on-year, despite new sales instructions rising by 8.1%. The report for September showed a 5.7% yearly drop.

“This can prove to be an issue. Indeed, if an HNW is seeking a mortgage for a property that he or she does not intend to live in, some lenders will be hesitant to provide the necessary capital.”

Looking at London

High-net-worth activity is, of course, particularly centred on London. However, Bhakta says that this market, in particular, “is being dominated by speculation about potential regulatory and taxation reforms,” not least with the Autumn Budget looming on 30th October.

She says: “Over the past 10 years, sweeping changes have been made to mortgage reliefs, Stamp Duty surcharges for second homes and overseas buyers, while tighter regulation has been introduced into the private rental sector as well.

“These reforms have affected buyers and BTL investors alike, and there is much anticipation as to what will be revealed by the Chancellor in the upcoming Autumn Statement.”

Alongside expected changes to Section 21 ‘no-fault’ evictions, the Government has hinted to an increase to Capital Gains Tax (CGT), while reforms to the ‘non-dom’ status are likely to be addressed

Nevertheless, Bhakta says: “The data suggests that once the Autumn Statement provides some clarity around any reforms, we could see an uptick in activity as buyers capitalise on the elevated number of properties for sale.”

She adds: “One other perennial trend worth mentioning is the PCL market’s ability to attract significant investment from overseas investors.

“Recent data from Sotheby’s reinforces this fact, showing that 40% of properties valued above $15m went to American buyers in 2023.

“We expect this upward trend to continue as the economic climate improves.”

Advice for brokers

This is not a simple, or ‘cookie-cutter’, section of the property market. Nevertheless, with the right support, brokers can make the most of a market primed for growth.

ALPA BHAKTA

Bhakta concludes: “Building a strong relationship with a lender specialising in large mortgages is essential.

“These lenders understand the complexities of high-value loans and often underwrite early in the process.

“This allows them to consider the unique aspects of both the property and the borrower involved with a mortgage application, and provide finance on cases that mainstream, conventional lenders would otherwise avoid.

“For brokers, it’s crucial to establish these relationships proactively, not just when a high-value case arises.

“Even if multi-million-pound cases are rare, understanding how specialist lenders can assist and what the process entails ensures brokers are wellprepared when they are faced with such cases in the future.” ●

Key challenges facing rst-time buyers

First-time buyers are arguably the lifeblood of the housing sector. Their number is closely linked to the state of the mortgage market and the wider economy. Yet there has been a series of statistics over the past 12 months which show how challenging the environment is for these would-be homeowners.

Of course, every statistic and piece of data has to be considered and veriﬁed, but we know from our own experiences – and our work with intermediaries – that ﬁrst-time buyers are facing challenges, just as the wider market is, too.

It’s therefore no surprise that the topic of ﬁrst-time buyers was a signiﬁcant election talking point earlier this year.

The changes subsequently announced by the incoming Labour Government to support the building of more new homes are very much welcomed across the sector, and we await further details on the plans for investment in social and aﬀordable housing.

The a ordability challenge

It used to be that ﬁnding a deposit was the main barrier to homeownership, and various schemes were implemented to try and address this.

Many young people have also been helped by their parents to fund a deposit in recent years, but with the cost of living impacting everyone, many of those parents are also feeling more squeezed, and may not have access to signiﬁcant sums of cash.

Even once a deposit is available, the cost of owning is now as much of a challenge as the cost of buying, with higher mortgage rates pu ing additional strain on aﬀordability.

So, while initiatives such as raised Stamp Duty thresholds for ﬁrst-time buyers, Lifetime ISAs and the Mortgage Guarantee Scheme have been designed to help ease the deposit burden, we’re still bound by Financial Policy Commi ee rules restricting lending, and aﬀordability stress tests.

As wages haven’t increased in line with house prices, this means wouldbe buyers might not pass aﬀordability tests, even if they have been able to raise the minimum 5% deposit.

The market’s reaction

While a number of Government schemes have been introduced over recent years, such as those mentioned above, plus the First Homes Scheme, Rent to Buy, Shared Ownership and Help to Build, availability is o en limited and restricted, and the mortgage market has had to innovate to meet customer challenges.

It means lenders working with brokers to understand the sticking points and, where possible, design new products and criteria to make homeownership as accessible as we can within the boundaries of current legislation.

Joint borrower sole proprietor (JBSP) mortgages, such as our First Start proposition, can help with aﬀordability by allowing an additional borrower on the mortgage, such as a parent or step parent, to combine their income and share responsibility for the repayments, eﬀectively boosting borrowing power.

This sort of innovation from the market needs to continue. Lenders must continue to adopt a commonsense approach and continue talking to brokers. We’d also encourage brokers to talk to us to explore the options for their clients. ●

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

 The number of people who bought their rst home in 2023 was 257,000, down from 405,000 in 2021 and the lowest gure since 2013 (IMLA)

 The average age of the rst-time buyer has risen from 29 in 2011 to 32 in 2023 (Statista)

 Half of rst-time buyers in their 20s are getting an average £25,000 from their parents (Resolution Foundation)

 Becoming a rst-time buyer is possibly the most expensive it has been in 70 years (Building Societies Association)

 The average rst-time buyer needs a household income of £60,600 to get on the property ladder (Zoopla)

Changing seasons: Reasons to be cheerful

The schools are back, the weather’s turned, and we have a date for Rachel Reeves’ first Labour Budget. It’s been a busy summer, the stable interest rate has seen more buyers and home movers return to the market, but it’s also been filled with anticipation around what the first Labour Government’s Budget will include.

Sir Kier Starmer has warned taxes will have to rise to ﬁll the “black hole” le by the previous administration. This has led to a period of anticipation as everyone waits to ﬁnd out what that means. Meanwhile, life goes on, families grow, jobs come and go, and people still need to move house.

Through September, we saw the mortgage market pick up, and there’s a feeling of hope for ﬁrst-time buyers. As a building society, our purpose is to support people who want to own their own homes, and the recent change in tone is clear.

Economically, things are beginning to look more promising. The economy is growing steadily, real wages are increasing, inﬂation is back to a more sustainable 2% target, and the Bank of England has reduced the base rate once, with another expected later this year. Around 3.5 million public sector workers are also set to see their wages rise between 5% and 6%.

Among ﬁrst-time buyers, there is a bit more optimism. Recognising the need for aﬀordable housing across the country, Labour’s Housing Secretary Angela Rayner has set out a number of bold commitments:

1.5 million new homes to be built in collaboration with developers and local authorities over the next ﬁve years.

Extra funds to local authorities to

support planning departments in delivering these new homes. Stronger powers for local planning departments to push through approvals where developments are needed.

Prioritising brownﬁeld development while becoming more realistic about building on green belt land that Labour has categorised as ‘grey belt’. Plans for several new towns to be built. Think-tank UK Day One has suggested new urban areas within commutable distances from cities, including Oxford, Bristol, York, and Cambridge.

According to September’s Moneyfacts report, the average mortgage rates for 2- and 5-year fixed rate deals have fallen month-onmonth, now the lowest rate since Q1 2024. The average 2-year fixed rate is 0.36% higher than the 5-year equivalent. The 2-year fixed rate has now been higher than the 5-year equivalent since October 2022. This consistent trend feeds the market expectations for further reductions in the base rate by the Bank of England.

It’s also important to note the increase in the average mortgage shelf life to 21 days, up from 17 days a month prior. This durability is encouraging, indicating a greater degree of pricing stability in the market.

Although rate cuts are encouraging, they aren’t enough to bring back a sustainable level of activity in the market on their own. Despite Moneyfacts’ data showing a decrease in the average standard variable rate (SVR) to 7.99% from its peak in November and December 2023, aﬀordability challenges persist.

A lower SVR does help improve aﬀordability, given that borrowers

MICHAEL CONVILLE is chief customer o cer at Newcastle Building Society

are being stressed against lower thresholds, but this rate is still relatively high.

The upcoming Budget is also anticipated to reduce lending support from the ‘Bank of Mum and Dad’, requiring lenders to step in and help borrowers facing aﬀordability challenges.

But there are other options available to oﬀer further support. In April, the Building Societies Association (BSA) published a report assessing the ﬁrsttime buyer market entitled ‘Age-old problems, modern solutions – A roadmap for change’.

The report highlights the growing issue of loan-to-income (LTI) ratios for ﬁrst-time buyers, especially in regions with high property values. Recent generations have needed to borrow much larger multiples of their income than previous generations, yet lenders are subject to a cap on higher loan-toincome multiple lending.

Regulatory change, albeit timeconsuming to deliver, must prioritise first-time buyers. Relaxing the LTI flow limit, specifically for 95% loanto-value (LTV) lending, could enhance the volume of lending available to low deposit borrowers on high LTV fixed rate products.

There is a generation of would-be ﬁrst-time buyers who need support today, and lenders that can help them make that wish a reality. Here at Newcastle, we are taking this responsibility seriously. We are looking at how we can ensure we have the right products and criteria to support ﬁrst-time buyers, so watch this space for more details. ●

First-time buyers need more than promises

With its ambitious promises to create 1.5 million new houses over the next ﬁve years, Labour will be providing the largest boost to aﬀordable housing in a generation.

Additionally, it aims to stop large tracts of newly built real estate from being snapped up by foreign investors and give ﬁrst-time purchasers priority in realising their ambition of owning a home. However, the removal of one segment of a market creates opportunity for others.

Starmer’s property guarantee may draw in more than just ﬁrst-time purchasers. It’s entirely possible that a fresh wave of domestic buy-to-let (BTL) investors will be a racted by this inﬂow of new-build properties.

The UK household saving ratio increased to 11.1% in the ﬁrst quarter of 2024, according to recent Oﬃce for National Statistics (ONS) data. It has been rising steadily since decreasing to 6.6% in the second half of 2022.

The increases have coincided with cost-of-living pressures, weak consumer conﬁdence and slower growth in household consumption. Whatever the reasons are, it indicates that despite the current ﬁnancial pressures, there are people saving pots of money who may choose to invest it into property in the future. The opportunity to have a brand new property to generate a future income from might seem like an a ractive proposition for some.

There are a number of reasons why current landlords are cu ing their losses and selling up right now, such as the Renters’ Rights Bill, the impending rise of Capital Gains Tax (CGT) that is expected in October, and the

Energy Performance Certiﬁcate (EPC) requirements for rental properties. For landlords buying new-build, these issues will not be so daunting. The key is that if other asset groups suﬀer, property will remain a ractive.

Keeping up with the competition

Beleaguered ﬁrst-time buyers will still face competition for the new supply of housing – especially at the more ‘aﬀordable’ end of the market. It’s not as if they need more competition.

According to a report in The Independent, the average ﬁrst-time buyer saved more than £53,000 as a

Despite the current nancial pressures, there are people saving pots of money who may choose to invest it into property in the future”

deposit at the start of 2024 – around 19% of the average purchase price.

So, it’s no surprise that ﬁrst-time buyers ﬁnd they need to save for around a decade to achieve their goal.

In April, the Building Societies Association’s (BSA) report, wri en by housing analyst Neal Hudson, suggested that homeownership among younger people has been in decline over the last 20 years. Firsttime buyers have faced the dual aﬀordability struggle of raising a deposit to buy a home as well as paying a mortgage. Interest rates have come down since then, but not to the extent that anyone expected

– meaning that stress testing on standard variable rates (SVRs) can still present a signiﬁcant block to many would-be buyers.

As far as the supply is concerned, there remain significant upward pressures on pricing. The introduction of new rules like the Biodiversity Net Gain legislation, and the increasing costs of materials and labour, are all driving the price of new-build properties up, making it difficult for developers to build and stay within affordable pricing.

Ultimately, aﬀordable housing does not a ract the margins for developers that executive homes do. In 2025, the Future Homes Standard will be implemented, which means that any new homes built from then onwards will produce 75% to 80% less carbon emissions, and concerns have already been raised as to how this will aﬀect the price of new-builds.

If there is significant competition for the new stock from domestic landlords and first-time buyers alike, lenders will have to play a significant part in supporting buyers. Higher loan-to-value (LTV) lending will be important. If the ‘Bank of Mum and Dad’ is hit by the Budget, schemes like Shared Ownership and joint borrower, sole proprietor will play an even bigger part in supporting people.

The current Government was clear in its manifesto that it had li le ﬁscal help to oﬀer apart from extending the Mortgage Guarantee Scheme.

However, what is clear is that unless there is more help with the cost of finance, first-time borrowers may not be the sole beneficiaries of the new towns the Government wants to build. ●

KATHY BOWES is intermediary manager at e Cambridge Building Society

Contradictory MPC statements cloud rate outlook

If we were looking for any sort of clarity about what the Monetary Policy Commi ee (MPC) might do with Bank Base Rate (BBR) at its next meetings – in November and December – then it would appear that we shouldn’t be looking to members of the MPC to deliver it. Quite the opposite.

I fully understand that members of the MPC are explicitly chosen to have minds of their own, to give independent views about the economic situation, and to undertake a full analysis before making their minds up on what should happen.

However, I’m also minded to suggest that various senior bank employees and MPC members giving starkly diﬀerent views within the space of 24 hours is not likely to be helpful to anyone, let alone those who have to try and explain to customers what is happening now, why these u erances are made, and what they might mean for their individual circumstances.

As I write this, we had the governor of the Bank of England Andrew Bailey saying it could be a “bit more aggressive” at cu ing borrowing costs, which as you might expect fuelled further speculation rates might be cut again before the end of the year.

In our mortgage space, these words, of course, have consequences. While we know there is a disconnect between BBR and product rates, we’re also acutely aware that borrowers might not know this, and if they hear rates are to be cut further, then they will no doubt – in many cases – think the best option is to, where possible, sit tight and pick up a ‘guaranteed’ cheaperpriced product in the near future.

There is a wider aspect to this, of course, which tells you that Bailey – and the words of his fellow MPC

members – do have a real impact. The value of the pound fell rapidly a er Bailey spoke about the potential need for more aggression, trading at a three-week low against the dollar.

Mortgage realities

For mortgage borrowers, this might not be overly interesting or relevant. But again, it will tell them that each action has a reaction, particularly if the Governor of the Bank of England appears to be giving everyone, including the markets, a steer on what the MPC might do.

Jump forward less than 24 hours later – and who knows if this was a planned strategy in response to Bailey’s comments the day before – but we have the Bank’s chief economist Huw Pill announcing that “it will be important to guard against the risk of cu ing rates either too far or too fast.”

What might borrowers reading both these comments within the space of a day think? How might advisers tread a ﬁne line between trying to explain to borrowers that it’s possible for both these viewpoints to be held by senior members of the MPC, and for them both to not necessarily be right?

Of course, Bailey does have the casting vote in any tie, so to speak, but of more importance should perhaps be how this looks to the millions of borrowers in the UK, and indeed the position it puts professional advisers in, especially when such contradictory statements are made within just a day.

It’s clearly a slightly diﬀerent conundrum than your typical business board, but even so, would you have, for example, the chair and chief executive coming out on consecutive days providing diametrically opposed views on the where they think the future of the company lies? Of course you wouldn’t.

BOB HUNT is chief executive of Paradigm Mortgage Services

This is not new, of course. Almost every single member of the MPC over the course of any given month will be making speeches, giving interviews, and expressing their views on rate ma ers, but whether this actually helps anyone either way is, I would suggest, a moot point.

Perhaps, with the next meeting not being until 7th November, it is ﬁne to speculate some way into the distance, but as we can see, such pronouncements ma er.

There are too many vested interests wanting to get an early indication of which way the next vote might go. And of course, it impacts on the pound in our pockets.

Injecting uncertainty

I suspect many of us will remember ‘forward guidance’ – the process that former governor Mark Carney wanted to introduce, which would have involved providing a much longer-term view of rates so that such speculation could be headed oﬀ at the pass, delivering greater transparency and certainty.

That suggestion lasted about ﬁve minutes, and is clearly not deliverable when it is the members of the MPC themselves who are injecting various degrees of uncertainty into the conversation.

We should all hope that, going forward, there is a lesson to be learned here – rates ma er deeply, and every u erance is dissected as a result.

That being the case, thinking about those who actually have to wade through these o en contradictory statements, and who have to plot a course for a borrower through the mire, as advisers do, would certainly be appreciated. ●

Housing supply will get an

Quiassitatur, anos

Housing has taken a central role in the new Labour Government’s plans to stimulate growth in the UK economy. Like previous Governments before it, this one has pledged to build more than 300,000 new homes each year it is in power – a total of 1.5 million over the next ﬁve years.

Delivering on that promise has proven tricky for governments of every political persuasion over the past 25 years.

Whether Sir Kier Starmer and Deputy PM Angela Rayner can come up with the goods, time will tell. Regardless, there are clear opportunities that such ambitions present.

There are also challenges, and the entire new-build industry will need to consider both. What’s been promised, what it means for lenders’ risk exposure, and the details of how and what will be delivered, will be a ma er of huge debate over the coming months.

To quote the party: “Labour will take a more strategic approach to greenbelt land designation and release to build more homes in the right places. The

release of lower quality ‘grey belt’ land will be prioritised and we will introduce ‘golden rules’ to ensure development beneﬁts communities and nature.”

Greenbelt land accounts for 12% of England. Within that, Knight Frank research has identiﬁed more than 11,000 previously developed sites that comprise less than 1% of the greenbelt.

All those sites combined could support between 100,000 and 200,000 new family homes depending on the density of the developments, according to Cameron McDonald, head of geospatial at Knight Frank.

Labour has loosely described the grey belt as “poor-quality scrub land, mothballed on the outskirts of towns” and “poor-quality and ugly areas.” Car parks, disused land – wasted space, essentially. Sounds reasonable, but there is no legal deﬁnition of grey belt land currently, which will pose challenges –challenges I am sure the whole industry is poised to address.

Labour said: “In partnership with local leaders and communities, a Labour Government will build a new generation of new towns, inspired by the proud legacy of the 1945 Labour Government.

CRAIG HALL is director - strategic partnerships, nancial services at LSL Property Services

“Alongside urban extensions and regeneration projects, these will form part of a series of large-scale new communities across England.”

The think-tank UK Day One has been quick oﬀ the mark to identify where Labour’s new towns could be developed, with the village of Tempsford in Bedfordshire – currently home to just 590 households – ﬂagged as a likely location. A New Town Commission is promised by the end of the year, with its objective to identify where Labours new towns will be developed. Consensus

overdue shot in the arm

soluptas mint

seems to suggest that sites near Bristol, York and Oxford are most likely.

Lending realities

Wherever the new towns spring up, there will be considerations for lenders. Mortgage valuations rely on up to date and accurate information, and by their very nature, new towns will lack any meaningful data on sales.

New towns have also had a mixed history of success. According to UK Day One: “Some new towns have been dysfunctional because they were badly designed, or because they were located in areas with low housing demand. But there are numerous examples of highly successful new towns.

“York, Oxford and Salisbury were Roman, Saxon and Mediaeval new towns respectively. Edinburgh New Town is one of Britain’s most successful urban designs. Saltaire, Bournville and Letchworth are successful new towns enabled by railways. Not everyone likes the urban design of Milton Keynes, but it is prosperous and sought-a er. A wellsited and well-designed new town can be hugely successful.”

The cultural, social and community success of newly developed towns is hugely complex, but absolutely critical to the value of the homes located there. We should not forget the paramount importance of location and the supporting infrastructure.

There will need to be signiﬁcant co-operation between developers, planners and lenders to ensure mortgage ﬁnance is available to fund home purchase in these towns.

A ordable housing

The party again: “Labour will deliver the biggest increase in social and affordable housebuilding in a generation. We will strengthen planning obligations to ensure new developments provide more affordable homes; make changes to the Affordable Homes Programme to ensure that it delivers more homes from existing funding; and support councils and housing associations to build their capacity and make a greater contribution to affordable housing supply.”

Aﬀordable housing includes homes for sale or rent and is for

Wherever the new towns spring up, there will be considerations for lenders”

people whose needs are not met by the private market. For would-be buyers, this includes the relatively new First Homes Scheme, through which homes are sold to people buying their ﬁrst home for 30% to 50% below market value.

Aﬀordable homes also include Shared Ownership, which provides an opportunity to buy an initial share of a home worth between 10% and 75% of its market value, while paying rent to a housing provider on the rest.

Deposit and affordability challenges remain, and lenders will need to address the requirement for higher loan-to-value financing, combined with enhanced affordability measures that reflect lower running cost and the need for improved loan-to-income assessments. ●

Why recent rate rises are not a cause for concern

Headlines say lenders are ‘spooked’ by increases in swaps, and some have either inched rates upwards, or pulled ‘best buy’ products.

Price rises have been minimal, and we are in something of a limbo period anyway before the end of month Budget, and November and December’s Monetary Policy Commi e (MPC) meetings. If you were a be ing person, you might be tempted to wager that we’ll get at least another base rate cut in one of the two remaining meetings.

Further aﬁeld, and notably with the small ma er of a US Presidential Election, there is a debate about whether the US economy could be heading for a recession, and the Federal Reserve appears not to be

le ing the grass grow under its feet. While we might not see a 0.50% cut as we did at September’s meeting, it appears to be swinging the way of a further 0.25% cut in November. That will have an impact on what the MPC decides.

We should also reﬂect on what lenders might be in the process of doing. The last quarter of the year is always interesting from a mortgage market perspective, not least because applications may not complete until the next year, certainly when it comes to purchases. Therefore, we are between writing business for a 2024 year-end, and developing pipeline business for the early part of 2025.

How lenders react now will be determined by where they currently are in their yearly targets.

On a similar point, we should also be aware that rate changes are

SEBASTIAN MURPHY is group director at JLM Mortgage Services

o en determined by service levels. It may well be that lenders have been up at the ‘top of the charts’ for some time, and are bringing in business commensurate with that.

Certain lenders could require an easing oﬀ on the lending pedal for a while in order to deal with what they have in the current pipeline. Service is not a uniform process either, and rate changes reﬂect this.

Overall, then, while rates may bump up a li le in the coming weeks, there is enough to show that they will continue to dip again in the not so near future. Of course, a message out to borrowers which says, ‘the best rates might be going up soon’, is not a bad one if it encourages clients to act sooner rather than later. There is always a positive to be found. ●

‘Bank of Mum and Dad’: Is there a better way?

Over the past decade or so, I’d argue that the ‘Bank of Mum and Dad’ has become one of the most recognisable ﬁnancial institutions in the UK. Quite an achievement for something with no branches, no CEO, and no marketing! Yes, it has undeniably become a household name, and with good reason.

A regular flow of data in recent years has highlighted just how big a lender this bank is – but what’s staggering is that it’s showing no signs of slowing down. Quite the opposite. Recent statistics reveal that financial support from family members is expected to reach a record £9.2bn this year, with an enormous £30bn predicted to be gi ed to first-time buyers over the next three years, according to Legal & General.

This reliance on ﬁnancial support from the family highlights a persistent issue: the major barriers ﬁrst-time buyers face when trying to get onto the property ladder.

We know that a key issue here is the widening gap between average

house prices and average wages. Over the past decade, property prices have increased by nearly 50%, while wage growth has lagged behind at just 28%. It’s no surprise that 52% of young people now believe they will never be able to buy a home, according to the HomeOwners Alliance.

This leaves many first-time buyers struggling to save for a deposit. As a result, the ‘Bank of Mum and Dad’ is stepping in to fill the gap in a housing market that is increasingly difficult for young buyers to access.

Clearly, the disparity between incomes and deposits needed is making aﬀordability a tougher challenge than ever before. But I don’t think it’s the only factor at play here.

I’d argue that traditional lending models o en don’t reﬂect today’s diverse workforce, where many prospective homeowners don’t work the full-time, permanent roles long considered the norm.

They might be working multiple part-time jobs, freelancing, or running their own businesses. Has the industry moved fast enough to reﬂect the increasingly diverse ways we live and work? The jury is out on that one.

PRAVEN SUBBRAMONEY is chief lending o cer at Nottingham Building Society

We know from our ongoing dialogue with brokers that they are witnessing more cases like this. Non-traditional income streams are making it harder for borrowers to ﬁt the o en rigid and inﬂexible criteria that lenders typically demand. This approach doesn’t tally with how many people earn a living today.

Reviewing the options

I strongly believe that lenders need to take a more flexible approach to assessing affordability. By doing so, we can create a fairer system that reflects the changing nature of work and helps more people get onto the property ladder.

At No ingham Building Society, we are taking steps to oﬀer more ﬂexibility in how we assess mortgage applications.

For example, we’ve recently introduced tailored products for foreign nationals and returning expats, allowing us to meet the needs of borrowers who may not have a UK credit history or meet traditional lending criteria. We are also reviewing our income recognition and expense models.

This kind of innovation ensures a wider group of people can access homeownership.

Ultimately, reducing reliance on the ‘Bank of Mum and Dad’ requires building a mortgage market that is ﬂexible, fair, and forward-thinking.

The goal should be to oﬀer more options and make homeownership accessible to all. That will require a bigger shi in mindset and approach, to ensure the housing market works for everyone.

London remains the place to be

The London property market has shown signiﬁcant resilience, despite the various economic challenges faced in recent years.

The end of the pandemic saw a mass exodus, with many Londoners looking to move to more rural towns and retreat to a life in the countryside in a bid to have more space. However, this trend has now slowed down, according to data from Rightmove.

In August 2021, as many as 46% of London home movers were looking to leave the city, but this year that ﬁgure dropped to only 32% looking outside the capital, back to the levels seen before the pandemic.

There is also an increase in the number of people looking to move into London who don’t already live here, which shows that despite the cost-ofliving pressures, there is a renewed interest in city living.

Properties in London had an overall average price of £708,083 over the past year. The majority of sales were ﬂats, selling for an average of £562,061, with terraced properties going for £809,775 on average and semi-detached properties fetching £790,519.

increase in rental prices, have put the option of being a homeowner in

ROBIN

JOHNSON is managing director at Kinleigh Folkard & Hayward

While data suggests that movers are now not looking to move out of London, it also shows that a number of buyers are switching locations within the capital, with areas such as Shoreditch, Islington and Ba ersea being among the most popular locations.

The rst cut

First-time buyers might be facing some of the toughest conditions in 70 years, but many are still determined to buy a home, and according to data 48% of house hunters in London this year were ﬁrst time buyers. This was up from 41% in 2023 and up from 28% a decade ago.

Lower mortgage rates, which are expected to fall further, and an

more in ﬁve years’ time, with the average price in the capital standing at £577,256.

Indeed, looking forward, London’s economy is primed to underpin this, as data from the GLA Economics forecasts suggests that the capital is expected to see a rise in the number of workforce jobs in 2025 and 2026, to 1.3% and 1.5% respectively. Household spending, while showing a modest growth this year of 0.6%, is set to show stronger growth of 2.1% in 2025 and 2.0% in 2026, with household incomes also set for a 2.8% rise in 2025 and 2.6% in 2026.

In March of this year, data from EY was forecasting stronger economic growth in London and the wider South East of England than for the rest of the country. Overall, it said economic

growth across the UK would average 1.9% a year between 2024 and 2027 – spurred by lower inﬂation, a strong jobs market interest rate cuts from However, London and the South East would grow by 2% and 2.1%, respectively – above every other

Pressure drop

We are clearly not out of the woods yet, and October’s Budget will likely pour more pressure on rents as landlords address rises in Capital Gains Tax, continue to deal with the Energy Performance Certiﬁcate (EPC) targets for 2030 and take on board the commitments of renter and leasehold reform.

But higher rents, if that is what manifests, will again turn minds to purchasing.

What is clear is that London’s property market remains remarkably resilient given everything that is being thrown at it. Its streets may not literally be paved with gold, but with a global base of admirers it remains a draw to anyone who wants the best of what global cities have to oﬀer. ●

Cladding is a real problem, but there is help

It’s hard to believe that more than seven years have passed since the tragedy at Grenfell Tower on 14th June 2017. For the families and loved ones of those who lost their lives in that monstrous ﬁre, it must have felt like a long time coming earlier this month, when the results of Sir Martin Moore-Bick’s inquiry were ﬁnally published.

In his statement accompanying the panel’s ﬁndings, Sir Martin admi ed that the inquiry had taken longer than hoped, partly because it “uncovered many more ma ers of concern than we had originally expected.”

While the failings at Grenfell were multiple, there is no doubt that the cladding used exacerbated the strength and speed of the ﬁre. Sir Martin stated explicitly: “The simple truth is that the deaths that occurred were all avoidable and that those who lived in the tower were badly failed over a number of years and in a number of diﬀerent ways by those who were responsible for ensuring the safety of the building and its occupants.”

Among the long list of organisations at fault were “those [that] manufactured and supplied the materials used in the refurbishment” and “those [that] certiﬁed their suitability for use on high-rise residential buildings.”

The ﬁnal inquiry provides the detail behind why and how mistakes were made, yet it was widely acknowledged in the fairly immediate a ermath of the tragedy that remedial work to remove cladding from thousands of other buildings across the UK was urgent.

Yet, terrifyingly for those living in them, the most recent Government ﬁgures show that, at the end of August 2024, there were 4,771 residential

buildings 11 metres and over in height identiﬁed with unsafe cladding.

Within that total are 1,626 buildings 11 metres and over in height that have been identiﬁed as having life-critical ﬁre safety defects which developers have commi ed to remediate or pay to remediate.

Critical risks

Any number of buildings with lifecritical fire safety defects is too high, but even this number doesn’t reflect the true scale of fire risk posed by cladding across the country. There are thousands of buildings not covered in the scope of Government figures, and yet, quite aside from the risk to life, the liability associated with ownership of these buildings is an unknown quantity. There is a potential liability risk for mortgage lenders with charges secured against buildings which do not pass fire safety regulations. A bigger risk still is that these building defects are not caught.

Even before the pandemic, many lenders were increasing their adoption of desktop valuations and automated valuation models (AVMs) for lower loan-to-value (LTV) lending. That trend has continued, particularly driven by the need to improve eﬃciency and processing costs.

Yet, without interrogative assessment in person, it’s not always possible to identify cladding risk. That poses a big problem for lenders, where ﬁnancial exposure is ultimately dependent on asset value, should the borrower fail to repay.

Indebtedness is becoming a way of life for millions of individuals. We are about to see another ra of tax rises in Labour’s upcoming Budget. And still, property prices go up, up, up.

Lender risk is changing proﬁle, and understanding the condition of stock

STEVE GOODALL is managing director at e.surv

underpinning their balance sheets is increasingly important.

Typically, the launch of Government-backed, and now lenders’ own, 95% LTV schemes results in increased demand for physical inspections. On standard residential property, lenders understand the need to corroborate values with condition. For property with cladding that has gone unreported, values could be overstated. The cost and time savings aﬀorded by greater automation in the mortgage application process are valuable, but they should not come without a degree of ﬂex on the fringes.

It’s too easy to forget that automation is just one aspect of tech. Arguably far more valuable is the opportunity to collate data. The holy trinity is ﬁnding the right balance between the two. We believe our UK cladding database is doing just that.

The database, which is updated in real time as new insight comes to light, can be accessed via application programming interface (API) and allows for a desktop appraisal of any block with potentially defective cladding – improving asset risk assessment without compromising on eﬃciency. More data will increase its eﬀectiveness further, and we are now working with the Government to incorporate additional insights relating to the funding status of remedial works.

This kind of proposition delivers information in a way that allows lenders to identify problems as they arise and ones that are already on their back-book. The format may have changed, but the fundamental knowledge and expertise has not. ●

Bridging the nancial literacy gap

Let’s be honest, the current state of the UK’s ﬁnancial literacy is concerning.

A recent survey found that nearly 23 million people – or two-ﬁ hs of the population – lack basic ﬁnancial knowledge. If people don’t have an understanding about mortgages, savings or how interest rates work, how can they make informed decisions about their future?

A er all, these are some of the biggest ﬁnancial decisions a person will ever make. Increasingly in today’s intermediary-driven market, they are made with the help of a mortgage adviser, and given the stats, there’s no underplaying the vital role they have in helping to boost the country’s ﬁnancial literacy.

This is especially true with the Consumer Duty regulations now in place across all ﬁnancial services. Mortgage advisers have a duty to ensure their clients fully understand the products and services being oﬀered, as well as the features and potential risks. Where there are knowledge gaps, advisers must be prepared to provide additional support, not just to ensure informed decisions are made, but good outcomes are delivered.

But it’s not their duty alone. The size and scale of the issue is massive and requires a fully joined-up approach. In a study by the Global Financial Literacy Excellence Centre, just 20% of UK adults could answer three basic ﬁnancial questions correctly.

Meanwhile, a survey by the Centre for Economics and Business Research found that young people aged 16 to 18 scored an average of just 2.3 out of 10 on ﬁnancial literacy questions. There’s no question that we need to catch this early and educate young people

on basic ﬁnancial topics before they leave school.

Education initiatives

Take the US for example – every April is Financial Capability Month, when the Government dedicates an entire month to financial literacy awareness. There’s a huge opportunity for UK Government to do something similar. The first place to start is integrating financial education into the national curriculum, particularly as part of PSHE. These stepping stones can then become the foundations for future generations to have the skills to manage their finances responsibly. This should not be limited to just schools, either. Employers can play their part too, especially those with bigger workforces that can offer workshops on financial management to their employees. Not only will this help improve knowledge but enables employers to build resilient workforces.

Accessibility and collaboration

Alongside a change in curriculum, advisers need ﬁnancial institutions to pull in the same direction. Research by Habito found that an A-level education is necessary to fully understand a mortgage contract, yet almost half of the UK adults don’t have that level of education. Just as concerning is the fact that 75% of homeowners admi ed that they signed their mortgage contracts without fully reading them.

While mortgage advisers can help by explaining terminology and simplifying the complex jargon found in mortgage contracts, lenders should be doing more to simplify documents and to use plain English. Let’s not forget that making sure these key documents are accessible

PETER O’CONNOR is CEO of Target Group

for all is another key requirement of Consumer Duty.

With all the buzz around technology and artiﬁcial intelligence (AI), it is high time banks and lenders collaborate and create resources and tools to make it easy for everyone to understand complex ﬁnancial information. Audio-visual explainers, infographics, and online tools like mortgage calculators go a long way in building the foundation for an informed and resilient society.

Community support

One thing we can all beneﬁt from is the communities we live in. Local councils and community groups can set up knowledge exchange sessions where experienced homeowners share their insights with ﬁrst-time buyers. Mortgage advisers can also get involved too, whether it’s local newspaper columns or hosting sessions for local community groups or clubs, helping buyers to understand the market and make informed choices.

We cannot achieve financial literacy in the UK with a ‘one-size-fits-all’ solution. It will take years of hard work and plenty of collaboration. But it’s far from an impossible task. With education, Government intervention, and a collective effort, a financially literate, resilient population can certainly be a reality.

Whether they realise it or not, mortgage advisers sit on the frontline in this mission. By educating their clients and increasing knowledge, they can not only help them achieve their goals, but nurture true loyalty and ultimately help to bridge the ﬁnancial literacy gap. ●

Action, not words, to boost rst-time buyer prospects

Most people in this industry would accept that ﬁrst-time buyers are the lifeblood of the property sector, an absolute necessity. Yet it’s equally inarguable that those who hope to get onto the housing ladder are in an incredibly diﬃcult spot.

In fact, recent analysis from the Building Societies Association (BSA) suggested that becoming a ﬁrst-time buyer is more costly today than at any time in the previous 70 years.

It’s because of this situation that Atom bank has recently made some important improvements to our criteria, which we believe will have a material impact on the homeownership prospects of many aspiring borrowers.

The deposit challenge

One of the most obvious areas where first-time buyers need support is in the supply of low-deposit mortgages. Saving a deposit has always been one of the most significant hurdles faced by aspiring homeowners; clearing that hurdle has only become more difficult of late.

Rising house prices have pushed up how much needs to be saved as a deposit, but actually saving that money has been a stretch for many given the rising costs faced by those hopeful homeowners on their existing bills. With rents rising to hit new record highs – and the cost of bills like water, energy and broadband increasing consistently – it’s not been easy for potential buyers to build more substantial deposits.

As a result, it’s welcome that the level of choice is improving. A study by Moneyfacts found that the number of mortgage deals with a maximum

loan-to-value (LTV) has increased to 361, the highest level seen since mid2022. Meanwhile, the number of deals available up to 90% LTV has increased over the past 12 months, from 525 to almost 800.

As a lender that has long recognised the importance of oﬀering products aimed at those with small deposits, it’s pleasing to see greater levels of choice. Aspiring borrowers need more options if they are to achieve their dreams.

Where LTV matters

However, it’s important to remember that LTV caps on certain types of properties can prove a particular hurdle for first-time buyers. Those looking to purchase new-build flats and houses, for example, may find they are unable to raise the sums needed as a result.

This is a particular issue in areas where properties are more costly, and every percentage counts on the LTV.

It’s something Atom bank has looked to address through our latest criteria changes, increasing the maximum LTVs on certain property styles for those looking to buy in London and the South East.

The reality is that house price growth in these regions has been so substantial that borrowers need greater support from lenders if they are to land themselves a home there. Take London, for example. Even though the rate of house price growth has been lower than other regions, in cash terms it has made homeownership into a pipedream for many. According to the latest data from the Oﬃce for National Statistics (ONS), the average property price in the capital is now £523,000, compared with £285,000 nationally.

Li le wonder that so many end up turning to family for ﬁnancial

support, but that’s not an option open to everyone.

A question of income

Another hurdle comes in the form of loan-to-income (LTI) caps. While lenders obviously need to prioritise acting responsibly, there are cases where borrowers ﬁnd they cannot raise the sums needed – and which they can aﬀord – as a result of a lender’s LTI caps.

Given that house prices have continued to grow at a pace beyond any income increases buyers have received, that can scupper their aspirations.

Atom bank has increased the maximum LTIs available to employed applicants with an annual income in excess of £75,000.

Taking action

First-time buyers play a vital role in our housing market. Without them, the ladder simply does not function properly.

But there’s no denying that they need more understanding support from lenders. It’s not enough to simply recognise that things have got harder for would-be homeowners – lenders must act to make the changes that will directly improve the prospects for potential buyers.

Atom bank will continue to work closely with our broker partners to ﬁnd the best ways of delivering that support to aspiring borrowers underserved by mainstream lenders, from ﬁrst-time buyers to those with the odd credit blip on the record.

A fairer mortgage market is in the interest of all of us. ●

RICHARD HARRISON is head of mortgages at Atom bank

The Inter view.

Chetwood Bank

Jessica Bird speaks with Andrew Arwas, managing director –mortgages at Chetwood Bank about how an eventful 2024 will make for an exciting future

From lender acquisitions and launches to a brand refresh, Chetwood Bank has had an eventful year. e Intermediary sat down with Andrew Arwas, managing director – mortgages, to discuss the culmination of years of planning and strategy, and understand what the future looks like for the bank.

Purpose and planning

Arwas has been in nancial services from the starting line, going from a Barclays student sponsorship and graduate programme to remaining with the lender for almost two decades, emerging into the mortgage world following the acquisition of the Woolwich.

From that point, with a route through consultancy and wealth management, it was in 2016 that the opportunity arose to join the start of something new – and so, Chetwood was

born. Having long been in positions that centred around strategy and transformation, in the past year or so, Arwas’ career has shi ed to a new business role.

“ is is new for me, running a mortgage business with sales targets,” Arwas says. “But I’ve spent the past three years designing and building it, so who better to run it?

“One of the things I’ve had the opportunity to explore is understanding how a clear sense of purpose and strategy is necessary in driving a business forward.”

Arwas adds: “We had a mission, which was to use technology to make people better o , and to nd under-served markets.”

is has not always been a simple plan to execute, however.

He explains: “I’ve learned that change is incredibly di cult, and you cannot go into it naively thinking that just because you wrote a plan once, it was right, or that you can deliver on it exactly.

“Just because it looks di erent, doesn’t mean it’s going wrong – you have to have patience with the change process.”

When it comes, speci cally, to the lender’s growing buy-to-let (BTL) mortgage proposition, Arwas says: “In a market that is increasingly complex, what we wanted to bring is something that felt simple despite the complexity. Smarter, faster, simpler mortgages.”

Furthermore, he says, the proposition recognises at its core that the broker is the customer, who “needs to get as much return from every hour in the day as possible,” and therefore needs as much certainty, as fast as possible. Finally, the proposition was formed to standards of clarity and conduct comparable to that of regulated products, despite these being unregulated contracts.

Tech and inclusion

While the plan to “approach technology di erently” has always been fundamental to the Chetwood model, in and out of the mortgage market, Arwas says that one of the important lessons learned over the years was that this alone could not be the factor that di erentiated it.

For a start, he explains, the problem with basing a rm’s unique selling point (USP) on anything technological or digital, is that others

can quickly follow any innovations, leaving the business sitting as another one of many. It is important, therefore, to have a deeper mission, and a proposition that stands out for itself.

“ e one constant is our belief in creating products that genuinely help people,” Arwas says. “Everything we do is developed from the ground up with customer feedback at the forefront of our mind, ensuring their voices count and we can truly meet their needs.

“ e evolution of our brand and product o ering means we can now serve a wider range of customers who can bene t from our simple and clear, no-nonsense approach.”

“Chetwood has always said that we want to create a real proposition that’s actually helpful and solves a problem for our target market.”

Big moves

Two years ago, the next stage of Chetwood’s development was conceived –ModaMortgages. e process of building the brand new BTL lender was not simple, but for the past three to six months, it has been all but ready. Here, Arwas says, has been a real proof of the model that having an underlying purpose creates the ability to pivot when needed, while having an eye on the “red lines.”

ModaMortgages o cially entered a controlled launch phase on 9th October 2024 – with lending going live to an exclusive list of specialist distributors and packagers, and further expansion prepared for the near future.

While it could have launched sooner, this was an exercise in nding the balance between commercial value and risk. Arwas says that there were certain things he and the team were not prepared to compromise on.

“If we stop being ‘smarter, faster, simpler’ – that’s where I would pause and say we shouldn’t go out,” he says. “For example, we shouldn’t go live if there’s a chance our decisions would be unpredictable, preferring to wait until all the pieces were in place, certainly for brokers.

“ e proposition being built on key principles has helped us make decisions as to where those lines are.”

Amid the nal throes of building ModaMortgages, the opportunity arose to acquire CHL Mortgages for Intermediaries, (CMI), which uses the brand name CHL Mortgages under licence. CMI came with a level of maturity, expertise and reputation in the market – starting blocks upon which to build, unlike the brand new ModaMortgages brand.

It was also an exciting prospect, Arwas adds, because it had space to grow.

“It was an opportunity to be writing business in the market,” he says. “With a sales team and brand known in the market, it meant we could accelerate the build-up of our own originated asset, and on top of that, we really liked what we saw, and was in a part of the market we very much believe in.”

In acquiring CMI, Chetwood had the opportunity to grow the CHL Mortgages brand, including the backing to recruit more sta , grow its sales and underwriting functions, increase its business support, and generally grow to its full proposition and capabilities, including relaunching products for more complex BTL deals.

“It was the right business in the right market at the right time,” Arwas adds.

In the ve months since the acquisition, this investment has already seen CMI double the ow of applications and level of completions, and bring much of its criteria back, with more to come in the future.

e simultaneous acquisition and launch have had other bene ts – despite adding considerably more work – including a central telephone business development manager (BDM) team that supports both brands.

Key di erences

Despite sharing a parent company, as well as resources and expertise, ModaMortgages’ and CMI’s propositions ll di erent gaps in the BTL market, allowing Chetwood Bank to present a varied and diverse proposition, that is only set to grow.

Arwas says: “Of course, there’s some business that either brand can handle, and none of what we do could be called ‘vanilla’ or ‘high street’ BTL, but in ModaMortgages’ case incorporated landlords will probably have gone for relatively simple [special purpose vehicle (SPV)] structures, while the CHL Mortgages brand is more geared up to look at the much wider limited company structures.

“CHL Mortgages gives us that opportunity to play in that more complex part of the market, while ModaMortgages’ proposition addresses landlords who have professionalised and got portfolios, but maybe who haven’t got into the most complex areas of the market.”

For ModaMortgages, its ability to maintain a “consistently high-quality service for brokers” will be its USP, while CHL Mortgages will be its ability to provide a tailored approach, predicated largely on dialogue with the broker, that addresses more complex needs.

“ at isn’t something you can necessarily smooth over with on-screen application forms,”

Arwas explains. “It comes down to the people handling the cases, the valuers we use for more complex properties, and just being geared up to understand and handle complexity.

“While ModaMortgages isn’t a ‘computer says no’ situation, it is going to be relatively decisive, whereas CHL Mortgages is prepared for a more negotiated deal. So, the operating models and systems are slightly di erent because of that.”

Because these are, ultimately, quite di erent lenders, Arwas says it has been key not to be “dogmatic about forcing systems together,” which is a trap some acquisitions can fall into, in an attempt to unify.

He adds: “We’ll look for the opportunities to make the systems more e cient by bringing them together, and we’ll also look at where teams can support di erent brands and propositions.”

What has been important, he adds, is the integration of CMI’s people, and the work to ensure that it does not “feel like an outpost.” Instead, with a “rich history” and expertise, it was important to approach this as a process to “add, not absorb” the business.

Part of making this integration e ective was to put Chetwood’s money where its mouth is. Arwas says: “If you say you’ll back the business, do it – make the investment, be visible.”

Becoming the bank

Chetwood Financial has had a full banking license since 2018. is year – a matter of days before the time of writing, in fact – Chetwood Financial nally rebranded to Chetwood Bank.

Arwas says: “Increasingly, particularly on the savings side, where people are entrusting you with their life savings, it was important to us and them that the word ‘bank’ was included in the name. On the mortgage side, this coincided with the story around the mini-Budget, ‘Truss economics’, and non-bank lenders being forced from the market.

“ is showed the signi cance of being a bank with consistent ow of funding – we’re not going to just dip in and out when the markets are attractive, we’re not ‘here today, gone tomorrow’.”

With £3.5bn in retail deposits, in addition to various other funding lines, Chetwood can o er the ability to be present, which is becoming increasingly important as people reel from the e ects of a turbulent few years.

Arwas adds: “ e CMI story has ampli ed that. One of our big promises was that we had the funding to back as much business as it could generate.”

e shi to Chetwood Bank as a brand is, therefore, not a change in structure, but a recognition that this is not just a collection of independent businesses or house of brands.

Arwas says: “Customers want that sense that they are dealing with a bank, and one that is well-regulated and well-funded. It’s an opportunity to refocus on what’s important.”

Future plans

Chetwood’s recent moves have, in many ways, been fuelled by change in the landlord market. Arwas points to landlords becoming more professional, tending towards larger portfolios, and the overall increase in complexity within the BTL lending sector. is, he says, will only continue to develop, with houses in multiple occupation (HMOs) and multi-unit blocks (MUBs) growing as a “very important strategic part of the market” as the UK looks to optimise existing housing stock.

Arwas says: “Brokers need a lending partner that understands that complexity, and that has products and policies lined up with the growing complexity of the market.”

Looking forward, Arwas wonders what the Budget will have in store for the BTL market, but remains optimistic that specialist lenders will be able to support a resilient cohort of landlord borrowers.

For the business, the experiences and successes of this year have created something of a template for potential future growth. e ambition is for CMI to become a leading specialist lender, moving on to expand beyond BTL to add to the range on o er to borrowers. Arwas says there is plenty of opportunity to address gaps and ful l the ethos of “making people better o .”

In the short-term, though, Arwas said for now, the work is being done to bring CHL Mortgages into people’s consciousness, to ensure it is “a business of consistent high delivery.” For ModaMortgages, the plan is underway to get the brand out, and eventually match CHL Mortgages’ level of business.

A successful year ahead for ModaMortgages means establishing full distribution, with no service failures, never having to pull back from the market in order to deliver, and getting the work done with minimal fuss, a er a 2024 full of challenges and excitement.

Arwas concludes: “We’ve got a really good proposition for portfolio landlords, and we can deliver that well – we just need to keep those consistent high standards throughout the year. If we do that, we’ll be known as a lender that meets expectations and keeps promises.” ●

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Valuations: What brokers need to know

Houses in multiple occupation (HMOs) are the talk of the town, and it’s easy to see why. With higher rental yields and the security of multiple tenants, they’re a winning strategy – especially in areas buzzing with students or young professionals.

But before clients dive in, there’s one crucial piece of the puzzle that needs careful a ention: valuations. Valuations are more than just numbers on a page; they’re the foundation of ge ing the right ﬁnance and making sure an investment lives up to its promise. Understanding which type of valuation to use – and when – is important.

What’s the di erence?

Let’s start with a common misconception I see all too o en: thinking a Red Book valuation is the same as an investment valuation (IV).

While Red Book valuations follow the rigorous Royal Institution of Chartered Surveyors (RICS) standards, and are essential for legal and ﬁnancial compliance, they don’t always reﬂect the full income potential of a property.

An IV focuses on what the property is worth to an investor based on its ability to generate income. It’s all about future potential – how much rent it can bring in – rather than just what it’s worth today.

Vacant possession (VP), on the other hand, is straightforward. It’s the value of the property if it were sold empty, without tenants. No rental income is taken into account – just a simple market value. Knowing when to use each one can be the diﬀerence between a successful deal and a missed opportunity.

When is it the right move?

If the property is showing strong rental income and there’s solid demand, an IV is probably the way to go. Here’s when it makes sense:

1. If the HMO has a track record of high occupancy and steady rental income, the IV will give a clearer picture of its true value. This is crucial for securing the right level of borrowing.

2. In places with Article 4 Directions, where planning permission is needed to convert properties into HMOs, existing HMOs are in short supply. They o en command a premium, and the IV will reﬂect that be er than a VP value.

3. Properties that have been upgraded with features like en-suite bathrooms or top-notch ﬁnishes are likely to a ract tenants willing to pay more. An IV will take this into account, showing the enhanced earning potential.

4. An HMO in a sought-a er area with high tenant demand will have a stable income stream, making an IV more appropriate than a traditional VP valuation.

Real-life example

Take this example from our own experience at HTB.

A broker came to us with a client looking to reﬁnance an HMO in an Article 4 area of Manchester. The property was fully let, newly refurbished, and in a high-demand location.

The broker knew that the IV would reﬂect the property’s true value, and that’s what we went with.

As a result, we secured a reﬁnancing package that matched the property’s income-generating potential, pu ing the client in a much stronger position than if we’d used a VP value.

This is a great example of why choosing the right valuation is so important.

A gamechanger

Not every lender will consider IVs, but knowing which ones do – and when to use them – can make all the diﬀerence. At HTB, we’re more than happy to look at IVs, because we understand that they can unlock opportunities that might otherwise be missed.

One broker recently told me that our approach to IVs is a gamechanger. It means they can secure funding that truly reﬂects the property’s income potential, rather than just its base market value. But it’s not just about saying yes to IVs – it’s about understanding the local market and the speciﬁc property to ensure we’re making the right call.

Make the right call

Ge ing the valuation right is only part of the story. Brokers must work with lenders that are willing to go the extra mile and tailor their approach to each individual case.

At HTB, we pride ourselves on being a partner you can rely on. We work closely with brokers to navigate the complexities of investment valuations and provide the support needed to get the best outcomes for your clients. It’s all about making sure the ﬁnance reﬂects the full potential of the investment.

A er all, securing the right ﬁnance is about more than just numbers – it’s about making sure the investment delivers on its promise. That’s what we’re here to help you achieve. ●

ALEX UPTON is managing director, specialist mortgages at Hampshire Trust Bank

The return of the buy-to-let purchase market

By historical standards, purchase lending has been weak over the past couple of years. Landlords are still adding to their portfolios, of course, but just not in the same numbers as they once were.

When people discuss the fall oﬀ, they tend to compare current lending levels with the peak of the market in 2022, which isn’t a fair comparison.

According to UK Finance, purchase lending was down around 40% in July, compared with the same month in 2022. However, this is misleading, as lending in 2022 was artiﬁcially boosted by landlords bringing forward transactions ahead of rising interest rates. Compared with July 2023 instead, lending is down 18% – not an insigniﬁcant fall, but a more palatable comparison, nonetheless.

The good news, though, is that a er two relatively barren

years, the purchase market is now turning a corner.

Looking at our own book, purchase lending currently makes up 53% of new lending, which is mainly driven by professional landlords.

Favourable conditions

That’s certainly what our data is telling us, and I would be surprised if this wasn’t the same for other lenders in our market.

Why? Because conditions are becoming a lot more favourable for landlords, especially in terms of borrowing costs, and full-time professional landlords tend to move ﬁrst.

Over the past year, our new lending rates have fallen by 0.88%, on average, with similar drops seen across the market. This means borrowing costs have fallen by more than 10% for the average landlord over the past 12 months.

ELISE COOLE is managing director at Keystone Property Finance

At the same time, rents have risen by more than 5% over the past year, according to Zoopla, so the cost of holding debt has become a lot more manageable for landlords.

Higher mortgage rates didn’t just slow buy-to-let (BTL) activity, of course; they have also led to a slump in the number of residential buyers, many of whom have been holding out for rates to fall.

Looking long-term

There is a misconception that landlords don’t look beyond tomorrow, but many of them run their portfolios as a business. Those serious about growing their portfolios will have been hunting for bargains while the housing market remains relatively ﬂat and quiet. They will also be aware of the proﬁt they are set to make once the market recovers and house prices rise again.

On top of that, many landlords have large portfolios with blended borrowing costs. Therefore, while they may be paying marginally higher debt costs on new purchases, they still have properties in their portfolio locked into ultra-low ﬁxed rates. As a result, higher mortgage rates have been more of an inconvenience than a deal breaker.

Where professional landlords lead, smaller landlords tend to follow. So, I expect a more widespread pick-up in the purchase market throughout the rest of 2024 and 2025 as rates continue to fall.

While the main story of the past two years has been the demise of purchase lending, I believe the story of the next two will be about its revival.

While landlords may be paying higher debt costs on new purchases, many still have properties on low xed rates

The HMO landscape is changing – are you keeping up?

With houses in multiple occupation (HMOs) generating above average rental yields of 7.2%, according to Pegasus Insight, you can see why landlords could be looking to diversify.

The eﬀects of the pandemic are still being felt in terms of supply and demand, with the number of available homes to rent 20% lower than 2019 – pre-pandemic – plus there are also now 22% more tenants are looking to move, based on evidence from Rightmove.

HMOs can come with their own set of challenges and complexities, which is an important consideration, especially for new landlords looking at this type of investment.

For example, it’s pivotal to understand what the local council restrictions are. In some areas, councils or local authorities have Article 4 implemented, which can restrict the types of works that can be completed on properties, including conversion from C3 (dwelling house) to C4 (HMO) use. Landlords must ensure they have obtained all the relevant permissions before any works can take place.

If a client is considering purchasing an existing HMO property to avoid conversion costs or planning implications, they are likely to be looking at paying an additional premium which could impact their yield margins.

Specialist lenders, such as Kent Reliance for Intermediaries (KRFI), have diﬀerent products available dependent upon criteria points, such as number of beds, as well as ﬁrsttime landlord versus experienced portfolio owners.

KRFI accepts up to 20 le able rooms, while some lenders will only consider a maximum of 10.

A recent case of ours was a remortgage of a semi-detached house purchased in January 2024, which was then renovated into a ﬁve-bed HMO property, all with ensuite bathrooms.

This was an experienced landlord with a portfolio valued at £18m who had already placed considerable business through OSB Group.

The portfolio is a combination of ﬂats, houses and semi-commercial assets as well as HMO properties with their ﬁrst HMO being purchased in 2020.

This property type now makes up 14% of their total portfolio, with the majority of these purchased in the past six years, and we’re seeing a similar trend with other customers.

Energy e cient

The vast majority of HMO properties include bills in the monthly rental amount; therefore, landlords must ensure their properties are as energy eﬃcient as possible, as they might not have control over energy usage. For example, bills could rise very quickly if the heating is le on 24 hours a day.

This, teamed with the volatility of the energy market, means that if the property isn’t as energy eﬃcient as it could be, it could eat into a landlord’s proﬁts.

Plus, HMO properties tend to be most popular with students or young professionals who are likely to be inﬂuenced by environmental aspects when looking at their rental options, so these considerations can make a property more appealing.

Another case that recently completed with us was a ﬁrst-time landlord who wanted to create an HMO in a high demand area due

ADRIAN MOLONEY is group intermediary director at Kent Reliance for Intermediaries

If a client is considering purchasing an existing HMO property to avoid conversion costs or planning implications, they are likely to be looking at paying an additional premium which could impact their yield margins”

to its proximity to a university and hospital. This was a full ‘back to brick’ refurbishment that created a sixbedroom property, all with ensuite bathrooms.

The refurbishment enabled the landlord to be in full control of making the property energy efficient, with insulation, double-glazed windows and fit out including energy efficient white goods.

The HMO property was completed to a high standard, and therefore when it hit the rental market, it was in such demand that all rooms were snapped up quickly.

If you do have a ﬁrst-time HMO landlord case, remember that KRFI can accept applications if they can present a good business case, drawing on a professional network such as experienced builders, use of le ing agents, and of course, that they have completed all their due diligence. ●

Taking the longterm view though a regional lens

The ongoing imbalance between supply and demand continues to present opportunities for landlords in many areas of the UK. However, challenges persist, and careful portfolio management is crucial, with many property professionals prioritising diversiﬁcation strategies and the incorporation of limited companies.

When looking though a regional lens, research from Rightmove highlights signiﬁcant disparities in rental demand. Wrexham, for instance, ranked as the busiest rental market, with le ing agents receiving an average of 54 enquiries per property – nearly three-times the UK average of 19. Glasgow and Bristol followed closely behind with 52 and 51 enquiries per property, further illustrating these regional diﬀerences.

Despite the high demand in certain areas, this data suggests that the UK rental market is gradually moving towards a more balanced state. The number of tenants seeking homes was suggested to have fallen by 16% compared to last year, and the supply of available rental properties has increased by 8%.

However, the market remains undersupplied, with available rental homes still 32% below pre-pandemic levels in 2019. This shortage continues to push rents higher, with the average rent outside London reaching £1,349 per month, representing a 5% year-onyear increase. While this is a notable rise, it represents a slowdown from the 12% annual growth seen in 2022.

Staying on a regional theme, according to a study by Hamptons, the North West leads rental growth, with a 53% increase in average rents on newly let properties since 2019. In

contrast, Wales has seen the weakest growth at just 19%.

Adjusting for inﬂation, real term rental growth across the UK has been more subdued, averaging 2% annually since 2019. Although, the North has seen real terms rents rise by 24%, signiﬁcantly outpacing the 10% growth in the South and even a 5% decrease in Wales.

It’s always risky to say too much ahead of major political events, such as the upcoming Budget, but there appears to be a growing sense of cautious optimism around the buy-to-let (BTL) market. Particularly among those who are commi ed to a strategic, long-term approach to property investment.

A ordability concerns

For professional landlords, opportunities not only lie in responding to current demand, but also in anticipating future needs as aﬀordability continues to prevent many ﬁrst-time buyers from entering the housing market.

These concerns were further highlighted in research from Go.Compare Home Insurance, which revealed that 60% of nonhomeowners believe they will never be able to buy a home, primarily due to the current housing market and economic climate.

Renters pointed to various reasons as to why they feel that homeownership is no longer important.

Many feel that is too big of a commitment (30%) and renting is an easier option (28%), oﬀering them be er value for money (17%).

In addition, some felt they had more important things to save for or spend money on (22%), or were concerned that they could lose a lot of money in

GRANT HENDRY is director of sales at Foundation Home Loans

the long run by buying a home due to changes in house prices (14%)

Such data oﬀers plenty of encouragement for the existing landlord community, and potential new ones who are well-positioned to deliver good quality housing to those struggling to get onto the ladder, as well as those people who are opting to rent for longer.

In addition to geographical diversiﬁcation, many landlords are focused on this quest for quality and raising the standards of new and existing properties to meet rising tenant expectation.

A er all, landlords who offer well-maintained, energy-efficient homes are far more likely to a ract first-rate tenants and reduce void periods. Furthermore, investing in the long-term upkeep of properties allows landlords to maintain competitive rental rates, even in a cooling market.

Looking ahead, the private rented sector will remain a crucial component with the wider UK housing landscape. Inevitably, interest rate adjustments, economic conditions, Government intervention, legislative change and housing aﬀordability will all play key roles in shaping the sector’s future.

However, for landlords with a clear strategy and a commitment to longterm investment, the market still holds signiﬁcant potential.

As a lender that is fully commi ed to the buy-to-let space, we remain dedicated to providing mortgage intermediaries with the required solutions, criteria, service and insights to support their clients with all their short, medium and longer-term portfolio objectives. ●

The Renters’ What does it mean for the

Quiassitatur, anos

Aer years of discussion and delays, the Renters’ Rights Bill has now been laid before Parliament.

This Bill replaces the previous legislation – the so-called Renters (Reform) Bill – introduced by the former Government, which, given multiple setbacks, didn’t have time to pass into law before the General Election.

This new legislation, which was introduced to Parliament on 11th September, mirrors much of the original Bill, but contains some critical changes.

It will be debated in detail and subject to amendments across both Houses. It will then become law.

most consequential elements of the revised legislation. Labour’s Renters’ Rights Bill plans to scrap ‘no-fault evictions’ in the interest of increasing tenant security and stability.

The abolition will apply to both new and existing tenancies as soon as the legislation is passed, providing immediate protection to private renters. Pennycook stated that the Government hopes “a ban on evicting tenants in England without a reason will be in place by next summer.”

The Government, thanks to its large majority, hopes it will pass through Parliament quickly.

Housing Minister, Ma hew Pennycook said: “We hope [the bill] will make very quick progress through the House of Commons and that we have that new tenancy system in place within the ﬁrst half or around summer next year.”

While not all of the reforms will be music to the sector’s ears, it ﬁnally oﬀers a path towards clarity, giving us a much clearer understanding of what the legislative landscape will look like in the coming years and the time we have to prepare.

There is concern from le ing agents and landlords about this change leaving landlords with challenges when it comes to evicting tenants that present anti-social behaviour issues or fall into arrears, as well as the need to reclaim the property to live in or sell. The Government, however, says the Bill will make provisions for such eventualities.

A er leaving us for too long in limbo, we now know the broad contours of what we’re dealing with. Here are some of the key changes coming down the track:

Abolishing Section 21

The abolition of Section 21 no-fault evictions has been a hot topic for years, and this is certainly one of the

The Government has promised a ‘smooth transition’, something which will be vital given that the legislation will apply to existing tenancies as well as new ones.

The industry has already voiced signiﬁcant concerns about this shi , particularly for agents and landlords operating in the student market.

A greater level of concern is felt around the capability of the courts to handle what the sector believes will be a rise in eviction cases coming before them. So far, there has yet to be any mention of reforms to the judicial system to address this issue, leaving a large question-mark over how this will shake-down in practice.

Fixed-term no more

A less covered area, but potentially one that will be more impactful in practice, is the end of the ﬁxed-term tenancy. The ﬁxed-term contracts will be replaced with ‘periodic tenancies’ – rolling contracts that mean tenants can stay in a property until they decide to leave, provided they have lived there for four months before they give their two months’ notice.

When Propertymark surveyed members last year, 93% said removing ﬁxed-term tenancies would negatively aﬀect both agents and landlords.

Interestingly, recent research by Goodlord showed that tenants also felt this would be a negative change.

Strengthening tenants’ protections

The Bill aims to empower tenants even further by allowing them to challenge rent increases and end rental bidding wars. Landlords and le ing agents will be legally required to publish an asking rent when marketing a property, and will be banned from accepting oﬀers above this price, to try and limit ‘gazumping’ or pressure to overbid on properties.

If a landlord wants to evict a tenant going forward, they will need to provide speciﬁc grounds, such as intention to sell the property.

It is not clear how the market will react to such a change, but one hypothesis is that we could see a rise in rental values to accommodate it – therefore making the legislation somewhat redundant.

Landlords will also be limited to raising rents once a year, and only in line with market rates. In a further area of strengthening tenant protections, the Bill will outlaw blanket bans on tenants with children or those on beneﬁts, ensuring fair access to housing.

Pets in lets

One of the most talked about areas of the legislation is pets. The Renters’ Rights Bill will give tenants the right

soluptas mint

Rights Bill industry?

to request a pet both before and during a tenancy, with landlords not able to unreasonably refuse a tenant’s request for a pet.

However, similar to the Renters (Reform) Bill, landlords and le ing agents will also be able to request insurance to cover potential damage from pets if needed.

Decent standards

The bill introduces a Decent Homes Standard to ensure that all private rental homes are safe and hazardfree, addressing the high number of substandard homes in the sector.

If the bill passes, it will be the ﬁrst time there will be a standard for the private rental sector.

According to the Government: “21% of all privately rented homes are considered non-decent, and more than 500,000 contain the most serious of hazards.”

Landlords who fail to address these hazards can be ﬁned up to £7,000 by local councils and may face prosecution for non-compliance.

In a key diﬀerence from the previous legislation, the Bill will see Awaab’s Law, already in force for social housing, apply to the private sector. Awaab’s Law will mean landlords will be required to follow strict timescales to inspect and repair hazards, such as damp and mould.

Digital database and Property Ombudsman

A digital database will provide tenants with information to help make informed decisions when entering new tenancies. It will also help landlords and agents stay compliant, and councils will be able to focus enforcement eﬀorts where needed.

The Bill also introduces a new Property Ombudsman, oﬀering a fair

OLI SHERLOCK is managing director of insurance at Goodlord

and impartial resolution service to se le disputes without the need for court involvement. This mirrors similar proposals that were included in the Renters (Reform) Bill.

Overall, the majority of the Labour legislation is closely aligned with the Conservative Bill that had been making its way through Parliament prior to the General Election.

But critical diﬀerences – such as the immediate abolition of Section 21 and the wider scope of the housing standards rules – mean landlords and agents have a lot of detail to get across before the legislation hits the statute books next year. Preparations should start now. ●

Buy-to-let will evolve and we will all support it

This year’s Labour Party Conference was awash with promises and plans for changing Britain for the be er. There were several announcements relevant to the housing market – a pledge to tackle homelessness for veterans, domestic abuse victims, and young people leaving the care system among them.

Energy Minister Ed Miliband was given the task of announcing a ban on landlords renting out properties that don’t meet energy eﬃciency targets by 2030.

While it was billed as a new policy, the move will reinstate the previous Government’s energy eﬃciency rules requiring landlords to improve let properties’ Energy Performance Certiﬁcate (EPC) ratings to a minimum Band C. Labour’s deadline is more lenient than under the Conservatives, who proposed these improvements be made mandatory by 2028 – a policy they later dropped.

“We all know that the poorest people in our country o en live in cold, draughty homes,” Miliband told The Times. “This Government will not tolerate this injustice and we will end it.”

A consultation is set for later this year, which should provide landlords with more clarity around how much they can be expected to spend on building work to bring energy eﬃciency bands up to standard. Further detail about funding support from Government should also be forthcoming. Most landlords have been preparing for these changes for several years now, with millions of properties already upgraded to Band C. Yet the chopping and changing on deadlines, and the previous Government’s decision to ditch the

plans, has been illustrative of the constant uncertainty faced by the private rented sector (PRS).

Landlord bans

It’s almost a decade since George Osborne ﬁrst announced the rollback on tax relief for buy-to-let (BTL) mortgage interest. Portfolio rules, interest rate stress-testing and the Mortgage Credit Directive followed. More change is in the pipeline. The long-awaited, much-debated Renters (Reform) Bill has been replaced by the Renters’ Rights Bill and will ban Section 21 ‘no-fault’ evictions for new and existing tenancies.

The Decent Homes Standard will be applied to the PRS for the ﬁrst time, and several other bans will come into force:

A ban on rental bidding wars, cracking down on those who make the most of the housing crisis by forcing tenants to bid for their properties. Landlords and le ing agents will be legally required to publish an asking rent for their property. They will also be banned from asking for, encouraging, or accepting any bids above this price.

A ban on in-tenancy rent increases wri en in to contracts, to prevent landlords implementing too high rents mid-tenancy, o en to push out the current tenants. Under these reforms, landlords will only be allowed to raise the rent once a year, and to the market rate. Abolishing blanket bans on tenants with children or those in receipt of beneﬁts.

The King’s Speech also included a reference to dra legislation due to be published on leasehold and commonhold reform with the intention to ban the sale of new

MARK BLACKWELL is chief operating o cer at CoreLogic

leasehold on new ﬂats. A proposal to end the use of forfeiture by landlords or freeholders when a residential leaseholder falls into ground rent arrears is also included in the dra Bill. For lenders assessing compliance with so many variable rules – let’s not forget the miasma that is licensing – underwriters need access to vast amounts of data and expertise so they can concentrate on the elements that ma er in credit risk.

As a web-based desktop platform that helps lenders comply with the Prudential Regulatory Authority’s (PRA) SS13/16 portfolio landlord underwriting standards, our Buy-toLet Hub is designed to do exactly that. The system allows lenders to flex their own criteria to reflect their broader appetite for types of risk profile on originations. It allows lenders to figure their own rules around interest coverage ratios (ICRs) and loan-tovalue (LTV) exposure in real-time to reflect risk appetite and exposure levels within their business.

It also provides brokers with the ability to import landlord data from multiple spreadsheets, which is automatically veriﬁed and converted into lender-speciﬁc templates before an application is submi ed.

With so many anticipated changes to regulation, we are already looking to develop the data and usage levers within the hub to support lenders ge ing to grips with additional compliance as it comes in.

In such a ﬂuid market, there are those who focus on challenges rather than the opportunities. Far from being over as an a ractive asset class, BTL is becoming a more robust prospect for lenders looking to strengthen their asset risk exposure. ●

Quality rentals are here to stay

Predictions for the housing market are up there with the weather and royal family – love them or loathe them –when it comes to smalltalk for Brits.

Given how keen the new Government has been to prepare us for tax rises in October’s Budget, I was heartened to see someone upbeat about the country’s economic prospects. Research house Pantheon Macroeconomics expects house price inﬂation to accelerate to 4.5% yearover-year in December.

Further cuts to the base rate indicated by the Bank of England’s Monetary Policy Commi ee (MPC), solid wage growth, and low unemployment will drive that housing rebound, according to senior UK economist Ellio Jordan-Doak. “Forward-looking indicators suggest upside risk,” he says. “They point to 6% year-over-year house price gains.”

While hopeful ﬁrst-time buyers might be irked by this prospect and the weight it could put on their buying power, it is a bit of good news for landlords in the private rented sector (PRS). Particularly if you consider the broader picture in the housing market.

Second homeowners are a point of contention for locals living in some of the country’s more popular holiday destinations, with the argument going that local communities are being pushed out of their homes as ‘outsiders’ inﬂate property prices. That may be about to U-turn in some places, with a noticeable rise in the number of second homes being put on the market.

This is likely down to two main factors – the ﬁrst being a knock-on from higher residential mortgage rates. Second homeowners usually have a mortgage on both properties, making remortgaging from rates around 2% onto rates of more than

5% doubly painful. The most sensible way to mitigate that payment shock, in many cases, is to sell the second home and put the equity back into the primary residence.

The second reason is changes to Council Tax for second homes. Some second homeowners may already be paying an additional 100% on their Council Tax bills, but from April 2025, local authorities in England will be able to impose a second premium of 100%, meaning some second homeowners could pay triple.

In Wales, local authorities have been entitled to do this since April 2023, and Hamptons research suggests that in some counties on that side of the border, people are taking pre-emptive action to avoid this “punitive regime.”

Hamptons’ ﬁgures show 135 second homes listed for sale in in Pembrokeshire in July this year, a rise of 255% compared to the 38 on the market at the same time last year.

Doing the maths

Landlords with legacy property portfolios with higher loan-tovalues (LTVs), purchased based on the commercials that existed over a decade of interest rates at rock bo om, are struggling to make the maths work today.

However, there are lots of landlords with healthy levels of equity in their portfolios who have options.

A glut of properties coming onto the market will make prices competitive for investors, whose appetite is now based on today’s commercial context. Higher interest rates are not an issue for aﬀordability calculated fresh for purchase. Rental growth is strong, and demand is consistently high.

Moreover, the economic basis Pantheon Macroeconomics outlines for the coming months serves to strengthen the investment case for buy-to-let (BTL) from a capital perspective. It’s far too simplistic to reduce the PRS to a basic equation that

LISA MARTIN is development director at TMA

more regulation and higher interest rates means landlords are abandoning the market. More accurate would be to say the sector is gradually ﬁltering out landlords whose ﬁnancial positions are less stable, replacing them with investors focused on a strong commercial imperative.

While the Government has conﬁrmed plans to pass legislation banning Section 21 no-fault evictions, along with several other measures to boost renters’ rights, those investing in the sector are well aware of the changes in store.

Moreover, the reimposition of net zero targets requiring private landlords to upgrade rented properties to a minimum Energy Performance Certiﬁcate (EPC) of Band C by 2030 –two years later than the Conservatives’ deadline, which they later abandoned altogether – means investors are factoring in those costs.

We expect there to be a higher turnover of homes over the next ﬁve years as property owners of all types rejig their exposure to ﬁt the needs of the market we are now facing.

With the MPC indicating future base rate cuts are likely, the return on cash, which has been very good for the past couple of years, is already falling back.

The need for quality rented accommodation is not going anywhere; the case for investing in it is looking more promising than it has for several years. ●

SME housebuilders need access to funding

Planning reform alone won’t solve the housing crisis. The Government has an opportunity to partner with the private sector, namely regulated non-bank lenders, to help small to medium (SME) housebuilders access the funding they need to build more homes.

In her ﬁrst major speech as Chancellor, Rachel Reeves announced that Labour will bring back mandatory local housing targets with a consultation on reforming the National Planning Policy Framework. Central to her address was the urgency of planning reform, and while those steps are undoubtedly welcome, it is clear that planning reform alone won’t solve the housing crisis.

To ensure that housebuilders, especially SME property developers, can continue to grow and deliver the housing that the country needs, it is important that they can access the necessary development ﬁnance, and that lenders and investors are incentivised to operate in this space.

Over the past four years, in the a ermath of the Covid-19 pandemic, accessing development ﬁnance has become increasingly diﬃcult for a

large number of SME housebuilders. According to the Home Builders Federation’s (HBF) 2023-24 State of Play report titled ‘Challenges and opportunities facing SME home builders’, 61% of respondents said that development ﬁnance was a major barrier to housing delivery – a higher proportion than in any previous year.

The conversations we have with our own borrowers also support and strengthen this view. Indeed, many of our customers are housebuilders that used to borrow from the challenger banks, but have become increasingly disenchanted with the way development funding – arguably the most specialist of all sectors –has in recent years been consumed and absorbed within a much larger banking beast, and the layers of reporting and risk analysis that go with it.

Access to development ﬁnance remains a major challenge for many SME housebuilders, and there is still much work to be done.

From the shadows onto the main stage

Of course, there isn’t a silver bullet to help SMEs access the funding they need to build homes.

But acknowledging the source of funding shi from banks to regulated non-bank lenders, and devising ways to work with these nimble and able organisations, would be a good place to start.

Indeed, once in the shadows of the lending ecosystem and dismissed as the lender of last resort, non-bank lenders have evolved, and in recent years positioned themselves at the centre of the lending ecosystem – now regulated and with a clearly deﬁned appetite to support.

These specialist organisations have stepped in to ﬁll the gap le by banks and other traditional lenders, which have seen their lending appetite cut back due to the current market environment.

Recommitting to the bank referral scheme

One tangible and practical step that the new Government could take to solve these problems would be to recommit to the Bank Referral Scheme, which requires banks that refuse to lend – including RBS, Lloyds, Barclays Bank and HSBC – to refer SMEs to three Government designated ﬁnance platforms.

These platforms – Alternative Business Funding, Funding Options, and Funding Xchange – are, in turn, required to a share a business’ details, in anonymous form, with alternative ﬁnance providers such as those for specialist developer ﬁnance.

Since many SMEs simply aren’t aware of the other lending options available to them, this referral helps to facilitate a conversation between the business and any provider which expresses an interest in supplying ﬁnance to them. ●

YANN MURCIANO is CEO at BLEND

It is important that developers can access the necessary nance to keep building homes

Using bridging to take advantage of opportunities

The latest industry reports are all showing that the property market is experiencing healthy levels of activity, with house price index (HPI) data indicating signiﬁcant price inﬂation.

According to the Halifax HPI for August, annual house price growth has risen to 4.3%, the strongest rate since November 2022. The average property is now just £1,000 below the record high set in June 2022 of £293,507. This upward trajectory in property prices presents a golden opportunity for investors.

Savills predicted that property prices will rise by 21.6% over the next ﬁve years. This is underpinned by a combination of factors, including an improving outlook for economic growth in 2024 and the decisive General Election result.

Savills also highlights the cautious – but growing – optimism in the market, noting that while price rises this year may be contained to 2.5%, the longer-term outlook remains positive.

The forward indicators from Royal Institution of Chartered Surveyors (RICS) have become more favourable, with new buyer enquiries increasing and surveyors’ price expectations following suit. However, the market is not without its challenges.

The continued imbalance between sellers’ expectations and buyers’ ability to pay, along with volatile swap rates and external economic pressures, means that the market remains exposed to potential headwinds.

Despite these challenges, demand for property remains robust, driven by investors who have access to cash or ﬁnancing and are eager to expand their portfolios. The market is still rich with opportunities for those

who can move quickly. Investors, particularly landlords, are looking to maintain or expand their holdings, with li le sign of retrenchment.

The need for speed

The urgency to act is further emphasised by the fact that, while the supply of new properties coming to market has increased, demand is still outpacing it.

Demand is only likely to increase further if we are indeed at the start of positive cycle for asset prices. In such an environment, quick decision-making can be the diﬀerence between securing a lucrative deal or missing out.

Of course, bridging lenders are known for their ability to act swi ly, o en completing deals in a ma er of days, which is crucial in a market where property prices are on the rise.

Bridging loans oﬀer ﬂexibility and speed, enabling investors to secure assets before prices climb further.

As long as the lender is conﬁdent in the borrower’s exit strategy – whether through the sale of the property, reﬁnancing, or other means – they can provide the necessary funds quickly.

This speed and ﬂexibility are particularly valuable in scenarios such as property auctions, which look set to remain popular among investors, ﬁrst-time buyers, and owneroccupiers. Auctions o en present opportunities to acquire properties at competitive prices, especially those that may need refurbishment. However, the rapid turnaround required – typically within 28 days of the auction’s conclusion – means traditional options such as buy-to-let mortgages are o en too slow.

By securing a bridging loan, investors can not only purchase the auction property in the short window

JONATHAN RUBINS is director at Alternative Bridging Corporation

of opportunity, but also ﬁnance any necessary refurbishments.

Once the property is improved, the investor has the option to either sell it for a proﬁt or remortgage with a buy-to-let term loan or residential mortgage, depending on their strategy.

The beneﬁts of bridging loans are not limited to investors alone. Homebuyers can also take advantage of regulated bridging loans in a rising house price environment.

For example, when a property chain breaks down, homebuyers may ﬁnd themselves at risk of losing their desired property. A regulated bridging loan can eﬀectively turn them into a cash buyer, allowing them to proceed with the purchase.

The fast turnaround of the bridging application ensures that the home purchase stays on track, which is important in a market where property prices are steadily increasing.

As we head towards the end of 2024, the signs are that property market conditions in the short to mediumterm will favour those who can act quickly and decisively.

With property prices on the rise and demand remaining strong, the window of opportunity for investors is upon us.

Bridging loans offer a quick and flexible financing solution that can help investors and homebuyers alike secure properties before prices climb further.

As the market continues its upward trajectory, those who delay may ﬁnd themselves priced out of prime opportunities. Therefore, the time to act is now – before the best deals are gone. ●

Importance of fair value assessment and Consumer Duty

Ensuring that customers receive genuine value is of paramount importance in today’s rapidly evolving mortgage market.

Both fair value assessment (FVA) and Consumer Duty have essential roles to play for mortgage service providers. Both concepts emphasise transparency, fairness and the delivery of meaningful outcomes for consumers, making them essential for those businesses that prioritise long-term customer relationships and regulatory compliance.

The role of FVA

FVA is a critically important tool when it comes to evaluating whether the services and products being oﬀered deliver genuine value to customers. By examining both costs and outcomes, the FVA ensures that the pricing structure remains competitive without sacriﬁcing quality.

A recent comprehensive FVA carried out by Crystal Specialist Finance helped determine that the pricing of our mortgage advisory services not only aligns with industry standards but also avoids overcharging customers. Through a detailed analysis of our service costs – ranging from staﬃng and technology to operational overheads – we ensured that our fee structure reﬂected the actual value provided to customers.

We looked beyond cost analysis to evaluate customer outcomes such as successful mortgage completions and satisfaction rates. This customercentric approach helped identify areas where value could be enhanced without inﬂating costs.

For instance, our policy of charging zero application fees across all product areas emerged as a signiﬁcant

contributor to customer satisfaction and value perception.

This balance – between offering competitive fees and maintaining high service quality – ensures that customers consistently benefit from the services offered, leading to higher satisfaction and retention rates.

A pillar of trust

FVA is closely tied to the broader principles of Consumer Duty, which aim to ensure that businesses act in the best interest of their customers.

In the mortgage market, this involves providing clear communication, fair treatment and products that meet customer needs.

Crystal Specialist Finance has embedded Consumer Duty at its core, commi ing to oﬀering services that align with customer expectations and regulatory standards.

One of the key highlights of this commitment is the reduction of complaints related to fees. By aligning our fee structure with customer expectations and maintaining transparency, we saw a 15% reduction in complaints.

This demonstrates the importance of clear and honest communication on pricing.

Customer satisfaction also plays a pivotal role in the Consumer Duty framework. A 92% customer satisfaction rate showcases our own commitment to delivering value and upholding the principles of fairness and transparency.

Regular service enhancements, such as the introduction of digital tools that streamline the application process, can further strengthen the relationship with customers, ensuring that they are continually provided with improved services at no additional cost.

JASON BERRY is group sales director at Crystal Specialist Finance

Compliance and continuous improvement

In addition to meeting customer needs, regulatory compliance is a nonnegotiable aspect of Consumer Duty.

Companies like ours ensure that their services and products comply with the latest regulatory standards, reﬂecting a strong commitment to best practices.

Feedback from regulatory reviews is taken seriously and any necessary adjustments are incorporated into business operations to ensure continuous improvement.

Looking forward, our commitment to future service enhancements demonstrates our dedication to staying ahead of customer needs. The ongoing review of fee structures ensures that they remain fair and continue to deliver exceptional value to customers.

In conclusion…

FVA and Consumer Duty are more than just regulatory requirements in the mortgage market – they are now essential when it comes to building trust and delivering meaningful customer outcomes.

The commitment to continuously reviewing and improving our services ensures that we remain a trusted partner for our customers, fostering long-term relationships built on trust and value.

As the mortgage market continues to evolve, companies that prioritise FVA and Consumer Duty will not only meet regulatory requirements but create lasting value for their customers. They will also solidify their position as industry leaders. ●

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Meet The BDM

The Intermediary speaks with Helen Comben, business development manager (BDM) at OSB

How and why did you become a BDM?

I started my nancial career journey in February 1997, working as a mortgage broker in an estate agents. at’s where I met a BDM with Royal Bank of Scotland (RBS) who had come in to discuss some mortgage products, and I knew then that I wanted to be a BDM, being out on the road, meeting brokers, nding solutions for di erent types of cases – it all just really appealed to me. I then became a sales manager in another estate agent, which was really valuable experience and put me in a great place for my rst BDM role in 2001 with NatWest. A er I returned from parental leave in 2004, the lender started creating specialist teams, which gave me the opportunity to join Intelligent Finance in 2006, which is considered

the pioneer of internet banking. In 2008, Nationwide was building a sales team, and although I wasn’t looking to move roles or companies, it just felt like the right move for me, mirroring my values and aspirations. e merger with e Mortgage Works (TMW) provided me the opportunity to focus more on buyto-let (BTL), which really sparked my interest and is still something I love working on today.

What brought you to OSB Group?

I started to notice Kent Reliance for Intermediaries (KRFI) doing great deals with some of my key accounts, and recognised industry names such as Adrian Moloney and Andy Williams, who were moving over to this company that I wasn’t even aware of at the time! is provided

comfort that KRFI was a strong, ethical company, and in 2017 I applied for a BDM role with them.

e more I watched and learned, I could see KRFI was creating a lot of excitement within the BTL market with its strong can-do attitude on cases, and that really set it apart from other lenders.

Joining OSB Group – with its three lending brands, Precise, Kent Reliance for Intermediaries and InterBay – provides me with daily variety and exible opportunities to shape deals.

What makes OSB Group stand out from the crowd?

One of the best kept secrets is that we have three di erent lending brands under the OSB Group ‘umbrella’, so this gives us a strong

advantage when placing cases. I immediately start ‘ ltering’ down to see which lending brand best ts the customer’s nancial requirements.

It’s about listening to the broker and working out where a case would be best suited. As a BDM, I feel empowered to give the broker the best solutions for their customer with the ability to choose from three brands rather than just one.

What are the challenges facing BDMs right now?

Obviously, we have the micro- and macro-economic conditions to navigate around, such as the interest rate challenges, which have made a ordability di cult, but now with the lowest mortgage rates for 15 months fuelling a return of buyers to the market, things are de nitely changing.

ere are also challenges in the BTL market, aside from the regulatory changes. Rents are not in the same place as they were a few years ago, and although rent prices have increased there are still supply issues, but there is a shi happening.

Margins can be challenging, which has led to dynamics changing in support of a more professional private rental sector (PRS), something that has been echoed by research from Landlord Leaders, a membership community that is focused on creating a fairer and more sustainable PRS.

What are the opportunities for BDMs?

We’re continuing to see an increase in landlords who operate through a limited company structure with plans to buy, refurb and rent. Gone are the days where décor and energy performance weren’t considerations for renters. Nowadays potential tenants want a space that re ects both their tastes and values. Landlords understand that they are providing tenants with a home, with many indicating that the top bene t

to them is being able to improve the lives of tenants.

Professional landlords are always seeking new opportunities, and I have seen this play out as buying properties from auction or looking at low lease properties. ey want properties they can build equity into from day one, and are in it for the long-term gains rather than shortterm wins.

Another area of growth is houses in multiple occupation (HMOs), as these tend to generate above average rental yields.

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

It’s never been more important to have a strong network both internally and externally. Internally, it’s the ability to present a case to underwriters and real estate colleagues, helping to paint the bigger picture and answer any queries such as payments on bank statements, for example. is helps to reach solutions for the broker and their customer.

It’s also really important to have colleagues to soundboard o . Although we spend a lot of time on the road, we use that time constructively to chat to brokers and colleagues to pick through cases and con rm actions. My car is e ectively my o ce and I make sure I’m equipped with everything I need to work as e ectively as if I were at my desk.

Externally, you need to have good communication and have built up trust with your brokers, as you can’t support a case unless you know every single detail. We work hard to keep both the broker and their customer in the loop throughout their nancing journey.

Brokers also have access to our underwriters, too, so they can get updates and answers on their cases directly from the people reviewing the application, which is so bene cial for time limited brokers.

What advice would you give

borrowers in the current climate?

I’m a strong supporter of helping to provide the right nancial solution for people according to their individual circumstances.

Working for a specialist lender means that we are well placed to consider applicants that may have been turned away by a high street lender due to previous nancial challenges or perhaps multiple income streams. ese challenges shouldn’t hinder someone’s path to homeownership or an investment opportunity, and specialist lenders can help open those doors.

BTL opportunities will always be part of the mix, but it’s more strategic nowadays. It’s about nding the right type of property – with a willingness to be exible on property types, too – in the right area, in order to achieve a good return.

I don’t think there is ever a time that there isn’t an opportunity to be had, as the market is incredibly resilient. ● OSB Group

Contact

NavigatiNg the fuNdiNg maze

ALTERNATIVE SOLUTIONS FOR SMES

by Jessica O' Connor

Small and medium-sized enterprises (SMEs) play a significant role in the UK’s economy. In all, SMEs turn over £2.4tn in revenue and employ more than 16.7 million people, according to The Federation of Small Businesses (FSB).

However, despite their crucial role, securing finance remains a persistent challenge for many business owners. From navigating complex application processes to facing limited access to affordable credit, SMEs continue to encounter significant barriers when seeking the funding necessary for growth.

With many traditional financial institutions hesitant to lend to smaller businesses, especially those in emerging sectors, or with less established credit histories, alternative finance options are on the rise, but these come with their own complexities and risks.

High interest rates, stringent lending criteria, and an ever-evolving regulatory environment have continued to compound these challenges,

making it harder for SMEs to access the resources they need.

With the Chancellor’s much anticipated Autumn Budget set to be unveiled at the end of the month, the SME sector will be watching for policy changes that could address these funding hurdles. While business leaders are hopeful for measures that will ease the financial strain, it is clear that as the financial landscape shifts, the future of SME funding hangs in the balance.

Funding demand

In recent years, SMEs have demonstrated remarkable resilience, despite the wider challenges posed by the economic landscape. Aldermore’s SME Growth Index found that smaller businesses are still actively seeking funding, with an average of £232,539 earmarked for investments in areas such as online presence, staff training, and new equipment. According to Ross McFarlane, commercial director, invoice

"Ironically I set up because of a lack of decent support"

"I thought 'small' was the business, not the loan."

finance at Aldermore, this trend is on the rise: “The appetite for funding is there and SMEs remain focused on enhancing and expanding their operations. According to the British Business Bank, the use of external finance by smaller businesses has increased to 50%.”

The SME market is also expanding rapidly, with the Department of Business and Trade reporting a 23% increase in the number of SMEs since 2010, adding up to one million new businesses.

Neil Rudge, chief banking officer, commercial at Shawbrook, has observed a steady stream of funding applications from SMEs.

“Our research revealed close to nine in 10 of SMEs feel confident about their business prospects, and over a quarter feel extremely confident,” Rudge shares.

Adding to this optimism, Angela Norman, interim managing director for YBS Commercial Mortgages, notes that as small businesses seek to

develop a portfolio of funding options, “they are looking to lenders […] to step into this space and support them.”

She adds: “The options and choice available to them are growing all the time.”

Accessing funds

While expanded options for SMEs may be emerging onto the market, many business owners continue to face significant challenges when it comes to actually accessing the funds they need.

Mike Randall, CEO of Simply Asset Finance, points out that “fewer than half of SME credit applications are successful,” leaving many small businesses struggling to secure the vital resources required for expansion, investment in modern technology, and improving productivity.

Slow payment of invoices further compounds this, leading to cashflow problems, especially as operating costs remain at record highs.

Additionally, certain industries, like those at higher risk of environmental damage or money laundering, may face more obstacles in securing loans from cautious lenders.

Norman notes: “[Some lenders] have sector limitations; for example, some lenders don’t lend on high-risk sectors such as businesses which carry a high-risk of environmental damage.

“But with the right advice and preparation, businesses can navigate an appropriate path towards their goals.”

Rudge underscores the need for greater flexibility in funding options, as many SMEs find that mainstream finance often falls short.

"Nearly half (46%) of those who applied for finance in the past year said it didn’t meet their specific needs, while 45% found the process confusing, 28% felt it was too slow, and 20% said it lacked flexibility," he explains.

“Mainstream finance often falls short in this area, which is why many business owners turn to personal funds or alternative options.”

Beyond the high street

Since the 2008 financial crisis, mainstream lenders have tightened their criteria in an effort to mitigate risk, a trend that has only intensified following the pandemic.

As a result, many SMEs now find it more difficult to secure financing; McFarlane, for one, has seen more SMEs turned away from mainstream lenders.

He notes that this tightening of criteria is compounded by the growing reliance on automated, digital services by traditional banks.

While technology can streamline processes, it often leads to a one-size-fits-all approach, which overlooks the unique needs of SMEs with more complex financial requirements.

As McFarlane explains: “Traditional banks’ automated and ‘cookie-cutter’ processes have reduced the availability to provide tailored advice and guidance for SMEs.” This has made it particularly difficult for smaller businesses or those operating in niche markets to receive the personalised support they need.

However, Rudge says that “there’s no shortage of finance available for businesses,” and that mainstream lenders still play an essential role in offering straightforward loans to those that meet their criteria. Yet, he says, for businesses with more complex needs or those that fall outside traditional risk models, “specialist lenders provide real value.”

These lenders tend to offer greater flexibility and a wider range of products, tailoring solutions to meet the specific needs of businesses that do not fit the conventional mould.

THE SME LANDSCAPE

In Numbers

◆ SMEs account for 99.9% of the business population, more than 5.6 million businesses.

◆ SMEs account for three-fifths of employment and around half of turnover in the UK private sector.

◆ Total employment in SMEs was 16.7 million, 61% of the total.

◆ Turnover generated by SMEs was estimated at £2.4tn (53%).

◆ Employment in small businesses – those with up to 49 employees – was 13.1 million, 48% of the total, with a turnover of £1.6tn (36%).

Source: Federation of Small Businesses (FSB)

According to Rudge, what sets them apart is the personalised attention they provide, as their relationship managers often have fewer clients than those at mainstream banks, allowing them to take the time to understand each business’ unique situation.

Consequently, many SME owners have turned to these alternative lenders, which have, according to McFarlane, “become an important source of funding.”

Sustainable finance

As SMEs continue to explore alternative funding options, an emerging trend reshaping the market is the rise of sustainable, or 'green', business.

Green SMEs are themselves becoming a key feature of the UK’s business landscape, driven by increasing consumer demand for sustainable products and services, as well as growing regulatory pressure, as well as the goals of business owners themselves.

According to Aldermore’s Green SME Index, the number of has tripled since early 2023, marking a significant shift as more businesses adopt environmentally friendly practices.

"This is hugely encouraging, as SMEs make up the majority of private sector businesses in the

For those brave enough to navigate the complex world of finance, advice from brokers and financial experts is essential”

UK, and as such, they will always be at the heart of our transition to net zero," says McFarlane.

Financial vehicles tailored to green businesses, those that impact environmental sustainability or community wellbeing, or those looking to make energy efficiency improvements, calls for a specialist approach. This includes catering for firms offering environmental products or services, such as environmental technology businesses, organic farms, educational services focused on sustainability, low-impact land management projects and rural businesses that serve local communities.

However, there are still significant barriers when it comes to financing green projects. Many SMEs struggle to access commercial finance, particularly from traditional lenders, as sustainable initiatives often require more specialised expertise and tailored vehicles.

Lena Mitchell, business development manager (BDM) for community and commercial mortgages at Ecology Building Society, highlights that “commercial finance in particular is not easy for customers to access directly themselves – and even more so for sustainable, or green, SMEs."

This has led to growing demand for alternative finance providers and brokers who specialise in green funding options.

In tandem with this market growth, Mitchell also notes that ‘greenwashing’ remains a challenge, making it difficult for SMEs to confidently find financing that aligns with their sustainability goals.

She says: "Borrowers should be able to access a choice of alternative lenders and funding options, but with a lack of green finance products available from high street providers, it can be difficult for SMEs to find trusted providers."

In addition, with high energy prices persisting, SMEs are increasingly investing in energyefficient solutions to reduce long-term costs and futureproof their operations.

“Green financing for these types of projects is no longer a ‘nice to have,’ but a business imperative,” says Mitchell.

“There is growing demand among businesses to make more ethical and sustainable choices in all aspects of their operations and getting the right finance shouldn’t be any different.

“I hope to see more lenders following our lead to meet this demand for genuinely green mortgages,” she concludes.

Funding female leadership

Data from the Alison Rose Review found that the underrepresentation of women in UK businesses is costing the economy around £250bn annually. One of the factors contributing to this disparity is the added difficulty female-led businesses face in accessing funding in comparison to their male counterparts.

British Business Bank data on loan approvals analysed by gender found that male-led businesses received on average £507,000 for every loan application, whereas female-led businesses received £174,000.

Roxanne Goodman, founder of Female Founder Finance, was inspired by this landscape to take action and help support female founders across the country.

Goodman points out that both conscious and unconscious biases contribute to the disparity. Having worked in the male-dominated commercial finance sector for 18 years, she has witnessed these challenges first-hand.

"Like many women-led ventures, addressing this imbalance became a personal mission for me," she explains.

One of the most glaring inequalities lies in venture capital and angel investment, with female entrepreneurs receiving less than 2% of the funding in the UK.

Yet, as Goodman asks: "Are women any less capable of starting, growing, or scaling a business? The answer, statistically, is no. Yet the gap remains."

In 2023, Community Development Finance Institutions (CDFIs) made strides by delivering 44% of start-up loans to female entrepreneurs – a significant improvement in levelling the playing field, albeit only one step in a longer journey.

Goodman notes that financial institutions like Cambridge and Counties, NatWest, and HSBC are also starting to develop products specifically for female entrepreneurs, in growing recognition of this gender disparity, and its role in preventing the SME market from reaching its peak.

She says: “We still have a long way to go, especially when 35% of women seeking funding have encountered gender bias. But things are improving.”

Accessing advice

With myriad challenges facing small businesses across the country, for those brave enough to navigate the complex world of finance, advice

from brokers and financial experts is essential. With limited time and resources, Norman notes that many business owners struggle to research the best funding options or identify solutions tailored to their specific needs.

She says: “This is such a specialist area; we would always advise [business owners] to seek the support of an expert willing to take the time to fully understand their needs and find the best solution for their individual circumstances.”

Commercial finance brokers play a crucial role in developing robust borrowing portfolios that can drive business growth. According to McFarlane, SMEs that work with brokers have secured over £95,000 in funding on average in the past 12 months, resulting in over £100,000 in additional business revenue.

He adds: “Now more than ever, small business help and guidance can steer SMEs towards the right options that can help their business survive and grow. Above all, SMEs shouldn’t suffer alone."

Norman adds: “I would always recommend that [SMEs] seek independent professional advice from a specialist commercial finance broker if they have any doubts at all about what they need to help with that preparatory process – or where they can best find it.”

Budget opportunities

From high street lenders tightening access to funding and the rise of alternative finance providers, to the growing demand for green finance and addressing gender disparities in funding, this is a complex maze to navigate. The upcoming Autumn Budget will play a critical role in shaping the future of SME finance.

SMEs must be strategic in securing the right financial support. Tailored guidance from advisers will prove essential in helping businesses thrive in a competitive environment.

Mike Conroy, director in commercial finance at UK Finance, highlights the need for a regulatory framework that supports lenders in providing access to finance, including extending the Growth Guarantee Scheme.

"For many SMEs, access to the new Growth Guarantee Scheme is critical to success," Conroy notes. “The Scheme is currently due to expire in March 2026; this needs to continue longerterm to give businesses greater confidence about accessing the support.”

Additionally, reforms to initiatives such as the Commercial Credit Data Sharing scheme and improving the efficiency of the R&D tax credit assessment process would encourage further investment in innovation and development.

As Randall points out, the Government must also address longstanding issues that have

Protecting SME business

MARCUS PRIMHAK IS NATIONAL ACCOUNT MANAGER AT LV=

It is important that businesses look at shareholder or partnership protection, which ensures funds are made available, should an owner fall critically ill or sadly pass, for their share to be purchased by another owner or shareholder and all parties are treated fairly.

Key Person Cover can also be considered for employees and owners who make a significant contribution to the trading success of a business, while sponsoring protection for employees is a tax efficient option through our Relevant Life Cover and Executive Income Protection policies.

While inflationary pressures have seen businesses take a more thoughtful approach to their costs, Association of British Insurers (ABI) stats show that the SME business protection market has grown by over 30% since the pandemic.

More recently, we have seen an emergence in business owners’ understanding of the need to protect against the financial consequences caused by the death of an owner or employee, with financial advisers we work with reporting an increased number of entrepreneur clients requesting guidance on protecting their businesses during such events.

hindered SME growth, such as reducing red tape and promoting timely payments. It remains to be seen how the recently launched Industrial Strategy will affect SMEs, for example, with Business and Trade Secretary Jonathan Reynolds and Chancellor of the Exchequer Rachel Reeves looking to drive long-term growth in key sectors that is sustainable, resilient and distributed across the country.

It is clear that with the right support, and with the right funding, SMEs can continue to drive economic growth.

As put by Rudge: “With inflation rates stabilising and interest rates on a downward trajectory, businesses can feel more confident about the economic landscape, creating a wealth of opportunities for growth and success in the year ahead.” ●

Norton Finance Q&A

The Intermediary speaks with Mark Stringer, director at Norton Finance, as the business celebrates 50 years

Tell us a bit about Norton’s history, and your own career.

Norton was set up by my father, Keith Stringer, in 1974, as a loan and insurance brokerage. He learned about the industry from his brother, Barry Stringer, who he worked with for a couple of years before setting up his own business working from home – long before that became a thing.

For the first decade or so, Norton operated solely as a brokerage. It wasn’t until the mid-1980s that the business started to lend its own money as Norton Home Loans.

I joined the business in 1985 when I was 18, and worked on the insurance side for about five years. I then decided to leave and set up my own brokerage business in competition to Norton, which I ran for 18 years up until the Credit Crunch in 2009, when I merged my brokerage back into the business.

Today, my brother Paul and I run the company together. I am one of the directors primarily involved in the marketing and sales of the business, and we are both actively involved in all aspects of the business, including the company’s operations and compliance requirements.

and we surrendered a new lease we had taken out on larger business premises and reduced staff to help us weather the storm.

Thankfully, the business has always had prudent financial management and not overspent in the good times, which I think has stood us in good stead. This has enabled us to ride out the bad times relatively unscathed.

The Credit Crunch was a tough one, as the secured loan business market declined by 90%, forcing a lot of brokers to liquidate their businesses. The challenges this presented to Norton were significant, but through our strong lending book, Norton kept the business going during that time.

The pandemic impacted Norton to a lesser extent, as although the market slowed, we managed to maintain sufficient volumes of business to cover our overheads and continued lending when some lenders were unable to lend through restrictions on funding lines, etcetera.

Norton has grown a lot over the years, but we have always maintained independence and it is still very much a family owned and managed business.

What

are

the most signifi cant challenges faced over the past 50 years?

The property crash in the late 1980s and early 1990s had the most significant impact on our business, because it involved loans secured on property. As with all market cycles, business before this was really good, and the market was growing steadily, placing us in a really strong position. However, the market seemed to drop overnight, so plans to expand were put on hold

Regulation and compliance have also had a big impact on the market and on the business over the years, with a constantly changing and evolving regulatory framework. Having said that, I believe this year, with the advent of Consumer Duty, we have more stability and certainty from a regulation perspective, enabling us to make more long-term plans.

How has Norton fared as a business in 2024?

2024 has been a huge success for the brokerage, and in July we had the best month we have had for a very long time. I would say all the signs suggest that the broker market is starting to see a return to form after what can only be described as a tough time over the past few years.

Consumer confidence is returning, and people are beginning to realise that the market as it is, is here to stay. Interest rates are also on a downward trend, and people are starting to realise that they cannot keep deferring their house purchase or home improvements forever. There is also

MARK STRINGER

Regulation and compliance have also had a big impact on the market and on the business over the years, with a constantly changing and evolving regulatory framework.

Having said that, I believe this year, with the advent of Consumer Duty, we have more stability and certainty from a regulation perspective, enabling us to make more longterm plans”

How

did the Norton 50th birthday celebrations go?

We had a great party at Hellaby Hall in Rotherham for everyone involved in the business, as well as for colleagues and partners with whom we have worked with over the years.

A lot of effort went into planning and preparing the event, and Norton’s Lisa Muscroft and Nick Morton have been exceptional in organising and managing the event from start to finish.

It promised to be a great night and did not disappoint. Everyone enjoyed it and we have been touched by the amazing warm wishes and complimentary feedback from the event. ●

What the lenders say

“I have dealt with Norton as a broker and latterly as a lender for almost 30 years, and during that time they have consistently been professional, efficient and a joy to deal with. Congratulations on the massive milestone of 50 years.” Paul Carley, head of sales – mortgages, Spring Finance

increased competition in the market, which is driving down interest rates and improving the available criteria for brokers. This means they can place more cases than what they have become used to in recent years.

Obviously, the competition in the lending market has affected our lending business, which has performed reasonably well, but due to funding constraints has not seen the same level of activity as the brokerage.

What is the outlook for 2025?

First charge mortgages are going to be a big area for us, and we are trying to focus more on that side of the business and achieve growth in 2025. We have also invested significantly in the bridging and commercial area of the brokerage business over the last few years, so that is a key area for us as it offers a lot of potential.

On the lender side, we have recently improved our criteria and reduced our rates to ensure we are more competitive in the market. We want to continue to grow steadily, and make sure we have prudent financial management and ensure that we are here for the future. It’s business as usual really.

“I have had the privilege of working with the Norton team for over 20 years, and we are absolutely thrilled to be part of the celebrations to acknowledge the contribution that Norton Finance has made over the past 50 years, not only in the second charge industry but the wider specialist lending market. Personally, I have some fantastic memories of working alongside Norton Finance, and on behalf of everyone working at West One we would like to congratulate Keith, Paul, Lisa and the team on this incredible milestone.” Marie Grundy, managing director, residential mortgages and second charges, West One

“It is exciting to see a company with Norton’s experience and expertise thrive over so many years by adapting to changing markets and really delivering what customers need. Happy 50th anniversary Norton, we can’t wait to see what the future holds for you.” Jonny Jones, CEO, Interbridge Mortgages

“Congratulations on reaching this incredible milestone of 50 years in business! Your dedication and commitment to supporting businesses and customers over the decades have made a lasting impact. Thank you for being a trusted partner in the journey of so many. Here’s to many more years of success!” Pepper Money

Why have seconds still not reached full potential?

According to the Finance & Leasing Association (FLA), the latest ﬁgures released in September show new second charge business was up by 25% in terms of the number of new agreements, and 30% by volume, compared with the same July period in 2023. Put into perspective, 10 years ago monthly volumes were averaging £45m to £50m against the July 2024 ﬁgure of £163m.

On the face of it, the industry is thriving and taking its place as a reliable source of ﬁnance in the intermediary market, but are we missing the opportunity to boost the second charge sector so that it reaches its full potential?

The question, then, is how do you quantify ‘full potential’? As a long-time advocate of the second charge market, myself and colleagues have worked tirelessly to educate intermediaries and their customers about the value of second charge mortgages, and sometimes the results were discouraging, to be honest.

It was frustrating when I could see the number of instances where, rather than remortgage, clients would have been be er oﬀ with a second charge option. It was also discouraging to have done so many presentations and discussions and not seen the needle move to show an immediate diﬀerence.

However, when I compare volumes of business being done today against 10 years ago, it is clear that the messages are beginning to get through. The intermediary market is nothing if not adaptable, even though it can take time to see real results.

The best analogy I can think of is that of a massive oil tanker trying

to come to a full stop. It can take up to 10 miles to do it. Perhaps it is no surprise that it has taken so long for the intermediary market to react positively to the opportunities posed by second charge mortgages.

Because the existing orthodoxy was ﬁrmly set on remortgages –and because of concerns over the perception of seconds being expensive and only good for clients with adverse credit – it is hardly surprising that second charge mortgages were largely ignored for so long.

The right competition

While mortgage rates generally are becoming cheaper, the reality today is that the gap between rates for ﬁrst and second charge mortgages is at its shortest, and with the arrival of new lenders into the industry, there is every possibility that lenders will come under greater pressure to compete with each other.

New lenders will need to be able to oﬀer unique selling points (USPs) that brokers can latch onto, and the simplest – if costly – way is to promote market leading rates to help establish a footprint and gain visibility in a lending market where consensus pricing has meant that rates have been relatively uniform across competing lenders.

Of course, unless the new players have access to cheap funding that the rest of us are unaware of, market leading rates cannot be held indeﬁnitely, and diﬀerentiating a new brand against peers still relies more on conventional means – such as clear messaging to the broker community, pertinent news stories in the trade press about the culture and plans for the business, hiring experienced business development managers (BDMs) to carry the message

LAURA THOMAS

is regional sales manager at Equi nance

My belief is that rather than witness spectacular growth, the seconds market will grow more organically”

directly to brokers, and the fostering of relationships with key inﬂuencers such as packagers and networks.

However, no ma er how long lenders have been established, the fact still remains that there has been only a gradual if steady increase in new business. So, although the increases seen over the past few years are very welcome, should we be satisﬁed with progress?

From where I stand, a er years of seeming indifference in the intermediary sector, there are definitely signs of consistent growth. The messages, which my colleagues and I have been hammering on about for years, showing where second charge mortgages can be effective, are finally bearing fruit.

My belief is that rather than witness spectacular growth, the seconds market will grow more organically.

There is no doubt in my mind that in our sector there is no magic bullet that will propel business volumes skywards. Rather, like the story of the tortoise and the hare, the tortoise won the race by just carrying on at its own pace. ●

WE KNOW YOUR CLIENTS WON’T ALWAYS FIT THE MOULD.

— We take into account earned income up to the age of 70, or even 75 if the client is in a non-manual role

— We’ll consider pension pots, as well as ﬁxed pensions, investment and rental income. Other income can be considered on a case-by-case basis

— We lend in retirement with higher maximum ages than most lenders

— We have a common sense approach to lending and use human beings, not robots, to underwrite each case. This means we can tailor our solutions to each of your client’s needs.

Meet The Broker

Jessica O’ Connor speaks with Luke Schlemmer, consultant, structured finance at FinSpace

Tell

us a little about yourself – what made you become a broker?

Having played professional sports for seven years, I thrive on staying active and constantly challenging myself to improve, both mentally and physically, by 1% each day. My interest in financial markets began in South Africa – where I’m originally from – where the volatility of the financial and property markets, driven by international developments, sparked my passion for the global economy.

I specialise in sourcing the best short-term finance solutions for clients by leveraging market knowledge, technology, and flexibility in the lending market to secure the most cost-effective debt options tailored to each client’s needs.

As part of the structured finance team, I focus on bridging, development, and term finance for residential and commercial properties. I firmly believe that effort directly correlates with results, enabling me to excel in high-pressure environments and adapt to the ever-changing market landscape, where both intellectual and emotional intelligence are crucial in delivering effective solutions for clients in need.

What sets FinSpace apart from other firms? How does the company support its clients?

FinSpace distinguishes itself in the industry with its advanced technology. Our top-tier in-house tech team has developed myFinSpace, an online portal that enhances the loan transaction process for all stakeholders.

FinSpace focuses on client needs, providing a comprehensive suite of tools that surpass those of our competitors.

A key feature of our portal is providing a free tool that others typically charge for. Clients can use financial calculators for quick calculations, access auction listings from leading UK auction houses, obtain non-committal quotes from top lenders, complete fact-finds at their convenience, manage applications online, and generate appraisals.

Additionally, our platform allows clients to easily apply for bridging finance or development funding online, making the process swift and efficient. This approach reduces risks, ensures wellpackaged applications, and streamlines access to funds. Clients can view their document upload requirements and submit everything online, further minimising risks.

What are the main opportunities in the market for brokers?

The specialist lending market has seen significant growth, particularly in the wake of the pandemic. Rising living costs, increasing inflation, and difficulties in securing funding from traditional high street lenders have driven borrowers towards specialist products.

As affordability challenges have led to fewer loan approvals and higher rates, specialist lending has become an increasingly attractive option.

Now, with more signs of optimism and stability, the demand for specialist finance appears likely to persist. Interest rates have continued to fall, prompting lenders to reduce rates and introduce more products into the market.

This has allowed us to offer a wider range of products and bespoke options to our clients, expanding our network and business reach overall.

Confidence in the residential market is also expected to improve, with many borrowers continuing to require access to specialist lending and customised products that best meet their needs. It’s fair to say that specialist lending is not

just a solution for turbulent times, but a viable option in any market environment.

What are the key issues currently aff ecting the sectors in which you operate?

The specialist finance market, and our brokerage, have faced numerous challenges recently. The property market has been particularly volatile, with rising interest rates implemented to combat inflation.

This has made borrowing and affordability difficult for customers, as loans have become more expensive and strict criteria have led to higher monthly repayments. Since the pandemic, economic uncertainty has persisted, leading to cautious behaviour from homebuyers and investors regarding property finance. Additionally, fluctuations in property prices have added to the market’s instability.

As a brokerage, we ensure that our brokers and case managers stay agile and informed about market changes, including updates on product rates and criteria, to provide precise and relevant advice. The introduction of Consumer Duty legislation has further impacted the industry, requiring us to offer accurate advice, and suitable products, and be mindful of vulnerable clients.

Providing brokers with clear guidance on the required documentation from day one is vital to maintaining the pace of the bridging market. Additionally, regularly sharing case studies and summaries of completed deals can reinforce important criteria that brokers may have overlooked.

Does FinSpace have any new developments in the pipeline?

We are constantly building tools to simplify the funding process. We are empowering customers to effortlessly manage their applications through our online portal.

This will be further extended to provide ‘know your customer’ (KYC) and packaging features so that lender and legal requirements are handled much more transparently. This will then be enhanced through a full-featured mobile app. All this, coupled with an expansion in broker numbers and services offerings, will keep us busy for the foreseeable future. ●

Despite these challenges, this year has brought

Despite these challenges, this year has brought some optimism. Interest rates have shown signs of improvement, prompting our lender partners to reduce rates and offer more flexibility to meet their targets.

We anticipate further interest rate cuts and increased affordability in the latter half of the year, which is expected to boost optimism in property finance.

In what ways, if any, could lenders better support brokerages such as FinSpace?

Lenders play a crucial role in ensuring brokers fully understand the key criteria for their lending or funding lines. This clarity enhances brokers’ ability to place deals more effectively, increasing the likelihood of successful outcomes.

Fostering strong relationships between brokers, business development managers (BDMs), and underwriting teams is essential for direct communication. This collaboration helps identify and remove potential obstacles, facilitating smoother transitions from underwriting to completion.

LUKE SCHLEMMER

What do women want?

Iﬁrst asked the titular question when we realised that I was coaching senior men all the time. As I progressed through ﬁrms, the women just melted away.

To be honest, I didn’t notice at first. Coaching men is great – they o en haven’t done much in the way of self-reflection, so taking stock and recognising their strengths and achievements in a trusting, positive relationship translates easily into establishing and pursuing new goals. Once self-limiting beliefs were challenged, new understanding of personality differences, drivers and motivation were installed, and new constructive behaviours established, there was no stopping them.

But why weren’t women reaching the highest echelons? At White Water, we have lots of opinions, but we don’t want to make assumptions without evidence to back them up. So, 15 years ago, we worked with London School of Economics (LSE) to research what held women back, and what they needed to succeed.

That led to our book ‘Coaching Women to Lead’, which spawned women’s leadership programmes and a ra of interventions to guide women through the labyrinth to success. During the pandemic, going a li le stir crazy, we decided to check how much change had really occurred 10 years on.

There’s been change, but not nearly enough. So, we continue to support women with our programmes, as well as companies that sincerely choose to shi the gender balance because they know the commercial beneﬁt of diversity of thought. We don’t have much time for the virtue signalling of changed vocabulary if the ratio at every level isn’t improving.

Finding a place

We work with women directly, not because they need ﬁxing, but because

they are functioning in a world that has been designed and run by men.

If they try to ﬁt in and mimic their male counterparts, they lose their authenticity, and in fact, the very diversity of thought they are meant to bring. If they get through as the sole – and sometimes perceived as token –woman, they have very li le chance of changing the status quo or improving the culture. A er an uphill ba le, they will leave and go to the competition or set up their own business.

If you want to fish from the entire talent pool and hold onto precious resources, it pays to understand where difference lies. Here, distilled, are some of the findings, the rest of which can be found in the book.

First, diverse companies are more proﬁtable. Coaching is successful at sustaining the talent pipeline, and it pays for itself many times over.

Second, the nature of work is changing. It will require leaders who are good at building relationships and managing people diﬀerent from themselves. The change will be from work-centric to life-centric, and women are generally be er at that.

Our initial research identiﬁed the main barriers to women’s advancement in organisations as:

◆ Family and career balance

◆ Understanding corporate culture

◆ Systematic investment in career and development

◆ Conﬁdence

◆ Lack of role models

◆ Knowledge of strengths

◆ Networking and inﬂuence

◆ Career planning

Further research showed that male colleagues were largely unaware of these issues. They assumed their organisations were female-friendly, and that there were no barriers to advancement, other than the woman’s own ambition. They knew women could ‘do it all’, and so made no a empt to advocate for them, assuming – perhaps with good reason

AVERIL LEIMON is co-founder of White Water Group

– that many would be irritated by a man interceding on their behalf. One constant in all our findings has been the issues that women experience with confidence. In their own area of expertise, women can be supremely confident, but are o en more diffident on areas outside of their speciality. Men, more prepared to take a punt, will be seen and heard more frequently, making a bigger impact even when later they turn out to be wrong!

Women tend to assume working hard and ge ing it right will be rewarded in due course, overlooking the fact that, in many organisations, conﬁdence is rated higher than competence. They make fewer mistakes, but gain much less glory. Our goal is never to encourage women to mimic men, but to plan their careers more strategically. Here is what they say as a result:

◆ Many things I thought were my issue, I have realised others had too.

◆ It was great to network with other women with diﬀerent challenges, in a safe space to talk.

◆ You are always told to network, be more conﬁdent, delegate…breaking it down into manageable steps made it less daunting.

◆ I used to say I had low conﬁdence, but I just labelled myself to hold myself back.

◆ I took my strengthsfor granted, but now realised not everybody has them.

◆ I have made myself more visible to management.

◆ I wish I had done this course much earlier in my career.

Women are far more likely to stay and thrive in an organisation that invests in their development. ●

It’s time to ditch the jargon

I’m not going to win any prizes for originality by pointing out that the ﬁnancial services sector is awash with jargon. To an outsider, our industry speaks an unintelligible language designed more to confuse than to educate.

Jargon makes press quotes and client communications sound long-winded, soulless, and crucially, oﬀ-pu ing to the very people you’re trying to reach.

If your audience is primarily business-to-business (B2B), you might get away with the odd sprinkling. But even if you’re understood, you’ll sound as dull as dishwater.

Not everyone agrees with me, of course. Some argue that jargon is necessary, because ﬁnancial products are inherently complicated. I disagree. There is always a simpler way to explain something. Here’s how:

Use simple language

One of the mistakes financial services firms make is overestimating how much knowledge their clients have about finance.

A 2022 study by insurer Aviva reveals that seven in 10 UK adults are puzzled by ﬁnancial jargon. Perhaps most surprising, only 58% of 18 to 24-year-olds had heard of the term ‘interest rate’.

So, how do you explain what are clearly foreign and complicated concepts in a way that everyone can understand?

Review your communications, and when you come across an industry term, ask yourself: would my grandparent understand this? Is there a simpler way to describe it?

For example, an ‘amortisation schedule’ might become ‘repayment plan over time.’ Or ‘90% loan-to-value’ could be described as a ‘10% deposit mortgage’.

It’s also worth stripping out acronyms wherever possible, as there’s a good chance your client won’t know

what they stand for. By simplifying the language you use, clients will be er understand the information you’re giving them without needing prior knowledge.

Explain when necessary

Where possible, omit jargon. But sometimes you may be forced to use it, either for regulatory reasons or because you can’t ﬁnd a be er alternative.

Review your communications, and when you come across an industry term, ask yourself: would my grandparent understand this? Is there a simpler way to describe it?”

If that’s the case, be sure to explain what you mean.

For example, you might describe ‘base rate’ as the UK’s core interest rate, set by the Bank of England, which inﬂuences the cost of mortgages. Don’t assume your audience knows the term. If you think there’s any doubt, explain it.

Consider compiling a glossary of key mortgage terms in simple language and hosting it on your website, so clients can look up anything they don’t understand.

Be concise and direct

Finance is complicated, so be as concise and direct as you can. Avoid unnecessarily long descriptions when a simpler option is available. Consider this example. You could say: “We

PAUL THOMAS is head of news and content at MRM

oﬀer a comprehensive loan range with various repayment options and interest rate terms.”

Or, you could say: “We oﬀer a range of mortgage options to suit your needs.”

The second example is just two words shorter, but it’s signiﬁcantly clearer. By using concise language, you ensure that clients aren’t overwhelmed by unnecessary details.

Provide examples

Whenever possible, oﬀer relatable examples to help clients be er understand their options.

For instance, take the term ‘early repayment charge’. While many people may grasp the general idea, they might struggle to calculate how much it would cost them to exit a deal early.

Break it down using a simple, real-life example to show the costs involved.

Test and learn

When you’re immersed in an industry, it’s hard to appreciate where your client base might have knowledge gaps. That’s why it’s important to test your communications on them.

How you do that is up to you, but the goal is to ﬁnd out how easily understood your communications are and how they can be improved.

For the best results, ask people of diﬀerent ages, education levels and social backgrounds to ensure that you’re pitching your communications at a level everyone can understand. ●

Case Clinic

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

CASE ONE

Foreign income and complex contracts

Two clients are hoping to buy their first home. The first has a lower income at £25,000 a year, while the second earns £35,000, but paid in euros. The second is employed permanently, but on short-term sub-contracts – typically two months on, two off – with a fixed salary during both working and non-working periods. The second is exempt from tax due to time spent at sea. They require a high loan-to-value (LTV), as they are struggling to save for a deposit.

HARPENDEN BUILDING SOCIETY

We can accept foreign income with a range of currencies accepted. Euros is fine and a 20% haircut would be applied after conversion. We can consider the second applicant’s contract set-up, but would require some further information. One thing to note is that our maximum LTV is 80%.

BUCKINGHAMSHIRE BS

This is not a case the society could consider as we are unable to take foreign income, however we could consider the contracts that the applicants are employed on. We could also consider a higher LTV of up to 95% for a first-time buyer.

WEST ONE LOANS

West One recently launched a new limited edition 95% LTV product for first-time buyers which these applicants could use. Both applicants fall into the acceptable age categories and exceed

the minimum income requirement of £15,000. We can work with workers on contracts, but we require them to be employed for a minimum of three months, which seems to be the case. One issue is West One does not accept foreign income. Depending on the property cost, and eligibility, we could progress with a single applicant.

TOGETHER

With our flexibility with no loan-to-income (LTI) calculations and stated affordability we may still be able to support the level of lending needed without including any income from overseas. We can support with Shared Ownership mortgages, lending 100% of the applicants’ share if the customer is struggling to save for a deposit and this is the right solution. We can also provide a mortgage term up to 40-years, which may support with affordability of the monthly payments.

CASE TWO

1930s property with timber cladding

Aclient is looking to buy a house built in the 1930s. It has a combination of standard methods of construction, but the older part is timber framed with timber cladding. Lenders have turned them away due to the cladding.

HARPENDEN BUILDING SOCIETY

We pride ourselves on being a great lender for quirky properties, meaning those with a timber frame and timber cladding can be considered, subject to valuers’ comments.

BUCKINGHAMSHIRE BS

We would be unable to consider this, as timber framed with timber cladding isn’t acceptable to us. If the timber cladding could be replaced with an acceptable cladding, it could be considered. We would ask the broker to refer to the society first to discuss what the cladding could be replaced with, as we can talk cases like this through with the valuers to make sure it would then become suitable security.

WEST ONE LOANS

West One would be unlikely to have issues with the property itself. As other lenders have turned the borrowers away, this may limit their options and potentially the value of the property. The complexity would come from the valuer’s comments. Once the property has been assessed, this may impact the LTV and product options, with further funds potentially needed for LTV connotations. But the valuer’s comments could be positive, and not affect the plans of the borrowers. Even though we would have minimal concerns on the property type, it would be essential to address our questions on the value.

UNITED TRUST BANK

Yes, we would consider this case, as we do consider non-standard construction properties. This is subject to the property being of mortgageable standard.

TOGETHER

Many customers work with Together due to our flexibility with different property types and nonstandard construction. When it comes to cladding, depending on the surveyor’s comments, we may restrict LTV. We can also support lending against property types valued with a cash-only valuation if this was returned by the surveyor. Of course, we will require a full valuation to help us review our maximum LTV, and the loan amount is subject to an affordability assessment and criteria checks.

CASE THREE

Divorce settlement challenges

Aclient, 63 and recently divorced, wants to raise funds to repay an interest-only mortgage and release equity for a buyout. He has significant credit card commitments,

which impact the affordability, and a high LTV. He wants interest-only for as long as possible, because he wants to sell while in his mid to late 80s, when he will downsize. The client is employed at a university, with a good income; however, his pension is forecast lower than his earned income.

BUCKINGHAMSHIRE BS

We could consider a split term. Interest-only would be subject to a max 60% using downsizing, which is also linked to number of bedrooms, plus £135,000 equity would be required at the start of the mortgage. Part and part can also be considered if the LTV needs to be above 60%, earned income can be taken to age 75, subject to the client’s plausibility of being able, and intending, to work to this age. Pension income will need to be provided if the term will take the client into retirement. The society does not have a debt-to-income (DTI) ratio, no minimum income for interest-only, and any debt being cleared from the proceeds of the mortgage is not to be included in the affordability.

TOGETHER

We could support this customer with releasing equity to consolidate debt. Our max LTV, subject to property type, is 75% on a regulated remortgage. An assessment of affordability will be based on the customer’s current circumstances, and we will also need to understand the plausibility of affordability when lending into retirement. It is crucial that the customer provides us with full details, and we would need to see that payments could be maintained.

We can consider interest-only, providing there is sufficient equity in the property for the downsizing exit to be plausible, and our affordability assessment will be based on the mortgage payments on an interest-only basis. We can also consider utilising earned income to the age of 70, and a term up to 85. However, this will need to be referred initially to one of our underwriters as the customer is over 56, and the term is beyond the age of retirement.

METRO BANK

If the client intends to continue working to 80, we would be able to use employed income, in full, with no pension proof needed, up to the age of 80. If affordability is still short, joint borrower sole proprietor would be an option. Providing the client can afford to service the credit card commitments alongside the loan, these themselves are not a barrier as we have no DTI ratio, and for affordability purposes any part of the mortgage that is on interest-only, we assess as interestonly. This also means the term of the interest-only mortgage will not affect the loan amount. ●

The benefits of referral partnerships

Delivering good outcomes for customers is a key component of the Financial Conduct Authority’s (FCA) Consumer Duty requirements.

For advisers working in the mortgage market, this means there is now an expectation to go above and beyond during the advice process.

Under the FCA’s requirements, advisers should now be actively considering all the other financial wants and needs their clients may have, not just their mortgage needs.

This means taking a broader, more holistic approach to the advice process and asking questions about their clients’ protection and general insurance requirements, for example, as well as other financial services where appropriate.

Access to specialists

Historically, protection advice such as life insurance, income protection and critical illness cover have often been given by protection specialists working outside, or independently, from the mortgage process.

This means there are likely to be a high number of advisers in the mortgage market who are unfamiliar, or who have had limited dealings, with these kinds of products.

While many of these advisers will understand the new Consumer Duty standards mean they should raise the issue of protection with every one of their clients, many are also very aware they don’t necessarily have the knowledge, authorisation or qualifications required to provide this kind of advice to their clients.

For any adviser that finds themselves in this situation, being able to gain access to industry specialists

to which they can refer clients to is essential, especially when it comes to ensuring they achieve the right outcome for their clients’ needs.

Not only will this provide reassurance that the client is getting the appropriate advice for their individual circumstances, it will also ensure the referring adviser is meeting their Consumer Duty obligations by raising the issue of protection with their client.

However, knowing where to look and who to trust when trying to find a qualified protection adviser can be daunting, which is why referring the client to a network can provide the kind of support and access advisers need when seeking a protection specialist.

Referral partnerships are an important part of The Right Mortgage & Protection Network’s (TRM) proposition, and we aim to offer advisers a one-stop shop.

As mortgage networks are directly authorised by the FCA, it also means our members are fully compliant with regulatory guidelines, so all referring advisers can rest assured that the needs of their clients will be dealt with by a qualified professional.

Business as usual

The TRM referral process is straightforward, and all the referral services link directly to the network. This means any adviser using the service will be connected to a dedicated protection specialist that can handle the needs of the client being referred.

This helps to give advisers peace of mind that their customers will receive excellent advice and service from a fully-qualified and trained specialist, and enables the referring adviser to focus on the other needs of their clients.

ADAM

STRETTON is managing director at e Right Mortgage & Protection Network

Under the FCA’s requirements, advisers should now be actively considering all the other nancial wants and needs their clients may have”

They will also be paid a fee and kept in the loop about their clients’ progress.

Of course, there is also the option for referring advisers to become specialists themselves, by exploring other product areas. This can be done within TRM’s in-house supervision programme.

This allows advisers to develop their product knowledge and offer a broader range of solutions to their customers, while simultaneously growing their business and improving their product knowledge.

Whatever the goal, understanding the options that are available in terms of referral partnerships is a key part of the advisory process.

For those advisers who are not yet comfortable with addressing their clients’ protection needs, referring them to a specialist could be a solution.

This will ensure their client gets the advice and outcome they need, and also ensure they continue to meet their Consumer Duty obligations. ●

Advertise with The Intermediary and reach 12,000 current and next-generation property nance business leaders. With commercial opportunities spanning print, digital and events, e Intermediary has a multitude of creative channels that can deliver your marketing message to the people that matter. Contact Stephen Watson on STEPHEN @ THEINTERMEDIARY.CO.UK to discuss how e Intermediary can help your business achieve its goals. Want to share your message with the industry? theintermediary.co.uk

Odds are, greenwashing

GOODMAN is CEO and president of Edenark Group

Atop concern on the minds of people around the world is the environment, and consumers are expressing that concern with their wallets.

Surveys say that the majority of consumers will move their loyalty from you to the competitor down the street if they believe that company is environmentally sustainable and you are not. 75% of Gen X and Gen Z say sustainability is more important than brand name, according to a YouGov study, and they will spend more for products from a company they believe is sustainable. Companies feel the pressure and want to cash in, often without actually becoming environmentally sustainable. When a firm exaggerates its environmental actions, it is called ‘greenwashing’. The majority of companies around the world admit to doing it in order to win the hearts – read, ‘wallets’ – of those environmentallysupportive consumers.

So, what does this mean for you? First, time is not on your side. Governments and activists are hunting greenwashers, and if they find one, the damage can be significant in both fines and lost brand image. Courts around the world are taking a more aggressive position on greenwashing, too.

In order to address Government compliance and global mandates, claims must be aligned and certified under a globally recognised standard, and thirdparty verified – proving you did those actions within the parameters of the standard you were certified under. Let’s define the rules of the road for when your environmental actions put you at risk of greenwashing:

◆ If your company wishes to do environmental projects and not talk about them, wonderful! This is what we all should be doing, and means no certification or verification is needed.

◆ If your company wishes to talk about a project and its results – ‘We put solar

DAVID

you’re – now what?

panels on the roof and it reduced our energy cost by 15%’ – you do not need a certification, but you need a legitimate third-party to validate the claims.

◆ However, the minute you start making corporate or product claims, or if you have environmental pictures in your logos or ads, your claims must be certified under a globally-recognised standard and third-party verified. In other words, your claim of being sustainable is only valid if it is verified to be within the parameters of the standard you were certified under.

If you want to satisfy the market demand that your company prove its environmental commitment, and you don’t want to risk greenwashing, you need to become certified or verified. But how do you know what to look for in a program?

There are eight components of a sustainability program that will make it sucessful:

It must include employee performance and health

Sustainability is not just about energy savings or ‘greening up’, it is about people.

For most businesses, employees are one of the biggest costs, one of the biggest risks –mistakes, insurance, law suits – and one of the biggest opportunities for new ideas, collaboration, product knowledge. Every organisation suffers from the ‘Big Five’ – insomnia, stress, anxiety, physical pain, mental acuity – losing 5% of profit per year as a result. Make sure your program has a ‘people piece’ that addresses employee performance, health and happiness

It must certify the business, not the box

Most building – ie ‘box’ – certifications only care about building energy. Building certifications are expensive

and hard to market, with poor return on investment (ROI). You want to say, ‘buy more of my product because we are a certified sustainable business’, but you do not get much value from, ‘buy more of my product because we are in an energy efficient building’. You want the certification on your business, not the building your business is in.

It must have a third-party audit component

Oversight delivers credibility and trust. From passing your driving test, to getting your college diploma, to passing a bar exam, we use thirdparties to ensure compliance. There are many sustainability programs that deliver a certification based on your ‘word’...and your payment. Make sure the program you choose uses a thirdparty to validate your work.

It must follow a respected and integrated global standard

The sustainability industry is maturing and coalescing around a few specific standards. The UN has created its 17 sustainability development goals (SDGs), and 50% of the world’s economies require sustainability reporting.

Greenwashing lawsuits are growing, so don’t pick a program that is not globally respected by, and integrated with, the world leadership groups, or that does not have the ability to integrate the other three legs of the stool – carbon neutrality, ESG and net zero.

There’s no reason to spend the time and money, only to then find you are not following the same programs and protocols that the leadership groups have adopted.

It must include promotion of the certification

Historically, sustainability has been a cost-side play. Most programs and providers have been 100% trained

and focused on cost-side measures –energy reduction, carbon reduction, waste reduction, water reduction, and travel reduction.

But consumers are searching for certified sustainable companies. If you don’t talk about being certified sustainable they will never know you are. You want a program provider that is built to do the cost-side work and the revenue-side work, and which helps you promote your certification

It must pursue continual improvement

Sustainability is not finite, it requires long-term commitment. But change is hard for all of us. If the bar is set too high, we can get frustrated and give up. You want a program that lets you come as you are and allows you to continually improve. This will keep everyone happy and committed year after year.

It must require annual updates

Current means credible. You don’t want a program that does not have a date attached to its certification. You want to continually improve, see your success, and annually update your certification to show you are current and credible in your actions.

It must be at a price you can afford and produce a positive ROI

We could have started with cost, but you need the above seven components at a price you can afford. It needs to show a positive and rapid ROI.

The cost includes both money and time and covers everything – the certification, the third-party audit, and your work to become certified.

If you use a program that delivers on these eight items, you will address consumer demand, avoid greenwashing risks, and be happy with the performance and ROI of your sustainability program. ●

The evolution of the equity release market

Imagine a coach-load of placard-wielding over-55s showing up at your head oﬃce one day alongside investigative journalist Roger Cook of the infamous ‘Cook Report’. This was one of my first exposures to the equity release sector, just after I joined the former Cheltenham and Gloucestershire Building Society in June 1992!

The group was objecting to the society’s 1989 funding of a home income plan by Aylesbury Associates that was supposed to fund a retirement income for borrowers. There weren’t many things that ﬂustered then CEO Andrew Longhurst, but he ended up walking out of Cook’s interview!

The product worked in the right market conditions, but when house prices and the stock market crashed and rates went the wrong way, this didn’t end well for these particular borrowers. Some of them lost their homes.

This was probably one of the first major reputational issues for what we now know as the equity release, or later life lending, market.

It was around this time that Safe Home Income Plans (SHIP) was created by the equity release providers of the time. This led to the creation of new Codes of Practice, and also a requirement that advisers were suitably qualified to give advice.

Of course, in 2012 SHIP rebranded to become the Equity Release Council (ERC), today a hugely important trade body working on behalf of the industry. The last conference was a brilliant event with stakeholders of the industry from across the UK and Europe attending – a clear sign that growth and expansion is expected.

Phoebus has a unique insight into this market, having worked in the

sector since 2007, and today having over £20bn of assets being serviced on our platform for many later life lending clients.

So, let’s look at where this important market sector is at.

The market today

Lending volumes are down from the heady volumes of 2022, when the market was worth over £6bn, but as the recent ERC stats show, this year’s volumes are stabilising from the downward spirals we have seen.

But, fundamentally – with over £4tn of equity in unencumbered property wealth in the UK – equity release has to be considered as part of an overall retirement income strategy for many.

For me, there are a lot of indications that the market will return and grow moving forward.

Clearly, interest rates are a driver, and projected reductions in Bank of England base rates will ﬂow through to new product rates. My conversations around the market with our clients and funders 100% indicate that there will be a massive increase in funding for this product, both in the UK and across Europe.

I had several funder meetings at the global asset-backed securities (ABS) conference in Barcelona in June, and there is genuine interest and positivity around funding this sector. At Phoebus, we have many requests from clients, and conversations with funders, to utilise the funding and securitisation functionalities that are features of our account servicing solution.

What we are also seeing is an appetite among equity release lenders to purchase portfolios. This, of course, grows a business’ assets in one hit without the need for originating lots

RICHARD PIKE is chief sales and marketing o cer at Phoebus

of individual loans – and pricing in the current market is reasonably attractive. We are seeing more use of the Phoebus migrations application programming interface (API) to facilitate these transactions in a smooth and accurate way.

So, a lot of positive alongside a backdrop of market uncertainty as a whole. But we are seeing more funding, market expansion, product innovations, new lenders and brands coming to market.

For many players, the right servicing technology that lowers operational costs through automation will be key – as will be readying for market growth. Automation is essential in allowing lender users to deal with more diﬃcult queries, as well as managing eﬃciencies around the drawdown, and further advanced processes can now be achieved through presenting relevant borrower servicing data through our API to originations platforms.

In summary, economic factors, technology capabilities and industry reputation all lead me to believe this market is going to excel and grow again over the next 12 to 24 months and beyond.

The equity release sector was created for a purpose that is probably more relevant today then ever, and with the uncertainty that our new Government brings in terms of pensions and property taxation, we could yet see this driving volumes quicker than ever. ●

The forgotten cost of mortgage prisoners

The High Court recently ruled that TSB’s Whistletree subsidiary did not breach contracts by charging higher rates for mortgage prisoner claimants. Support group UK Mortgage Prisoners called for claimants not to be “unduly disheartened” pending a full hearing.

Homeowners who find themselves trapped in high-interest mortgage deals, seemingly with no ability to switch to more affordable options, are often referred to as mortgage prisoners. There are several ways this can happen, such as the collapse of Northern Rock, when TSB acquired its mortgage portfolios and borrowers found themselves on the Whistletree standard variable rate (SVR).

There are about 195,000 mortgage prisoners in closed mortgage books with inactive firms, according to the Financial Conduct Authority (FCA).

While governments and financial institutions tend to focus on the immediate financial strain on individuals, the broader socioeconomic impact is often overlooked. We in the mortgage industry have a responsibility to appreciate the wider repercussions while working to provide borrowers with practical mortgage solutions.

Who are they?

Mortgage prisoners are typically trapped with higher interest rates than current market rates, with some paying rates as high as 8.29% – nearly double the rates available to new borrowers – according to LSE London.

There are also those who, through a change in circumstances such as illness or redundancy, no longer meet the affordability criteria to allow them to switch to a cheaper product.

Then there are those who find themselves in negative equity because their property has dropped below the value of the mortgage they secured it

against. Perhaps they’ve experienced a relationship break-up and no longer pass affordability tests.

It can also be a challenge for older age groups, including those nearing or in retirement. LiveMore research in 2022 showed that only 4% of people over 50 believed they could take out a new mortgage. This dropped to 2% for people over 80.

We talk to people in their 50s right up to their 90s who have mistakenly considered themselves ineligible for remortgaging. Few realised that there are now lenders that will consider pensions and other assets such as investments as valid forms of income, which mainstream lenders often ignore.

Economic and social

Due to high mortgage payments, mortgage prisoners often have less disposable income. This affords households less money for other

CASE STUDY

David Higginson, 69, from Stockport, found himself at risk of becoming a mortgage prisoner when his interest-only deal expired and his lender demanded he repay £125,000 or sell up. But his two-bedroom house was only worth £250,000, which would leave little le over, and it would cost £1,000 to rent somewhere.

e lender then oﬀered David a 10-year repayment loan, which would have quadrupled his monthly payments to around £1,000 a month, which was half his income. Eight further lenders rejected him because of his age. We were very happy to help David stay in his home with an interest-only mortgage with monthly costs of £500.

LEON DIAMOND is CEO of LiveMore

goods and services, negatively impacting local businesses and the broader economy.

Higher payments may also create financial instability, resulting in higher default rates and repossessions, lowering property values and depressing the housing market. The economic ripple effect of repossessions can be devastating for homeowners, their communities, and local economies.

Financial stress is closely linked to mental health problems such as anxiety and depression. In England alone, more than 1.5 million people are experiencing both problem debt and mental health problems, according to the Money and Mental Health Policy Institute. It can strain family relationships and lead to conﬂicts and a lower quality of life. Children can experience negative impacts on their education and development, as parents may not have the time and resources to support their needs. They may also suffer from anxiety and depression through fear of losing their home.

Financial stress can limit a person’s engagement with their community, while mental and physical health issues cause increased demand for NHS services, a greater strain on resources, higher costs and longer waiting times. It can also impact homeless shelters, emergency services, and public health spending on social support programs.

Unlocking the door

Of the 195,000 trapped in high-interest rate mortgages alone, a third should be able to switch to lower rates, according to the FCA. We are working with brokers to help them understand the opportunities to unlock the door. ●

While we are seeing advisers becoming more engaged with later life lending, the truth is that there remain far too many who feel they don’t need to be active in this space.

They don’t have clients for whom they feel it is applicable, or perhaps they are put off by regulatory and authorisation issues, or the perceived increased risk for themselves and their business – or a combination of all this.

Nevertheless, the opportunity has never been greater for advisers to deliver a better service to their clients, meet regulatory expectations – for example Consumer Duty – and boost their own financial position by adding the growing range of later life lending options to their suite of services.

Opening doors through innovation

A key element driving increased interest in this sector among forward-thinking advisers is product innovation. We are now seeing a great deal more creativity from providers, like ourselves, in product design fuelled by client wants and needs, as well as the shift in regulatory focus around assessing ongoing affordability and requirements. This has created an emergent product range where there is much less of a leap from mainstream to lifetime mortgage, and with which all advisers can, and should, engage.

All lifetime mortgage products provide the option to make interest payments during the life of the plan, but advisers and their clients can now tap into products which reward customers with a reduced interest rate in exchange for committing to making payments for a fixed term, such as our Apex Interest Reward product, and alternatives offered by the likes of Standard Life Home Finance, Just, Pure, and Legal & General.

These products effectively serve as a real bridge between the mainstream and the traditional lifetime mortgage, spanning the gap that previously existed, not just for borrowers, but for advisers who need to provide more

specialist advice for every single client who is over 50/55 and now has access to these options.

Also, where the market was once dominated by products with lengthy early repayment charges (ERCs), more2life has led the way in establishing alternatives with short ERC periods, and in the case of our groundbreaking Maxi Zero ERC, no charges at all.

A change of thinking

Despite this progress, I’d argue that the way we view later life lending still needs to evolve quickly if we are to truly make the most of these products. Providers have embraced the need for innovation, and specialist later life advisers have expanded their range of options, but we aren’t seeing enough mainstream mortgage advisers following suit.

For too long there has been an impression among some that later life lending products are only really an option for clients who have already retired, from those who might have recently given up work stretching to those far later in life.

But times are changing. Increasingly, providers are creating products that are actively designed to serve younger borrowers. We have a host of products available to those aged over 55, and there are now later life lending options for those aged over 50, and so as a sector, we can offer products for suitable borrowers who are still happily working and able to make monthly interest payments, but who want to unlock some of the equity in their home.

As an industry, we need to do a better job in supporting advisers with this change of thinking, so that whenever there is a client over the age of 50, later life lending products are actively considered alongside mainstream mortgages, retirement interest-only (RIO) and the like.

Doing our duty

One of the most obvious drivers for advisers engaging more with later life lending is the Consumer Duty. The regulator’s focus on positive outcomes for customers means advisers need

The time is now to embrace later life lending

to go further in demonstrating that all the possible options have been given adequate consideration.

But there are other, tangible benefits open to advisers who embrace later life lending, not just in terms of meeting a range of regulatory measures. The growth of product transfers has had a detrimental impact on the bottom line for mainstream advisers, since the proc fees involved don’t reﬂect the work being undertaken. The adviser might have to conduct multiple appraisals due to product rate changes, but end up back at the existing lender, having to accept a grossly unfair, lesser proc fee from the vast majority of lenders.

Yet later life lending products not only represent a better option for a growing number of this cohort, they also deliver proc fees that actually reﬂect the work undertaken. Ensuring later life lending is included in the advice process with over-50 or over-55 clients is not just better for them, it’s better for advisers.

The direction of travel

Let’s be clear, the number of borrowers suitable for these products is only going to grow. Utilising housing equity earlier will become more acceptable and accessible, and that, married with the ability to keep on paying the interest, makes this a much more attractive option. Plus, it provides a product route map from the mainstream, through these new products, to traditional lifetime mortgages.

Whether it’s managing their existing debt, funding lifestyle needs, or simply helping family by providing an early inheritance, there is no shortage of compelling reasons for tapping into that equity.

The later life lending market is already worth around £20bn a year,

DAVE HARRIS is CEO of more2life

with traditional lifetime mortgages accounting for around 10% of that. As these new, innovative forms of lifetime mortgage become more commonplace, and as advisers add them to their service range, they are only going to represent a bigger slice of the pie.

Everyone benefits – clients get access to a new modern range of later life lending products that better meet their needs, while advisers get properly remunerated for the work they carry out. Advisers who aren’t already including these products in their toolkit need to ask themselves, if not, why not –and if not now, then when? ●

Job loss protection makes a welcome return

Anumber of factors over the past decade led to insurers retreating from the sales of accident, sickness and unemployment (ASU) cover, most notably the Covid-19 pandemic.

Since then, the UK’s workforce has been woefully under-protected against job losses. This is not great at a time when persistent economic uncertainty means that more people face unemployment than at any time since 2019.

Company distress means employee distress

According to the latest data from The Insolvency Service, 2,191 companies were registered insolvent in July 2024 – 16% higher than the same month in 2023, and far higher than during both the Covid-19 pandemic, and the period between 2014 to 2019.

This included 320 compulsory liquidations – the highest monthly number since pre-pandemic – 1,699 creditors’ voluntary liquidations (CVLs), 155 administrations, and 25 company voluntary arrangements (CVAs). All types of insolvency are higher now than 12 months ago.

These figures are backed up by business restructuring firm Begbies Traynor, whose latest research shows the level of firms in ‘significant’ financial distress rose 8.5% in the second quarter of 2024, 36.9% higher than Q2 2023. 40,613 UK businesses are currently in ‘critical’ financial distress.

All this data certainly paints a worrying picture for the UK’s workforce, with the ever-looming prospect of job losses hanging over their heads.

According to the Oﬃce for National Statistics (ONS), the UK

unemployment rate for the period May to July 2024 increased to 4.1%, in a period during which job vacancies decreased. Currently, the number of unemployed people per job vacancy in the UK stands at 1.6.

Better protection

Here at Berkeley Alexander, we’ve seen increased demand from agents and their clients for income protection products in recent years. Demand is particularly high among Millennial and the Gen Z customers who entered the job market during and a er the pandemic, and therefore see the value in protecting their incomes against the backdrop of continued macro and micro-level economic uncertainty.

We decided it was long overdue for someone to take the lead in changing the perception of income protection.

All the old bad press around the payment protection insurance (PPI) mis-selling scandal had one major impact – on the conﬁdence of you, the independent ﬁnancial adviser (IFA) and mortgage broking industry, to talk to your clients about the cover. But don’t forget, it wasn’t the IFA or broking profession that was in the main responsible for this.

When sold correctly, it has always been a vital and valuable cover when people really need help, or even just peace of mind that, should the worst happen, their homes and families are protected.

We’re delighted to announce that our persistence and hard work has paid oﬀ – new job loss protection products are making their way back to the market, and into the hands of intermediaries.

Safeguarding your clients’ income has never been easier, with policies that are relevant to the needs of your clients today. Our new Safeguard

GEOFF HALL is chairman of Berkeley Alexander

This type of responsive cover is long overdue, but it’s hitting the market at just the right time, given the new Labour Government’s gloomy diagnosis of the state of Britain”

Protect policy, for instance, includes optional and ﬂexible cover to include a lump sum personal accident –including being able to add the spouse or partner, and/or children to the policy for an extra layer of protection – and mortgage, rent and income protection delivers a range of monthly beneﬁt levels depending on individual circumstances and gross monthly income.

This type of responsive cover is long overdue, but it’s hi ing the market at just the right time, given the new Labour Government’s gloomy diagnosis of the state of Britain, tough ﬁscal situation, and the potential for a tax-raising Budget.

There’s never been a more urgent need for intermediaries to proactively speak to clients about protecting themselves against the impact of unemployment.

It’s time to put the reticence of the past ﬁrmly behind you and add these products back into your portfolio –your clients will thank you. ●

Can home insurance ever become ‘sexy’?

Breaking the mould – apologies for the pun! – on the image of general insurance (GI) is always my intention when people ask what job I do, and my default answer is ‘pu ing the sass into home insurance’. There is an inevitable raised eyebrow and wry smile, but at least it gets a ention.

Realistically however, when we think about it, buying a home is one of our greatest aspirations – more so now as it is so diﬃcult to save a deposit to get onto the housing market.

So, with such a positive image, you would think that protecting that aspirational asset would be high on buyers’ agendas. Usually for ﬁrst-time buyers it absolutely is, as they need insurance in order to get a mortgage, but for homeowners who have had property over the decades, they can start to ‘cut corners’ on the quality of cover for their home, or choose not to have insurance at all!

Statistically, 20% of properties are without any home insurance at all in the UK. So why do we love property so much, and yet pay such li le a ention to property insurance?

Interestingly, TV and digital streaming channels do very well

with property-centric programmes, such as the hugely popular Netﬂix series ‘Selling Sunset’ or the UK-based ‘Buying London’. They a ract millions of viewers as we obsess over stunning homes and properties. These multimillion-pound properties need protecting and insuring, just as much as our own humble abodes do.

It’s interesting that our obsession with property – almost as intense as our obsession with the British weather – stops becoming sexy when it moves to the subject of insuring and protecting it.

Small price to pay

We all know just how exceptionally stressful it is when something happens to our home or belongings. It is at times when our home is at risk that having access to a great broker and insurance company really does become a necessity.

Strangely, with the average cost of combined home insurance – buildings and contents – being around a modest £150 to £300 a year, it is a relatively small price to pay for protecting an asset that on average in the UK is worth £250,000.

General insurance is an industry that pays out approximately £8m in claims every day on accidental

damage, the , ﬁre and water damage, and yet the general public don’t give home insurance much time or priority overall. Peace of mind, family security, freedom from worry and looking a er our much loved and desirable homes should surely be our prime focus when we are a homeowner.

Maybe looking forward, as every home becomes more technologically advanced with smart security systems – ﬁre detectors or leak detection devices, for example – we will be more inclined to be smart and proactive at protecting our homes.

Food for thought

Not only this, but the eco-conscious younger demographic – homeowners of the future – may be more inclined to be inﬂuenced and drawn towards the marketing of home insurance that can cover green home upgrades, or incentives from insurers for ecofriendly practices by policyholders. All of this is food for thought in the ever-changing landscape of insurance.

So, can insurance ever become ‘sexy’? I honestly think this will only truly become the case if we see more of the property programmes giving airplay to events such as the dramatic Californian wildﬁres or rain induced landslides on ‘Selling Sunset’, and the devastation of the property owners having to rebuild their homes in order to sell them or live in them.

Or maybe it will happen if social media inﬂuencers partner up with property inﬂuencers who then integrate insurance as part of their ‘must-have’ home checklist.

These could be the breakthrough ‘sexy’ moments for general insurance. Let’s watch this space and see what happens! ●

STEPHANIE DUNKLEY is development director at Safe&Secure

Why do we love property so much, and yet pay such little attention to property insurance?

Generational claim di erences: Adapting to needs

Advisers are o en the unsung heroes for many families. Providing expertise on how to overcome complex ﬁnancial issues, as well as delivering specialised knowledge to help clients navigate stressful and confusing periods – such as buying a home – their service is crucial.

However, true value is delivered when advisers really get to know their clients and their individual needs, especially when it comes to ensuring their homes are properly protected.

So, as far as insurance is concerned, the best approach is certainly not ‘onesize-ﬁts-all’, and examining our claims data over the past 12 months really helps to put this into perspective.

Higher frequency

As people age, we generally see an increase in insurance claims frequency. This can be a ributed to several factors, including greater familiarity with insurance policies. As customers become more aware of the beneﬁts and coverage options available, they may be more likely to ﬁle claims. However, this also underlines the importance of ensuring that all customers have policies that adequately meet their evolving needs and provide coverage for the things that ma er most to them.

Our data also shows that the takeup of personal possessions cover to protect items while away from home increases as consumers get older, with 25% of 61 to 70-year-olds choosing to add this optional extra to their Paymentshield Home Insurance for extra piece of mind. In addition, the proportion of people that claim for personal possessions increases as customers get older.

This stat really speaks to the importance of providing customers with tailored advice based on their own unique needs. For those older clients who might have more disposable income, and therefore have a greater need for protecting valuable items, ensuring the advice process is reﬂective of this is crucial –highlighting the beneﬁts of optional extras can go a long way to ensuring lasting client satisfaction.

True value is delivered when advisers really get to know their clients and their individual needs”

It’s apparent that a huge part of the work advisers do is reassuring clients, helping to reduce stress and going above and beyond to provide support in trying times. Therefore, anticipating what’s likely to be important to clients is extremely valuable when it comes to discussing insurance with them.

Protecting assets

Of course, personal circumstances also play a big part in what’s going to be most valuable when it comes to insurance. For example, there are more Paymentshield customers in the 31 to 40 and 41 to 50 age brackets that have children than don’t, and perhaps unsurprisingly, we ﬁnd that accidental damage claims are highest for these two age groups.

Furthermore, individuals in this age group are also likely to be living through a period deﬁned by massively evolving responsibilities. Whether it’s

growing families, providing greater care for elderly parents or fluctuating mortgage payments, they all represent significant financial burden to contend with and as a result, there exists a greater need to make sure they properly protect their most valuable assets.

So, it’s clear there are generational differences in insurance claims. This means advisers really have to be agile and able to adapt to the differing needs of different age cohorts. However, the one uniting and fundamental factor is that each group requires advice. By leveraging the unique position that advisers are in and offering bespoke advice that provides value beyond monetary worth, advisers have a golden opportunity to create appreciative lifelong clients.

We recognise that this is a huge resource demand for time-stricken advisers. It’s why we’ve worked hard to develop an all-round suite of tools that help advisers to deliver advice as eﬃciently as possible.

This might be by referring clients to our in-house telephone referral team, to ensuring that clients are always on the receiving end of the best possible support – regardless of an adviser’s resource capacity.

Alternatively, it might be utilising our Premium Flex tool, to enable advisers to adjust their commission for the more price-sensitive clientele they have – who’ve maybe just had a baby, or a recent house purchase pu ing additional burden on their budget.

The point is that advisers are in pole position to create those lasting client relationships, regardless of who their clientele are. ●

ADAM RYAN is head of partnerships proposition at Paymentshield

Q&A

Sikoia

The Intermediary speaks with Alexis Rog, founder and CEO at Sikoia, about the mortgage market’s delicate relationship with technology

To begin with, can you tell us about Sikoia and your role?

I am the founder and CEO of Sikoia, a businessto-business (B2B) fintech that helps lenders and brokers automate their customer verification processes. Before starting up Sikoia, I used to be a tech investor, and saw first-hand how financial innovation can drive efficiencies in financial services.

However, it was also clear that the fintech solutions that have evolved over the past decade had created fragmentation, leading to data silos and the ongoing need for crossvalidation between different sources.

This presented the chance to create a new type of player that could unify customer data from different sources to tackle process inefficiencies.

The mortgage market has been relatively slow in adopting technology – where can it improve?

The mortgage market is particularly interesting, and it’s an area where Sikoia is gaining significant traction, which is unsurprising given how much of the process is still manual today.

For example, the initial onboarding for a consumer applying for a mortgage or a small business seeking a loan is usually swift, with decisions in principle often based on credit bureau data. However, as the application progresses, the process becomes bogged down by the need to manually verify, request and cross-check data from multiple sources.

Sikoia’s Customer Verification Platform aims to change that by centralising structured and unstructured data from different sources and standardising them to enable more consistent decision-making.

In addition, Sikoia achieved ISO 27001 certification recently, marking a significant milestone in our commitment to maintaining the highest standards of information security for our partners, clients, and stakeholders.

To drive improvement, it’s important to understand the root cause of this inertia, the first being the heavy intermediation between lenders and brokers, which creates a Catch-22.

Lenders want brokers to adopt new technology first, while brokers wait for lender support.

The second challenge is customer behaviour, especially given the older target demographic in the mortgage market compared to other financial products. Many improvements can be made in areas such as enhancing connectivity between brokers and lenders, eliminating double keying, and standardising customer data across the mortgage process.

The key to unlocking efficiencies is offering customers a range of options to share their data that accommodate different preferences, but lead to the same unified outcome.

What benefits do you think AI brings to the mortgage market?

Artificial intelligence (AI) has the potential to not only bring significant time savings to the mortgage process, but also a fundamentally better customer experience. The best part is that it

ALEXIS ROG

Leveraging the power of AI, users will be able to automate the processing and verification of customer documents, such as analysing bank statements, payslips and tax returns, reducing the administrative burden of manual assessment. Other key features include automated budget planning, income verification, and employer checks”

can be implemented in a way that requires minimal changes to current processes and behaviours.

Sikoia’s AI-powered tool automatically processes mortgage application documents, such as payslips, bank statements and tax returns and provides customers with instant updates as soon as they submit their documents.

This can save customers time on tasks like filling out budget planners, while automated checks verify income, employer details, and affordability behind the scenes.

A few years ago, such technology would have been costly and unreliable, but AI now fills that gap efficiently and affordably.

This is demonstrated by systems such as Mutual Vision, One Mortgage System (OMS) or brokers such as Y3S and Green Mortgages, with whom we recently announced new partnerships to enhance mortgage processing efficiency.

Through these collaborations, they are integrating Sikoia’s AI-powered automated document processing solution.

This advanced solution is designed to simplify and accelerate the mortgage process, by reducing administrative burdens and significantly improving the borrower experience.

Leveraging the power of AI, users will be able to automate the processing and verification of customer documents, such as analysing bank

statements, payslips and tax returns, reducing the administrative burden of manual assessment. Other key features include automated budget planning, income verification, and employer checks.

One criticism levelled at tech is the lack of human touch – how do you navigate this?

A mortgage is a significant commitment, and many borrowers understandably prefer the reassurance of speaking with a real person about their concerns. The idea that technology will replace this human interaction in mortgages is a misconception.

I believe technology will complement, not replace, human advice in the sector. AI can enhance the mortgage process by supporting providers, allowing them to work more consistently and efficiently.

It handles the heavy lifting, freeing up time for advisors to focus on the personalised, human touch that borrowers value.

How do you see the role of AI panning out?

There is no doubt that AI is set to become a major part of our lives in the next five to 10 years, whether we’re prepared for it or not. Just as we can’t imagine working without computers today, future generations will likely find it hard to envision their work without AI.

Unlike past technological waves, AI can handle complex cognitive tasks and is advancing at a pace that’s hard to grasp.

What seems impossible today could be achievable in just six months from now. This has a lot of implications: it will enhance a lot of existing jobs, create completely new ones, but also render some roles obsolete.

Over the next five to 10 years, lenders and brokers are likely to handle more cases with the same team size, and AI will make handling more complex cases more cost-effective.

At the same time, more customer data will also help lenders develop new tailored products by pricing risk more accurately.

The market will likely divide into two tiers: those who adopt AI and those who don’t. Adopters will benefit from lower processing costs, faster turnaround times, and the ability to focus on higher-margin, more complex cases. ●

Tech helps meet vulnerability tasks of Consumer Duty

Even with Consumer Duty in force across all of financial services, there’s no doubt that many firms are still trying to get to grips with its requirements. A new report from the Chartered Insurance Institute (CII) has concluded that firms would benefit from assistance to be er understand the characteristics of vulnerability and to be er identify vulnerable customers.

It’s no secret that understanding customer vulnerability is the hardest part of Consumer Duty. Not only does the report say this, but so does the regulator, which has consistently communicated this to ﬁrms.

The Financial Conduct Authority (FCA) has long encouraged firms to adopt and integrate technology to help meet these requirements. A er all, this is far more efficient than expecting firms to train every member of staff to spot every type or trait of vulnerability, as well as learning all suitable next steps. Rather than having to build their own systems inhouse, the technology already exists in the market to answer many of key challenges experienced by firms.

Vulnerability data

The report highlights diﬃculties in securing the necessary data, with many ﬁrms trying to repackage existing information – something the FCA has warned against.

While this data may offer some insights, it’s unlikely to include all of the customer’s characteristics, or cover the broad range of vulnerabilities firms must now consider. It also likely won’t provide any data on the difficulties faced by new customers.

This helps explain why these ﬁrms are reporting a proportion of

vulnerable customers between 7% and 13%. The FCA’s own research found many firms reporting few or even zero vulnerable customers. For perspective, the FCA’s ‘Financial Lives’ survey says that around half of all UK adults are vulnerable in some way, so while figures may differ based on customer profile or sector, a firm’s customer base should reflect this, too.

The most eﬀective way to understand customer vulnerability and identify vulnerable customers is to engage with consumers directly. Rather than particular subsets, we must engage with all customers.

Through our own experiences, and that of firms using the MorganAsh Resilience System (MARS), engaging directly – using vulnerability assessments – enables firms to generate the necessary data to report a proportion of vulnerability much closer to the FCA’s findings.

Objective assessment

Crucially, though, we need consistent and objective assessment methods to generate the quality of data needed to communicate consistently, to measure the outcomes consumers receive and to properly report on the ﬁndings.

Technology has an important role to play here, bringing consistency as to how assessments are undertaken, what information is collected and how it is standardised and recorded.

Just as important is the objectiveness technology can bring to the assessment. This simply isn’t possible by relying solely on human decisionmaking – especially as the perceived prevalence and severity of customer vulnerability will vary between diﬀerent advisers and frontline staﬀ.

Leveraging technology at the heart of the assessment process allows ﬁrms to generate an objective measure of

ANDREW GETHING is managing director at MorganAsh

vulnerability. Using MARS as an example, our assessments produce a Resilience Rating, which is much like a credit score for vulnerability.

Not only can this be shared across the value chain, it provides a top-level indication of vulnerability without sharing extensive personal data –answering concerns some have about data protection.

Reporting requirements

With the right data, generated by pu ing the correct systems and technology in place, the reporting requirements of Consumer Duty become much more straightforward. Rather than a mad scramble or trying to repackage existing data, firms can generate detailed reports that demonstrate outcomes over time – and, importantly, how they compare between the vulnerable and nonvulnerable. With the right technology, this vital information is always at firms’ fingertips.

There’s no question that customer vulnerability is a daunting task – and we must applaud CII, and its partner FWD Research, for raising the concerns of ﬁrms. It goes to show that education is still needed to highlight the innovations already available. Alongside regulatory compliance, technology can help ﬁrms realise the true competitive advantage of Consumer Duty. Not only is it an opportunity to stay closer to our clients, but a chance to deliver a far be er service – particularly when it comes to ‘in the moment’ support. Add to this a chance to deliver far be er outcomes for all, and there’s a real opportunity to win clients for life. ●

AI will be a partner to advisers, not a threat

CHRISTOPHER TANNER is CEO at HLPartnership

We are hearing a lot about how artiﬁcial intelligence (AI) will revolutionise our industry. It is estimated that in the UK, the total market for AI is already worth around £17bn, and is expected to grow to £803.7bn by 2035.

In our industry, by all accounts, we stand on the brink of a major shi in how consumers research and engage with mortgage options. However, it was not so long ago that the industry was worried by the advent of ‘roboadvice’, which would supposedly see the end of intermediary-based business and its replacement by webbased ﬁrms, where mortgage solutions could be dispensed without the need for human intervention. It never caught on, as the majority of people still felt they needed the reassurance of a human interface.

Early stages

In the same way, we should look on AI as the next step forward in the way that technology can be harnessed to make our businesses more eﬀective.

AI will increasingly inﬂuence the early stages of the mortgage advice journey with its ability to automate processes such as document veriﬁcation and helping to analyse customer data. AI will help shape consumer interactions and expectations, but despite this technological evolution, the importance of expert human advice will remain indispensable, particularly when navigating the complexities of mortgage decisions. Unlike traditional search engines which rely on keyword matches and a list of ranked links, AI-driven platforms will engage in a more

dynamic and responsive search experience. These AI systems will interpret natural language queries and offer highly relevant, precise responses based on the user’s context and financial data. This will bypass the need to comb through pages of search results, offering quicker access to tailored information that is highly specific to customer needs.

As AI becomes an integral part of the early stages of the mortgage journey, it will fundamentally shi how consumers approach mortgage research.

E cient and accessable

Historically, the process of ﬁnding the right mortgage has involved extensive legwork, visiting numerous comparison sites, gathering information from various sources, and a empting to decode the complexities of terms and conditions. AI will streamline this, making it far more eﬃcient and accessible.

AI-powered search engines will present consumers with a curated list of mortgage products, tailored to their personal and ﬁnancial situation, o en using real-time data such as credit scores or employment changes. This will not only save time, but also allow for a more personalised approach, ensuring consumers have access to options that are best suited to their circumstances from the outset.

Consumers may arrive at mortgage advisers with more speciﬁc, nuanced questions, having already done much of the basic research. This will inevitably alter the adviser-client dynamic, as consumers will be be er informed and more decisive at the outset.

Life experience

Despite AI’s ability to streamline

and personalise the early stages of the mortgage search process, there remains an irreplaceable role for expert human advisers. AI cannot replicate the empathic, tailored advice a human adviser oﬀers, particularly when dealing with complex, personal ﬁnancial decisions.

Mortgages are o en tied to significant life events – buying a first home, downsizing in retirement, or moving due to a growing family. These scenarios are laden with emotional considerations that an algorithm cannot fully comprehend. Human advisers are essential for providing context, reassurance, and strategic advice that takes into account not just financial metrics, but also life goals and emotional needs.

Furthermore, AI tools, no ma er how advanced, cannot navigate the more complex areas of mortgage advice, such as regulatory changes, tax implications, or long-term financial planning. Advisers offer a depth of understanding that goes beyond data, ensuring clients are not only informed but also confident in their decisions.

The future of mortgage advice will be deﬁned by a partnership between AI and human expertise. AI will handle routine tasks and initial research, enabling advisers to focus on complex issues and client relationships. Consumers will beneﬁt from the best of both worlds.

Advisers who embrace AI to enhance their services, rather than view it as competition, will thrive in this evolving landscape, providing more value to their clients, delivering not only eﬃcient solutions but also deeper insights and tailored advice. ●

Securing your place in the attention economy

We live in an a ention economy, and with more options, everyday businesses must adapt their tech to hold people’s a ention. Consumers increasingly expect seamless digital experiences, and this has clearly spread to the mortgage industry.

As ﬁnancial services become more digitally driven, mortgage portals are becoming essential tools for brokers and clients alike. This technology needs to keep up with clients, or risk losing their a ention for good.

Modern consumers are accustomed to using technology that integrates smoothly into their daily lives.

From banking apps to e-commerce platforms, the demand for quick, easy, and secure digital interactions is growing. Those that don’t keep up will lose customers.

In the mortgage sector, this translates to the need for advanced, user-friendly portals that oﬀer more than just basic functionality.

Mortgage portals are secure digital platforms that streamline the entire application process. They provide clients with instant access to their application status, allow for the easy upload of documents, and facilitate communication with their brokers.

Yet, the real advantage lies in how these portals cater for the way people use technology today – on-the-go, on multiple devices, and with an expectation of transparency and immediacy.

Mobilisation

One of the key trends in consumer technology use is the shi towards mobile access. People expect to manage their ﬁnances from their

phones, whether they’re checking a bank balance, paying bills, or applying for a mortgage.

A mobile-accessible mortgage portal, like the one oﬀered by ﬁnova Broker, allows clients to manage their mortgage applications anytime, anywhere, directly from their smartphones or tablets.

This level of convenience is not just a nice-to-have; it’s increasingly becoming a necessity. Consumers are busy, and the ability to quickly check the status of an application, upload a required document, or communicate with their broker without needing to log in from a desktop computer is a signiﬁcant advantage in grabbing their a ention. It’s about meeting clients where they are – on their mobile devices, o en during their daily commute or in between other tasks.

For brokers, the use of advanced mortgage portals translates into stronger client relationships.

These platforms enable real-time updates, secure document sharing, and two-way communication, ensuring that clients are never le wondering about the status of their application.

The transparency provided by these portals helps build trust, making clients feel more informed and engaged throughout the process.

Another advantage is that it should also save time as clients have less need to phone a broker chasing their case. Moreover, the ability to send push notiﬁcations or reminders through a mobile app ensures that clients complete necessary tasks on time, reducing delays in the application process and reducing the need for brokers to send emails or chasing phone calls.

This kind of proactive communication is a game-changer in

the mortgage industry, where timely decisions are o en critical.

Making a mark

In a crowded market, brokers who leverage technology effectively can distinguish themselves from the competition. A robust mortgage portal demonstrates a commitment to innovation and client service, which can be a major selling point. Clients are likely to choose brokers who offer the convenience of a digitalfirst approach, knowing that their mortgage application process will be smoother and less stressful.

Furthermore, as regulatory standards continue to evolve, having a technologically advanced portal ensures that brokers stay compliant while also providing the highest level of service. This not only helps in avoiding legal pitfalls but also showcases a broker’s dedication to maintaining high ethical standards.

As the mortgage industry continues to evolve, the role of technology will only become more central. Mortgage portals that integrate the latest tech advancements – like AI-driven insights, secure document storage, and seamless communication features – will set the standard for how business is done.

For brokers, utilising this technology is not just about keeping up. It’s about staying ahead.

By adopting platforms that align with how consumers use technology today, brokers can enhance client satisfaction, improve operational eﬃciency, and ultimately, drive business growth. ●

MATT HARRISON is director of sales at nova Broker

IT change is always about people

If people are truthful, very few enjoy constant change. As a species, we are wired to create stability in what is, a er all, a fragile existence. Nevertheless, change is happening all the time. Perhaps unsurprisingly – as a company that creates and manages change – we recognise how deepseated that fear can be. Think back to when you ﬁrst started in your current job. How long did it take you to learn not just how to use the programmes and systems, but also which to use for what? Chances are it was at least six months before you stopped having to ask someone to remind you how to submit expenses, do a work order, or ﬁnd your pension or pay plan details.

In industries where digital reliance is high, it can take even longer. Systems can be vast, interactive or not, and even if you’ve used a programme before, it’s probably been tailored to the needs of that organisation speciﬁcally. In short, a boardroom dream, if not implemented correctly, can become a nightmare.

Most mortgage lenders have to upgrade their systems urgently, because there has been so much regulatory change over the past 10 years. Not just that, technology itself has transformed over that same period.

improve their technology systems to make them ﬁt for the needs of today’s market, we know it’s o en not the desire to have slicker tech that has held people back from change. It’s the people themselves.

With change comes a perception that we need to start the learning process all over again. There’s also o en a suspicion that slicker systems replace the need for people who currently do certain jobs. And then there is the frustration and stress of having to learn new skills while still doing your job at the speed you were without all that extra work. Not to mention the stress of managing other people adapting to their own stress and frustration.

Urgently important

But still – there is a critical need for new, be er, more eﬃcient technology at a worryingly high number of lenders which have had their a ention pulled in a hundred diﬀerent directions as regulation, the economy, politics and people shi . There’s a saying, most o en referred as the former US President Dwight Eisenhower’s principle. “What is important is seldom urgent, and what is urgent is seldom important.”

JERRY MULLE is UK managing director at Ohpen

Consumer Duty will mean knowing more about customers and their properties in real time to protect them from foreseeable harm and protect institutions from reputational risk.

The question, then, becomes one of how to change and take everyone with you – because without the people who will use new systems and processes, those systems won’t work as well as they should.

Change is cultural as well as technical, and success comes from understanding the problem you are trying to ﬁx in the boardroom and how to implement the solution on the ﬂoor. It sounds obvious when you take a step back, but the key to ge ing this right is for tech providers to do more than just provide the tech.

The road to navigating change is li ered with lenders where the boards, eager to improve, have jumped to solutions before they have really understood the problem they are trying to solve.

There are lenders where the processing systems still run on so ware ﬁrst brought in in the 1970s, ‘80s and ‘90s, which has been patched and patched and patched into the technological embodiment of Frankenstein’s monster.

Upgrading lender tech has long been important, now it is both vital and urgent. Basel 3.1 and the evolution of

The needs of each business are unique, and it’s important to have access to those with the experience of managing change successfully.

O en, that’s about managing how upgrades progress as you are

Yet those who work in those lenders understand the monster – a er years of watching it grow, some members of staﬀ are irreplaceable because of their knowledge of how systems work. As a ﬁrm that exists to help lenders

of watching it grow, some members their knowledge of how systems work.

where a lot of lenders can go reactively but without suﬃcient

to give yourself the best chance of successful change is to put the right team in place to deliver it, which is we our clients with just that.

O en, that’s about managing how upgrades progress as you are in the process of undergoing them. Ge ing that right is where a lot of lenders can go awry, changing the goalposts reactively but without suﬃcient consideration of the knock-on eﬀects. We believe the best way to give yourself the best chance of successful change is to put the right team in place to deliver it, which is why we go to such lengths to provide our clients with just that. ●

NAME is job at Company

Quiassitatur, anos The results are in

is business development director at MSO Mortgages

STEVE CARRUTHERS

er months of research, meticulous analysis and numerous interviews with lenders that have been generous enough to give their time to contributing, we recently unveiled the results of our 2024 Mortgage Eﬃciency Survey in a webinar hosted by UK Finance on 25th September.

Examining vast datasets and understanding borrower performance is one area most lenders highlighted as ripe for innovation.

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One lender suggested the possibility that machine learning from data analysis could facilitate a move from loan-to-value (LTV) based pricing to individually modelled pricing based on actual behaviour.

This is the 13th survey we have published, making it a valuable tool to measure how lenders use technology across the mortgage journey and how that relationship has developed as the market has evolved.

This year’s survey has thrown up yet another set of challenges, opportunities and common focuses for lenders of all sizes and funding models.

While the insight it offers spans topics from the Financial Conduct Authority’s (FCA) Consumer Duty rules, net zero targets and environmental regulation to affordability trends and political context, today I’m going to focus on what lenders told us about their views on artificial intelligence (AI).

Learning or making decisions

Most lenders view AI as machine learning, rather than true AI, meaning the quality of data that is fed into algorithms is fundamental to any automated processes’ success.

Training people

During the interview process, it became obvious just how important the workforce is to lenders, particularly insofar as they interact with automated processes and those facilitated by algorithms that learn. One lender told us they were already encouraging large numbers of staﬀ to take AI qualiﬁcations.

Others saw the more digital interactions of younger generations in the workforce as a hint of what might yet come, with more than one lender positing the idea of business development manager (BDM) models powered by AI as being possible in the relatively near future.

For the majority, it was seen as complementing current human roles in providing services, not as a replacement.

Interestingly, for building societies using AI models to improve process eﬃciency and cut costs, retaining the human personal touch was a key concern. Much of the mutual market relies on manual underwriting and experience to get deals over the line, and all were keen not to compromise that. Some had already embedded features such as chatbot solutions and were mulling ‘execution-only plus’ journeys, while the majority were keeping a watching brief.

What wasn’t said was as interesting and important as what was.

A statistically signiﬁcant number of lenders have not begun to assess how the development of AI could impact their borrowers.

For some, that is simply a pragmatic reﬂection of their current borrower type, but it was interesting that no one we spoke to highlighted concerns about how AI might impact the broader job market and borrower prospects.

Product and pricing

One or two lenders told us they were running a sandbox to trial machine learning which could oﬀer data-driven insight into future product modelling.

Sector by sector

Perhaps unsurprisingly, the uptake of machine-learning and AI-based decisioning varied in a way that highly correlated to the risk proﬁle of a lender’s target borrower spread.

It also suggests an increased demand for reﬁnance among a cohort of borrowers who would have been exceptionally sensitive to aﬀordability pressures.

In contrast, high street lenders dominated the LTV band between 50% and 89%, a noteworthy shi from last year when challengers and specialists were strongest between the 75% to 89% LTV bands.

This suggests that lenders are moving back up the risk curve as it relates to asset value, but could also indicate increased conﬁdence in borrower creditworthiness.

While lenders did not speculate, it’s possible that this rising risk tolerance is broadly in line with borrowers reﬁnancing onto higher rates.

Higher margin business

As borrowers remortgage from very low ﬁxed rates onto rates above 5%, fewer remain at risk of a remortgage payment shock. As balance sheets adjust, lenders’ origination appetite for higher margin business is supported.

By way of consequence, challengers and specialists have stepped in to support higher LTV lending.

While the role AI has to play in future origination strategies was not a topic explicitly covered in this year’s interviews, the results of our research this time indicated that this could well be a focus in next year’s report.

Broadly speaking, lenders are increasingly engaged in ﬁnding ways to make the most of AI-powered processes that can take cost out of running their businesses, supporting the lender-broker relationship and providing borrowers with the most appropriate products for their needs.

On a percentage of lending basis, smaller regionals led the way in lending over 90% LTV this year. Challengers and specialists excelled in 95%-plus lending. Arguably, this reflects their role in the market, offering manual underwriting in more complex and difficult areas of lending.

As a ﬁnal note, we asked lenders, if they had the funding, where would they put the investment. With very few exceptions, lenders looked to improving the post-application part of the process with more interoperability – using APIs – to make use of data sources to improve the consistency and volume of underwriting across their businesses.

This theme of how to make the most of technology and data within the business’ decision-making was a theme for this year. Digitalisation, it seems, is happening inside as well as outside lender businesses. ●

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... Brighton

Brighton, the seaside city known for its iconic pier and lively, artistic culture, has long attracted a diverse range of homebuyers.

With its appeal as both a bustling university town and a popular destination for professionals seeking to escape London, the city has become a hotspot for property investment, especially among first-time buyers, landlords, and families seeking a more relaxed lifestyle.

However, like much of the UK, Brighton’s property market is currently navigating a challenging period, with rising interest rates and increased caution among lenders putting pressure on affordability.

The upcoming Autumn Budget adds another layer of uncertainty, as homeowners, prospective buyers, and investors await key decisions that could impact landlords, Stamp Duty, and support for first-time buyers.

As Brighton continues exhibit appeal as a seaside escape, The Intermediary sought to find out how these national economic factors are impacting the local property market, and understand whether the city’s enduring appeal as a cultural hub could help it withstand these temporary headwinds.

Current

values

According to the latest data, the average property price in the Brighton

postcode area is approximately £422,000, with the median price around £364,000. This reflects a decrease of £14,100, or -3%, in the average price over the past 12 months.

Over the past year, there were 8,600 property sales in the area, a significant drop of 32%, equating to 4,400 fewer transactions.

The majority of properties sold fell within the £300,000 to £400,000 price range, with 2,294 sales, followed by the £400,000 to £500,000 range, which saw 1,443 transactions.

The most affordable area in Brighton is ‘BN21 3’, where the average property price is £197,000. On the other hand, ‘BN3 6’ is the most expensive, with properties averaging £920,000. For different property types, detached homes in Brighton cost an average of £622,000, while semi-detached properties averaged £446,000. Terraced homes are priced at approximately £415,000, and flats come in at £273,000.

Cautious residential market

Brighton’s housing market is currently experiencing notable shifts, particularly when it comes to residential purchase trends.

According to Iain Carter, director of My Mortgage Company, the demand for residential mortgages has improved, with the market gaining momentum, especially in the larger family home sector.

JESSICA O’CONNOR is senior reporter at e Intermediary

Demand for residential mortgages has improved, with the market gaining momentum, especially in the larger family home sector”

“The longer we remain with the current product rates, the more clients are becoming used to them,” he explains, also highlighting an increase in first-time buyers entering the market.

Charlotte Oakley, director and adviser at Your Mortgage Room, also notes a rise in remortgaging as homeowners seek to lock in long-term fixed rates due to ongoing concerns over inflation and interest rates.

Many are choosing to extend their homes rather than face the costs of moving, with energy-efficient properties becoming increasingly attractive.

Sophie Pollard, director at MyHaus Brighton, points out that the market has a strong buyer presence, though they are more cautious and keen on value for money. Nevertheless, with many landlords selling one-bedroom properties, particularly in the central areas, there’s a noticeable influx of first-time buyers eager to take advantage of these opportunities.

She adds: “It really feels like a buyers’ market and as the year has gone on, the motivation of our vendors has come into play in what they really want to get out of the sale.”

Popular lenders

Several mortgage lenders have become particularly popular in Brighton, thanks to their tailored products.

Gaining momentum

TIAIN CARTER director of My Mortgage Company

he appetite for residential mortgages has been increasingly getting better. The market seems to be picking up momentum, primarily in the larger family home market.

The longer we remain with the current product rates the more clients are becoming more and more used to them.

We have also seen more first-time buyers coming into the market at the moment. However, some of our main client base includes selfemployed and limited company directors. We typically deal with all the larger high street banks; however, specifically in our local area, we have a larger amount of self-employed people. Therefore, we tend to take them to other lenders that may look at net profit of business – and this presents them potentially with a bigger budget.

In terms of developments in the area, apart from new-build flats, there seems to be more updating of local areas such as children’s parks in key areas. The seafront has seen a lot of development with new cafes, skate parks, tennis and paddle courts, which is great to see.

Nationwide remains a standout lender, offering mortgages of up to 5.5 or 6-times a borrower’s income, which is especially beneficial for those navigating Brighton’s high property prices.

“This makes them particularly appealing to both first-time buyers and those looking to move up the property ladder,” Oakley notes.

Meanwhile, Halifax and Santander also remain strong options, providing products for first-time buyers, remortgaging, and buy-to-let (BTL) clients. Oakley adds that Barclays is also a significant player, offering competitive mortgage deals across both residential and BTL sectors.

Coventry Building Society has gained traction in the area among the

self-employed, offering flexibility for individuals who have transitioned from paid employment to running their own businesses.

Self-employed demand

Brighton’s housing market has seen a significant rise in self-employed, freelance, and limited company borrowers in recent years. Carter notes that many of his clients fall into this category, as compared to other UK cities, Brighton boasts higher

concentration of self-employed individuals.

He explains: “We typically deal with all the larger high street banks; however, specifically in our local area, we have a larger amount of selfemployed people. Therefore, we tend to take them to other lenders that may look at net profit of business – and this presents them potentially with a bigger budget.”

Oakley has seen more people transitioning from traditional

A city of opportunity

TCHARLOTTE OAKLEY director and adviser at Your Mortgage Room

he housing market in Brighton continues to demonstrate resilience despite national economic challenges.

The market remains competitive, especially in sought-after areas for example ‘The Golden Triangle’ and Kemptown, where period homes and proximity to the coast drive demand. Properties in family-friendly areas such as Hove and Patcham also continue to attract strong interest, particularly from London buyers looking to relocate.

Several trends have emerged over recent months. First, the demand for energy-efficient homes has increased, driven by the rising cost of utilities and a greater focus on sustainability. Buyers are placing more emphasis on properties that have modern insulation, energy-saving features, or even the potential for eco-friendly upgrades.

Additionally, there’s been a surge in interest for properties that allow more flexible living spaces, with many buyers looking for homes that accommodate working from home. Larger homes with gardens, home offices, or adaptable spaces have become highly sought after, reflecting the shift in work-life patterns post-pandemic.

There’s also a growing demand for remortgaging, with many existing homeowners looking to secure long-term fixed rates as uncertainty surrounding interest rates and inflation continues. Remortgage clients are also looking to extend their homes rather than spend the money on the costs involved to move.

A significant portion of our clients are young professionals relocating from London, drawn by Brighton’s vibrant lifestyle, excellent transport links to the capital, and the allure of a coastal living environment. These individuals are often seeking more space, a better work-life balance, and the creative, community-driven culture that Brighton is known for. We’ve also seen a growing number of self-employed

employment to freelance or setting up their own businesses.

She adds: “New lenders such as Generation Home Loans have gained traction as well, offering more flexible criteria for clients with unique financial circumstances, particularly self-employed individuals and contractors.”

In addition, the demand for homes with adaptable spaces, such as home offices and gardens, has surged, as more buyers seek properties that

clients, reflecting a broader shift in the workforce as more people move from traditional employment to set up their own businesses or work as freelancers.

These trends reflect the evolving nature of our client base, with more people seeking creative ways to borrow and meet their property goals in a market that continues to be both vibrant and competitive.

Brighton has long been a forward-thinking city, with several exciting developments already transforming the landscape. One is the regeneration of the Brighton seafront, including the redevelopment of the Black Rock site. This revitalised area has already attracted various businesses to its newly created shopfronts, enhancing the city’s leisure, housing, and commercial offerings.

Brighton has also seen significant investment in transport infrastructure. Ongoing improvements to Brighton Station, along with enhanced cycle lanes and pedestrian routes, have made the city even more appealing to buyers who prioritise sustainability and easy access.

BTL in Brighton has experienced mixed fortunes. While rising interest rates have squeezed landlords’ profitability, the city’s strong rental demand has continued to attract investors.

Brighton remains a university town with a high student population, and with a significant number of young professionals and commuters, the rental market remains buoyant. However, regulatory changes has caused some landlords to rethink their portfolios. New landlords are increasingly cautious, opting for properties that meet or exceed energy efficiency standards to avoid costly upgrades in the future.

Despite these challenges, we’re still seeing a steady stream of experienced investors taking advantage of the high rental yields that Brighton offers, particularly in central locations and popular areas like Hove and Seven Dials.

A landlord heavy market

WSOPHIE POLLARD director at MyHaus Brighton

e are seeing buyers out there, but they are looking for value for money without huge amounts to negotiate with. The mid-level market of three to four-bedroom houses is always popular, and location is still key, with many of our buyers relocating and needing the commutability.

We are seeing many landlords looking to sell, with one-bedroom properties dominating the central areas – a real opportunity if you were looking to grow your portfolio. Not that many are at the moment! Over the past few months, we have seen investors and landlords looking to sell, and first-time buyers are looking to snap up those properties. Even the subtle decrease in rates has helped those ready to take the leap.

There is consistent development in Brighton & Hove and beyond, what we’re seeing is that the impact of these developments, especially in the rental market, is affecting those higher priced ‘luxury’ properties.

The advice we’re giving to landlords is to look at the condition and compliance of your properties, because it’s going to continue be more important than ever with the upcoming year. The Renters’ Rights Bill is a hot topic and compliance more important than ever.

support flexible home working arrangements.

Younger demographics

In 2020, Brighton’s population stood at 864,000 residents, with an average age of 42.5 years, cementing the city’s reputation as one with a relatively young population.

A significant portion of Oakley’s clients are young professionals relocating from London, drawn by the city’s vibrant lifestyle, coastal living, and transport links to the capital.

She says: “These individuals are often seeking more space, a better work-life balance, and the creative, community-driven culture that Brighton is known for.”

Carter notes that, despite the market being dominated by demand for family homes, he has seen a significant increase in first-time buyers coming into the marketplace at the moment. Pollard adds that this trend has been boosted by turmoil in the rental market.

As investors and landlords are increasingly looking to sell, more first-time buyers are seizing the opportunity to snap up these homes –especially with the recent reduction in mortgage rates helping them take the leap onto the housing ladder.

Upcoming developments

One of the most notable projects pointed out by local experts at the moment is the regeneration of the Brighton seafront, particularly the redevelopment of the Black Rock site. This revitalised area has attracted new businesses, enhancing Brighton’s leisure, housing, and commercial offerings.

Significant investment in transport infrastructure, such as ongoing improvements to Brighton Station and enhanced cycle lanes and pedestrian routes, is also making the city even more appealing to buyers who value sustainability and accessibility.

Pollard highlights that this steady development, both within central Brighton and beyond, is impacting the rental market, particularly in higherpriced luxury properties.

“Renters are looking for quality and added value,” she explains, adding that many have been opting for purposebuilt blocks that offer more for a slightly higher rent.

Carter adds that beyond newbuild flats, there has been a focus on updating local amenities, such as children’s parks and new features along the seafront, including cafes, skate parks, and tennis courts, which contribute to the area’s appeal.

Rental trends

With 26.1% of Brighton’s housing stock privately rented, slightly above the national average of 23.6%, the city’s rental stock certainly forms an integral part of its housing market. The city’s strong rental demand, driven by its university population, young professionals and commuters, has kept the market buoyant despite rising interest rates.

Oakley notes that while higher rates have squeezed landlords’ profitability, investors are still attracted to Brighton’s high rental yields, particularly in central areas like Hove and Seven Dials.

However, regulatory changes are prompting some landlords to reconsider their portfolios.

“Despite these challenges, we’re still seeing a steady stream of experienced investors,” Oakley says.

New landlords, in particular, are cautious, focusing on properties that meet energy efficiency standards to avoid future upgrade costs.

Pollard says that many landlords in the city are selling up, especially one-bedroom properties in central locations, offering opportunities for others who might be looking to expand their portfolios.

However, with the looming Renters’ Rights Bill and growing compliance demands on the horizon, Pollard warns that landlords should look at the condition and compliance of properties, because this will be “more important than ever in the upcoming year.” ●

Brighton postcode area. Source: www.plumplot.co.uk

On the move...

Leeds Building Society adds intermediary development manager

Andy Alvarez has joined Leeds Building Society as national intermediary development manager. Alvarez previously held senior roles at Morgan Stanley, Nationwide, Mansﬁeld Building Society, Vida Homeloans and St James’s Place.

He said: “I’ve long admired the way that Leeds puts its purpose at the heart of everything, and is laser-focused on pu ing homeownership within reach of more people.”

Yorkshire Building Society appoints nonexecutive director

YAlvarez will implement the sales strategy for intermediary mortgages and manage the ﬁeldbased relationship management team.

AJames O’Reilly, head of intermediary partnerships, said: “[Andy has] already proven that he is a highly engaged and versatile leader. We look forward to seeing how he will take our teams to the next level and demonstrate to our intermediary partners that we are commi ed to supporting them.”

Assetz Capital appoints new leadership team

ssetz Capital has appointed four senior executives to its board as it seeks to strengthen its management team for the next phase of growth.

CEO and co-founder Stuart Law will continue to lead the company, with newly appointed board members including Andrew Fraser as chief commercial officer, Irene Thomas as chief operating officer, Mark Wardrop as chief financial officer, and Tim Harper as chief credit officer.

Dave Allanson will remain as nonexecutive director.

The announcement followed the decision of managing director Andrew Charnley to step down to pursue other opportunities.

Law said: “It is encouraging to see our lending returning to pre-pandemic levels and this reflects the expertise that we have in supporting SME house

builders and property investors in accessing vital funds.

“Our board appointments mark a significant milestone for our leadership team. Each of these individuals have played an integral role in our journey so far, and their contributions will be even more valuable as we move into our next phase of growth.

“We really appreciate Andrew’s contributions and leadership. He’s been instrumental in navigating the business through a pivotal phase, and we wish him the best in his future endeavours.”

orkshire Building Society (YBS) has conﬁrmed Janet Pope will join its board as non-executive director on 29th October.

With more than 30 years of experience in ﬁnancial services, Pope currently sits on the board of debt charity StepChange and is chair of the Charities Aid Foundation Bank.

She recently retired from Lloyds Banking Group as staﬀ and chief sustainability oﬃcer, prior to which she was CEO at Alliance Trust Savings, executive vice president, global strategy at Visa International and head of retail banking Africa at Standard Chartered.

She said: “I’m looking forward to joining the Board at Yorkshire Building Society, an organisation which has a strong social purpose and is commi ed to delivering long-term value for its members and communities. I intend to use my experience to support the society as it grows and continues to help people ﬁnd a place to call home and deliver value for savers.”

Atom bank appoints Ayshea Robertson as chief people o cer

Atom bank has appointed Ayshea Robertson as chief people oﬃcer (CPO). Robertson joins from Zen Internet, where she spent six years as CPO and board director. Robertson will work with the executive commi ee and people experience team to deliver a high-quality employee journey, and will oversee Atom’s recruitment strategy.

Robertson said: “I love the purpose, vision and values of Atom – they match my own value set, and being part of a purposeled business is very important to me.

to give back to the community I live in.”

"Additionally, the fact that Atom is based in the North East gives me the chance to be part of the growth of a local business and the opportunity

Mark Mullen, CEO at Atom, said: “Ayshea comes with excellent credentials and a proven track record across a range of organisations and sectors.

“Ayshea’s leadership will be critical to the success of Atom as we drive our cultural renewal programme and continue to make Atom bank one of the best places to work in the UK.”

SUAVEK ZAJAC

ANDY ALVAREZ

JANET POPE

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The Intermediary – October 2024

From the editor...

The Team

Contributors

Contents

INTERVIEWS & PROFILES

The Interview 24

In Pro le 10

Q&As 48, 70

Meet the BDM

Why we must widen community input on planning

Finding inspiration

Total representation

Specialist answers to complex challenges

O ering exibility

Peace of mind: Making mortgages simple

Why this way?

Doing things di erently

A blank page

In Profile.

Butterfield Mortgages Limited

Complex conditions

Looking at London

Advice for brokers

Key challenges facing rst-time buyers

The a ordability challenge

The market’s reaction

Changing seasons: Reasons to be cheerful

First-time buyers need more than promises

Keeping up with the competition

Contradictory MPC statements cloud rate outlook

Mortgage realities

Injecting uncertainty

Housing supply will get an

Quiassitatur, anos

overdue shot in the arm

soluptas mint

Lending realities

A ordable housing

Why recent rate rises are not a cause for concern

‘Bank of Mum and Dad’: Is there a better way?

Reviewing the options

London remains the place to be

The rst cut

Pressure drop

Cladding is a real problem, but there is help

Critical risks

Bridging the nancial literacy gap

Education initiatives

Accessibility and collaboration

Community support

Action, not words, to boost rst-time buyer prospects

The deposit challenge

Where LTV matters

A question of income

Taking action

The Inter view.

Purpose and planning

Tech and inclusion

Big moves

Key di erences

Becoming the bank

Future plans

Time is of the essence

of reports delivered ahead of schedule

Guaranteed fee scale

Need to speak to someone?

Take control

Still need to speak to someone?

Making your exit smooth

Valuations: What brokers need to know

When is it the right move?

Real-life example

A gamechanger

Make the right call

The return of the buy-to-let purchase market

Favourable conditions

Looking long-term

The HMO landscape is changing – are you keeping up?

Energy e cient