The Intermediary – September 2023

OPINION ⬛ The latest across residential, buy-to-let, specialist finance and more

INTERVIEW ⬛ Dan Wass reflects back over a year at the helm of The Bucks

BROKER

Marketing, Meet the Broker, and tips for tricky cases

COMMONS SENSE

From the editor...

Many of my conversations in this industry centre around the work being done to create, raise and maintain high standards, whether in terms of product development, how lenders deal with brokers, how brokers handle client needs, or any of the other myriad moving parts at play. This has come even more to the fore over the past year or so, with the approach, implementation, and now initial stages of the new Consumer Duty. I won’t spend too many words on that, as I’ve already dedicated a previous comment – and many editorial pages beyond – to the subject.

However, this context made it particularly disheartening to report the news that the Financial Conduct Authority’s (FCA) year-long review of the later life mortgage market found “many cases” where advice “did not meet the standards expected,” as well as issues with almost 400 promotions. This is not to say that the later life mortgage market hasn’t come a long way, that the key players aren’t conducting themselves with customers’ best interests at heart, or that it should be singled out as the only sector with a long path ahead of it. However, the fact remains that later life lending has – rightly and wrongly – always been plagued with a negative image, and therefore has more of an uphill struggle than other parts of the market.

This negativity is something that many in the industry have worked tirelessly to counter, but the idea of doting grannies being turfed from

The Team

Jessica Bird Managing Editor

Jessica O’Connor Reporter

editorial@theintermediary.co.uk

Claudio Pisciotta BDM claudio@theintermediary.co.uk

Ryan Fowler Publisher

Felix Blakeston Associate Publisher

Maggie Green Accounts nance@theintermediary.co.uk

Barbara Prada Designer

Bryan Hay Associate Editor Subscriptions

subscriptions@theintermediary.co.uk

their homes is an emotive one, and hard to shi . It would be easy to blame this on the need for more mythbusting, but the fact that the regulator looked at major firms, responsible for around half of all lifetime mortgage sales, and found them wanting, suggests that there is still very real work to be done.

This comes at a time when the dialogue around property finance in all its forms is incredibly fraught. While those of us with an eye on the internal workings of the market have, for example, seen lenders in their droves lower rates recently, my suspicion is this narrative only reaches so far. The average borrower is still facing an affordability cliff-edge, and the image of young families struggling to juggle childcare costs with rising mortgage payments, for example, is stirring up consternation.

Speaking of emotive subjects, last month I waxed lyrical about the need to eschew party politics when it comes to housing, no ma er how tempting an election ba leground it might be. This month, from interviews to comment pieces, the topic is clearly weighing even heavier on commentators’ minds across all the sectors we cover. In fact, take a look at our feature on Page 34 for a particularly in-depth look at the idea of taking a fresh approach to policy. Perhaps our experts have the insight needed to address the property powder-keg before it’s too late. ●

Jessica Bird @jess_jbird

Contributors

Aaron Conlon | Alison Pallett | Alpa Bhakta

Aimie-Jo Shutt | Andrea Glasgow

Brian West | Chris Pearson | Dave Magee

David Binney | David G Jones | David Morris

Donna Wells | Elise Coole | Ellen Fell

Grant Hendry | Jacqueline Dewey | Jade Keval

Jason Berry | Jatin Ondhia | Jay Shah

Jeremy Duncombe | Jonathan Newman

Jonathan Stinton | Leon Diamond

Lukasz Grochowski | Lucy Waters

Marie Grundy | Mark Gregory | Martese Carton

Matthew Dilks | Natalie omas

Neal Jannels | Nicholas Mendes | Paresh Raja

Paul Brett | Paul Goodman | Paul Glynn

Paul omas | Phil Deacon | Ranjit Narwal

Richard Rowntree | Rob May | Robin Johnson

Steve Goodall | Tony Ward | Vic Jannels

Will Hale | William Reeve

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

—

— 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.

Feature 34

Natalie Thomas asks what’s on the wishlist for future housing policy

Broker Business 68

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

Local Focus 80

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

On the Move 90

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

The Interview 20

Local Focus

BUCKINGHAMSHIRE BUILDING SOCIETY

Dan Wass looks back at his rst year at the helm, and ahead to the society’s future

In Pro le

KEYSTONE 32

Elise Coole talks sustaining service levels in turbulent times

PARAGON 50

Louisa Sedgwick looks at how lenders can step up to support landlords

PURE RETIREMENT 64

Andrew Clare discusses the evolution of the later life sector

Q&A

CSS/CORELOGIC 76

Matthew Cumber and Mark Blackwell discuss their recent partnership

PAYMENTSHIELD 86

Louise Pengelly dissects the latest Adviser Survey results

Meet the BDM 54

MAGNET CAPITAL

Will Calito tells us about the challenges and opportunities facing business development managers

Getting clear on the logic of 40-year terms

Iwas pleased to see HSBC UK launch into the 40-year term space at the end of August, which is another way we are helping customers with the increased cost of living.

‘So what’s new?’ I hear you say, and you may have a valid point. HSBC UK was not the first of the high street lenders to let borrowers take out 40year mortgages.

So, what is behind this latest evolution towards longer-term mortgages? Is it good for customers? Will we see the trend continue?

The issue of a ordability

We know that homeownership is a key life ambition for many people, but affordability can be an issue. This move underscores our commitment to supporting aspiring homeowners in their journey onto the housing ladder.

In very simple terms, it reduces monthly payments, making lending more affordable and ge ing onto the property ladder more possible.

Taking out a 40-year term versus a 35-year term reduces monthly repayments from £1,239 to £1,202 on a £200,000 mortgage at the average 2-year fixed rate of 6.72%, as per the example quoted in The Times on 30th August.

Every penny counts

Where absolutely every penny counts in the monthly household budget –and ever-increasing proportions of those budgets are being consumed by mortgage costs in the current interest rate environment – it’s easy to see the argument in favour of stretching that mortgage term out a li le further for some borrowers.

When I refer to ‘some borrowers’, we must be alive to the fact that extending the term out as far as 35 to

40 years comes with the caveat that the borrower has the propensity in terms of their current age profile, or is well provisioned in terms of income up to and into retirement, to ensure such a lengthy term is a viable option.

Reducing payments

Pu ing in a larger deposit, such as from ‘the Bank of Mum and Dad’ – a whole debate for another article, perhaps – as well as interest-only, part and part, etcetera, are also viable options to reduce monthly repayments depending upon the customer profile and lender’s policies, as well as the a itude to risk the customer may have in respect of all these options.

No one is extolling the virtue of stretching the term for as long as we can and worrying about tomorrow another day. A longer term is not a magic wand approach to reducing monthly repayments, there’s a cost to doing it. Delving back into The Times article referred to earlier, it says if you take out a longer-term mortgage you will pay more interest over the lifetime.

PEARSON

Assuming an interest rate of around 4% over the entire term, someone who took out a 25-year £200,000 mortgage would pay £316,800 overall, whereas someone who took out the same loan over 40 years would pay £401,280. A significant difference.

Evolution of advice

As customers’ circumstances evolve over the years, so too should the advice that brokers provide to them. While a 40-year term may be right today, that advice can o en evolve to reducing the term later, if and when the customer is earning more money and can afford to do so.

This is one very important upside – among many – to always having a great adviser on your side, consistently checking to make sure your mortgage is tailor-made to always meet your precise needs.

The question around how many of these longer-term mortgages mature to run their full term remains to be seen. Some will no doubt reduce their term as circumstances allow. However, at the outset we must assume that they will run to term and therefore ensure that each customer has the propensity to cover off that level of commitment into older age.

Innovation will certainly reach into the market to offer further solutions I’m sure. For now, extending the term as a tool to reduce monthly repayments remains a good option as long as customers, brokers and lenders are all clear on the logic both now and in 40 years’ time. ●

CHRIS

is head of intermediary mortgages at HSBC UK

Getting onto the ladder can be made easier

What do higher interest rates mean for HNWs?

One aspect of the Bank of England’s interest rate hiking cycle that has perhaps been overlooked is the impact it has had on high-net-worth individuals’ (HNW) mortgages. In the current economic climate, the fate of the affluent borrower is understandably not front and centre of the media’s a ention. But we should not discount the challenges higher rates pose to HNWs, particularly when coupled with the difficulties many already face when seeking a mortgage.

One would think that, by definition, having a high net worth would mean that applying for and securing credit would be a relatively straightforward task. However, the reality is quite different; many HNWs are turned away by mainstream lenders because of the unique nature of their income, investments, and liquidity.

With interest rates set to remain at these new, elevated levels –and potentially rising further as inflationary pressures continue in the UK – what does the new era of higher rates mean for HNWs seeking mortgages? And what does this, in turn, mean for lenders and intermediaries?

Rising rates and HNWs

Before the start of 2022, the UK mortgage market had grown accustomed to a period of historically low interest rates, with some borrowers acquiring mortgages with interest rates as low as 1%. The Bank of England’s 14 consecutive hikes to the base rate have changed all that.

Despite their wealth, HNWs are not immune to the impact of such rapid hikes. They frequently invest in highvalue properties, and typically carry

larger mortgage debts than the average borrower. Moreover, those mortgages are o en on 5-year or 10-year terms, rather than the 15-year or 30-year terms many homebuyers obtain on the high street.

Simply put, larger mortgages on shorter terms mean a change in interest rates will be more pronounced for these individuals, with less flexibility to spread the costs.

Clearly, lenders and brokers are required to help HNWs navigate this economic climate to find the right product. A er all, high street banks are o en ill-suited to catering for HNW borrowers, whose complex financial profiles and irregular incomes do not satisfy more rigid application criteria.

The greater an individual’s wealth, the more complex their financial situation tends to be. They may not receive a regular paycheck or have a credit history, for example. Their wealth might be locked into other investments and assets, or they might be non-UK residents.

Commonly, the mortgages sought by HNWs are not intended for the purchase of a primary residence. They may not even plan to live in the property at all. A er all, prime property is still one of the most popular investment asset classes among HNWs – particularly in the upper echelons of the market.

All these factors present challenges if high street lenders want to engage with HNWs. The rise in interest rates and greater scrutiny borrowers are now under will only exacerbate the problem.

Lender HNW expertise

HNWs need lenders and brokers that can assess a more inclusive, holistic picture of their financial situation, as

BHAKTA

well as their investment motives. This includes those with mortgages and those applying for them.

Working with specialists in the HNW mortgage sector is important. It is a particular skill and experience, with the ability to cater for each client on a more bespoke, case-by-case basis, which is especially valuable in the current climate.

Complex applications

As they are typically more flexible, specialised lenders are not only be er suited to assessing complex applications from HNWs, but also to work with such clients once the loan has been delivered.

A recent Bu erfield Mortgages survey of UK mortgage customers revealed that just 44% feel they have received adequate support and communication from their mortgage provider over the past 18 months.

It is clearly a pertinent issue – a reminder that lenders must proactively engage with brokers and borrowers to identify any concerns and, wherever possible, present solutions to them.

It is evident that HNWs need support. They are not immune to the effects of the rapid rise in interest rates, either when applying for mortgages or repaying existing ones.

It is vital, therefore, that lenders with expertise in working with HNW clients are able to guide them through the changing economic environment and, with the help of brokers, deliver the right products to ensure they can still invest in property with confidence. ●

ALPA

is CEO at Butter eld Mortgages

Alexa, what is wellbeing?

ellbeing is a subject that can engender, from some, an eyeroll and a lung emptying sigh. However, with a large number of rate changes over the past few months, I want to take a moment to consider the impact on broker wellbeing.

I once asked “Alexa, what is wellbeing?” and she de ly replied: “Wellbeing is a quality of life that is intrinsically valuable to an individual.” She also referred to it as a “state of contentment.” That sounds nice.

It’s been a busy time for all of us working across the mortgage industry with the recent complexities of a more changeable market. I appreciate the challenges that rapidly changing rates can have on mortgage brokers.

From having to get clients to act quickly to take advantage of the best rates, to revisiting certain deals when rates reduce, this can all have a real impact on work-life balance, as brokers work around the clock to get the best deals for their clients.

WIt’s also good to reflect on why we are here. I refer not to the mystery of our existence, but rather the ‘why’ of our roles. Our customers are our why – lender and broker alike. We want the best possible outcomes for our customers. It is their financial wellbeing that is our raison d’être

As lenders, we don’t want brokers working all hours, and we don’t want that for our own colleagues, either. We understand that, as intermediaries, reputation and financial stability can hang on your recommendations. We genuinely want you to have confidence in those recommendations – with eyes fixed on the customer’s financial contentment.

Market fluctuations are outside of our control, and they require lenders to adapt swi ly and adjust strategy, in much the same way as a broker, to ensure customers receive the best possible outcomes. This can lead to increased stress and pressure to stay up to date with the latest market trends.

E ective communication

Managing clients’ expectations and concerns requires effective

communication from us all. How and when we communicate with you as a broker is key. We want to be able to give you as much time as possible to ensure you can deliver the right advice to your customers and maintain a good work-life balance.

We have recently launched our Santander for Intermediaries LinkedIn page, which enables us to cascade additional messages in another format. We appreciate there is more that can be done, and we continue to look for more effective ways to communicate with our broker community.

We continue to take broker feedback on board, and I hope that the improvements we have already made to the range of communication channels available, and the speed we can cascade information, will help support the wellbeing of our teams and the wider broker community. Wellbeing could be described as an outfit that looks different on everyone, and as such, the remedies are different too. Personal lives aside, I believe there are aspects, such as communication, that all lenders can consider as an element which could improve wellbeing in our professional lives.

Sir Winston Churchill famously said: “To improve is to change, to be perfect is to change o en.”

We as lenders would do well to ingrain this ethos, taking the opportunity to try and improve with every change. This will ensure that even in a rapidly changing market, we can all have time to think about our wellbeing. ●

AIMIE-JO SHUTT is national key account manager at Santander UK

Lenders and brokers alike want the best possible outcomes for customers

Bring it Home with LV= GI

Bring it Home with LV= GI

This October, we’re launching ‘Bring it Home’ - an entire month dedicated to making the most of general insurance.

This October, we’re launching ‘Bring it Home’ - an entire month dedicated to making the most of general insurance.

We believe it’s your duty of care to make sure your clients are fully protected, so we’ve made it our mission to provide you with all the tools you’ll need to start those all-important home insurance conversations and grow your business.

We believe it’s your duty of care to make sure your clients are fully protected, so we’ve made it our mission to provide you with all the tools you’ll need to start those all-important home insurance conversations and grow your business.

Sign up today to take part

Sign up today to take part

We’re asking advisers to pledge to talk general insurance with every mortgage and remortgage conversation in October.

We’re asking advisers to pledge to talk general insurance with every mortgage and remortgage conversation in October.

Doing your bit for them helps us do our bit for others

Doing your bit for them helps us do our bit for others

If you take part in ‘Bring it Home’ month, we’ll donate £5* to Family Action for every completed Gold or Platinum Home insurance sale you make in ‘October 2023.’

If you take part in ‘Bring it Home’ month, we’ll donate £5* to Family Action for every completed Gold or Platinum Home insurance sale you make in ‘October 2023.’

Once you’ve signed up, you’ll receive an email with all the details you need to make sure your sales count.

Once you’ve signed up, you’ll receive an email with all the details you need to make sure your sales count.

With our collective voice, we’ll reduce the stigma associated with asking for help, especially focussing on those less likely to reach out, so it becomes the norm. We’re ready to help, are you ready to sign up? Scan the QR code to nd out more or sign up. * LV= General Insurance will donate up to a maximum of

With our collective voice, we’ll reduce the stigma associated with asking for help, especially focussing on those less likely to reach out, so it becomes the norm. We’re ready to help, are you ready to sign up? Scan the QR code to nd out more or sign up. * LV= General Insurance will donate up to a maximum of £10,000.

For Financial Advisers only

For Financial Advisers only

£10,000.

Market behaviour and expectations

Posting thoughts and speculation based on limited published information always fills you with a sense of hesitation and dread.

In a market which continually faces challenges, any shi in dynamics can make you want to write about the past, taking comfort that it’s at least something you can control.

At the time of writing, UK Finance and the Bank of England have published the latest Household Finance Review for Q2 2023, and Money and Credit Report for July 2023, respectively.

Lending for house purchases and external remortgaging remained weak in Q2 2023 according to UK Finance, impacted by affordability constraints and a reduction in house buying and selling activity. Meanwhile, the Bank of England says net mortgage approvals decreased from 54,600 in June to 49,400 in July, while approvals for remortgaging slightly increased from 39,100 to 39,300 during the same period.

The highlights in both reports aren’t exactly revolutionary for brokers, given the past few months and a quieter summer period than normal. This potential break may have even been welcomed by some, considering the past year we’ve had.

Borrower activity

With a wet summer coming to an end, Q3 certainly seems to be warming up. Mortgage holders approaching the end of their fixed rates are open to reviewing remortgage options versus product transfers, with product transfers having been the most common recommendation recently, and sometimes the only option because of affordability constraints.

Interestingly, purchase activity seems to have taken an upward shi in confidence, with an increased desire to move despite growing mortgage costs.

First-time buyer (FTB) activity has also taken a positive turn, with FTBs taking a higher share of the smaller purchase market. Shaking off any anecdotal thoughts, we could see this taper off until 2024, when they may benefit from a property price dip.

Regardless of how my predictions hold up, at least we can take some comfort as brokers, knowing we can assist more clients moving forward.

Rates and in ation

Mortgage rates understandably continue to be a topic of discussion. While no one can be certain of what the best buys will look like at the end of the year, we can relax slightly in the knowledge that most lenders have started to slowly reduce rates.

Core inflation was 6.9% in July, unchanged from June, which saw the highest level since 1992.

With inflation remaining as stubborn as my seven and four-yearolds in Hamleys during the festive period, markets are forecasting further base rate rises as the Bank of England continues with the main tool in its toolbox to bring down inflation.

As Robert Sinclair from the Association of Mortgage Intermediaries (AMI), speaking with Foundation Home Loans on a recent webinar, eloquently put it: “[It is a] tool created back in the ‘80s, when 80% of people had variable mortgages and 70% of ownership had mortgages, so if they move interest rates up, it had a very quick impact on the economy.

“We’re now in a position where 80% are on a fixed rate and only 50% of ownership have got a mortgage. Therefore, the population impact is much smaller, and it’s going to take a lot longer for that to feed through and deal with the issue.”

While swap rates at the end of August broadly mirrored the end of July, there’s still a margin for lenders to reprice fixed rates downwards, but at a slower pace than initially hoped.

NICHOLAS MENDES is mortgage technical manager at John Charcol

Now that markets are se ling and lenders are no longer playing weekend rate change poker and ‘catch me if you can’ with brokers, we can spend more time doing what we do best: delivering a high level of service to our customers – unless you’re an estate agent that relies on blackmail to secure clients. While there is an expectation that fixed rates will continue to fall slowly through the rest of 2023 and into 2024,

certainty and stability remains key for mortgage holders; as a brokerage, we’re seeing mortgage applicants overwhelmingly opt for fixed rates versus trackers or discount products.

For the remainder of the year, I expect to see lenders continue to reprice downwards, albeit sporadically, with a mixture of criteria changes. Recent changes – from HSBC extending the term to 40 years, or No ingham BS accepting sale of mortgage property for interest-only – aren’t revolutionary. However, in the current climate, lenders will be tweaking their criteria to align with competitors and win over more business.

These tweaks are certainly welcomed, and I encourage more lenders to review their policies, as this helps maximise the opportunities for brokers to place cases. ●

I expect to see lenders continue to reprice downwards, albeit sporadically”

going on

Perspective is a tricky thing to get a handle on – especially when it comes to the economy. Everything is measured by the rate of change, the absolute value, the rise, the fall, the stay the same. There may be no be er way to describe our economic health, but it does lend itself to painting a picture with a dramatic lack of perspective.

There are few examples of this conundrum which be er illustrate the damage that thinking about the economy within the limitations of percentage change does, than with house prices.

What is average?

First of all, averages are almost meaningless, especially in the housing market. What’s an average house? In Pimlico it might be a Victorian converted terrace. Next door to Kensington Palace, it’s a vast multi-million-pound mansion with electric gates and security guards. In Carshalton Beeches, it’s a 1930s semi. Inner city docklands, you’re probably talking glass and steel skyscrapers with a balcony and ‘partial river view’. Mansion blocks in Maida Vale, high rise estates in Tower Hamlets, mews in Mayfair.

To claim that house prices are rising or falling anywhere is o en to completely miss the point. It isn’t about price at all, but demand, and that comes down to the very antithesis of average.

Ironically, what the stats don’t emphasise – but should – is that it’s more important to think about the property itself. Average prices may be falling, but it’s most probably because the price of average – read ubiquitous – properties is falling.

If something is in oversupply, demand is spread across a wider base, so prices come down.

In Britain, we are lucky that our housing market is so diverse –especially in London. It’s hard to imagine a flood of identikit houses listed on estate agents’ books, all concentrated in one area.

This is exactly why the blanket numbers churned out in national price indices are unable to paint a picture that makes sense in practice. If a rare home goes on the market and a buyer is there, falling house prices be damned, that buyer will pay.

There’s another consideration when it comes to perspective on how healthy a housing market is. What are we comparing today to? The answer is at worst four weeks ago, and at best a year ago.

Staying put

Do you know anyone who moves house once a year? The very fact that 2-year and 5-year mortgages are the norm illustrates that the average person stays put.

In the heady housing market days that preceded the Global Financial Crisis in 2008, received wisdom had it that most people moved home every seven years or so. Now it’s almost double that amount of time – largely because prices have risen so much in relation to incomes over the intervening years.

There are silver linings in this tale of housing market clouds gathering above the capital. There are a few things it’s worth remembering when considering falling house prices. Lower prices are irrelevant unless you have to sell or remortgage to a different lender. Indeed, lower prices are irrelevant if you don’t have a mortgage. Lower prices are good if

ROBIN JOHNSON is MD of KFH professional services

you want to move to a bigger home. A house worth £100,000 would sell for £90,000 a year later if prices fell 10%, but a house worth £500,000 would sell for £450,000 a year later on the same basis. You’re losing £10,000 on the home you sell, and saving £50,000 on the one you buy. Every time there is a downturn, we see this writ large.

Zoopla’s trend analysis showed in May that London’s housing market saw modest annual price falls of around 0.2%. At the same time, the number of agreed property sales in London is among the highest in the country. Why? Because of perspective.

Price softening

Below-average house price growth in London over recent years, coupled with a so ening in prices, makes housing in the capital more affordable than five to seven years ago. It’s driving demand inwards, with properties in Inner and West London a racting more buyers than many of the suburbs. These details o en go missing when we generalise at regional and national levels. This is what really defines the health of the housing market – and in London, we’re in good shape.

Whatever else ails our industry in terms of affordability challenges, property itself as an asset is remains resilient. How many other asset classes can you name that can undergo the challenges that face housing, and still perform as well as it does.

We mustn’t forget to take a step back at times when things seem gloomy. The picture isn’t perfect for all, but dour headlines are just that. ●

Perspective is key to understand what’s really

Single rst-time buyers struggle to buy a house

Over the past two decades, even though the percentage of new house purchase loans taken out by firsttime buyers (FTBs) has continued to increase, high prices and affordability issues have meant a big reduction in the proportion of mortgages taken out by single FTBs.

With housing at its most unaffordable level for 150 years, firsttimers are particularly impacted. Rates of ownership among 25 to 34-year-olds are round 41%, having collapsed from 59% in 2003.

According to data from UK Finance, the number of loans to FTBs fell to 370,200 in 2022, by around 9% compared with 2021 – a year which saw the highest level of FTBs since 2006. Although the actual number of loans to FTBs fell in 2022, the proportion of their loans as a percentage of all house purchase loans increased, and now stands at 54% –its highest ever level. The continued number of FTBs entering the market reflects the overwhelming desire to become owner-occupiers.

However, the proportion of FTB loans taken out by single applicants fell in 2022 to 45%, reversing the increase in 2021 under the temporary Stamp Duty holiday. In 2006, singletons accounted for 53% of all FTB loans, but this has fallen steadily as affordability issues hit. During the first five months of 2023, the proportion of FTB loans taken out by single people stood at 46%.

Should we be concerned about this reduction? Yes. FTBs are crucial to the health of the housing market. Without them, the market would grind to a halt. We also know that the dream of owning your own home remains as strong as ever.

However, over the past 50 years, due to a combination of an ageing population, an increase in the number of divorces, and more people choosing to live alone, there has been a change in household composition – singleperson households have doubled. This has increased the demand for properties from singletons, who have suffered as the lack of housing supply has pushed up prices to levels never seen before.

Shared Ownership

There is some light at the end of the housing tunnel, particularly through the Shared Ownership scheme, which allows borrowers to buy a share in the overall value of a home and pay a rent on the rest of it. The scheme is specifically aimed at helping FTBs get on the housing ladder.

Shared Ownership has quickly become the tenure of choice for many FTBs. In 2021-22, more than threequarters of private registered provider Shared Ownership sales were to first-timers. The scheme can also help younger people become homeowners earlier, with the average age being 31, compared with 34 for FTBs in general.

Shared Ownership is especially important for singletons, as it provides a much be er chance to get on the housing ladder. In 2021-22, around 56% of these purchases were made by one-adult households, versus just 29% for FTB households in general.

Leeds Building Society is the largest Shared Ownership lender in the UK, and we know that the deposit requirements are typically lower, so it can also shorten the period someone needs to save up for their deposit. The average deposit required for a Shared Ownership mortgage in 2021-22 was £20,800, compared with £43,693 on average for FTBs.

A matter of stock

As we approach National Shared Ownership Week in September, singletons still face huge pressures in ge ing on the housing ladder due to insufficient new-builds.

Across England there were 210,070 properties built in 2021-22, of which only around 28% were classed as affordable homes. There were 19,386 new Shared Ownership properties delivered in 2021-22, of which 92% were new-builds, meaning Shared Ownership properties accounted for just 30% of the new-build total. That figure is way too low.

It’s estimated that over the next 15 years the UK will require five million new homes – an average of 340,000 each year. This is greater than the Government’s current 300,000 target, which has not been achieved since 1971. The average number of homes delivered each year over the past decade has been under half this figure.

Achieving these targets will be difficult and will take all parts of the market to deliver this level of housebuilding, from private developers to housing associations and local government.

But the longer-term aim for the next Government, whatever that might be, should be to address the drastic shortage in housing.

The issues facing homeownership are deep-rooted and wide-ranging, but building enough homes to meet demand is the right place to start and would be the first step in delivering on the homeownership aspirations of millions of people. ●

MARTESE CARTON is director of mortgage distribution at Leeds Building Society

Family support for purchases should be accessible to all

The cost-of-living crisis, inflation, high rents and rising base rates, along with property prices far outstripping average incomes – there’s no denying that today’s first-time buyer has a sea of economic challenges to overcome on their journey to owning a home.

It’s no wonder, therefore, that generational support is becoming more heavily relied upon. More firsttime homes are being bought with support from parents, grandparents and siblings than ever before.

The ‘Bank of Mum and Dad’ –having financial help from parents in order to purchase a home – is a common concept in the UK, yet a stigma remains.

The phrase conjures up images of the privileged minority with plenty of extra cash reserves comfortably gi ing large sums of money to their children. While this is, of course, a stereotype like any other, not all who support their children in buying a home are extremely wealthy.

The fact remains that is not easy or straightforward for everyone to support their family members in ge ing a foot on the property ladder.

Traditionally, lenders have only easily supported familial support in the form of a gi ed deposit: that is, cash given to the homebuyer for a deposit with no expectation of having any of it returned.

There are strict rules that this cannot be a loan – it must be stated in writing that this is a gi with no intention of repayment. This clearly restricts who can support their family and how they can help get their foot on the ladder: in essence, only those who have enough additional cash to give away and not expect a penny back.

Family support for buying a home is becoming increasingly common, so we as an industry need to think about how we can make familial support accessible to more people.

At The No ingham, we are proud to have partnered with innovative fintech disruptor Gen H which is doing just this. As its only building society partner, we have provided a forward flow of funds to help Gen H roll out its innovative lending products to more people.

ALISON

We need to be able to allow more people to support loved ones in the journey to ownership – not just those who can gi cash reserves with no need to have it paid back.

It is partnerships like these –between historic lenders and industry innovators with a shared vision of making the dream of homeownership a reality for all – that will help make family support more accessible to a wider range of borrowers.

We must work together and support each other in this industry, to create a be er ecosystem that meets the needs of today’s borrowers.

We’re delighted to be able to provide not only funding but expertise and knowledge, as a lender with a 170-year history. As part of our partnership, Gen H will broaden who can support their families in home buying, and how such support can be offered.

Its innovations mean that people can easily help their children, grandchildren, nieces and nephews, brothers and sisters, and even friends without having to gi money that they don’t need paying back.

Supporting loved ones

Whether it is by making a loaned deposit contribution as simple and straightforward as a gi ed one, or allowing a simple way to commit to supporting monthly repayments, a flexible and forward-thinking approach to family support is refreshing and necessary.

A need for innovative thinking and support is even more prudent when we consider that today’s modern borrower is not only facing external hurdles such as high house prices, but that the very nature of who they are and how they work is changing.

The concept of a full-time ‘job for life’ is simply no longer the norm. Today, ever more people are working on contracts, are freelance or selfemployed, or have multiple income streams. It is these borrowers who face additional challenges in the mortgage market, and who need as many options as possible to help them get on the ladder – including different ways for family and friends to support them.

The mortgage sector must adapt to the needs of borrowers and offer solutions which reflect the economic environment, and I look forward to seeing how traditional lenders and financial disruptors can continue work together to make familial support an option for everyone. ●

PALLETT is sales director at Nottingham Building Society

Traditionally, lenders have only easily supported familial support in the form of a gifted deposit”

Is the mist nally W

e’ve seen a rollercoaster of ups and downs in mortgage rate trends since the Bank of England (BoE) began increasing its base rate in December 2021. Average market rates currently stand at 6.16% for a 5-year fix and 6.67% for a 2-year equivalent. A far cry from the circa 1% offerings which had been commonplace since 2008. Questions like ‘what will interest rates do next?’ and ‘which mortgage should I choose and when?’ are now perhaps the most common ones being fielded by brokers every day. So, when this happens, what should they say?

Well, a er months of uncertainty during which the swap rates lenders reference in pricing products have bounced around all over the place, there are now tangible signs that the central rate which influences them –in addition to other factors – may be close to reaching its peak.

BoE governor Andrew Bailey addressed the Commons Select Commi ee on 6th September, telling MPs he believed that “we are much nearer now to the top of the

cycle,” a ributing his new-found optimism to falling energy prices and a weakening labour market.

He also predicted that high inflation, which successive rate increases have been intended to curb, will “fall quite markedly” before the end of 2023. This, if it happens, will reduce the need for further tightening, and the likelihood of the BoE’s Monetary Policy Commi ee feeling the need to increase the base rate again in future months.

This, of course, means there may at last be hope on the horizon for borrowers struggling with mortgages and other cost-of-living pressures; however, brokers are still likely to hear the question ‘how quickly and how far might rates fall once the trend does reverse?’

While no one can offer a definitive answer on that, it does help to be able to explain to them all the elements at play, and what they might mean.

Steady away

The governor’s change of tack follows a range of economic factors showing tentative signs of se ling down.

Threadneedle Street’s chief economist Huw Pill had already indicated that the rate rises were working, although policymakers were still having to respond as the economy and data evolved. This was due to the components fuelling the need for rate rises being volatile from month to month, as borrowers wrestle with a range of issues affecting the ability to afford both daily essentials like food, fuel and energy, and their mortgages.

The main ‘enemy’ the Government and Bank of England have been trying to beat into submission via higher interest rates is, of course, inflation.

They have faced a difficult balancing act in trying to bring this cost driver down from its recent heady heights – Consumer Price Index (CPI) inflation topped out at 11.1% in October 2022 – to their target expectation of 5% by the end of 2023, without imposing such curbs on people’s pockets that it pushes the country into recession, defined as two quarters of negative economic growth.

The latest figures released by the Office for National Statistics (ONS) for June pegged CPI inflation at 7.9%, so it seems they are on track to achieve

starting to clear?

this crucial stabilisation; however, it’s important to remember that there are broader factors at play, and even an eventual reduction to 5% would be higher than the usual target of 2%.

Growth is another vital component of the country’s economic health.

According to the International Monetary Fund (IMF), the UK is set for the slowest growth out of the richest economies, predicted to fall to 0.5%, 0.7% below its forecast earlier in the year. Indeed, while gross domestic product (GDP) was up 0.2% quarter-on-quarter, overall economic output is still only about 1% higher than it was in 2019, pre-pandemic. We have hovered around this point since Q2 2022.

Meanwhile, in August, the National Institute of Economic and Social Research noted that we could be entering a period of stagflation – a toxic combination of higher inflation and li le growth, fuelled by the unique structural issues the UK faces, also highlighted by Pill recently, like productivity and our trading relationship with the EU.

While the potential stabilisation of rates is good news, the real challenge for the powers-that-be, going forward, will be how to drive growth without

sending inflation spiralling again. We will all now be watching September’s base rate decision in earnest.

Most sectors will have felt the impact of the past year’s economic volatility, with financial services providers like ourselves front and centre when it comes to reacting fast to cushion the impacts for our customer base.

However, it will be interesting to see how discussion evolves in the months ahead around wider factors impacting the UK’s financial health, like trade barriers, productivity and fiscal policy.

For example, Brexit continues to weigh heavy, with a recent Department for Business and Trade annual survey of 3,000 companies revealing many have concerns around red tape and supply chain issues, as well as falling demand for UK goods and services.

At the same time, the Office for Budget Responsibility (OBR) forecasts that we’re heading into the highest tax burden in post-war Britain. Both reports serve as a reminder of the UK’s ongoing challenges. The fact that, despite these, economic news remains dominated by inflationary linked ma ers more typical of boom times, further highlights the complexity.

Nevertheless, the UK is also showing signs of resilience. The collapses in growth and house prices many pundits predicted haven’t materialised, and it looks hopeful that we could avoid recession.

While this is good news on the one hand, the fact remains that any dramatic recovery still looks unlikely.

As issues surrounding inflation hopefully start to recede, the more farreaching structural challenges may become more obvious issues – lack of growth in particular.

One irrevocable truth, however, is the vital role brokers play in helping their clients – our borrowers – navigate a safe path through the minefield that is the current mortgage market, helped by innovation from lenders. ●

DAVID MORRIS is chief operating o cer at Yorkshire Building Society

JEREMY DUNCOMBE is managing director at Accord Mortgages

Coming –ready or not

Just when lenders find themselves dealing with distressed borrowers – selfdiagnosed or otherwise – Consumer Duty has added more complexity to mortgage lending. This does as much, I think, to increase lenders’ regulatory risk as it does to address the economic risk to borrowers.

Consumer Duty is the first step on a path that moves away from a focus on pure product regulation, and the behaviour and processes around that, to embrace a notion of borrower outcomes. We will all discover in due course how broad that word really is, but it is seismic in its implications for everything around advice and borrower management.

Key to the idea of good outcomes is the idea that a lender understands its borrowers, and how vulnerable they might be.

money is arguably vulnerable. A er all, they are in someone’s debt. But the real point here, on a practical risk basis, is around how firms decide what action to take with which individuals.

For now, at least, we should assume that borrowers are not vulnerable until circumstances, either of their own others’ making, have made them so.

Lending remedies

Interestingly, in addition to the Consumer Duty requirements, some lenders have signed up to the Mortgage Charter and pledged to offer certain remedies which, while not new, defer economic judgements to political decision-making rather than prudent lending.

Clearly, the right option for any borrower in distress will depend on the customer’s circumstances. But in those very moments, that might not be so obvious. It is unlikely that everyone will simply unanimously agree which measure best delivers the right outcome.

TONY WARD is non-executive chairman at Fortrum

We go back to outcomes. “Our rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability –and how they behave, at every stage of the customer journey,” states the FCA.

“As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.”

The intention of this regulation is to offer greater protection to consumers, and with good reason. The majority of lenders are readying themselves for 2024, and recent senior appointments among lenders in collections departments tell their own story.

To recap, the Financial Conduct Authority (FCA) is crystal clear. It states: “Our view of vulnerability is as a spectrum of risk. All customers are at risk of becoming vulnerable, but this risk is increased by having characteristics of vulnerability.

“These could be poor health, such as cognitive impairment, life events such as new caring responsibilities, low resilience to cope with financial or emotional shocks and low capability, such as poor literacy or numeracy skills.”

Vulnerability as a concept in financial services, it appears, is expanding. I’d be tempted to suggest that anyone who needs to borrow

We will in some instances, I am sure, have the prospect of doing the very best to keep people in their own homes even when the circumstances this action create more problems at the end of a period of payment relief. Borrowers may actually owe more than if they had handed in the keys. There will be exceptions where walking away will be the best option for a borrower.

The line is unclear, and boardrooms need to understand that the guidance they give at a high level will have to work at a granular level operationally, and be evidenced as such.

When does forbearance start to act to the customer’s detriment, who is the judge of this, and can it be decided before the fact?

When interest rate movements happen, who becomes vulnerable, and should all responses really be the same?

It’s a division of most lenders’ operations that has lain relatively untested since 2007. Most expect arrears to grow and initial signs of distress are already visible. Lenders are under no illusion that the regulator expects forbearance and leniency where consumers are under duress through li le fault of their own.

Consumer Duty has changed the focus of what constitutes good behaviour, and it is more important than ever that lenders understand the risks to their loans from this change. From distribution to servicing and funding, many of the logical actions implied as a result of these rules will impact how loans are wri en and managed for years to come.

As we move into a new era of consumer care, the entire value chain from broker to funder will need to understand where their responsibilities lie, where the handoff points begin and end, and how the interplay between the parties involved in lending has to evolve to afford not just be er outcomes for one party, but for everyone. ●

The entire value chain from broker to funder will need to understand where their responsibilities lie”

Putting the borrower in control

complete, at a time when speed is o en of the essence.

The second component is the role of title insurance for relatively straightforward remortgages.

days. It’s not a long period of time. It’s less than your two-week summer holiday, for example.

But following the launch of our fasttrack remortgage service last October, this is the average time it takes for our remortgages to complete once the offer has been issued for borrowers using this service. The time taken by the broader industry is higher – much higher – but more on that in a moment.

It seems reasonable to assume that the velocity of remortgage approvals could be the story of the industry for the rest of the year.

A vast number of fixed-rate deals need to be remortgaged. Some 81% of outstanding residential mortgages are fixed agreements and – according to Government data from January – most of those coming to an end this year were set at interest rates below 2%.

As if anyone needs reminding, the Bank of England’s base rate currently sits at 5.25%, a er a rapid ascent.

Approximately 800,000 fixed-rate borrowers will have gone through this process in the second half of this year. How many of them will experience high levels of anxiety about ge ing their deal over the line before it expires, while also worrying about being exposed to higher rates?

Increasing the velocity of approval, improving borrowers’ chances of achieving the rate they want, and reducing these likely levels of anxiety are all possible.

This is why we believe that it is important to put borrowers back in control of the remortgage process, enabling them to complete quickly once the mortgage offer has been issued.

Speedy and e ective

One material contributor to these shorter remortgage approval times is efficient conveyancing. In our view, there are two components to speedy and effective legals.

The first is an in-house legal team. This means a team of solicitors who sit within the mortgage business, rather than an agreement with a single law firm or panel of solicitors.

External legal advice can, of course, bring many benefits. These depend on the specific lender-lawyer service level agreement and the type of transaction taking place. Not all cases have straightforward legal requirements, and in those instances it would be prudent to obtain separate legal representation.

However, when lenders start to bundle such services into their products, marketing them as free legals, the cost benefit can easily be wiped out if it takes weeks or even months for the remortgage to

Post-transaction title claims – from a property’s previous owners, its builders, or others – are not common. Nevertheless, they can pose a significant threat to the remortgaging process, especially in terms of time. Just when your client believes they have a done deal, they are thrown off balance by this wagging tail risk.

Bundling title insurance into the legal process from the start can reduce the time it takes to remortgage. This is what can take a borrower down to that 11-day average.

Essentially, what we have here is the second charge legal process placed into the first charge market. This is all designed to put the borrower in control of their remortgage process.

We understand the siren call of free legals can appear a ractive. The cost-of-living crisis continues, with household disposable income down 0.6% year-on-year, and more than 1.4 households facing the prospect of higher interest rates.

Free legals do not necessarily mean be er legals. They can, in fact, o en mean a longer process. This is the ‘two to six weeks’ o en quoted by the industry. Plus, a longer process can mean missing the target date of a deal’s expiry. At a time when anxiety levels will be high, this is needless additional pressure on the borrower.

Instead, pu ing the borrower in control of time and costs, giving them piece of mind about their chances of meeting their target, is surely the bigger and more valuable prize. ●

MARIE GRUNDY is managing director of residential mortgages and second charge at West One Loans

In the driving seat: Putting the borrower in control of time and costs gives them piece of mind

post-nups have a vital role to play

Apre-nuptial agreement – or ‘pre-nup’ – is a legal document drawn up between a couple before their marriage to outline how each of their assets will be divided in the event of a divorce. A post-nuptial agreement does exactly the same thing, only it is created during the marriage.

To many, the idea of signing a prenup may seem unromantic, or even pessimistic. However, this is far from true. Even se ing aside the high rate of divorce in the UK, pre-nups are a very sensible way to enter into a marriage with a shared sense of openness and honesty, and should be kept in mind by all financial advisers when exploring wealth protection and estate planning options for clients.

Unlike many jurisdictions around the world, pre-nups are still not legally binding in the UK. There has, however, been a growing recognition within the English courts that pre-nups that have been entered into properly should be upheld, provided they meet the needs of the parties concerned.

A tool for certainty

If dra ed properly and with all the necessary criteria satisfied, pre-nups can be an invaluable tool to protect wealth and provide both parties with a degree of certainty for the future. They help avoid lengthy and distressing litigation when a relationship breaks down, saving time and money, and are increasingly viewed as a way to foster trust and open communication between parties about finances.

At Hall Brown Family Law, we have seen an increased number of instructions over the years from

couples wishing to enter into a prenup. Generally speaking, they are more likely to be put in place when one partner entering a relationship already has, or is likely to receive, more assets than the other. For example, the most common scenarios tend to be: those who enter a relationship with generated wealth or established business interests; those who have, or are likely to receive inheritances; and landowners, business owners or couples who are marrying later in life and wish to ensure that the wealth they have built up can be passed on to their children.

It’s important that clients understand the benefits of a prenup, and how it can significantly support people when it comes to amicably dealing with a relationship breakdown.

Key factors

Asset protection: Once married, parties have various financial claims against one another’s assets, which can include those brought into a relationship. A pre-nup helps protect assets such as inherited wealth or anticipated inheritance, business and trust assets, gi s, properties, and children’s financial interests, as well as other valuable assets.

Clarity: This type of agreement allows for a degree of certainty and transparency which can avoid arguments later down the line on visceral issues. It is also an opportunity to view things in a fair and objective manner, as opposed to a position of potential hurt or conflict, where emotions can cloud judgement. Cost benefits: It is far less expensive to negotiate and dra a nuptial agreement than embark upon expensive financial proceedings upon divorce.

ELLEN FELL is a senior associate solicitor at Hall Brown Family Law

Less stress, more freedom: Not only does it minimise acrimony upon separation, but it also allows for greater freedom of choice as to what to include in the contract, as opposed to having the terms imposed. Control: Clients can choose a specific process. This might include collaboration, mediation, or roundtable meetings, whereby the dialogue can be far more valuable than wri en communication.

We understand that advisers o en find themselves dealing with clients who require family law advice, and there are many unanswered questions clients may have. Financially, it is always in the best interest of the client to seek legal advice at the earliest possible time to safeguard their finances, understand all the options available to them and allow for future plans to exist.

At Hall Brown Family Law, we thrive on working with clients to help them enter or exit commi ed relationships in a financially secure way. ●

Pre-nups and

There has been a growing recognition within the English courts that pre-nups that have been entered into properly should be upheld, provided they meet the needs of the parties concerned”

The Inter view.

value of what he refers to as the ‘mutual mindset’, which he rst found when he joined e Woolwich.

He says: “Re ecting on my career, the mutual sector is one I feel quite strongly about.

“ is is the notion of, yes, being a business that strives to generate a pro t, but one that sustains its position to continue to provide its services well into the future, and distribute the value that it generates through its membership and into the community it serves.

“It’s a relatively simple model, but one that I found a very strong connection with.”

Wass describes this mutual ethos as being focused on pro ts as a source of sustainability and a cushion for the future – whether that is in the context of steady growth, or a bu er to provide protection for both the society and its members against the shocks and vagaries of a cyclical market.

He also sees this mindset as being inherently linked with listening to members, and using those pro ts to develop the business in ways that are important to them.

From the point he started out at e Woolwich in the ‘90s, through to two decades spent at major institutions – including Barclays and Nationwide – Dan Wass’ career has given him a strong foundation and broad base of expertise in nancial services.

All of this came to a head when he took over as CEO of the Buckinghamshire Building Society in September 2022, with a view to focusing on the mutual’s everyday relationships, reinvigorating its membership, and moving it from a product to a propositional mindset.

At the anniversary of his taking over this role, e Intermediary spoke with Wass about his achievements so far, how the Buckinghamshire Building Society has fared during a turbulent year, and what lessons he has learned for the months ahead.

The mutual mindset

Looking back over his experience so far, Wass notes that he has always been aware of the

“Once we’ve made sure that we’ve got su cient protection and cushion for the future, we can then start to invest in our products and services,” Wass explains. is is one of the things that drew Wass to Buckinghamshire Building Society.

He says: “I could see from the beginning that Bucks has a very clear mutual ethos.

“It’s very proud of its heritage and its roots, and has been around for a long time – founded in 1907. You won’t be surprised, then, to hear that there is also a strong set of values and a strong culture.

“It was a combination of those reasons that meant that, when the chance arose to lead [the society], it was a real opportunity and privilege to join an organisation with that heritage, purpose and mutuality, and a team of people that have such strong values.

“It was a big opportunity to lead and shape that for the future.”

Part of this mutual ethos, put simply, is that the building society is very much rooted in Buckinghamshire. It has worked hard to maintain deep connections to its community, while also, of course, distributing mortgages at a national level.

Jessica Bird sits down with Dan Wass, CEO of Buckinghamshire Building Society, to look back over his rst year at the helm, and ahead to the society’s future

Buckinghamshire Building Society

Overall, Wass explains, this mutual mindset – whether it is investing in local relationships, creating a cushion for an uncertain future, or listening to what members want – is increasingly important in the modern world.

Mortgage borrowers across the board are facing rising costs, tightening in ationary pressures, and an ever-moving carousel when it comes to products and prices. For many, the value of working with an organisation that focuses on sustainability and accountability, both for its clients and in its impact on the world around it, is only going to rise.

Wass says: “ ere is a strong resonance with those sorts of business models, given the pressures that the planet is facing at the moment – fairness, sustainability and the distribution of value is as relevant today as it ever has been.

“As the world moves on at pace, even more people will take notice of this model.”

Walking the walk

While the idea of having a clear culture and set of values, as well as pride in its heritage, history and local community, are all well and good, Wass is clear that this foundation is not just high-level messaging and good PR.

It also shows in the day-to-day dealings brokers and members have with Buckinghamshire Building Society. To put it simply, this is not just talk.

One element that makes Bucks stand out, for Wass, is its clear mortgage and lending proposition. At its core, this is founded on the simple purpose of supporting people into homeownership.

Beyond this, however, the building society has carved out certain niches, such as tailored products for those with credit blips, family assist options to allow parents to help their children onto the housing ladder, joint borrower sole proprietor (JBSP) mortgages, self-build deals for those looking to build their own dream home, and on into buy-to-let (BTL), holiday let, and specialist expat o erings.

One of the factors underpinning this proposition, Wass says, is the commitment to provide brokers and borrowers with “access to human beings.”

is includes human underwriting for every deal it handles.

“ at sits right at the centre of our proposition, and is one of the things that is uniquely di erent about our approach,” he adds.

“In accordance with that, we’re able to think about how we nd solutions to needs that can be identi ed in the market, whether they’ve

The team has worked incredibly hard to build these strong, open relationships with the broker community. And we can see through the feedback that this really has resonated – we hear back about the openness, friendliness and supportive nature of the teams that work here”

been raised through our broker relationships or through our own members directly.

“We have this unique position where we can start to see those opportunities.”

is consistent approach to seeking both new opportunities and solutions to the real issues faced by members and brokers is also supported by the society’s strong local partnerships. ese help it understand the market realities, and work with partners and members to focus on their needs.

“ e ‘Bucks way’ is to deliver a service that matches the product line,” Wass says.

Brokers are a particularly important element of this. To this end, Wass explains, the society’s approach centres on accessibility, openness and transparency.

“ e team has worked incredibly hard to build these strong, open relationships with the broker community,” he says.

“And we can see through the feedback that this really has resonated – we hear back about the openness, friendliness and supportive nature of the teams that work here.

“Given the challenges the market is facing at the moment, those elements are particularly strong.”

The rst year

While Wass settled quickly into his new role, it was certainly not against a market backdrop anyone would wish for.

Whether the seemingly endless interest rate hikes, the e ects of the cost-of-living crisis on large swathes of the borrower community, or broader geopolitical turbulence on the world stage, this has been a dramatic year, to say the least. is has taken an inevitable toll on the mortgage market, and the lenders that make it up.

“ e market has changed dramatically just in the year I’ve been here,” Wass says.

“It feels completely di erent to where it was 12 months ago.

“What would have been the relatively simple task for lenders of pricing mortgages then is now a very challenging thing to do, driven by a lot of uncertainty.

“It has made for challenges in pricing funding and mortgages at a level that is sustainable.

“ ere is a global geopolitical set of challenges, combined with the national circumstances that have stimulated a lot of change.”

Nevertheless, Wass points out, Bucks itself has shown some solid results, even reporting 12.7% asset growth and a £1.5m pre-tax pro t when it released its nancial results in March 2023.

In addition to this, the society hit all its key metrics, including member satisfaction, which remained strong in spite of the challenges facing lenders.

“As I re ect, the year has passed very quickly, but it’s a year in which we’ve taken some big strides,” Wass says.

“We had a clear strategy when I arrived, and that hasn’t changed.

“As a small society with a distinct proposition, the strategy was to achieve a level of measured growth.

“What we did a year ago, which I was particularly pleased about, was to put a simple shorthand around that strategy, which we refer to as: sustainably strong, member centred and community rooted.

“What that has done is allow us to both internally and – to an extent – externally build better communications and marketing, and to distil our priorities down and create more clarity as to how our proposition is put out to the market.

“It has allowed us to sharply prioritise internally, and to channel our e orts in ways that we know matter to our members and the brokers that we work with.”

Wass also re ects on the community aspect of the mutual model, with the society having made key investments into local organisations such as the South Bucks Hospice over the past year.

More to come

Looking back at those nancial results, Wass has a positive outlook for the society in the year ahead.

“I was really pleased with the solidity of those results in the context of a market that,

for everyone, was particularly challenging,” Wass says.

“Going back to that mutual model, that enables us to think about how we’re going to invest further in the proposition.”

As well as taking a closer look at aspects like technology, this is about investing further in local relationships, particularly with brokers.

He says: “ e broker relationship is key for us, and how we develop those relationships is important, too.

“At the moment, we’re starting the extension of our Platinum broker proposition, extending those services to brokers based locally, in order to o er them fast-tracked [decisions in principle (DIPs)] and applications, right the way through to exclusive products.

“We’re looking at ways we can particularly drive up the local proposition, whether for mortgage brokers or directly to members.”

For the second year of his tenure, and following a strong performance in the rst, Wass says the focus will be on “moving with the times but recognising feedback.” is includes boosting members’ online access on the savings side, and looking to extend its community investment and partnership programme into 2024.

Resilience and competition

For the wider market, Wass says that casting an eye back over the dramatic challenges faced over the past year does show evidence of a silver lining, in that it has demonstrated the resilience of the both the economy and, more speci cally, the housing market. is makes him hopeful about staving o recession, and could allay concerns about a the potential for a signi cant house price drop.

Wass says: “ ere are signs of resilience there, though I don’t think we’re through the woods yet.

“ e mortgage market has clearly been subdued, and will continue to be, but has shown signs of resilience too.

“ ese conditions will continue, certainly in the short-term.

“ ere will be increased competition for funds over the short-term as lenders look to secure funding at the right price, and until the base rate stabilises it will continue to be a challenging environment.”

Rather than a bleak outlook, however, Wass explains that it is times like these when lenders such as Buckinghamshire Building Society, with foundations focused on steady growth, sustainable pro ts and supportive service, are able to come into their own.

“We – and other lenders with a similar ethos –should be there for our respective members and brokers,” he says.

“ ese are the times when we should be listening to the market and our partners, to what their needs are, working through where it’s prudent for us to participate.

“ ese times are designed for lenders like us, as long as we are clear about where people’s needs are, and where we can and cannot provide solutions.

“We shouldn’t feel pessimistic, we should look for those points of opportunity and optimism.”

Lessons for the future

When looking ahead to the future, for both the market and the building society itself, Wass further stresses the importance of remaining optimistic.

Indeed, this is all the more important as he predicts that 2024 will see more of the same when it comes to market turmoil and uncertainty. Even when the market does move beyond this turbulence, it is unlikely that it will ever quite see a full return to the conditions that were considered normal prior to the Covid-19 pandemic.

However, he notes that even in the face of these challenges, it is clear that the housing market is stronger than it was during the 200708 Global Financial Crisis, and while advising caution, he does not anticipate a substantial house price drop, despite some of the more pessimistic predictions plaguing the headlines.

For Bucks, the future means continuing its steady, sustainable growth strategy, guided by brokers, members and its local partnerships. is includes enhancing the journeys of both brokers and members, as well as considering what areas of the market are currently underserved, and where the society would be best equipped to make a di erence.

“ ere are some important things we want to do to enhance our local partnerships with brokers, so expect to see more of that in the coming months,” Wass says.

Finally, he concludes: “Ultimately, we will be growing sustainably, being membercentred – which brokers are integral to – and community rooted.

“ at agenda remains, and we will just be looking to refresh it, re ne it, and keep it relevant.” ●

These conditions will continue, certainly in the short-term. There will be increased competition for funds over the short-term as lenders look to secure funding at the right price, and until the base rate stabilises it will continue to be a challenging environment”

EPC bill doesn’t just need to be delayed… it needs rethinking

For more than two years now, landlords have been living under a cloud of uncertainty.

Potentially, they face a bill in the tens of thousands of pounds to ensure their properties have an Energy Performance Certificate (EPC) rating of at least Band C by either 2025 for new tenancies, or 2028 otherwise.

I say potentially, because the bill proposing that has fallen into some sort of political purgatory, yet continues to evolve in the background, such that a new single deadline of 2028 has recently appeared.

The snappily titled Minimum Energy Performance of Buildings (No.2) Bill, introduced in 2021 by the late Sir David Amiss MP, reached the second reading stage in May 2022 and has stayed there ever since.

Going by current timescales, that means landlords have less than 15 months to find the money to make the required upgrades. That is simply unfair, and is nowhere near enough time.

Given that the bill must go through 10 more steps in the legislative process before it receives Royal Assent, there is no way the current timetable is workable. That’s assuming it becomes law at all, seeing as so few Private Members’ Bills do.

As a result, calls for the implementation of the bill to be delayed have grown louder. The most recent of those came from none other than Michael Gove.

Not enough

However, in my eyes, the bill not only needs to be delayed – it needs to be rethought entirely.

As one of the first lenders to introduce a green mortgage range in

2021, we wholeheartedly support the drive to make the UK’s housing stock more energy efficient.

While I have no doubt that this bill was proposed with the best intentions, it is the wrong document, in the wrong place, at the wrong time.

There are so many holes and potential pitfalls in the legislation that there is a serious risk of unintended consequences, were it to go through in its current format.

Firstly, basing the legislation on the flawed EPC system is unwise at best. EPCs are not fit for purpose, as they are based on energy costs, rather than emissions, meaning they do not always incentivise property owners to lower their carbon footprint.

Architects have also argued that these simplistic certificates unfairly punish owners of older buildings, and are based on outdated data assumptions.

While the EPC system is clearly flawed, I am conscious of the fact that it is the best we have currently got. However, a commitment to reforming it should form part of this legislative bill.

Another major cause for concern is the proposed exemption clause. As things stand, landlords can apply for an exemption if the cost of the works exceeds £20,000, or the work is unfeasible.

But how will that be policed? What’s to stop a canny property owner obtaining a grossly inflated quote from a friendly-yet-unscrupulous builder?

Moreover, it is far more likely that energy efficiency upgrades on a £2m house in Surrey will breach the threshold than a £200,000 house in Bradford. This clause punishes those landlords who can least afford it.

Incentives and tax breaks are sometimes controversial, but I cannot

COOLE

see how this policy could be workable without them.

The expression of a ‘carrot and stick’ approach stands the test of time across all areas of endeavour – where is the incentive that always precedes the penalty?

Suggestions that lenders will simply further ‘incentivise’ those who can get to the required level stops short of considering the real costs and disadvantages to those who cannot ever reach that level.

Looking to lenders

At the moment, the legislation will require lenders to ensure that the average energy performance of their portfolios is at least EPC Band C by 31st December 2030.

Lenders could decline to lend on new transactions from an effective date, but those with current mortgages would rightly challenge the terms and conditions that do not cover this requirement, and turn lenders into the Government’s police.

As an industry, we have spent over 15 years agonising about mortgage prisoners, yet now run the risk of creating a far larger cohort of ‘property prisoners’.

Unfortunately, everything is up in the air, and as far as anyone can tell, we are no closer to getting a clear position from politicians.

We need MPs to agree on a position and a timetable, but most importantly, they need to address all of the weaknesses I have identified above.

If they don’t do that – and soon –then I worry the implementation of this piece of legislation could be a catastrophe. ●

ELISE

is managing director at Keystone Property Finance

Competitive options for those who keep the faith

In light of the economic turbulence experienced in recent times, a large number of landlords across the UK have taken stock of their financial position and the performance of their portfolios, and in some cases, re-evaluated their short, medium and longer-term buy-to-let (BTL) aspirations.

Inevitably, this has led to some landlords selling up and exiting the market altogether, although it’s fair to say that this trend has been far more prominent among landlords with one or two properties, rather than at the more professional end of the spectrum. In fact, from discussions with our intermediary partners who service the needs of larger portfolio clients, confidence remains largely unwavering among this latter type.

This assurance helps underline just how remarkably resilient the BTL market continues to be.

Limited stress

One of the main factors behind this sustained confidence is the number of competitive options still available for landlords who benefit from the tax efficient nature of trading through a limited company vehicle, and from the lower levels of stress testing by many lenders for this product type.

The sustained rise in limited company lending has been ably supported by the quality of advice on offer across the intermediary market, not to mention an even more professional approach on show across the whole sector. This trend is only likely to continue.

In fact, according to the Q2 2023 Landlord Panel research from BVA BDRC – in conjunction with Foundation Home Loans – almost three-quarters (74%) of respondents

are now intending to buy their next property within a limited company structure, a figure which represents a new high, up 12% compared with Q1.

The report outlined that only 17% plan to purchase as an individual, a fall of 7% on the previous quarter and a whopping drop of 12% compared to Q4 2022.

Those with larger portfolios remain significantly more likely to purchase in a limited company structure – 63% of six-plus property landlords, versus 37% of those in possession of one to five properties.

Renting for longer

The strength of tenant demand is also playing a key role in the positive outlook for portfolio landlords, and with a growing number of potential buyers being priced out of the housing market – a combination of significant house price growth, higher mortgage rates, rising living costs and the impact on affordability – there continues to be a supply and demand imbalance.

This combination is forcing more people to rent for longer, which – in a classic ‘Catch-22’ situation – is fuelling further demand, pushing up rental costs and therefore denting financial capabilities to build deposit pots for a future purchase.

These factors were reflected further in Q2 BVA BDRC data, which showed that tenant demand remained high and stable, with two-thirds of respondents reporting increased demand over the last quarter.

The research outlined that just 2% of landlords have seen a fall in demand over the past three months, and there’s no sign of any let-up, with demand currently sitting at a historic high.

This heightened demand is also resulting in a greater proportion of

GRANT HENDRY is director of sales at Foundation Home Loans

Just 2% of landlords have seen a fall in demand over the past three months”

landlords reporting rising rents in Q2 2023, with 85% experiencing an uplift in rents being charged within the areas they let properties.

The proportion of landlords planning to increase rents in the next six months remains stable at around one in two. However, single property landlords are said to be much more reluctant to increase rents – with just 29% planning to do so – and those who are planning an increase will do so by 8.4% on average.

Part of the conversation

The private rented sector is never too far from the headlines, and its importance within the wider housing conversation will continue to grow, with the UK is slowly but steadily transforming into a nation of renters.

In fact, recent analysis by Sky News suggested that only three countries within the EU – Germany, Austria and Denmark – have more renters as a share of their population than there are in the UK.

This is an enlightening fact, which further demonstrates the importance of the role being played by landlords, buy-to-let lenders, and advisers working for an everincreasing number of individuals, couples and families across the UK, who are relying on good quality rental accommodation to meet their housing needs. ●

Reliability is crucial for brokers with complex cases

The role of a broker often isn’t easy. Some may think this is an understatement, and others may disagree, but supporting clients is often challenging, and just one part of a multi-faceted role which requires a huge amount of resources to get deals over the line. That’s without taking market conditions into account.

One common frustration among brokers that we hear about is lender inconsistency and a lack of certainty. A broker places their case with the lender, and things appear to be proceeding positively, only for the lender to then drop out at the last minute.

At times this is justified due to issues surrounding, say, anti-money laundering (AML) or things not appearing as they seem. This is still, however, hugely stressful for everyone involved. The client may face a tight deadline – perhaps they are looking to get a new purchase over the line or refinance their portfolio from another lender by a certain date.

There is inevitably a financial cost, too, beyond having to write off any professional fees already paid. The buyer may miss out on that purchase altogether, or perhaps take the hit of remaining on a punitive reversionary, development finance or bridging rate.

Impact on the broker

There is a real downside to the broker, too. First and foremost, there’s the frustration that comes from their efforts coming to nothing, and the time spent getting the application together and pushing the case along only for it to fail. Then there are the professional consequences. Brokers miss out on procurement fees if cases aren’t completed, but these false starts

can also damage the relationship between the broker and client.

After all, while the client will primarily blame the lender, there may also be some residual blame laid at the door of the broker. How did they not see this coming? Why did they recommend placing the case with that lender in the first place?

The disappointment of one case falling through could mean that the client goes elsewhere in the future, denting the income of the broker not only now but for years to come.

Stepping into the breach

We have heard these frustrations firsthand from brokers, having rescued a number of cases recently where other lenders have pulled out.

While it’s not always possible to help, there have been occasions where our nimble processes and understanding of the residential buyto-let (BTL) and semi-commercial sectors have allowed us to move quickly and ensure that the client does not miss out. This is, in part, down to our flexible criteria, and our ability to get comfortable with the complex.

For example, we recently had a case where a customer purchased a property via bridging finance with another lender. The funds were used to refurbish the property with a view to using this as a holiday let. However, the original lender didn’t check the exit strategy thoroughly enough. As a first-time landlord, the customer was unable to exit the bridge, as the single assured shorthold tenancy (AST) income was deemed insufficient.

They might have defaulted, therefore resulting in credit impairment and the eventual sale of the property. Fortunately, based on the client’s background income, we were able to make an exception in this case

ANDREA GLASGOW is sales director –specialist mortgages at Hampshire Trust Bank

and step in to lend on this property for its intended purpose.

Choosing the right lender

Being a mortgage broker has never been a straightforward nine-to-five, but the upheaval seen so regularly in recent years means that advisers have had to put in the hours in order to deliver for their clients. Getting a case over the line has rarely taken quite so much time, and so much work.

It’s crucial for intermediaries to choose a reliable lender, to sidestep the dangers that come from placing a case with one that may not be able to deliver, when it says it can.

Lenders like Hampshire Trust Bank, which truly understand the specialist BTL market, stand out precisely because of that sense of reliability.

That starts with simply listening. We’re problem solvers and will always ensure at the start of a deal that we get as much detail as possible to ensure we see the whole picture. That human touch cannot be overlooked.

This continues throughout a deal, from initial contact with a business development manager, through to interactions with dedicated lending managers, and onto underwriting and credit.

Brokers want to deliver the best possible experience to their clients. That has always meant taking into account their full circumstances, and not just focusing on the lowest rate.

Working with lenders that go the extra mile, and have a track record of delivering for those in specialist situations, means that borrowers avoid the disappointment of a disappearing lender and ensure that their case gets over the line. ●

Landlords are weathering the economic storm

It’s understandable that confidence among brokers and borrowers has been impacted by recent economic conditions, but portfolios continue to perform, underpinned by record levels of tenant demand.

We recently published our Private Rented Sector (PRS) Trends report, covering the second quarter of the year. To create the report, almost 1,000 landlords provided insight on different aspects of the sector, including their expectations for various aspects of letting – capital gains, rental yields, the financial market, the PRS, and own a letting business.

The report reveals a fall in optimism, and sentiment is an important indicator of investment behaviour, because landlords are unlikely to purchase much-needed PRS properties if they are not confident about the sector’s prospects.

If we look back to the period following the peak of the pandemic and compare it to now, it’s no surprise that landlords, like brokers, don’t feel as optimistic. Two years ago, a mixture of strong tenant demand, record low interest rates and healthy portfolio equity due to rapidly rising property prices fuelled an incredibly buoyant market. In stark contrast, over the past year we’ve experienced a level of economic volatility not seen since the Global Financial Crisis.

It’s also worth noting that the research for our report was carried out in July, when swap rates, steadily increasing since mid-June, peaked to push up mortgage rates. Since then, inflation has eased, and earlier forecasts have been revised to suggest that the economy bounced back from the pandemic more quickly than originally thought. This has helped to

stabilise the swaps market, leading to reduced mortgage rates.

While it would be unwise to deny the challenges posed by the instability seen in the financial system at various points during the past 18 months, how landlords feel at any given moment in time is not necessarily an accurate reflection of the state of the sector.

Intermediaries can play an important part in helping landlords make informed investment decisions based on a balanced picture, where positives are considered alongside the negatives that dominate the news agenda.

Divestment down

Since the previous PRS Trends report, which covered the first quarter, we’ve seen investment in privately rented homes go up, while divestment has gone down.

Small movements either way, but heading in the right direction.

There is also evidence to suggest that portfolio landlords remain active in the purchase market. This can be seen when we look at limited company structures, often more prevalent amongst those with larger portfolios.

Of the landlords who intend to buy in the next year, a record proportion will do so via a limited company structure, while the average portfolio size of landlords with at least one property in a limited company has increased since Q4 2021.

Interestingly, our research revealed that it is these larger portfolio landlords, particularly those with more than 10 properties, who report better returns on their buy-to-let investments, with higher yields than those with a single let.

When averaged across the spectrum of different portfolio sizes, we see that yields have stabilised after dipping

RICHARD ROWNTREE is managing director at Paragon Bank

at the start of the year, while arrears experienced by landlords remain steady, too.

A fundamental influence on these factors is demand, something that remains at the record levels revealed in previous editions of PRS Trends. This has steadily increased over the past few years and, sustained by longerterm societal shifts such as changes in household composition and increases in immigration, shows little sign of falling to a level that supply can satisfy any time soon.

We need more homes for tenants now and in the future, so I am reassured by the fact that landlords plan to continue providing homes for tenants for over nine years on average.

Professional landlords who have weathered previous economic storms, over years spent building larger portfolios, tell us that they expect to continue letting longer still. It is these landlords that are most likely to leverage their existing investments in order to take advantage of improving market conditions as interest rates and property prices both fall.

These professional landlords have always been a key customer segment for Paragon, and we’ll continue to support them while also helping to grow smaller portfolios where there is ambition to do so. ●

Of the landlords who intend to buy in the next year, a record proportion will do so via a limited company”

Net zero has to be affordable for everyone

Apaper published in early August by the think-tank Tony Blair Institute for Global Change, titled ‘How to address the growing backlash against net zero policy’, confirmed what we have all been observing for some time now.

“Across Europe, a backlash against net zero policy is underway,” wrote the report’s authors Tone Langengen and Brett Meyer.

“While polls show that an overwhelming majority believe climate change is a problem, and support policies to address it, that support starts to fall once green policies come into force and people begin to experience their costs.

“To ensure a smooth transition to net zero, policymakers must begin to develop strategies to reduce and address resistance to green policy.”

In the UK, Langengen and Meyer claimed, this pattern has not yet come to full fruition, writing: Although there has been occasional, localised objection […] there has not yet been widespread rejection of green policy.

“Yet many of the deadlines for the most significant policies are still in the future, so their costs have not yet been fully felt by the British public.”

Indeed, the deadline to end sales of new petrol and diesel cars isn’t until 2030, and the gas boiler ban isn’t planned to take effect until 2035.

However, the proposed deadlines to upgrade privately rented homes

to a minimum Energy Performance Certificate (EPC) rating of Band C by 2025 for new tenancies and 2028 for existing agreements are looking extremely close now. So close, in fact, that Michael Gove, under whose remit housing policy falls, told the Daily Telegraph in July that the Government ought to consider “relaxing the pace” of change. “We’re asking too much, too quickly,” he told the paper.

EPC upgrades

Landlords would not disagree. This legislation being put back is no bad thing from a financial point of view. Landlords have enough on their plates what with refinancing shocks, rent affordability and arrears under severe stress in parts of the market, and the imminent need to upgrade their properties at a cost, conservatively, of thousands of pounds.

This has already forced hundreds of thousands to quit buy-to-let (BTL) and, despite larger portfolio and institutional landlords seeing the current situation as a buying opportunity, the effect on stock is crippling tenants. It would be wise to review the timetable for energy efficiency upgrades – most importantly for those who are renting.

Meyer and Langengen anticipate that electoral pressure will make a delay impossible to refuse.

There is a socially ethical side to net zero, as well as an environmental one. The issue of reducing our carbon footprint is vital for the long-term

protection of the planet and our children’s children. But it’s not so simple as deciding to eliminate carbon emissions overnight.

In fact, it’s becoming increasingly clear that it’s going to be extremely challenging to cut emissions as significantly as the UK has committed to doing over 30 years.

Plain facts

Even the most earnest of climate change proponents cannot ignore the plain economic facts.

Another think-tank, the Resolution Foundation, has done extensive research into how the costs of a net zero transition will affect households across the UK’s socio-economic spectrum. Published on 15th August, its most recent report shows that more than a third of homes in England are at high risk of overheating. People who do not own their own homes are more likely than others to live in an at-risk property, and the poorest fifth of households are three-times as likely to be affected as the richest.

The situation is a spaghetti soup of contradicting needs, wants and challenges – there is no one right answer to everyone. But coming at it from my own perspective, more important than anything else is that landlords are given certainty.

Ultimately, the country’s landlords are business-people. They weather financial, fiscal and regulatory changes. They find ways to adjust to protect profits and people. But

to do that, they need to be able to plan ahead.

Practicality first

Getting this right isn’t so much about drawing a red line on when changes must have taken place by.

Reducing our housing stock’s carbon output is one of several important factors that must be considered when planning policy. The practicality of delivering upgrades is the first –there are simply not enough skilled labourers to meet such tight deadlines.

The second is the knock-on effect that necessitating largescale investment into properties’ energy efficiency has. At a time when rental affordability is bursting at

the seams, landlords’ mortgage costs are rocketing.

Far from achieving a lower carbon footprint by enforcing onedimensional policies, the reality is that cost pressures come first.Families must put the children they have today ahead of the next five generations. Without getting too esoteric, this entire debate really comes back to one very basic thing.

We need to stop tinkering with politically emotive policy speculation, and we need – more than ever – a sensible, practicable housing strategy that addresses every tenure. That includes landlords, social tenants, better energy efficiency and improved access to affordable homes. ●

Many of the deadlines for the most signi cant policies are still in the future, so their costs have not yet been fully felt by the British public”

STEVE GOODALL is managing director at e.surv

What could a Labour Government mean for landlords?

January 2025 is a significant time for the Prime Minister and the entire Conservative Party. It is the latest Rishi Sunak can call a General Election. With growing public frustration, heavy by-election defeats and Labour well ahead in the polls, it could be a painful night for the Tories.

While reports suggest Sunak could wait as late as October 2024, some senior Conservatives are said to be pushing for a spring election for damage limitation. As one senior Tory put it, this is less about maintaining power and more about “minimising the size of the defeat.”

With the real prospect of a Labour Government – or a coalition with the Liberal Democrats – what could this mean for the industry, and the buy-tolet (BTL) sector in particular?

Wealth tax ruled out

Most recently, Shadow Chancellor Rachel Reeves announced a U-turn on a wealth tax, ruling out any version should Labour win. This would mean Labour would not increase Capital Gains Tax (CGT) or put up the top rate of income tax – positive for landlords. She also signalled that Labour would not target expensive houses with a mansion tax, as the opposition looks to appeal to the country’s wealth creators. This angered much of the party’s left-wing grassroots, but the Shadow Chancellor insists the way to prosperity is not through taxation. This is a sea-change for the party, and the Shadow Chancellor. Those with good memories will remember her calling for taxes on “people who get their incomes through stocks and shares and buy-to-let properties.”

If Labour really does want to appeal to wealth creators such as landlords,

many will want to see them go further than ruling out future tax hikes. It’s well documented that measures such as restrictions on mortgage interest relief, Stamp Duty, and the reduced CGT exemption have created a heavy burden and disincentivised landlords.

While Labour previously confirmed all tax reliefs are under review, relieving the pressure felt by landlords would certainly be a vote-winner, and good news for the rental market.

Rental reform

With one hand, Labour has been quick to show support for landlords, particularly following their glaring omission from Jeremy Hunt’s mortgage support package. With the other, though, it has continued to push the need for rental reform, with Keir Starmer himself promising to get tougher on landlords.

Shadow Levelling Up Secretary Lisa Nandy, prior to being replaced by Angela Rayner, announced Labour’s own version of the controversial Renters Reform Bill, which it will look to put to a vote within their first 100 days. Labour’s charter would also look to abolish Section 21 evictions, as well as introducing four-month notice periods, allowing pets and alterations, and creating a national landlord registry, among other measures.

While any decent landlord is in favour of protecting the rights of tenants, they will argue it should be balanced with protection for landlords. After all, without hardworking landlords, the rental market will face significant challenges and a much deeper shortage of supply. This has somewhat been acknowledged by another U-turn on potential rent controls, with Nandy calling it a “sticking plaster” in place of building new homes.

PAUL BRETT is managing director for intermediaries at Landbay

Ripping up planning rules

With the UK’s tax burden already incredibly high and the Shadow Cabinet pledging fiscal discipline, Starmer must focus on low-cost policy pledges and low-hanging fruit to make an impact. Taking an axe to planning rules and opening the greenbelt is just one example, as is reinstating mandatory housebuilding targets.

For the longest time, landlords have been unfairly blamed for the supply shortage, supposedly buying up all available properties. In reality it’s a smoke screen over persistent failures to reform planning rules, housebuilding and expand social housing.

Labour continues to place great emphasis on homeownership, but there will always be those that have no intention of buying.

Understanding the important role the private rental sector plays in the wider housing mix is critical for whichever party finds itself with the keys to Number 10. To its credit, Labour has already shown positive signs of engaging, not least with the recent mortgage summit with the Association of Mortgage Intermediaries (AMI) and brokers of all sizes.

As we get closer to an election, landlords in particular will want to see more than just discussions, pledges and U-turns.

No matter who’s in charge, there are a wealth of talented brokers and specialist lenders, such as Landbay, that are ready to provide the tools to succeed in the buy-to-let arena. ●

Rental market desperately needs a confidence boost

Over recent months, we’ve not been short of headlines about the rental market. As stories on rising rents have taken centre stage, so too have anxieties about the number of landlords leaving the market. As our latest Goodlord and Vouch ‘State of the Industry’ report shows, these fears may be well founded.

Although a full-blown exodus of landlords has not yet come to pass, all industry stakeholders are suffering from the ongoing uncertainty around costs, regulations, and future plans.

As we enter a new Parliamentary term, and with a General Election on the horizon, the private rental market is crying out for reassurance.

According to our research, 95% of UK letting agents saw at least one of their landlords sell at least one of their properties over the past 12 months. This is quite striking. Although reports of the death of the rental market may have been exaggerated, these are worrying signs of what may be to come.

Indeed, 80% of letting agents said they expected more landlords to leave the sector in the next 12 months, and 36% believed this would be a “significant amount.”

Ever-shifting

Scores of landlords are, of course, feeling the pressure of rising interest rates. Our survey showed that financial or economic reasons were the primary reason for landlords leaving the sector. However, huge numbers are also fed up with navigating the ever-shifting reality of sector regulations.

After years of discussion and speculation, the Renters (Reform) Bill

still hasn’t been passed into law. And, if the Second Reading hasn’t happened by 7th November, the Government will have to reintroduce the bill and kick-start the process all over again.

The majority (54%) of landlords are feeling pessimistic about the introduction of the bill, and 62% believe that the scrapping of Section 21 will have a negative impact.

Despite the purpose of the legislation being to professionalise standards and create a better managed, level playing field for renters, the majority of landlords clearly are yet to be convinced of its merits.

Likewise, the new rules around Energy Performance Certificate (EPC) ratings continue to be a major cause of concern for landlords.

When surveyed, which was before the recent extension of the compliance guidelines, only 20% of landlords said they have already begun working to improve their EPC ratings. Letting agents are also concerned about the EPC restrictions, with 78% of agents believing the plans would have a negative impact on the private rented sector.

Overall, only 44% of landlords said that they felt confident about coping with future legislation changes.

Nearing the tipping point

We are facing a powder keg of factors that risk pushing landlords out of the market. These stats should be the wake-up call, to show that the Government needs to take action.

If we continue to see landlords sell up, the impact on tenants is only going to intensify.

Challenges for tenants are already acute, with 76% of those who moved between July 2022 and July 2023 saying they found it difficult to find a rental property.

WILLIAM REEVE is CEO at Goodlord

Decision-makers must work with all stakeholder groups, including landlords, to shore up the private rented sector and offer clarity over future plans. If landlords and agents could be given clear commitments and assurances about what’s coming down the track, this would make a huge difference. It would give the sector a boost in confidence at a critical time.

Robust incentives

Earlier this year, when Goodlord conducted additional polling of landlords and agents, many said they wanted to see more robust incentives for industry players. More than three-quarters of landlords (77%) said financial incentives should be the Government’s top priority to keep landlords in the sector, and many landlords are also keen to see a reinstatement of tax relief under Section 24.

Financial incentives could and should be complemented with more support for the industry, such as initiatives to professionalise the sector and better guidance for first-time landlords, as well as specific reforms, such as streamlining the courts and boosting the build-to-rent sector.

The market also needs more consistency, including simplifying compliance – particularly around local licensing regimes – and offering clarity on regulatory timelines.

We are potentially at an industry tipping point, but it’s not too late to act. Decision-makers must put clarity and consistency at the heart of their strategy, and do all they can to give landlords a reason to stay. ●

In Pro le.

The Intermediary speaks with Elise Coole, managing director at Keystone, about buy-to-let challenges and sustaining service levels during turbulent times

Among other things, the headlines in 2023 have been full of attention-grabbing statements about the buy-tolet (BTL) market. While some of these, such as the effect of the cost-of-living crisis on renters’ ability to keep up with costs, are undoubtedly true, others may be misleading. The debate rages on, for example, about whether landlords truly are leaving the market in droves, and what rental reforms might mean for the future of this sector.

With a particular penchant for the interesting and tricky cases, Keystone is in a strong position to look across the market and understand the trends affecting brokers, and the landlords they serve.

To this end, e Intermediary sat down with Elise Coole, managing director, to take a look at what brokers need to know, and how Keystone keeps calm in choppy waters.

Managing growth

Coole joined Keystone as operations director five years ago and took up the position of managing director at the end of 2021. With previous experience in investment banking and managing mortgage portfolios, her career so far has given her opportunities to understand the entire journey.

“What drew me to Keystone was its values,” Coole says. “It’s an owner-managed business, and it was an opportunity to join a company in those initial stages of starting up.

“It was a different prospect, and gave me the opportunity to build on my skillset. I was able to bring knowledge that I had from my previous experience and work with the team, with the support of the company, to grow together.”

When she joined, there were 14 people in the business, but it has since grown to 90.

Keystone focuses on specialist BTL and providing flexible funding support. Two years ago the firm introduced product transfers, which Coole notes is not something many specialist lenders have the capacity for.

Throughout this period of growth, Coole says that the values embedded in the small business that started out have also evolved. In order to maintain them, the focus has been on hiring the right people and teaching them the right skills.

She says: “It’s of utmost importance that our values align, because skills can be learned. It’s also about not just saying what your values are –fairness, hard work, consistency, openness, asking questions – you have to display those as well.”

This means leading by example, and empowering team heads to focus on what works and who might be a good fit within their own departments.

Externally, Keystone’s proposition has remained consistent, while increasing brand awareness, the number of registered brokers, and its outreach efforts with networks and clubs.

Deciphering the headlines

While the news might be full of doomsaying around landlords flooding from the market, the reality is not so simple – nor so dour. In fact, Coole says, it seems there is simply a shift in approach: “We’ve definitely seen an increase in limited company applications. Currently it’s at around 80%

ELISE COOLE

of our applications, whereas the long-term average would be 60%.

“In 2022, market data suggested that there were over 200,000 properties sold by landlords. But actually, of this, 73% were retiring landlords that were taking profits on properties they’d owned for a long time and potentially locking it in now when [Capital Gains Tax (CGT)] is at a known level, ahead of a future change in Government.

“Some people are taking that longer-term view and exiting now, which leads to [the] headlines. Actually, when we look at our applications, we’re seeing 44% for purchase.”

Coole suggests that market rates are shifting portfolio landlords’ focus, rather than scaring them away. For example, investors are increasingly opting for higher yielding options such as houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs).

“That opportunistic landlord approach is still there, people are still buying properties,” she adds. Indeed, Hamptons found that in 2022, 12% of all property purchases were made by landlords – the highest number since the 3% Stamp Duty surcharge was introduced in 2016.

Other trends Coole notes at the moment include increased appetites for 2-year rather than 5-year fixed rates in the current environment, as well as increased arrangement fees for lower rates, to address interest coverage rate (ICR) requirements.

The environmental issues

While fears about landlords exiting in droves appear to be unfounded, pressures are mounting on these property investors. One of these is the march towards net zero targets.

The goalposts for new Energy Performance Certificate (EPC) rules are constantly moving, with little real clarity. The main upshot is widespread confusion in terms of the timeline, what changes will be expected from landlords, and how much of the bill they will end up footing.

Coole says: “The bill is not currently fit for purpose. They’ve delayed it from a staged approach starting from 2025 to everything coming in 2028. There’s no clear rules on exemptions – the amount has increased three times and there’s no understanding of how exemptions would work and who would be enforcing that.

“It’s really about understanding what the aim is – if we are going to get to net zero by 2050, is getting all properties to a minimum Band C going to help us meet that target? I don’t think that’s the answer, though it is a step in the right direction.”

In the completion of its third securitisation in May 2023, Keystone found that just under 53% of the properties on its book were Band C or above, compared with around 44% in its previous two.

“Landlords are already starting to make changes, even though there’s no clarity from the Government,” she explains.

Either way, this is a complex challenge for landlords. Specialist lenders may increasingly be the place to turn for support. Coole therefore emphasises the importance of information gathering, and understanding what offerings make the most sense for this market. She herself has even undertaken to do an EPC assessor course, to gain a greater understanding of the intricacies of this side of the market and identify what is needed on the part of landlords and their brokers.

Service level commitments

Although the dramatic headlines might only go ink-deep, the market has seen turbulent times. As such, Coole explains, it is important to commit to and maintain strong service levels.

One of the ways in which Keystone does this is through transparency and reporting. The website displays its service levels, including the average number of seconds taken to answer the phone or respond to online chats, as well as other metrics such as the length of time from instruction to inspection and for underwriting to take place.

These stats are automatically updated, without adjustment, on a daily basis. The business classes anything above 29 seconds a failure, and reports only a 2% failure rate by this standard.

Having this data prominently displayed, Coole says, helps keep service at the forefront of employees’ minds, and means that teams work hard to maintain them and understand the levers to pull if there is a dip.

“You want to ensure you can keep up that communication,” Coole says. “With the market uncertainty and volatility we’ve seen recently and during Covid-19, everybody looks for some certainty, even if it’s just keeping them informed on what’s going on in the business.”

For brokers that have yet to work with Keystone, Coole explains: “We like complex BTL, we like to discuss the case with you ahead of submission and during the process. We’ve got a great system which means you can access your case 24/7. We pride ourselves on communication and access.

“We’ve got a sensible approach to lending and to applications – we don’t just take a box-ticking approach. Because we have those conversations up-front, we’ve got a really strong certainty of execution.”

She concludes: “One of our values is being transparent, as well as looking at it from the other side and thinking about what we would want as a broker. We’re always looking for where we can innovate, but in the meantime we will carry on doing what we do, and doing it well.” ●

Commons sense

IS IT TIME TO TAKE HOUSING OUT OF PARTY POLITICS?

Natalie Thomas for The Intermediary

Pick any Tory Minister from the past 13 years out of a hat, and chances are you will have grabbed a one-time Housing Minister. There have been no fewer than 15 since 2010, after all.

Unfortunately, it has not been the case that more hands make for lighter – or better – work. Over the past decade, in fact, the housing crisis has gone from bad to worse, with some now defining it as a housing emergency.

With a General Election on the horizon next year, promises on housing are sure to pour in over the coming months as each party seeks to sway voters over a naturally emotive topic.

In the past year, those paying attention will have witnessed a rise in rural developments being blocked by the so-called ‘Not In My Back Yard’ (NIMBY) constituents, who fear their local landscape will be spoiled. In some instances, Levelling-Up Secretary Michael Gove has personally intervened to block such developments, much to the dismay of housing developers and proponents of the new homes.

In a recent interview with the Daily Telegraph, Matthew Pratt, chief executive of housebuilder Redrow, claimed that housing has become a political football, with Ministers constantly

changing their minds and seemingly too focused on short-term policies.

He suggested that an independent body, similar to the Migration Advisory Committee, should be established to assess the required number of homes based on factors such as population growth and immigration.

Would a politically neutral approach to housing be better and more viable? If not, then what solutions are on the wishlist to address the worsening housing shortage?

The size of the problem

The latest figures on house building make for worrisome reading. A report from the thinktank Centre for Cities earlier this year found that Britain has a backlog of 4.3 million homes that were never built. It claims that this housing deficit would take at least half a century to fill, even at the current target – itself largely an intellectual exercise rather than a reality – of building 300,000 homes a year.

Tackling the problem sooner would require 442,000 homes per year over the next 25 years, or 654,000 per year over the next decade in England alone.

When this is contrasted against the latest building statistics, we can see the extent of the shortfall, with only around 233,000 homes built last year. Before the Government announced its recent decision to remove nutrient neutrality rules, the Home Builders Federation (HBF) had warned that builds could plummet as low as 120,000 annually, with the number of housing projects granted planning permission in Q1 2023 standing at a meagre 3,037, the lowest quarterly figure on record.

The past 12 months have been particularly challenging for developers. We have witnessed the end of Help to Buy, as well as Gove watering down the Government’s building targets.

In June this year, The Family Building Society published its latest report on the housing market – ‘Achieving a More Coherent and Consistent Approach to Housing Policy’ – in collaboration with the London School of Economics (LSE). Among other things, the report found that current housing policy is not fit for purpose, with too many decision-makers and an insufficient number of homes being built in the right locations. It also found that previous initiatives had been too heavily concentrated on stimulating demand, rather than ensuring a stable, long-term supply of housing.

Alistair Nimmo, director of marketing at the Family Building Society, says: “Short-termism

“To be fair on him, it is a dogs dinner"

is the bane of effective action, and this is too important for the future of the country. We can't bumble on as we are.

“That’s one of the reasons why we are working with the All-Party Parliamentary Group on the Housing Market and Housing Delivery, as well as reaching out to all the main parties to engage with them beyond the sound-bite level.

“But we aren’t naive. Housing is a politically contentious issue. Change won’t happen quickly.

"We simply believe that incremental change, backed by a solid plan, is the way forward.”

Housing is not just a political issue, but also one that is heavily interlinked with the mortgage market. With fewer homes to buy, affordability is inevitably continuing to worsen.

Richard Fearon, chief executive of Leeds Building Society, says: “This is the least affordable point to buy a home in 150 years. Average house prices are nearly nine-times the average wage, up from four times in the mid-'90s. Ownership among young adults has fallen from around twothirds in the early 1990s to just two-fifths now.”

Last year saw the building society pull out of the residential second homes market so it could focus on first-time buyers (FTBs).

“There are approximately 500,000 second homes in this country, which restricts supply to FTBs, where we’ve chosen to focus support,” Fearon says.

“We need fundamental reform of the housing market to improve supply long-term. The solution must start with building more homes of all types.

“How we build the homes we need is complex, but we need a clear and consistent long-term plan. House builders, lenders, councils, and housing associations all need the same thing: stability – economic, regulatory, and political.”

A politically neutral way forward?

While the solution — building more homes — might seem straightforward, in practice, gaining permission and laying those bricks is proving challenging for developers. So, would detaching housing from politics work?

"I want to make evictions harder –specifically mine"

On the home stretch

Laura Markus is policy and external affairs manager at the Home Builders Federation

As we begin the nal stretch of this Parliament, with a General Election likely little more than 12 months away, all eyes are beginning to turn towards what may form each of the party’s main manifesto commitments. While housing has struggled to work its way its way up politicians’ and voters’ priorities in recent elections, it is undoubtedly now one of the key dividing lines between parties, and is repeatedly among the top ve issues voters identify as the most important facing the country, thanks in part to all the chaos we have seen in the mortgage markets over the past year.

While homeownership has become increasingly less a ordable over the past 30 years, with prices rising at much faster rates than wages, a range of Government interventions throughout this time have kept it a reality for many. Most recently, the Help to Buy Scheme, which helped more than 385,000 households to purchase a newbuild property over its 10-year lifespan. Since its closure, average deposits for new-build homes have increased by 300%, and with

interest rates well over 6%, annual mortgage payments have increased by over 200%.

It is a simple fact that builders can only build if buyers can buy. However, a tightening mortgage market has added to a range of wider constraints on housing supply, including the Government's proposed weakening of the planning system in response to 'NIMBY' politicians’ concerns, which have seen at least 60 local authorities withdraw their local plans so far.

Conversations surrounding housingrelated reforms can prove controversial, but both main parties are now trying to position themselves as the party of homeownership. However, the manifesto commitments need to re ect this, and action must be taken quickly by whoever forms the next Government, to address the barriers and to enable more people the chance to buy.

The list of asks we need to see from the Government gets longer each day, but with regard to demand-side interventions, which are not particularly controversial or politically charged, the industry would like to see:

Lawrence Turner, director, at planning consultancy Boyer, says: “Housing delivery is a highly political issue and something that can influence election outcomes at both the local and national levels. Politicians often prioritise local interests, incumbency advantages or ideological viewpoints, which affect the success of their housing delivery policies.”

He believes Conservative and Labour Governments have differing ideologies regarding the role of the state in housing delivery.

“Traditionally, Labour Governments put greater emphasis on state intervention, while the Conservatives prefer a laissez-faire approach, with policies that favour the private market,” Turner adds.

“Changes in Government – and more recently changes in Conservative leadership – have led to a significant inconsistency and unpredictability for the development industry.

1A new FTB scheme which focuses on addressing and signi cantly reducing the deposit requirements for households who want to buy a new, high quality and energy e cient property.

2

A proper market for green mortgages. A new-build house costs, on average, £180 less a month in energy bills; however, typically homebuyers are assessed against one national average assumption for energy costs. This a ords no mortgage a ordability bene t to those who opt to purchase a more energy e cient home with lower monthly running costs.

3

Making buyers of retirement properties exempt from Stamp Duty in order to encourage downsizing. Such an approach would recognise the bene ts that result further down the chain, helping older people, young families and FTBs.

This is the bare minimum we need to see to ensure the housing market is functioning for everyone, and I hope that, as the election creeps ever closer, politicians will ensure housing is given the attention that it needs and that voters want to see.

"Party politics at a local level can often conflict with central Government. This can lead to disagreement and deadlock when preparing local plans or determining planning applications.”

Turner would favour a cross-party agreement on housing, adding: “Policy should be based on long-term planning and investment for the UK – something that is nearly always at odds with the immediate priorities of politicians seeking re-election.

“There are common goals among political parties that agree on the importance of providing affordable and market housing.

"A cross-party approach could facilitate the creation of solutions that achieve these common goals.

“Housing policy changes take longer than a single political term to fully implement and show results. Therefore, a bipartisan approach could ensure a degree of consistency and continuity p

Holding the keys

Broadhead

Ihave no doubt that housing will be a key issue during the lead up to the next General Election.

With falling numbers of new homes being built and 13 consecutive increases in the bank rate since December 2021, it has become increasingly di cult for FTBs to get onto the housing ladder. A ordability of monthly repayments and raising a deposit were cited as the main barriers to purchase in the BSA’s June 2023 Property Tracker. Helping FTBs into homes has been one of the key reasons building societies have existed for over 150 years, requiring constant innovation to respond to changing market conditions.

Following Michael Gove’s commitment to FTBs in his 10-point housing plan, we would expect to see further promises of support for this area of the market as we get closer to the General Election. We would advocate for existing schemes – such as the Lifetime ISA and Help to Buy ISA – to be reviewed and updated to ensure they remain t for purpose.

However, interventions such as these tend to x symptoms and not causes. We need to resolve the housing supply conundrum, rather than focusing largely on the demand side, and I am keen to see how the main political parties propose to address this.

The BSA has long called for a joined-up approach to housing strategy, and more cross-party collaboration would certainly support this. It was great to see that the Government still believes it is on track to see one million new homes being built by the end of this Parliament, but we need to see the right homes in the right places, built in the right way. For example, newbuild properties still have no requirement to meet high energy e ciency standards.

I am a big supporter of the custom and self-build (CSB) market as a route to help ll the housing shortage that has resulted from chronic underinvestment in housing supply. It would be good to see some recognition of the role it can play in creating additional supply, alongside large and small to medium (SME) housebuilders.

A joined-up, cross-party approach to address the challenge of retro tting the existing housing stock in the UK would also be a welcome change. With 20% of the country's carbon emissions coming from residential properties alone, it’s essential that the issues of consumer education and Government support are addressed to enable homeowners to take action to green their homes with con dence.

BSA members are already playing their part by providing green mortgages. It is important that Government focuses on the housing stock as a whole if we are going to stand any chance of meeting the country’s commitment to net zero.

in housing policies, irrespective of changes in Government.”

In addition to bringing together different insights from opposing parties, he believes a cross-party approach could also increase public trust in politics.

Patrick Bamford, head of international business development at Qualis Credit Risk, part of AmTrust International, has been advocating a cross-party approach for many years.

“It is such a crucial industry for the wider UK economy and ideally should not be left in the hands of a few inexperienced politicians who have little or no long-term interest in resolving housing issues,” he says.

However, he is sceptical that such an approach will ever be implemented.

“It would require a rethinking from the main political parties, and that clearly seems unlikely at the moment, particularly given the fact that most parties see housing intervention as a way to win votes over a short-term period,” he says.

“It would be beneficial to have a long-term commitment to housing supply over the decades ahead, not just the life of a Parliament.

"However, it’s deeply unrealistic to think this will happen. It’s not the way this country ‘works’ — we only need to look at the NHS.”

When it comes to mortgages, however, he would prefer this to be left to “market forces,” while he highlights the decision to move the Bank of England (BoE) base rate decision out of the Government’s hands in 1997 as beneficial.

He says: “Government intervention in terms of a guarantee scheme to support greater product choice for high [loan-to-value (LTV)] borrowers was warranted, and acted as a catalyst for lenders to do more in this sector.

"However, it is now right and proper that the market stands on its own two feet in this area. Innovation to help FTBs is still warranted, although again, I’m not sure that using taxpayers’ money to do this is right or justified.”

General Election wish-list

While the call for a cross-party approach is gathering pace, as is often the case in British politics, reality is slow to catch up. In the absence of the seismic change needed to take party politics out of the equation, market commentators turn their thoughts to a more realistic set of wish-list items ahead of the impending General Election.

Nimmo says: “Quick wins would include reforming Stamp Duty to free up the market and encourage older people to move to housing better suited for later life. Older people in large homes don't move because they don’t want to pay

Paul

is head of mortgage and housing policy at the Building Societies Association (BSA)

a big cheque to the taxman. This has gummed up the market.

“During the pandemic, raising the Stamp Duty threshold to £500,000 boosted the market and older people moved, generating economic activity. It was a success, and it's baffling that a policy that clearly worked was abandoned.”

He would also like to see a Housing Secretary of State appointed, not just a junior minister, to “hold the policy pen across the Government.”

Bamford would also be in favour of Stamp Duty reform, adding: “[It] remains a major issue in our marketplace, and part of me thinks we should go for the nuclear option of removing it altogether, instead adopting a seller’s transaction tax unless you are downsizing. To my mind, this would boost purchase activity.”

Instead of launching a similar scheme to Help to Buy, he says: “Why not allow and provide capital relief to well-capitalised lenders and mutuals so they can have flexibility around lending to FTBs – in terms of LTV, [loan-toincome (LTI)], product innovation, etcetera.

“Providing incentives to those lenders who underwrite the risk on such business, for example via private mortgage insurance, rather than intervening directly in the market, would be beneficial, as the latter approach merely stokes house price inflation.”

Kevin Shaw, national sales managing director at property services group Leaders Romans Group (LRG), adds his voice to the calls for Stamp Duty to be looked at.

“Over £500,000, the current Stamp Duty thresholds are punitive and deter many people from moving up the market.

"This then prevents the freeing up of smaller properties for either second-time buyers, firsttime buyers, or investors,” he says.

When it comes to building new homes, Tim Foreman, managing director of land and new homes at LRG, would like to see a “clearer, more straightforward planning policy” to enable developers to obtain planning permission through a much less time-consuming and expensive process.

“It would be helpful to have firm deadlines in place for local authorities’ planning decision-making, and a clear and reasonable set of guidelines and criteria for developers and planning consultants to provide a more direct route to planning consent,” he says.

“New housing is already in short supply, and with the recent turmoil in the market and planning process, it is only going to get far worse.

"Some developers are reducing their development starts and choosing not to buy land due to the current mess.”

In light of the recent interest rate rises, Foreman would also welcome the return of some previous Government initiatives, such as Help to Buy and Stamp Duty assistance.

Turner feels the introduction of a National Plan could prove helpful.

“This would allow for a national, long-term focus on planning that can bypass the shorttermism that comes with political cycles. This would benefit housing delivery that requires multi-decade timescales,” he says.

“It would also allow better integration of housing delivery with other sectors, such as transport and infrastructure delivery, to help support new housing and promote sustainability.”

He would also like to see a national review of the Green Belt, alongside a strategy for the delivery of new towns.

“This would allow for a comprehensive approach to delivering patterns of sustainable development,” Turner explains.

Another area where he feels there is room for improvement is through the use of technology.

“Using big data – demographic trends, environmental factors, etcetera – would allow plan-making to better forecast future demands on a local authority and its neighbouring authorities,” he says.

“The use of artificial intelligence [AI] technology could help planners visualise the outcome of different scenarios when preparing local plans.

“For decision-making, AI could help streamline more procedural tasks, such as checking planning applications for registration and compliance with national and local planning policy.”

A key focus in the next election?

The housing crisis appears to be a puzzle with a potential solution, yet the path to achieving it often feels insurmountable. The various political challenges that stand in the way of reaching this goal have transformed housing into a highly emotive political issue.

Regrettably, it seems unlikely that any party is willing to depoliticise it, even though such a move could ultimately benefit the country. Currently, politicians are often influenced by those who oppose housing development. However, as affordability continues to worsen, this stance could shift.

The forthcoming pledges related to housing in the upcoming General Election will be interesting to see, with many eager for any future Government to demonstrate a genuine and intentional desire to boost housebuilding. ●

Dispelling refurbishment nance myths

For property investors seeking the finance to fund development projects, understanding the differences between light, medium and heavy refurbishment loans is imperative, yet there remains a significant amount of confusion around these definitions, as well as the information required by lenders in order to secure funding.

Incorrect applications for refurbishment finance are common, and cases are frequently reassessed and resubmi ed accordingly, which is time-consuming and creates more work for brokers and lenders.

Dispelling this confusion is important, as it can help brokers and investors gain a be er understanding of the requirements of lenders, and create a more efficient and streamlined application process.

In the majority of cases, light refurbishment typically refers to cosmetic updates such as plastering, painting or new flooring, or the replacement of fixtures and fi ings, such as a new kitchen or bathroom.

The majority of lenders will not accept any structural work or work that requires planning permission, permi ed development or building regulation approval for light refurbishment bridging loan applications, as developments of this kind would be classified as heavy refurbishment.

In many light refurbishment cases, there is a wrongly held belief that because a client may not require the lender to fund any building costs, the lender will not ask for proof of funds for the refurbishment costs.

However, this is not actually the case. The reality is that a full schedule of works is one of the most important factors for investors to

consider when applying for all types of refurbishment finance, including both light and heavy.

Similarly, in many heavy refurbishment cases, clients o en expect to receive a quote for a build on the back of cursory and approximate figures for the works, but again, a full schedule of works is imperative.

This should contain details such as the work to be undertaken, how much each element will cost, how long it will take, and the inclusion of any contingency fund that can be used in the event of any delays or overspending that may occur during the development.

Realistic expectations

In heavy refurbishment cases in particular, clients always need to establish the current value of the site, demonstrate a good understanding of the cost of the refurbishment works, and have realistic expectations about timings, especially as lenders will not complete until planning permission has been granted.

One important consideration that applicants don’t always take into account is that if the build costs are high, the building works are large compared to the original property, or if the majority or all of the property is being knocked down, then this will then be classed as a full development. This means that rates will increase in line with the level of information required by the lender.

Another fundamental factor to consider in all aspects of refurbishment finance is gross development value (GDV).

This is a significantly misunderstood aspect of the refurbishment finance sector, and many clients wrongly assume that lenders will lend off the GDV for the

day one maximum loan, rather than the current value for the day one lend.

Understanding this difference is critical. GDV is calculated based on the market conditions prevailing at the date of the valuation, and may also be based on an analysis of recent property transactions for similar properties in the area of the development.

This can include asking prices, sale prices, information provided by le ing agents or estate agents, or assessments provided by development surveyors. It may also be calculated as part of an initial development appraisal, and may then be continually assessed to help determine whether the project is likely to be, or has been, profitable.

A safe exit

As with all bridging loans, the exit strategy of any refurbishment finance loan is critical, especially in these more economically challenging times, and should hopefully demonstrate that the investor has a realistic understanding of the market. In some cases, two exit strategies will be preferable to account for any change in circumstances.

One final aspect to also keep in mind is that most lenders will typically charge an exit fee and that in ‘full’ development finance cases, costs such as rates, valuations and quantity surveyor re-inspection fees will increase as the project unfolds.

It is therefore advisable for investors to try and keep their project within the light to heavy refurbishment categories, as this will mean reduced funding costs, less underwriting time and a wider choice of lenders. ●

MATTHEW DILKS is bridging and commercial specialist at Clever Lending

Challenges and opportunities in specialist nance

e’ve seen no end of market turmoil over the past six to 12 months, and beyond, but guess what? Our phones are still ringing constantly, enquiries continue to flood in regarding a variety of property purchases and refinancing, and transactions are completing on a daily basis.

The best advisers remain busy, because they realise where business opportunities are being generated and how to service them. Be this on their own or via the support of a trusted packaging partner. It should also come as no surprise to hear that many of these opportunities are emerging from the specialist lending marketplace.

So, with that in mind, let’s focus on some of these key areas which are generating new business.

Second charge

According to the latest figures from the Finance & Leasing Association (FLA), the second charge mortgage market returned to growth in June, with lending up 3% by volume and 4% by value compared with the same month in 2022.

On a quarterly basis, lending in Q2 remained down 9% by volume and 10% by value compared with the same quarter last year. However, on an annual basis, lending totalled £1,504m in the 12 months to June, up 10% compared with the previous 12 months. The number of new agreements totalled 32,575 over the past year, up 5% on the previous 12 months.

The distribution by purpose of loan in June showed that 58% of new agreements were for the consolidation of existing loans, 13% for home

Wimprovements, and a further 23% for both loan consolidation and home improvements, figures which help demonstrate where demand lies across the sector.

Bridging

The latest Bridging Trends data for Q2 2023 highlighted that regulated bridging extended its market share from 46.2% in Q1 to 48.7% – the highest proportion since the 53% reported in Q3 2020 amid the Stamp Duty holiday. Furthermore, demand for bridging loans to prevent chainbreaks remained the most popular use for the second consecutive quarter, at 24%.

The report added that property investors and landlords returned to the market in Q2, with bridging loans for investment purchase purposes jumping from 15% in Q1 to 22% in Q2. This increase is likely due to investors and professional landlords taking advantage of a sluggish property market to purchase assets at a reduced rate.

To add further weight to this trend, Knowledge Bank recently reported that ‘regulated bridging’ had consistently appeared in the top two most searched-for bridging terms over the past two years.

The data also pointed to an increasing number of housing chains collapsing, with a greater uptake in regulated bridging loans being used to enable people to break a chain and buy the property they are a er, without being reliant on their own purchasers.

Development finance

Despite facing significant hurdles, research from Shawbrook outlined that more than a third (34%) of property developers have been able to expand their business over the past

12 months, which shows they have remained resilient and flexible in the face of such a volatile market.

Although this hasn’t been without its fair share of challenges – due to the impact of increased costs, 96% of developers have been prompted to make changes to their business strategy, with a change in building materials (40%) being the most popular change – 39% have also built or are planning to build different types of properties.

Commercial

It’s evident that small businesses (SMEs) have been under unprecedented strain over the past few years, with the pandemic, the cost-ofliving crisis, and ongoing economic volatility creating persistent and cumulative challenges. Yet, a survey from payment technology provider Dojo suggests that the majority are looking ahead with optimism. Twothirds (65%) were confident about the outlook for the economy, a similar number (63%) assured about the end of the cost-of-living crisis, and 79% confident about their own business.

While business leaders are optimistic about the next year, they are also realistic, with hurdles cited including growing revenue (43%), expanding to new geographies or branches (36%), and broadening their product ranges (33%).

Considering the challenges and opportunities facing potential buyers, homeowners, property professionals and SMEs, the intermediary market will continue to play a key role in delivering specialist solutions. ●

DONNA WELLS is director at Envelop

Bridging is booming

The bridging finance market is booming –no surprise when you consider that current conditions have created the perfect environment for it to flourish.

Historically, many intermediaries have shied away from bridging other than to break a chain and ensure the client’s dream of moving home was still a reality. How that perception has changed! Over the past couple of years new lenders have entered the market, introducing new features and – as is ever the case with competition –driving down pricing.

Events of the past 12 months have also had a huge and positive impact, from the outcome of the mini-Budget of last September, to ever-increasing interest rates, lenders tightening product criteria and repeated product withdrawals with li le or no notice.

Intermediaries have found it harder to get clients a fixed term deal, and in many instances haven’t wanted to, given the volatility and uncertainty of pricing and product availability.

Stability and certainty

While the traditional lending market has been – to say the least – turbulent, the same hasn’t been true in the bridging market for two reasons, both connected to funding mechanisms. Rates have been comparatively stable, with only one increase in pricing, and there haven’t been any product withdrawals or criteria changes, so while chaos has ensued in the traditional lending space, all has remained calm and certain here.

The combination of interest rate rises and tightened lending criteria have both made bridging an increasingly a ractive alternative for intermediaries, and so has the cooling of house prices over the past few months.

Q2 Bridging Trends data shows that chain-breaking is still the most

popular use of bridging (24%), but we can’t ignore the rise in popularity of investment purposes – from 15% in Q1 to 22% in Q2.

Again, this should come as no surprise, as over-leveraged ‘dinner party’ landlords leave the buy-tolet (BTL) market, and professional landlords use bridging to snap up bargains. Bridging really is the ideal financing vehicle that intermediaries should be considering to support their property investor clients, at the same time allowing them to diversify their business models.

This is all due to its product features. It can be arranged incredibly quickly and o en in a ma er of days, allowing buyers to effectively negotiate as cash buyers. Bridging lenders are also focused on the final value of a property, not its current condition. So, unlike high street lenders where the primary concern is market value, bridging is the solution to buy uninhabitable property, property that requires conversion, or to buy at auction.

Another feature that some intermediaries are unaware of is that it can be used as a second charge vehicle, ideal for clients needing additional, short-term borrowing, while saving the low rate, fixed-term deals they don’t want to disturb. That opportunity is also reflected in the bridging trends data, with ‘business purposes’ rising to 10% in Q2.

Choose your partner

As more intermediaries understand the flexibility and versatility of bridging finance, they should also consider carefully who to use as a distribution partner. Bridging is a specialist market with many boutique lenders, so intermediaries should look for an expert with close working relationships, which understands the fine detail of lenders’ criteria –allowing the distributor to quickly find the best outcome for the client.

JASON BERRY is group sales director at Crystal Specialist Finance

Intermediaries should also look for a partner that offers both referral and packaged services. For cases where bridging could be the solution, a referral service allows the distributor to manage the advice process while enabling the intermediary to focus on new business.

I recommend asking three questions when considering your distribution partner for bridging. What is your average time to complete? The market average according to Bridging Trends is 58 days. Do you offer a referral service? Do you offer an online tracking service for referrals, so that I can keep up to speed with the status of the case?

At Crystal Specialist Finance, it takes us an average of just 24 days to complete a bridging deal. And yes, we do offer a referral service with a digital dashboard to track case progress.

Here to stay

It could be argued that once interest rates fall, the a raction of bridging finance will wane, having served its purpose. That simply won’t be the case, though, as the world of property finance has fundamentally changed. We won’t see 1% fixed-term deals again, financial situations have changed, clients are increasingly looking at non-standard residential property, and professional investors are being creative to maximise yields. Yes, it will be a bumper year for bridging finance, but it certainly isn’t a flash in the pan as more intermediaries experience its certainty and flexibility.

If bridging isn’t already a significant percentage of your case pipeline, now is the time to look at this expanding market, and grow the income of your business. ●

A rising tide lifts all boats

In the corporate world, the formula for success has been meticulously dissected, analysed, and interpreted countless times. Business magnates and thought leaders have consistently championed the quintessential element that underpins lasting success: a clear, coherent strategy. Yet, while businesses have been immersing themselves in strategy development sessions and painstaking ‘strengths, weaknesses, opportunities, and threats’ (SWOT) analyses, there’s a more colossal entity that stands to benefit from similar discipline: the nation itself.

Emerging from a series of once-ina-generation events and transitions, the UK’s need for a comprehensive industrial strategy is more pronounced than ever. While tactical measures can offer momentary respite, they are but sticking plasters over deeper systemic issues.

The UK’s path forward should not just be a series of reactive steps; it needs a grand vision – a clear path for businesses to confidently stride down, invigorated by the promise of a nation that knows where it’s headed.

Beyond buzzwords

When we u er the word ‘strategy’, the images that traditionally flood our minds are those of boardrooms brimming with charts, or military generals hovering over a map. But to pigeonhole strategy into mere corporate lingo or to confine it to military manoeuvres is to misinterpret its depth and richness.

So, what exactly is strategy? At its core, it is the art and science of making informed decisions today that pave the way for a desired future. It’s a harmonious blend of foresight, objectives, and the means to achieve them. It’s not merely a plan, but a coherent framework that defines what an entity stands for, where it aims to go, and how it intends to get there.

Strategy is decidedly not a oneoff activity, a checklist, or a shortterm gambit. Nor is it a reaction to immediate challenges. Those are tactics – useful, but not a substitute for the broader vision. Imagine playing chess and focusing only on the next move without any consideration for the endgame; you might capture a piece or two, but you’re unlikely to checkmate your opponent.

On a micro level, such as in a small enterprise (SME) or a local community, a strategy might involve identifying core strengths, understanding the desires of stakeholders, and charting a roadmap for growth or improvement over a set period. This approach provides clarity and purpose, ensuring every decision and action aligns with the overarching goals.

When we extrapolate this to a macro scale, the intricacies grow, but the foundational principles are unchanged. A national strategy involves gauging the collective aspirations of citizens, recognising global trends and threats, and formulating policies that steer towards a brighter, more prosperous future. It’s about se ing priorities, making trade-offs, and building bridges to the future, while understanding the historical and cultural underpinnings that define a country.

The need for strategy, be it in a startup or a sovereign state, springs from the same human desire: to shape the future, rather than be shaped by it.

It’s the compass that guides entities through the uncertain voyage of time, ensuring that every tactical decision made en route is in service of the grander vision.

Shaping the conversation

While the National Association of Commercial Finance Brokers (NACFB) can and does champion tactical initiatives – such as the call for a rejuvenated Bank Referral Scheme

or enhanced incentives for SME housebuilders – there’s an underlying sentiment that’s hard to ignore.

These tactical proposals, as crucial as they are, must be components of a larger, holistic vision. Standalone initiatives can bring about change, but for that change to be transformative and lasting, it needs to be anchored within a comprehensive national industrial strategy.

There’s a broad consensus among stakeholders regarding the pillars of a successful industrial strategy. These pillars have been distilled into five critical themes: skills, which dictate the workforce’s proficiency; infrastructure, laying the foundation for commerce; finance, the lifeblood of enterprises; innovation, the engine of growth; and the overarching business environment that determines the ease of operations and growth.

It’s within this context that the role of the intermediary comes into sharp focus. The potential of intermediaryled lending, as championed by the NACFB, isn’t an isolated lever for progress. It’s a piece of the larger puzzle.

To truly harness the transformative power of intermediary-led lending, we cannot be content with merely elevating a single vessel. The NACFB’s mission is grander: to aid decisionmakers in grasping the broader vision, ensuring that as the harbour swells, every vessel, big or small, is buoyed by the rising tide.

The UK’s future is shimmering with promise. By embracing a comprehensive industrial strategy, we are not merely responding to challenges but forging a path where innovation, collaboration, and strategic vision converge, leading the nation toward increased prosperity. ●

PAUL GOODMAN is chair of the NACFB

Full fat is back, and it’s an absolute necessity

For some time now, I have been warning of a ticking timebomb in the bridging industry. At Brightstone Law, working as we do with multiple lender clients on originations, process and documentation, and recovery, we have coalface experience of the latest trends and developments.

In recent years, these developments have included the Covid-inspired enforcement moratorium, the increasing difficulties experienced in exiting loans, and borrower desperation. These have given rise to a trend to fight enforcement action whenever and wherever they can, or at least think they can.

Financial duress, unsatisfactory legal advice, confusion about what constitutes regulated lending – these questions are now put forward, not just by borrowers, but also by their legal advisers, who in many cases lack the clarity or experience to recognise fundamental flaws in their reasoning.

Registration difficulties arising from a pared down origination process, inefficiencies at the Land Registry, and faltering third-party lawyers, all add to the above.

Now these trends, against a difficult property market backdrop, are combining to create a perfect storm.

In the past three months, we have experienced an unusual and unseasonal hike in problematic instructions from both existing clients and new clients to the firm, for whom lessons are to be learned for the first time.

Borrowers are finding it difficult to refinance loans, and exits through sale of property are challenging. Inevitably, and as a result, our approach and role has widened.

First, our wide range of experience operates on a quasi-consultancy level, educating lenders when and where a pared-down approach might be the cause of difficulty in the future.

Second, by a acking dispute early and robustly, backed up by a clear demonstration of the legal and regulatory background, we become educators. This is not just to our clients, but equally importantly to our counterparts, cu ing to the chase early, with a view to averting the time and costs of lengthy proceedings which benefit neither side.

The lenders which have already invested in experienced legal support also face challenges, but they are o en be er placed to tackle these challenges head on. A cerebral approach isn’t just about pursuing process, but creating early solutions and intelligently cra ed legal advice. Those who have taken a leaner approach to legal support are le more exposed.

Save the semi-skimmed

A healthy property market disguises the mistakes of taking a skinny approach, but mistakes become exposed in tougher economic conditions. The adverse conditions we see today are exposing problems arising from the pared down operating model.

As a result, more lenders are realising the benefits of a multidimensional, full-fat legal approach to lending, a trusted relationship based on service and key individuals, with thicker margins to allow for sensible processes proportionate to the lend, and security, caution, and diligence.

Full-fat may not have been fashionable recently, but it is now demonstrating its value.

Periods such as this can be a very lonely time for lenders. The

challenges seem insurmountable, and the outlook can appear bleak and isolating. However, if you find yourself in this position, my message is that you are not alone.

This is where a meaningful relationship with your legal partner can reap dividends. As a trusted adviser, your legal counsel should be there to support you in identifying solutions, supporting best practices, and enabling correct decisions to be made at speed.

The standard contractual stuff is a given, but it’s in this partnershipbased approach that the bonus value lies. A skinny model simply does not allow for this. Today, you need the comfort of a full-fat approach.

More than this, though, lenders must understand that others are experiencing the same challenges.

Working together is something we should all be encouraging. We have an excellent, and very proactive trade association in the form of the Association of Short Term Lenders (ASTL), but there remains a reticence to divulge vulnerability, even in confidence.

A more open dialogue will help everyone involved in our sector. It’s something that I am keen to encourage, and that I am happy to facilitate in whatever way I can.

A full-fat approach to legal support is back, and is an absolute necessity, but so too is looking beyond the walls of your organisation and out towards the wider market.

In sharing experiences, knowledge, and potential solutions, we can all emerge from this perfect storm stronger than before. ●

JONATHAN NEWMAN is senior partner at Brightstone Law

Working towards a stronger market S

hort-term mortgage lending continues to demonstrate its resilience in challenging conditions.

The latest lending data from the Association of Short Term Lenders (ASTL) shows that bridging mortgage loan books continued to grow in Q2 2023, increasing by more than 5% to an alltime high of just over £7.1bn.

The figures, compiled by auditors from data provided by members of the ASTL, reveal that bridging completions were £1.3bn in the second quarter of the year, representing a slight fall of 5.3% on the previous quarter. This small drop was reflected in applications, which were £9.2bn in the quarter ending June 2023 – a decrease of 5.9% compared to the quarter ending March 2023.

While applications and completions were slightly down on the previous quarter, they were both higher than the same period last year. Given that we are still faced with the vagaries of an uncertain economy and faltering property market, this represents another very strong performance.

Nevertheless, it would be naïve to think that bridging is completely immune to the influences of the wider economy. Most recently, at the time of writing, we have seen reports of annual house price falls, as well as property sales falling to the lowest level in 12 years, while the wider outlook remains uncertain.

Spiralling inflation has, of course, been a major contributor to the current situation, coupled with the string of rate rises introduced to curb this. Opinions are divided as to whether the Bank of England will continue to increase rates, and if so by how much, but the general consensus is that we are now approaching the top of the cycle.

If inflation figures continue to show reductions, then there’s a chance that the tide will turn and confidence could

increase. Asset management firm deVere recently said that it expects property sales to rebound in the first quarter of 2024.

So, the outlook is uncertain, but not without promise. In the bridging sector, brokers report seeing a larger than usual number of applicants who want to raise capital in order to upgrade their property ahead of pu ing it on the market, and this is certainly encouraging. This approach is particularly popular among the later life age group, where trading down is a good option to move to a smaller property while releasing equity from the current home.

Regulatory dialogue

Homeowners using bridging finance to fund home improvements ahead of a sale can, however, pose a potential problem for lenders. If the schedule of intended works is three months, say, then there is only nine months le for the property to be marketed and sold. On a regulated transaction this might prove a concern for bridging lenders, given the regulator’s insistence that they cannot re-bridge a regulated

bridge at the end of term. This is an area in which the ASTL is already in an active dialogue with the regulator.

Much of the feedback we are seeing from the market is on the time it takes for conveyancing work to be completed following the issue of a mortgage offer. It is recognised that there is a process to be followed and properly managed, but this continues to be an area that needs to be addressed. We would welcome lenders and lawyers working together more closely to streamline the process with a view to cu ing timings.

Bridging, by its very nature, is tasked to be a quick source of finance, yet times from application to completion are lengthening.

O en this means that, where funds are needed while another property is sold, for example, it is sold before the bridge completes and the funds are no longer needed, leaving brokers out of pocket and lenders without a mortgage. Protracted conveyancing also exacerbates the problem for regulated bridging that is used to finance renovations ahead of a sale.

The property market faces a challenging period, but there may be brighter times ahead sooner than many might think. In the meantime, bridging continues to provide a flexible source of funding to finance periods of transition and the sector continues to be robust.

Our job at the ASTL is to support this sustainable growth of our market by encourage high standards and responsible lending, while also working with the regulator and policymakers to ensure we are best placed to deliver positive outcomes for our customers. ●

VIC JANNELS is CEO of the ASTL

Bridging has displayed a strong performance

The specialist role

According to Shelter, there is a shortage of at least four million homes in the UK at present. So, it is hardly surprising that with an election on the horizon, both major political parties have begun pu ing forward potential strategies for addressing this perennial social issue. However, given that Governments on both sides have fallen short of fulfilling their manifesto commitments to housebuilding over recent decades, such pledges are likely to be received with a degree of doubt. Indeed, relying purely on any Government – or five-year Parliament – to single-handedly address the housing shortage would be unwise.

Instead, a collaborative effort between the private and public sectors is needed, with the financial services industry having a key role to play.

To that end, here are five ways in which both specialist lending and brokers can help in the ma er:

1Financing property developments

Specialised lenders can rarely provide the initial development finance for a construction project. However, they can offer support as the project approaches its conclusion.

Incomplete developments are a widespread occurrence. This frequently stems from developers facing financial constraints towards the end of a project, a problem that has become increasingly prevalent in the past two years as costs – for labour and materials – will commonly now overshoot the original budgets. Development exit loans offer a solution to this problem. They allow developers to se le their initial development loan, thus preventing any penalties for late repayment. Subsequent funding can then be supplied to facilitate project completion, paving the way for sale or rental and ensuring a smoother process for developers.

2 Making use of empty commercial units

Due to the pandemic-induced switch to hybrid and remote working pa erns, data from Goldman Sachs suggests that 14% of London’s commercial office space is currently unoccupied. A strong case should be made for transforming these commercial units into new homes.

Furthermore, following the Government’s revision of permi ed development rights (PDR) in 2021, properties falling under the Class E classification – encompassing

establishments like banks, gyms, and shops – have become more viable projects to take on due to reduced planning permission for changing their designated usage.

The question, though, is where can investors, landlords or developers turn for the necessary capital to undertake a conversion project?

Specialist lenders and brokers can help these businesses or individuals source the financial products.

This is an area we should expect to see high levels of activity in the coming years. Positively, considering the substantial number of unoccupied commercial spaces in city centres – precisely where the demand for residential properties is highest – such projects will seamlessly align with the preferences and requirements of prospective buyers and renters.

3Adding extensions to existing properties

The need for new homes is undeniable, but equal consideration should be given to augmenting and adding to the square footage of current properties. Addressing the housing crisis extends beyond constructing entirely new buildings; it also encompasses the expansion of living space, be it through extra bedrooms or the extension of living areas.

in UK housing

Fortunately, the Government is enacting legislation to streamline the process of implementing such extensions. Indeed, Housing Secretary Michael Gove recently revealed plans to significantly reduce red tape, enabling a larger number of individuals to undertake lo extensions.

This approach looks to make be er use of the buildings we already have. In the pursuit of doing so, lenders can supply landlords and investors with financial products that allow them to carry out such work on their properties at pace and with a great deal of flexibility.

Again, brokers can provide vital support and education to landlords about the products available for extend properties in their portfolios.

4

Getting derelict properties back on the market

Leeds Building Society’s analysis of Government data shows that some 677,000 homes sit empty in England alone, of which around 249,000 have been unoccupied for longer than six months. Action can be taken here in ge ing some of these properties back on the market.

Many empty properties will not be up to a liveable standard, and others will be caught up in

probate proceedings or other legal complexities.

For investors seeking a property to revitalise, and thereby grow the number of available habitable homes, there are a number of options available. For instance, there are dedicated platforms and auctions tailored to discovering abandoned real estate, while lenders can provide the finance needed to facilitate the acquisition and renovation process.

5

Raising awareness of the housing deficit

The housing shortage is a challenge requiring input from public and private sector stakeholders. Key players in the property market need to contribute insights and solutions to boosting the availability of housing. Therefore, the fi h approach through which specialised lenders and brokers can bolster housing stock is to maintain an ongoing dialogue about the ma er – it is vital that lenders engage with all stakeholders to exchange knowledge and ideas to effectively tackle the housing deficit. Establishing and nurturing an ongoing, transparent discourse regarding pragmatic approaches to tackle the housing scarcity is imperative for achieving sustainable, lasting results. ●

PARESH RAJA is CEO at Market Financial Solutions

Consumer Duty will lead to an evolution in advice fees

If you break the speed limit in this country, you get a speeding ticket. You know exactly where you are. This is a classic example of rulesbased regulation. However, in financial services we rarely have a such a black and white view of what is acceptable and what is not.

The regulation that governs our sector has tended to be more outcomes-based, meaning that firms are largely le to interpret how to act based on a set of high-level principles.

In the ball-park

This approach has clear advantages: it’s far less prescriptive, allowing firms more flexibility and, theoretically, sets the right conditions to encourage innovation. However, it also creates grey areas and ambiguity, meaning that a good head of compliance is worth their weight in gold.

A classic example of that is the recent Consumer Duty, which places far more onus on firms to prove they are doing right by their clients than the old Treating Customers Fairly (TCF) regime.

On the surface, the duty’s guiding principles – for firms to act in good faith, to avoid causing foreseeable harm and to provide fair value – are fairly unambiguous and easy to understand. However, they do not exactly offer a roadmap for firms to follow to ensure that their products and services are compliant under the new regime.

The market has been preparing for the new regime for well over a year. It’s clear from my conversations with brokers that the majority have treated the Consumer Duty with the respect and consideration such an important body of regulatory work deserves.

However, understandably, many of them have spent the past year or so wondering – perhaps even worrying a li le – about whether the solutions they have devised are in the right ball-park.

They have been keen to find out how their peers and rivals have interpreted the duty, and what solutions they have devised in order to be compliant.

If anything, they want to ensure that their own interpretation of the rules doesn’t make them an outlier.

A good example of this is the Consumer Duty’s requirement for firms to prove the services and products they offer provide ‘fair value’. Value is a very subjective concept; what is good value to one person may not be for another.

More movement to follow

Will brokers feel the need to review their current fee structures now that everyone has shown their hand? We have already seen at least one network move away from percentage-based fees – will more follow?

While brokers were required to be compliant by the 31st July live date, regulation is ever-evolving and good businesses will adapt with the market, especially when they are armed with a greater awareness of the interpretations taken by others.

I imagine most businesses will have had conviction in their rationale, but there is always room for greater improvement, so we will see some movement in fee structures over the coming weeks and months.

How that pans out over the longterm remains to be seen, but I am sure brokers will be taking cues off each other – and indeed the regulator – in the coming months, and fee structures will evolve as a result.

If that results in be er outcomes for consumers, as indeed the Consumer Duty intends, then that will be no bad thing. ●

LUCY WATERS is managing director at Aria Finance

Consumer Duty: More onus on rms to prove there are doing right by their clients

Don’t let your development lender frustrate your client’s project

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• Lower fees. All our fees are based on net loan amounts and not gross.

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• Loans from £200k to £2m.

• Low surveying fees - no QS monitoring for loans with build costs below £500k.

• ‘Commended’ Best Service from a Development Finance Provider 2022 at Business Moneyfacts Awards.

• Additional introducer fee can be added to the loan.

In Pro le.

In March 2023, Paragon Bank brought in Louisa Sedgwick as mortgages commercial director, to lead the development of its specialist buy-to-let (BTL) product proposition and support the bank’s green agenda. She joins at a time when the BTL market is often in the headlines, facing pressure due to rising mortgage rates and the tightening cost of living, rapid regulatory changes, or the moving goalposts of environmental reform, to name a few. e Intermediary sat down with Sedgwick to discuss the changes seen over her time so far, and why all these pressures make for an exciting market for those lenders willing to take up the challenge.

The Paragon proposition

From starting her career at Bradford & Bingley, to understanding the value of the building society mindset at Leeds, and on into new start-ups and challenger banks, Sedgwick has a broad view of the various businesses that make this market.

With this in mind, she says: “I’ve found my new home, and they’ve got me for good. While it’s not a mutual, it has that feel – a sense of belonging, a great family atmosphere. Everybody is collaborative and there is a drive to succeed – it enriches everybody’s experience at work.”

This internal culture, Sedgwick explains, feeds into how the business performs in the market.

“Paragon has got a great reputation,” she adds. “There’s strong trust in the company and the brand, and the icing on the cake is getting to know Richard Rowntree. He’s a great leader.”

A volatile market

The first few months of Sedgwick’s tenure have been spent getting to know her team. This includes challenging everything to weed out those places where processes might be streamlined.

“We’ve focused on what’s important and how can we become more efficient,” she explains.

“Having a belt and braces around everything is the right thing to do, but sometimes you can bolt it up too tightly and then you can’t get as much

done. We’ve started to think about what we can take out in order to do things quicker.”

When she joined, Paragon was able to get new products to market in around five or six days. In a matter of months, the team has reduced this to approximately 24 hours. This approach has also encompassed elements such as procuration fees, working on paying them more regularly at a time when cashflow struggles are hitting intermediaries harder than ever.

Sedgwick adds: “It’s about streamlining processes that we already have in place, taking away some of the noise, and thinking about what we can do better going forward.”

These efforts have been spurred on by the volatile nature of the current market, in which even market-leading products can become quickly out of date or overtaken, and fresh challenges face landlords every day.

“As one of the pioneers of BTL, Paragon has been at the forefront of the market for so many years,” Sedgwick explains. “The market has contracted a

The Intermediary speaks with Louisa Sedgwick about the challenges of catering for landlords in the current market, and how Paragon is stepping up to the plate

LOUISA SEDGWICK

little, so if the pie is not as big as it once was, but you still want the same cut, then clearly we need to be a lot more agile.”

Sedgwick has, therefore, come in as a fresh pair of eyes to help the business take a new approach to a market it already knows well.

Other trends include changes and challenges with affordability calculations for BTL landlords.

Sedgwick says: “The impact of those [interest coverage ratios (ICRs)] and higher interest rates is making them think about what their portfolio needs to look like, and how to make it as resilient as possible going forward.”

To this end, she has seen an uptick in houses in multiple occupation (HMOs) and multi-unit blocks (MUBs). While historically these might have formed 20% of Paragon’s business, this is now up to around 40%.

News of an exodus

The pressures facing landlords have led many to warn of a mass exodus from the market. However, for Sedgwick this does not tell the whole story.

“What we have seen is a trend towards limited companies, which now make up maybe 80% of our BTL business,” she notes. “That’s led by the tax legislation and also the fact that they can borrow that bit more, because the ICR calculation tends to be a little bit less.”

Where Sedgwick has seen losses is in the ‘amateur’ landlord space – those with one or two properties, who perhaps see BTL as a supplemental income.

“Any loss from the market is not a great thing,” she adds. “We want to keep a really healthy private rental sector because we know it’s needed, and we’ve already got a supply and demand mismatch. However, if you’re going to lose any part of it [...] then those are the ones where it doesn’t stack up in the same way, where they might not be making the right return.”

In the larger portfolio space, reports of a mass exodus have been greatly exaggerated. However, new landlords are needed, and new investors should not be put off by experienced portfolio landlords dominating the market.

Sedgwick says: “There’s a difference between an ‘accidental’ landlord, compared with someone who is starting at the beginning of their landlord career – we want to support them and help them grow into the portfolio landlords of the future.”

Paragon hosts educational resources on its website for anyone who wants to take those first steps. This is also an area Sedgwick wants to invest further in for the future, ahead of older landlords eventually ageing out of the market.

“We’re working on lifecycle management,” she says. “From day one of becoming a landlord,

through to when you might want to dispose of your portfolio. We’re working on how we support all of that, as well as helping grow and enhance portfolios in the middle.”

Relaxing reforms

Part of this, of course, the question of sustainability, and the march – albeit faltering –towards net zero. BTL market players will have closely followed the shifting proposals around rented property Energy Performance Certificate (EPC) ratings. Just as it seemed clear that all rented properties would be required to reach Band C by 2028, Housing Secretary Michael Gove expressed that it was necessary to relax the pace of reforms.

Sedgwick warns that this may be counterintuitive: “Giving landlords more time is great in one sense, but we were trying to grow some impetus around the need to improve properties. The longer they kick that down the road, the more difficult that position will be.”

The concern, she adds, is that once the Government does decide on a deadline, it may then give landlords only 12 months to meet the requirements. In the meantime, the market may continue to fall behind, rather than get ahead.

Paragon’s focus on education, which is going to grow in the coming months, aims to help landlords understand the importance of starting sooner rather than later. From its own research, the firm found that more than 50% of landlords care about making these EPC changes, but are being stymied by a lack of clear legislation and funding options.

Sedgwick says: “We just need some clarification on what needs to happen and when it needs to happen, and I’m absolutely sure the whole of the lender community will get behind it.”

She adds her voice to the rising call for a longterm agenda with a 15 to 20-year set of goals, rather than the six-month timeframes created by the constant change of Housing Ministers.

On the horizon

In the meantime, Sedgwick says: “We care about the environment, and the impact housing has on the green agenda. We’re working on innovative solutions, which we will be able to speak more about in the next six months.”

Sedgwick says the firm is also looking to completely replatform its systems over the next year in order to make processes slicker and stronger for brokers, adding that: “The importance of it cannot be underplayed.”

She concludes: “We will be doing some product innovation as well over the next six months, and then leading into the second half of next year, I would tell brokers to watch this space – there are exciting times ahead.” ●

Evaluating opportunities in the current climate

Investing in property is never a straightforward process; it requires comprehensive analysis of diverse data points to establish the relative merits and risks. Naturally, then, a thorough process should go hand in hand with a study of market dynamics, macroeconomic influences, and regulatory pa erns – being wellinformed is key.

This is particularly true in the current economic climate. Sticky inflation and climbing interest rates have complicated ma ers, making it more difficult to predict confidently how any particular investment or asset will perform in the medium to long-term. This only heightens the rigour with which any development – and developer – must be assessed before it can be presented to investors.

So, what is involved in the evaluation of a potential property investment, especially in the construction phase? At Shojin, our focus lies in offering fractional investment opportunities into UKbased property developments – our experience means we are well placed to share insight into what is involved in cherry-picking the right investments.

The valuation process

Stating that asset valuation plays a central role in assessing investment opportunities might seem obvious, but there is more than one factor to consider at this first stage.

First, any property valuation must address the essentials: market conditions, property status, land valuation, and construction expenses. However, a detailed and accurate valuation must delve into more extensive socio-economic trends.This means a keen understanding of supply and demand dynamics.

There are further layers to consider when valuing off-plan properties and development projects.

The goal is to identify the right investment opportunities among these planned developments, whether they are already in the construction phase or not, to ensure the selection of the most lucrative, risk-adjusted opportunities for our investors.

Of course, the success of an investment property is influenced by factors such as tenant demand and rental income, capital appreciation, and the ease of selling the property.

The location of the property plays a crucial role in determining these factors across various categories, including residential, commercial, and purpose-built student accommodation (PBSA).

There must be absolute confidence that the chosen location will contribute to long-term success.

The right venture

Assessing the quality of the developer through proper due diligence is also key whenever investing off-plan, whether an equity or debt investment.

Evaluating a developer’s proposal requires some up-front costs to ensure meticulous consideration of all the details. Potentially complicating factors – such as escalating labour and material costs – need to be accounted for, alongside ensuring demand for the end product.

For example, in build-to-rent projects, meeting contemporary renter standards and preferences is vital. This could extend to amenities like leisure spaces, gyms, and coworking areas – features in high demand in the rental market.

This bears greater weight for equity investors seeking ownership of assets for rental, residence or resale.

In debt investments, where returns span a pre-agreed term, the asset’s eventual value diminishes in importance, but only slightly. Nevertheless, the key gauge remains the sustenance of market demand, indicating the project’s enduring success and likelihood of completion.

The right developer

To set yourself up for success in property investment, whether through equity or debt, it is important to partner with a developer that boasts an impressive track record.

Using publicly available information as well as your own research, it is important to scrutinise a developer’s past achievements and ongoing projects. Shojin carries out regular on-site visits to assess the quality of the developer’s work and offer assurance to investors that the project will go to plan.

It is also important to consider the developer’s funding stack, and to ensure that the developer has skin in the game through their own equity contribution, as well as assessing the incentives of the other lenders.

An institutional lender may have provided the bulk of funds through senior debt, but with their first charge security they won’t be as worried about a smooth exit as someone providing junior finance.

In the current financial landscape, the value of research and due diligence cannot be understated.

In the property sector, as with any asset class, it is key that investment providers are transparent, thorough, and approachable, ensuring they can select the best opportunities available for their clients.

JATIN ONDHIA is CEO at Shojin

Choice is good, but are brokers getting more value?

There are very early signs of recovery in the property and mortgage markets, but there is still no time for complacency. Every forward-thinking practitioner and stakeholder in the sector is commi ed to growth and seeing a wider adoption of bridging and short-term finance in the intermediary channel.

From a small co age industry in the ‘80s and ‘90s, the bridging sector has grown from being the preserve of solicitors managing private client money through short-term loans, to the highly sophisticated business it is

to si all the information they must gather to reach a conclusion.

Of course, technology has leapt forward, and sourcing systems are an indispensable weapon for every mortgage broker.

For bridging purposes, though, sourcing systems are largely still not up to the task, as individual circumstances do not fit so easily into an algorithm.

So, how does a broker deal with the 140-plus short-term lenders, and decide on whether they have the ideal solution?

Saving time

The more complex a client’s individual circumstances, the more likely that advisers will turn to specialist distributors to provide a time-saving alternative to trying to sort a solution on their own.

Advisers are usually time-poor. Having to si through masses of lender information – much of which is hard to find – can add more pressure. Yet so much of the heavy li ing can be done by exploiting the resources provided by specialist distributors or packagers.

Breaking down barriers

Real or perceived barriers to entry need to be eased if the sector is to continue to grow.

Whether about fees or processes, education remains a priority. Part of that education means helping new introducers understand that they do have a choice as to how they can access the bridging market. Whether they choose to use it is up to them.

What I would say to all brokers is that they should assess the advantages and disadvantages of direct contact as opposed to using a third-party specialist distributor.

For brokers with the luxury of a backup team to make the string of individual enquiries to each lender and come up with a genuine recommendation based on rate, service and suitability, then going direct can work well.

today, providing finance for anything from property auction purchases to land development projects for building or total refurbishment.

However, the simple fact remains that advisers are expected to ensure their customers are given recommendations based on a thorough analysis of the products and pricing that most closely match their needs.

How advisers reach that recommendation is based on a mixture of industry knowledge, experience, and however they choose

Not only can they help to educate advisers about the wider specialist lending sector, but they can also convert many practitioners to the concept of making more use of their experience, backed by their broad-based lender panels and close relationships with those lenders.

If I were a broker coming to bridging for the first time and used to dealing directly with mortgage lenders for most of my first charge needs, I would like to know that I could deal with a lender directly. However, given the potential complexity of many short-term deals, especially on the development side, would I want to?

However, my question to brokers working on their own and without the benefit of a researcher or paraplanner is: how much time do you really have to make that kind of assessment before making a recommendation? I would suggest that the answer in many cases would be ‘not much’.

I am an advocate of the specialist distributor route. For brokers, there is a real advantage in having a resource with access to all the major lenders in the sector.

Their knowledge of lenders’ individual requirements, and the option to provide clients with a full advice service, can leave brokers free to concentrate on new business, while still making the most compelling recommendation. ●

RANJIT NARWAL is head of origination at Kuflink

I am an advocate of the specialist distributor route. For brokers, there is a real advantage in having a resource with access to all the major lenders in the sector”

Meet The BDM

How and why did you become a business development manager (BDM)?

I enjoy building relationships – a cliché, I know, but it’s true – and as a BDM my main role is to do exactly that, be it with borrowers, brokers, or even other lenders.

I knew that a role where I could sit over a co ee with a client and be able to talk business would be where I’d t best.

My days are varied, be it out on sites with developers or in swanky Central London boardrooms meeting

brokers. ere’s always someone new to speak to or a new business opportunity to work on.

What brought you to Magnet Capital?

A er leaving a nationwide estate agency group, I really wanted to nd a company with an approach to business that matched mine.

When I came across Magnet Capital, I instantly knew this was a company I wanted to join.

While Magnet Capital is only six years old, it has already won the Business Moneyfacts award for ‘Best Service from a Development Finance

Lender’ and continues to grow with great success.

It’s exciting to be part of the team, and to have such an in uence on its trajectory, which makes Mondays something to look forward to.

What makes Magnet Capital stand out from the crowd?

We are a small team, but a small team that works extremely well. at allows us to provide a truly tailored service to clients.

I’m sat next to our three decisionmakers, which enables quick

The Intermediary speaks with Will Calito, sales executive at Magnet Capital

decisions. It also means we all know what’s going on at all times. If an issue arises, not only do clients and brokers have access to me, but they also have the whole team.

We’ll always work with them to nd the best solution.

Our focus is to create a genuine partnership, and we always take keen interest in our clients’ projects.

A touch of old-fashioned business principles goes a long way, and a face-to-face approach is a key reason our repeat borrower rate is so high.

What are the challenges facing BDMs right now?

ere are constant challenges we face as BDMs. As we operate in such a busy market, we have to work even harder to explain to our brokers why we stand out from the crowd.

ankfully, at Magnet Capital we have some very strong unique selling points (USPs) as a specialist development nance lender, and I enjoy seeing a broker’s face when I’m able to present a product that’s genuinely fresh and unique.

What are the opportunities?

In a property climate which has plenty of hurdles, this is the time to show your clients exactly what sets you apart from the next lender.

Now is when going that extra mile must be standard practice across all aspects of the role.

Everyone is nding it a little harder right now, but as BDMs we can really in uence the process, whether that’s making the extra e ort to give a broker you haven’t spoken to for a while a call, or popping down to a current project to see the progress and have a catch up with the client.

ese are all the things which build up a partnership, and in tougher times when borrowers and brokers are looking towards lenders for that extra reassurance and support, we’ll always keep close contact and o er solutions along the way.

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

I think the main thing really is to keep an open dialogue between the borrower, the broker and the lender from the get-go. I’ll want to be on a Zoom call or on-site as soon as I can once an enquiry comes in, with both the broker and the borrower.

Brokers do a great job at getting the information over to us, but sitting across from one another having a discussion about the borrower’s project and background is key in identifying the full picture from our end. It also gives the borrower an opportunity to ask questions directly to us.

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

In property development, you need to be adaptable. For better or for worse, we are constantly facing new hurdles and challenges to overcome, as the past 12 months in particular have shown.

ere are some fantastic opportunities out there now, and there is – as we know – a real need for more quality housing.

Developers need to ensure every cost is accounted for, with a reasonable contingency in place, and be conservative about end values.

I think those that will do well are the ones that adapt and keep in line with market trends. Developers have their own USPs, and now is really the time to show them o . ●

Magnet Capital

Established 2018

Products Development nance:

Up to 55% gross development value plus rolled-up interest

Stage payments within 24 hours from inspection

Residential, new-build, conversion and refurb projects

Loan amounts from £100,000

minimum to £2m maximum

Contact details: will@magnetcapital.co.uk

0208 075 3255

There is – as we know – a real need for more quality housing. Developers need to ensure every cost is accounted for, with a reasonable contingency in place, and be conservative about end values”

Equity release advice evolves with the products

The evolution of later life lending products continues to gather pace, turning the spotlight on the advice process as it adapts to growing demand from an increasingly wide range of older customers.

The range of options currently available for customers and advisers means there is now o en no single right answer. The result is that providing the best advice can be complex and require the consideration of a matrix of different risks and benefits.

Add to this the launch of Consumer Duty, which has shi ed the focus from treating customers fairly to providing good customer outcomes, and it is clear that advice in the sector must continue to evolve and grow.

It is against this backdrop that Key – as the UK’s leading equity release advice firm – has decided to evolve its advice philosophy to enhance personalisation, with a focus on supporting client understanding and encouraging the active management of borrowing.

A ordability supports personalisation

The la er point is arguably the biggest change, as traditionally one of the features of equity release was the fact that repayments were not mandatory. This is not to say that advisers did not discuss affordability and the benefits of making repayments with clients, but it was typically fairly light touch when compared with what we see in the residential market.

However, with many equity release plans now facilitating the servicing of some or all of the interest – as well as all products allowing ad hoc repayments to be made – assessing

affordability has become even more relevant in ensuring customers are recommended the right product and that they are actively managing their debt.

The relevance of this will only increase if the long-awaited hybrid products – which combine a variety of features from across the later life lending arena – are launched in 2023, as suggested by various pundits.

The right advice

All clients who approach Key for support with their later life lending needs will undergo an affordability assessment. This, alongside an initial exploration of views and preferences, will help determine not only what products the customer may be eligible for – including retirement interestonly (RIO) and standard residential mortgages – but also what advice route will help them achieve the most suitable outcome.

Assessing early in the process what level of repayments may be manageable can ensure that customers recognise immediately the benefits of active management of any borrowing, including opening up a wider range of options in the future, and ensuring products evolve alongside the needs and circumstances of customers as they move through later life.

The focus on affordability does not mean that – if a client cannot afford to make some form of payments – they will be unable to access equity release in the traditional form that allows the compounding of interest.

Rather, by embedding this into the advice process, a clearer view of all of the product options that may be available can be achieved.

This will also help ensure that the advice is as personalised as possible, and that any customer product

bias is challenged, to ensure that a balanced view of all the alternatives is properly considered.

These changes do not mean that these important considerations were not included before, but the new tools and processes will formalise the approach and help evidence the advice recommendations much more clearly. This is invaluable, particularly where there is no one clear answer.

Evolution

Looking to the future, each firm will have their own views on how they need to adapt to the new Consumer Duty regime, as well as the rapidly evolving product landscape.

What might work for one firm may not work for another’s current systems and processes, but we fundamentally need to challenge ourselves by considering what will provide good customer outcomes.

Are our approaches not only fit for purpose at the moment, but inclusive enough to cover all later life lending products, and flexible enough to encompass future innovation?

At Key, we believe the principles within our evolved advice philosophy will achieve this, but this is a debate that we need to have as an industry. ●

WILL HALE is CEO at Key Later Life Finance

Are our approaches not only t for purpose at the moment, but inclusive enough to cover all later life lending products?”

Getting vulnerability right will empower later life borrowers

The implementation of Consumer Duty is a rallying cry for change in the mortgage industry, particularly when it comes to consumers over the age of 50.

Later life borrowers have been woefully underserved by large swathes of the financial services sector, with many finding themselves excluded from mortgage opportunities, despite their financial stability and wealth of life experience.

Consequently, a lot of them do not hold our sector in very high regard. How do I know that? Because they tell us. Every year, LiveMore surveys thousands of people aged 50 to 90 across the UK to produce what we call the LiveMore Barometer.

We ask them their personal and financial priorities, their views on the economy, and their experience of financial advice and products.

The Barometer weaves a rich tapestry of views and experience, with – perhaps unsurprisingly –significant amounts of age-related and geographical variation.

It tells us, for example, that parents in the South East are less likely to help their children onto the property ladder, despite being the least affected by the cost-of-living crisis. Or that 80 to 90-year-olds are the most dissatisfied with the Government’s handling of the economy.

But there is pre y much universal agreement on one thing: many 50 to 90-year-olds feel like the ‘forgo en generation’ when it comes to financial products, with significant numbers saying that financial institutions are either not working on their behalf, do not have enough information for them, or over-promote certain products to ensure a sale.

Others say that financial products aimed at them do not address the real issues facing people of their age, while many say that the promotion of financial products to people over the age of 50 is patronising and condescending.

This theme is a common one, with one respondent saying: “I feel invisible. Not old enough for a lifetime mortgage, not rich enough for fixedrate mortgages on the market. I have no help from anyone.”

An era of change

The Financial Conduct Authority’s (FCA) Consumer Duty initiative, driven by a renewed focus on customer outcomes, should change this narrative and herald a new era of financial inclusivity for the over-50s.

It also represents a unique opportunity for the mortgage industry to excel in offering these customers the right products.

That process, of course, puts managing and understanding vulnerability at its core. In practice, this imperative to avoid foreseeable harm hinges on four key areas:

Low financial resilience, such as debt, limited or no savings, and difficulty in coping with financial or emotional shocks.

Poor health, including mental health, illness and disabilities.

Recent negative life events, such as bereavement, divorce, or new caring responsibilities.

Low capability, including poor literacy or numeracy skills.

In its Financial Lives 2022 survey, the FCA found that 24.9m adults displayed one or more of these characteristics of vulnerability, which goes to show that this is a widespread and important issue. There are varying degrees of vulnerability, and

LEON DIAMOND is CEO and founder at LiveMore

it can come and go, but it is important for advisers to be able to recognise when someone is vulnerable.

It is not just important at the point of sale. We should also assess clients throughout the term of their mortgage as people’s lives change, especially as they get older. This is why we offer a unique annual Ongoing Care Fee of 0.13% for intermediaries who contact their clients every year with a customer care call.

Advisers will need the right skills to identify and understand customer vulnerabilities, the right processes in place to evaluate and rectify their needs, the right products to meet those needs and the right information to communicate with them clearly, consistently and continually.

Training can help advisers to recognise and respond to the needs of vulnerable customers, but firms should also be monitoring this and learning from situations that occur.

The FCA will be keeping an eye on lenders and intermediaries as Consumer Duty beds into the industry, and vulnerability is one of the regulator’s key concerns.

The age of the typical retirement is consigned to history. Many retirees want to carry on working – and borrowing – to maintain a be er quality of life.

By helping them to fulfil this ambition with empathy, clarity, and a genuine desire to help, we can restore faith in our industry and create an environment where vulnerable consumers feel heard, supported and empowered. ●

pparently, ‘90s fashion is back. While you will be relieved to know that I will not be donning a bucket hat nor a shell suit for the next awards event, this did get me thinking about how far technology has come since that decade.

Society, as well as our industry, has moved on significantly since the Nokia 8110 was the height of sophistication, equity release was yet to be regulated, and only one in five UK households had internet access.

So, what has changed, and where to next? First, we have seen great strides forward when it comes to sourcing products, with the advent of platforms and the increasing use of application planning interfaces – or APIs as they are more commonly known.

The idea that an adviser can identify the right product for their customer

and then – rather than starting the laborious task of rekeying the data into the lender’s portal – submit the details with one click of a bu on has been a game-changer. Not only does it save time, but in the current environment when products are changing rapidly, it allows advisers to keep on top of the latest developments. Air has seven APIs live with lenders, and others will be added shortly.

Fact-finds are now also digital, and have evolved considerably from the numerous pages of documentation that used to be part of the typical client meeting. Due to their dynamic nature, these are not only more sophisticated and able to allow for be er interrogation of the client’s needs, but they also ensure this information is clearly and – most important –compliantly captured.

Some programmes, including Air’s WriteRoute fact-find, also include access to other applications, such

as Comentis, which will provide a financial vulnerability assessment of the individual client. While this in no way replaces the ‘so skills’ that advisers use to identify and support vulnerable customers, these types of augmented processes are invaluable.

Further additions, such as the integration of Google maps into the WriteRoute process, and flood risk checks into sourcing, have also made the adviser journey easier.

However, it is not just what happens behind the scenes that ma ers, but in front of the customers, with the advent of dynamic tools which support advice discussions.

Advisers who helped clients take out products in the early 2000s would have marvelled at the current ability to show the total cost of borrowing over a number of years with the click of just a couple of bu ons.

Looking back and forward

These are just some of the technological innovations we’ve seen in recent years, so the question then becomes, can we go further? I believe we can!

While there are already some approaches in the market to help firms fulfil their obligations under Consumer Duty, Air is working on an innovative tool to help advisers and clients compare a broad set of later life lending products, as we adapt to the changing regulatory environment.

There is also the advent of artificial intelligence (AI) to consider, and while I don’t think that we will see it replace the empathy, in-depth knowledge and

expertise of advisers in this space, I do think we should consider what it could do.

Speaking to providers, I know that there is some appetite to see if AI could provide support when it comes to repetitive administrative tasks, so I do foresee changes in this arena.

With compliance and the need to clearly illustrate why a customer has made a specific product choice, I can also see further reliance on technology when it comes to achieving this objective. Again, it would not replace advisers, but could augment what they do and help to safeguard firms by providing a be er and more consistent approach.

Finally, with the generation of customers that we are serving becoming more techy savvy than ever before, should we also be looking at direct to consumer, rather than just business to business innovation? I can imagine a situation whereby a customer could check the progress of their application –and the amount owed, as well as the terms and conditions of their policy – via a portal.

Looking across to other financial services disciplines, these ideas are not revolutionary. But to be taken seriously as a sector, we do need to keep upgrading our Nokia 8110s. ●

PAUL GLYNN is CEO at Air

Progress begins with listening to advisers

Many homeowners want to unlock wealth from their property without having to sell.

This has seen the lifetime mortgage sector continue to be a popular solution for homeowners in later life. 2022 saw record activity, according to the Equity Release Council (ERC), with 93,421 new and returning customers choosing to use lifetime mortgages.

Although a higher interest rate environment in 2023 has inevitably impacted demand and lowered the chances of a record-breaking year, the industry hasn’t ceased to innovate.

One of the most important areas of focus for lenders has been addressing evolving customer needs, recognising that not every customer will follow the same journey – they might need to access property wealth at different times, for different reasons, and draw down different amounts.

Our current products and future innovations must provide solutions to address these varying needs, and as lenders, it’s important we listen to adviser feedback to be er understand where change and innovation are needed.

Features and exibilities

Innovations o en come into their own in challenging market conditions, such as those we’ve experienced over the past 12 months. Through this period, adviser feedback has been integral to how we think about our customers and respond to their changing needs.

We regularly review our processes and products to make sure our customers are in the best possible position for later life. This has led us to reduce the minimum drawdown

amount on our lifetime mortgages to £1,000, allowing customers to take smaller sums to top up their income requirements and reduce the overall interest charged on the loan.

We also now allow new lifetime mortgage customers to make up to 12 repayments each year, up from four, and make repayments by standing order. Other changes include new features, such as extending the offer validity period to 90 days to add an extra layer of reassurance.

All these innovations have been the result of direct adviser feedback on customer challenges or opportunities.

Helping advisers

As signs of a market recovery begin to materialise, greater automation and operational efficiencies will play an increasingly important role in helping advisers achieve the best outcomes.

We have initiated processes such as our distribution oversight function, which generates data that supports firms to improve the quality of business and the speed of our application to offer turnaround times. This is aimed at improving advisers’ understanding of our products and processes, to help them provide the best support throughout the application process.

Full steam ahead

New Consumer Duty rules reinforce the need for regular collaboration between providers and advisers to demonstrate and evidence we’re delivering good outcomes.

In response, we changed our product descriptions to provide greater distinction, helping advisers be er understand the target markets.

Advisers will need to ensure that their advice journey and recommendations match these

DAVID G JONES is distribution director at Legal & General Home Finance

descriptions, ensuring they are generating leads from the right places and presenting the relevant options.

We’re also commi ed to supporting people in vulnerable circumstances, which is a particular focus of the new rules and a priority of our adviser partners. Different circumstances or situations can make people vulnerable at any time, including significant life events, like bereavement or job loss, or low resilience when hit with financial or emotional shocks.

Being more exposed to vulnerability shouldn’t stop individuals from achieving positive outcomes and financial wellbeing. They might just need more help and support to make informed financial decisions.

That is why we provide a vulnerability toolkit to advisers to help them identify and support these customers. This includes tips on how to identify triggers of vulnerability throughout the advice process, guidance when making big financial decisions, and signposting to charities and other organisations such as StepChange and Macmillan Cancer Support, so that the needs of clients are catered for with the most care.

The resources we share with partners, and specialist training for our own teams, should reassure the advisers we work with that their customers are in the best hands if they experience challenging times.

Ultimately, achieving a more flexible later life lending sector will need to be a collaborative effort.

In order to navigate a market that is constantly evolving, firms will need to stay ahead of customers’ needs, and this can only be done by encouraging conversation with advisers on a regular basis. ●

The myths and facts of equity release

The face of modern living for over-55s has changed. Put simply, people are living longer, have considerable property wealth, and are looking to get more out of later life. This has catalysed the need for fresh thinking and product innovation.

While the first half of 2023 has been challenging, Q2 has shown promise, with total lending for equity release reaching £664m between April and June, according to the Equity Release Council (ERC). The number of active customers rose to 17,028 in Q2.

Traditionally, people passed down equity as inheritance, but people are increasingly tapping into this wealth to bolster retirement finances. Clients are turning to equity release for debt repayment, supporting loved ones and home improvements, to name a few.

Given market volatility, it’s no surprise that 54% of the equity released in Q1 was to manage debt, and the largest chunk of funds were used for mortgage repayments, according to the Mortgage Advice Bureau. Meanwhile, Standard Life finds that almost one in five people (19%) used some or all of the proceeds as gi ing for family or friends last year.

While lending volumes have increased over the years, so too has the professionalism of the market, and the safeguards for borrowers. Yet at times, the sector is still haunted by negative misconceptions.

Myth #1: Paying more than your home is worth

There are safeguards in place to ensure that your clients never owe more than their home is worth. As a member of the ERC and authorised by the Financial Conduct Authority (FCA), at Fluent we offer a ‘no negative equity guarantee.’ No ma er how long interest accrues, the owed amount will never surpass the value of the property linked to the plan.

Myth #2: Making monthly payments

With a lifetime mortgage, your client is not obligated to make monthly payments, although they do have the option. Our lending partners – all ERC members – now offer new lifetime mortgage plans that permit penaltyfree, optional repayments. Typically, your client can make repayments of up to 10% of the balance annually or choose to clear the interest monthly.

If they decide not to make any payments, the interest on the borrowed amount will accumulate over time. Both the initial borrowed amount and the accrued interest will only be repaid when the home is sold, or when the last homeowner either passes away or moves into care.

Myth #3: You will never own your home

Equity release with a lifetime mortgage doesn’t involve selling the property to the lender, as they’re borrowing against its value.

A home reversion plan, which accounts for less than 1% of the market, entails selling a portion or all of the property.

Unlike traditional mortgages, lifetime mortgages have no fixed end date, providing flexibility for older homeowners who may face limited mortgage options.

Equity release also grants the right to transfer the lifetime mortgage to a new home, provided it meets the lender’s criteria. If the new home has a lower value, then your client may need to repay a portion of the lifetime mortgage and potentially incur early repayment charges.

Myth #4: A mortgage prohibits equity release

Owning a mortgage does not prevent your client from releasing equity. In

fact, utilising the property’s wealth to help pay off an existing mortgage is one of the most popular applications.

With a lifetime mortgage, a client will receive cash in exchange for a first charge for an equivalent amount. This can be used to repay the existing mortgage, all in one legal transaction.

Customers who want to make regular monthly interest payments can select a suitable plan and set up a direct debit. If they are unable to afford further payments, the mortgage does not default; it automatically switches to rolled-up interest.

Myth #5: Too expensive

It’s not unusual for a lifetime mortgage to be cheaper than a conventional mortgage. With a flexible range of products available, we offer a variety of lump sum and drawdown options, which could in fact reduce the cost of borrowing for your clients.

The negative narrative

There have been some great leaps forward in terms of educating customers in the industry, not to mention the work that the ERC is doing to banish misconceptions, but this is an ongoing job.

Changing customer needs and a itudes will see equity release continue to transition from a specialist to a mainstream option. With growing numbers of people exploring equity release, it’s more important than ever to ensure they get the right advice.

Equity release has undergone a huge amount of growth and modernisation in the past few decades. In this everchanging environment, now might be the time consider these products for your clients. ●

AARON CONLON is equity release managing director at Fluent

Voluntary repayments are a gamechanger

Increasing numbers of homeowners are improving their standards of living in later life by releasing some of the equity tied up within their property. As equity release specialists, we’re finding the voluntary payment feature within lifetime mortgages has been a game-changer for customers this past year, given the higher interest rates following September 2022’s mini-Budget. These penalty-free partial repayments are now a mandatory feature for all lifetime mortgage products, as per the standards laid down by the Equity Release Council (ERC).

Control and comfort

We know from research conducted prior to the launch of smartER™– the UK’s only consumer equity release research tool – that having control is a key priority for consumers today.

Having the control and flexibility to be able to make payments back to the lender and reduce the cost of borrowing has become an increasingly popular benefit.

The main perks are the ability to reduce future interest charges by

restricting the compounding effect of the interest, while still taking comfort in the ability to counteract the cost-of-living crisis, pass on a living inheritance, and all the while preserve a proportion of the estate.

Major decisions

Due to the cost-of-living crisis, many people aged 50-plus are looking to make major financial decisions about their home to generate extra cash. This is especially true of the past 12 months, as people look to release equity from their homes to fund the ramifications of the cost-of-living crisis, as well as home improvements.

We’ve witnessed a rising number of customers using monies to replace their existing mortgage, consolidate debts, and support everyday needs, which has provided much-needed financial flexibility, given that with equity release no monthly payments are required.

Given that the home is still likely to be one of the most significant financial assets many homeowners have, equity release will continue to form a large support pool for retirement needs as people use their property to

bridge the gap, utilising finances for lifestyle goals, home improvements, affordability and gi ing.

Plus, with equity release becoming a far more flexible and versatile product than ever before, it’s proving increasingly popular.

We’ve found that usage of our voluntary payments calculator increased by 128% in the last quarter, as people investigate how to keep the balance in check.

A prime example

Our customers are embracing this newfound wave of choice, flexibility, and control within the sector.

A prime example of this is a customer of ours, who recently wanted to release equity from their two-bed bungalow to create extra space and gi funds to their son.

They had lived in the property –worth £325,000 – for 32 years, and they were very happy, with no desire to move. Our adviser explained that as the couple was 70 and 68, they were eligible to consider all options for later life lending.

They were presented with the options and proceeded with a flexible

lifetime mortgage, which allowed them to borrow the required lump sum and make voluntary monthly payments to cover the interest added to the loan.

They had the flexibility to stop, reduce or take a payment break, without the risk of their home being repossessed for missing payments, or affecting their credit profile.

Interest-only

The couple chose to borrow £44,750 with a monthly payment of £191 for the entire term, adhering to their manageable £200 monthly budget in the short and long-term, and ensuring that their capital balance would not increase. Effectively, they proposed to manage the loan as an interest-only mortgage. Additionally, they could make extra payments to reduce the balance further if they wanted to.

The couple were delighted with their decision, as they managed to add a conservatory to their property, made a gi of £10,000 to their family, and even went on a luxury holiday during the installation process, plus they can make repayments in their own time, and by making voluntary repayments

the couple were able to preserve the value of their estate.

Putting customers rst

We recommend advising clients that are interested in equity release to start their journey with smartER™, which enabled the example case above, to find out how much they could borrow and the associated interest rate, followed by inpu ing the information into the voluntary repayments calculator for a full breakdown.

Your clients can check live rates based on their personal circumstances, before speaking to one of our independent advisers. smartER™ also gives consumers live, whole of market information, presented in a way they can understand.

This la er pojnt is particularly important due to the Financial Conduct Authority’s (FCA) Consumer Duty principles se ing out higher and clearer standards of protection across financial services, and requiring firms to put their customers’ needs first.

Equity release has increasingly become more of a mainstream financial planning solution over the years.

Lenders and advisers alike understand the importance of offering customers as much information as possible to help them enter the advice process with the ability to make informed decisions.

Therefore, simplifying the whole research process for customers through the use of smart technology only seeks to add greater benefit to all parties involved. ●

MARK GREGORY is CEO and founder of Equity Release Supermarket

In Pro le.

Pure Retirement celebrated its 10th birthday earlier this year, and in that time has built up an impressive 14% market share and played an integral role in shaping the later life market. e Intermediary sat down with Andrew Clare, head of operations, who himself has over 40 years’ experience in the property finance industry, to understand how the business has evolved, and what the later life market of today looks like.

Change and stay the same

After a career covering the full gamut of what makes a mortgage, Clare’s career brought him to the lifetime space, and to Pure Retirement. This, he says, was partly a matter of personal fit.

“I’ve done everything you can do with a mortgage over the years,” he explains. “It felt like a good opportunity, a good change.”

In the time since he joined, Pure Retirement has nearly tripled in size, from about 100 employees to approximately 270.

“There have been two journeys side by side,” he says. “One is the growth of Pure, with more funders, more product ranges, and the ability to make a difference in the way we operate as we grow. At the same time, I joined a year or so before Covid-19, and have seen it right the way through from what was traditionally a 100% office and paper-based system, to taking the originations department to 99% paperless.

“That was a big challenge in itself. We also went through a spell of desktop valuations – which are very difficult for lifetime mortgages, because in lifetime the almost exclusive source of repayment is going to be the sale of the property.”

During Clare’s tenure, the later life market has had to remain steady in a context of constant change. From the challenges of the pandemic, through to the rapid recovery post-lockdown, and then once more into a downturn in 2022-23.

“It has been up, down and all around,” Clare says. “In the meantime, the products have matured, the

processes have matured, but the fundamentals have stayed exactly the same, while the world we operate in just keeps changing.”

Business ethos

Pure Retirement copes with this environment by working closely with its funders, and ensuring its products are fit for the current market.

Clare says: “All lenders will be facing similar challenges. We need to make sure our products are as competitive as they can be.”

It is also about focusing on the consumers, and “making sure that we’ve got the right tools in the right place,” he adds.

Clare says: “We place a lot of pride in our servicing area and looking after our back books, giving us flexibility to cope with variations in the market.”

Pure Retirement also looks after its staff internally, creating a strong, people-based culture. Part of the process for any business looking to move with the times is the role of technology. This

The Intermediary speaks with Andrew Clare, head of operations at Pure Retirement, about the evolution of the later life sector, and why these products are more important now than ever

ANDREW CLARE

is still largely in its nascent stages within the later life market, but Clare says there is a clear avenue to using tech to support speed, accuracy and client outcomes.

“Any delay can cause the customer anxiety and have a financial impact,” he explains. “It’s about making the right decision first time. The last thing we want to do is issue an offer which falls through down the line. So we make sure we take the time to resolve everything before offer, without affecting the speed.

“All the technology on the originations process is about driving all that – speed, accuracy and reducing back and forth.”

To this end, Pure Retirement is in the process of rolling out an enhanced version of its online application form, designed to get the right information first time, with fewer requirements for the slower process of free-format text.

“Once that’s through, it’s about dealing with all the other aspects of the process as smoothly as we can, reducing the touchpoints where possible,” Clare says.

Rather than removing the human touch, he notes that technological advancements can facilitate greater access – including getting underwriters on the phones more. In fact, Pure Retirement assigns dedicated underwriters to help reduce the back and forth for brokers.

“Technology should ideally help avoid the need for that,” Clare continues. “But when the need arises, we want to get the answers right away and the decision made as smoothly as we can.”

While he concedes that there is scope for deals to be made at the press of a button, this does not reflect the complex reality of cases in this market.

“That’s why we work very closely with our broker population,” Clare adds. “Underwriters talk directly to brokers, we’ve got underwriting managers going out with our sales team on roadshows, educating around what’s happening in the underwriting world, fielding questions and meeting brokers. That puts out a human face at the same time as building that contact up.”

This also means listening to feedback from brokers around how to improve the journey and eliminate any sticking points. With all these measures in place, Pure Retirement has been able to go from application to offer in as little as 14.5 hours in a recent case.

Part of this is ensuring a smooth sales process, which works in partnership with the underwriting team. Pure Retirement’s underwriters regularly shadow sales, and vice versa, to understand the application process and weed out any issues.

“We want a consistent approach all the way through,” Clare explains. “That either means having the same person, or people work closely together.”

With the launch of the Consumer Duty regulations earlier this year, the property market has been abuzz with talk of protecting clients’ interests and remaining vigilant about vulnerability. Nowhere is this more pointed than in the later life sector, particularly in an increasingly fraught market.

“Once the loan is completed, we’re talking to customers all the time,” Clare says.

“A lot of customers are requesting a further drawdown to help with the cost of living and ease debt situations, and we absolutely need to be very alert and aware of the customer’s situation.

“Meanwhile, with the initial loan, we work closely with brokers to flag any concerns to make sure they’re addressed, and the consumers get the right deal for them.”

This, he adds, is where training and experience are key. The question of vulnerability is not a new one, and Pure Retirement is in a strong position to handle the issue. Clare points out that it is not just the client that must be taken into consideration, but also treating their relatives with compassion and care at what can be a difficult time.

“Our guys are specially trained and experienced in talking things through and being there for them,” he says.

“We give out contacts for guidance organisations and counselling – just being there and making sure they’ve got someone to talk to, handling it with empathy and awareness. Our culture is very people-based and empathic, and that carries across to our consumer culture.”

While this was already ingrained in the firm’s approach prior to vulnerability being highlighted under Consumer Duty, Pure Retirement worked hard ahead of the regulatory change in order to ensure its products were fit for purpose.

Fulfilling an important need

Lifetime products are more relevant now than ever, and looking ahead, Clare says this picture is unlikely to change.

“There’s a real message to get across that if you’ve got a property, it can be used to help resolve your financial needs.

“Lifetime isn’t a bad thing, where it might have been 20 or 30 years ago. It’s a properly regulated, responsible industry that can provide a real service to customers and fulfil a real need.”

One of the biggest changes seen by Pure Retirement in the 10 years since its foundation, Clare adds, is the increased acceptance and normalisation of an important product.

He concludes: “At Pure, we’ve played a big part in that, with our involvement with the Equity Release Council and our own work to make sure lifetime lending is done properly and responsibly.” ●

Worth a second look?

From the perspective of an outsider – albeit one immersed in the second charge market for 15 years up until 2010 –it’s fascinating to read industry comments suggesting that the sector has reinvented itself since coming under Financial Conduct Authority (FCA) rule in 2014, that it is unrecognisable compared to its former self, and that there has been a rapid pace of change in recent years.

In all honesty, there is so much that simply doesn’t appear to have changed since 2007! Yes, some lenders have disappeared into history while new ones have emerged, but broadly speaking the numbers –around 15 to 20 key second charge players – have remained remarkably consistent. Contrast this against the proliferation of bridging lenders since we emerged from the Credit Crunch – where a handful has morphed into many hundreds.

Barely changed

The prevailing economic conditions mean that demand is now very strong from clients seeking to leverage the equity in their property. Without disturbing their fixed rate mortgages, they are now using second charge loans to consolidate debt and fund home improvements. Beyond this, there are a wide range of other uses –from financing individual events like a wedding to injecting money into a business, funding a child’s education to buying a holiday home.

In truth, this list of uses for second charge loans has barely changed in 30 years!

Back in the noughties, one of the biggest frustrations for lenders was the sheer number of mortgage brokers that didn’t understand or feel comfortable recommending second charges. They frequently neglected to even mention second charge loans existed, even when it was glaringly

obvious that a second charge could be the best tailored solution for their client.

Of course, the introduction of the Mortgage Credit Directive in 2016 was supposed to resolve this issue by ensuring all mortgage brokers assessed second charges as an alternative to a remortgage when capital raising. What’s the old saying? Ah yes: you can lead a horse to water, but you can’t make it drink.

The o -repeated solution over so many years is ‘broker education’, but this must be considered against a backdrop where lenders have played an active role in dumbing down many mortgage brokers by forcing them to access their products through specialist second charge packagers.

Optimism over reality

Even today, industry commentators are suggesting that the new Consumer Duty rules will miraculously ensure mortgage brokers start offering a comprehensive range of solutions, including second charges. Yet again, optimism seems to be triumphing over the likely reality!

Frankly, it’s amazing that so many facets of the second charge market really haven’t changed. Average lifespans for loans are still way below their contractual term, a focus on the customer journey, technology and automation remains unchanged, niche products are vaunted but still elusive, and service levels, of course, remain key.

Lenders still seem to see three or four conversions from every 10 enquiries – a level that bridge lenders can only dream of! – and the path of least resistance is as popular today as it was 20 years ago.

Potential for innovation

So, what has changed in the past 20 years? Well, completion volumes are not what they were! Before the Credit Crunch, monthly completions were

nudging towards £500m a month, whereas now they are languishing at around £130m. At the time of writing, the Finance & Leasing Association (FLA) has confirmed new business value and volumes were down 14% in July, thanks to “cautious consumer sentiment given the current economic environment.”

Of course it’s a tough market, and that’s likely to be reflected in the annual volume figures. Some old industry lags will argue that without the Rule of 78 to calculate redemptions and payment protection insurance to boost commissions, the market is destined to remain small, despite its evident potential. In doing so, they ignore the potential for new innovative ideas to turbo charge the market.

Back in 1997, Firstplus – with a campaign fronted by Carol Vorderman promoting debt consolidation secured loans to 125% loan-to-value (LTV) – proved to be an innovative game changer. Today, the market awaits that game-changing moment and watches with interest to see what new products are brought to market.

There is talk of green second charge retrofi ing products, of new second charge loans against buy-tolet properties, home equity lines of credit, and much more besides.

Innovation is coming down the track, and maybe that truly big idea is taking shape somewhere.

You can have all the service excellence, the use of technology, and the education in the world, but it’s product innovation – and hopefully that ‘big idea’ – that will mean second charges are well worth a second look. ●

BRIAN WEST is head of sales and marketing at Saxon Trust

The case for second charge mortgages U

ncertainty in the economy over the past few years has altered the landscape of the UK mortgage market, bringing greater demand for specialist lending products and an increased need for tailored advice, as borrowers navigate a higher interest rate environment and increased living costs.

Most recently, the slowdown in the housing market has also led to a significant uptick in the take up of product transfers (PT) as more borrowers opt for a low-stress transfer with their existing lender while they try to ride out the current volatility in the economy.

Figures from UK Finance show that product transfers accounted for 83% of remortgaging activity in Q2 2023 alone, compared with an average of 77% across the whole of 2022. This was driven mainly by affordability constraints, as well as increased competition among lenders, many of which are prioritising retention with more options and a ractive pricing for existing borrowers.

Taking out a product transfer may prove to be a more suitable and cost-

effective solution than remortgaging for those at the end of their term. However, for those borrowers looking to capital raise with a year or two still to run on their current deal, taking out a second charge mortgage could offer a more a ractive solution, by enabling them to tap into the equity in their home without losing the preferential rate on their first charge mortgage.

Quick and exible

The popularity of second charge mortgages has increased in recent years, as both brokers and their clients start to realise the benefits of second charge loans as a quick and flexible alternative to remortgaging.

Figures from the Finance & Leasing Association (FLA) show that £136m worth of new business was wri en in June 2023, and demand for this type of financing continues to grow.

There are a number of reasons why a broker should consider a second charge mortgage over a remortgage for any client seeking to capital raise. This includes those cases where the customer plans to renovate or extend their existing home, needs money for business purposes or to pay a tax

bill, or requires funds to finance a medical procedure, buy a holiday home or even pay for a wedding.

In each of these cases, a second charge mortgage could provide the solution they need, while keeping the terms and preferential rate of their first charge mortgage intact.

This is particularly beneficial in those situations where capital is needed quickly, because a more streamlined and less complex application process means the money can o en be available within four to six weeks.

Another benefit of a second charge mortgage is that, in the majority of cases, the client is unlikely to need a solicitor to carry out any legal and conveyancing work. Most applications are conducted by brokers directly with lenders.

This can prevent any back-end delays and help to release the funds more quickly.

Similarly, in most second charge cases, an automated valuation model (AVM) is more than sufficient in helping to determine property valuations, which again can help to avoid the lengthy wait or delays o en associated with securing a physical valuation, and can enable the client to move quickly.

As with all financial products, second charge mortgages may not be suitable for every client, but for brokers with customers looking to raise funds to carry out renovations, pay off debt or finance other lifestyle obligations, a second charge may be worth considering. These products can offer a fast and flexible financing solution, without the penalties that can come with remortgaging. ●

DAVID BINNEY is head of sales at Norton Home Loans

Second charges can be useful for many client needs - even to pay for a wedding

t’s rare that personal finance stories hit the front page. The collapse of Northern Rock is a prime example, and occasionally, sharp movements in mortgage rates steal the headlines. However, I struggle to remember a recent personal finance story that has dominated coverage in the way the Nigel Farage de-banking scandal did.

From a journalist’s point of view, this story had everything: deception, unexpected twists and a ‘David versus Goliath’ narrative running through it.

But for those of us operating in the mortgage market, the debacle is a warning of how quickly events can

spin out of control. It offers some vital lessons in how to avoid or mitigate a PR crisis.

Create a ‘crisis comms’ plan

It’s not my job to throw muck at fellow communications professionals, but Coutts and NatWest would themselves no doubt concede that mistakes were made with their response to the Farage story.

Good PR means planning for the worst – and that means having a robust crisis communications plan, should the proverbial hit the fan.

This is simply a blueprint for dealing with the media and other

stakeholders if a situation arises that could generate reputational damage for your firm.

A crisis comms plan isn’t just for big, multinational corporations, either – every firm should have one. Identifying potential scenarios that could lead to detrimental impact on how your business is perceived by customers, regulators, partners or other stakeholders is vitally important – and just good planning.

Whether it’s service interruptions, data breaches, product failures or any other type of issue, it’s important to understand the types of threats that could emerge. Identifying and assembling a small crisis team of

PAUL THOMAS is head of news and content at MRM

senior decision-makers or subject matter experts to help co-ordinate your response to a crisis is also crucial.

You also need to quickly identify the key stakeholders that need to hear your responses, and what format those responses should take.

Most importantly, make sure everyone in your firm is familiar with the plan, or at least knows who to turn to if a crisis ensues and a journalist comes knocking at the door.

Be proactive

A good crisis plan is useless unless you are willing to act on it. Put simply: don’t bury your head in the sand, or you will be in trouble when the fur starts to fly.

Prepare appropriate comms lines in response to the situations you may face so you aren’t starting from scratch if a crisis does arise.

Roles and responsibilities need to be clearly defined. Who is going to speak? How are they going to speak? When are they going to speak?

Make sure they are available, too. There is nothing worse than seeing the words “unavailable for comment” next to your company name when a potentially damaging story lands.

Be honest

Over the past five years, I have media trained dozens of senior managers and C-suite executives within the financial services industry.

In each of those sessions, I include one basic piece of advice: don’t lie. It may seem obvious, but I can’t stress how important that is.

Of course, messages can be honed, crafted and shaped to tell your side of the story. But lying to a journalist is a major no-no. If you’re tempted, know this: you will be found out.

If you are misleading or disingenuous, a piece of fleeting negative coverage can turn into a full-blown disaster from a reputation management point of view.

Coutts – and parent NatWest –forgot about that when representatives of both banks suggested Farage’s account was closed because he no longer met the bank’s criteria, rather than because they viewed him as a reputational risk.

Avoid the ‘off-the-record’ bear trap

Before making the switch to PR, I spent 10 years as a personal finance journalist. During that time, I had countless ‘off-therecord’ conversations with trusted key sources.

For a journalist, off-the-record chats are amazingly useful, allowing them to glean information they perhaps wouldn’t be able to access if the source was quoted.

They can also be useful for companies, as they allow you to shape how a story is written by providing

context and background, without having to put your name next to those words.

Useful as they are, they can also be fraught with risk.

Unfortunately, Allison Rose, the former CEO of NatWest, found that out the hard way when she discussed Farage’s account closure privately with BBC business editor Simon Jack at a charity dinner.

The issue is that the term ‘off-therecord’ is open to interpretation. Some take it to mean the source can be quoted but not named.

Others say off-the-record means that absolutely nothing from the conversation can be reported, not even anonymously. It is purely for background.

What is the lesson you should take from all this?

Assume that everything you say to a journalist can and will be quoted, and choose your words carefully, because you may be reading what you’ve said in print shortly after you’ve said it.

Clearly, this is serious stuff. It’s worth remembering that the consequences for key decision-makers at Coutts and NatWest were that they ultimately lost their jobs.

That serves to underline how quickly events can spin out of control for even the most experienced and high-profile professionals in a crisis.

Make sure you’re prepared. ●

Meet The Broker

The Intermediary speaks with Austyn Johnson, nancial consultant and founder of Mortgages For Actors, about self-employment and the bene ts of nding your niche

First, can you introduce yourself and the business?

I’ve had a very varied career, starting with being a subsidence surveyor in my teens, and loving working with houses. Then I had a car crash and when I eventually got back to work a year later, I started working in mechanics and tyres, and started working for myself. Then I decided

to move out and become an aircraft engineer. I did that for seven years, in the freezing cold and soaking wet in an airfield, and then I had a baby due, so I decided it was the time to change careers, to really go and enjoy something.

I decided being a mortgage broker was a great idea, so I took all the tests. HD Consultants took me on, basically said I had promise, and to go self-employed and see how I did. That’s what I’ve been doing for five years now.

In 2020, I started this mortgage practice as its own specific brand. A lot of the people that work in the entertainment industry, when they start to get paid a decent amount, invest in property, because it can help where they’ve got a varied income.

It started because I went to see someone in London, I can’t say who, but I had seen him in a movie a couple of weeks earlier. I did about four of his mortgages, and he said he’d been to six other brokers, all of

whom hadn’t been able to help him, so recommended me to his friends. I got six referrals from him, and then another six or so from the next one, and it went on like that, so I decided to focus on it.

It was going really well, and then Covid-19 hit and completely ruined everything for the entertainment industry. But we thought, let’s just launch it anyway, because people are going to need this help more than ever, and if nothing else, we can at least help them get through it.

I thought we might get a couple of referrals, but we were absolutely flooded, because there were so many money problems out there and they didn’t have a clue what to do.

We provided financial counselling to help them get through, and then on the other side they could get a house and a mortgage.

We get actors coming in from all over the country. I think about 90 mortgages last year were for actors, musicians and dancers. It’s just been going from strength to strength, and this year we decided to expand.

What are some of the challenges facing this group of borrowers?

Well, they don’t get paid how others would expect to be – their contracts are all over the place. When you approach a lender in the usual way, the computer system just says no straight away. We try to avoid that by just talking to people until they understand the situation.

For many of these people they’re paid absolutely fine, just in a different way.

We have placed deals with high street banks like HSBC quite regularly, because once you get those relationships sorted, they understand that you’re not just going to send in rubbish cases, you’re going to send them something that they can work with.

It does mean obviously it’s harder work. I could maybe do with a couple of vanilla cases now and then!

Do you think these messages about complex income streams resonate for

the whole market?

Absolutely. A lender often looks at a PAYE contract as the most secure option for lending money, but if you ask me, self-employed people can diversify, whereas someone in traditional employment could be unemployed the day after getting a mortgage, with no leg to stand on.

Self-employment should be seen as much more secure than it is, but the market is stuck in the old days.

Often the system gets put in place, and then it takes 10 years to change it, and it’s outdated by the time we get done.

If lenders took a more broad spectrum approach, stepped back and looked at each borrower as a normal person, I think we’d get a lot better treatment for those who are self-employed.

What are some of the challenges facing brokers at the moment?

It’s a difficult market, and some brokers are getting no leads and panicking about their jobs. Whereas I haven’t slowed down, because I’ve got such a niche.

It makes you worry about people relying on a company to keep them in leads, as it takes a while to build up your own social media presence and following, and some people are having to start from day one.

What are the benefits of the self-employed model for brokers?

You get to make your own hours, and the whole system is a nice fit. I went from employed to self-employed and it was a scary time, especially with a baby on the way. But if I hadn’t done it, I would be miserable.

For anyone that’s worried about it, I would say you have to have a plan place, rather than just winging it, especially when you’ve got people who depend on you.

What are the plans for the business this year?

We’ve got lots of plans. We actually won an award this year, the Best Nationwide Complex Mortgage Adviser for 2023.

Later this year we’re one of the principal sponsors for the Autumn Festival of Norfolk, and giving out one of the awards.

We’ll get lots of business through that, which helps us as we’re looking to expand this year. ●

Would you like to feature in Meet The Broker and share what makes your business unique? Email: editorial@theintermediary.co.uk to find out more

We have placed deals with high street banks like HSBC quite regularly, because once you get those relationships sorted, they understand that you’re not just going to send in rubbish cases, you’re going to send them something that they can work with”

Case Clinic

lenders will allow a large age range, so he can still get a 20-year to 25-year mortgage term.

CASE ONE

Ambitious second property purchase plan

Rather than selling his current home, the client wants to keep it as a second property and use the new one as his main residence.

Looking into his affordability with two properties as credit commitments, most lenders are unwilling to lend enough. The client therefore wants to consider renting out his current home.

Lenders have specified that the client’s current property must have been rented out for a minimum of three to six months before they can consider it self-financing. As the client is still living in his property, this is not achievable.

The client is almost 60 and wants a longer term so that his monthly repayment figures are as low and manageable as possible.

VISIONARY FINANCE

“There are two routes this client could take, with the first and most preferable option being to consider remortgaging his current home onto a letto-buy (LTB) mortgage, also known as a consumer buy-to-let (CBTL) mortgage, even though his property isn’t currently being rented out. This would enable him to take out a new purchase mortgage for his ideal home, as long as there was simultaneous completion of both mortgages.

“The second option would be to get a consent to let from his current lender. In both instances, the lender would be able to exclude the current mortgage commitment, giving him the affordability that he needs to purchase his new home.

“Obviously, the final outcome will be down to each lender and its risk appetite at the time of application and the overall profile of the client. If the client does go down the LTB route, most

“If he is concerned about the affordability on the LTB mortgage, then he could consider an interestonly mortgage for that property, which would help to keep his monthly payments low.”

CASE TWO

Family gifted deposit on a new development

Two first-time buyers have their hearts set on a popular new-build development. To secure one of the last properties, they must have the mortgage arranged immediately, even though it will not be finished until August 2024. The couple has not finished saving their deposit, as they did not anticipate the properties selling so quickly.

One set of parents is willing to gift some savings, but they are apprehensive, as – if the couple separate in future and the house sold – their money will be lost.

A lot of lenders say a gifted deposit must be unconditional, but ideally the family wants a safety net. The couple also wants to keep their repayments as low as possible. They are concerned about what rates are going to do next, and are not sure if they should lock into a 2-year or 5-year deal.

COVENTRY FOR INTERMEDIARIES

“We can allow a second charge on a family gifted deposit – meaning that if the property is sold, the family can essentially have their deposit back.

“Our mortgage offers for new-build properties are initially granted for nine months, but can easily be extended for an extra three months to make it up to full 12 months they need.

“The mortgage rate they apply for will also be secured for the next 12 months, but if they wish to

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Get in touch with details at editorial@theintermediary.co.uk

swap to a new product within that time, they can do so without penalty. They can also opt for a 40year term if they want to keep the payments down.”

VISIONARY FINANCE

“The main concern I have is that the developer appears to be forcing the client to secure a mortgage immediately. There is no need to apply for a mortgage until three months before the build is complete, as there is a chance the developer could overrun on the project, and it is wrong for the developer to put pressure on them in this way.

“I would strongly advise the clients to have their affordability assessed by an independent mortgage adviser so they can understand what they can borrow once they have achieved their desired level of deposit. Family gifted deposits are totally acceptable and quite common, but as the completion date for the development is still a year away, they still have [time] to save while they gear up for completion, by which time it may be that they have sufficient money saved so that they do not need to rely on their parents’ funds.

“If they till need to rely on their parents, they will only need to have a 10% deposit ready to exchange contracts, with the remainder of the deposit not needed until completion. There are also a handful of lenders that could consider the deposit as a loan, which would serve to provide comfort for those parents concerned about losing their money.”

PRINCIPALITY BUILDING SOCIETY

“Our team can help secure a mortgage quickly on a new-build property. Our offer is initially valid for eight months, but we offer flexibility, allowing the client to extend for another eight subject to revaluation, a new credit check and up-to-date income verification.

“We will also honour the original rate they secured, but if rates have decreased the borrowed may also select the cheaper product. The client’s

rate can be changed up to completion if our newbuild product interest rates continue to change.

“Gifted deposits from immediate family members – if a deed of trust is being set up through the client’s solicitor to guarantee that the deposit will stay within the family – are also accepted.”

CASE THREE First-time buyer starting their first full-time job

Aclient has worked as a supply teacher for three years, earning approximately £600 gross per week. She lived in rented accommodation until a few months ago, when she moved home to save up a 5% deposit (£6,000) on her first house. She has been based at her current school since September 2022. However, her position was recently made permanent, starting September 2023, and her salary will be £35,000. The property is valued at £120,000. The application would likely be declined by many lenders with the first payslip and bank statement showing salary credit being required.

PRINCIPALITY BUILDING SOCIETY

“Our underwriting team would need to assess her employment situation and financial security by reviewing six months’ of payslips to confirm her current employment situation. We would also need a copy of the offer letter for her new job, along with her new salary. Assuming her details are correct, the client would then be pre-approved and eligible for our 95% LTV fixed rate residential product, which would help her secure her first property.”

VISIONARY FINANCE

“Although the client hasn’t yet started, she is essentially just changing the way she is being paid, moving into a continuation of her existing profession. Although quite a lot of lenders would need the employment to have started, there are a few that will lend based on future earnings, the new employment contract and an imminent start date, as teaching is seen as a secure profession.

“To broaden her options, particularly as she has been earning £600 a week on a self-employed basis and will have declared her income to HMRC, she could also use her existing employment and tax returns to assess affordability to give the lender additional comfort.”

New developments in tech – how do lenders stack up?

Since 2018, Smart Money People has published our bi-annual Mortgage Lender Benchmark study, where we find out and collate intermediary views on lenders.

Our first study interviewed 391 brokers, producing 1,173 pieces of feedback. This has grown to 778 brokers by 2023, giving 3,724 pieces of feedback.

The studies are wide-ranging, from overall satisfaction with lenders and the reasons why, to contemporary issues, such as working from home in 2020 and Consumer Duty in 2023. A big focus, however, is technology.

Three years is a short time for tech development in any modern era. But the years 2020 to 2023, with Covid-19 accelerating many of the trends already occurring within this space, were especially significant.

Fast-paced changes

The publication of our 10th half-yearly Mortgage Lender Benchmark study gives us the ideal opportunity to see what changes have occurred, and the extent to which they accellerated during this time frame.

The fi h edition of our report referred to H2 2020, and our latest issue H1 2023, and I’ve referenced these in the following insights.

Our tech-focused questioning in both studies probed brokers’ a itudes towards customer relationship management (CRMs), affordability tools, criteria sourcing tools, and product sourcing tools specifically.

In both studies, CRM providers scored the lowest out of all tech firms. Additionally, the functionality of systems drew low scores in each year, despite brokers placing a high value on this.

Speed ratings give be er news, where CRMs improved massively. Opinion on support and reliability also changed significantly, harvesting low scores in 2020 but earning high scores in 2023.

It’s within the affordability tools category that we see the first instance of a theme that continually rears its head throughout the following five years: the eventual format the integration of technology into existing workflow pa erns takes.

Double checking

In 2020, brokers remarked on a lack of confidence in results produced by affordability tools, with most saying they would go directly to a lender to double-check figures. In 2023, confidence has not improved, and brokers are still checking with lenders directly – but that they’re happy to do so and see these tools as guides, rather than something providing a final answer. As well as this, scoring for customer service improved by 2023.

Criteria sourcing also sees a perceived lack of accuracy raising

its head, this time being described as ‘frustrating’. By 2023, though, opinion cooled, with brokers again being happy to use these systems as guides rather than the final word.

By 2023, criteria sourcing providers are the overall highest scoring tech firms, with ease of use and value for money rating highly. But functionality scores low, with brokers saying that the tools don’t offer enough flexibility for their needs.

In both 2020 and 2023, product sourcing systems are praised for being so easy to use. And in 2020, accuracy is again cited as a concern. However, the positive theme we’ve seen develop around this breaks down in this category, with brokers being unhappy. Adjectives used when asked for feedback include ‘glitchy’, ‘clunky’, and ‘basic’.

This is just a small slice of the insight our surveys provide. But even so, it describes a rich and detailed picture of what technology providers are doing right and where they still need to improve, along with some of the surprising ways technology has slo ed into how brokers work today.

To improve their standing with brokers and so bring in more business, it’s imperative that providers take heed of these trends. ●

JACQUELINE DEWEY is CEO at Smart Money People

Tech is intergrating into more of the broker journey

In both 2020 and 2023, product sourcing systems are praised for being so easy to use”

The value of a personalised support journey

Technology has certainly opened doors for more businesses in terms of the way they work and the approach they take in meeting customers’ ever-changing needs. It remains a dominant force throughout the industry when it comes to breaking down sales barriers, delivering a host of service enhancements, and streamlining various processes and procedures.

However, technology in itself is not the be-all and end-all, especially in the intermediary mortgage market.

That may seem like an odd thing to say coming from a specialist tech provider, but as a business with over 25 years’ experience, we realise the value a ached to the personal touch, as well as to technological support and innovation.

A hybrid approach

Following a period which forced the dial to be shi ed in terms of how advice was being administered, a new hybrid communication model is vital for all businesses across the sector going forward.

Combining the benefits of technology with experience, expertise and a personable support network will play a key role in the ongoing success of intermediary firms in generating healthy business volumes and maintaining confidence levels.

With this in mind, it was encouraging to see the recent Mortgage Market Tracker report from the Intermediary Mortgage Lenders Association (IMLA) reveal a “surprisingly upbeat market sentiment” among advisers during Q2, although the data indicates growing caution about the outlook for the sector.

Overall, 75% of advisers described themselves as ‘confident’ about the mortgage market for the quarter, but the proportion of those who were ‘very confident’ fell from 26% in April to 20% in June, while the ‘fairly confidents’ fell from 56% to 40% over the period.

The research also showed that intermediaries are maintaining healthy business volumes, with the average adviser placing 93 cases over the previous 12 months.

The figure is slightly lower than Q2 2022 (97) and Q2 2021 (95), but significantly higher than any quarter in the four years preceding 2021, three of which pre-dated the pandemic.

Commentary around the report also highlighted that, despite the fact that the economic environment is set to remain challenging, the demand for professional mortgage advice will continue to grow.

IMLA’s prediction that intermediaries could account for 90% of mortgage distribution by 2024, as reported in its New Normal report earlier this year, is still apparent.

Value of advice

This data highlights the personal value on offer throughout an advice process which continues to rise in importance during an increasingly complex lending environment and lingering economic uncertainty.

In addition, the level of support required for advisers from the lending community, distribution partners, strategic affiliations and tech providers to service an even wider range of client needs is also clearly evident.

There are a number of ways in which to deliver this support, both virtually and in person. One of the best ways to convey the simplicity and effectiveness of our system

is to manually demonstrate it, as this allows potential new users and partners to see exactly how it can work for their business and their processes.

In September and October, we will be exhibiting and presenting at two of the industry’s most prominent events in Manchester and London.

Ge ing out into the field is vital for us, not only in manually demonstrating the system, but also in terms of generating feedback into what type of additional features might be useful for our end users, and how we can integrate them to deliver a more comprehensive and costeffective solution.

Start to nish

It’s also important to point out that any sign-ups from such events should be viewed as being the first point of the personal service journey, not the last.

We take great pride in supplying a comprehensive training package and ongoing support, unlike some tech providers, which focus the vast majority of their a ention on capturing users and then leave them to it once they have signed the contract.

In my opinion, a good tech provider should continue to engage with its users, customers, clients or partners on a personal level, to ensure they receive the right training, understand all the features which can have a positive impact on their business, and be able to successfully implement them.

A er all, technology, the value of meeting in person, and a personalised support journey, are all vital factors in an increasingly complex industry. ●

NEAL JANNELS is managing director at One Mortgage System

Q&A

The Intermediary speaks with Matthew Cumber, managing director at CSS, and Mark Blackwell, COO at CoreLogic, about their partnership and the future of surveying tech

First, can you introduce your businesses?

Matthew Cumber: Countrywide Surveying Services (CSS) is one of the largest residential providers of valuations and surveys in the UK. We have more than 400 surveyors operating across England, Wales, Northern Ireland and Scotland, and a big operating centre in Derby.

CSS has been going for decades – we celebrate our 40th birthday in 2025 – and is an enormously large surveying and valuation practice working with most major banks and building societies.

In addition, we help major lenders in the UK to help shape their mortgage and valuation policies and criteria, plus working with trade associations.

We have an influential role within the Royal Institution of Chartered Surveyors (RICS), chairing the EWS Working Group, plus the UK RICS Residential Mortgage Specification Review. The latter will have far-reaching impacts and will drive how surveyors value for years to come.

Mark Blackwell: CoreLogic UK is a global business providing property data and technology services across a range of jurisdictions, mainly the US, Australia, New Zealand and the UK. We provide services to the UK mortgage market, predominantly surveying and valuation software to companies such as CSS.

We also work with brokers and lenders looking to submit buy-to-let (BTL) portfolios as part of a mortgage application, where they are required to be stress-tested, through our BTL hub. We work with about 15 lenders in that area today, and brokers inputting portfolio data on that platform.

We also have an energy division which works with several energy companies in the UK. Lenders have a common problem around decarbonising their mortgage books, and we have solutions that can help them do that. We are set up to help lenders understand what their financed emissions are, how green their properties are, and how we can help them become greener.

CSS and CoreLogic announced their partnership recently, what does that entail?

MC: We took about 15 months from when we started requesting suppliers to provide information about their services before we came to the final decision to partner with CoreLogic. The level of due diligence and governance we put into this is beyond anything we’ve ever done before, because we wanted to make sure that we were getting two things. One was products that we can use immediately and that we don’t have to put a lot of time into developing. That was one of our absolute pure objectives.

Second, we wanted an organisation that truly understood our needs and was completely prepared to work with us to build products and services that we could see are going to be needed in the future.

MB: We were delighted that CSS awarded us this opportunity, considering the key player that it is in the marketplace. We work with some great customers already, but CSS really helps create a significant enough cohort in the industry to look at how we can build out even more efficient technology networks, improve the exchange of

MATTHEW CUMBER MARK BLACKWELL

property data, and use that data to improve the wider conveyancing process, not just surveying and valuation.

What is the role of tech for CSS?

MC: First, it’s about having the tools to do the job, that’s exceptionally important. CoreLogic provides us with all those tools for our surveyors and our back-office teams to be able to carry out their job, knowing that they’ve got the best products and technology available to them.

We all know the industry is changing – and changing at pace – and we need to make sure that we partner with someone that’s capable of understanding that change, and what innovation needs to be brought into the marketplace both now and in the future. There are lots of different areas CoreLogic is involved in as a global company. That was an attraction to us as well, to be able to potentially see what they’re doing elsewhere, and whether these are elements that we could bring here. The homebuying process is becoming more challenging, to put it nicely, and even in an age where technology is improving, we have not yet got to a position where the data everybody needs is available in one place. If there’s a provider capable taking advantage of that when it is available, that’s the one that we want to be with.

We also don’t want to stand still. We have a history of bringing innovative products to the market, and while tech is important, the end product is just as important. I’m talking specifically about HomeFact, which is a different type of survey and energy fact-find.

We all now understand the challenges in terms of net zero. EnergyFact, launched in 2021, helps the consumer quickly understand what they have in their property and what changes they could possibly make, as well as whether to bring in professional help. We’re onto building the next iteration of that product, which will be in conjunction with CoreLogic.

We won’t rest on our laurels; we will seek to get constant insight and look forward to what our lender partners and the consumers want from us in order to gain speed in the homebuying process. We are committed to ensuring we get the right quality products to consumers when they’re making the biggest financial decision of their lives.

How is tech evolving in an increasingly challenging market?

MB: Technology is clearly a key driver in the property transaction process, and is becoming more so. If you move a generation ahead, the

things we’re talking about today will appear quite archaic, I’m sure. As it stands, though, we’ve moved the process on quite significantly. What we try and do within CoreLogic is help organisations like CSS streamline their operations both centrally and for the chartered surveyors out in the field. That, in turn, should help improve productivity, which is commercially and operationally a positive. Fundamentally, we’re thinking about what the lenders broadly want, and how CSS wants to help them make better lending decisions and mitigate risk. Core to all of this is the customer, who is looking for transparency and certainty. Tech has a key part to play in getting that valuation instruction delivered, and that’s what we’re in the business of doing. Technology and data, together, are fundamental to the successful conclusion of that process.

MC: Everyone’s been trying to get their applications in to capture rates before they’re pulled, and as fast as a lender can go through that processing, it’s not always that quick. There isn’t necessarily an easy way for everybody to communicate in one pipeline. So, it’s even more important that data is shared as quickly as possible.

How is this industry evolving?

MC: The survey is almost getting left out of the conversation at the moment. When talking about digital and data, everyone’s interested in getting the information that a valuation provides, but the survey bit is slightly outside that. A lot of lenders have moved to a position where they don’t offer the consumer a survey at point of sale. They clearly say you need to get one, but have moved away from the automatic offer. So it’s even more important for the consumer to get the right level of advice.

There is an element where the human being needs to come in and talk about what type of product they need, explain that it costs money, but that in the long-term it might save thousands in terms of finding out problems with their property.

MB: From the customer’s point of view, yes they want to know about the condition of the property, whether the value correlates with their own expectations, or what the affordability constraints might be going forward. This is where I see the use of more data in understanding about the property. There are also issues like the environmental impact of that property going forward. It might not be today, but this aspect is coming, I’m sure.

Lenders and borrowers will be more aware that what they’re investing or buying into has to

contribute to the environment in a more positive way than it perhaps is today.

What are some trends on the horizon for the surveying industry?

MC: Lenders, working in partnership with surveying firms, will find ways to facilitate their own needs as they go more digital, and as they try to get that valuation report back quickly. So, we’ll find different ways of being able to return those reports with the level of data that is available.

As for the market, it’s in a different place compared to 12 months ago. There are still some real positive signs out there, but we’d be remiss not to realise that it’s slightly more subdued.

Those of us old enough will have been through the peaks and troughs of this industry before, and we will see the peaks and troughs again.

For us and our future, we will continue to meet the challenges and make sure that we are ready for when the next cycle starts to turn positively upwards again. We continue to build talent, innovate with technology, and find quicker, smarter ways of doing things – one step ahead of what the consumer is looking for.

MB: It would be wrong to say there’s not a challenge in the market today, but we also see that as an opportunity. There’s a bit more headroom for our clients to think about the future and further improve their business models and think about innovations, particularly around the broader conveyancing process, which has been crying out for better communications and transparency.

We can really help affect change in a key part of the transaction, which is not just the survey and the valuation, but after when there’s a series of questions that can arise. With CSS on board, we can extend the range and improve the potential for a better network of communications.

The customer is coming more to the fore, whether it’s mobile technology or the increased digitisation of the process. If anything, in the next 12 months and beyond, we’ll see the customer get more of a 360-degree view of their transaction.

What would you like to see from other players in this market for a more streamlined journey?

MC: The sooner the Government realises that you can digitise documents, and that local councils can have a repository to easily access all this information, the better. No professional – surveyors, conveyancers, mortgage brokers,

lenders – wants to have a slow job there. We’re all for doing the right thing for the customers involved. It’s just that we’ve created a paper trail of information which needs to be obtained at the point of putting a property on the market, and all those checks need to be done early in the process, so that everybody can get access to that same information when they need it. It has to be Government, but the Government wants the industry to do it, and the industry has competing challenges. This isn’t about party politics whatsoever. We have to agree a non-political, long-term strategy.

MB: There’s a lot of engagement already. We’re working with third-party data organisations in order to provide those services to our customers. There’s a lot of participation to get a job done properly and professionally, and what we’re looking forward to now is to develop more pace in the integration of our platforms with lenders, because that then extends the ability for lenders to share data swiftly and securely with their surveying partners. That also improves the quality of the journey for their customers.

What are your plans for the future?

MC: We’re quite a simple organisation, really. We’re about providing valuations and surveys, so it’s about what that survey product will look like in 18 months’ time. I’m really trying to innovate for the long-term future. Our business will continue to grow and we’re very ambitious to do so by ensuring we’ve got the right sort of platform to work on, and to build on those foundations.

CSS has been through some relatively big changes over the past five years. It’s now about making sure that our people coming into the business are the best talent, the best equipped, and the best quality.

MB: You can have great technology and datasets to play with, but you absolutely need the right people in both businesses to make the whole proposition come together. Both organisations, in the time that we’ve spent working together, have shown that in droves.

Right now, we’re in the middle of a series of workshops and sessions where we’re looking at our software and CSS’ processes and blending those together to give them the optimal launchpad to go live later this year. Alongside that, we continue to invest in and support all of our existing customers to make sure that everybody’s got the right access to the right data tools and people to optimise opportunities they see in the market as it evolves over the coming years. ●

Each month, The Intermediary takes a close-up look at the housing market in a speci c region and speaks to the brokers supporting the area to nd out what makes their territory unique

Focus on... Coventry

While Coventry has not been totally immune to the market troubles that have plagued the mortgage sector over the past 12 months, it has endeavoured to remain buoyant in the face of an abundance of economic headwinds.

Much like the majority of regions across the country, Coventry’s property market saw its fair share of trouble following Truss’ shortlived premiership, the September 2022 mini-Budget, and all the chaos that followed.

However, nearly one year on and despite the odds, the area remains abuzz with mortgage activity.

Only one hour by train from London, and a thriving economic hub in its own right, Coventry remains a vibrant and historic city full of opportunity for those looking to relocate and invest in its property market.

This month, The Intermediary sits down with Coventry’s local property professionals to hear their take on the current market, and why it remains an attractive region for home movers and landlords alike.

Current values

The average property price in the Coventry postcode area is £230,000, while the median price sits at around

A busy residential market

JAY SHAH is director at Managing Mortgages

The housing market in Coventry has not slowed down – there are still plenty of people looking to buy. Recently, I have been dealing with a lot of professionals who are looking to move out of London, as there are a lot of job opportunities available in Coventry.

As a result of this, there are a lot of new homes being built in and around Coventry, which is great to see. Of course, this year has been challenging, with many lenders constantly changing rates. Thankfully, this trend seems to have calmed down now.

JESSICA O’CONNOR is a reporter at e Intermediary

We remain very busy with residential mortgages, as a lot of the potential buyers have seen their rent drastically increase as of late. This is pushing people to consider buying as an option, as in some cases continuing to pay rent is more costly than mortgage payments would be.

Some landlords are looking to sell their buy-to-let properties, which has then opened up more choices for people looking to purchase on the residential market. This also allows other investors to purchase in certain areas where it was previously difficult before buy. Overall, the buy-to-let market in Coventry has not been as busy as it was previously. However, we are still seeing a few investors that are looking to buy and put a higher deposit down rather than keeping the money in a savings account.

£210,000. This is compared with a national average and median of £360,000 and £275,000 for England and Wales.

The average price in the region increased by £8,400 (4%) over the past 12 months, likely as a result of the ongoing turmoil that has plagued the property market of late.

The typical detached property in Coventry will fetch £426,000 on average, with semi-detached homes setting buyers back by approximately £268,000.

Terraced homes in the postcode boast an average price of £207,000,

while a flat will cost buyers £131,000 on average.

The most affordable place to live is in the ‘CV1 5’ postcode, with an average price of £160,000.

The most expensive is currently ‘CV4 7’, where properties could set buyers back upwards of £442,000.

Continued demand

Coventry recorded approximately 3,100 property sales last year, marking a significant 26.4% drop when compared to the year prior.

However, despite these somewhat disheartening statistics, Jay Shah, →

Coventry Residents 935k Average age 39.3 Residents per household 2.4

director of Managing Mortgages, says that mortgage activity is still going strong from his perspective.

According to Shah, even in light of wider market challenges and the costof-living pressures which have placed a strain on affordability, many people are still looking to buy.

Of the 3,100 sales in the Coventry postcode last year, 24.2% of those transactions were for properties valued in the £200,000 to £250,000 range, while 26.8% were in the lower £150,000 to £200,000 range.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society also notes that there is a continued demand for housing, citing Coventry as a “pocket of high demand” in a market that is otherwise at risk of being stymied by high mortgage rates.

Alternative routes

Lukasz Grochowski, mortgage and protection adviser at Access Financial Services, agrees with this assessment and notes that while affordability issues continue to be a problem for many, people have been quick to find alternative routes onto the property ladder. Grochowski has seen a rise in first-time buyers looking for

property in the area, with some opting to co-purchase properties with their parents as a way of securing their dream home.

In terms of buyer demographic, there has been a notable shift in the area as of late. With an estimated 935,000 total residents and an average age of approximately 39.3 – it is clear that the market in Coventry falls on the younger end of the scale.

Both Stinton and Shah identify this trend, citing the area as particularly popular with young families and firsttime buyers.

On the fringe

With this shift in demographic, inevitably comes a shift in buyer habits. There have also been shifts for other reasons, not least of which are changing preferences following

Moving to the fringes

The property market here largely mirrors the rest of the country. Since the pandemic, we’ve seen a shift – people are working in Coventry, but considering moves to the fringe of the city. Remote workers are finding the current landscape more accommodating, as they don’t have to account for travel expenses when relocating out of the city. This added flexibility has notably improved budgeting for those working from home.

Coventry’s central location offers easy access to key motorways like the M6, M1, M42 and M5. Many companies have established their main offices, logistics hubs, and warehouses here, including Royal Mail and other delivery and logistics firms.

I’ve seen a high number of prospective first-time buyers lately, mostly young families.

Additionally, I’ve seen a rise in parents co-purchasing properties with their children as a way of securing their future.

the pandemic. Where once living as close to the city centre as possible was the most desirable option, potential buyers are now turning their attention further afield.

Shah says that he has been dealing with a lot of young professionals relocating from busier areas such as London, all in search of a slower pace of life and new job opportunities.

Grochowski also notes this change, stating that many buyers have been considering moving closer to the outskirts of Coventry, as the rise in remote work has added a new layer of flexibility for buyers in terms of potential locations.

New-builds

For brokers looking to help clients move further away from the centre of Coventry, there are a number of new developments to be aware of popping up on the outskirts of the city.

With easy access to major transport links such as the M6 and M1 – as well as the ongoing development of the much-anticipated HS2 project – it is unlikely that these developments will slow down anytime soon, even when considering the ongoing challenges being faced across the UK development market.

The cost-of-living situation presents challenges for young families as they try to save a deposit, making financial assistance from parents more common.

The fringe areas are abundant with new-builds, which are drawing in mainly young families. The Houlton development near Rugby has had substantial interest. Many families living and working in Coventry have specifically enquired about this project.

Rugby in general is particularly favoured for its new-build schools. While homebuyers are keen on staying near Coventry, they’re also willing to relocate to the outskirts for larger properties with more garden space.

Primarily, the major high street banks dominate the market here. Nationwide, Halifax, HSBC, and Barclays are the key players.

The year started off relatively quiet. Interest in buy-to-let was subdued due to stress tests. However, as landlords began to increase the rents on their buy-to-lets in order to safeguard their margins, activity picked up.

In addition, many families started to evaluate the benefits of owning their home rather than paying escalating rents.

LUKASZ GROCHOWSKI is a mortgage and protection adviser at Access Financial Services

There are a number of new developments to be aware of, popping up on the outskirts of the city”

A desirable city with a buoyant market

The first-time buyer market has remained particularly resilient, despite the challenges of the year, and we’ve made a number of enhancements to our proposition, such as widening our gifted deposit criteria, to further support this important part of the market.

Coventry has some pretty well-known claims to fame, like the fact that it’s the only UK city to have three cathedrals. It also has some much less well-known claims to fame, like that it’s the home of the bicycle, it’s the most central city in England, and it used to be the capital city.

It’s only a one-hour train journey to the actual capital – which will be even quicker when the highly anticipated HS2 arrives.

There are two world-class universities, it has its own version of Camden in FarGo village, and its own colour in Coventry Blue. It’s a charming city of culture which is rich in history, but with a contemporary village feel.

Needless to say, there’s a lot to be said about Coventry. It’s a desirable place to be.

While activity in the housing market has slowed down a little over the year, much like it has for the rest of the country, it seems fair to say that the Coventry area remains a pocket of high demand.

It’s this demand which has caused prices to remain relatively stable, with most properties still selling at asking price or only seeing a slight reduction in order to entice buyers.

The demographic of these buyers is varied – there’s a good mix of home-movers and those looking to step onto the ladder for the first time.

Indeed, such is the demand for these new-build properties, the average price of one in the area is approximately £57,000 more than that of an older, established property.

One of the more popular areas to buy is in Rugby, due to its close proximity to Coventry city and its abundance of new-build schools.

According to Grochowski, the new Houlton development in the area has had a lot of interest, appealing to many first-timers looking for their first step onto the property ladder.

Recovering landlords

Not only is Coventry rife with residential business, but as a university city it remains an attractive option for landlords, though commentators concede that this side of the market has slowed somewhat. The private rented sector (PRS)

Of course, not everyone wants to move – many people in the area are perfectly happy where they are – so there’s always a steady stream of homeowners simply looking to be advised on their next mortgage deal. This presents a real opportunity for brokers who are looking for those more straightforward cases, where the sole purpose is to help clients find and secure the next best rate.

For those looking to rent, it’s a similar picture –demand is still very high, largely due to the high proportion of students in the area. There are still multiple tenants applying for properties, which, for now, means landlords aren’t struggling to see their properties occupied.

Of course, there have been challenges in the buy-tolet market as a whole this year, but we have seen that the majority of landlords are committed to staying in the sector and supporting renters through thick and thin.

Historically, the housing market – not just in Coventry, but across the whole of the UK – has been good at adapting to changes in the economy.

As we go into the latter part of the year, we don’t expect this to change. Homeownership remains an important goal for many people, and lenders and brokers alike will no doubt continue in their mission to support that.

accounts for 21.5% of the housing stock in the area, a respectable figure when compared to an average of 23.6% across England and Wales.

According to Stinton, demand for buy-to-let (BTL) opportunities that plays a key role in Coventry’s bustling property market. Despite a slow start to the year, he has seen the majority of landlords hold onto their investments, even in the face of rising stress tests and unaffordability.

What’s more, tenant demand has remained strong, with multiple tenants still applying for available properties as soon as they come onto the market.

Both Shah and Grochowski agree with this assessment; however, both note that a rise in rental costs has changed the dynamics within the buy-to-let market – pushing renters to consider buying.

As a city that has seen a great deal of new housing and infrastructure development, Coventry has no shortage of investment opportunities for potential buyers looking to take a step onto, or up, the ladder.

Bucking the trend

With a young population – made up of young professionals, first-time buyers and students looking to rent, the area continues to benefit from an active property sector.

Bucking the wider UK trend which has seen a slowdown in property transactions and landlords forced to exit the buy-to-let sector, Coventry’s mortgage market continues apace.

As a city with a rich history and plenty of job opportunity, demand for property in the area is likely to continue long into the future. ●

JONATHAN STINTON is head of intermediary relationships at Coventry Building Society

Navigating Consumer Duty with referrals

The new Consumer Duty rules are designed to ensure that all consumers achieve good outcomes and avoid foreseeable harm. While this may seem pre y straightforward for many in financial services, the age-old challenge of a lack of protection cover presents unnecessary harm and a clear contradiction to the new rules.

The protection gap has long been identified as an issue for the sector and is well documented. In fact, the Financial Conduct Authority’s (FCA) own Financial Lives survey recently revealed that more than half of UK adults (53%) had no form of protection in the past two years. Meanwhile, nearly 13 million adults in the UK are reported to have low financial resilience – the ability to cope with a financial shock or difficulties.

It’s a recipe for disaster, especially in a cost-of-living crisis where some choose to forego or even cancel policies designed to protect them, their income or the loan in challenging times. Not only is it a constant ba le for brokers to educate clients, it’s also a challenge to dedicate the time needed to have those meaningful conversations.

It’s no secret that protection can sometimes be the poor relation to mortgage advice.

With Consumer Duty now in force, placing emphasis on outcomes and minimising potential harm, it’s clear this is no longer compatible. It’s up to brokers to find a way to offer a complete service, while avoiding customer detriment and meeting their compliance obligations.

One option is to refer out clients to a nominated protection specialist or financial adviser. Many are wellversed in this already, referring clients

for wider advice such as investments, savings or pensions. It’s a particularly good option for busy brokers, those still finding their feet with protection, or for clients with more complex medical conditions.

When it isn’t possible to have those conversations, brokers can refer the case, ensuring the mortgage is fully protected and the client isn’t le exposed. A by-product is that brokers are able to see more clients and increase their own bandwidth.

As cases continue to become more complex and transactions take longer, brokers then have the opportunity to dedicate greater time to supporting clients with their mortgage needs.

In addition to providing training and protection workshops, we recently expanded our referral proposition to help brokers at our sister firm Just Mortgages, in time for Consumer Duty.

So, in addition to wider financial advice, brokers can now send clients to one of our Just Wealth advisers to review protection options.

Clear line of sight

Rather than ‘out of sight, out of mind’, good brokers look to nurture longstanding relationships with clients. The fear when referring clients to a third-party is they fall into a black hole, with brokers unaware of the experience or outcome.

Our proposition keeps the client journey under one roof, with brokers referring to a colleague and maintaining a clear line of sight at every stage of the process.

We’re ge ing ready to launch Just Refer, our new referral portal, which will streamline the entire process and ensure regulatory requirements are met. Brokers will also benefit from the revenue share of maximising every

transaction. Through our half-year and annual reviews, Just Wealth advisers will be able to regularly monitor the suitability of products as required by the new duty, and send clients back to brokers in time for the next remortgage period, or as their needs change.

In the run up to the implementation of Consumer Duty, there was much talk about what it all means for brokers and advisers.

In reality, the new rules provide an exciting opportunity to ensure we’re doing all we can to deliver the best outcomes and offer clients the best possible service.

It creates the necessary impetus to increase the level of protection and address the material detriment of clients being le exposed without the right cover or any cover at all. A er all, this has long been high on the industry agenda.

Referring cases may not be the right fit for every broker, and some will prefer to manage that process themselves. However, as we all get to grips with the new duty, it presents a valuable opportunity when necessary.

Brokers at Just Mortgages are well-versed in referring cases to Just Wealth advisers, with more than 1,200 referrals for financial advice coming across in 2022 alone.

As a result, many brokers have already built strong ties with advisers, making the protection referral process much smoother for all parties. ●

DAVE MAGEE is head of wealth at Just Wealth

Protecting against inheritance tax exposure

hen purchasing a residential property in the UK, it is a legal requirement to ensure there is buildings insurance in place. Many clients will also explore insurance to protect the property’s contents, particularly if this includes valuable personal effects such as jewellery and art. However, one type of insurance that is o en overlooked when buying properties of significant value is inheritance tax (IHT) insurance.

Inheritance tax exposure

Since 6th April 2017, all UK residential property, whether owned directly or indirectly – such as through an offshore company – has been within the scope of UK IHT. This is levied on death at a rate of 40% when the value of one’s UK estate exceeds the nil rate band (NRB) allowance.

The NRB is set at a modest £325,000 – which can rise to £500,000 in limited cases. As such, for clients that own or are purchasing UK residential property of significant value, this allowance provides limited scope in protecting the IHT exposure.

To add insult to the limited protection available, the due date for IHT ends following the sixth month a er death. For example, if an individual’s death occurred in January, IHT must be paid by 31st July of that year. If any of the tax remains unpaid following the due date, HMRC charges interest at an annual rate of a whopping 7%. This creates both an emotional and financial dilemma, particularly in the case of property assets which are illiquid in nature and may need to be sold against a family’s wishes in order to pay the IHT charge.

WPlanning around mitigating the IHT exposure might include: the inter-spouse exemption, which provides an exemption from IHT on the death of the first spouse; taking out a mortgage to reduce tax exposure, which must usually be done at the point of purchase; coowning the property with children; or gi ing the property and surviving seven years. However, to simplify ma ers, inheritance tax insurance could also be taken out. If death arises and triggers an IHT charge, this can provide family members or other beneficiaries with the necessary funds and liquidity to pay the IHT charge within the due date.

Long or short-term

In its simplest and most cost-effective form, inheritance tax insurance can be set to last for a specified term and then expire. This works particularly well for clients who are gi ing their property and wish to protect the seven-year exposure to IHT.

It also works well for non-UK domiciled clients that only expect to own the property for a limited time. Alternatively, clients may opt for insurance which will last for the whole of their lives where they expect to retain the property until their death arises, whenever that may be.

Case study one

A non-UK resident, non-UK domiciled client owns a UK residential property. While it was originally purchased with a mortgage to offset the IHT exposure, with interest rates rising in recent times, her advisers were seeking a more cost-effective route to protect the IHT exposure.

The property is valued at £12.5m and, if the mortgage is repaid, the property will be exposed to an

IHT charge of £5m – 40% of £12.5m –ignoring the nil-rate band allowance.

The client is aged 60 and expects to sell the property within the next 15 to 20 years. As this reflects the client’s only UK asset, following sale of the property, and assuming the sale proceeds are moved outside of the UK, there will be no further IHT exposure. The solution was to provide term insurance until such time that the property will be sold and the proceeds moved outside of the UK. To protect against the value of the property increasing in future to £15m, the insured amount required was £6m.

Case study two

A UK resident, non-UK domiciled client owns a UK residential property. The client’s two children live in the property and the client has no ongoing use of the property. To assist with IHT planning, the client wishes to gi the property to their two children.

The property is valued at £20m and, following the gi , the client’s children will be exposed to a potential IHT charge of £8m – 40% of £20m –ignoring the nil-rate band allowance if the client dies within seven years. The IHT exposure will reduce in line with taper relief.

The client is aged 70 and, provided they survive for seven years following the gi being made, there will be no further IHT exposure.

The solution was to provide term insurance for a period of seven years. The initial insured amount required was £8m, reducing in line with taper relief. ●

Q&A

The Intermediary speaks with Louise Pengelly, proposition director at Paymentshield, about the results of the annual Adviser

Survey for 2023

To begin with, tell us a bit about yourself and Paymentshield

I am the proposition director – responsible for all our product and proposition development, marketing, and digital teams.

I’ve been at Paymentshield for just over four years, but I’ve been working in insurance for just over 25 years now, starting at Aviva.

Paymentshield focuses on home insurance sold through mortgage intermediaries and nancial advisers. We also work within the lettings sector, selling products for lettings agents, landlords and tenants.

Why is Paymentshield’s annual Adviser Survey important, now more than ever?

Our primary market is mortgage advisers and nancial intermediaries. Our role is to help them maximise the opportunities presented by selling general insurance (GI). It’s important for us to have our nger on the pulse and to understand what their current priorities are, what their current challenges are, and how they see GI.

We use the survey as a way of understanding how advisers are feeling, to identify how we can best help them. We also use it to test existing ideas, giving us continual feedback about our primary market and how we can support it.

What are some of the long-term trends the survey has uncovered?

We see a level of consistency in some of the answers that we’re getting. A couple of things really stand out. One is that the overwhelming majority of advisers feel that it is important to o er GI to customers. I think that has always

been the case, but it is especially true now in light of the new Consumer Duty regulations.

In fact, in our latest survey, 92% of advisers felt it was best practice to always o er their client GI. 526 advisers responded this year – last year it was 331. While it’s always a little dangerous to read too much into statistics, perhaps this points to this greater emphasis on protection.

e other thing that is consistent across the survey ndings is that three out of ve advisers, or around 60%, say that they sometimes miss opportunities to o er GI. So, it’s really important to advisers, but they are not necessarily doing it all the time – particularly at the moment, because the market is so challenging it makes o ering GI quite di cult.

Is there a gulf between the importance placed on GI versus advisers putting that into practice?

I think this trend will shi under Consumer Duty; we’re already seeing that. Almost 90% of advisers feel that discussing GI with clients is an important part of their Consumer Duty responsibilities. While advisers can nd this hard and may miss some opportunities, we do also see a lot of really good practice in the market. A lot of advisers and networks are doing this all the time. Broker networks especially are taking the steps to integrate this as part of their processes so that getting that GI quote is really easy.

Consumer Duty has been a bit of catalyst to address this, but providers

in the market are playing their part too, by putting solutions out there that can step in if the adviser is struggling to find the time to offer GI.

What factors are pushing people to prioritise protection?

The cost-of-living crisis is clearly a factor. There will undoubtedly be products that fall victim as people prioritise what they spend on, but in real terms, that represents a massive opportunity for advisers. Cutting back on GI could be really tempting, but actually it’s a false economy, because the last thing a customer needs is some kind of nasty surprise whereby something happens in the home, and they can’t claim for it.

Monthly insurance premium costs will be a drop in the ocean compared to a potential loss on a claim which could run into the thousands of pounds. That might be what is reflected in this increased demand from consumers.

It has always been the case that there’s value in an advised conversation, because there are a lot of customers out there, particularly first-time buyers, who haven’t had insurance before and won’t understand it very well. The adviser’s role of walking them through can be of value to everyone.

At a time in which you don’t want any nasty surprises when it comes to money, making sure that you have the right cover in place is important.

How is Paymentshield supporting advisers?

We recently launched a new referral proposition which we are continuing to develop – so there will be further iterations of that to come. That means that if an adviser isn’t in a position or hasn’t got the time to have that advised conversation about GI, they can pass it to us to do on their behalf.

The other thing we know from our survey is that it is really important to advisers to get through that quote and apply process quickly. The majority would prefer it to be streamlined, but they have also said that an accurate quote is more important than a quick one.

This is reflected in the survey results, which showed us that more than 88% of respondents agreed with the statement that ‘an accurate quote that doesn’t jump up in price at application is more important than a fast one’. So, one of the things that we’ve recently done is to redevelop our quote journey. We’ve made it a lot shorter, but we feel that we have struck that balance between keeping the questions needed to ensure that the adviser is getting an accurate quote.

First, advising on GI and embedding it into a firm’s sales process comes down to more than just a fast quote and apply process. For example, fast quote technology is of no use if advisers aren’t comfortable discussing GI in the first place, or if they’re not already comfortable using the tech available to them. For these advisers, an even quicker quote process probably won’t make a huge amount of difference.

Second, a quick quote is ultimately meaningless if it doesn’t offer good quotability to ensure the adviser can offer a quote to a broad spectrum of customers. More than three-quarters of respondents (75.1%) agreed with the statement that ‘offering quotes for a broader range of risks is more important than generating a fast quote’. This is no surprise to us.

We’ve seen these results previously and have responded to them by making sure that our speed of quote also comes with impressive quotability. We’ve also worked hard to provide strong quote technology alongside access to our sales team and our freely available adviser tools and educational resources.

What do you hope advisers take away from this research?

The key thing for us is that advisers know how important GI is, and that our main role is to support them by making everything as easy as we can.

We work hard to try and understand the challenges they face, and to provide the tools to drive those strong outcomes for their customers. Not only are brokers saying that GI is more important for customers, but they are also recognising that its more important for them, too. In a market where they are worried about the volume of mortgages that they might be able to write in the coming months, there’s an opportunity for GI to play a heightened role.

Where we’re really seeing a growth in the market is in remortgage and product transfer opportunities. Brokers have seen a lot of activity in these areas in the past 12 months.

That’s where we know that they have found it particularly difficult to bring up GI. Looking at how we can help them maximise this area is going to be really helpful for us in the next 12 months. ●

45% of advisers want technology to make the quote process easier, why do you think this number is not higher?

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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 Claudio Pisciotta on CLAUDIO @ THEINTERMEDIARY.CO.UK to discuss how e Intermediary can help your business achieve its goals.

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Cover upgrades deliver P

rotection insurance customers deserve as much certainty as it is possible to give them, and protection insurance providers almost always assert that this is their aim. Yet advisers and their clients can only be certain themselves when these assertions are then met with the payment of a claim, and that can take some time, given the nature of protection insurance.

More certainty

Guardian, as a relatively new business, has worked with advisers for five years to try and deliver more certainty. We have pored over the details of the products available across the market to understand where and how we can bring improvements in terms of process and product design.

One of those features, our cover upgrade promise, has now ‘done what it said it would on the tin.’ This has resulted in one of our earlier policyholders benefi ing from changes to policy terms offered to new customers that were also upgraded for existing customers.

Treating customers the same

Cover upgrade is Guardian’s promise to check a claim against both the critical illness definitions offered when the customer bought the policy, as well as the definitions offered to new customers, and crucially, to pay out if the claim is valid under either.

The successful claim, detailed below, involves a client who has sadly developed Parkinson’s disease, but who, at least, has the financial certainty that a successful claim brings.

This claim represents a significant milestone for us as a business, because it shows that we are doing what we said we would with a product feature that exemplifies our overall approach.

Clear de nitions

From the outset, it is important to minimise the possibility of client confusion. For critical illness, this means se ing out the clearest definitions for a host of common conditions – including heart a acks, strokes and cancer – complemented by an efficient and timely claims process.

For income protection insurance, it involves using an ‘own job’ rather ‘own occupation’ definition, which will increase clarity and should bring much greater certainty at the point of claim.

However, protection does not exist in a vacuum. Medical advances can bring big changes in context. The design of our critical illness product already involved taking a very close look at current practice, particularly around cancer, heart a ack, stroke and neurodegenerative definitions.

However, we did not feel that was sufficient in terms of treating our existing and new customers fairly. That is why we introduced cover upgrade.

Proving the concept

The cover was taken out in July 2019 when Guardian’s Parkinson’s disease definition was: “A definite diagnosis by a UK Consultant Neurologist of idiopathic Parkinson’s disease. There must be permanent clinical impairment of motor function with associated tremor and rigidity of movement.”

We then upgraded this definition in October 2019, le ing customers know that their definition had been upgraded with no additional charge.

The definition changed to: “A definite diagnosis by a UK Consultant Neurologist. There must be permanent clinical impairment of motor function. This impairment should include either an associated tremor or muscle rigidity.”

Of course, as any protection adviser knows, the devil is in the detail –

although in this case, you might argue the ‘angel is in the detail’.

In the claim in question, the customer had received a definite diagnosis by a UK medical consultant of Parkinson’s and had an associated tremor, but they were not yet experiencing muscle rigidity. The definition would not have been met in the contract the customer bought in July 2019, but with cover upgrade it was met, and therefore we were able to pay the claim.

We believe that this example shows why cover upgrade is such an important and valuable feature of Guardian’s critical illness cover, demonstrating exactly what we’re trying to achieve for our customers.

Appropriate support

The policyholder has also been referred by our HALO claims service to specialist neurological therapy provider Krysalis, and has received a baseline assessment, six therapeutic sessions addressing concerns – such as how to manage the inevitable anxiety about the condition itself, advice on fatigue management so as not to exacerbate symptoms, suggestions for potential lifestyle modifications, and advice about accessing NHS help.

For us, this story – and indeed this package of support – demonstrates how protection insurance policies, when designed well and managed fairly for the life of the policy, can make a huge difference.

It also provides a foundation for building more trust in the protection sector, to help ensure your advice meets client expectations. ●

PHIL DEACON is head of claims at Guardian

On the move...

Rick Haythornthwaite to take over as chair of NatWest Group

Rick Haythornthwaite has been named successor to Sir Howard Davies as chair of NatWest Group. Haythornthwaite joins as a non-exec director on January 8th 2024, and will formally take on the role of chair on April 15th, 2024. He previously served as chair of Ocado Group.

Mark Seligman, senior independent director of NatWest Group, said: “Rick is a highly experienced chair who combines a successful commercial career with a deep knowledge of financial services

HTB promotes Lorenzo Satchell to sales director role

Hampshire Trust Bank (HTB) has promoted Lorenzo Satchell to sales director within its bridging division.

Satchell has over 30 years’ experience in the property finance sector, and joined HTB in January of this year as head of sales for bridging, following 15 years at Together.

He will be responsible for managing the bridging sales team as well as overseeing all originations and intermediary business partners that work with the bank for bridging finance solutions.

Satchell said: “2023 has been a whirlwind of a year so far and I couldn’t be happier with how much the bridging channel has achieved in such a short space of time.

“In addition to my existing duties my new role includes providing focus on strategic values, both within the bank and our key business partners.

“I’m very much looking forward to the challenge and taking HTB bridging to the next level.”

Centrick appoints director of build-to-rent

markets and technology, as well as a strong track record of delivery.”

Davies added: “Rick’s experience and range of skills will complement and further strengthen the NatWest board in the years to come. I look forward to working closely with him to ensure a smooth handover.”

Haythornthwaite said: “I am inheriting a very different NatWest compared to my predecessor; one that is more customer-focused, financially resilient, and well-positioned to maintain its recent strong performance.

Centrick has appointed Clare Johnson as build-to-rent director, heading the VICI division, currently overseeing a pipeline of over 1,000 rental units across the UK.

Johnson joined from Inland Homes plc, where she served as BTR director. She will focus on enhancing VICI’s consultancy and management services.

She said: “[Centrick has] a proven background and diverse in-house skills. We will invest further in proptech to improve our client services and community lifestyle within a BTR community.”

OMS strengthens senior management team

One Mortgage System (OMS) has appointed Melanie Spencer as business partnership and growth director, to fortify senior management and enhance lender origination operations. Neal Jannels, managing director, said: “Mel comes with a huge amount of experience and in-depth

Lesley

understanding of all the unique components across both lenders and the intermediary mortgage market and I’m sure that she will prove a huge asset to the business.”

Spencer said: “I am looking forward to helping OMS to really make a difference both for intermediaries, and with lenders.”

to chair Market Harborough Building Society

Lesley Titcomb CBE is set to become chair of Market Harborough Building Society, subject to regulatory approval, from 1st October 2023.

A qualified chartered accountant, Titcomb’s career has included roles as COO at the Financial Conduct Authority (FCA) and chief executive of The Pensions Regulator.

She said: “I’m excited to be joining the society at this time and look forward to working with Iain Kirkpatrick and the team

to deliver its strategy and the Thrive! Agenda.”

The society extended its thanks to outgoing chair Michael Thomas, who has served the organisation for 10 years in various capacities.

Iain Kirkpatrick, chief executive, said: “I’d like to thank Michael for his support and passion for the Society and the mutual movement, and also for his guidance as I joined the society last year. I’m really pleased to welcome Lesley to MHBS at this exciting time as we expand and deliver our Thrive! Agenda.”

Titcomb CBE

LORENZO SATCHELL

MELANIE SPENCER

CLARE JOHNSON